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Tech Wobbles, Delta Shakes and Jobs

The Week That Was - What Lies Ahead?

Editorial

The week closed with disappointing earnings news out of Amazon, $AMZN down -7.6% on the news and fear merchants pushing Delta variant headlines fueling growth concerns. The Fed met and another dovish press conference from Powell with 10 yr Treasuries yields down 5 bps this week to 1.22%.

Powell is struggling to justify ongoing historic monetary inflation as transitory with intense inflationary moves abound. Perhaps with so many destroyed economically and living on the breadline the Fed is well away they are surviving at best and aware  such lack of demand will become deflationary as supplies normalise.

Public confidence is eroding sharply with the US Administration and the Fed iseems to be the last hope for many. What happened if the insular American masses gather what is unfolding globally? The Fed however would have been relieved by the better-than-feared PCE Prices for June, little changed on a year-over-year basis but still running well above 2.0%. The U.S. Dollar Index increased 0.3% to 92.14. WTI crude futures increased 0.3%, or $0.25, to $73.87/bbl as banchmark U.S. natural gas prices hovered either side of $4 btu most of the week . Strong earnings reports from energy majors ExxonMobil and Chevron showing the benefit from these prices and importantly underscores a key strength of the US Economy

Next week will focus on Friday's July employment report and over a quarter of the S&P 500 reporting earnings and their calls on reopening activity, supply chain disruptions and rising costs. Fed Chairman Jerome Powell said at Wednesday's FOMC he would like to see strong jobs reports before winding down the central bank's $120 billion a month bond-buying program. July is expected to show 788,000 nonfarm payrolls, down from 850,000 in June, according to Dow Jones. The unemployment rate is expected to dip to 5.7% from 5.9%. Average hourly wages are expected to rise 3.9% year over year.

The three credit events that got our attention last week remain our key watches.

Firstly credit spreads on corporate bonds.

U.S. Treasuries widened credit spreads on corporate bonds to multi-month highs in the last few weeks. The Federal Reserve chairman weighed in on when asked about US Bonds Wednesday. ‘We’ve seen long-term yields come down significantly,’ Powell said at a press conference… ‘I don’t think that there’s a real consensus on what explains the moves between the last meeting and this meeting.’”

The second again was the world’s most indebted developer, China Evergrande Group shares and bonds.

Evergrande’s bond (8 ¾ 2025) price colla[sed 9 points to a record low 44.7. Yields surged 700 bps this week to 36.33%, with a two-week gain of almost 1,400 bps. Evergrande yields ended May just below 14%. An index of Chinese high-yield bonds surged 220 bps to 12.79%, up 310 bps in two weeks to the high since March 2020. This index yielded 8.20% at the end of May.  Developer offshore bonds were under heavy liquidation. Easy Tactic bond yields spiked 1,300 bps to 28.9%, and Kaisa Group yields surged almost 500 bps this week to 19.6%.

The third was falling bond yields despite heightened inflationary pressures and further price increases.

Clearly QE and associated liquidity excess have severely distorted both global bond and stock markets. German bund yields fell four bps to negative 0.46% (up 11bps). French yields declined two bps to negative 0.11% (up 23bps). The French to German 10-year bond spread widened two to 35 bps. U.K. 10-year gilt yields dipped two bps to 0.57% (up 37bps). In the US Two-year government yields slipped a basis point to 0.19% (up 6bps y-t-d). Five-year T-note yields dipped two bps to 0.69% (up 33bps). Ten-year Treasury yields fell five bps to 1.22% (up 31bps). Long bond yields declined two bps to 1.89% (up 25bps). Benchmark Fannie Mae MBS yields dropped five bps to 1.68% (up 33bps).

About 165 S&P 500 companies reported in the biggest week of the earnings season, with tech heavyweights Amazon, Tesla, Apple, Microsoft, AMD, Facebook and Alphabet among them. Strong beats other than by AMZN and FB, the risk is peak performance from the Pandemic for those two firms but the others signalled strength in the rebuilding global world.

After this week's FOMC it's worth reminding ourselves of  this insight from the The Economic Affairs Committee of the U.K.’s House of Lords report, “Quantitative Easing: A Dangerous Addiction?”

“No central bank has managed successfully to reverse quantitative easing over the medium to long term. In practice, central banks have engaged in quantitative easing in response to adverse events but have not reversed the policy subsequently. This has had a ratchet effect and it has only served to exacerbate the challenges involved in unwinding the policy. The key issue facing central banks as they look to halt or reverse quantitative easing is whether it will trigger panic in financial markets, with effects that might spill over into the real economy.”

In light of last week's ECB and this week's FOMC an important realisation that the Central Bankers are well of aware of the consequenses here.

"We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise." - MoneyNeverSleeps

There is the prospect of an overheating U.S. economy, but remember we are coming off a low base and the lockdown has decimated many sectors of the economy and people's lives. The relevaton from the speed of technology adapting and disrupting to a new world with the lockdown is transformative. The shift has enabled and transformed the traditional economy that we measure future outcomes off.

We still need to add almost 20 million jobs in the US alone to get back to par. Europe is in worse shape, so overheating at this point isnt a concern for most policymakers.  The unparalleled government monetary inflation has inflated many price levels and distorted asset markets BUT that was intended as to increase confidence in the 'guts' of the economy, homeowners and 401k holders. This point is missed by the uber bear community. From here is the big question. The RBA stability report gives us an insight into central banker thinking, they concluded Australian banks are in strong financial position coming out of pandemic and have abundant liquidity and funding,

The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off tis continuos dip feed? At this point the Central Banks have kicked that answer down the road.

After the monthly and weekly employment data the market will be going though whether the recent stimulus rounds are working with in the background of the Federal Reserve Continuing to downplay inflation risk.

Of note during the Arctic Blast with the EV mania and the Biden Admin Green deal push we noted the spike in spot Texas electricity prices pushing the cost of electricity not on fixed plans to unheard of levels. Bloomberg reported on recharging a Tesla from about $18 to $900. Yes the price spike was fleeting but it should remind the sane amongst us the broader issue of the disconnect between the push toward electrification and our massively inadequate energy infrastructure. This is the area that needs investment, not just for our glorious EV but for all energy and possible disasters like we just saw.

Comments from Yellen and others on the same page suggest that low rates conveniently push potential debt instability far out into the future. The Fed is poised to expand its balance sheet, by adding liquidity to the tune of $1.5 TN this year with no regard for rampant asset price inflation and bubbles. Now the new administration has control of the blank checkbook and is determined to us it with no long-term thinking or planning; everything is short-term focused. Washington is gambling with our nation’s future, from kicking cans down the road to rolling drums down a hill. 

Contents

  • Part A: Stockmarkets
  • Part B: Bonds
  • Fed and Banks
  • Part C: Commodities
  • Energy - Oil and Gas
  • Gold and Silver
  • Part D: Foreign Exchange
  • Geopolitics and Economics
  • Economy Week ahead

 

PART A - Stock Markets

Highlights - USA

  • S&P500 declined 0.4% (up 17.0% y-t-d)
  • Dow slipped 0.4% (up 14.1%)
  • Nasdaq100 fell 1.0% (up 16.1%)
  • S&P 400 Midcaps jumped 1.2% (up 17.2%)
  • Small cap Russell 2000 gained 0.8% (up 12.8%)
  • Utilities added 0.4% (up 4.9%)
  • Transports dropped 2.0% (up 15.6%)
  • The Banks gained 0.8% (up 24.7%) and the Broker/Dealers rose 1.0% (up 22.5%)
  • Semiconductors rose 2.3% (up 20.1%).
  • Biotechs were little changed (up 0.1%).
  • With bullion gaining $12, the HUI gold index rallied 5.7% (down 8.7%).


US Indices W 7 30 2021


 

Highlights - Europe Stocks

  • U.K.'s FTSE equities index was little changed (up 8.9% y-t-d).
  • France's CAC40 added 0.7% (up 19.1%).
  • German DAX equities index fell 0.8% (up 13.3%).
  • Spain's IBEX 35 equities index dipped 0.5% (up 7.5%).
  • Italy's FTSE MIB index gained 0.9% (up 14.1%).

