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Strange times But remember The Joker once served as the https://traderscommunity.com/administrator/index.php?option=com_content&view=article&layout=edit&id=2559#wf-editor-wysiwygIranian ambassador for the United Nations.
Record High Stocks, Fed and Yields
The Week That Was – What Lies Ahead?
The week began on Monday with a sell-off on a disappointing read on consumer sentiment, inflation and Covid-related growth scare which brought uber bears out of hibernation with 10-year Treasury yield hitting a low of 1.12% early Tuesday before reversing and with it stocks. As the benchmark yield rose, stocks rallied. The ECB on Thursday put into action the new monetary policy strategy with revised guidance on interest rates with policy shifts tied to hitting its new 2% inflation goal, and said it won’t necessarily react immediately if prices do exceed that 2% target for a ‘transitory’ period.
Three credit events got our attention. Firstly credit spreads on corporate bonds.
“Risk-off sentiment that drove Monday’s sell-off on Wall Street and rally in U.S. Treasuries widened credit spreads on corporate bonds to multi-month highs. The spread on the ICE BofA U.S. High Yield Index, a commonly used benchmark for the junk bond market, spiked from 318 bps on Friday to 344 bps as of the last update late Monday, its highest level since late March, according to Refinitiv data. It was also the biggest widening in a day since last June.” July 20 – Reuters (Karen Pierog)
The second again was the world’s most indebted developer, China Evergrande Group shares and bonds hit new lows on Tuesday and fears spilling over into other parts of the offshore market as investors cut their exposure to riskier borrowers. Property developers are leading falls among China’s offshore junk bonds with groups such as Kaisa Group Holdings and Guangzhou R&F Properties bonds.
The third was falling bond yields German bund yields ended the week at a five-month low negative 0.42%. Italian yields fell another nine bps to 0.62% and Greek yields down two bps to 0.65%. Ten-year Treasury yields ended the week at 1.28%, despite heightened inflationary pressures and further price increases. Clearly QE and associated liquidity excess have severely distorted both global bond and stock markets.
Nevermind fear was quelled by week’s end with stocks are hovering at all-time highs. The three major U.S. stock indexes saw fresh closing records. The Dow closed above 35,000 for the first time on Friday. The S&P 500 gained 1% to close at 4,411.79, and the Nasdaq Composite ended the day up 1%. On the data front the Markit manufacturing PMI hit another record high of 63.1 in July, easily beating market forecasts, although price pressures and material shortages continue to weigh.
A big week ahead for catalysts with The Federal Reserve meeting with the usual obsession with tapering back its bond buying. About 165 S&P 500 companies are due to report in the biggest week of the earnings season, with tech heavyweights Tesla, Apple, Microsoft, and Alphabet among them. Thursday’s report of second-quarter gross domestic product will have the eyes of the bond market upon it.
Noticably this power move to new highs replicates last month’s after the S&P 500 significantly tested and held its 50-day moving average at 4182.14 to start the week. It hasn’t closed below its 50-day moving average since early March.
Looking at the bounce this week it brings me back to 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
Recall Powell did address the extraordinarily uncertain economic, inflation and policy backdrops at the last FOMC.
“I think we have to be humble about our ability to understand the data. It’s not a time to try to reach hard conclusions about the labor market, about inflation, about the path of policy.” “The problem now is that demand is very, very strong. Incomes are high. People have money on their—in the bank accounts. Demand for goods is extremely high and it hasn’t come down. We’re seeing the service sector reopening, and so you’re seeing prices are moving back up off their lows there.”
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.
- 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 gained 2.0% (up 17.5% y-t-d)
- Dow increased 1.1% (up 14.6%).
- Nasdaq100 advanced 2.9% (up 17.3%).
- S&P 400 Midcaps jumped 2.1% (up 15.9%)
- Russell 2000 rallied 2.1% (up 11.9%)
- Utilities declined 0.8% (up 4.5%)
- Banks slipped 0.3% (up 23.7%), while the Broker/Dealers added 0.9% (up 21.3%).
- Transports rose 1.8% (up 18.0%)
- Semiconductors surged 4.3% (up 17.3%).
- Biotechs recovered 1.6% (up 0.2%).
- With bullion down $10, the HUI gold index fell 2.3% (down 13.6%).
Highlights – Europe Stocks
- U.K.’s FTSE equities index added 0.3% (up 8.8% y-t-d).
- France’s CAC40 rallied 1.7% (up 18.3%).
- German DAX equities index increased 0.8% (up 14.2%).
- Spain’s IBEX 35 equities index jumped 2.5% (up 8.0%).
- Italy’s FTSE MIB index rose 1.3% (up 13.0%).
Highlights – Asia Stocks
- Japan’s Nikkei Equities Index fell 1.6% (up 0.4% y-t-d)
- South Korea’s Kospi index fell 0.7% (up 13.3%).
- India’s Sensex equities index dipped 0.3% (up 10.9%).
- China’s Shanghai Exchange increased 0.3% (up 2.2%).
- Australia’s S&P/ASX 200 edged 0.1% higher to close at 7394.4 on Friday to a new all-time high. The market added 0.6% cent for the week despite heavy losses on Monday and Tuesday
Highlights – Emerging Markets Stocks
- EM equities mainly higher.
- Brazil’s Bovespa index declined 0.7% (up 5.1%),
- Mexico’s Bolsa added 0.2% (up 14.1%).
