Shorts Crushed As Dollar Surges, Euro Tumbles In Violent Trend Reversal Tyler Durden
Mon, 08/03/2020 – 09:48
Following the worst month for the dollar in a decade, there has been a bout of position squaring as we start August, largely on the back of a slump in the Euro, which is down 200 pips in 2 days, and accelerating weakness in the Yen, which have sent the Bloomberg dollar index to its highest level in a week, surging the most since June 14.
The spike in the dollar has pushed Treasury yields higher from their all time closing lows printed on Friday (as positive purchasing managers readings in China and Europe helped buoy risk appetite), while the sharp reversal has triggered a furious bout of short covering in Dollar futures, which according to the latest CFTC data has printed the most short in 9 years.
The shorting of the dollar accelerated last week, with Goldman’s FX strategists noting that in the week ending July 28, non-commercial traders net sold $5.2bn USD, following net sales of $2.2bn USD the previous week. Currently, they are net short $24.5bn USD. Both asset managers and leveraged funds contributed to the net sales of Dollars. At the same time, asset managers net sold $6.3bn USD, primarily against net purchases of EUR, JPY, and GBP.
The net sales of USD were primarily against net purchases of $5.1bn EUR, which non-commercial traders have also net purchased in eight of the prior nine weeks. Asset managers are currently net long $48.3bn EUR, the highest exposure in years. Leveraged funds also net sold USD, while net purchasing $1.3bn EUR
A similar increase in net longs was also observed in the Yen.
And now that traders are starting to turn their attention to surging covid cases in Europe and Japan while the US situation appears to have plateaued, expect this rollercoaster to reverse fully with the EUR slide only starting and the Dollar uptrend resuming.
What is most surprising perhaps about the reversal in the dollar is the lack of gold weakness – at least for now – despite the surge in the dollar. Keep an eye on precious metals to see if gold strength continues despite the apparent break in the dollar downside trend.
via ZeroHedge News https://ift.tt/39YDNw0 Tyler Durden
President Donald Trump said Friday that he would ban the popular video app TikTok in the U.S. Neither the technical or the legal means under which he could do so were clear, but Trump has a pen and some paper and told reporters he could write an executive order banning the Chinese-owned app.
The move comes as Trump and members of his administration accuse ByteDance, the company behind TikTok, of passing user data to the Chinese government.
Do Americans need better education about personal data security and how everyone can protect their own privacy? Undoubtedly. But banning communications apps outright from on high is the stuff of dictatorial regimes, not countries that respects free speech and free markets. China is fond of it. Russia, too.
The somewhat good news here is that Trump may be reversing course—if an American company buys TikTok for U.S. users.
Microsoft hopes to be the one. “Microsoft will move quickly to pursue discussions with TikTok’s parent company, ByteDance, in a matter of weeks, and in any event completing these discussions no later than September 15, 2020,” the company said in a statement. Microsoft would also buy operation rights to TikTok in Canada, Australia, and New Zealand.
“Should the deal go through, Microsoft would gain instantaneous entry into the social media space dominated by Facebook and Google, as well as smaller services like Snapchat and Twitter,” notes Dylan Byers at NBC News.
The deal would be less objectionable than an outright ban, of course. But it’s not encouraging to see federal powers bullying a foreign company into selling off part of itself to a U.S. company, especially through the threat of an outright ban based on entirely hypothetical fears. The administration has offered no evidence that the Chinese government is harvesting U.S. user data through TikTok or to what plausible end people’s TikTok data would be valuable to China’s leaders.
Instead, we’ve got Secretary of State Mike Pompeo going on Fox News to fearmonger about Communist cybervillians.
“These Chinese software companies doing business in the United States are feeding data directly to the Chinese Communist Party, their national security apparatus,” Pompeo told Fox’s Sunday Morning Futures show early in the day on August 2. “Could be [users’] facial recognition pattern, it could be information about their residence, their phone numbers, their friends, who they’re connected to. Those are the issues that President Trump’s made clear we’re going to take care of. These are true national security issues.”
By Sunday evening, however, Reuters was reporting that Trump had “agreed to allow Microsoft Corp…to negotiate the acquisition of popular short-video app TikTok if it could secure a deal in 45 days, three people familiar with the matter said on Sunday.”
“Trump changed his mind following pressure from some of his advisers and many in his Republican party,” reports Reuters:
Banning TikTok would alienate many of its young users ahead of the U.S. presidential election in November, and would likely trigger a wave of legal challenges. Several prominent Republican lawmakers put out statements in the last two days urging Trump to back a sale of TikTok to Microsoft….
The negotiations between ByteDance and Microsoft will be overseen by CFIUS, a U.S. government panel that has the right to block any agreement, according to the sources, who requested anonymity ahead of a White House announcement. Microsoft cautioned in its statement that there is no certainty a deal will be reached.
New York Times tech writer Kara Swisher thinks that Trump “is directionally correct in his effort to thwart China’s ambitions to establish internet hegemony.” But—even putting aside principled qualms with Trump’s heavy-handed meddling in private business and speech—there’s a big flaw in plans to either ban TikTok or force a bad deal.
“The Trump administration…can block economic activity by TikTok in the U.S., but we fortunately don’t have a Great Firewall in this country,” Alex Stamos, director of the Stanford Internet Observatory, told Swisher. “If they push too hard, ByteDance can focus on providing TikTok as a side-loaded Android app and a mobile website, both of which would be impossible for Trump to block.”
