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Can Consumer Confidence be Restored?

The Week That Was - What Lies Ahead?

Editorial

Friday brought a sharp sell off that shouldn't have been unexpected with waning confidence, now  backlash to Biden vaccine rule, coming on top of aleady plummeting popularity numbers. We have concerns of the Coronavirus and it's variants on the economy. Then on Friday we had verdicts from the Apple v. Epic games court case sending $AAPL down $5.

After August’s final reading of the University of Michigan’s key consumer sentiment index at 70.3 a pandemic-era low Augusts report due out Friday morning will be telling. Consensus forecasts calling for a September reading of 71.3, according to FactSet. Keep in mind this is all despite near record highs in a 7 month stock market rally.

We also got Central bank decisions from the ECB, Australia and Canada. What is most interesting is the Fed governors talk of tapering and monetary policy. News broke of Governors Kaplan and Rosengren playing the markets in millions. This and tapering talk after a dismal unemployment report underscore who disconnected these bankers and politicians are from main street and ethical reality.

Keep an eye on any affect from the deadline on the expiration of pandemic unemployment benefits for roughly 7.5 million Americans last Monday.

What is also feeding risk adverse positioning is the major market has gone 292 calendar days without a decline of 5% or more. This is nearly three times the average since World War II, according to data from CFRA's Sam Stovall. Granted this is because of the base effect from the Covid collapse and trillions of dollars pumped into it since, however it is an extraordinary move nevertheless.

Valuations defy gravity, the S&P 500's price-to-earnings ratio on a forward 12-month basis stands at 21.3, a 35% premium to its 20-year average, according to Refinitiv Datastream.

Inflation isn't going away, August's producer price index showed a jump of 8.3% year over year, due in part to supply chain constraints, after July's largest annual increase in over a decade. We get consumer inflation this week, economists expect CPI to rise at a 0.4% pace month over month. The coronavirus Delta variant hindering growth with these price rises and consumer restraint. Analysts at Morgan Stanley cut third-quarter U.S. gross domestic product to a gain of 2.9% from a 6.5% increase last week.

Back to why the market took the poor NFP reading in it's stride, we know from Fed Chair Powell's Jackson Hole speech  he feels substantial further progress has been met on inflation but not yet employment, which suggested tapering will start later this year and is data dependant. Powell also differentiates tapering criteria from rate-hike criteria.

Some sage advice from your parents, "Know what's under your hood, not what they tell you, learn to drive a manual first before driving an automatic"

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 seems to be the last hope for many. What happened if the insular American masses gather what is unfolding globally?

 

The three credit events that have our attention remain our key watches.

Firstly credit spreads on corporate bonds.

U.S. high-yield spreads (to Treasuries) and CDS have also turned more closely correlated to Chinese Credit developments.

September 10 – Bloomberg (Brian Smith): “The U.S. investment-grade primary market completed its busiest week in history after an eyebrow-raising 54 high-grade companies sold debt in just four days to break the record for number of deals… Weekly volume of $77.8bn ranks fifth all time, trailing only four weeks in 2020 when issuers rushed to the capital markets in search of liquidity… Bond sales nearly doubled projections of $40bn-45bn, accounting for more than half of the $140bn expected for the entire month…”

September 10 – Bloomberg (Lisa Lee): “The leveraged finance market is bracing for a surge in new deals, fueled by booming demand for M&A financing and investors hungry to get their hands on anything offering an alternative to rock-bottom interest rates. September could see as much as $110 billion of U.S. high- yield bond and leveraged loan sales, according to bankers…, making it one of the busiest months in years. The leveraged loan market already saw 12 deals launch on Tuesday, and there’s little sign the deluge is set to slow anytime soon… The impending onslaught adds to what’s already been a historic year. U.S. junk-bond issuance of about $346 billion is on pace to surpass last year’s record $432 billion. Leveraged loan supply of around $400 billion, excluding repricings, is already the most since Bloomberg began tracking the data in 2013.”

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

Evergrande has over $300 billion of debt. Evergrande and the faltering apartment Bubble remain a clear danger.

September 9 – Bloomberg: “Regulators in Beijing have signed off on a China Evergrande Group proposal to renegotiate payment deadlines with banks and other creditors, paving the way for a temporary reprieve as the cash-strapped developer struggles to come to grips with more than $300 billion of liabilities. China’s Financial Stability and Development Committee, the nation’s top financial regulator, gave its blessing to Evergrande’s plan last month after the property giant missed interest and principal payments on some loans, a person familiar with the matter said…”

Evergrande’s four-year bond yields rose to 62% in Wednesday trading, before the above news of lender forbearance sparked a relief rally (yields ended the week at 52.5%). Other troubled developer bonds also reversed higher. Yet an index of Chinese high-yield bonds ended the week with yields not far off highs since March 2020.

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

Three-month Treasury bill rates ended the week at 0.0375%. Two-year government yields added a basis point to 0.21% (up 9bps y-t-d). Five-year T-note yields rose three bps to 0.82% (up 46bps). Ten-year Treasury yields increased two bps to 1.34% (up 43bps). Long bond yields slipped a basis point to 1.94% (up 29bps). Benchmark Fannie Mae MBS yields gained one basis point to 1.80% (up 46bps). Given the shakey China and global market developments the safe haven argument was sullied. This raises the question of how much support the Treasury market has left to offer in the event of an intensifying “risk off” dynamic. There’s always an Ebb and Flow associated with financial instability, and there is a Beijing-directed hiatus in the evolving Credit crisis. With a relatively tranquil week for China (and Asia & EM), Treasuries turned more attentive to U.S. overheating.”

