Join us in our weekly market thread.
Where have we been and where are we going? Join our weekly market thread on Traders Community…
FEAR NOT Brave Investors
Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.
Central Bankers and Evergrande
The Week That Was – What Lies Ahead?
The week began with fear, down and with a late realization of the #Evergrande credit balloon popping and shakes ahead of the upcoming FOMC. By Friday Evergrande is playing out as we thought. Basically in the situation where foreign shareholders get nothing, foreign bond holders get 25% in a most likely case and local projects transferred to other firms, barter exchanged or Central Government edicts. Does that stay contained? Next up in this saga is a 30 day countdown to default.
The Fed for its part was a little more hawlish bringing forward a taper to November and to be completed by mid 2022 ahould the economy remain steadfast. What many bulls and bears alike miss is that it was important to be somwewhat hawkish to signify the economy is improving. Confidence is low for consumers and businesses alike and Powell is most aware of that. By the end of the week S&P 500 was +0.5% and Nasdaq +0.1%. Rates and oil were significant moves this week. WTI Crude oil futures settled at $73.98 Up $0.68 or 0.93% Friday. The high price $74.27 was above the July 30 swing high at $74.23. US 5-year notes have been rangebound since March and maybe at the end of a period of consolidation. Rates are in danger of closing at the highest levels of the year.10yr US govt bonds closed +2bp/1.46% yield and 30yr bonds +4bps/1.99% yield, which is +8bps week-over-week for both tenors.
An important point about tapering, it is a taper of a massive $120 billion in monthly bond purchases that have supported the recovery. In plain English there will be still huge amounts of bonmd purchases. Other factors concerning the Fed, and the market is negative sentiment around President Biden. He appears unable to get Senator Manchin (D-WV) on board with the $3.5 trillion infrastructure plan, a warning from the White House that not increasing the debt limit could cause a recession. Monday is the tentative deadline for the House vote on the bipartisan infrastructure package. Thursday is the deadline for Congress to pass a stopgap funding bill that will avert a government shutdown. The debt ceiling standoff will likely go down to the wire, but expectations are still optimistic. German federal elections take place this weekend as the Angela Merkel era winds down. The SPD holds a narrow lead in the polls going into the election but no party is even close to a majority meaning negotiations, potentially lasting months, lie ahead. The market impact should be limited.
Powell did not really address the fact Federal Reserve Presidents Kaplan and Rosengren have been trading stocks and bonds. He said he was unaware and look into it. This comes after said they will sell individual stock holdings after the press questioned their ethics. This comes at a time of taper concerns and market top calls.
Clearly high prices have led to a decline in assessments of buying conditions for homes, vehicles, and household durables. How much does this affect spending activity in the future is the big question mark. If consumers hold off on purchases either because they think prices will come down if they wait longer or if they resist paying persistently high prices altogether in the absence of offsetting income gains. This and tapering talk after a dismal unemployment report underscore how disconnected these bankers and politicians are from main street and ethical reality.
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, Annual CPI continues is elevated at 5.3% in August, near the highest since August 2008. M/M CPI +0.3% lower than expected +0.4%. Core m/m +0.1% vs +0.3% exp. Transitory? lowest since Feb and +4.0% vs +4.2% y/y expected. Last week 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. . The coronavirus Delta variant is hindering growth with these price rises and consumer restraint.
In 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?
ETF Market Mania
This is a market like no other with more wide spread participation than at any time in history
ETFGI reported om September 10 that inflows into exchange traded funds are above 2020’s record total globally. Worldwide net investor inflows reached $834.2bn at the end of August, already surpassing the last year’s total of $762.8bn. Global assets held in ETFs have soared to $9.7tn, more than double the $4.8tn managed in the funds and products at the end of 2018.
The bulk of the $9tn exchange traded funds industry consists of plain vanilla index trackers focused on mainstream assets. However higher risk such as Cryptocurrency ETFs have taken off in non US other jurisdictions including Canada, Switzerland, Germany and Jersey. Total assets in these funds tripled from $3bn at the end of last year to $9bn as of June.
The sums committed to leveraged and inverse exchange traded products,designed to amplify gains from market rises or conversely profit from falling asset prices has risen from $79bn at the end of 2019 to a record $109bn, ETFGI reported
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. Creditors are banks and non-bank financial institutions, domestic and international bond holders, suppliers and apartment buyers. It has bank borrowings of $90 billion, including from Agricultural Bank of China, China Minsheng Banking Corp and China CITIC Bank Corp (reports have 128 banks with exposure). Thousands of suppliers are owed around $100 billion. Evergrande and the faltering apartment Bubble remain a clear danger.
“China’s central bank continued to pump liquidity into the financial system on Friday as policy makers sought to avoid contagion stemming from China Evergrande Group spreading to domestic markets. The People’s Bank of China has injected a net 460 billion yuan ($71bn) of short-term cash into the banking system in the past five working days, including 70 billion yuan on Friday. That’s helping ensure sufficient liquidity throughout the Evergrande crisis… The cost of borrowing overnight fell to 1.68%, the lowest level since late July, down from 2.28% last week. September 24 – Bloomberg (Chester Yung):
September 16 – Bloomberg: “Chinese high-yield dollar bonds were down as much as 4 cents on the dollar Thursday, according to credit traders, led by developers amid signs of growing contagion from Evergrande’s debt woes.”
The third is massive monetary inflation, the Fed’s Q2 2021 Z.1 “flow of funds” report.