FREE MARKETS
Federal financial relief for U.S. small businesses and their staff went to Chinesecompanies. “Millions of dollars of American taxpayer money have flowed to China from the $660 billion Paycheck Protection Program that was created in March to be a lifeline for struggling small businesses in the United States,” The New York Timesreported on Sunday, based on a new analysis from consulting firm Horizon Advisory.
“Because the economic relief legislation allowed American subsidiaries of foreign firms to receive the loans, a substantial chunk of the money went to America’s biggest economic rival,” writes the Times‘ Alan Rappeport. Somewhere between $192 million and $419 million “has gone to more than 125 companies that Chinese entities own or invest in,” with “at least 32 Chinese companies receiv[ing] loans worth more than $1 million” each.
Florida kid masterminds Twitter hack? A teenager is accused of conducting the July 15 Twitter hack that affected Barack Obama, Joe Biden, Kim Kardashian West, Elon Musk, and other hugely prominent people. Hacked accounts tweeted out a Bitcoin scam that allegedly earned the scammer $117,000 in the cryptocurrency.
Florida state prosecutors have charged Graham Clark, age 17, with one count of organized fraud for more than $5,000, one count of unauthorized access to a computer or electronic device, 11 counts of fraudulent use of personal info, and 17 counts of communications fraud. Over the weekend, Hillsborough County Judge Joelle Ann Ober set Clark’s bail at $725,000.
“Under Florida law, it would take 10 percent of the bail set Saturday—$72,500—to free Clark pending trial,” notes the Tampa Bay Times. “He faces state charges because he is a juvenile, federal authorities say, and was held without bail when he was arrested Friday. Two others involved in the scheme face federal charges in California.”
QUICK HITS
• “What we’re seeing today” with COVID-19 in the U.S. “is different from March and April,” coronavirus task force coordinator Deborah Birx told CNN on Sunday. “It is extraordinarily widespread—it’s into the rural as equal urban areas.”
Here's a new CDC study which shows COVID-19 "spread efficiently" at a Georgia youth overnight camp. 44% of kids/staff were infected.
• New Jersey lawmakers passed a bill last week “to allow immigrants, regardless of their status, to apply for professional and occupational licenses in the state if they meet all other requirements. The legislation was approved by the state Senate last week and is expected to be signed by Gov. Phil Murphy,” northjersey.com reports.
• Protests—and clashes with law enforcement—continue in Portland as federal agents pull out.
• Ugh. From earlier this morning:
In an illegal late night coup, Nevada’s clubhouse Governor made it impossible for Republicans to win the state. Post Office could never handle the Traffic of Mail-In Votes without preparation. Using Covid to steal the state. See you in Court! https://t.co/cNSPINgCY7
President Donald Trump said Friday that he would ban the popular video app TikTok in the U.S. Neither the technical or the legal means under which he could do so were clear, but Trump has a pen and some paper and told reporters he could write an executive order banning the Chinese-owned app.
The move comes as Trump and members of his administration accuse ByteDance, the company behind TikTok, of passing user data to the Chinese government.
Do Americans need better education about personal data security and how everyone can protect their own privacy? Undoubtedly. But banning communications apps outright from on high is the stuff of dictatorial regimes, not countries that respects free speech and free markets. China is fond of it. Russia, too.
The somewhat good news here is that Trump may be reversing course—if an American company buys TikTok for U.S. users.
Microsoft hopes to be the one. “Microsoft will move quickly to pursue discussions with TikTok’s parent company, ByteDance, in a matter of weeks, and in any event completing these discussions no later than September 15, 2020,” the company said in a statement. Microsoft would also buy operation rights to TikTok in Canada, Australia, and New Zealand.
“Should the deal go through, Microsoft would gain instantaneous entry into the social media space dominated by Facebook and Google, as well as smaller services like Snapchat and Twitter,” notes Dylan Byers at NBC News.
The deal would be less objectionable than an outright ban, of course. But it’s not encouraging to see federal powers bullying a foreign company into selling off part of itself to a U.S. company, especially through the threat of an outright ban based on entirely hypothetical fears. The administration has offered no evidence that the Chinese government is harvesting U.S. user data through TikTok or to what plausible end people’s TikTok data would be valuable to China’s leaders.
Instead, we’ve got Secretary of State Mike Pompeo going on Fox News to fearmonger about Communist cybervillians.
“These Chinese software companies doing business in the United States are feeding data directly to the Chinese Communist Party, their national security apparatus,” Pompeo told Fox’s Sunday Morning Futures show early in the day on August 2. “Could be [users’] facial recognition pattern, it could be information about their residence, their phone numbers, their friends, who they’re connected to. Those are the issues that President Trump’s made clear we’re going to take care of. These are true national security issues.”
By Sunday evening, however, Reuters was reporting that Trump had “agreed to allow Microsoft Corp…to negotiate the acquisition of popular short-video app TikTok if it could secure a deal in 45 days, three people familiar with the matter said on Sunday.”
“Trump changed his mind following pressure from some of his advisers and many in his Republican party,” reports Reuters:
Banning TikTok would alienate many of its young users ahead of the U.S. presidential election in November, and would likely trigger a wave of legal challenges. Several prominent Republican lawmakers put out statements in the last two days urging Trump to back a sale of TikTok to Microsoft….