 Highlights - Asia Stocks

  • Japan's Nikkei Equities Index fell 1.0% (down 0.6% y-t-d).
  • South Korea's Kospi index lost 1.6% (up 11.4%).
  • India's Sensex equities index dipped 0.7% (up 10.1%).
  • China's Shanghai Exchange sank 4.3% (down 2.2%).

 Highlights - Emerging Markets Stocks 

  • EM equities mixed.
  • Brazil's Bovespa index dropped 2.6% (up 2.3%),
  • Mexico's Bolsa gained 1.2% (up 15.4%).
  • South Korea's Kospi index lost 1.6% (up 11.4%). India's Sensex equities index dipped 0.7% (up 10.1%). China's Shanghai Exchange sank 4.3% (down 2.2%).
  • Turkey's Borsa Istanbul National 100 index jumped 3.1% (down 5.7%).
  • Russia's MICEX equities index rallied 1.0% (up 14.7%).

IPO and SPAC mania remians in full force.

Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.

Biggest SPX Stock Winners and Losers Last Week

 TOP 5 Stocks W 7 30 2021

 S&P 500 Index Technical Analysis via @KnovaWave

SPX spent the week rebalancing the Chikou after all time highs remaining in the clear channel.  We have to respect the number of alternatives of degree of 5. With such trends keeps it simple support is Tenkan and Kijun and watch for ABC.

The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages.  Note the 100% extension from the emotive element and MM levels when the spit kicks in.

 SPX D 7 30 2021

SPX has continued to roll higher since spat the weekly channel it had been tracking since the break of v of (III) or (V). Each new high has evolved after testing the Tenkan. look for failure when that doesn't hold.

Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan.  To repeat  "We look for 3 waves down and reactions to keep it simple with the alternatives in the daily."  Keep an eye on the putcall ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as chickou rebalances

 SPX W 7 30 2021

A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets.

 NADSAQ 100

Nasdaq has been the messiest of the major indices, compare the clinical tests of the SPX Tenkan versus Spits of Tenkan to Kijun in NDX which helped fuel the more extreme moves.

 NAS W 7 30 2021

Russell 2000

RUT W 7 30 2021
 

The small cap Russell RUT has been developing a large flag which it spat though last week, only to close above the Tenkan. We need Kijun to close thru to get power to retest highs. Support the cloud should it fail.

Semiconductors SMH

The Semiconductor segment represented by SMH cleanly with Murray Math levels & Tenkan keys are previous high above +4/8 and Chikou rebalance patterning. Below Kijun spat to provide support as the reaction from above continued

SMH W 7 30 2021
 

NVidia $NVDA

Following the announcement of NVDA 4/1 split some levels off the energy break. This week we hit the 50% at $709 fueled by calls being cheap, we got earnings and $TSLA split memories and boom! The AMC meme move also fueled speculatiojn, at least NVDA has more substance than Doge!

NVDA W 7 30 2021
 

Apple $AAPL

 AAPL W 7 30 2021

Amazon $AMZN

Amazon high was MM +3/8 and from there has built a large weekly flag which it closed under after failing near the previous high. AMZN fell 7.5% after earnings, watch if Tenkan closes through Kijun for a bigger move down. Support is weekly cloud and resistance previous flag and Tenkan..

 AMZN W 7 30 2021

ARKK ETF

The ARKK ETF trading clinically, tested triangle breakdown and Tenkan after bouncing off 50 WMA. Support cloud, needs to clear Tenkan to test Kijun for bulls.

ARKK W 7 30 2021
 

US Stocks Watch

 

Earnings Week Ahead

This three-month period is the second to be compared to year earlier profits that were affected by the pandemic. According to Refinitiv, earnings for the second quarter are looking to be up 78.1%. With the US stock markets at record highs the downside to increasing profit expectations is the potential for some disappointments and that could cause adverse or stalled markets potentially.

Investors (and algos) will focus on the conference calls and outlooks. Last quarter everyone expected the worse, we saw critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals. 

Last week we heard from 

Tesla, Lockheed Martin, F5 Networks, Check Point Software, Hasbro, LVMH, Otis Worldwide, Ameriprise, Apple, Alphabet, Microsoft, 3M, Visa, Advanced Micro Devices, General Electric, Boston Scientific, PulteGroup, Raytheon, JetBlue, Archer Daniels Midland, Chubb, Mondelez, Starbucks, Hawaiian Holdings, Waste Management, Corning, Sherwin-Williams, UPS, Stanley Black and Decker, Teradyne, Cheesecake Factory,Boeing, Facebook, Pfizer, Ford, Qualcomm, McDonald’s, Bristol-Myers Squibb, PayPal, General Dynamics, GlaxoSmithKline, Norfolk Southern, Automatic Data, CME Group, Garmin, Moody’s, Steve Madden, Penske Auto Group, Hess, Aflac, Canadian Pacific Railway, Fortune Brands, Samsung,Amazon, Merck, Comcast, Airbus, Anheuser-Busch InBev, MasterCard, Intercontinental Exchange, AstraZeneca, Hilton Worldwide, Northrop Grumman, Altria, Hershey, Yum Brands, American Tower, Gilead Sciences, Pinterest, Deckers Outdoors, First Solar, Beazer Homes, U.S. Steel, Molson Coors Brewing, Southern Co., Tempur Sealy, Textron, Nielsen, Valero Energy, Martin Marietta Materials, Caterpillar, Chevron, ExxonMobil, Procter & Gamble, Colgate-Palmolive, AbbVie, Booz Allen, Lazard, Church & Dwight, Johnson Controls, Illinois Tool Works, Cabot Oil & Gas, CBOE Global Markets

This week we hear from:

  • Monday starts us off with
  • Take-Two Interactive, Mosaic, Vornado Realty, Eastman Chemical, Simon Property, Transocean, Pioneer Natural Resources, Reynolds Consumer Products, ON Semiconductor, NXP Semiconductor, AXA, Loews
  • Tuesday with Earnings from
  • Alibaba, Amgen, Eli Lilly, Clorox, KKR, Under Armour, Eaton, Discovery, Pitney Bowes, Marriott, ConocoPhillips, Activision Blizzard, Avis Budget, Public Storage, Devon Energy, Jacobs Engineering, Bausch Health, Incyte, Philips 66, Ralph Lauren, Expeditors International, Nikola, Warner Music
  • Wednesday Earnings Include
  • Booking Holdings, CVS Health, GM, Etsy, MGM Resorts, Allstate, Uber, Fox Corp., Electronic Arts, Roku, Kraft Heinz, Toyota, Sony, AmerisourceBergen, Marathon Petroleum, BorgWarner, Entergy, Apollo Global Management, New York Times, Scotts Miracle-Gro, Tupperware, MetLife, IAC/Interactive
  • Thursday Earnings Include
  • Regeneron, ViacomCBS, Beyond Meat, DropBox, Expedia, Sprouts Farmers Market, TrueCar, Shake Shack, Square, TripAdvisor, Cushman and Wakefield, Kellogg, Cigna, Zillow, Lions Gate, Ambac, Virgin Galactic, Motorola Solutions, Zynga, Illumina, AIG, SeaWorld, Cardinal Health, Duke Energy, Thomson Reuters, Datadog, Eventbrite, NRG Energy, Choice Hotels, Parker-Hannifin, Wayfair, Zoetis
  • Friday Earnings include
  • Liberty Broadband, Liberty Media, AMC Networks, Draftkings, Fluor, Gannett, Canopy Growth, Nuance Communiciations, Goodyear Tire

These are the highlighted earnings for the US this week. Please check daily schedules for more reports.

 

IPO Wrap

US IPO Weekly Recap:

US IPO Weekly Recap: Biotechs pop and Robinhood flops in a record 20 IPO week July 30, 2021

The 2021 US IPO market continues to break records. 20 IPOs went public this past week, the most in a single week since the year 2000. New filers have slowed ahead of the August lull, with just one IPO submitting an initial filing.

Three issuers postponed, citing either volatility or market conditions: vehicle battery maker Clarios International (BTRY), specialty funding solutions provider Preston Hollow Community Capital (PHCC), and adtech platform Teads (TEAD).