After last 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  recent ECB and FOMC meet and greets 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

  • The S&P500 dropped 1.7% (up 18.7% y-t-d)
  • Dow fell 2.2% (up 13.1%). Nasdaq100 lost 1.4% (up 19.8%)
  • S&P 400 Midcaps dropped 2.7% (up 14.9%)
  • Small cap Russell 2000 slumped 2.8% (up 12.8%)
  • Transports fell 2.6% (up 14.9%).
  • Utilities declined 1.5% (up 8.6%).
  • Banks lost 1.3% (up 27.7%)
  • Broker/Dealers sank 2.9% (up 24.6%)
  • Semiconductors slipped 0.4% (up 22.2%).
  • Biotechs dropped 2.0% (up 2.5%).
  • With bullion dropping $40, the HUI gold index sank 5.8% (down 18.8%).


US Indices W 9 10 2021

 

Highlights - Europe Stocks

  • France's CAC40 declined 0.4% (up 20.0%).
  • German DAX  fell 1.1% (up 13.8%).
  • Spain's IBEX 35  dropped 1.9% (up 7.7%).
  • Italy's FTSE MIB index lost 1.5% (up 15.5%)
  • U.K.'s FTSE dropped 1.5% (up 8.8% y-t-d)..

 Highlights - Asia Stocks

  • Japan's Nikkei Equities Index surged 4.3% (up 10.7% y-t-d).
  •  South Korea's Kospi index dropped 2.4% (up 8.8%).
  • India's Sensex equities index added 0.3% (up 22.1%).
  • China's Shanghai Exchange jumped 3.4% (up 6.6%).
  • Australia's S&P/ASX200 finished the week down 1.55% with spectre of COVID-19. Sharp falls in iron ore prices on Monday and Wednesday hit miners BHP -3.15%, Rio Tinto -4.7%. Uncertainties about China’s steel outputs and its construction industry after Moody’s and Fitch downgraded property giant China Evergrande as fears rose about the company’s ability to repay its debts. Energy stocks rallied after Oil Search and Santos confirmed the terms of a planned $21 billion merger, which would propel the newly formed company into the top 20 largest oil and gas producers globally.

Image

 Highlights - Emerging Markets Stocks 

  • EM equities mixed.
  • Brazil's Bovespa index fell 2.3% (down 4.0%),
  • Mexico's Bolsa declined 0.6% (up 16.9%)
  • Turkey's Borsa Istanbul National 100 index fell 2.0% (down 2.6%).
  • Russia's MICEX equities index was little changed (up 21.7%).

IPO and SPAC mania having break but remains 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 SPX Stocks W 9 10 2021

 S&P 500 Index Technical Analysis via @KnovaWave

SPX rejected the top of the daily trend & broke through the Tenkan to retest +1/8 rebalancing the Chikou after a sharp ABC to 1 month lows back into all time highs remaining in the clear channel as it tries to test +2/8. 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. No fear is the driving element

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 9 10 2021
 

SPX failed to break weekly highs (+5/8) reversing to test the recent break up. Each new high has evolved after testing the Tenkan which is key support. Look for failure if that doesn't hold. Extensions are difficult to time, keep it simple. #ES_F #SPY

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 9 10 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.

 NASDAQ 100

Nasdaq tested and rejected to top of the upward channel to test the consolidation triangle. Support Tenkan to Kijun which has helped fuel the more extreme moves. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

 Nas W 9 10 2021

Russell 2000


 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.

 RUT 9 10 2021

Semiconductors SMH

The Semiconductor segment represented by $SMH cleanly with Murray Math levels & Tenkan keys. Previous high above +4/8 and Chikou rebalance patterning. Powered by Kijun spit to as the reaction from above reverted with the retest at triple top patterning. Reaction from above reverted with $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX mainly pushing up

SMH W 9 10 2021

 

NVidia $NVDA

Following the announcement of NVDA 4/1 split some levels off the energy break. NVidia hasn't looked back since the $NVDA 4/1 split, We saw a power move off the $200 retest (old $800)! It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.

NVDA W 9 10 2021
 

Apple $AAPL

Apple's Friday dump appears to be a healthy rinse on the weekly. Support from previous highs, resistance is ATH. Potential impulse from upcoming #AppleEvent Remember the impact $AAPL has, at least short term on all the major indices.

 AAPL W 9 10 2021

Amazon $AMZN

Amazon high locked at Kijun seems ...MM +3/8 and from there has built a large weekly flag after failing near the previous high. Watch Tenkan through Kijun for a bigger move down. Support is weekly cloud and resistance previous flag and Tenkan.

 AMZN W 9 10 2021

ARKK ETF

The $ARKK ETF trading clinically, tested triangle breakdown & Tenkan after bouncing off 50 WMA. Support cloud, needs to clear Tenkan to test Kijun for bulls. We saw ATH in Nasdaq and #SPX and a big week for #RUT - needs to flow through to #ARK to break up soon rather than later.