The negotiations between ByteDance and Microsoft will be overseen by CFIUS, a U.S. government panel that has the right to block any agreement, according to the sources, who requested anonymity ahead of a White House announcement. Microsoft cautioned in its statement that there is no certainty a deal will be reached.
New York Times tech writer Kara Swisher thinks that Trump “is directionally correct in his effort to thwart China’s ambitions to establish internet hegemony.” But—even putting aside principled qualms with Trump’s heavy-handed meddling in private business and speech—there’s a big flaw in plans to either ban TikTok or force a bad deal.
“The Trump administration…can block economic activity by TikTok in the U.S., but we fortunately don’t have a Great Firewall in this country,” Alex Stamos, director of the Stanford Internet Observatory, told Swisher. “If they push too hard, ByteDance can focus on providing TikTok as a side-loaded Android app and a mobile website, both of which would be impossible for Trump to block.”
FREE MARKETS
Federal financial relief for U.S. small businesses and their staff went to Chinesecompanies. “Millions of dollars of American taxpayer money have flowed to China from the $660 billion Paycheck Protection Program that was created in March to be a lifeline for struggling small businesses in the United States,” The New York Timesreported on Sunday, based on a new analysis from consulting firm Horizon Advisory.
“Because the economic relief legislation allowed American subsidiaries of foreign firms to receive the loans, a substantial chunk of the money went to America’s biggest economic rival,” writes the Times‘ Alan Rappeport. Somewhere between $192 million and $419 million “has gone to more than 125 companies that Chinese entities own or invest in,” with “at least 32 Chinese companies receiv[ing] loans worth more than $1 million” each.
Florida kid masterminds Twitter hack? A teenager is accused of conducting the July 15 Twitter hack that affected Barack Obama, Joe Biden, Kim Kardashian West, Elon Musk, and other hugely prominent people. Hacked accounts tweeted out a Bitcoin scam that allegedly earned the scammer $117,000 in the cryptocurrency.
Florida state prosecutors have charged Graham Clark, age 17, with one count of organized fraud for more than $5,000, one count of unauthorized access to a computer or electronic device, 11 counts of fraudulent use of personal info, and 17 counts of communications fraud. Over the weekend, Hillsborough County Judge Joelle Ann Ober set Clark’s bail at $725,000.
“Under Florida law, it would take 10 percent of the bail set Saturday—$72,500—to free Clark pending trial,” notes the Tampa Bay Times. “He faces state charges because he is a juvenile, federal authorities say, and was held without bail when he was arrested Friday. Two others involved in the scheme face federal charges in California.”
QUICK HITS
• “What we’re seeing today” with COVID-19 in the U.S. “is different from March and April,” coronavirus task force coordinator Deborah Birx told CNN on Sunday. “It is extraordinarily widespread—it’s into the rural as equal urban areas.”
Here's a new CDC study which shows COVID-19 "spread efficiently" at a Georgia youth overnight camp. 44% of kids/staff were infected.
• New Jersey lawmakers passed a bill last week “to allow immigrants, regardless of their status, to apply for professional and occupational licenses in the state if they meet all other requirements. The legislation was approved by the state Senate last week and is expected to be signed by Gov. Phil Murphy,” northjersey.com reports.
• Protests—and clashes with law enforcement—continue in Portland as federal agents pull out.
• Ugh. From earlier this morning:
In an illegal late night coup, Nevada’s clubhouse Governor made it impossible for Republicans to win the state. Post Office could never handle the Traffic of Mail-In Votes without preparation. Using Covid to steal the state. See you in Court! https://t.co/cNSPINgCY7
CFIUS Gives Microsoft 45 Days For TikTok Deal Talks As ByteDance Shifts HQ To London Tyler Durden
Mon, 08/03/2020 – 09:25
Just weeks after abandoning a planned move to London – a cancellation that was reportedly politically motivated, according to myriad reports in the British press (more on that here) – ByteDance will reportedly shift its headquarters to London from Beijing.
The decision, which was motivated by the Trump Administration’s threats to bar TikTok from the American market on national security grounds, follows a quiet agreement between British government ministers and ByteDance. Last night, we reported the confirmation that Microsoft had restarted talks with ByteDance regarding a possible acquisition of TikTok.
The company confirmed the reports Monday, and it appears ByteDance has finally shown itself willing to play ball with the US, despite the brief period of uncertainty over the weekend after ByteDance and Microsoft reportedly broke off talks pending more guidance from the administration.
Whoever buys TikTok will control the app and its global operations, but ByteDance will retain ownership of a separate app called Douyin (“TikTok”) which is Chinese-language and built for the Chinese internet.
Microsoft says it’s aiming to wrap up talks by Sept. 15, giving us a 6-week timeline during which we expect the White House to tone down its rhetoric a little bit, even if the administration does move ahead with imposing new restrictions on apps like WeChat, and companies like Huawei.
As investors tried to piece together exactly what was happening behind the scenes, Reuters came through last night with exactly that: a deeply-sourced report citing White House officials who explained that President Trump’s comments on Friday – that the US would move to ban TikTok – elicited serous pushback from his advisors and Republican lawmakers like Lindsey Graham. Trump initially opposed the idea of allowing ByteDance to sell TikTok to Microsoft. But he quickly relented, and by Sunday night, GOP lawmakers had provided enough assurances to BD and Microsoft CEO Satya Nadella that a deal to buy TikTok would receive the administration’s blessing when the time comes for the CFIUS review.