- South Korea’s Kospi index fell 0.7% (up 13.3%). India’s Sensex equities index dipped 0.3% (up 10.9%). China’s Shanghai Exchange increased 0.3% (up 2.2%).
- Turkey’s Borsa Istanbul National 100 index lost 0.9% (down 8.5%).
- Russia’s MICEX equities index fell 0.9% (up 13.5%).
From rebalance as a natural reversion after the bull mania we have surged with another speculative rush. This after Dow ended the second quarter with a 17.8% gain, the biggest quarterly rally since the first quarter of 1987, when it ripped up 21.6%. IS that enough to rebalnce and go higher? The S&P 500 had its biggest one-quarter surge since the fourth quarter of 1998, soaring nearly 20%. The Nasdaq Composite jumped 30.6% for the quarter, its best quarterly performance since 1999.
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
S&P 500 Index Technical Analysis via @KnovaWave
SPX rallied again to new all time highs, after testing and spitting tenkan san & 8/8 Murrey Math at the Daily Cloud & with a positive Chikou retest. We have a number of alternatives of degree (iii) or (iv) of 5, Keep it simple support is Tenkan and Kijun as Chikou rebalances.
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.
Weekly SPX spat the break channel it had been tracing since the break of v of (III) or (V). Key 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
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.
Watching Semiconductors cleanly with Murrey Math levels and Tenkan – keys are previous high at +1/8 and Chikou rebalance patterning. Weekly +2/8 around 250 key number recognition factor also. Below Kijun spat to provide support as the reaction from above continued.
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!
Amazon high was MM +3/8 and from there has built a large weekly flag which it closed under after breaking the Tenkan and Kijun, watch if Kijun closes through Tenkan for a bigger move up. From there we have seen a series of work around that up and down. More coiling in affect above the cloud.
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
IBM, J.B. Hunt, AutoNation, Cal-Maine Foods, Steel Dynamics, Tractor Supply, F.N.B. Corporation, Travelers, Netflix, United Airlines, UBS, Chipotle, Synchrony Financial, Citizens Financial, Halliburton, Canadian National Railway, Interactive Brokers, Intuitive Surgical, ManpowerGroup, KeyCorp, Johnson and Johnson, Coca-Cola, Verizon, CSX, Whirlpool, Texas Instruments, Novartis, Nasdaq, Harley-Davidson, Anthem, Baker Hughes, Northern Trust, Tenet Healthcare, Discover Financial, SLM, Netgear, Intel, AT&T, Blackstone, Twitter, Snap, Biogen, Dow, Union Pacific, Abbott Labs, American Airlines, DR Horton, Southwest Air, Capital One, Boston Beer, Celanese, VeriSign, Honeywell, American Express, Norsk Hydro, Kimberly-Clark, Schlumberger, Regions Financial
This week we hear from:
- Monday starts us off with
- Tuesday with Earnings from
- Wednesday Earnings Include
- Thursday Earnings Include
- Friday Earnings include
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
These are the highlighted earnings for the US this week. Please check daily schedules for more reports.
US IPO Weekly Recap:
Life sciences, software, and more ride the summer wave in a 19 IPO week July 23, 2021 Weekly Recap IPO activity continued at a record pace this past week with 19 IPOs, marking the fourth week in 2021 with at least 17 US IPOs, the most since the year 2000. With the August lull around the corner, the pipeline saw less activity than usual; five IPOs and 13 SPACs submitted initial filings.
Protein therapy platform Absci (ABSI) priced at the midpoint to raise $200 million at a $1.6 billion market cap. Absci currently has nine active programs across seven partners, which include Merck and Astellas, for which it has either negotiated or plans to negotiate license agreements. Highly unprofitable, 90% of its tech development revenue came from a single partner in the 1Q21. Absci finished up 43%.
Couchbase (BASE) upsized and priced above the range to raise $200 million at a $1.2 billion market cap. Couchbase provides a NoSQL database that enables enterprises and developers to build and run applications across the cloud, on-premise, hybrid, or mobile and edge environments. The company has a sticky customer base, though it remains unprofitable due to high S&M costs. Couchbase finished up 42%.
Legal software provider CS Disco (LAW) priced above the upwardly revised range to raise $224 million at a $1.9 billion market cap. Fast growing and unprofitable, DISCO provides a cloud-native, AI-powered platform that simplifies the legal process and case management. The company has improved margins, though they may contract in the near term as expenses increase post-COVID. CS Disco finished up 40%.
Latin America’s VTEX (VTEX) priced above the range to raise $361 million at a $3.8 billion market cap. VTEX operates a B2C e-commerce platform for enterprise customers that natively combines commerce, order management, and marketplace functionality. The company has demonstrated growth, though investments in SG&A and R&D have weighed on profits. VTEX finished up 34%.
Ryan Specialty Group (RYAN) priced at the midpoint to raise $1.3 billion at a $6.1 billion market cap. The company assists in the placement of hard-to-place risks for retail brokers, and the sourcing, onboarding, underwriting, and servicing of those risks for carriers. The company has demonstrated strong organic growth and EBITDAC margin, though it is highly leveraged post-IPO. Ryan Specialty finished up 22%.
Water infrastructure company Core & Main (CNM) priced at the low end to raise $698 million at a $4.8 billion market cap. Profitable with steadily improving margins, Core & Main distributes water infrastructure products that connect 4,500 suppliers to over 60,000 municipal, non-residential, and residential customers. The company is reliant on municipal projects, and it is leveraged post-IPO. Core & Main finished up 19%.