Vaccine biotech Icosavax (ICVX) upsized and priced at the midpoint to raise $182 million at a $622 million market cap. This clinical stage biotech is initially focused on developing vaccines against infectious respiratory diseases using its virus-like particle platform technology. Its most advanced candidate is currently in a Phase 1/2 trial for SARS-CoV-2. After popping 133%, Icosavax finished up 66%.

Retail brokerage Robinhood Markets (HOOD) priced at the low end to raise $2.1 billion at a $34.9 billion market cap. The company offers a no-commission retail brokerage platform with over 18 million MAUs. Despite triple-digit revenue growth in the 1Q21, the platform is dependent on trading volumes, and the recent retail trading boom may be unsustainable. Robinhood finished down 8%.

Language learning platform Duolingo (DUOL) priced above the upwardly revised range to raise $521 million at a $4.6 billion market cap. Duolingo provides an online platform for over 300 million users to learn over 30 new languages. Benefiting from a COVID-related boost in demand, Duolingo posted triple-digit growth in 2020. Duolingo finished up 38%.

AIM-listed cell engineering platform MaxCyte (MXCT) upsized and priced within the range to raise $176 million at a $1.4 billion market cap. MaxCyte's Flow Electroporation technology facilitates the complex engineering of a variety of cells. Its flagship product, the ExPERT platform, can be used across the continuum of the rapidly-expanding cell therapy sector. MaxCyte finished up 31%.

Rare disease biotech Rallybio (RLYB) offered more shares and priced at the low end to raise $81 million at a $438 million market cap. The company is developing antibody therapies for rare diseases. Its lead program is currently being evaluated to treat fetal and neonatal alloimmune thrombocytopenia in a Phase 1/2 trial. Rallybio finished up 31%.

Israeli anti-fraud firm Riskified (RSKD) priced above the range to raise $368 million at a $3.8 billion market cap. This company provides a software platform that improves e-commerce fraud protection for enterprise merchants. Unprofitable with a long sales cycle, the company grew revenue at a 51% CAGR from 2018 to 2020 and achieved 117% net revenue retention in 2020. Riskified finished up 31%.

Traeger (COOK) priced at the high end to raise $424 million at a $2.3 billion market cap. This company makes premium backyard wood pellet grills with a tech feature, allowing owners to program, monitor, and control their grill through the Traeger app. Traeger is a category leader of the wood pellet grill, growing revenue at a 28% CAGR from 2017 to 2020. Traeger finished up 23%.

Oncology biotech Immuneering (IMRX) upsized and priced at the midpoint to raise $113 million at a $398 million market cap. Immuneering's lead program, IMM-1-104, is a highly selective dual-MEK inhibitor being developed for advanced solid tumor patients harboring RAS mutant tumors. The company plans to submit an IND for IMM-1-104 in the 1Q22. Immuneering finished up 17%.

Oncology biotech Nuvalent (NUVL) upsized and priced at the midpoint to raise $166 million at an $850 million market cap. Nuvalent's lead candidate, NVL-520, is a brain-penetrant ROS1-selective inhibitor and is expected to begin clinical trials in patients with ROS1-positive non-small cell lung cancer and other advanced solid tumors in the 2H21, pending the acceptance of its IND. Nuvalent finished up 7%.

PowerSchool Holdings (PWSC) priced at the low end to raise $711 million at a $3.5 billion market cap. The company provides an education platform for teachers to manage classroom activities such as collecting work and grading assignments. Serving over 12,000 customers in over 90 countries globally, PowerSchool turned profitable on a net income basis in the 1Q21. PowerSchool finished up 3%.

Heart disease biotech Tenaya Therapeutics (TNYA) upsized and priced at the midpoint to raise $180 million at a $615 million market cap. The company's multi-modality drug discovery platform targets both genetic and non-genetic forms of heart disease, and consists of a gene therapy program, a cellular regeneration program, and a precision medicine program. The company plans to submit INDs for in 2022. Tenaya finished up 2%.

Smart home integration system Snap One Holdings (SNPO) priced at the low end to raise $249 million at a $1.4 billion market cap. This company provides smart home technology products to over 16,000 professional integrators. Snap One has demonstrated solid growth and was profitable on an EBIT basis in the 1Q21. Snap One finished about flat.

After postponing in November 2020, IN8bio (INAB) priced at the low end to raise $40 million at a $195 million market cap. This Phase 1 biotech is developing allogeneic gamma-delta T cell therapies to treat solid tumors. Although gamma-delta T cells could potentially treat solid tumors, the company is very early stage and has dosed a limited number of patients. IN8bio finished flat.

Intraocular lens platform RxSight (RXST) priced and the low end to raise $118 million at a $448 million market cap. RxSight states that its RxSight Light Adjustable Lens system is the first and only commercially available intraocular lens technology that enables doctors to customize and optimize visual acuity for patients after cataract surgery. RxSight finished flat.

Oral capsule developer Rani Therapeutics (RANI) priced well below the range to raise $73 million at a $528 million market cap. Rani is advancing technologies to enable the development of orally administered biologics. Its RaniPill capsule is a novel, proprietary, and patented platform technology, intended to replace subcutaneous or IV injection of biologics with oral dosing. Rani finished flat.

Canada-listed Draganfly (DPRO) raised $20 million at a $132 million market cap. Draganfly serves the unmanned aerial vehicle or drone market with a suite of products and services that includes quad-copters, ‎fixed wing ‎aircrafts, ground based robots, hand held controllers, flight training, and software used for tracking, live ‎streaming, ‎and data collection. Draganfly finished down 5%.

After lowering its deal size on Monday, cancer biotech Candel Therapeutics (CADL) raised $72 million at a $248 million market cap. Candel's most advanced candidate is currently in a Phase 3 trial as a combination therapy for newly diagnosed localized prostate cancer. The company expects to complete enrollment in the 3Q21 with a final data readout in 2024. Candel finished down 5%.

Gene therapy biotech Omega Therapeutics (OMGA) priced at the midpoint to raise $126 million at an $866 million market cap. Omega's pipeline consists of preclinical programs that span a variety of indications. The company has conducted in vivo preclinical studies in hepatocellular carcinoma, non-small cell lung cancer, and acute respiratory distress syndrome. Omega finished down 6%.

Financial software firm MeridianLink (MLNK) upsized and priced at the high end to raise $343 million at a $2.2 billion market cap. MeridianLink offers a cloud-based digital lending and account opening platform for mid-market community banks and credit unions. The company saw double-digit organic growth in the FY20, although business is cyclical. MeridianLink finished down 9%.

After withdrawing its IPO attempt in 2018, Dole (DOLE) downsized and priced at the low end of the downwardly revised range to raise $400 million at a $1.5 billion market cap. This leading fruit and vegetable company offers 300+ products sourced from 30+ countries to 80+ countries globally. Slow growing and profitable, Dole's offering was made in connection with its merger with Total Produce. Dole finished down 9%.

US IPO Week Ahead:

US IPO Week Ahead: Weber hopes for a well-done debut in a 9 IPO week July 30, 2021

Following another record week for activity, the IPO market is cooling down heading in to August with nine IPOs scheduled for the week ahead.

Outdoor grilling brand Weber (WEBR) plans to raise $750 million at a $4.7 billion market cap. The company manufactures and sells charcoal grills, gas grills, smokers, pellet & electric grills, and connected grills across 78 countries. Growing and profitable, Weber holds a 20%+ share of the US and global outdoor cooking markets.

Biopharmaceutical royalty firm Healthcare Royalty (HCRX) plans to raise $750 million at a $3.4 billion market cap. The company buys royalty interests in marketed and late-stage biopharmaceutical companies. Healthcare Royalty is highly profitable, and free cash flow turned positive in the 1Q21, though its top 10 products accounted for 86% of royalty receipts in the 1Q.

Clinical trial solutions provider WCG Clinical (WCGC) plans to raise $720 million at a $6.1 billion market cap. The company performs ethical reviews and other clinical trial services to biopharmas and contract research organizations. Profitable on an EBITDA basis with positive free cash flow, WCG Clinical supported approximately 90% of all global clinical trials in the two years ended 12/31/20.