For decades, American law has required a government board to weigh in – and ultimately approve – every foreign deal involving major American assets and ensure that the deal doesn’t impact American national security priorities. China’s wave of ambitious buyouts around the world over the past 10 years – remember, China owns Smithfield foods, one of the biggest pork producers in the world, and a company that’s technically an American company – has made western governments wary of Beijing’s “neo-imperialist” approach.
Once Trump assented to the deal, CFIUS reportedly gave the two companies 45 days to work out a deal (hence the Sept. 15 deadline shared by Microsoft).
Lindsey Graham tweeted over the weekend that a Microsoft buyout of TikTok would be a “win-win” for America and China.
What’s the right answer?
Have an American company like Microsoft take over TikTok.
Win-win.
Keeps competition alive and data out of the hands of the Chinese Communist Party.
TikTok has roughly 100 million users in the US, and has been valued at $50 billion, reportedly. Though it’s unclear what prices MSFT is looking at.
For some reason, we suspect Beijing doesn’t see things Graham’s way. And as Reuters pointed out, whether Microsoft can successfully separate TikTok’s technology from ByteDance in a way that would successfully assuage security concerns remains to be seen. It’s probably one of the biggest risk factors standing in the way of any eventual deal.
A key issue in the negotiations will be separating TikTok’s technology from ByteDance’s infrastructure and access, to alleviate U.S. concerns about the integrity of personal data. ByteDance owns a Chinese short video app called Douyin that was based on the same code used for TikTok.
Not to say that it can’t be overcome. But it certainly explains the intense government scrutiny at every stage in the process, as CFIUS told Reuters it intends to monitor the negotiations.
The negotiations between ByteDance and Microsoft will be overseen by CFIUS, a U.S. government panel that has the right to block any agreement, according to the sources, who requested anonymity ahead of a White House announcement. Microsoft cautioned in its statement that there is no certainty a deal will be reached.
One idea under consideration is to give Microsoft and ByteDance a transition period to develop technology for TikTok that will be completely separate from ByteDance, one of the sources said.
Microsoft said it did not intend to provide further updates until there was a definitive outcome in the negotiations.
The scrutiny facing TikTok isn’t unprecedented: Scrutiny from CFIUS and the White House recently forced a Chinese company to divest its ownership stake in the American LGBTQ-focused hookup app “Grindr”.
But we can’t help but suspect that Trump’s Friday remarks about barring the app from the US have left a bad taste in Beijing’s mouth. We fear the deal talks might be fraught with ongoing conflict as both companies struggle to balance their own priorities with the demands of their respective governments.
As much as we appreciate a good compromise…
via ZeroHedge News https://ift.tt/3gjIa77 Tyler Durden
Key Events In The Coming Week: Payrolls, PMIs And (Lack Of) Profits Tyler Durden
Mon, 08/03/2020 – 09:16
Looking ahead to this week now, the release of PMIs from around the world (today and Wednesday mostly) will set the tone, before the July US jobs report on Friday rounds out the week. On the central bank front, we will hear the monetary policy decision from the Bank of England and Governor Bailey’s ensuing press conference on Thursday. The market also enters the second half of Q2 earnings season, which has already seen a record number of beats in the S&P 500.
Looking at the current week, the data highlights will be Friday’s payrolls and various high-frequency economic in the form of survey, with the majority of manufacturing PMIs out on today, before services and composite PMIs come out on Wednesday for the most part. There’ll also be the ISM manufacturing index from the US (today) and non-manufacturing ISM on Wednesday. The key here, according to DB’s Jim Reid, will be to see how differentiated PMIs are given that some governments around the world are cautiously easing restrictions with others needing to tighten. For the countries where we already have a flash PMI reading, they generally showed that the recovery has more momentum in Europe than in the US. Many of the flash European levels were the strongest in at least two years, while both manufacturing and services PMIs in the US failed to meet expectations.
As ever caution is required as these are diffusion indices which simply monitor whether activity is better or worse than the previous month. And as the DB strategist notes, remember that the US was never as shutdown as Europe so momentum was always likely to be more in the latter’s favor regardless of the recent rise in cases.
In terms of payrolls on Friday, markets are generally expecting a third straight month of gains, though likely at a slower rate than we saw in June. DB economists are looking for a further +900k gain in the headline, below consensus estimates at +1.578m. This follows last month’s blowout +4.8m increase. The economists also see the unemployment rate falling to 10.5% from 11.1%, in line with the median estimate. This data will give some insight into how the renewed spread of the coronavirus through the US, especially in the South and West have affected the US economy. The rest of the key data can be found in the day by day week ahead guide at the end.
On the central bank front, one highlight will be the Bank of England meeting and Governor Bailey’s ensuing press conference on Thursday. While most economists do not expect any change to the policy rate this meeting, there is a chance for a dovish surprise on the overall commentary and tone. Focus will be on the central bank’s economic projections, the ongoing review of the effective lower bound, and the path of QE.
Elsewhere in central banks, India and Brazil are also releasing their policy decisions on Wednesday and Thursday, respectively. The two countries have the highest confirmed coronavirus caseloads outside the US, and are expected to lower interest rates in light of the continued economic impact of the pandemic. Following the FOMC last week and the lifting of the blackout period, we will hear from the Fed’s Bullard, Evans, Mester and Kaplan.