Treasury borrowings continue to command system Credit growth. Outstanding Treasuries gained nominal $359 billion during Q2 to a record $24.302 TN. Treasuries surged $6.487 TN, or 36%, over the past two years. Treasuries to GDP slipped slightly during the quarter to 107%. This ratio ended 2007 at 41% and was up to 87% prior to the pandemic.
Agency (GSE) Securities gained another $181 billion during the quarter to a record $10.408 TN. At $663 billion, one-year growth was the strongest since 2007. Agency Securities jumped $1.144 TN over the past two years. Combined Treasury and Agency Securities swelled an unparalleled $7.631 TN over two years to a record $34,709 TN (153% of GDP).
Total Mortgage borrowings rose $308 billion during the quarter, more than double Q2 2020 growth to the largest increase since Q3 2006 ($343bn). Home Mortgages rose $238 billion during Q2 (strongest since Q3 ’06) and $687 billion for the year (largest since 2006).
Household Assets jumped $6.196 TN, or 16.2% annualize, during Q2 to a record $159.342 TN. Household Assets inflated $24.269 TN over the past year. Household Liabilities rose $347 billion during the quarter to $17.674 TN, the strongest growth since Q1 2006. Liabilities were up $1.093 TN over four quarters, the strongest annual growth since 2006.
After this week’s FOMC it’s worth reminding ourselves of this insight from the The Economic Affairs Committee of the U.K.’s House of Lords report, “Quantitative Easing: A Dangerous Addiction?”
“No central bank has managed successfully to reverse quantitative easing over the medium to long term. In practice, central banks have engaged in quantitative easing in response to adverse events but have not reversed the policy subsequently. This has had a ratchet effect and it has only served to exacerbate the challenges involved in unwinding the policy. The key issue facing central banks as they look to halt or reverse quantitative easing is whether it will trigger panic in financial markets, with effects that might spill over into the real economy.”
In light of 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.
- 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 increased 0.5% (up 18.6% y-t-d)
- Dow rose 0.6% (up 13.7%)
- Nasdaq100 was little changed (up 18.9%)
- S&P 400 Midcaps rose 0.8% (up 17.0%),
- Small cap Russell 2000 increased 0.5% (up 13.8%).
- Utilities fell 1.2% (up 3.8%).
- Banks rallied 3.1% (up 32.9%),
- Broker/Dealers gained 2.0% (up 26.0%).
- Transports added 0.5% (up 14.7%).
- Semiconductors added 1.0% (up 23.6%).
- Biotechs declined 0.8% (up 3.0%).
- As bullion slipped $4, the HUI gold index sank 3.0% (down 23.1%).
Highlights – Europe Stocks
- France’s CAC40 recovered 1.0% (up 19.6%).
- German DAX equities index added 0.3% (up 13.2%).
- Spain’s IBEX 35 equities index rallied 1.3% (up 9.9%).
- Italy’s FTSE MIB index rose 1.0% (up 16.8%).
- U.K.’s FTSE rallied 1.3% (up 9.1% y-t-d).
Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September adding 10 new members to the German stock index from the MDAX which will be reduced from 60 to 50 members.
Highlights – Asia Stocks
- Japan’s Nikkei Equities Index declined 0.8% (up 10.2% y-t-d).
- South Korea’s Kospi index declined 0.5% (up 8.8%).
- India’s Sensex equities index jumped 1.7% (up 25.8%).
- China’s Shanghai Exchange was little changed (up 4.0%).
Highlights – Australian Stocks
- Australia’s S&P/ASX200 finished the week 7342.6 down 0.65% for the week overall.
- Mining stocks see-sawed on predictions that iron ore could stay below $US100 into next year. Morgan Stanley analysts noted that lower prices have not impacted Australian GDP yet, further falls could have a bigger impact.
Highlights – Emerging Markets Stocks
- EM equities mixed.
- Brazil’s Bovespa index recovered 1.7% (down 4.8%)
- Mexico’s Bolsa slipped 0.4% (up 16.0%).
- Turkey’s Borsa Istanbul National 100 index dropped 2.4% (down 6.2%).
- Russia’s MICEX equities was little changed (up 22.8%).
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
S&P 500 Index Technical Analysis via @KnovaWave
SPX showed impulse in 3 to the bottom of the daily cloud after it broke the Tenkan after rejected top channel. From the there bounced with impulse to channel re-catch. We watch if this low was a (a) or C Will determine if sharp ABC completed to all time highs around +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
After #SPX failed to break weekly highs it reversed to test recent break up at Tenkan. Each new high has evolved after testing Tenkan key support. We had a false break to close back over for the week, we watch for a spit of a spit otherwise ATH 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
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 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.
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.
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
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.
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.
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.
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.
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:
Lennar. FedEx, Adobe, AutoZone, Cracker Barrel, Aurora Cannabis, Stitch Fix, Workday General Mills, KB Home, Blackberry, Steecase, Nike, Costco, Vail Resorts, Trip.com, Darden Restaurants, Accenture, Rite Aid, Scholastic Dell, Carnival
This week we hear from:
Monday starts us off with
- Earnings: Aurora Cannabis
- Analyst meeting:
Tuesday with Earnings from
- Earnings: IHS Markit, Micron, Cal-Maine Foods, Thor Industries, United Natural Foods, FactSet and MillerKnoll
- Analyst meeting:
Wednesday Earnings Include
- Earnings: Jabil, Cintas, Herman Miller
- Analyst meeting:
Thursday Earnings Include
- Earnings: Jefferies Financial, CarMax, Bed Bath & Beyond, Paychex and McCormick
- Analyst meeting:
Friday Earnings include
- Analyst meeting:
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):
Toast gets buttered up in a 13 IPO week
It was another busy week for the fall IPO market as 13 IPOs raised $4.6 billion led by restaurant payment processor Toast (TOST), which jumped 56% in its debut. Six SPACs also went public, and one IPO postponed: Canadian consumer products company Knowlton Development (KDC). The pipeline was fairly active, with seven IPOs and five SPACs submitting initial filings.