Nutraceutical maker The Better Being Co. (BBCO) plans to raise $200 million at an $843 million market cap. The Better Being Co. develops, manufactures, and sells vitamins, supplements, minerals, and other personal care products under brands such as Solaray, KAL, and Zhou. The company has demonstrated growth, but gross margin contracted in the 1H FY21.

Hair removal chain European Wax Center (EWCZ) plans to raise $175 million at a $1.1 billion market cap. The company franchises a chain of over 800 wax-based hair removal salons across the US. European Wax Center was hard hit by pandemic restrictions, and it will be highly leveraged post-IPO at 8.4x net debt/LTM EBITDA.

Safety equipment provider Cadre Holdings (CDRE) plans to raise $125 million at a $606 million market cap. The company manufactures and distributes safety and survivability equipment users in hazardous or life-threatening situations. Cadre is profitable, and revenue growth is expected to rebound in the 2Q21. Existing shareholders will receive a cash distribution of $55 million following the closing of the offering.

Amazon logistics center REIT ROX Financial (ROXA) plans to raise $83 million at a $90 million market cap. ROX intends to use substantially all of the IPO proceeds to purchase an Oakley, CA-based last-mile Amazon delivery station from NorthPoint Development. The REIT intends to continue to build a curated portfolio of logistics properties leased to Amazon. It plans to offer a 3% yield.

Orange County Bancorp (OBT) plans to raise $30 million at a $184 million market cap. This New York bank has 14 full-service branches and one loan production office across the Lower Hudson Valley. As of March 31, 2021, the company had $1.9 billion in assets, $1.2 billion in loans, $1.7 billion in deposits, and $135 million in stockholders' equity.

Female cancer biotech Context Therapeutics (CNTX) plans to raise $20 million at a $93 million market cap. Context is developing treatments for female cancers, such as breast, ovarian, and endometrial cancer. The company’s lead candidate is currently in Phase 2 trials for ovarian and endometrial cancer, with preliminary results expected in the 2H21 and the 1H22.

IPO data via Renaissance Capital

Part B : Bond Markets

Highlights - Treasuries

Why the angst in the bond market?

The After the FOMC presented new economic projections including a forecast of 6.5% for gross domestic product this year with PCE inflation going to 2.4% this year, but falling to 2% next year. Powell reiterated that the Fed sees only a temporary pickup in inflation this year because of the base effects against last year's numbers when prices fell. The Fed will target an average range of inflation around 2%, meaning it could exceed that threshold for some time which is a change to the Fed's ground rules. The majority of Fed officials did not see any interest rate hikes through 2023.

What concerns bond holders and impacts stocks over the past weeks is the Fed appears to be too Blaise about inflation. This view got added weight when crude oil hit the highest prices since 2019 after OPEC decided to stay pat on production for April. But since then Crude has fallen over 12% in just a week from those highs. Hence why Powell has said "We’re going to wait to see signs of actual inflation or the appearance of other risks that could threaten the achievement of our goals. And we’ve seen that the economy can sustain exceptionally low levels of unemployment without inflation.”

There is a view that Powell also refuses to be dictated to and set the bond bullies up for failure. The V reversal this month suggests that. Air needs to come out of the market, particularly Tech, this is best illustrated by the ARK Funds and Semi-Conductor SMH ET's (see below). From here we have another massive $1.9 Trillion stimulus. Is that enough to keep asset prices elevated, hard to fight the Fed and that kind of cash floating around. Watch the argument from analysts that higher yields mean the economy is growing, stocks are value versus hyperinflation is on its way.

Raise your eyes and look at the stopped car in front of you you may want to hit the brakes.The pandemic is not close to our greatest worry, nor is energy it seems. The  runaway credit bubble in the era of delusion and entitlement has multiple unintended consequences or are they intended? The stockmarket has lost rationality  the danger is should the bubble pop the consequences of a historic debt crisis in a deeply divided nation and unprepared social and geopolitical backdrops could be earth shattering as the Fed disregards asset inflation and bubble dynamics.

  • Investment-grade bond funds saw inflows of $294 million, and junk bond funds posted positive flows of $996 million (from Lipper).
  • Three-month Treasury bill rates ended the week at 0.04%.
  • Two-year government yields slipped a basis point to 0.19% (up 6bps y-t-d).
  • Five-year T-note yields dipped two bps to 0.69% (up 33bps).
  • Ten-year Treasury yields fell five bps to 1.22% (up 31bps).
  • Long bond yields declined two bps to 1.89% (up 25bps).
  • Benchmark Fannie Mae MBS yields dropped five bps to 1.68% (up 33bps).

 TNX W 7 30 2021

All good while markets hold up but take note that the loosest financial conditions in history have supported a record $1.4 trillion of corporate debt issuance. While easy credit availability has supported economic activity,  funding new investment whilst keeping vulnerable companies afloat. THe combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.

Highlights - Mortgage Market

Unprecedented cash payments by the U.S. government to households, changing consumer preferences and lowest mortgage rates in history have fueled a pandemic boom in housing, the fastest pace of increase on record in data from 1988 and prices surpassing the peak from the last property boom in 2005. The S&P CoreLogic Case-Shiller U.S. National Home Price Index rose 14.6% in the 12 months through April, according to the latest available numbers, marking the fastest pace of increase on record in data from 1988.

  • Freddie Mac 30-year fixed mortgage rates increased two bps to 2.80% (down 19bps y-o-y).
  • Fifteen-year rates dipped two bps to 2.10% (down 41bps).
  • Five-year hybrid ARM rates fell four bps to 2.45% (down 49bps).
  • Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down a basis point to 3.02% (down 10bps).

Highlights - Federal Reserve

  • Federal Reserve Credit last week expanded $25.2bn to a record $8.199 TN. Over the past 98 weeks, Fed Credit expanded $4.473 TN, or 120%. Fed Credit inflated $5.389 Trillion, or 192%, over the past 455 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week dropped $12.1bn to a six-month low $3.514 TN.
  • "Custody holdings" were up $107bn, or 3.1%, y-o-y.
  • Total money market fund assets rose $14.9bn to $4.502 TN.
  • Total money funds declined $68bn y-o-y, or 1.5%.
  • Total Commercial Paper increased $6.6bn to $1.139 TN. CP was up $120bn, or 11.7%, year-over-year.

We do know we have massive speculation pockets, viz a viz the Meme or GameStop, Weed stocks and cryptocurrency spectacles in just the matter of weeks. The Fed is today throwing additional fuel on historic speculative manias.

  • The Fed QE infinity programme is a yield curve control policy with long government bond yields coming down. Bond supply and continued central bank resistance to more negative policy rates limits the move. Central banks have been cutting rates and adding liquidity to avoid systematic failure.

Highlights - European Bonds

  • Greek 10-year yields fell five bps to 0.60% (down 2bps y-t-d).
  • Ten-year Portuguese yields slipped two bps to 0.17% (up 14bps).
  • Italian 10-year yields were unchanged at 0.62% (up 8bps).
  • Spain's 10-year yields were unchanged at 0.27% (up 22bps).
  • German bund yields fell four bps to negative 0.46% (up 11bps).
  • French yields declined two bps to negative 0.11% (up 23bps).
  • The French to German 10-year bond spread widened two to 35 bps.
  • U.K. 10-year gilt yields dipped two bps to 0.57% (up 37bps).

Highlights - Asian Bonds

  • Japanese 10-year "JGB" yields were unchanged at 0.02% (unchanged y-t-d).

 

Part C: Commodities

Highights

  • Bloomberg Commodities Index added 0.6% (up 23.3% y-t-d).
  • WTI crude rallied $1.88 to $73.95 (up 52%).
  • Gasoline rose 1.9% (up 66%)
  • Natural Gas dropped 3.6% (up 54%).
  • Copper gained 1.9% (up 27%).
  • Wheat jumped 2.9% (up 10%).
  • Corn added 0.4% (up 13%).
  • Bitcoin rallied $7,799 this week to $41,584 (up 43%).
  • Risk markets continue to respond to a Conronvirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
  • U.S. producers production still under pre Laura levels.
  • Higher crude prices prompt some U.S. producers start drilling again with rigs up for the ninth week in a row.