Earnings will continue to be in focus, with 133 companies reporting from the S&P 500 and a further 95 from the STOXX 600. Among the releases include HSBC, Heineken, Siemens, Berkshire Hathaway, and Ferrari today. Then tomorrow markets will hear from Bayer, Diageo, Fidelity, BP, Walt Disney and Activision Blizzard. Wednesday will see Deutsche Post, Allianz, Humana, Bayerische Motoren, Regeneron Pharmaceuticals, CVS Health, MetLife and Fiserv release earnings. Following that, Thursday includes Merck, AXA, Siemens, adidas, Bristol-Myers Squibb, Novo Nordisk, Becton Dickinson & Co, Zoetis, T-Mobile, Illumina. Finally on Friday, Standard Life Aberdeen, Norwegian Cruise Line, Royal Caribbean Cruises and Ventas. So another busy week.
Data: Japan final Q1 GDP; Japan, China (Caixin), Brazil, Spain, Italy, France, Germany, Euro Area, UK and US (Markit) final July manufacturing PMIs; US July ISM manufacturing index, June construction spending and July total vehicle sales
Central Banks: Fed’s Bullard and Evans speak on economic outlook
Earnings: HSBC, Heineken, Siemens Healthineers, Berkshire Hathaway, Global Payments, Ferrari
Tuesday
Data: Euro Area June PPI; Canada July manufacturing PMI; US June factory orders, and final durable goods orders; Japan CPI, France June budget balance
Earnings: Bayer, Diageo, Fidelity, BP, Walt Disney, Activision Blizzard
Wednesday
Data: Japan, China (Caixin), Spain, Italy, France, Germany, Euro Area, UK and US Markit final July services and composite PMIs; US July ISM non-manufacturing index, weekly MBA mortgage applications, June trade balance, and July ADP employment change; UK July new car registrations
Central Banks: Brazil Monetary policy decision; Fed’s Mester speaks
Earnings: Deutsche Post, Allianz, Humana, Bayerische Motoren, Regeneron Pharmaceuticals, CVS Health, MetLife, Fiserv
Thursday
Data: Germany June factory orders and July construction PMI; Italy June industrial production; UK July construction PMI; US July job cuts, weekly initials jobless claims and continuing claims
Central Banks: Monetary policy decisions from India and the Bank of England; BoE Governor Bailey speaks; Fed’s Kaplan speaks
Earnings: Merck, AXA, Siemens, adidas, Bristol-Myers Squibb, Novo Nordisk, Becton Dickinson & Co, Zoetis, American Electric, Booking Holdings, T-Mobile, Illumina
Friday
Data: Japan June labour cash earnings, real cash earnings, household spending, and preliminary June leading index; Germany June trade balance, June current account balance and June industrial production; France preliminary Q2 private sector payrolls, June industrial production, manufacturing production, trade balance and Q2 wages; Spain June industrial output; US July change in nonfarm payrolls, unemployment rate, average weekly hours, average hourly earnings, labour force participation rate, final June wholesale inventories, June consumer credit; China July trade balance, foreign reserves, and Q2 BoP current account balance
Central Banks: Reserve Bank of Australia statement on monetary policy
Earnings: Standard Life Aberdeen, Norwegian Cruise Line, Royal Caribbean Cruises, Ventas
Finally as Goldman notes, focusing just on the US, the key economic data releases this week are the ISM manufacturing index on Monday, the ISM non-manufacturing index on Wednesday, and the employment report on Friday. There are several scheduled speaking engagements by Fed officials this week.
Monday, August 3
09:45 AM Markit US manufacturing PMI, July final (consensus 51.3, last 51.3)
10:00 AM ISM manufacturing index, July (GS 53.6, consensus 53.5, last 52.6); We expect the ISM manufacturing index to increase by 1.0pt to 53.6 in July, after rising by 9.5pt in June. Our manufacturing survey tracker increased from 51.2 to 53.6 in July.
10:00 AM Construction spending, June (GS +0.7%, consensus +1.0%, last -2.1%); We estimate a 0.7% increase in construction spending in June, with a faster recovery in non-residential than residential construction.
12:30 PM St. Louis Fed President Bullard (FOMC non-voter) speaks; St. Louis Fed President James Bullard will give a speech on monetary policy and the economy at a virtual event. Audience and media Q&A are expected.
01:00 PM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Thomas Barkin will give a speech on the economic outlook at a virtual event.
02:00 PM Chicago Fed President Evans (FOMC non-voter) speaks: Chicago Fed President Charles Evans will provide a briefing on the economy to reporters on a conference call.
Tuesday, August 4
10:00 AM Factory orders, June (GS +6.0%, consensus +5.0%, last +8.0%); Durable goods orders, June final (last +7.3%); Durable goods orders ex-transportation, June final (last +3.3%); Core capital goods orders, June final (last +3.3%); Core capital goods shipments, June final (last +3.4%): We estimate factory orders increased by 6.0% in June following an 8.0% rebound in May. Durable goods orders rose by 7.3% in the June advance report.
Wednesday, August 5
08:15 AM ADP employment report, July (GS +1,600k, consensus +1,200k, last +1,000k); We expect a 1,600k gain in ADP payroll employment, reflecting a boost from lower jobless claims and prior-month payrolls.
08:30 AM Trade balance, June (GS -$50.0bn, consensus -$50.3bn, last -$54.6bn); We estimate the trade deficit decreased by $4.6bn in June, reflecting a decline in the goods trade deficit.