ARKK W 9 11 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 

Casey's General Stores, Korn Ferry, GameStop and Lululemon Athletica, Hooker Furniture, Hovnanian and J Jill, American Outdoor Brands and Dave & Buster's

This week we hear from:

  • Monday starts us off with
  • Palo Alto Networks analyst meeting, Zoom conference, Oracle earnings
  • Tuesday with Earnings from
  • Crocs investor day
  • Wednesday Earnings Include
  • Cisco investor day
  • Thursday Earnings Include
  • Friday Earnings include
  • Manchester United earnings

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

“U.S. companies are rushing to cash in on soaring stock prices. It isn’t just the white-hot market for initial public offerings. Companies are returning to the public markets to issue shares and raise cash from investors at the same time that existing shareholders are tapping the public market to unload their stockholdings at a record clip. Companies including Zoom Video Communications Inc. and Norwegian Cruise Line Holdings Ltd. have sold billions of dollars of shares this year… There have been 556 follow-on offerings, or stock sales by companies or existing shareholders, among U.S. companies this year, the most since 1996, according to Dealogic... They have raised a total of $133 billion. Behind the boom in share issuance? An ascendant stock market.”  August 25 – Wall Street Journal (Gunjan Banerji):

IPO Wrap

US IPO Weekly Recap:

IPO launches abound in the post-Labor Day frenzy

Five blank check companies went public this past week. While there were no traditional IPO pricings, more than 10 companies launched as the IPO market gears up for a busy September. The pipeline remained active with eight IPOs and eight SPACs submitting initial filings. Five SPACs raised $860 million led by SILVERspac (SLVRU), which raised $250 million to acquire a fintech or proptech business.

Eight IPOs submitted initial filings. Singaporean tech services provider TDCX (TDCX) filed for a $400 million US IPO. Restaurant chain First Watch Restaurant Group (FWRG), drug discovery platform Exscientia (EXAI), and urban home developer Thomas James Homes (TJH) all filed to raise $100 million. ADHD drug developer Cingulate (CING) filed to raise $58 million, online brokerage Zhong Yang Financial Group (TOP) filed to raise $28 million, kitchen and bath products supplier FGI Industries (FGI) filed to raise $18 million, and electric powersport vehicle maker Volcon (VLCN) filed to raise $15 million. Eight SPACs submitted initial filings led by Marblegate Acquisition (GATEU), which filed to raise $300 million to target post-restructuring businesses.

US IPO Week Ahead:

The Fall IPO market kicks off with a 10 IPO week.

After a wave of launches in the short holiday week, 10 IPOs are scheduled to raise over $3 billion in the week ahead.

Tech consultancy Thoughtworks (TWKS) plans to raise $700 million at a $6.3 billion market cap. This agile software developer provides premium, end-to-end digital strategy, design, and engineering services to more than 300 enterprise customers. The company grew revenue at a 14% CAGR from 2017 to 2020, and expanded margins in 2020 and the 1H21.

Swiss running shoe brand On Holding (ONON) plans to raise $591 million at a $5.9 billion market cap. On is a global provider of premium athletic footwear, apparel, and accessories that are designed using sustainable materials and its proprietary technology. The company has demonstrated growth and profitability, though it faces significant competition from other well-known sportswear brands.

After ending talks to go public via SPAC, Sportradar Group (SRAD) plans to raise $504 million at a $7.9 billion market cap. Covering over 750,000 events annually across 83 sports, this Swiss company provides software, data, and content to sports leagues, betting operators, and media companies. Sportradar is profitable, and growth accelerated in the 1H21 as live sports resumed.

Drive-thru coffee chain Dutch Bros (BROS) plans to raise $400 million at a $3.3 billion market cap. This Oregon-based company has a chain of 471 drive-thru coffee shops in the Western US, and it has been able to maintain a track record of same-store sales growth as it has expanded to new states. Insiders received pre-IPO dividends and will sell shares back to the company.

Healthcare intelligence platform Definitive Healthcare (DH) plans to raise $350 million at a $3.3 billion market cap. This company provides a healthcare commercial intelligence and analytics platform, helping its customers to analyze, navigate, and sell into the complex healthcare ecosystem. Unprofitable with strong growth, Definitive Healthcare will be leveraged post-IPO.

Identity management platform ForgeRock (FORG) plans to raise $248 million at a $2.1 billion market cap. The company provides identity and access management software, with a platform to provision, authenticate, and govern all types of digital identities. Unprofitable with high sales and marketing expenses, ForgeRock is a leading next-gen provider in the multi-billion-dollar identity and access market.

Immunology biotech DICE Therapeutics (DICE) plans to raise $160 million at a $550 million market cap. This biotech is developing oral small molecule therapies to treat chronic diseases in immunology and other therapeutic areas. DICE plans to initiate a Phase 1 trial of its lead candidate S011806, an oral antagonist with a variety of immunology indications.

Surgical robotics developer PROCEPT BioRobotics (PRCT) plans to raise $127 million at a $1.1 billion market cap. This commercial-stage company develops surgical robotic systems for minimally-invasive urologic surgery with an initial focus on treating benign prostatic hyperplasia. PROCEPT BioRobotics is highly unprofitable and saw revenue increase more than sixfold in the 1H21.

Oncology biotech Tyra Biosciences (TYRA) plans to raise $101 million at a $584 million market cap. This preclinical biotech is developing FGFR kinase inhibitors for cancer, specifically solid tumors. Tyra’s lead candidate is initially focused on bladder cancer, and the company expects to submit an IND for it in mid-2022.