Kaltura (KLTR) priced at the midpoint to raise $150 million at a $1.4 billion market cap. Kaltura provides live, real-time, and on-demand video products to a wide range of businesses including educational institutions, and media and telecom companies. Thanks to the growing adoption of virtual events, the company saw revenue expand in the 1Q21, though gross margin contracted. Kaltura finished up 18%.
HR software provider Paycor HCM (PYCR) priced above the range to raise $426 million at a $4.0 billion market cap. Paycor provides human capital management software to SMBs, covering the payroll process and key HR functionality. While net revenue retention fell in the FY20, the company is targeting a large addressable market and has a track record of profitability. Paycor finished up 17%.
Cell analysis instruments provider Cytek BioSciences (CTKB) upsized and priced at the midpoint to raise $285 million at a $2.3 billion market cap. Cytek’s core products are the Aurora and Northern Lights systems, which are full spectrum flow cytometers that deliver high-resolution cell analysis. Profitable with explosive growth, the company has placed over 750 instruments to over 620 companies around the world as of 3/31/21. Cytek finished up 10%.
Miami community bank U.S. Century Bank (USCB) priced at the low end to raise $40 million at a $183 million market cap. U.S. Century has 11 banking centers and a digital banking platform, offering a range of commercial products and services for SMBs in the Miami-Dade metro area. As of March 31, 2021, total assets were $1.6 billion. U.S. Century Bank finished up 8%.
Fitness franchisor Xponential Fitness (XPOF) downsized and priced below the range to raise $120 million at a $529 million market cap. Xponential Fitness is the largest boutique fitness franchisor in the US with over 1,750 studios operating across nine distinct brands. While the company’s business was impacted by the pandemic in 2020, preliminary 2Q21 results show 60%+ revenue growth and adjusted EBITDA swinging positive. Xponential finished up 2%.
Gene editing biotech Caribou Biosciences (CRBU) upsized and priced at the high end to raise $304 million at a $972 million market cap. Caribou Biosciences is using its novel CRISPR platform to develop genome-edited allogenic cell therapies. Its lead program is a CAR-T cell therapy with PD-1 removed from the cell surface that is currently in a Phase 1 trial for relapsed or refractory B cell non-Hodgkin lymphoma. Caribou finished up 2%.
Instructure Holdings (INST) priced at the midpoint to raise $250 million at a $2.9 billion market cap. Instructure states that it is the LMS market leader in both higher education and paid K-12, with over 6,000 global customers across 90 countries. Profitable on an EBIT basis with solid growth, the company’s gross margin contracted in the last two fiscal years and most recent quarter. Instructure finished up 2%.
Content marketing platform Outbrain (OB) priced below the range to raise $160 million at a $1.2 billion market cap. Outbrain’s platform helps engage users and monetize visits by gathering over 1 billion data events each minute. The company is profitable and has demonstrated growth at scale. However, its revenue is concentrated, and it does not have long-term commitments from advertisers. Outbrain finished flat.
Gambling.com Group (GAMB) priced at the low end of the downwardly revised range to raise $42 million at a $288 million market cap. Profitable and fast growing, Gambling.com is a performance marketing company and a digital marketing services provider active exclusively in the online gambling industry, with a principal focus on iGaming and sports betting. Gambling.com finished flat.
Beverage brand Zevia (ZVIA) downsized and priced at the midpoint to raise $150 million at a $986 million market cap. Zevia provides six product lines of zero calorie, zero sugar, naturally sweetened beverages in the US and Canada. The company has demonstrated consistent growth and a steadily expanding retail footprint, though it operates in an increasingly crowded market. Zevia finished down 2%.
Swiss health tech company SOPHiA GENETICS (SOPH) priced at the midpoint to raise $234 million at a $1.2 billion market cap. SOPHiA GENETICS provides a cloud-based SaaS platform capable of analyzing data and generating insights from complex multimodal data sets and different diagnostic modalities. As of 3/31/21, it had approximately 240 applications used for precision medicine across various disease areas. SOPHiA finished down 7%.
Brazil’s Zenvia (ZENV) priced at the low end to raise $150 million at a $508 million market cap. The company’s software platform facilitated the flow of communication for more than 10,190 customers throughout Latin America as of March 31, 2021. While it achieved a net revenue expansion rate of nearly 110%, Zenvia’s EBITDA turned negative in the 1Q21. Zenvia finished down 22%.
Immunotherapy biotech HCW Biologics (HCWB) priced at the low end to raise $56 million at a $290 million market cap. The company’s molecule HCW9201 is currently being evaluated for generation of memory-like NK cell products in two ongoing Phase 2 trials for relapsed/refractory acute myeloid leukemia, with preliminary data expected in the 2H21. HCW Biologics finished down 35%.
Five SPACs raised $895 million led by Vince Cubbage’s TortoiseEcofin Acquisition III (TRTL.U), which raised $300 million to acquire a business in the energy transition and sustainability arena.
US IPO Week Ahead:
Robinhood’s billion-dollar deal headlines a 17 IPO week July 23, 2021 Week Ahead After another week of record activity, the IPO market is expected to remain hot with 17 IPOs scheduled for the week ahead.
Long-awaited retail brokerage Robinhood Markets (HOOD) plans to raise $2.2 billion at a $36.8 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.