10:00 AM ISM non-manufacturing index, July (GS 54.0, consensus 55.0, last 57.1); Our non-manufacturing survey tracker increased by 49.4pt to 51.2 in July, following stronger regional service sector surveys. However, increased virus-related restrictions in some states are likely weigh on responses. We expect the ISM non-manufacturing index to decrease by 3.1pt to 54.0 in the July report.
05:00 PM Cleveland Fed President Mester (FOMC voter) speaks; Cleveland Fed President Loretta Mester will give a speech on the economic outlook at a virtual event. Prepared text and audience Q&A are expected.
Thursday, August 6
08:30 AM Initial jobless claims, week ended August 1 (GS 1,300k, consensus 1,415k, last 1,434k); Continuing jobless claims, week ended July 25 (consensus 16,940k, last 17,018k); We estimate initial jobless claims declined but remain elevated at 1,300k in the week ended August 1.
10:00 AM Dallas Fed President Kaplan (FOMC voter) speaks; Dallas Fed President Robert Kaplan will discuss the outlook for monetary policy and the economy at a virtual panel hosted by the Official Monetary and Financial Institutions Forum.
Friday, August 7
08:30 AM Nonfarm payroll employment, July (GS +1,000k, consensus +1,578k, last +4,800k); Private payroll employment, July (GS +800k, consensus +1,326k, last +4,767k); Average hourly earnings (mom), July (GS -0.3%, consensus -0.5%, last -1.2%); Average hourly earnings (yoy), July (GS +4.4%, consensus +4.2%, last +5.0%); Unemployment rate, July (GS 10.7%, consensus 10.5%, last 11.1%): We estimate nonfarm payroll growth slowed to +1.0mn in July after +4.8mn in June. Our forecast reflects an outright decline in employment in the Sunbelt that is more than offset by net gains in the rest of the country. We also believe education seasonality could boost July payroll growth by as much as 500-750k, as many end-of-school-year layoffs took place in April rather than in June/July. Because of difficulty measuring temporary business closures in the establishment survey, we note scope for nonfarm payrolls to outperform the household survey measure of employment in Friday’s report. We expect that household employment rose by slightly less than payrolls and that the labor force participation rate increased as a recovering labor market encouraged job searches, but that the unemployment rate still fell by four tenths to 10.7% in July. We estimate average hourly earnings declined 0.3% month-over-month (but remain up 4.4% year-over-year) as lower-paid workers were rehired and the composition shift toward higher paid workers continued to unwind.
08:30 AM Wholesale inventories, June final (consensus -2.0%, prior -2.0%)
Source: DB, BofA, Goldman
via ZeroHedge News https://ift.tt/2XjPsQD Tyler Durden
Analysts expect U.S. new vehicle sales to keep rebounding in July after increasing by 42.3% MoM in May and 6.9% in June according to Wards data.
However, June’s level remained quite low at 13.05m (SAAR), far below February’s level of 16.83m, which offers room for another rise in July:
1-According to Cox Automotive, “ the seasonally adjusted annual rate (SAAR) of auto sales in July is expected to be 13.3 million, up from last month’s 13.0 million pace, but down from last year’s 16.9 million level..”
2-ALG, Inc., a subsidiary of TrueCar, Inc. projects “total new vehicle sales will reach 1,098,960 units in June 2020, down 24% from a year ago when adjusted for the same number of selling days. This month’s seasonally adjusted annualized rate (SAAR) for total light vehicle sales is an estimated 14 million units.”
3- Industry consultants J.D. Power and LMC Automotive said “The seasonally adjusted annualized rate (SAAR) for total sales is expected to be 14.3 million units, down 2.5 million units from a year ago..”
4- Finally, Wards Intelligences noted “Sales have continually surprised on the upside”. More precisely, they expect sales to reach 14.1 million SAAR.
via ZeroHedge News https://ift.tt/2Pms014 Tyler Durden
Isaias Expected To Intensify Monday, Then Move Up East Coast Tyler Durden
Mon, 08/03/2020 – 08:50
Tropical Storm Isaias is expected to become a hurricane as it nears the Carolinas on Monday evening, according to the National Hurricane Center (NHC).
NHC’s latest update shows Isaias was approximately 115 miles east-southeast of Jacksonville, Florida, moving north at nine mph.
Isaias is expected to strengthen into a Category 1 hurricane on Monday, making landfall in South Carolina Monday night or early Tuesday.
Tropical storm warnings extend through Delaware, with watches seen as far as parts of coastal southern New England.
“Interests elsewhere along the northeast coast of the United States should monitor the progress of Isaias,” NHC said, adding that, “additional watches or warnings may be required later today.”
The storm is expected to track up the East Coast, arrive in the Mid-Atlantic area by Tuesday morning and New York City later in the day into Wednesday.
Tropical storm winds will be seen on coastal Georgia, South Carolina, and North Carolina on Monday, then in the Northeast Tuesday into Wednesday.
Isaias’ rainfall totals through Wednesday.
“Storm surge inundation of 3-5 ft above ground level is expected due to #Isaias between South Santee River, SC and Cape Fear, NC. 2-4 ft is expected for other parts of the NC and SC coasts, where Storm Surge Warnings and Watches are in effect,” NHC tweeted.
Isaias is expected to bring tropical storm conditions to the Baltimore–Washington metropolitan area on Tuesday.
New York City could see wind gusts up to 80 mph later on Tuesday evening.
