Morning 10-26

The DAX 30 plunged over 2% to touch a 3-month low of 12,259 dragged down by a 20% decline in technology giant SAP, which is set for its worst day in 24 years. The company reported disappointing earnings, with both revenues operating profit falling and cut its 2020 outlook. Meanwhile, the number of new COVID-19 infections across the region continue to worry investors. The number of deaths has crossed 10,000 in Germany and on Sunday the country reported more than 11,000 new cases, following 14,000 tallies on Saturday. – trading economics

European countries stepped up restrictive measures to curb the spread of the coronavirus disease during the weekend, moving closer to those imposed during the first wave of infections as nations struggle to control the second wave peaks. Spain announced a nationwide curfew and Italy introduced the strongest measures since May, while several others leave the door open to new lockdowns like Belgium and Poland. The WHO’s director said some countries in the northern hemisphere are facing a dangerous moment as US coronavirus infections hit a record for the second day and France’s cases rose by more than 50,000 and China tackled another outbreak. On a more positive note, AstraZeneca vaccine candidate produced a robust immune response in elderly people; and J&J said the first batches of its shot could be available in January. At the same time, India’s cases continue in a declining trend. – Trading Economics

Markets pricing in less of a chance of a blue wave and thus less chance of a big stimulus package. A few notes

JPMORGAN ANALYSTS SEE AN “ORDERLY” ELECTION VICTORY FOR DONALD TRUMP AS MOST FAVOURABLE OUTCOME FOR EQUITIES

Via Zero hedge

Winter storm bringing needed precip to the central & southwest Plains, but also stressing livestock… The central and southwest Plains are dealing with a significant winter storm that is bringing significant rain, freezing rain, sleet, snow and very cold temperatures, according to World Weather, who says the system is likely to linger through Thursday. World Weather reports that if the forecast verifies, “Drought will be broken down in a major way.” But the wintry blast is also creating “extremely dangerous” conditions for livestock in the region, reports World Weather. The storm will also halt harvest and fieldwork on summer crops

Dollar higher   Yields lower Italian BTP rallying smartly as Country was upgraded on Friday afternoon a bit of surprise.precious metals lower for now.

Trump is on the trail all week with stops in Pennsylvania on Monday.

On Tuesday, Trump heads to Michigan, Wisconsin and Nebraska (home of potentially important split Electoral College votes) … Vice President Mike Pence will also stay on the trail despite aides testing positive for Covid-19 … Biden is on the trail as well including an event in Warm Springs, Georgia on Tuesday  Morning money

Nat Gas and Biden odds

I was hoping for a bit a clarity by looking at Biden odds for presidency and Nat gas. Inverse correlation in the summer months but over last few weeks positive correlation as His odds increase hmm.. More regulation on fracking some type of measure that could ultimately could decrease supply.

Nat Gas

Still no answers on why NG-HH spread is so out of whack Worries about a Biden win?LNG demand? Weather not much of a concern yet. below is yearly Nat Gas swaps for 2021, 22 and 23. 2021 the only one Trading above $3 ( H/T@brynneKKelly NGN) so short term bullish medium term sideways for the full yearprices.

China Demand for LNG staying strong from JPM “China continues to boost LNG imports: Offshore Energy reported on Thursday 24 September 2020 China, the world’s largest energy consumer, is continuing to post higher monthly LNG imports and reported a 16.3 percent year-on-year increase in August. LNG imports totaled 5.96 million tonnes last month, data from the General Administration of Customs showed. In the January-August period, the country imported 42.17 million tonnes of chilled fuel, a year-on-year rise of 10 percent.”

is it all LNG demand that is driving NG and HH prices likely a big part.A Biden win bad for nat gas due to tougher regulation on fracking is a thought,I Don’t believe A Biden win will be the end of fracking I think some tougher regulations will an cause an increase in the cost of production

Morning 10-23

 Yesterdays debate Civil 10 days till election…The  Weekly update of Fed balance sheet showed an increase of.36%  resulting in a new all time high of $7.177 Trillion .last 3 weeks the balance sheet has increased by ~1.5%  not much conversation surrounding this move  so a stealthy move to add more liquidity . Fed balance sheet =37% of U.S. GDP ECB 66% and BOJ’s 137%.  Not much in the way of Fresh news on Stimulus  We may see some tweets or headlines but market impact likely to be nonexistent unless we seed declaration of Deal done…Gilead science share higher preopen as its antiviral Therapy becomes the first drug formally cleared to treat Covid-BBG