Micro-cap gas delivery service EzFill Holdings (EZFL) plans to raise $25 million at a $104 million market cap. This mobile-fueling company provides an on-demand fuel delivery service in Florida via mobile app. Highly unprofitable with explosive growth, EzFill states that it is the dominant player in the South Florida market.

 IPO Calendar W 9 10 2021

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 $2.325 billion, and junk bond funds posted positive flows of $710 million (from Lipper).
  • Three-month Treasury bill rates ended the week at 0.0375%.
  • Two-year government yields added a basis point to 0.21% (up 9bps y-t-d).
  • Five-year T-note yields rose three bps to 0.82% (up 46bps).
  • Ten-year Treasury yields increased two bps to 1.34% (up 43bps).
  • Long bond yields slipped a basis point to 1.94% (up 29bps).
  • Benchmark Fannie Mae MBS yields gained one basis point to 1.80% (up 46bps).

 

 TNX W 9 10 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 added a basis point to 2.88% (up 2bps y-o-y).
  • Fifteen-year rates increased one basis point to 2.19% (down 18bps).
  • Five-year hybrid ARM rates slipped a basis point to 2.42% (down 69bps).
  • Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up one basis point to 3.05% (down 6bps).

Highlights - Federal Reserve

  • Federal Reserve Credit last week expanded $9.8bn to $8.471 TN. Over the past 104 weeks, Fed Credit expanded $4.590 TN, or 123%. Fed Credit inflated $5.506 Trillion, or 196%, over the past 461 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week dropped $10.7bn to an almost 10-month low $3.471 TN.
  • "Custody holdings" were up $72.3bn, or 2.1%, y-o-y.
  • Total money market fund assets slipped $5.2bn to $4.504 TN. Total money funds increased $36bn y-o-y, or 0.8%.
  • Total Commercial Paper increased $0.6bn to $1.163 TN. CP was up $153bn, or 15.2%, 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 dipped a basis point to 0.77% (up 15bps y-t-d).
  • Ten-year Portuguese yields added a basis point to 0.23% (up 20bps).
  • Italian 10-year yields declined one basis point to 0.70% (up 16bps).
  • Spain's 10-year yields were unchanged at 0.33% (up 29bps).
  • German bund yields rose three bps to negative 0.33% (up 24bps).
  • French yields gained two bps to 0.00% (up 34bps).
  • The French to German 10-year bond spread narrowed one to 33 bps.
  • U.K. 10-year gilt yields rose four bps to 0.76% (up 56bps).

Highlights - Asian Bonds

  • Japanese 10-year "JGB" yields increased one basis point to 0.05% (up 3bp y-t-d).

 

Part C: Commodities

Highights

  • Bloomberg Commodities Index was little changed (up 24.4% y-t-d).
  • WTI crude increased 43 cents to $69.72 (up 44%).
  • Gasoline was unchanged (up 53%),
  • Natural Gas jumped 4.8% (up 95%).
  • Copper rose 2.7% (up 27%).
  • Wheat sank 5.2% (up 8%).
  • Corn declined 1.2% (up 7%).
  • Bitcoin sank $4,392 this week to $45,432 (up 56%).
  • 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 Exchange Dry Index surged 6.1% to 3,864 on Friday, its highest since September 3rd and extending gains for a second straight session, amid firmer rates for larger segments due to brighter prospects for both supply and demand. The Baltic Dry Index fell about 2% in the second week of September.
  • The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, advanced 12.2% to 5,567;
  • Panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains rose 2.4% to 3,595, its highest in about a week. Among smaller vessels, the supramax index extended its fall to a straight eight sessions and dropped 9 points to a more than three-week low of 3,170.
  • Source: Baltic Exchange

 BDI W 9 10 2021

Copper

Copper continued to rise after testing the lower weekly channel +2.7% on the week & is up 27% YTD. #HG shrugged off demand concerns from resurgence in Covid-19 supply disruptions. The power spits of +8/8 and +2/8 were rebalanced by the Tenkan breaking the Kijun with 50wma and cloud below. Copper had been a leader in the risk on movement for commodities.

 Copper W 9 10 2021


 Corn

CORN W 9 10 2021 

 Lumber

 Lumber W 9 10 2021

Soybeans

SOY W 9 10 2021

US Crude Oil (WTI)

4 Hour:: WTI chopped all week in a continuation pattern since regaining the 240 cloud after it bounced from -1/8 to rebalance the Chikou at +2/8 to close the week. Continue to watch Kijun reactions and Murrey Math confluence.


 WTI 240 9 10 2021

Daily:  Price action continued from last week's WTI completing its correction of the May breakup in 3 waves (or X) & rebounded from daily cloud base to close back at it just above the 50dma. Support is Tenkan and Kijun as the market rebalances at the Chikou. We got a repeat as fractals continue with oil.