Vehicle battery maker Clarios International (BTRY) plans to raise $1.7 billion at a $9.7 billion market cap. The company manufactures low-voltage vehicles batteries globally, stating that it has the number one market position in the Americas and EMEA. Profitable on an EBIT basis, Clarios saw revenue growth accelerate in the 1H FY21 after turning negative in the FY20 due to COVID.
Altice’s ad-tech platform Teads (TEAD) plans to raise $751 million at a $4.6 billion market cap. Teads operates a cloud-based programmatic digital advertising platform for advertisers and publishers. Profitable with solid growth, Teads provides monetization services to about 3,100 publishers.
Education software provider PowerSchool Holdings (PWSC) plans to raise $750 million at a $3.7 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.
After withdrawing its IPO attempt in 2018, Dole (DOLE) plans to raise $559 million at a $2.0 billion market cap. This leading fruit and vegetable company offers over 300 products sourced from over 30 countries to over 80 countries globally. Slow growing and profitable, Dole’s offering is being made in connection with its merger with Total Produce.
Language learning platform Duolingo (DUOL) plans to raise $460 million at a $4.1 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.
Traeger (COOK) plans to raise $400 million at a $2.2 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.
Israeli anti-fraud firm Riskified (RSKD) plans to raise $333 million at a $3.1 billion market cap. This company provides e-commerce fraud protection for enterprises. Growing but unprofitable, Riskified saw its free cash flow swing positive in the 1Q21.
Financial software provider MeridianLink (MLNK) plans to raise $300 million at a $2.1 billion market cap. MeridianLink offers a cloud-based digital lending and account opening platform for mid-market community banks and credit unions. Although business is cyclical, the company saw double-digit organic growth in the FY20 due to strong mortgage activity.
Smart home integration system Snap One Holdings (SNPO) plans to raise $270 million at a $1.5 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.
Specialty funding solutions provider Preston Hollow Community Capital (PHCC) plans to raise $200 million at a $2.3 billion market cap. This company is a market leader in providing specialized impact financing solutions for projects of significant social and economic importance to local communities in the US. It serves a variety of areas, including infrastructure, education, healthcare, and housing.
Vaccine biotech Icosavax (ICVX) plans to raise $150 million at a $590 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.
Cancer biotech Candel Therapeutics (CADL) plans to raise $85 million at a $398 million market cap. Candel’s most advanced candidate is currently in a Phase 3 trial in combination with prodrug valacyclovir for newly diagnosed localized prostate cancer with an intermediate or high-risk for progression. The company expects to complete enrollment in the 3Q21 with a final data readout in 2024.
Rare disease biotech Rallybio (RLYB) plans to raise $81 million at a $465 million market cap. This clinical stage biotech is developing antibody therapies for rare diseases. Its lead program is currently being evaluated to treat fetal and neonatal alloimmune hrombocytopenia in a Phase 1/2 trial.
Ocean Biomedical (OCEA) plans to raise $50 million at a $506 million market cap. The company is currently pursuing preclinical programs in oncology, fibrosis, infectious disease, and inflammation that have been licensed directly or indirectly from Brown University, Stanford University, and Rhode Island Hospital.
After postponing in November 2020, IN8bio (INAB) plans to raise $44 million at a $215 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.
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 outflows of $1.198 billion, and junk bond funds posted negative flows of $742 million (from Lipper).
we are now 92 weeks and $4.23 trillion into the latest bout of QE, liquidity injections that commenced in the pre-pandemic backdrop of near record stock prices and a multi-decade low unemployment rate.
- Three-month Treasury bill rates ended the week at 0.0425%.
- Two-year government yields slipped two bps to 0.20% (up 8bps y-t-d).
- Five-year T-note yields dropped six bps to 0.71% (up 35bps).
- Ten-year Treasury yields dipped one basis point to 1.28% (up 36bps).
- Long bond yields were unchanged at 1.92% (up 27bps). Benchmark
- Fannie Mae MBS yields declined three bps to 1.72% (up 38bps).
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 sank 10 bps to a five-month low 2.78% (down 23bps y-o-y).
- Fifteen-year rates fell 10 bps to 2.12% (down 42bps).
- Five-year hybrid ARM rates increased two bps to 2.49% (down 60bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates slipping a basis point to 3.03% (down 15bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week surged $97.5bn to a record $8.174 TN. Over the past 97 weeks, Fed Credit expanded $4.448 TN, or 119%. Fed Credit inflated $5.363 Trillion, or 191%, over the past 454 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week dropped $12.0bn to $3.526 TN.
- “Custody holdings” were up $124.2bn, or 3.6%, y-o-y.
- Total money market fund assets gained $7.2bn to $4.487 TN. Total money funds declined $102bn y-o-y, or 2.2%.
- Total Commercial Paper increased $2.8bn to $1.132 TN. CP was up $111bn, or 10.9%, 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 declined two bps to 0.65% (up 3bps y-t-d).
- Ten-year Portuguese yields fell seven bps to 0.19% (up 16bps).
- Italian 10-year yields dropped nine bps to 0.62% (up 8bps).
- Spain’s 10-year yields slipped two bps to 0.27% (up 22bps).
- German bund yields sank seven bps to negative 0.42% (up 15bps).
- French yields dropped seven bps to negative 0.09% (up 25bps).
- The French to German 10-year bond spread was little changed at 33 bps.
