Morning 2-9

A bit of sideways action so far overnight in Stocks. Treasury Curve continues to flatten for second day after steepening to start February. Both 10- and 30-year yields touched multi month highs then turned tail and moved lower as part of the flattening Curve. The XLF still moving higher, not one red day so far in February but let us see if the flatter curve has any impact, same goes for banks KBW bank index. BBG flagging up that Average junk bond yields have dipped below 4% for the first time ever   okay then it appears no worries about any companies’ ability to survive this pandemic/recession. Yesterday saw 6-year highs   for both 5- and 10-year inflation breakeven, a little bit of inflation is good, for now, Brent printed north of $61 today, Platinum continues upward trend a break of 1195 will be highest price in 6 years. Reflation trade worries about inflation are good for commodities. USDA report today and Grains higher, yes fundamentals a big part of the story South American weather, China Demand but also too outright Commodity demand as a hedge against inflation.  Another stimulus bill in the pipeline regardless of size is still going to give a boost to spending so Inflation expectations unlikely to pause for long.  DTN Ags with a note saying that some countries that do not handle Inflation well may have to increase export controls to tamp down prices I.E. Argentina and Russia. More commodities that we rarely mention Soy oil highest in 6 years palm oil multiyear high as well. China Lunar New Year starts Friday.

 Real yields continue to trend lower if they continue Risk likely to maintain a bid. JGB yields easing higher as Futures have fallen for 10 consecutive days longest streak since 2003, 40 year yields highest since march 2019 speculation that BOJ could widen band of JGB yields aka less control of rates (IFR). Bitcoin off overnight highs of 48,885 in futures but s till +$1500 on day

News:

 White House Press Secretary Jen Psaki said that the plan will probably advance under the budget procedure which means it will only need a simple majority in the Senate for approval. Biden is being won over by liberal Democrats who cite the reduction in the size of the 2009 bailout as the cost of reaching compromise with Republicans. -Morning money (MM)

The Senate begins former President Donald Trump’s second impeachment trial today with a fight over whether it can proceed at all-MM

Small business optimism index drops to 8 months low “economic conditions deteriorated sharply.”

In the fight to suppress Covid-19, Japan has found success by stripping down its policy to one simple measure: closing restaurants and bars at 8 p.m.  WSJ

the Philippines plans to import around 400,000 MT of pork this year to help cover a domestic meat shortfall and rein in inflation. This is more than double the initial proposal to bring in 162,000 MT of the meat. The country’s hog herd was hit by African swine fever. -pro Farmer

Markets:  Spoos for second day in a row have 15 handles overnight range Vix attempting to break below 21 handle European stocks sideways to lower, Asian stocks higher CSI 300 +2.1%

Morning 2-8

  • 30-year yield traded above 2% for first time in a year.
  • Japans TOPIX & NKY Stock market touched 30 year high, Dax multi years high.
  • Brent above $60 for first time in a year, closing higher for 6 consecutive days.
  • Yellen and Biden both calling for swift passage of latest stimulus bill, but some cold water being thrown on it By Larry Summers who believes the $1.9 T price tag is a bit much and worried about Inflation risks due to the size of Deal. Per ITC markets” Tsy Sec Yellen (7 Feb CNN): We have to consider the risk that the stimulus plan could cause inflation, but we have the tools to deal with risk, repeats again that the risk is we don’t do enough on stimulus.
  • Speaking of Inflation   10-year breakeven rate printed 2.21% highest since 2014, 5s 30 curve steepest in years and trend appears too higher.
  • Draghi could be sworn In by Friday as next Italian PM per ITC markets “Italy’s League leader Salvini (6 Feb): Will decide next week whether to back a Draghi led govt, common ground had emerged in Sat’s discussion.”
  • Citi’s Global risk aversion index briefly popped last week, but now printing below lasts weeks GME driven highs. All is week in the World…
  • Oh, lookie here TESLA HAS BOUGHT $1.5B IN BITCOIN – SEC FILING
  • China car sales Rebounded in Dec +6.6% expected to move higher in 2021 Platinum 4.5-year highs.

Econ Data

Spain’s industrial production fell 0.6 percent from a year earlier in December 2020, following a revised 3.7 percent slump in the previous month. It was the smallest contraction in output since December 2019.