  Stocks in Europe looking to close out week on a positive note all Bourses +>1.25% Some earnings from Barclays, Daimler raised Forward guidance and Renault top estimates lifting shares. Spoos little changed Nasdaq +.25% all markets waiting for the election. Nat Gas a a bit heavy today as LNG exports come off the boil a bit, still above 30-day Average but below Wednesday weekly highs for second day in a row. Dollar a bit lower but Weekly lows still have not breached. U.S 5s 30 continues to steepen if not broken why fix it right   working a 6th consecutive higher or steeper close. Take notice fed balance sheet all-time highs as 10- and 30-year yields creep higher. From IFR news However, the prospect of a Blue Wave at the November election has disrupted this script…so far this disruption has been modest but could turn into a headache on a confirmed Biden victory. Already as Biden widened his lead over Trump, since the start of the month, we have seen 1) a 17bps rise in 10y yields; and 2) Russell2000 outperform the S&P500 by around 430bps. A Blue Wave is far from being priced largely because most investors tend to go into such election events with a neutral stance and stick to longer-term themes as opposed to a short-term gamble.

Quiet Economic calendar today markets likely to drift, Positive EU-Brexit trade comments also provided a bit of a lift to European Stocks. China may announce new import quotas for corn thus increasing demand for U.S. grain Corn +$1 or 400 ticks since August 15th! Even though Chin; s Hog Imports are very impressive +122% for September vs year ago levels   market wants to see more demand Hogs touched limit down yesterday and Chart pattern no friend to bulls.Bitcoing trading around 13K.

Real Yields

10 year real yields sideways to higher as long as no sustained move higher should be good for Gold and Risky assets

5 year real yields same story

Now if Inflation Expectations or actual infaltion would start to perk up a bit Real yields would continue to stay low. Yesterday from beige book and last weeks CPI we know used car prices and Home prices are moving higher.Also part of reflation trade base metals are moving higher,below LME metal index…

And Bloomberg Commodity sub index of Ag products,Soy ,corn,Wheat,Coffee ,cotton and others trending higher

when if ever will these Higher prices cause producers to increase costs and thus push on on to consumer? Fed obviously hoping for that to happen but since food is not counted as inflationary in Fed Vernacular then hope lies on the base metals, maybe we have to wait a bit longer for inflation surge

Morning 10-22

 Via yahoo finance

      “The Federal Reserve’s latest Beige Book — a collection of economic anecdotes from across the country — highlighted two COVID-19 era trends that continue to fascinate us all: 1) “Residential housing markets continued to experience steady demand for new and existing homes, with activity constrained by low inventories,“ and 2) “Demand for autos remained steady, but low inventories have constrained sales to varying degrees.”

There are a lot of things behind what’s been driving demand. Simply put, the pandemic has motivated people to 1) move out of densely packed cities to places where you can get a stand-alone home and 2) seek alternative modes of travel in an effort to avoid densely-packed, mass-transit options like planes, trains and buses.

  What I take from this is a bit of upward price pressure on the over all price level of Goods, not enough to push CPI or PCE substantially higher but enough to firm these metrics.

Dollar higher so far this morning Risk a Bit Off Gold, silver Copper lower you know the drill based on Dollar direction. Just released Jobless claims beat consensus by 100k,5 standard deviation beat, market ignores as lots of noise in the weekly claims number.

   From Mizuho scoreboard update on earnings Earnings season has gone well so far, with most companies, including Tesla, beating estimates handily. Verizon raised its earnings per share guidance and its fourth quarter wireless service revenue expectations. Whirlpool raised full year guidance more than 27% above consensus forecasts ($17.50 – $18.00 vs $13.70 consensus). Truck broker Landstar System handily beat its guidance, which was raised in early September. The company posted its second-best third quarter ever so Far so good with Earnings even though the bar for “beats “was set pretty low.

 Pelosi press conference at9 :45 today yesterday the FBI warned of Foreign Interference in Elections (Russia, Iran) as the two countries attempt to influence voters. Another piece of Evidence that election results will be contested, which candidate does this benefit?  Good question. Stimulus will happen in some way, amount and form depends on wins election. I still believe Unlikely before Nov 3rd.

Markets:

 Nat gas Still hovering around $3 handle as todays LNG exports pull back a bit ,they ae still above 30 day Average but  lower then yesterday. Stocks Worldwide a steady to lower, Bitcoin cash 19 month high, Gold -1% Silver -2% platinum -3%,copper-1.5% Bonds small bid    bunds  steady   Sideways markets expected again today driven by headlines

News

  • Telegraph Source: A Brexit trade deal could be agreed in 2 weeks after the EU gave ground in a significant shift that led to talks being restarted from today https://bit.ly/37vN5jW
  • US House Speaker Pelosi’s Spokesman: Discussions between Pelosi & Tsy Sec Mnuchin on the C-19 relief bill are bringing us closer to being able to put pen to paper
  • Final presidential Debate tonight 8:00 CST
  • Covid Update: Global active cases >12m; France and Spain reach 1m cases, first 2 in Europe     ITC markets
  • “Federal Reserve Governor Lael Brainard … said the biggest risk to the economic recovery, beyond the coronavirus, is the danger that Congress won’t pass additional aid for people and businesses hammered by the fallout from the pandemic (morning Money)

Market drop?