Toast (TOST) priced above the upwardly revised range to raise $870 million at a $22.9 billion market cap. Toast provides a suite of integrated payment and software solutions that are designed to streamline restaurant operations. The company grew ARR over 100% in the 1H21, though it has historically been unprofitable, and growth could slow as tailwinds from restaurants reopening abate. Toast finished up 39%.
Software firm Clearwater Analytics (CWAN) priced above the range to raise $540 million at a $4.4 billion market cap. Clearwater provides its 1,000+ clients with cloud-native software that allows them to simplify their investment accounting operations, and the company has a 100% recurring revenue model. A new investor and certain existing shareholders had indicated on $150 million of the IPO. Clearwater finished up 41%.
Customer engagement software provider EngageSmart (ESMT) priced above the range to raise $378 million at a $4.4 billion market cap. The company provides software that simplifies online workflows like paperless billing, electronic payment processing, scheduling, and client communication. While growth may slow post-pandemic, EngageSmart has a sticky customer based and a long track record of profitability. EngageSmart finished up 34%.
The largest deal of the week, Freshworks (FRSH) priced above the upwardly revised range to raise $1.0 billion at a $11.6 billion market cap. The company’s core product is its customer support software, and it also offers IT service management software and a nascent competitor to CRM solutions. While losses are expected to increase with S&M spending, Freshworks has delivered solid growth and 100%+ net dollar-based revenue retention as of 6/30/21. Freshworks finished up 30%.
Jewelry retailer Brilliant Earth Group (BRLT) downsized and priced below the range to raise $100 million at a $1.0 billion. Brilliant Earth is a digital-first jewelry company and a global leader in ethically sourced fine jewelry. The company has sold to consumers in all US states and over 50 countries, and has served over 370,000 customers through its e-commerce platform and 13 showrooms. Brilliant Earth finished up 27%.
COVID-19 test maker Cue Health (HLTH) priced at the midpoint to raise $200 million at a $2.4 billion market cap. Cue’s first commercially available diagnostic test for use with its Cue Health Monitoring System is its COVID-19 Test Kit, which has been authorized by two EUAs. Cue has five additional Test Kits in late-stage technical development, for which it expects to begin seeking FDA authorization or clearance in the 2H22. Cue Health finished up 25%.
Hiring solutions provider Sterling Check (STER) priced above the range to raise $329 million at a $2.3 billion market cap. Sterling is one of the leading US providers of background checks for corporate and government customers. The company serves more than 50% of the Fortune 100, often with exclusive contracts, though it operates in a highly competitive market. Sterling finished up 15%.
Food company Sovos Brands (SOVO) priced below the range to raise $280 million at a $1.2 billion market cap. Formed by Advent International, Sovos Brands offers a select group of acquired premium food brands. Profitable with solid growth, its largest brand of products, Rao’s, included the #1 selling SKU in the pasta and pizza sauce category. Sovos finished up 14%.
London-listed crypto mining company Argo Blockchain (ARBK) raised $113 million at an $697 million market cap. Argo states that it is a leading blockchain technology company focused on large-scale mining of Bitcoin and other cryptocurrencies. Argo has a fleet of more than 21,000 purpose-built computers (mining machines) and can generate more than 1,075 petahash per second. Argo finished up 11%.
Canadian bank VersaBank (VBNK) raised $55 million at a $266 million market cap. VersaBank is a Canadian Schedule I chartered bank and states that it is one of the world’s first fully digital financial institutions. As of July 31, 2021, VersaBank had $1.8 billion in assets, $1.6 billion in loans, $1.5 billion in deposits, and $202 million in stockholders’ equity. VersaBank finished up 10%.
Global money transfer firm Remitly Global (RELY) priced above the range to raise $523 million at a $8.1 billion market cap. Remitly provides digital financial services for immigrants and their families in over 135 countries, and it has expanded its core cross-border remittance product to over 1,700 corridors worldwide. The company is unprofitable but has demonstrated growth and margin improvement. Remitly finished up 3%.
Online fashion platform a.k.a. Brands (AKA) downsized and priced below the downwardly revised range to raise $110 million at a $1.4 billion market cap. a.k.a. acquires digitally-focused fashion brands oriented toward millennial and Gen Z consumers, starting with its acquisition of Princess Polly in 2018. The company has a long runway to grow its brands in the US, but its M&A strategy carries execution risk. a.k.a. finished down 9%.
Personalized supplements seller Thorne Healthtech (THRN) downsized and priced at the low end of the downwardly revised range to raise $70 million at a $611 million market cap. The company’s vertically integrated brands, Thorne and Onegevity, provide actionable insights and personalized data, products, and services. While it has delivered strong growth, long-term differentiation in the space will rely on the unproven Onegevity. Thorne finished down 17%.