Industrial production in Germany stalled in December, following an upwardly revised 1.5% rise in November and compared to market forecasts of a 0.3% increase, amid new coronavirus lockdowns at home and other European countries.

Virus:

  • South Africa to halt use of Astra shot due to limited effectiveness (BBG)
  • Newly reported coronavirus cases in the U.S. fell below 100,000 for the first time this year, and hospitalizations continued to decline, as vaccination rollouts picked up speed. -WSJ
  • But as the Lunar New Year holiday approaches, WSJ’s Jonathan Cheng explains that China is trying something different: handing out cash and gifts to those who agree not to travel.
  • IFR news “Virus infections have dropped in the United States has improved according to latest CDC reports- Rtrs, but in Europe both Health minister Spahn in Germany and UK PM Johnson are advocating for strict controls so no end to lockdown pressures- Rtrs news. That mixed news was followed by German production growth holding due to Chinese demand. Treasury secretary Yellin in comments over the weekend emphasized the need for a large fiscal stimulus bill and with-it full employment would be restored- Rtrs news.

Markets:

  • Stocks Continue to run and why wouldn’t they? Low rates more stimulus and the appearance that Virus is starting to be defeated SPX, NDX record highs last week Multi decade highs for Japanese stocks.
  • Italy’s Mib +1 year high,10-year BTPs 1-month lows

Morning

 Buy stocks…Again 3 reasons.

 Bloomberg article talking about how HF are making up for a lost January by buying and selling stocks at pace last seen in March “Hedge funds, which were forced to retreat furiously last week amid a retail-fueled short squeeze, have since been busy adding stocks on both the long and short side of their book. Their gross trading flow jumped on Tuesday at the fastest pace since the bear market bottom in March, according to data compiled by Goldman Sachs Group Inc.’s prime brokerage unit.”

 Also good for Risk   One step closer to a new Stimulus Deal “The Senate passed budget legislation which clears the way for President Biden’s $1.9tn stimulus plan, Vice President Harris breaking a 50-50 tie. From here it will proceed to the House of Representatives.” IFR News

 Lastly “The 7-day average of new Covid_19 cases per day is down 45% from the peak on January 11th and hospitalizations are down 31% from the peak on January 6th”-BBG.

P.S.  JNJ is asking the FDA to clear its COVID-19 vaccine for emergency use   if so 3 vaccines in the USA. Looks like a hearing on feb 26Th will decide its fate.

Markets:

  Bonds and bunds offered, US yield curve steeper, rumblings now that Bond Vol has found a bottom and Vix has found a top, Stocks higher Bonds lower. Brent a stone’s throw from $60 printed $59.75 another slight negative for long end bonds vis vi Inflation expectations creeping higher. Bond yields working the 7th Consecutive higher close.

Nat gas Up through $3 Cold artic weather here to stay for next 2 weeks per morning weather if so, we could see record storage withdrawals for the Month of February something the markets did not price in

Dollar sideways, Stocks sideways Expectations are for a strong payrolls Number any impact on markets will be short lived macro news more important than Economic data. You can look at payroll data in the sense of more or Less stimulus depending how strong or weak data is .be aware we will see yearly revisions,

morning 2-4

 Stocks Meandering for now

Dollar continues to press higher, but no Short Squeeze burst much to my surprise, Euro 2 month low the run up in Dollar not hampering or slowing the re- reflation trade as Stocks ease higher and Commodities are split. Precious metals   Sideways to lower, energy higher, base metals sideways to lower.  Long end bond lower as yields creep towards one-year highs a bit of higher inflation and good economic data weighing on futures. 5s 30 yield curve steepest in almost 5 years. A busy day for earnings no headline grabber type stocks,46 SPX companies report today. Gilead science and peloton after the close. Qualcomm yesterday warned of chip shortages a common theme throughout the sector Qualcomm down 6% or so premarket. Something lost in the Amazon earnings was that Company breached the $1B a day in sales average in 2020   ok then From Goldman Sachs Head of Commodity via BBg “His view is that we’re heading into a new commodities bull-market super cycle, reminiscent of the 1970s. He argues that President Biden’s policy priorities will contribute to a boom in oil prices, and other industrial commodities.