- U.K. 10-year gilt yields declined four bps to 0.58% (up 39bps).
- U.K.’s FTSE equities index added 0.3% (up 8.8% y-t-d).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields declined less than a basis point to 0.02% (unchanged y-t-d).
Part C: Commodities
- Bloomberg Commodities Index gained 1.3% (up 22.6% y-t-d).
- WTI crude recovered 26 cents to $72.07 (up 49%).
- Gasoline jumped 1.7% (up 63%),
- Natural Gas surged 10.5% (up 60%).
- Copper rose 1.8% (up 25%).
- Wheat declined 1.2% (up 7%).
- Corn fell 1.6% (up 12%).
- Bitcoin rallied $2,522 this week to $33,786 (up 16.2%).
- 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 3.1% to 3,199 on Friday, the highest since July 13th and extending gains for the third session
- The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes climbed 7.9% to an over 3-week high of 3,915.
- The supramax index went up 29 points to 2,871.
- The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains however fell 0.9% to 3,528, the lowest in a month.
- For the 3rd week of July, the Baltic index advanced 5.3%, as a surge in capesize rates (+13.8%) outweighed losses in the panamax segment (-2.9%).
- Source: Baltic Exchange
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 above the median line – beware of possible H&S Break retest would be +4/8
US Crude Oil (WTI)
4 Hour:: 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 blasting thru Kijun and 50ma. Targets 8/8 +2/8 MM. Support Kijun
Daily: WTI after completing 5 waves 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.
Weekly: WTI rebounded after corrected off previous highs in clinical ABC negating Monday’s 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
US Natural Gas (Henry Hub)
Daily: US Natural Gas August Nymex contract continues to rally impulsively as expected. NG rallied throughout the week and topped the $4.00 for first time since 2018 settling at $4.060/MMBtu Friday, up nearly 11% from the prior week. 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 has moved over the Tenkan and Kijun through the 50dma, which are now support. It accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. Support is tenkan and cloud. Watch for ABC formations.
Weekly: Natty has moved in a series of 3’s since spat 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.
Key Energy Reports
- Into The Vortex – EIA Reports Build of 49 Bcf in Natural Gas Inventories
- Around The Barrel – Crude Stocks at Cushing Lowest Since Jan 2020
- Halliburton Earnings Rise as Multi Year Upcycle Unfolds
- UAE and Saudi Arabia Reach Compromise For OPEC+ To Boost Oil Production
- OPEC Monthly Oil Market Report June 2021
- Spot Gold slipped 0.5% to $1,802 (down 5.1%).
- Silver fell 1.9% to $25.18 (down 4.6%).
After its manic rise to +5/8 weekly and rebalance of the Kikou in 5 waves then tested and failed the Tenkan, kijun and 50 wma. We found support at the wave 1 confluence of the higher degree 5, To be bullish we would need to get and stay above the cloud. We overcame the negative divergence between the weekly chikou, Silver spread and the recent highs BUT NOT yet Tenkan & Kijun fails.Murrey Math resistance. From there does the 5 play out? Watch Fibs and chikou.
Silver is back at the cloud and 50wma providing support after the correction following the squeeze which forced Gold/Silver which buoyed silver in the PM space, eventually we reversed with a double top. Silver fractal of the sharp C up to breakdown level above the cloud fed by divergence from gold reverting. The weekly Tenkan crossing the Kijun would signal more downside should support fail.
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.”
- For the week,the U.S. Dollar Index added 0.2% to 92.91 (up 3.3% y-t-d).
- Majors for the week on the upside the Canadian dollar increased 0.4%. On the downside, the Australian dollar 0.5%, the Japanese yen 0.4%, the New Zealand dollar 0.4%, the euro 0.3%, the Singapore dollar 0.3%, the Norwegian krone 0.2%, the British pound 0.1%
- Minors for the weeknil on the upside. On the downside, the South African rand declined 2.8%, the Brazilian real 1.6%, the South Korean won 0.9%, the Mexican peso 0.9%, the Singapore dollar 0.3%, the Norwegian krone 0.2%, and the Swedish krona 0.1%. The Chinese renminbi slipped 0.03% versus the dollar this week (up 0.71% y-t-d).
Australian Dollar – AUDUSD
Aussie dollar completed a 5 at the pysch 80 level and it back doing a break retest of 8/8 and the weekly tenkan. as one would expect after it completed 5 waves in emotive fashion.The Australian dollar fell to its lowest value since December, touching 75.12 US cents. The greenback extended gains It has closed over the 50 Wma in 5 waves but between 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.
New Zealand Dollar – NZDUSD
The Kiwi had been strengthening 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 closed cloud correcting 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.
Canadian Dollar – USDCAD
The Loonie hit in 3 year high this week as it continues to benefit from dollar weakness and commodity currency strength led by the AUSD and NZD after spitting the 261% Fib & Weekly 8/8 after 5 waves lower (USD higher) We closed ender the old 38.8% confluence. Use Fibs for support and resisitance until Tenkan and Kijun catch up
Euro – EURUSD
The Euro continues to correct in flags after broke the channel last May. after ABC (IV) then retested the tenkan to spit the +1/8 in 5 waves from there we closed the week back testing the tenkan (orange) and now Kijun (pink). A question of degree on recent high – 1 complete or 1 of 3?, Watch 3 waves to see development for continuation. Resistance is Fibs as marked. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.
