Outlook deteriorating

A few comments regarding European economy From Morgan Stanley

Euro Area | Softer data, slower recovery “we expect this weeks PMI data to weaken but hold above 50, indicating continued recovery at a modest pace.

UK Data-wise, following a strong summer, we expect data to slow into the autumn. September PMIs should decline sharply, although remain at an elevated level.

From raboBank “With central bank’s having come to the rescue in March, the fact that the US has failed to get the virus under control while many countries that were successful in bringing cases down to manageable levels, including Britain, are now very clearly entering the so called second wave of infections paints a bleak picture as regards global growth.”

A proxy for Asian Economy’s ,South Korean Exports reported late last week “

Korea’s September first 20 days exports have softened somewhat. However, this does not reverse the recovery trend in exports under way since early May. (Morgan )

With the chances of A another round of Fiscal stimulus fading fast some look to the Fed to fill the need, the Fed will not do anything in near term so to stay out of political fray, but comment from Dallas President Kaplan shows that the Fed may be in no hurry to increase bond buying regardless of politics “Asset buying at this point may do more to stimulate financial markets than then it helps the real economy,” Mr. Kaplan said. “I’d rather get to where the issues are, which I think are to encourage passage of more fiscal policy, health care protocols, and then go to areas of the economy where there isn’t good access to credit” as a way to help the recovery, he said-WSJ

US GOVTS-Chance of stimulus bill now near zero with DC drama over SCOTUS seat, double-dip

IFR Immediate Alert Global Squawk Box
US GOVTS-Chance of stimulus bill now near zero with DC drama over SCOTUS seat, double-dip Sep 21 2020 07:52 by Duncan Balsbaugh Back in August we warned of the potential for an “awful autumn”. It will get worse. How much, who knows. Of course, the news over the weekend added to angst, from several sources. Increasing Covid cases across the Atlantic threatens another lockdown in the UK. Europe’s big banks are getting gutted again (Deutsche Bank dumped near 8%). However, we see the main antagonist again as dysfunctional DC. The money-line, or main theme developing over the weekend, the chance of a stimulus bill are now near zero. The passing of Supreme Court justice Ruth Bader Ginsburg, and the GOP rush to fill the seat perhaps before the election, potentially kills any chance of a stimulus bill. That’s a big deal in our estimation. Equities are still priced for approximately $2+ trillion in stimulus. Now looking like a pipe dream. And the Powell Fed is now sidelined.

Likely until December, given that official election results may not be in by the November meeting. The stage is set for a double dip in the US economy. Don’t get caught up in the optimists’ focus on global trade improvements. That boomerang rebound in global trade, will benefit manufacturing economies by far, over service economies like the US. Manufacturing mainly in China, Asia, and Germany, saw durable goods demand postponed, now renewed. The opposite of the US service economy, representing likely 75% or more by now, where said services were canceled. Not to be replaced. And still near zero demand for so many services, now that the flu season joins the Covid’s second wave.

The timing could not be worse, as the nasty uncertainties playing out, intersect with the most overvalued equities market in history. Year to date, roughly 60% of the stocks in the S&P sport negative returns. Only about 25% of the stocks have beat the S&Ps return. And just five stocks are responsible for the S&Ps super-steroids performance. Of course that analysis is even worse within the Nasdaq100. However, S&P e-minis look to be near some support. 3218 is the 10% off the highs level. Which should cap gains on USTs, with 30-year yield support/price resistance near the 100 day moving average at 1.389% (low 1.395%). For selling to return, Spoos must recapture the 50 day mover at 3329.


Precious metals trying to breakdown out of a Month long sideways range

Stronger dollar weak yuan not helping risk one bit. The chance for a new Stimulus bill likely dead in the senate another reason why dollar stronger all else equal

Morning 9-21

Risk OFF!