 Today Yellen and heads of Sec and other regulators will gather to discuss Robinhood and everything Redditt, nothing of substance likely to come from it but look good in headlines. Bloomberg comment here that Robinhood’s option trading platform last month was the second most active platform next to Schwab.

Markets:

 With the run up in corn yesterday possibly on rumors of a Big Export order Out of China all eyes will be on the 7:30 Export order data from USDA. Hogs as usual will be in focus take note that Reuters reporting that another Swine flu outbreak is taking hold in China.  Crop report Tuesday may continue to limit volatility and interest in grain complex until the release. Via pro farmer “Another blizzard will track its way through the Midwest today, with temperatures expected to dive in its wake. That helped push cash hog prices $3.50 higher on Wednesday, as marketing’s will likely slow in states impacted by the wintry blast”.  Not a surprise country who have seen a successful roll out of vaccine’s are seeing their currency’s outperform peers -BBG.

Stocks Mixed worldwide Spoos little changed Nasdaq up a touch, Europe steady to higher Shanghai -.4%, Kospi -1,35%, NKY -1%, hang Seng closed-.6%. BOE hinted that negative rates are not happening Soon, 10-year gilt yields highest since 3-2020   and GBP rallying a bit.

Morning 2-3

News:

Via WSj “Most major pharmacy and retail chains will participate in expanding the vaccination effort, including Walgreens, CVS, Kroger and Walmart. (full story)

Jeff Bezos says he will shift from CEO to executive chairman at Amazon.

Annual inflation rate in the Euro Area jumped to 0.9% in January, the most in 12 months, ending 5 months of deflation and beating market forecasts of 0.5%, preliminary estimates showed. 

Both Google and Amazon higher post earnings

Per IHS “more than 80% of reports from SPX companies so far have surpassed analysts’ earnings expectations, with 97% of reports from technology companies beating” …

 Via trading Economics “Annual inflation rate in the Euro Area jumped to 0.9 percent in January of 2021, the highest rate since February of 2020, and ending 5 months of deflation, the annual core inflation, which excludes volatile prices of energy, food, alcohol & tobacco and at which the ECB looks in its policy decisions, jumped to 1.4 percent in January from a record low of 0.2 percent in each of the previous four months….  This provided a brief lift to the Euro.

Mortgage Application jumped 8.1% last week after falling prior 2 weeks.

Mario Draghi has been asked and accepted to try and form a new Government and thus become the new Italian prime Minister.  BTPs Love it yields -8 Bps, Mib loves it +2.27%. What is not to love to have the person who said will do anything to keep the Euro together?

Oil bid again brent Z1-Z2 spread highest in a year. heating oil Crack highest since May, 3-2-1 crack turning Oil into gasoline and Heating oil strongest since April (BBG) yesterday API data reported oil stocks dropped by 4.3m barrels.

◘ The short squeeze is over. Yesterday the Hedge Industry VIP ETF (GVIP +2.47%) outperformed the “Most Short Rolling” index (GSCBMSAL -7.81%) by over ten percentage points, the second-best day on record – Bloomberg. ◘ Crazy factoid of the day: No lows. According to our records, today was only the 6th time in the past 30 years that there were *0* securities on the NYSE falling to a 52-week low at any point during the day. (Sentiment Rader) via mizuho

China’s short-term money market rates continued to ease on Wednesday. The Shanghai Interbank Offered Rate (Shibor) for the overnight tenor fell 45.4 bps to 1.859%. The Shibor for one-week tenor dropped 9.5 bps to 2.146%   good news ahead of next week’s Lunar new year china will be closed from 2-11 to 2-17

  • Mexican ag ministry officials say country’s corn imports could slide 9% in 2021.
  • Gas Buddy reports the national average has risen for the fourth week in a row, rising 1.9 cents per gallon over the last week to $2.42. BBg
  • Disease disrupting Chinese hog herd rebuilding …Again    pro farmer.

Markets:

  Stocks Bid, Treasury says they will hold increasing size of net issuance for next 3 months as expected. Silver back   bid, hmmmm I thought squeeze was over +2.6%, Platinum +1.4% Gold +.2% Spoos a bit higher Nasdaq +.6%, European bourses higher. Dollar trying to take out yesterdays Highs strong dollar not weighing on commodities take note