British Pound – USDGBP
The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.
EuroPound – EURGBP
Back testing top of outer band and tenkan of Brexit. Johnson price reaction.after its classic ABC out of failure following the X wave. Tenkan will give us a clue if normalcy is returning to the channel trade.
Japanese Yen – USDJPY
USDJPY has declined for two consecutive weeks following the recent weakness with Treasury yields. BOJ could start to decrease purchases and that should thwart some yen strength. The 108.00 level should remain massive support for dollar-yen as long as Treasury yields start to stabilize. Any change will come from the weekly Kijun Tenkan kiss. Use your #USDJPY Murrey 6/8 0/8 grid for now. #EURJPY #AUDJPY will determine risk on/off
Mexican Peso USDMXN
The Peso corrected the collapse to +1/8 against the USD right back to the 100% Fib We have seen violent moves with outisde uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.
Turkish Lire USDTRY
The Turkish Lire had corrected back to the weekly cloud to bounce to the Kijun, correcting back through Tenkan. The Turkish Central Bank removed its tightening bias and scrapped the end-2021 inflation target in a dovish move. The Turkish lira has plunged about 11% since Naci Agbal was fired as the central bank governor in March.
In the last 12 months Bitcoin exploded after it spent a year consolidating under the 61.8% spit. Each tenkan and kijun tap saw an explosive kiss of life to over 423% of that consolidation. 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)
From there 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.
On the Risk Radar
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
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?
June 6 – New York Times (Alan Rappeport): “Treasury Secretary Janet L. Yellen secured a landmark international tax agreement over the weekend, one that has eluded the United States for nearly a decade. But with a narrowly divided Congress and resistance from Republicans and business groups mounting, closing the deal at home may be an even bigger challenge. The Biden administration is counting on more than $3 trillion in tax increases on corporations and wealthy Americans to help pay for its ambitious jobs and infrastructure proposals. Republicans have expressed opposition to any rise in taxes and have warned that President Biden’s big spending plans are fueling inflation and will deter business investment. Business groups have complained that higher taxes pose a threat to the economic recovery and will put American companies at a competitive disadvantage.”
June 10 – CNBC (Jeff Cox): “The U.S. budget deficit passed the $2 trillion mark in May amid a continuing flow of fiscal largesse to a rapidly expanding economy… Government red ink for the month was just below $132 billion, the lowest monthly shortfall of the year but still enough to put the total deficit at $2.063 trillion… With four months left to go for the fiscal year, the government is on pace to come close to 2020′s record $3.13 trillion deficit.”
June 17 – Wall Street Journal (Andrew Duehren and Kristina Peterson): “A growing bipartisan group of lawmakers and the White House haggled over how to finance a roughly $1 trillion infrastructure proposal, awaiting feedback from President Biden as Democrats began discussions on a separate economic package that could cost up to $6 trillion. Since negotiations between Mr. Biden and a group of Senate Republicans collapsed last week, an alternative set of Republican and Democratic senators have held talks on a infrastructure plan that would spend $973 billion over five years… Initially a group of five Democrats and five Republicans, the group expanded to include 11 Republicans and 10 members of the Democratic caucus…”
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.
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.”
- June 14 – Bloomberg: “China lashed out at the U.S., calling the country ‘very ill indeed,’ after President Joe Biden secured support from European allies to present a more united front against Beijing. Foreign Ministry spokesman Zhao Lijian criticized Biden’s efforts during summits of the Group of Seven and North Atlantic Treaty Organization in recent days. The response was the latest sign of Beijing’s frustration with Washington, amid tensions over everything from trade and security to human rights and the pandemic. ‘The U.S. is ill and very ill indeed,’ Zhao told reporters… ‘The G-7 had better take its pulse and come up with a prescription.’”
- 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…”
- ”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 19 – Reuters: “Taiwan will tighten curbs on the use of water from June 1 in the major chip making hubs of Hsinchu and Taichung as it battles an islandwide drought, if there is no significant rainfall by then, the government said… Describing the drought as the worst in the island’s history, the economy ministry said in the absence of rain it would raise the drought alert level to its highest, requiring companies in the two science parks to cut water consumption by 17%.”
- “France’s public deficit is expected to reach 9% of gross domestic product (GDP) in 2021, French Finance Minister Bruno Le Maire said…, up from a previous forecast of 8.5% as the country enters its third national coronavirus lockdown. The change follows a downward revision of France’s growth forecast from 6% to 5% for this year… Le Maire… said France’s public debt was set to reach 118% of GDP this year, up from its latest forecast of 115%.”
- 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
- May 17 – Bloomberg (Eduardo Thomson, Valentina Fuentes and Matthew Malinowski): “Chilean assets plunged after the ruling coalition suffered a surprise drubbing in the election for a constituent assembly, placing the writing of a new charter firmly in the hands of the left-wing. The benchmark stock exchange closed down 9.3%…, while the peso fell 2.3%. Yields on Chile peso bonds due in 2030 jumped 22 bps to 3.82%. Candidates from the ruling coalition obtained just 37 of 155 seats on the assembly designed to write the new constitution… Contenders unaffiliated with any political parties secured 65 seats. The result means the ruling coalition falls short of the one-third threshold they needed to block market-unfriendly clauses in the new charter.”
- 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.” Nevertheless Banks are telling investors to buy, buy, buy, who is selling you should ask?