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 - hence the fractal energies reverberations. Support is previous lows, Murrey Math levels and Fib cluster. Support is the 50dma, kijun, tenkan and prev high confluence. ;

WTI D 9 10 2021
 

Weekly: The weekly Tenkan gives us a clearer view of the rally off the clear ABC off 50wma and the acceleration and recapture of Tenkan and Kijun. Key is the rebalanced Chikou indicative of crowd behavior and 50% fib failure 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 and 5 waves develop. 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 9 10 2021
 

Oil 2020 2021

Oil 2014 2021

Oil 2020 2021

US Natural Gas (Henry Hub)

Daily: US Natural Gas tested the Daily +2/8 after natgas exploded out of the corrective ABC pennant of a (IV) off the 50dma to new highs as expected with impulse the Tenkan crossed Kijun depicting power. Notice the fractals of 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. Tenkan, Kijun and 50dma support.

Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term.

 NG D 9 10 2021

Weekly: Natural gas smoothly continued to it's first target, it's now a question of degree, 3 or 5? its move in a series of 3's spitting the Weekly Tenkan for Chikou to rebalance. Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan. 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 9 10 2021


  Key Energy Reports

 

Precious Metals

Highlights

  • Spot Gold dropped $40 to $1,788 (down 5.9%).
  • Silver sank 3.9% to $23.74 (down 10.1%).

Gold

Gold vulnerability remains, hanging on at base of weekly cloud after another rejection of the tenkan, Kihun and 50wma after wave (ii) alt gains favor. Still listless after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.

 Gold W 9 10 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 9 10 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 increased 0.6% to 92.58 (up 3.0% y-t-d).
  • Majors for the week For the week on the downside, the Australian dollar declined 1.4%, the Canadian dollar 1.3%, the euro 0.6%, the Swiss franc 0.5%, the British pound 0.2%, the Japanese yen 0.2%
  • Minors for the week for the week on the upside, the South African rand increased 0.7% Chinese renminbi gained 0.17% versus the dollar (up 1.29% y-t-d)and the Mexican peso 0.2%. For the week on the downside, the Swedish krona 1.0%, the Brazilian real 1.0%, the South Korean won 1.0%, the New Zealand dollar 0.6%, and the Norwegian krone 0.1%. The

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 9 10 2021

New Zealand Dollar - NZDUSD

The Kiwi mirrored the AUD in its wave (iii) spit and has corrected at the cloud much of the FOMO muster wave and retested the 50% Fib & 4/8 confluence. Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.

NZD W 9 10 2021

Canadian Dollar - USDCAD

The Loonie is holding the tenkan after a 3 year high in June and corrected that in 3 waves led by the AUD and NZD. #oil price impacting direction. Watch flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.

 CAD W 9 10 2021

Euro - EURUSD

Euro continues to correct in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as #EURUSD consolidates in the cloud. Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.

 EUR W 9 10 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 W 9 10 2021
 

EuroPound - EURGBP

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

 EURGBP W 9 10 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 9 10 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 9 10 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 9 10 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 9 10 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

Each Thursday the Labor Department reports high numbers of Americans that applied for unemployment benefits.  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

  • September 2 – Associated Press (Lisa Mascaro): “Centrist Sen. Joe Manchin said… Congress should take a ‘strategic pause’ on more spending, warning that he does not support President Joe Biden’s plans for a sweeping $3.5 trillion effort to rebuild and reshape the economy. The West Virginia Democrat’s pointed opposition was stronger than his past statements and taps into a grab-bag of arguments over inflation, national security and other concerns to deny Biden and his party a crucial vote on the emerging package. The timing of his comments comes as lawmakers are laboring behind the scenes to draft the legislation ahead of this month’s deadlines. ‘Instead of rushing to spend trillions on new government programs and additional stimulus funding, Congress should hit a strategic pause on the budget-reconciliation legislation,’ Manchin wrote…”
  • September 2 – Wall Street Journal (Kristina Peterson and Kate Davidson): “Democrats’ efforts to pass trillions of dollars in new spending by the end of September are colliding with a pair of other looming deadlines: keeping the government funded and raising the federal borrowing limit to avoid defaulting on debt payments. Time is running short against a backdrop of deep partisan disagreements over President Biden’s agenda, complicating the path forward on Capitol Hill. With most of Democrats’ focus turned to crafting an expansive $3.5 trillion package of healthcare, education and climate provisions, lawmakers and congressional aides said they would almost certainly have to prevent a partial government shutdown Oct. 1 by passing a short-term extension of its current funding, known as a continuing resolution, or CR.”