 European Banks -5.1% As a report over the weekend indicated banks moved money for individuals or entities that they could not identify (BBG) raising the alarm for all sort of possible fraudulent activity. ING and Deutsche -7% Barclays and HSBC both down 6% US banks following the lead pre cash open. HSBC trading at lowest levels since 1995 per BBG

 Secondly  worry’s growing over a second or third surge of virus cases across Europe U.K chief scientist said “ the country is on pace for 50k cases a day unless urgent measures are taken(BBG)  this brought the conversation around to another set of Possible lockdowns’. Johnson will speak tomorrow to lay a new plan. Travel and leisure sector in Stoxx 600 -5%

Third The passing of ruth Ginsberg is increased the partisan divide in Senate this further pushes any chance of new stimulus further out of reach. Per goodjudment.com the chance of Getting stimulus del before Oct 31st is down 6% over last week and stands at just 30 %, not before Jan 31st, 2021 stands at 65% +7% over last week. The fed cannot do it all thus the pleading to members of Congress to provide more stimulus, the markets need more stimulus to move higher without it the path of least resistance likely to downside.

 Double whammy to risk comes from stronger dollar and yen, hard for stocks to move higher with both of these currencies positive on day   DXY +.35%, JPY +.4% higher for 6th consecutive day trading at highest level since March. Japan on two-day holiday watch once they return watch for Comments regarding the Strong currency as the time is approaching for some verbal intervention.


 Dow -2%, Spoos -1.7% Nasdaq _1.6% Ugly in Europe Stoxx 50 -3.2%, FTSE and Dax -3.4% Mib -3% Outside of Italy 10-year EZ yields lower Germany -3.3.  Euro -.4% Gold -1.4%, Silver -2.6% Platinum -2% Bonds =1 handle ultra +2 handles. The liquidation in October Nat Gas continues unabated, open interest continues to decline towards zero as roll continuous  gas -3.8%today whereas Nov little change.


  • US approaches 200K virus deaths
  • “Trump approved a deal … that will allow TikTok to continue operating in the United States, a decision that comes after more than a month of geopolitical turmoil between Washington and Beijing over the future of the video-sharing app
  • Powell and Mnuchin in front of Congress on Tuesday Powell back in front of house on Wednesday
  • WSJ’s Sam Goldfarb and Paul J. Davies: “Surging deposits and declining lending are driving banks to dramatically increase their holdings of U.S. Treasury’s, offering significant support to the bond market at a time of massive government borrowing.

Morning 9-18

FOMC Meeting behind us so now the Election Is the biggest event risk on the horizon. The problem is it is 7 weeks or so away so likely markets chop around with no real purpose till then. We already see the dollar sideway, Nasdaq  tried to break out of its sideway range to the downside but has yet to do so with momentum last 8 trading session SPX  between 3310 -3424  yes a hefty range but still going nowhere

 Momentum to the downside can explain Nat Gas down ~19% from Wednesday’s highs LNG demand still okay but industrial demand is a the lowerst for this of year since 20159BBG).Momentum to the upside is Soybeans, last 3 days +6%,yesterday was a contract high Volume day, open interest is increasing all signs of a bull market  higher prices and higher open interest.

 Stimulus hopes fading per morning money “Democrats and Republicans appeared even further away from a coronavirus relief deal on Thursday, despite mounting calls from rank-and-file lawmakers — and even President Donald Trump — for action. “With no mood for dealmaking in either party, the House and Senate are leaving for the weekend without any progress on an agreement, casting further doubt that Congress can muster the political will to adopt another massive economic stimulus measure before the November election.”


  • White house Will ban some transactions over wechat and tik tok starting Sunday-BBG
  • Quadruple witching today
  • PBOC: Sets USDCNY ref at 6.7591 vs 6.7675 prev, strongest lvl since May 6 2019-ITC markets
  • Libya will restart some Oil exports oil -trading lower today
  • FT: Scientific groups advising the UK govt are recommending another 2 week national lockdown


 Stocks sideways,Dollar 20 tick range sits unchanged, Bunds up a bot Bonds little changed to higher.JPY approaching strongest level vs Dollar in 6 months ,possibliltes of some verbal intervention from BOJ  if 104 handle taking out. Remember the “begger thy neighbor “policy no central bank wants a strong currency these days, Japan is closed on Monday and Tuesday  so any verbal intervention may have to wait a few days. 3 fed speakers on calendar 2 doves and a  slight hawk also interesting to hear the first few fed speakers post meeting as they try to explain what they really meant in their policy statement, Bullard at 9,Bostic at 11 and kashkari at 2:00.  European bank index -2% travel and leisure  group -2.6%(virus proxy)

More beans

Weekly Exports to China you can see the seasonal pattern and if true more demand is coming.