BDI Freight Index

  • The Baltic Dry Index rose 2.4% to 3,292 on Friday, the highest since July 12nd and gained 2.9% for the week but ended the month 2.7% lower.
  • The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes jumped 6.2% to 4,306, the highest since May 13th.
  • The supramax index added 17 points to 2,945.
  • The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, fell 1.1% to 3,304, the lowest since June 11th.
  • Source: Baltic Exchange

 BDI W 7 30 2021

Copper

Copper has been a leader in the risk on movement for commodities. The weekly channel since the low has captured the move and has rebalanced the Chikou after the power spits of +8/8 and +2/8. Support at the Tenkan and Kijun - beware of possible H&S Break retest would be +4/8

Copper W 7 30 2021
 

Corn

 CORN W 7 30 2021

 Lumber

 Lumber W 7 30 2021

US Crude Oil (WTI)

4 Hour:: After WTI Oil spat the -4/8 in 3 waves and breaking up thru the Tenkan impulsively to the cloud in a full 8/8 measured move, from there the Tenkan has been support with Kijun and 50ma below. Targets 8/8 +2/8 MM.

WTI 240 7 30 2021 

Daily: WTI continued it's rebound after it sharply corrected in 3 waves the May breakup at -1/8 and the daily cloud (where broke the double top successfully to close above +2/8 multiple resistance). We have rallied sharply back thru tenkan and kijun as the market rebalanced at the Kikou and neckline.  The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit. Support  is the 50dma, kijun, tenkan & prev high confluence. Resistance is Murrey Math levels and Fib clusters.  

WTI D 7 30 2021 

Weekly: WTI rebounded  from the weekly Tenkan after corrected off previous highs in clinical ABC negating the OPEC inspired collapse to close back above tenkan and at a rebalanced chikou indicative of  crowd behavior around $70 strike and 50% fib at 70.29 over 7/8. Reflect on series of fractals at last Dec wave 1 turn after we had completed 5 waves as marked, from here we watched 3 & 5 waves develop. Oil failed to test Kijun (close!) but regaining of Tenkan highlights overall strength Support below at Kijun and 50 wma It must retain this energy to take out new highs.

These are special times, recall "After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications." Support is previous channels, tenkan and Kijun. Above we have Murrey Math time and price 

 WTI W 7 30 2021

 

Oil 2020 2021

Oil 2014 2021

Oil 2020 2021

US Natural Gas (Henry Hub)

Daily: US Natural Gas August Nymex contract rallied impulsively as expected, completing 5 waves spitting the 50% before correcting impulsively down.  NG has been working around $4.00, given last week was the first time since 2018 settling at $4.060/MMBtu that is healthy.  The move after completing the ( C of 4 bullish scenario has played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. Price is testing the Tenkan and Kijun with the 50dma support.  It accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs, we are testing that break in a pennant ABC. 

 NG D 7 30 2021

Weekly: Natty continues to move in a series of 3's spitting the key 50% longer term  as Chikou rebalances. Recall the impulse wave powered from the spit of  the 50 wma to get over weekly Kijun and Tenkan and bounced off the 50wma. Breaking recent highs on its 3rd attempt.   A series of fractals between old 38 and 50% channel., as you would expect in a seasonal commodity with weather a prime mover. Resistance is Fib/Murrey confluence.

 NG W 7 30 2021


 

 Key Energy Reports

 

Precious Metals

Highlights

  • Spot Gold rose 0.7% to $1,814 (down 4.4%).
  • Silver recovered 1.9% to $25.49 (down 3.5%).

Gold

Gold still listless after manic rise to +5/8 weekly & rebalance of Chikou in 5 waves. From there been cloud locked around Tenkan, Kijun & 50wma. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.

 Gold W 7 30 2021

 Gold 2 26 21 Fail

Silver

Silver is back at the cloud spitting 50wma providing support after reversed with a double top. The weekly Tenkan crossing the Kijun signaled downside and is now resistance. Major support is the 50wma

 Silver W 7 30 2021

 

Part D: Forex Markets

John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Highlights

  • For the week,the U.S. Dollar Index declined 0.8% to 92.17 (up 2.5% y-t-d).
  • Majors for the week on the upside the Swiss franc 1.5%, the British pound 1.1%, the euro 0.8%, the Japanese yen 0.8%, the Canadian dollar 0.7%. On the downside, the Australian dollar declined 0.3%.
  • Minors for the week on the upside the South African rand increased 1.7%, the Swedish krona 1.1%, the Mexican peso 1.0%, the Norwegian krone 0.6%, the Singapore dollar 0.5%, and the South Korean won 0.1%. The Chinese renminbi increased 0.31% versus the dollar in a volatile week of trading (up 1.02% y-t-d) On the downside, the Brazilian real dipped 0.2%.

Australian Dollar - AUDUSD

The Aussie dollar has corrected in 3 waves since completing a 5 at the pysch 80 level and it back break retest of wave 1 and the weekly cloud as one would expect after it completed 5 waves in emotive fashion. The Australian dollar fell to its lowest value since December under 73 US cents. Resistance the Tenkan and Kijun like many commodities. The AUDUSD old three year high of 0.7820 from January 6 is a key option energy point playing out.

AUD W 7 30 2021

New Zealand Dollar - NZDUSD

The Kiwi had been consolidating after RBNZ policy mostly went as expected with no changes with interest rates or its large-scale asset purchases. NZD has mirrored the AUD in its wave (iii) spit and has since been correcting at the cloud much of the FOMO muster wave and retesting the 50% Fib & 4/8 confluence.  Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.

NZD W 730 2021

Canadian Dollar - USDCAD

The Loonie hit a 3 year high June and corrected that move in 3 waves with dollar and commodity currency weakness led by the AUD and NZD, We closed the week testing flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.

 CAD W 7 30 2021

Euro - EURUSD

The Euro continues to correct in what seems like eternal flags after broke the channel last May. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as EURUSD consolidates in the cloud. A question of degree on is whether 1 complete or 1 of 3?, Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.


EUR W 7 30 2021
 


British Pound - USDGBP

British pound classic retest of daily cloud break with magnet pull of cloud twist after ABC correction - will need Tenkan to break through Kijun for more strength. The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.

GBP D 7 30 2021
 

EuroPound - EURGBP

Back testing tenkan in a C or 3 after inconclusive X - symbolic of BREXIT? Kijun, 50wma and clouds resistance.

 EURGBP W 7 30 2021

Japanese Yen - USDJPY

USDJPY continues to test wave i after the recent weakness with Treasury yields. The 108.00 level should remain massive support for dollar-yen. Any change will come from the weekly Kijun as it breaks through the old channel. Use your #USDJPY Murrey 4/8 8/8 grid for now. #EURJPY #AUDJPY will determine risk on/off

JPY W 7 30 2021

 Mexican Peso USDMXN

The Peso continues in the long triangle and consolidated despite outside uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.

MXN W 7 30 2021

Turkish Lire USDTRY

The Turkish Lire after falling in 5 waves closed under the Tenkan with the weekly cloud Kijun and 50wma below. The cloud and gap below offer targets with resistance tankan and USDTRY highs.

 TRY W 7 30 2021

Bitcoin

Bitcoin has corrected impulsively since completing 5 waves up at +2/8 Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we saw extreme volatility to the top of the cloud which is now key as to what the recent bottom marked. Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking . (Recall what happened after the CME and CBOE futures starts)

We have seen what you would expect from a 5 wave impulse peak, a violent correction or completion. Use Murrey Math levels for corrections and targets as algos control the herd here, support is the cloud and sharp ABC, 1-2 moves.

 BTC W 7 30 2021

 

 

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 

Geopolitical Tinderbox Radar

Trade Imbalances IMF

Italy CDS
Turkey Geopolitical

Economic and Geopolitical Watch

Job Losses

United States Unemployment Rate

Over 14.5 million are collecting traditional jobless benefits, up from 1.7 million a year ago, with no end in sight. on Thursday, the Labor Department reported under 800,000 Americans applied for unemployment benefits for the second time since the crisis.  With the Covid shutdown we lost over 22 million jobs in March and April. Still a huge shortfall in jobs, and the big question is will they come back?