#Isaias will cause thousands of power outages along the east coast… even New York City could see wind gusts of 80mph tomorrow! pic.twitter.com/PuLHIH3WUX
Bill Clinton’s former press secretary has urged Joe Biden not to debate President Trump, claiming that “it’s a fool’s errand” because Trump will not ‘follow the rules’.
Appearing on CNN over the weekend, Joe Lockhart followed up an op-ed urging that Biden will be consumed by having to ‘fact check’ everything Trump says.
CNN political analyst @joelockhart tells @smerconish that Joe Biden shouldn’t debate President Trump.
Trump “will take the truth and destroy it, and Biden will be in the position of correcting him over and over and over again. I don’t think he should give him that platform.” pic.twitter.com/4EOR4Q9Um7
“Whatever you do, don’t debate Trump,” Lockhart wrote in the piece, adding that “Trump has now made more than 20,000 misleading or false statements according to the Washington Post.”
“It’s a fool’s errand to enter the ring with someone who can’t follow the rules or the truth,” lockhart continued, adding that “Biden will undoubtedly take heat from Republicans and the media for skipping the debates. But it’s worth the risk as trying to debate someone incapable of telling the truth is an impossible contest to win.”
Trump “will take the truth and destroy it, and Biden will be in the position of correcting him over and over and over again. I don’t think he should give him that platform.” Lockhart said during the CNN interview.
No mention, however, of the fact that many on the left do not want Biden to debate Trump because they know Biden is prone to complete brain freezes and his own untruthful statements, such as a recent assertion that 120 MILLION Americans have died from Coronavirus, and 150 MILLION have died from gun violence.
A recent poll found that only 54 per cent of Americans believe Biden is capable of debating Trump.
The survey also found that almost a third (29 per cent) of voters thought it would have no impact on Biden’s campaign if he refused to debate Trump, while 56 per cent thought it would hurt his candidacy.
Biden recently asserted that he is “constantly tested” for cognitive decline.
“Look, all you got to do is watch me and I can hardly wait to compare my cognitive capability to the cognitive capability of the man I’m running against,” Biden declared.
Other polls show that 38 per cent of American voters think Biden has “some form of dementia,” including one in five Democrats. 61 per cent of voters also think Biden should address the dementia issue publicly.
Trump has noted that it is highly concerning that his rival for the Presidential election cannot even speak properly.
“Whenever he does talk, he can’t put two sentences together,” Trump said.
“It’s wonderful to say I feel sorry or that’s too bad, because I do, except we are talking about the presidency of the United States, and it is just not acceptable.” Trump added.
via ZeroHedge News https://ift.tt/3gpDz3d Tyler Durden
S&P Futures Jump To Five Month High, Dollar Spikes In Bullish Start To New Month Tyler Durden
Mon, 08/03/2020 – 08:19
World stocks rose and US futures jumped to the highest level since late February even as U.S. lawmakers struggled to agree on the next round of coronavirus aid while Covid cases around the globe continued to rise, while a squeeze on crowded short positions left the dollar clinging to a tentative bounce.
S&P 500 futures turned higher, reversing earlier losses with Microsoft rising in pre-market trading as it tried to salvage a deal for the U.S. operations of TikTok. Marathon Petroleum jumped after agreeing to sell its gasoline-station business for $21 billion. Still, investors remained jittery amid the lack of a progress on the stimulus package and White House Chief of Staff Mark Meadows not optimistic about a deal.
“Three months to go until the U.S. Presidential election! Surely Congress will want to get something over the line regarding new stimulus in the U.S. driven more by politics than necessarily economics,” said Chris Bailey, European strategist at Raymond James.
On Friday, Fitch Ratings cut the outlook on the United States’ triple-A credit rating to negative from stable and said the direction of fiscal policy depends in part on the November election and the resulting makeup of Congress, cautioning that policy gridlock could continue. However, as Reuters notes, those concerns have hardly hit the U.S. technology sector, evident in Friday’s record highs, with Apple overtaking Saudi Aramco to become the world’s most valuable company.
In Europe, stocks were up over 1% with all but four sector indexes advancing, with gains led by automakers, technology and chemicals sub- indexes, which are all up at least 1.7%. Travel and leisure stocks are the worst performers. Technology stocks rallied on positive read-across from peers on the other side of the Atlantic, while automobile shares jumped after the euro area recorded its first manufacturing expansion in one-and-a-half years when the final Eurozone mfg PMI printed at 51.8, above the 51.1 expected.
Spanish stocks, meanwhile, declined on Monday as the country saw the biggest jump in coronavirus cases since a national lockdown was lifted in June, while data showed international tourist arrivals to the country fell 98% year on year in June. “Second wave virus concerns are building in Australia, Europe etc. but no huge risk-aversion move,” said Bailey.
European gains were also limited by a selloff in big banks’ shares, with index heavyweight HSBC falling 5% to a fresh 11 year low after it warned that its bad debt charges could surge to as much as $13 billion, and France’s Societe Generale reported a 1.26 billion euro ($1.48 billion) second-quarter loss.
Earlier in the session, Asian stocks also gained, led by communications and health care, after falling in the last session. Most markets in the region were down, with Jakarta Composite dropping 2.8% and Singapore’s Straits Times Index falling 1.9%, while Japan’s Topix Index gained 1.8%. The Topix gained 1.8%, with ISB and ITmedia rising the most. The Shanghai Composite Index rose 1.8%, with Raytron Technology and Piesat Information Technology Co Ltd posting the biggest advances as investor margin debt resumed its climb.