Six SPACs raised $1.2 billion led by Kingstown Capital’s Inflection Point Acquisition (IPAXU), which raised $300 million.
US IPO Week Ahead:
September closes out with software and consumer names in a 3 IPO, 2 direct listing week
As September comes to an end, three IPOs are scheduled to raise almost $1.5 billion in the week ahead, joined by direct listings from Amplitude and Warby Parker.
Digital optimization company Amplitude (AMPL) will be the Nasdaq’s second major direct listing, with an estimated market value at listing of nearly $5 billion. Amplitude provides a customer behavior analytics for over 1,200 customers to improve and optimize digital products and businesses. Growing but unprofitable, this analytics company boasts high-profile customers such as IBM, Instacart, and Squarespace.
Eyeglasses retailer Warby Parker (WRBY) plans to direct list on the NYSE with an estimated market value at listing of nearly $3 billion. Warby Parker sells prescription glasses that start at $95 per pair through both its online store and in over 145 physical locations. The company has a track record of steady growth and is the category leader in DTC glasses, though the space has become increasingly competitive.
Hair care brand Olaplex Holdings (OLPX) plans to raise $1 billion at a $10.4 billion market cap. Backed by Advent, this company is a leading brand of prestige hair health products containing a patented repair ingredient. With a highly engaged customer base, Olaplex is growing rapidly with robust profitability. The offering is 100% secondary, and Olaplex will be leveraged post-IPO.
Investment management software provider Allvue Systems Holdings (ALVU) plans to raise $275 million at a $1.7 billion market cap. This Vista-backed company provides cloud-based software solutions to approximately 400 investment managers in the private capital and credit markets space. Allvue Systems has delivered strong growth and is profitable on an EBITDA basis.
Restaurant chain First Watch Restaurant Group (FWRG) plans to raise $175 million at a $1.1 billion market cap. Only serving breakfast, brunch, and lunch, this restaurant chain owns and franchises over 420 locations across the US. Despite growing uncertainty about the delta variant, First Watch has a track record of positive same-store sales growth.
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 $1.495 billion, and junk bond funds posted positive flows of $536 million (from Lipper).
- Three-month Treasury bill rates ended the week at 0.025%.
- Two-year government yields rose five bps to 0.27% (up 15bps y-t-d).
- Five-year T-note yields jumped nine bps to 0.95% (up 59bps).
- Ten-year Treasury yields gained nine bps to 1.45% (up 54bps).
- Long bond yields rose eight bps to 1.99% (up 34bps).
- Benchmark Fannie Mae MBS yields jumped eight bps to 1.93% (up 59bps).
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 two bps to 2.88% (down 2bps y-o-y).
- Fifteen-year rates rose three bps to 2.15% (down 25bps).
- Five-year hybrid ARM rates dropped eight bps to 2.43% (down 47bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up two bps to 3.05% (up 2bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week surged $86.3bn to a record $8.438 TN. Over the past 106 weeks, Fed Credit expanded $4.712 TN, or 126%. Fed Credit inflated $5.628 Trillion, or 200%, over the past 463 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week jumped $13.2bn to $3.484 TN.
- “Custody holdings” were up $60bn, or 1.7%, y-o-y.
- Total money market fund assets surged $50.1bn to $4.515 TN. Total money funds increased $100bn y-o-y, or 2.3%.
- Total Commercial Paper gained $6.1bn to $1.188 TN. CP was up $203bn, or 20.5%, 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 were unchanged at 0.81% (up 19bps y-t-d).
- Ten-year Portuguese yields rose six bps to 0.32% (up 29bps).
- Italian 10-year yields jumped six bps to 0.78% (up 24bps).
- Spain’s 10-year yield rose five bps to 0.41% (up 36bps).
- German bund yields gained five bps to negative 0.23% (up 34bps).
- French yields jumped six bps to 0.11% (up 45bps).
- French to German 10-year bond spread widened about one to 34 bps.
- U.K. 10-year gilt yields rose eight bps to 0.93% (up 73bps).
- U.K.’s FTSE equities index rallied 1.3% (up 9.1% y-t-d).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields added one basis point to 0.06% (up 4bps y-t-d).
Part C: Commodities
- Bloomberg Commodities Index rose 1.5% (up 26.8% y-t-d).
- WTI crude jumped $2.01 to $73.98 (up 53%).
- Gasoline added 0.7% (up 55%),
- Natural Gas gained 0.7% (up 102%).
- Copper recovered 0.9% (up 22%).
- Wheat rose 2.1% (up 13%).
- Corn was little changed (up 9%).
- Bitcoin sank $4,363, or 9.2%, this week to $42,918 (up 48%).
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.
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 snapped a five-day winning run, dropping 0.2% to 4,644 on Friday, but remaining close to its highest since November of 2009. The Baltic Dry Index posted a weekly gain of 8.6%. .
- The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, fell 0.6% to 7,393, but close to its highest in 12 years;
- The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, went up 0.5% to 4,012, its highest in more than ten weeks
- . Among smaller vessels, the supramax index, added 10 points at 3,359. The Baltic Dry Index posted a weekly gain of 8.6%.
Source: Baltic Exchange
Copper rebounded sharply off the 50wma pulled up by the flattening Tenkan and Kijun to close right at the channel break – a key juncture. #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.