US Politics

July 28 - CNBC (Jacob Pramuk): “The Senate voted Wednesday to advance a bipartisan infrastructure plan, a critical step toward Democrats passing their sweeping economic agenda. Senators voted 67-32 to push the bill forward; 17 Republicans and all 50 Democrats voted yes. The vote opens the process to debate and amend the proposal, which would put $550 billion into transportation, broadband and utilities. While senators who backed the procedural motion could oppose a final package, Wednesday’s vote bodes well for its chances of passage.”

July 24 – New York Times (Jim Tankersley and Cecilia Kang): “President Biden has assembled the most aggressive antitrust team in decades, stacking his administration with three legal crusaders as it prepares to take on corporate consolidation and market power with efforts that could include blocking mergers and breaking up big companies. Mr. Biden’s decision this past week to name Jonathan Kanter to lead the Justice Department’s antitrust division is the latest sign of his willingness to clash with corporate America to promote more competition in the tech industry and across the economy. Mr. Kanter has spent years as a lawyer fighting behemoths like Facebook and Google on behalf of rival companies.”

The virus and psychological affect on domestic and trade relationships have impacted growth strategies with unexpected consequences   In a  fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.

Drought Watch

July 24 – Bloomberg: “Extreme weather is slamming crops across the globe, bringing with it the threat of further food inflation at a time costs are already hovering near the highest in a decade and hunger is on the rise. Brazil’s worst frost in two decades brought a deadly blow to young coffee trees in the world’s biggest grower. Flooding in China’s key pork region inundated farms and raised the threat of animal disease. Scorching heat and drought crushed crops on both sides of the U.S.-Canada border. And in Europe, torrential rains sparked the risk of fungal diseases for grains and stalled tractors in soaked fields.”

June 4 – CNBC (Emma Newburger): “Nearly three-fourths of the U.S. West is grappling with the most severe drought in the recorded history of the U.S. Drought Monitor, as hot and arid conditions are set to exacerbate the threat of wildfires and water supply shortages this summer. Parts of California, Nevada and Washington experienced sweltering triple-digit temperatures over the past week amid the drought… Conditions this spring are much worse than a year ago. In fact, nearly half of the continental U.S. is in a moderate to exceptional drought, marking the most significant spring drought in the country since 2013, according to... the National Oceanic and Atmospheric Administration.”

June 10 – Reuters (Andrea Januta and Daniel Trotta): “The reservoir created by Hoover Dam… has sunk to its lowest level ever, underscoring the gravity of the extreme drought across the U.S. West. Lake Mead, formed in the 1930s from the damming of the Colorado River at the Nevada-Arizona border about 30 miles (50 km) east of Las Vegas, is the largest reservoir in the United States. It is crucial to the water supply of 25 million people including in the cities of Los Angeles, San Diego, Phoenix, Tucson and Las Vegas. As of 11 p.m. PDT Wednesday, the lake surface fell to 1,071.56 feet above sea level, dipping below the previous record low set on July 1, 2016.”

June 18 – Wall Street Journal (Katherine Blunt and Jim Carlton): “States across the West are at risk of electricity shortages this summer as a crippling drought reduces the amount of water available to generate hydroelectric power. Some of the region’s largest reservoirs are at historically low levels after a dry winter and spring reduced the amount of snowpack and precipitation feeding rivers and streams. The conditions are especially dire in drought-stricken California, where officials say the reservoir system has seen an unprecedented loss of runoff this spring—800,000 acre-feet, or enough to supply more than a million households for a year.”

June 16 – CNBC (Emma Newburger): “An extreme heat wave gripping the western United States will intensify and spread this week, creating dangerous conditions amid the worst drought in the last two decades and raising concerns about severe wildfires and electrical grid failures. More than 40 million people in the country are forecast to experience triple-digit temperatures this week, and roughly 200 million people are projected to see temperatures over 90 degrees Fahrenheit. More than three-fourths of the West is in severe drought… Temperatures in some areas could surpass 120 degrees, and excessive-heat warnings are in place for several states. Nevada and Arizona are forecast to see record temperatures of 125 and 128 degrees, respectively.”

Global Watch

Hot Spots

  • July 29 – Wall Street Journal (Keith Zhai and Quentin Webb): “China moved to ease investor concerns about crackdowns on listed companies, with a top regulator privately telling global financial firms that Beijing will consider the market impact before introducing future policies... Fang Xinghai, vice chairman of the China Securities Regulatory Commission, spoke to representatives of global banks including Goldman Sachs… and UBS Group AG, as well as some investment firms on Wednesday evening… Yi Huiman, the securities regulator’s chairman, was also present at the closed-door meeting in Beijing, they added. After the meeting, and following a series of upbeat articles in state media, Chinese technology stocks listed in New York and Hong Kong jumped, helping pull broader markets higher and clawing back some of their recent steep declines.” July 28 - Bloomberg: “China’s central bank broke out of its usual pattern of daily liquidity operations, as it boosted a cash injection into the financial system, soothing market nerves frayed by regulatory crackdowns. The People’s Bank of China added 30 billion yuan ($4.6 billion) of liquidity into the financial system with seven-day reverse repurchase agreements…”
  • June 7 – Reuters: “A report on the origins of COVID-19 by a U.S. government national laboratory concluded that the hypothesis of a virus leak from a Chinese lab in Wuhan is plausible and deserves further investigation, the Wall Street Journal said…, citing people familiar… The study was prepared in May 2020 by the Lawrence Livermore National Laboratory in California and was referred to by the State Department when it conducted an inquiry into the pandemic's origins during the final months of the Trump administration…”
  • July 27 – Reuters (Nandita Bose): “President Joe Biden… warned that if the United States ended up in a ‘real shooting war’ with a ‘major power’ it could be the result of a significant cyber attack on the country, highlighting what Washington sees as growing threats posed by Russia and China. Cybersecurity has risen to the top of the agenda for the Biden administration after a series of high-profile attacks on entities such as network management company SolarWinds, the Colonial Pipeline company, meat processing company JBS and software firm Kaseya hurt the U.S. far beyond just the companies hacked. Some of the attacks affected fuel and food supplies in parts of the United States. ‘I think it's more than likely we're going to end up, if we end up in a war - a real shooting war with a major power - it's going to be as a consequence of a cyber breach of great consequence and it's increasing exponentially, the capabilities,’ Biden said…” July 29 – Reuters (Polina Ivanova): “Russia and China will conduct joint military exercises involving 10,000 troops in mid-August, the Interfax news agency cited the Russian defence ministry as saying… Moscow has sought to boost relations with China since 2014, when its political ties with the West sank to post Cold-War lows over the annexation of Crimea from Ukraine.”
  • ”Geopolitical tensions with China and India are on the rise as China increases military hardware near the China and India's Himalaya border, a potential negative shock not priced by markets.
  • June 9 – Bloomberg (Maria Eloisa Capurro and Max de Haldevang): “Latin America’s top central banks are coming under growing pressure to raise interest rates, as inflation stands way above the target ceiling in Brazil and Mexico. Consumer prices in both countries came in above forecasts in May, showing persistent inflationary shocks… The data came ahead of interest rate decisions in both countries. Brazil’s central bank is expected to lift interest rates by 75 bps next week, its third consecutive hike of that magnitude this year. Mexico’s central bank… will revisit later this month its decision to hold the benchmark rate at a near five-year low of 4%. Consumer prices in Brazil jumped 8.06% in May from a year earlier… In Mexico, annual inflation slowed slightly to 5.89%, still way above the 3% goal.”
  • June 7 – Reuters (Andrey Ostroukh): “Russia’s annual consumer inflation accelerated to 6.0% in May, overshooting expectations and adding arguments for tighter monetary policy days before the central bank’s rate-setting meeting… Inflation, the central bank’s main area of responsibility, accelerated to its highest since October 2016 when the central bank’s key interest rate was at 10%.”
  • June 17 – Reuters (Trevor Hunnicutt and Simon Lewis): “President Joe Biden on his first foreign foray sought to cast Russia not as a direct competitor to the United States but as a bit player in a world where Washington is increasingly pre-occupied by China. Aides said Biden wanted to send a message that Putin was isolating himself on the international stage with his actions, ranging from election interference and cyber-attacks against Western nations to his treatment of domestic critics. But Biden could struggle in a parallel attempt to stop the rot in U.S.-Russia relations and deter the threat of nuclear conflict while also talking down Russia, some observers said. ‘The administration wants to de-escalate tensions. It's not clear to me that Putin does,’ said Tim Morrison, a national security adviser during the Trump administration. ‘The only cards he has to play are those of the disruptor.’”
  • June 8 – Bloomberg (Jason Scott): “As worsening geopolitical tensions with China spill into trade reprisals, Australian Prime Minister Scott Morrison is heading to the U.K. to meet global leaders this week with a message: There’s strength in numbers. ‘Patterns of cooperation within the liberal rules-based order that has benefited us for so long are under renewed strain,’ Morrison said… In order to support a ‘world order that favours freedom over autocracy and authoritarianism,’ he urged ‘active cooperation among like-minded countries and liberal democracies not seen for 30 years.’
  • Since Australia-China relations went into a tailspin after Morrison’s government last year called for Beijing to allow independent investigators to probe the origins of the pandemic, he’s become a vocal proponent of bolstering partnerships between what he calls ‘like-minded democracies.’”
  • ‘Polarization among Chinese developers will deepen this year, and more developers are likely to suffer from debt failures,’ said John Sun, co-managing partner at Aplus Partners Management Co… Weaker developers ‘will need to sell assets to fight for survival, while some will likely default on their debt.’”
  • May 20 – Reuters: “German producer prices rose by 5.2% year-on-year in April, the biggest increase in nearly a decade…, in a further sign that supply bottlenecks are leading to increased inflation pressure in Europe’s largest economy. The rise in producer prices followed a 3.7% year-on-year increase in March and compared with a Reuters poll forecast of 5.1%. Compared to the previous month, producer prices were up 0.8% in April…”
  • May 20 – Associated Press (Vladimir Isachenkov): “Russian President Vladimir Putin alleged… some of the country’s foreign foes dream about biting off pieces of the country’s vast territory, warning that Moscow would ‘knock their teeth out’ if they ever try. In strong remarks during a conference call with officials, the Russian president noted that foreign efforts to contain Russia date from centuries ago. ‘In all times, the same thing happened: once Russia grew stronger, they found pretexts to hamper its development,’ Putin said… ‘Everyone wants to bite us or bite something off us, but those who would like to do so should know that we would knock their teeth out so that they couldn’t bite,’ the Russian leader said. ‘The development of our military is the guarantee of that.’”c
  • For emerging markets the lower US dollar ihad been helping the Fragile 5. Argentina and Turkey are still red letter risks with Covid however.
  • June 16 – Wall Street Journal (Caitlin Ostroff): “Early tightening of the Federal Reserve’s policy could ripple across emerging markets that are dependent on the U.S. dollar. Prime among them is Turkey. The Turkish lira has come under pressure in recent weeks as investors try to assess whether the country’s central bank will heed the demands of its president to cut interest rates. But a rate cut could drag the lira down further at the same time that the country’s high inflation rate is already diminishing the currency’s buying power. Turkey’s economy is among the most vulnerable to signs the Fed is going to raise rates since a stronger dollar makes it harder for Turkey to pay its foreign-currency debts.”