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

  • September 1 – Reuters (Gabriel Stargardter and Lisandra Paraguassu): “Brazilian Vice President Hamilton Mourao said… a severe drought could lead to energy rationing in Brazil, contradicting other officials who have said that such a step would not be necessary. Brazil, one of the world's agricultural superpowers, is suffering from one of its worst droughts in a century. The lack of rainfall has emptied hydroelectric reservoirs, fanned inflation and hurt farmers. The government has given incentives to use less energy but says rationing is not expected. ‘There may have to be some rationing,’ Mourao told reporters in Brasilia, although he said the government had taken necessary measures to prevent blackouts.”
  • August 24 – Wall Street Journal (Kirk Maltais): “Drought is blistering key U.S. cash crops, further elevating prices for staples including corn and wheat. The punishing dynamics of a torrid summer were evident this month on the Pro Farmer Crop Tour… Driving along state Route 14 outside of Verdigre, Neb., Randy Wiese turned to see a farmer harvesting hay. The piles were small. ‘That farmer is sick to his stomach,’ said Mr. Wiese, who farms 800 acres of soybeans and corn… Extreme heat is baking most of the U.S. North Dakota, South Dakota, Minnesota, Iowa and Nebraska all contain areas of extreme drought… North Dakota and Minnesota, in particular, are experiencing near-record lows in soil moisture… As a result, many crops planted this spring are wilting. Some 63% of the U.S. spring wheat crop is in poor or very poor condition, versus 6% at this time last year…”
  • August 23 – Bloomberg (Lauren Coleman-Lochner): “The extreme drought that has gripped much of the western United States has shriveled crops, stoked wildfires, and drained reservoirs across several states. According the U.S. Drought Monitor, more than 60 million people are currently living under drought conditions in the region. For some cities, lack of water could be a fiscal as well as an environmental disaster: Prolonged droughts are threatening the creditworthiness of local governments, utilities and irrigation districts. According to a new report from S&P Global Ratings…, drought-struck municipalities may generate less income from their water systems because there’s less to sell or they may have higher costs to provide adequate supplies.”
  • August 8 – Axios (Rebecca Falconer): “More than 100 large wildfires are burning across nearly 2.3 million acres of the U.S. West, as forecasters warn Americans to brace for another extreme heat wave this week. Driving the news: ‘Widespread air quality alerts and scattered Red Flag Warnings stretch from the Northwest and Northern Rockies to the High Plains, as well as throughout parts of central California,’ the National Weather Service said…”
  • August 11 – Associated Press (Nicholas K. Geranios): “The wheat harvest on Marci Green’s farm doesn’t usually begin until late August, but a severe drought stunted this year’s crop and her crews finished harvesting last week because she didn’t want what had grown so far to shrivel and die in the heat. It’s the same story across the wheat country of eastern Washington state, a vast expanse of seemingly endless stretches of flatlands with rolling hills along its edges that produces the nation’s fourth largest wheat crop. It’s been devastated by a drought the National Weather Service has classified as ‘exceptional’ and the worst since 1977. ‘This is definitely the worst crop year we have had since we started farming 35 years ago,’ said Green, whose family is the sixth generation on the same farming land just south of the city of Spokane.”
  • 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

  • September 1 – Reuters (Yimou Lee): “China's armed forces can ‘paralyse’ Taiwan's defences and are able to fully monitor its deployments, the island's defence ministry said, offering a stark assessment of the rising threat posed by its giant neighbour. Beijing is stepping up military activities around the island… It has never renounced the use of force to bring democratic Taiwan under its control. In its annual report to parliament on China's military…, Taiwan's Defence Ministry presented a far graver view than it did last year, when the report said China still lacked the capability to launch a full assault on Taiwan. This year's report said that China can launch what it termed ‘soft and hard electronic attacks’, including blocking communications across the western part of the first island chain, the string of islands that run from the Japanese archipelago, through Taiwan and down to the Philippines.”
  • August 30 – Reuters (Francois Murphy and Josh Smith): “North Korea appears to have restarted a nuclear reactor that is widely believed to have produced plutonium for nuclear weapons, the U.N. atomic watchdog said…, highlighting the isolated nation's efforts to expand its arsenal.” September 3 – Bloomberg (Jonathan Tirone): “U.S. and European efforts to coax Iran back into nuclear negotiations as soon as this month are being blunted by support the Islamic Republic’s already emboldened leaders are receiving from China and Russia. The result is that three years after former President Donald Trump imposed his ‘maximum pressure’ policy, Iran has enriched uranium close to weapons grade while its economy is showing some signs of stabilizing with the help of Beijing and Moscow, even as crucial oil exports remain heavily sanctioned.”
  • August 26 – Bloomberg (Isabel Reynolds, Emi Nobuhiro, and Cindy Wang): “Lawmakers from Japan’s ruling party backed Taiwan’s entry into a Pacific trade pact meant to counter China’s influence, in the latest effort by Tokyo to bolster the democratically ruled island. Liberal Democratic Party lawmakers pledged to support Taiwan’s addition to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership during first-of-their-kind security talks with Taiwanese counterparts Friday.”

 

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.
  • August 30 – Reuters (Francois Murphy and Josh Smith): “North Korea appears to have restarted a nuclear reactor that is widely believed to have produced plutonium for nuclear weapons, the U.N. atomic watchdog said…, highlighting the isolated nation's efforts to expand its arsenal.”
  • September 3 – Bloomberg (Jonathan Tirone): “U.S. and European efforts to coax Iran back into nuclear negotiations as soon as this month are being blunted by support the Islamic Republic’s already emboldened leaders are receiving from China and Russia. The result is that three years after former President Donald Trump imposed his ‘maximum pressure’ policy, Iran has enriched uranium close to weapons grade while its economy is showing some signs of stabilizing with the help of Beijing and Moscow, even as crucial oil exports remain heavily sanctioned.”