If you wanted to play in the big room at Vegas, you are living it. Understand risk and the madness of crowds for your own sanity and wealth.
Continued volatility with the engulfing uncertainty of the Coronavirus and in commodity markets, particularly in oil and other commodities, not to mention unrest in Iran, Libya and Iraq.
- 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
- 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.
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.
- Goldman Sachs Trading and SPACs Investment Banking Fees Pull in Record Revenue
- Wells Fargo Beat Earnings With $1.05 Billion Reserve Release
- JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
- Blackrock Earnings Soar As Assets Under Management Rose to Record $9 Trillion
- PNC Bank Earnings Beat Ahead of Completing BBVA USA Bancshares Acquisition
- Citigroup Beats Earnings on Reserve Release, Exiting Most Consumer Banking in Asia, Europe, and Middle East
- Bank of America Earnings Rise With Net Interest Yield and Release of Loan loss Reserves
- Morgan Stanley Dealmaking and Trading Drive Record Profits
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”
The Week Ahead – Have a Trading Plan
All eyes on the reaction to the Covid delta variances and affect on expectations and the global economy. Key data to watch for include the Fed FOMC meet on monetary policy. On the economic data front, the US is releasing the first estimate of Q2 GDP, alongside durable goods orders and personal outlays. Other GDP updates to follow include those from the Eurozone, Sweden, Mexico, South Korea, Taiwan and Hong Kong. Eurozone and Australia inflation data will be keenly watched, as well as Japan retail sales and industrial output, and the China NBS PMI survey. The earnings season enters its busiest phase in the coming week, with Tesla, Apple, Facebook, Microsoft, Alphabet, Amazon, Exxon and Chevron reporting quarterly results
Central Banker and Geopolitics Watch speeches, reports and rate moves.
Monday: July 26 2021
- 07:00 MPC Member Vlieghe Speaks
Tuesday July 27 2021
- 03:30 JPY BoJ Governor Kuroda Speaks
Wednesday July 28 2021
- 14:00 USD FOMC Statement
- 14:00 USD Fed Interest Rate Decision
- 14:30 USD FOMC Press Conference
Thursday July 29 2021
- None seen
Friday July 30, 2021
- 09:00 St. Louis Fed President James Bullard
- 20:30 Fed Governor Lael Brainard
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, July 25 2021
- 18:45 18:45 NZD Trade Balance (MoM) (Jun)
- 20:30 JPY Manufacturing PMI (Jul)
- 20:30 JPY Services PMI
Monday, July 26 2021
- 01:00 JPY BoJ Core CPI (YoY)
- 01:00 SGD Industrial Production (MoM) (Jun)
- 04:00 EUR German Business Expectations (Jul)
- 04:00 EUR German Current Assessment (Jul)
- 04:00 EUR German Ifo Business Climate Index (Jul)
- 04:30 HKD Trade Balance
- 07:00 GBP MPC Member Vlieghe Speaks
- 10:00 USD New Home Sales (MoM) (Jun) 1
- 0:30 USD Dallas Fed Mfg Business Index (Jul)
- 11:30 USD 3-Month Bill Auction
- 11:30 USD 6-Month Bill Auction
- 13:00 USD 2-Year Note Auction
- 19:00 KRW GDP (QoQ) (Q2)
- 21:30 CNY Chinese Industrial profit (YoY) (Jun)
Tuesday, July 27, 2021
- 03:30 JPY BoJ Governor Kuroda Speaks
- 04:00 EUR Italian Trade Balance Non-EU (Jun)
- 06:00 GBP CBI Distributive Trades Survey (Jul)
- 08:30 USD Durable Goods Orders (MoM) (Jun)
- 08:55 USD Redbook (YoY)
- 09:00 USD House Price Index (MoM) (May)
- 09:00 USD S&P/CS HPI Composite – 20 s.a. (MoM) (May)
- 10:00 USD CB Consumer Confidence (Jul)
- 10:00 USD Richmond Manufacturing Index (Jul)
- 10:00 USD Richmond Services Index (Jul)
- 10:30 USD Dallas Fed Services Revenues (Jul)
- 10:30 USD Texas Services Sector Outlook (Jul)
- 13:00 USD 5-Year Note Auction
- 16:30 USD API Weekly Crude Oil Stock
- 17:00 KRW Consumer Confidence (Jul)
- 19:01 GBP BRC Shop Price Index (YoY)
- 19:50 JPY BoJ Summary of Opinions
- 21:30 AUD CPI (QoQ) (Q2)
Wednesday July 28, 2021
- 01:00 JPY Coincident Indicator (MoM)
- 02:00 EUR German Import Price Index (MoM) (Jun)
- 02:00 EUR GfK German Consumer Climate (Aug)
- 02:45 EUR French Consumer Confidence (Jul)
- 04:00 EUR Italian Business Confidence (Jul)