 

Trade Wars

  • Trade wars persist between Australia and China. The largest exporter of commodities and the worlds largest importer of commodities. China is experiencing record cold weather and it's beligerance is hurting shooting itself in the foot. Regional partners such as Japan and India have supported Australia's standing up to Chinese bullying.
  • In addition to rising tensions with China, the United States Trade Representative said last month said that the USTR is considering a new round of tariffs on $3.1 billion in European exports from France, Germany, Spain and the U.K..We are awaiting Biden's offical resposne.
  • Chairman Chi and President Biden had a phone hook last month week with the US saying they will review all policies but tariffs to stand in the meantime. China continued it's theats on the matter. 

 

Fat Tail Virus Risk

  • July 28 – Wall Street Journal (Sumathi Reddy): “The Delta variant of the virus that causes Covid-19 is often described as highly transmissible. So, what does that actually mean? Scientists studying Covid-19 say that Delta’s increased contagiousness means we need to update our thinking about exposure risks. Because people infected with Delta carry higher levels of virus than with earlier strains, the old rules of thumb no longer apply, they say—including the conventional wisdom that it takes 15 minutes of close contact with someone to get infected. Delta has already changed public-health advice about masking. The Centers for Disease Control and Prevention on Tuesday recommended that vaccinated people resume masking indoors in certain parts of the country. And local officials have begun to reinstate mask mandates, including in Los Angeles County and St. Louis County.”
  • July 28 - Bloomberg (Anna Edney): “The beginning of the school year is imminent, and superintendents around the country aren’t sweating bus schedules and bell times but Covid-19 vaccination rates and mask rules as the pandemic threatens to disrupt K-12 education for the third year running. School leaders face complex pressures with millions of students preparing to return. The spreading delta strain of the coronavirus is highly contagious, though it still appears that children typically fare better with the virus than their elders do. But they may bring deadly infections home.”
  • June 17 – CNBC (Holly Ellyatt): “The Covid-19 delta variant originally discovered in India is now spreading around the world, becoming the dominant strain in some countries, such as the U.K., and likely to become so in others, like the U.S… The World Health Organization said the variant had been detected in more than 80 countries and it continues to mutate as it spreads. The variant now makes up 10% of all new cases in the United States, up from 6% last week. Studies have shown the variant is even more transmissible than other variants. Scientists have warned that the data suggests the delta variant is around 60% more transmissible than the “alpha” variant… and is more likely to lead to hospitalizations…”
  • Fauci believes 70%-85% of the population must be vaccinated to reach herd immunity.

 

Banks

The major money cents banks released earnings with many record results for Q1. Mainly from trading and fees from IPO's and SPAC's. Rising interest rates also help the bottom line.

Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don't exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.

Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.

Banks are benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 to a record $60.113 trillion.

Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008.  

"Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch"

Akio Morita mistakes

The Week Ahead - Have a Trading Plan

Focus is on the US jobs report due Friday. Global PMI surveys are out as well as trade figures for the US, Canada and China. Central banks monetary policy from the UK, Australia, India, Thailand and Brazil. Earnings season continues with Berkshire Hathaway, General Motors and Uber due to report. Analysts will watch for the reaction to the Covid delta variances and affect on expectations and the global economy.

Central Banker and Geopolitics Watch speeches, reports and rate moves

Monday: August 2 2021

  • 10:00 Boston Fed President Eric Rosengren 14:00 Senior loan officer survey

Tuesday July 27 2021

  • 00:30 RBA Interest Rate Decision (Aug)
  • 00:30 RBA Rate Statement
  • 11:00 New York Fed release on household debt and credits

Wednesday August 3 2021

  • None seen

Thursday August 4 2021

  • 04:00 EUR ECB Economic Bulletin
  • 07:00 GBP BoE QE Total (Aug)
  • 07:00 GBP BoE Interest Rate Decision (Aug)
  • 19:00 AUD RBA Governor Lowe Speaks
  • 21:30 AUD RBA Monetary Policy Statement

Friday August 5 2021

  • 07:15 GBP BoE MPC Member Broadbent Speaks

Improvements in some economic indicators, such as home sales, manufacturing activity and  in employment data have bolstered investor confidence and helped extend the rally in stocks. Support in markets comes from the Fed’s balance sheet which has ballooned to $7.2 trillion, and the central bank committed to monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities.