Soybean futures have shown no life since hitting 35 week lows on IDA. Clear 5 waves down, look for 3 wave correction but needs to clear 50wma and cloud top with Tenkan pressing
US Crude Oil (WTI)
4 Hour:: WTI stayed above the cloud and in the channel all week in a continuation pattern since regaining the 240 cloud to rebalance the Chikou to close the week. Continue to watch Kijun reactions and Murrey Math confluence.
Daily: WTI Price action continued from last week’s WTI completing its correction of the May breakup in 3 waves (or X) Rebounded from daily cloud twist to close back at Chikou. Support Tenkan, 50dma and Kijun, 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. ;
Weekly: They key for #oil was the rebalanced Chikou indicative of crowd behavior and 50% fib failure at 70.29 over 7/8. 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. We watched 3 and 5 waves develop. Support below at Kijun and 50 wma. It must retain this energy to take out new high
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 tested the daily Kijun in 3 and closed the week at the Tenkan. Another corrective ABC pennant of a (IV) for bulls, A or a (i) for bears. 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. Should the highs be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 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.
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. Impulse just shy of the 8/8 and Tenkan confluence. 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.
Key Energy Reports
pot Gold slipped $4 to $1,750 (down 7.8%). Silver recovered 0.2% to $22.42 (down 15.1%).
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.
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
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 little changed at 93.33 (up 3.8% y-t-d).
- Majors for the week on the upside the Canadian dollar 0.9%, the Swiss franc 0.8%. For the week on the downside the Japanese yen 0.7%, the British pound 0.5%,
- Minors for the week For the week on the upside, the Norwegian krone increased 1.5%, and the Swedish krona 0.4%. For the week on the downside, the South African rand declined 1.6%, the Brazilian real 0.8%, the Singapore dollar 0.4%, the New Zealand dollar 0.4%, the Mexican peso 0.2%, and the South Korean won 0.1%. The Chinese renminbi was unchanged versus the dollar (up 0.94% y-t-d).
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.
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.
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.
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.
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.
EuroPound – EURGBP
Back testing tenkan in a C or 3 after inconclusive X – symbolic of BREXIT? Kijun, 50wma and clouds resistance.
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
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.
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.
Bitcoin 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. 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 that high we have 2 alternatives a iii of a 1 down or (C) of IV meaning the recent high was a (ii) or 1 of a (v)
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
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?
- September 22 – Bloomberg (Laura Davison and Christopher Anstey): “Democrats are pursuing an almost certainly doomed strategy to avert a government shutdown and stave off a federal default, raising the likelihood of financial-market stresses that will ultimately force U.S. lawmakers’ hands. While the House on Tuesday night approved a bill to keep the federal government funded past the end of the fiscal year on Sept. 30 and to suspend the debt limit for more than a year, blanket Republican opposition means it’s assured of failing in the Senate. Once that Senate rejection — expected in coming days — is complete, the clock will be ticking until the government runs out of authorization to keep many operations running past month-end.” September 20 – Reuters (Susan Cornwell): “Democrats in the U.S. Congress were scrambling… to find another way to include immigration reform in a sweeping $3.5 trillion social spending bill after a Senate arbiter said their first proposal broke the chamber’s rules. The ruling was the latest in a series of stumbling blocks President Joe Biden’s party faces as it enters a critical few weeks before a Sept. 27 vote on a $1 trillion Senate-approved infrastructure bill. Also ahead is an Oct. 1 deadline to continue funding the federal government and the threat later in the month that the government will breach its borrowing cap, risking default on U.S. payment obligations.”
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.
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.”
- September 16 – Bloomberg: “China slammed a move by the U.S. and U.K. to help Australia build nuclear submarines, saying the new partnership will stoke an ‘arms race’ as tensions heat up in Asia-Pacific waters. Prime Minister Scott Morrison joined with U.S. President Joe Biden and the U.K.’s Boris Johnson… to announce a new security partnership that will see Australia acquire nuclear-powered submarines. While it could take more than a decade for Australia to build one, the agreement shows the U.S. joining with key English-speaking allies to form a more cohesive defense arrangement to offset China’s rising military prowess. The partnership ‘greatly undermines regional peace and stability, aggravates the arms race and hurts the international non-proliferation efforts,’ Chinese Foreign Ministry spokesman Zhao Lijian told reporters… He also questioned Australia’s commitment to forgoing nuclear weapons, and said the U.S. and U.K. were ‘using nuclear exports as geopolitical gaming tool and applying double standards.’”
- September 16 – Reuters (Ben Blanchard and Yimou Lee): “Taiwan proposed… extra defense spending of T$240 billion ($8.69bn) over the next five years, including on new missiles, as it warned of an urgent need to upgrade weapons in the face of a ‘severe threat’ from giant neighbor China. Taiwan President Tsai Ing-wen has made modernizing the armed forces – well-armed but dwarfed by China’s – and increasing defense spending a priority, especially as Beijing ramps up military and diplomatic pressure against the island it claims as ‘sacred’ Chinese territory.”
- September 12 – Financial Times (Henry Foy and Richard Milne): “Russia plans to use war games this week with Belarus to deepen its control over its neighbour’s armed forces and increase its military capabilities on the borders of Nato member states, western defence officials have warned. The seven-day Zapad-2021 exercise, which began on Friday, involves tens of thousands of troops from both countries and conventional and strategic weapons tests to simulate conflict with a western enemy, and comes amid increased pressure from the Kremlin for deeper integration with Minsk. ‘Zapad fits into a broader pattern: a more assertive Russia, significantly increasing its military capabilities and its military presence near our borders,’ said Jens Stoltenberg, Nato secretary-general.”