 

Coronavirus Fat Tail Virus Risk

  • August 30 – Bloomberg (Antony Sguazzin): “South African scientists said they identified a new coronavirus variant that has a concerning number of mutations. The so-called C.1.2. variant was first identified in May in the South African provinces of Mpumalanga and Gauteng… The mutations on the virus ‘are associated with increased transmissibility’ and an increased ability to evade antibodies, the scientists said. ‘It is important to highlight this lineage given its concerning constellation of mutations.’”
  • August 25 – Wall Street Journal (Talal Ansari): “U.S. Covid-19 hospitalizations have surpassed 100,000 for the first time since January, nearly doubling since the start of August. While the figure remains below the country’s winter peak, hospitals in some parts of the U.S. are straining under the load, and officials in states including Georgia, Kentucky, Tennessee and Idaho have requested extra personnel and resources. The number of patients in hospital beds with confirmed and suspected Covid-19 cases hit 100,517 on Tuesday… That is up from 53,529 on Aug. 1.”
  • 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

Key inflation reports next week from the US and UK. Also, important data to follow include retail sales and industrial production figures from the US and China, employment reports from the UK and Australia, and foreign trade data for the Eurozone and Japan. US data to also watch for are foreign trade prices, business inventories, NY Empire State Manufacturing Index, Philadelphia Fed Manufacturing Index, overall net capital flows, and the government's monthly budget statement.

The expectation is that the Fed will announce in November or later in the fall that it will taper back its $120 billion a month bond program, starting at the end of the year or early next year. The tapering is expected to be gradual and continue for 10 months or more. The Fed’s own forecasts show its first rate hikes happening in 2023. No new information came from the Fed when officials gathered virtually for their annual symposium in Jackson Hole, Wyoming. But action was not expected to be taken until the September meeting or later.

Central Banker and Geopolitics Watch speeches, reports and rate moves

Monday: September 6 2021

      • None seen

Tuesday September 7 2021

      • 00:30 RBA Interest Rate Decision (Sep)
      • 00:30 RBA Rate Statement
      • 03:30 BoE MPC Member Saunders Speaks
      • 21:30 RBA Chart Pack Release

Wednesday September 8 2021

      • 04:10 RBA Assist Gov Debelle Speaks
      • 10:00 BoC Interest Rate Decision
      • Tentative BOC Press Conference
      • 13:10 FOMC Member Williams speaks at moderated discussion on economic trends and the outlook for the North Country at a virtual event hosted by St. Lawrence University.
      • 14:00 Fed Beige Book
      • Dallas Fed President Robert Kaplan discussion on economic developments and implications for monetary policy before a virtual town hall hosted by the Federal Reserve Bank of Dallas.

Thursday September 9 2021

      • 04:35 RBA Assist Gov Debelle Speaks
      • 07:45 Deposit Facility Rate (Aug)
      • 07:45 ECB Marginal Lending Facility
      • 07:45 ECB Monetary Policy Statement
      • 07:45 ECB Interest Rate Decision (Aug)
      • 08:30 ECB Press Conference
      • 11:05 FOMC Member Daly will present a paper in "The Economic Gains from Equity" discussion before Brookings Institution's virtual Papers on Economic Activity Fall 2021 Conference.
      • 12:00 BoC Gov Macklem Speaks
      • 14:00 FOMC Member Yew York Fed president Williams, Minneapolis Kashkari, Boston Rosengren, Dallas Kaplan will give remarks at a virtual event hosted by all 12 District Banks of the Federal Reserve System entitled "Racism and the Economy: Focus on Health."

Friday September 10 2021

      • 06:30 RUB Interest Rate Decision (Sep)
      • 08:00 RUB CBR Press Conference

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, September 12, 2021

  • 18:45 NZD FPI (MoM) (Aug)
  • 19:50 JPY BSI Large Manufacturing Conditions (Q3)
  • 19:50 JPY PPI (MoM) (Aug)

Monday, September 13, 2021

  • 02:00 EUR German WPI (MoM) (Aug)
  • Tentative CNY M2 Money Stock (YoY)
  • Tentative CNY New Loans
  • Tentative CNY Outstanding Loan Growth (YoY)
  • Tentative CNY Chinese Total Social Financing
  • 07:00 USD OPEC Monthly Report
  • 11:30 USD 3-Month Bill Auction
  • 11:30 USD 6-Month Bill Auction
  • 14:00 USD Federal Budget Balance (Aug)
  • 17:00 KRW Export Price Index (YoY) (Aug)
  • 17:00 KRW Import Price Index (YoY) (Aug)
  • 21:30 AUD House Price Index (QoQ) (Q2)
  • 21:30 AUD NAB Business Confidence (Aug)
  • 21:30 AUD NAB Business Survey (Aug)
  • 23:00 KRW M2 Money supply (Jul)

Tuesday, September 14, 2021

  • 00:30 JPY Capacity Utilization (MoM) (Jul)
  • 00:30 JPY Industrial Production (MoM) (Jul)
  • 02:00 GBP Average Earnings (Jul)
  • 02:00 GBP Claimant Count Change (Aug)
  • 02:00 GBP Employment Change 3M/3M (MoM) (Jul)
  • 02:00 GBP Unemployment Rate (Jul)
  • 02:30 CHF PPI (MoM) (Aug)
  • 03:00 EUR Spanish CPI (MoM) (Aug)
  • 03:00 EUR Spanish HICP (MoM) (Aug)
  • Tentative CNY FDI 25.50%
  • 05:30 ZAR Gold Production (YoY) (Jul)
  • 05:30 ZAR Mining Production (Jul)
  • 06:00 USD NFIB Small Business Optimism (Aug)
  • 08:30 USD CPI (MoM) (Aug)
  • 08:30 USD Real Earnings (MoM) (Aug)
  • 08:30 CAD Manufacturing Sales (MoM) (Jul)
  • 08:55 USD Redbook (YoY)
  • 11:00 USD Cleveland CPI (MoM) (Aug)
  • 18:45 NZD Current Account (QoQ) (Q2)
  • 19:00 KRW Unemployment Rate (Aug)
  • 19:00 JPY Reuters Tankan Index (Sep)
  • 19:50 JPY Core Machinery Orders (MoM) (Jul)
  • 19:55 KRW Trade Balance (Aug)
  • 20:30 AUD Westpac Consumer Sentiment (Sep)
  • 21:30 CNY House Prices (YoY) (Aug)
  • 22:00 CNY Fixed Asset Investment (YoY) (Aug)
  • 22:00 CNY Industrial Production (YoY) (Aug)
  • 22:00 CNY Chinese Industrial Production YTD (YoY) (Aug)
  • 22:00 CNY Retail Sales (YoY) (Aug)
  • 22:00 CNY Chinese Retail Sales YTD (YoY) (Aug)

