Morning 9-23

 A bit Of Virus News…

  • Johnson & Johnson to test single-shot coronavirus vaccine on 60,000 people in phase-3 trials … Pharmaceutical giant Johnson & Johnson (J&J) has begun the phase-three trials of its single-shot coronavirus vaccine candidate -BBG
  • Goldman, HSBC Halt U.K. return to office   BBG
  • Wisconsin added to Illinois travel order of 14-day quarantine
  • 27 states have shown an increase in the 7-day average of new confirmed cases since Labor Day BBG

Chart of the day 10-year treasury yields weekly close only chart, for 6 months yields contains in 20 bps range .77 to .54 its just crazy

 Dollar sideways to higher this morning, DXY closed above top of the range let’s see if this gives the bulls the upper hand in the short term. Not helping the Euro …The IHS Markit Eurozone Composite PMI decreased to 50.1 in September from 51.9 in August, below forecasts of 51.7. The reading points to a near stalling of the economy as rising coronavirus infections and ongoing social distancing measures curbed demand, notably for consumer-facing services (Trading Economics) even though the manufacturing PMI was reported a bit better then consensus…… More positive Dollar news “The USD also gained some further ground against many emerging market currencies yesterday, rising by over 1% against the Brazilian real and almost 2% against the Mexican peso. For now, at least, those moves have only reversed part of the prior gains the EM currencies made in August. (macro markets daily) Dollar higher again today against both of these.  Per Mizuho the gap between spot and front Month VIx is at that widest since 2012 Stocks a bit higher, metals lower copper gold and Silver. Lumber Limit Bid premarket watch dollar

News:

  • No govt shutdown as Congress passes a stopgap funding bill
  • A total of 29 Wild boars have the pig Virus but no domestic pigs
  • China’s imports of pork in August doubled from a year ago to 350,000 tons, but the imports slowed from the previous month’s record of 430,000 tons, according to customs data

All sorts of Charts

Goldman Sachs Financial Conditions Index,recall the FOMC comments on financial conditions and does not like Them to tighten

the higher it goes tighter conditions

Chicago Fed Financial Conditions index,it too turning higher

Euro Area Bloomberg Financial Conditions Index sideways,toppy

The lower it prints tighter conditions
Citi emerging market Macro Risk index above .5 means Risk Aversion is above average.it appears a trend towards more risk aversion is happening.

Why the relentless selling in October gas and now November? One reason is the Decrease in LNG exports,to do Multiple storms in Gulf. below is All U.S. LNG exports on a daily chart

The higher the number the more imports at expense of Exports

Morning 9-22

From Morgan Stanley.

 (BN) Morgan Stanley Warns Nasdaq 100 May Fall More Than 20% From
 Peak                                                          
More importantly, hedge funds have stayed “decidedly” long tech
and growth stocks, Wilson said, citing the firm’s prime        
brokerage data. While the conviction partly reflects the       
outsize returns from internet and software companies, it also  
highlights the danger should sentiment start to sour, he said. 
Despite this month’s retreat, the Nasdaq 100 is up 24% for the 
year, compared with a gain of less than 1% for the S&P 500.    
Many of those funds “are letting it ride,” Wilson wrote. “That 
may come into play and provide some fuel for this correction to
go a little further than most are expecting.”

 Impressive Nasdaq rally into the close yesterday, just when you think the fat lady is going to sing, bulls stage a comeback!  For a definition of cyclical stocks I will use the materials ETF XLB  it has been on impressive bull run over last 3 months as hopes and or  realization for an economic rebound were being priced, yesterday that changed.XLB dropped 3.8% biggest loss since early June, one day correction  or worries that a new stimulus round is unlikely? hmmm

  From Mizuho Watch this space. This is the first sign of real risk aversion in riskier US credit since June. Investors pulled more than $1 billion yesterday from the biggest junk-bond ETF, BlackRock’s $27.8 billion fund that trades as HYG. It is the biggest daily withdrawal since February, and one of the bigger ones in the fund’s history. Junk-debt spreads (LF98OAS Index) stayed consistent through recent jitters in big tech, but the threat of no extra fiscal support, paired with growing political uncertainty, pushed spreads wider yesterday, to a two-month high

 Powell testifies along with Mnuchin  in 9;30  in front of Congress it appears some of his comments are already leaked  Powell to say  “more stimulus needed to prevent long term economic damage”  and path ahead continues to be highly uncertain”- BBG shouldn’t be a market mover we have heard it all before nothing new.

New restrictions in UK Likely to last 6 months and told people to work form Home if possible. Restaurants, bars and pubs to offer table service only, partial reopening of sports stadiums suspended these restrictions will last 6 months.

 Tesla is a having a battery day.  A copy of apples iPhone day?  Musk did come out and say do not expect any of this new technology to be available till 2022 stock a bit disappointed down 2% pre cash open

Lumber back at limit down offer This morning….  macro views “HOUSING MARKET SLOWING? — Pantheon’s Ian Shepherdson: Pantheon Macroeconomics. “We remain bullish on the near-term outlook for the housing market, but momentum in the mortgage applications numbers has faded a bit in recent weeks. If this continues, it will signal a flattening in home sales towards the end of the year.” -Politico

 Was yesterday a correction or a start of a new trend? for the most part Markets sideways last month awaiting election results, new stimulus measure but now the Animosity in congress is growing. A New threat of Govt shutdown further strains relation on capitol hill, it will be a tumultuous few week. Watch natgas as the past few days have a been one of the strongest liquidations moves, I have seen, take no prisoners as longs liquidate or roll into back months.

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.

Dollar

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.

Markets:

 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.

News:

  • US approaches 200K virus deaths
  • TRUMP WANTS FINAL VOTE ON SUPREME COURT PICK BEFORE ELECTIONS
  • “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.”

News:

  • 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

Markets:

 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)