- September 15 – Reuters (Hyonhee Shin and Josh Smith): “North Korea and South Korea test fired ballistic missiles on Wednesday, the latest volley in an arms race in which both nations have developed increasingly sophisticated weapons while efforts prove fruitless to get talks going on defusing tensions… North Korea fired a pair of ballistic missiles that landed in the sea off its east coast…, just days after it tested a cruise missile that analysts said could have nuclear capabilities. Japan’s defence ministry said the missiles landed inside Japan’s exclusive economic zone (EEZ)…”
- 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.
- 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
- September 21 – Associated Press (Carla K. Johnson): “COVID-19 has now killed about as many Americans as the 1918-19 Spanish flu pandemic did — approximately 675,000. The U.S. population a century ago was just one-third of what it is today… But the COVID-19 crisis is by any measure a colossal tragedy in its own right, especially given the incredible advances in scientific knowledge since then and the failure to take maximum advantage of the vaccines available this time.” September 21 – Associated Press (Heather Holligsworth): “COVID-19 deaths in the U.S. have climbed to an average of more than 1,900 a day for the first time since early March, with experts saying the virus is preying largely on a distinct group: 71 million unvaccinated Americans. The increasingly lethal turn has filled hospitals, complicated the start of the school year, delayed the return to offices and demoralized health care workers.”
- 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.
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
The FOMC has passed but the Federal Reserve stays front and center again with Chairman Jerome Powell testifying before Congress and a host of other Fed officials speaking at events. Congress must address an appropriations bill in the coming week or the government could shut down by next Friday. We also have ECB, BoE and other Central Bankers talking. Thee is a 2-day ECB Forum on Central Banking that should give more clues on the monetary policy outlook. Data to keep an eye on include ISM Manufacturing PMI, PCE inflation; durable goods orders; construction spending; CB consumer confidence; pending home sales; Chicago PMI; Case-Shiller home prices; Dallas Fed Manufacturing Index; the advance estimates of goods trade balance and wholesale inventories; and the final readings of Michigan consumer sentiment and Markit Manufacturing PMI. Global manufacturing PMIs for September due on Friday will provide an update on the global economic recovery. Developments surrounding Chinese real estate developer Evergrande. Traders will also pay attention to the outcome of the German federal election and election of a new Japanese leader.
Central Banker and Geopolitics Watch speeches, reports and rate moves.
Monday: September 27 2021
- 07:45 ECB Lagarde speak.
- 08:00 FOMC member Evans speaks at the National Association for Business Economics’s 63rd annual meeting.
- 12:00 FOMC Williams speaks about the economic outlook before the Economic Club of New York
- 12:15 FOMC Brainard speaks at the National Association for Business Economics’s 63rd annual meeting.
- 14:00 BOE Gov. Bailey speaks
Tuesday September 28 2021
- South Africa SARB Quarterly Bulletin 09:00 Chicago Fed’s Evans
- Treasury Secretary Yellen, BOE policy maker Catherine Mann to speak at the NABE conference. BOE Governor Bailey speaks at the Society of Professional Economists dinner.
- 10:00 Fed Chair Powell and Treasury Secretary Yellen testify at the Senate Banking Committee hearing on “CARES Act Oversight of the Treasury and Federal Reserve.”
- ECB President Lagarde to speak at the ECB Forum on Central Banking. Executive Board members Schnabel and Panetta, plus Vice President de Guindos, chair sessions.
- 13:40 Fed Governor Michelle Bowman
- 15:00 Atlanta Fed President Raphael Bostic
- 19:00 St. Louis Fed President James Bullard
Wednesday September 29 2021
- 11:45 Central Bank chiefs Bailey (BOE), Kuroda (BOJ), Lagarde (ECB) and Powell (Fed) speak on an ECB Forum panel. Riksbank’s Deputy Governor Breman will also attend. – ECB’s Visco speaks at a Sustainable Policy Institute event
- 11:45 ECB’s Visco speaks at a Sustainable Policy Institute event
- 14:00 Atlanta Fed’s Bostic
Thursday September 30 2021
- 10:00 FOMC Williams speaks conference on the Fed’s pandemic response
- 11:00 FOMC Bostic speaksat an event hosted by the Bendheim Center for Finance
- 12:30 FOMC Evans speaks Thailand rate decision: Expected to keep Benchmark interest rate unchanged at 0.50% Fed Chair Powell and Secretary Yellen testify to House Financial Services Committee St. Louis Fed President Bullard speaks Mexico rate decision: Expected to raise Overnight Rate by 25 basis points to 4.75% Sweden Riksbank minutes
Friday October 1 2021
Philadelphia Fed President Harker talks about the economic outlook with the New Castle County Chamber of Commerce – ECB’s Schnabel speaks at a Fed 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 26, 2021
- German federal elections
- United Nations 76th General Assembly resumes
- 12:45 EUR German Buba Mauderer Speaks
- 19:50 JPY Corporate Services Price Index (CSPI) (YoY)
- 21:30 CNY Chinese Industrial profit (YoY) (Aug)
Monday, September 27, 2021
- 07:45 ECB Lagarde speak.