Economic Events in the Week Ahead:

Sunday, August 1, 2021

  • 18:30 AUD AIG Manufacturing Index (Jul)
  • 19:00 AUD Manufacturing PMI
  • 20:30 KRW Nikkei Manufacturing PMI (Jul)
  • 20:30 JPY Manufacturing PMI (Jul)
  • 21:00 AUD MI Inflation Gauge (MoM)
  • 21:30 AUD ANZ Job Advertisements (MoM)
  • 21:45 CNY Caixin Manufacturing PMI (Jul)

Monday, August 2, 2021

  • All Day Holiday Canada - Civic Holiday
  • 01:00 INR Nikkei Markit Manufacturing PMI (Jul)
  • 01:00 JPY Household Confidence (Jul)
  • 02:00 EUR German Retail Sales (MoM) (Jun)
  • 02:30 CHF Retail Sales (YoY) (Jun)
  • 02:30 CHF CPI (MoM) (Jul)
  • 03:15 EUR Spanish Manufacturing PMI (Jul)
  • 03:30 CHF procure.ch PMI (Jul)
  • 03:45 EUR Italian Manufacturing PMI (Jul)
  • 03:50 EUR French Manufacturing PMI (Jul)
  • 03:55 EUR German Manufacturing PMI (Jul)
  • 04:00 EUR Manufacturing PMI (Jul)
  • 04:30 GBP Manufacturing PMI (Jul)
  • 04:30 HKD Retail Sales (YoY) (Jun)
  • 09:00 SGD Manufacturing PMI (Jul)
  • 09:45 USD Manufacturing PMI (Jul)
  • 10:00 Boston Fed President Eric Rosengren
  • 10:00 USD Construction Spending (MoM) (Jun)
  • 10:00 USD ISM Manufacturing PMI (Jul) 11:30
  • USD 3-Month Bill Auction
  • 11:30 USD 6-Month Bill Auction
  • 14:00 USD Loan Officer Survey
  • 19:00 KRW CPI (MoM) (Jul)
  • 19:30 JPY Tokyo CPI (YoY) (Jul)
  • 20:00 USD Total Vehicle Sales
  • 21:30 AUD Building Approvals (MoM) (Jun)
  • 21:30 AUD Private House Approvals (Jun)

Tuesday, August 3, 2021

  • 00:30 AUD RBA Interest Rate Decision (Aug)
  • 00:30 AUD RBA Rate Statement
  • 02:30 AUD Commodity Prices (YoY)
  • 03:00 CHF SECO Consumer Climate (Q3)
  • 03:00 EUR Spanish Unemployment Rate
  • 05:00 EUR PPI (MoM) (Jun)
  • 08:55 USD Redbook (YoY)
  • 09:30 CAD Manufacturing PMI (Jul)
  • 10:00 USD Durables Excluding Defense (MoM) (Jun)
  • 10:00 USD Factory Orders (MoM) (Jun)
  • 10:00 USD IBD/TIPP Economic Optimism
  • 11:30 NZD GlobalDairyTrade Price Index
  • 16:30 USD API Weekly Crude Oil Stock
  • 18:30 AUD AIG Construction Index (Jul)
  • 18:45 NZD Employment Change (QoQ) (Q2)
  • 18:45 NZD Labor Cost Index (QoQ) (Q2)
  • 18:45 NZD Unemployment Rate (Q2)
  • 19:00 AUD Services PMI
  • 20:30 JPY Services PMI (Jul)
  • 20:30 CNY Caixin Services PMI
  • 20:30 CNY Chinese Composite PMI
  • 20:30 HKD Manufacturing PMI (Jul)
  • 21:00 NZD ANZ Commodity Price Index (MoM)
  • 21:30 AUD Retail Sales (MoM) (Jun)
  • 21:45 CNY Caixin Services PMI (Jul)

Wednesday August 4, 2021

  • 02:45 EUR French Government Budget Balance (Jun)
  • 03:15 EUR Spanish Services PMI (Jul)
  • 03:45 EUR Italian Composite PMI (Jul)
  • 03:45 EUR Italian Services PMI (Jul)
  • 03:50 EUR French Markit Composite PMI (Jul)
  • 03:50 EUR French Services PMI (Jul)
  • 03:55 EUR German Composite PMI (Jul)
  • 03:55 EUR German Services PMI (Jul)
  • 04:00 EUR Italian Retail Sales (MoM) (Jun)
  • 04:00 EUR Markit Composite PMI (Jul)
  • 04:00 EUR Services PMI (Jul)
  • 04:30 GBP Composite PMI (Jul)
  • 04:30 GBP Services PMI (Jul)
  • 05:00 EUR Retail Sales (MoM) (Jun)
  • 07:00 USD MBA 30-Year Mortgage Rate
  • 07:00 USD MBA Mortgage Applications (WoW)
  • 07:00 USD MBA Purchase Index
  • 07:00 USD Mortgage Market Index
  • 07:00 USD Mortgage Refinance Index
  • 08:15 USD ADP Nonfarm Employment Change (Jul)
  • 08:30 CAD Building Permits (MoM) (Jun)
  • 09:45 USD Markit Composite PMI (Jul)
  • 09:45 USD Services PMI (Jul)
  • 10:00 USD ISM Non-Manufacturing PMI (Jul)
  • 10:30 USD Crude Oil Inventories
  • 19:50 JPY Foreign Bonds Buying
  • 19:50 JPY Foreign Investments in Japanese Stocks
  • 21:30 AUD Trade Balance (Jun)

Thursday, August 5, 2021

  • 01:00 SGD Retail Sales (MoM) 
  • 02:00 EUR German Factory Orders (MoM) (Jun)
  • 02:45 EUR French Industrial Production (MoM) (Jun)
  • 03:30 EUR IHS Markit Construction PMI (Jul)
  • 04:00 EUR ECB Economic Bulletin
  • 04:30 GBP Construction PMI (Jul)
  • 05:30 EUR German Car Registration (YoY)
  • 07:00 GBP BoE QE Total (Aug)
  • 07:00 GBP BoE Interest Rate Decision (Aug)
  • 07:30 USD Challenger Job Cuts (Jul)
  • 08:30 USD Continuing Jobless Claims
  • 08:30 USD Initial Jobless Claims
  • 08:30 USD Jobless Claims 4-Week Avg.
  • 08:30 USD Trade Balance (Jun)
  • 08:30 CAD Trade Balance (Jun)
  • 10:30 USD Natural Gas Storage
  • 11:30 USD 4-Week Bill Auction
  • 11:30 USD 8-Week Bill Auction
  • 18:30 AUD AIG Services Index (Jul)
  • 19:00 KRW Current Account (Jun)
  • 19:00 AUD RBA Governor Lowe Speaks
  • 19:30 JPY Average Cash Earnings (YoY)
  • 19:30 JPY Household Spending (MoM) (Jun)
  • 21:30 AUD RBA Monetary Policy Statement
  • 23:00 NZD Inflation Expectations (QoQ)

Friday, August 6, 2021

  • 01:00 JPY Coincident Indicator (MoM) (Jun)
  • 01:00 JPY Leading Index (MoM) (Jun)
  • 02:00 GBP Halifax House Price Index (YoY)
  • 02:00 EUR German Industrial Production (MoM) (Jun)
  • 02:45 EUR French Current Account (Jun)
  • 02:45 EUR French Non-Farm Payrolls (QoQ) (Q2)
  • 02:45 EUR French Reserve Assets Total (Jul)
  • 02:45 EUR French Trade Balance (Jun)
  • 03:00 EUR Spanish Industrial Production (YoY) (Jun)
  • 03:30 GBP Halifax House Price Index (MoM) (Jul)
  • 04:00 EUR Italian Industrial Production (MoM) (Jun)
  • 07:15 GBP BoE MPC Member Broadbent Speaks
  • 08:30 USD Average Hourly Earnings (MoM) (Jul)
  • 08:30 USD Average Weekly Hours (Jul)
  • 08:30 USD Government Payrolls (Jul)
  • 08:30 USD Manufacturing Payrolls (Jul)
  • 08:30 USD Nonfarm Payrolls (Jul)
  • 08:30 USD Participation Rate (Jul)
  • 08:30 USD Private Nonfarm Payrolls (Jul)
  • 08:30 USD U6 Unemployment Rate (Jul)
  • 08:30 USD Unemployment Rate (Jul)
  • 08:30 CAD Employment Change (Jul)
  • 08:30 CAD Full Employment Change (Jul)
  • 08:30 CAD Part Time Employment Change (Jul)
  • 08:30 CAD Participation Rate (Jul)
  • 08:30 CAD Unemployment Rate (Jul)
  • 10:00 USD Wholesale Inventories (MoM)
  • 10:00 CAD Ivey PMI (Jul)
  • 13:00 USD U.S. Baker Hughes Oil Rig Count
  • 15:00 USD Consumer Credit (Jun)
  • 15:30 USD CFTC speculative net positions

 

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats. 

 

 

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