Hard to Pinpoint one specific reason so I will list Some Headlines that could have caused drop and remind everyone that Dollar did rally a bit post London fix at 10 A.M. . Also Sell into the European Close based on bearish EZ headlines then Bounce post 10:30, buy the European Close

  • Italy set a one Day record in new Virus cases
  • GERMAN CABINET, WHICH MET WED. MUST NOT GO INTO QUARANTINE DESPITE GERMANY’S HEALTH MIN. SPAHN’S POSITIVE CORONAVIRUS TEST – FOCUS ONLINE
  • Media reports say DF-17 missiles have been deployed to China’s southeast coast. Viewed as aircraft carrier killer, DF-17 has range of up to 2,500 km. If it is true, the Chinese mainland’s anti-access/area denial capability will be greatly enhanced in a war in the Taiwan Straits.
  • Boston Public Schools students will return to remote-only learning starting Thursday, as the city’s coronavirus positivity rate continues to rise, city and school officials announced Wednesday
  • **POMPEO SAYS US DESIGNATING US OPERATIONS OF SIX CHINA BASED MEDIA OUTLETS AS FOREIGN MISSIONS

But the Whitehouse with a Stick save on Markets drop

  • White House spokeswoman says cautiously optimistic on stimulus deal forexlive.com/news/!/white-h…
  • WH PRESS SEC. MCENANY: I AM CAUTIOUSLY OPTIMISTIC ON A STIMULUS DEAL.

Volatility

Bloomberg flagging up this interesting market pricing .Vix curve From 10-20 =orange line 9-21 Green and 8-18=Blue Line. The red circles show the expected peak in Volatility .Now Vix futures show what volatility may be in one months time So a high print in November contract means December volatility expected to be high.The red circle from 8-18 showed market players viewed the October contract as the peak in Volatility (November time period) as possibly the most volatile month,but now notice today and one Month ago that Guess is for November contract (month of )December..Contested election likely the cause for the movement .An Interesting bit of pricing don’t you think?

More election volatility currency vol starting to take notice of election day 2 weeks out

2 week Euro Volatilty

2 week Jpy Volatility

Morning 10-21

 What is the bond/Treasury market telling us?

10 year yields highest since June

30 year yields highest since June

5s 30 yield curve Steepest since Early June and if June high’s Broken 4-year highs

 Reflation trade, Democratic Sweep in upcoming election and /or pricing in a Stimulus deal of some sort  or combination of all three is driving Long rates higher .With Short term rates pegged to zero for a few years the Curve could continue to steepen as the Above  possible outcomes get priced in.

News:

  • Netflix Disappointing Earnings but most importantly new subscribers missed 2.2 mln vs f/c 3.4 yikes company being downgraded stock price -6% or so.
  • Other Earnings news Winnebago good Stock =15 AutoNation good Stock +8% Snap the best stock +22%
  • Yesterday Stimulus deal Deadline came and went without a deal…  Pelosi running out the clock Per Politico 
  • “The Justice Department’s suit against Google marks the first time in more than 20 years that the government is looking at splitting up a company for quashing competition. And if the judge decides that Google is an illegal monopoly, the case could be the first time in more than 100 years that a court orders a company breakup. -Politico
  • Bitcoin Above 12k for first time in a month

Markets:

 Dollar below the 93 and 92.70 level in spot Technicals turning bearish but surprisingly Stocks sideways to lower. Spoos and Nasdaq little changed European stocks heavy all main bourses down >1% 18-20 Stoxx sectors down on the day led by construction as Individual Stock earning in that sector disappoint. Weaker dollar may not be helping stocks but metals have bid Copper continues to gain trading at 2 + year high +1.25% precious metals higher, Nat Gas above $3 for first time in a little over a year. MXCn the MSCi China Stock Index approaching multi year highs yuan 2+ year highs  reflation trade here.

Charts BTC and LNG

Bit coin cash

Natural gas Turning into a Global product and thus Impacted by the Global LNG supply,demand and prices.China weather turning colder and per Bloomberg an early start to Winter likely to see an Increase in LNG demand,and from NGI natural gas intelligence LNG feed demand increased 8.5 BCF today”..Below is US LNG export demand in a 1 day percentage change recall the more negative number the higher exports,so a drop of 17% yesterday into today is one of the biggest surges in LNG Exports in last few weeks.$3 front month gas here we come as Nov trading 2.95