- 08:00 FOMC member Evans speaks,
- 08:30 US durable goods orders,
- 11:00 BOE Gov. Bailey speaks
- 10:30 USD Dallas Fed Mfg Business Index (Sep)
- 11:00 EUR ECB’s Panetta Speaks
- 11:30 USD 2-Year Note Auction
- 11:30 USD 6-Month Bill Auction
- 12:00 USD FOMC Member Williams Speaks
- 12:50 FOMC Brainard speaks
- 12:50 USD FOMC Member Brainard Speaks
- 13:00 USD 3-Month Bill Auction
- 13:00 USD 5-Year Note Auction
- 17:00 KRW Consumer Confidence (Sep)
- 19:50 JPY Monetary Policy Meeting Minutes
- 21:30 AUD Retail Sales (MoM) (Aug)
- 21:30 CNY Chinese Industrial profit (YoY) (Aug)
Tuesday, September 21, 2021
- 01:00 JPY BoJ Core CPI (YoY)
- 02:00 EUR GfK German Consumer Climate (Oct)
- 02:45 EUR French Consumer Confidence (Sep)
- 04:00 ZAR SARB Quarterly Bulletin 04:30 HKD Trade Balance
- 06:30 EUR German Buba Vice President Buch Speaks
- 08:00 EUR ECB President Lagarde to speak at the ECB Forum on Central Banking. Executive Board members Schnabel and Panetta, plus Vice President de Guindos, chair sessions.
- 08:30 USD Goods Trade Balance (Aug)
- 08:30 USD Retail Inventories Ex Auto (Aug)
- 08:30 USD Wholesale Inventories (MoM)
- 08:30 EUR ECB’s De Guindos Speaks
- 08:55 USD Redbook (YoY)
- 09:00 USD Chicago Fed President Evans Speaks
- 09:00 USD House Price Index (MoM) (Jul)
- 09:00 USD S&P/CS HPI Composite – 20 s.a. (MoM)
- 09:45 EUR ECB’s Panetta Speaks
- 10:00 US Conference board consumer confidence
- 10:00 Fed Chair Powell and Treasury Secretary Yellen testify at the Senate Banking Committee hearing on “CARES Act Oversight of the Treasury and Federal Reserve.”
- 10:00 USD Richmond Manufacturing Index (Sep)
- 10:00 USD Richmond Services Index (Sep)
- 10:30 USD Dallas Fed Services Revenues (Sep)
- 10:30 USD Texas Services Sector Outlook (Sep)
- 11:00 EUR ECB Executive Board member Schnabel
- 13:00 USD 7-Year Note Auction
- 13:40 USD Fed Governor Michelle Bowman
- 14:00 EUR ECB’s Panetta Speaks
- 15:00 USD Atlanta Fed President Raphael Bostic
- 16:30 USD API Weekly Crude Oil Stock
- 19:00 USD St. Louis Fed President James Bullard
- 19:01 GBP BRC Shop Price Index (YoY)
Wednesday, September 29, 2021
- Japan’s Liberal Democratic Party elects a new leader
- 02:00 GBP Nationwide HPI (MoM)
- 02:00 EUR German Import Price Index (MoM) (Aug)
- 02:00 EUR German Retail Sales (MoM) (Aug)
- 03:00 EUR Spanish CPI (MoM)
- 03:00 EUR Spanish HICP (MoM)
- 04:00 EUR Italian PPI (MoM) (Aug)
- 04:00 CHF ZEW Expectations (Sep)
- 04:30 GBP BoE Consumer Credit (Aug)
- 04:30 GBP Mortgage Approvals (Aug)
- 04:30 GBP Mortgage Lending (Aug)
- 05:00 EUR Business and Consumer Survey (Sep)
- 05:00 EUR Business Climate (Sep)
- 05:00 EUR Consumer Confidence (Sep)
- 05:00 EUR Consumer Inflation Expectation (Sep)
- 05:00 EUR Selling Price Expectations (Sep)
- 05:00 EUR Services Sentiment (Sep)
- 05:00 EUR Industrial Sentiment (Sep)
- 07:00 EUR Spanish Business Confidence
- 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
- 08:00 EUR ECB’s De Guindos Speaks
- 08:30 CAD IPPI (MoM) (Aug)
- 08:30 CAD RMPI (MoM) (Aug)
- 09:00 CHF SNB Quarterly Bulletin
- 09:15 EUR ECB’s Elderson Speaks
- 10:00 US Pending home sales
- 10:00 EUR German Buba Mauderer Speaks
- 10:30 EUR ECB’s Lane Speaks
- 10:30 US EIA Crude Oil Inventories
- 11:45 ECBs Lagarde, UK Gov Bailey, BOJ Gov Kuroda and Fed Chair Powell speak at the ECB forum on central banking
- 14:00 Atlanta Fed’s FOMC Member Bostic Speaks
- 17:45 NZD Building Consents (MoM) (Aug)
- 18:00 KRW Manufacturing BSI Index (Oct)
- 19:00 KRW Industrial Production (MoM) (Aug)
- 19:00 KRW Retail Sales (MoM)
- 19:00 KRW Service Sector Output (MoM) (Aug)
- 19:50 JPY Foreign Bonds Buying
- 19:50 JPY Foreign Investments in Japanese Stocks
- 19:50 JPY Industrial Production (MoM) (Aug)
- 19:50 JPY Industrial Production forecast 1m ahead (MoM) (Sep)
- 19:50 JPY Industrial Production forecast 2m ahead (MoM) (Oct)
- 19:50 JPY Retail Sales (YoY) (Aug)
- 20:00 NZD ANZ Business Confidence (Sep)
- 20:00 NZD NBNZ Own Activity (Sep)
- 21:00 CNY Chinese Composite PMI (Sep)
- 21:00 CNY Manufacturing PMI (Sep)
- 21:00 CNY Non-Manufacturing PMI (Sep)
- 21:30 AUD Building Approvals (MoM) (Aug)
- 21:30 AUD Housing Credit (Aug)
- 21:30 AUD Private House Approvals (Aug)
- 21:30 AUD Private Sector Credit (MoM) (Aug)
- 21:45 CNY Caixin Manufacturing PMI (Sep)
- 22:00 SGD Bank Lending
Thursday, September 30, 2021
- US Congress faces a deadline to approve a stopgap funding bill to avert a government shutdown on October 1st.