Corn Exports to China firming again.Do the stories of Corn crop damage due to Typhoons actually going to have an impact on supply?

Bonus chart

Spot Gold chart overlay with NDX

an odd day

Nat gas headed for one of the worst days in over a year,Longs taken out to wood shed a bit of forced liquidation ongoing. LNG exports trending higher,so we cant blame that for drop in prices weekly storage number beat by two standard deviations so plenty of supply available.Shoulder month upon us as October volume and open interest continue to drop and as November becomes the front month winter weather becomes focus.its still summer for pEte’s sake so no more weather concerns for a spell. nat Gas headd for one of the worst days in 1.5 years.

oil is on the opposite side as it continues its impressive run higher today,A bit of bullish comments from opec and maybe just maybe some unwind of a Long Gas/Short oil spread ?? CL +2.4% Brent +2.7% CLV option expiration today maybe adding a bit to volatility movement in CL.

Plenty of Cross currents today in lumber ;Fires,better weather west coast,a possible peak in spot prices,Steady growth in Single family Home starts. lets look at Lumber curve showing a bit of the backwrdation coming out of it.The curve doesn’t contain all the information one needs to trade but it at lest can give you a picture of supply situation.

The matrix not making much sense today dollar is /was stagnant but precious metal taken out to wood shed a bit,Nasdaq tested big support level and bounced for now it looks like a retest is in the cards. I m leaning Option expiration tomorrow as reason for collapse in prices.

Soybeans continue to impress Export demand strong soy +16% since August USDA report(@karenbraun)

Morning 9-17

Central banks:

 Bank of England left policy unchanged but   hinted strongly that negative rates may be coming, the bank plans to explore how a negative bank Rate could be implemented effectively “ BBG  GBP dropped .5% on news, Front End gilt yields dropped hard by ~5 bps ,further into negative territory both 2 & 5  year yields currently stand at -.12%  Not a sign of confidence in the Economy now is it?

 Bank of japan left rates unchanged, vowed to work closely with new PM and upgraded economic forecast for first time since March a sign that Economy has bottomed-(BBG)

Fed not Dovish enough? Some say for the reason for drop in stocks, my take is that market wanted a stronger signal that more QE is on the way, not just punting to hopes of Fiscal stimulus. With the Election 7 weeks away, the Fed does not want to be perceived as being partisan one reason I believe they shied away from a firm commitment for more QE.


 A traditional Risk Off move stocks Lower bonds higher European 10-year yields lower by 1-2 bps across board. In treasuries longer yields down a bit more then short end 30s -4.6 bps 3s -1.6bps thus flattening the curve. A bit of pessimism regarding the US economy possibly the reason. Currencies sideways outside of the GBP better then expected Aussie jobs report caused a brief spike in the currency currently trading sideways. Oil touch heavy after yesterday’s Short squeeze, OPEC tele- conference today Saudi Arabian oil minister issuing some harsh comments towards countries that do not comply with production cuts. Soybean  continue to trade above $10 as strong  Export demand continues. Lumber trade choppy last 2 days as Forest fires and possible decrease in Spot prices making the trade directionless for now.

TGA Treasury General Account

Remember all the theories surrounding the Treasury’s general account and what it may be used for, next round of Stimulus for one well that hasn’t materialized yet.The account is dipping a touch but staying quite hefty compared to last year.

One reason possibly for the account to still be quite large is the lack of use of the Feds main street lending programs,recall ” The Federal Reserve established the Main Street Lending Program (Program) to support lending to small and medium-sized for profit businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic.” below graph from Bloomberg shows little if any interest in this program.maybe someone should ask Powell at today’s presser why is it so