Wednesday, September 15, 2021

  • 00:30 JPY Tertiary Industry Activity Index (MoM)
  • 02:00 GBP CPI (MoM) (Aug)
  • 02:00 GBP PPI Input (MoM) (Aug)
  • 02:00 GBP PPI Output (MoM) (Aug)
  • 02:00 GBP RPI (MoM) (Aug)
  • 02:00 EUR German WPI (MoM)
  • 02:45 EUR French CPI (MoM)
  • 02:45 EUR French HICP (MoM) (Aug)
  • 04:00 EUR Italian CPI (MoM) (Aug)
  • 04:00 EUR Italian HICP (MoM) (Aug)
  • 04:30 GBP House Price Index (YoY)
  • 05:00 EUR Industrial Production (MoM) (Jul)
  • 05:00 EUR Labor Cost Index (YoY) (Q2)
  • 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
  • 08:30 USD Export Price Index (MoM) (Aug)
  • 08:30 USD Import Price Index (MoM) (Aug)
  • 08:30 USD NY Empire State Manufacturing Index (Sep)
  • 08:30 CAD CPI (MoM) (Aug)
  • 09:15 USD Capacity Utilization Rate (Aug)
  • 09:15 USD Industrial Production (MoM) (Aug)
  • 09:15 USD Manufacturing Production (MoM) (Aug)
  • 10:30 USD Crude Oil Inventories
  • 18:45 NZD GDP (QoQ) (Q2)
  • 19:50 JPY Foreign Bonds Buying
  • 19:50 JPY Foreign Investments in Japanese Stocks
  • 19:50 JPY Trade Balance (Aug)
  • 21:00 AUD MI Inflation Expectations
  • 21:30 AUD Employment Change (Aug)
  • 21:30 AUD Full Employment Change (Aug)
  • 21:30 AUD Participation Rate (Aug)
  • 21:30 AUD RBA Bulletin
  • 21:30 AUD Unemployment Rate (Aug)

Thursday, September 16, 2021

  • 02:00 GBP BoE FPC Meeting Minutes
  • 02:00 GBP Car Registration (MoM) (Aug)
  • 02:00 EUR Italian Car Registration (MoM)
  • 02:00 EUR German Car Registration (MoM) (Aug)
  • 02:00 EUR French Car Registration (MoM) (Aug)
  • 03:00 CHF SECO Economic Forecasts
  • 04:00 EUR Italian Trade Balance (Jul)
  • 04:30 HKD Unemployment Rate (Aug)
  • 05:00 EUR Trade Balance (Jul)
  • 08:15 CAD Housing Starts (Aug)
  • 08:30 USD Continuing Jobless Claims
  • 08:30 USD Initial Jobless Claims
  • 08:30 USD Jobless Claims 4-Week Avg.
  • 08:30 USD Philadelphia Fed Manufacturing Index (Sep)
  • 08:30 USD Philly Fed Prices Paid (Sep)
  • 08:30 USD Retail Sales (MoM) (Aug)
  • 08:30 CAD ADP Nonfarm Employment Change
  • 08:30 CAD Foreign Securities Purchases (Jul)
  • 08:30 CAD Foreign Securities Purchases by Canadians (Jul)
  • 08:30 CAD Wholesale Sales (MoM) (Jul)
  • 10:00 USD Business Inventories (MoM) (Jul)
  • 10:30 USD Natural Gas Storage
  • 11:30 USD 4-Week Bill Auction
  • 11:30 USD 8-Week Bill Auction
  • 16:00 USD US Foreign Buying, T-bonds (Jul)
  • 16:00 USD Overall Net Capital Flow (Jul)
  • 16:00 USD TIC Net Long-Term Transactions (Jul)
  • 16:00 USD TIC Net Long-Term Transactions including Swaps (Jul)
  • 18:30 NZD Business NZ PMI (Aug)
  • 19:30 JPY National Core CPI (YoY) (Aug)
  • 20:30 SGD Trade Balance

Friday, September 17, 2021

  • 02:00 GBP Retail Sales (MoM) (Aug)
  • 04:00 EUR Current Account (Jul)
  • 05:00 EUR Construction Output (MoM) (Jul)
  • 05:00 EUR CPI (MoM) (Aug)
  • 10:00 USD Michigan 5-Year Inflation Expectations (Sep)
  • 10:00 USD Michigan Consumer Sentiment (Sep)
  • 13:00 USD U.S. Baker Hughes Oil Rig Count
  • 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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