- 04:00 EUR Italian Consumer Confidence (Jul)
- 04:00 CHF ZEW Expectations (Jul)
- 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 Goods Trade Balance (Jun)
- 08:30 USD Retail Inventories Ex Auto (Jun)
- 08:30 USD Wholesale Inventories (MoM)
- 08:30 CAD CPI (MoM) (Jun)
- 10:30 USD Crude Oil Inventories
- 14:00 USD FOMC Statement
- 14:00 USD Fed Interest Rate Decision
- 14:30 USD FOMC Press Conference
- 19:50 JPY Foreign Bonds Buying
- 19:50 JPY Foreign Investments in Japanese Stocks
- 21:00 NZD ANZ Business Confidence (Jul)
- 21:00 NZD NBNZ Own Activity (Jul)
- 21:30 AUD Export Price Index (QoQ) (Q2)
- 21:30 AUD Import Price Index (QoQ) (Q2)
- 22:30 SGD Unemployment Rate
Thursday, July 29, 2021
- 02:45 EUR French PPI (MoM) (Jun)
- 03:00 EUR Spanish CPI (MoM) (Jul)
- 03:00 EUR Spanish HICP (MoM) (Jul)
- 03:00 EUR Spanish Unemployment Rate (Q2)
- 03:55 EUR German Unemployment Rate (Jul)
- 04:30 GBP BoE Consumer Credit (Jun)
- 04:30 GBP Mortgage Approvals (Jun)
- 04:30 GBP Mortgage Lending (Jun)
- 05:00 EUR Italian PPI (MoM) (Jun)
- 05:00 EUR Business and Consumer Survey (Jul)
- 05:00 EUR Business Climate (Jul)
- 05:00 EUR Consumer Confidence (Jul)
- 05:00 EUR Consumer Inflation Expectation (Jul)
- 05:00 EUR Selling Price Expectations (Jul)
- 05:00 EUR Services Sentiment (Jul)
- 05:00 EUR Industrial Sentiment (Jul)
- 06:30 EUR Spanish Business Confidence
- 08:00 EUR German CPI (MoM) (Jul)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD Core PCE Prices (Q2)
- 08:30 USD GDP (QoQ) (Q2)
- 08:30 USD GDP Price Index (QoQ) (Q2)
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 USD PCE Prices (Q2)
- 08:30 USD Real Consumer Spending (Q2)
- 10:00 USD Pending Home Sales (MoM) (Jun)
- 10:30 USD Natural Gas Storage
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 13:00 USD 7-Year Note Auction
- 17:00 KRW Manufacturing BSI Index (Aug)
- 18:45 NZD Building Consents (MoM) (Jun)
- 19:00 KRW Industrial Production (MoM) (Jun)
- 19:00 KRW Retail Sales (MoM)
- 19:00 KRW Service Sector Output (MoM) (Jun)
- 19:30 JPY Unemployment Rate (Jun)
- 19:50 JPY Industrial Production (MoM) (Jun)
- 19:50 JPY Industrial Production forecast 1m ahead (MoM) (Jul)
- 19:50 JPY Industrial Production forecast 2m ahead (MoM) (Aug)
- 20:00 SGD Business Expectations (Q2)
- 21:30 AUD Housing Credit (Jun)
- 21:30 AUD PPI (QoQ) (Q2)
- 21:30 AUD Private Sector Credit (MoM) (Jun)
- 22:00 SGD Bank Lending (Jun)
Friday, July 30, 2021
- 01:00 JPY Construction Orders (YoY) (Jun)
- 01:00 JPY Housing Starts (YoY) (Jun)
- 01:30 EUR French Consumer Spending (MoM) (Jun)
- 01:30 EUR French GDP (QoQ) (Q2)
- 02:00 GBP Nationwide HPI (MoM) (Jul)
- 02:00 EUR German GDP (QoQ) (Q2)
- 02:00 EUR German Import Price Index (YoY) (Jun)
- 02:45 EUR French CPI (MoM)
- 03:00 EUR Italian Monthly Unemployment Rate (Jun)
- 03:00 CHF KOF Leading Indicators (Jul)
- 03:00 EUR Spanish GDP (QoQ) (Q2)
- 03:00 EUR Spanish Retail Sales (YoY) (Jun)
- 04:00 EUR Italian GDP (QoQ) (Q2)
- 04:00 EUR Spanish Current account (May)
- 05:00 EUR Italian CPI (MoM) (Jul)
- 05:00 EUR CPI (YoY) (Jul)
- 05:00 EUR GDP (QoQ)
- 05:00 EUR Unemployment Rate (Jun)
- 08:30 USD Core PCE Price Index (MoM) (Jun)
- 08:30 USD Employment Benefits (QoQ) (Q2)
- 08:30 USD Employment Cost Index (QoQ) (Q2)
- 08:30 USD Employment Wages (QoQ) (Q2)
- 08:30 USD PCE price index (MoM) (Jun)
- 08:30 USD Personal Income (MoM) (Jun)
- 08:30 USD Personal Spending (MoM) (Jun)
- 08:30 USD Real Personal Consumption (MoM) (Jun)
- 08:30 CAD GDP (MoM) (May)
- 08:30 CAD IPPI (MoM) (Jun)
- 08:30 CAD RMPI (MoM) (Jun)
- 9:00 USD St. Louis Fed President James Bullard
- 09:45 USD Chicago PMI (Jul)
- 10:00 USD Michigan Consumer Sentiment (Jul)
- 11:00 CAD Budget Balance (May)
- 12:00 USD Dallas Fed PCE (Jun)
- 13:00 USD U.S. Baker Hughes Oil Rig Count
- 15:30 USD CFTC speculative net positions
- 20:30 USD Fed Governor Lael Brainard
- 21:00 CNY Chinese Composite PMI (Jul)
- 21:00 CNY Manufacturing PMI (Jul)
- 21:00 CNY Non-Manufacturing PMI (Jul)
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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