- 01:00 JPY Construction Orders (YoY) (Aug)
- 01:00 JPY Housing Starts (YoY) (Aug)
- 02:00 GBP Business Investment (QoQ) (Q2) 0
- 2:00 GBP GDP (QoQ) (Q2)
- 02:00 GBP Nationwide HPI (MoM) (Sep)
- 02:00 EUR German Import Price Index (MoM) (Aug)
- 02:45 EUR French Consumer Spending (MoM) (Aug)
- 02:45 EUR French CPI (MoM)
- 02:45 EUR French HICP (MoM)
- 02:45 EUR French PPI (MoM) (Aug)
- 03:00 CHF KOF Leading Indicators (Sep)
- 03:00 EUR Spanish Retail Sales (YoY) (Aug)
- 03:10 JPY BoJ Governor Kuroda Speaks
- 03:55 EUR German Unemployment (Sep)
- 04:00 EUR Italian Monthly Unemployment Rate (Aug)
- 04:00 EUR Spanish Current account (Jul)
- 04:00 EUR ECB’s Panetta Speaks
- 04:10 EUR German Buba Mauderer Speaks
- 05:00 EUR Italian CPI (MoM) (Sep)
- 05:00 EUR Italian HICP (MoM) (Sep)
- 05:00 EUR Unemployment Rate (Aug)
- 08:00 EUR German CPI (MoM) (Sep)
- 08:00 EUR German HICP (MoM) (Sep)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 USD Core PCE Prices (Q2)
- 08:30 USD Corporate Profits (QoQ) (Q2)
- 08:30 USD GDP (QoQ) (Q2)
- 08:30 USD GDP Price Index (QoQ) (Q2)
- 08:30 USD PCE Prices (Q2)
- 08:30 USD Real Consumer Spending (Q2)
- 09:45 USD Chicago PMI (Sep)
- 10:00 10:00 USD FOMC Member Williams Speaks
- 10:30 USD Natural Gas Storage
- 11:00 USD FOMC Member Bostic Speaks
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 11:30 USD FOMC Member Harker Speaks
- 12:30 USD Chicago Fed President Evans Speaks
- 18:30 AUD AIG Manufacturing Index (Sep)
- 19:00 AUD Manufacturing PMI
- 19:30 JPY Unemployment Rate (Aug)
- 19:50 JPY BoJ Summary of Opinions
- 19:50 JPY Tankan Report
- 20:00 KRW Trade Balance (Sep)
- 20:30 KRW Nikkei Manufacturing PMI (Sep)
- 20:30 AUD Home Loans (MoM)
- 20:30 JPY Manufacturing PMI (Sep)
- 21:30 AUD Invest Housing Finance (MoM)
Friday, October 1, 2021
- All Day Holiday Hong Kong – National Day
- All Day Holiday China – National Day
- 01:00 INR Nikkei Markit Manufacturing PMI (Sep)
- 01:00 JPY Household Confidence (Sep)
- 02:00 EUR German Retail Sales (MoM) (Aug)
- 02:30 AUD Commodity Prices (YoY)
- 02:45 EUR French Government Budget Balance (Aug)
- 03:15 EUR Spanish Manufacturing PMI (Sep)
- 03:30 CHF procure.ch PMI (Sep)
- 03:45 EUR Italian Manufacturing PMI (Sep)
- 03:50 EUR French Manufacturing PMI (Sep)
- 03:55 EUR German Manufacturing PMI (Sep
- ) 04:00 EUR Manufacturing PMI (Sep)
- 04:30 GBP Manufacturing PMI (Sep)
- 05:00 EUR CPI (MoM)
- 08:30 USD Core PCE Price Index (MoM) (Aug)
- 08:30 USD PCE price index (MoM) (Aug
- 08:30 USD Personal Income (MoM) (Aug)
- 08:30 USD Personal Spending (MoM) (Aug)
- 08:30 USD Real Personal Consumption (MoM) (Aug)
- 08:30 CAD GDP (MoM) (Jul)
- 09:30 CAD Manufacturing PMI (Sep)
- 09:45 USD Manufacturing PMI (Sep)
- 10:00 USD Construction Spending (MoM) (Aug)
- 10:00 USD ISM Manufacturing PMI (Sep)
- 10:00 USD Michigan Consumer Sentiment (Sep)
- 11:30 EUR ECB’s Schnabel Speaks
- 12:00 USD Dallas Fed PCE (Aug)
- 13:00 USD U.S. Baker Hughes Oil Rig Count
- 15:30 USD CFTC speculative net positions
- Sovereign Rating Updates – France (S&P) – Poland (S&P)
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.
-comment section below data-
Subscribe and Follow
Find us at www.traderscommunity.com
Follow our contributors on Twitter @traderscom @thepitboss16 @knovawave @ClemsnideClem
Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.