Factory activity data from China showed the fastest pace of expansion in nearly a decade.
That helped China’s blue chips rally 1.6%, offsetting worries about U.S.-China relations. Japan’s Nikkei meanwhile added 2.2%, courtesy of a pullback in the yen.
“There is going to be a recovery — we shouldn’t lose track of that as we go through this period,” Anne Anderson, head of fixed income at UBS Asset Management Australia, said on Bloomberg TV. “But returning to where we were before we started is going to be a real challenge and is going to require ongoing monetary and fiscal support. It’s a long way out of here.”
Meanwhile, tension between the U.S. and China emerged as another threat to risk appetite. The Trump administration will announce measures shortly against “a broad array” of Chinese-owned software deemed to pose national-security risks, U.S. Secretary of State Michael Pompeo said. Even so, shares advanced in Japan and China, where mainland-listed technology stocks surged on expectations of support from Beijing in response to U.S. moves against Chinese-owned software companies.
In FX, Dollar bears also took some profits as short positions hit an 11 year high, with the Bloomberg Dollar Spot Index heading for its biggest two-day gain in seven weeks, with the greenback rising against all Group-of-10 peers except the Swedish krona and the yen.
but any further gains were capped by the slowing U.S. economic recovery from COVID-19 and real rates breaking below -1% for the first time.
The real 10Y rate hit a record low amid a marked flattening of the yield curve as investors wager on more accommodation from the Federal Reserve.
The euro and the pound were down only slightly with the dollar at $1.1755 per euro and $1.3065 per pound. Both the currencies recorded their best monthly gain in nearly a decade in July.
“Amid improvements in business sentiment, signals are emerging that the initial boost from pent-up demand is fading and consumer confidence is slipping lower,” economists at Barclays wrote in a note. “Together with concerns about labour market and virus developments, this clouds the outlook and could be exacerbated if U.S. fiscal support is not renewed in time.“
In rates, 10-year Treasury yields were higher at 0.5576% after touching the lowest level since March last week. German government bond yields rose slightly to -0.527%. Treasuries bear steepened as month-end support came out of the market and investors looked ahead to Wednesday’s supply announcement where record sales of notes and bonds are expected. Yields higher by up to 3bp across long-end of the curve with front-end broadly anchored, steepening 2s10s, 5s30s by ~1.5bp each; 10-year yields around 0.545%, cheaper by 1.5bp vs. Friday close while bunds, gilts outperform by ~2bp each. Yields on 30-year U.S. Treasuries are set for the biggest daily increase since June 30 as U.S. equity futures advance and the bond curve bear-steepens. As Bloomberg adds, a busy week of IG corporate issuance also expected, adding to downside pressure on Treasuries along with delta hedging large option package.
The recent decline in the dollar combined with super-low real bond yields has been a boon for gold, which hit $1,984 an ounce on Monday and seemed on track to take out $2,000 soon.
In other commodities, oil prices eased on concerns about oversupply as OPEC and its allies are due to pull back from production cuts in August while an increase in COVID-19 cases raised fears of slower pick-up in fuel demand. Brent crude futures dipped 46 cents to $43.06 a barrel, while U.S. crude eased 51 cents to $39.76.
On today’s calendar, economic data include ISM and Markit manufacturing data. Ferrari is among today’s scheduled earnings.
Market Snapshot
S&P 500 futures down 0.1% to 3,260.50
STOXX Europe 600 up 0.4% to 357.57
MXAP up 0.3% to 165.11
MXAPJ down 0.4% to 549.24
Nikkei up 2.2% to 22,195.38
Topix up 1.8% to 1,522.64
Hang Seng Index down 0.6% to 24,458.13
Shanghai Composite up 1.8% to 3,367.97
Sensex down 1.7% to 36,967.20
Australia S&P/ASX 200 down 0.03% to 5,926.09
Kospi up 0.07% to 2,251.04
Brent Futures down 0.6% to $43.24/bbl
Gold spot down 0.2% to $1,972.89
U.S. Dollar Index up 0.1% to 93.44
German 10Y yield rose 0.4 bps to -0.52%
Euro down 0.03% to $1.1775
Brent Futures down 0.6% to $43.24/bbl
Italian 10Y yield rose 4.2 bps to 0.887%
Spanish 10Y yield rose 0.2 bps to 0.342%
Top Overnight News from Bloomberg
Factories across the euro area saw a stronger return to growth in July than initially reported, marking the region’s first manufacturing expansion in one-and-a-half years while economies from Germany to Italy beat expectations. In the U.K., although numbers were slightly below flash estimates, manufacturing grew at the fastest pace in almost three years as the nation’s lockdown eased
Gold’s spot and futures prices opened the week by hitting records, with the metal for immediate delivery closing in on $2,000 an ounce as the search for haven assets continues amid the coronavirus pandemic
Microsoft chief executive Satya Nadella attempted to salvage a deal for the U.S. operations of TikTok by speaking with President Donald Trump by phone
Oil edged below $40 a barrel in New York as OPEC and allied producers started to unwind output cuts even as many countries are still struggling to contain the virus
Asian equity markets began the new trading month mixed after last Friday’s positive close on Wall St where the tech sector rallied following earnings from the industry giants including Apple which rose to a fresh record high, but with upside in the region restricted ahead of this week’s risk events and after continued stalemate in US coronavirus relief discussions. ASX 200 (flat) was subdued as gains in commodity related sectors were offset by underperformance in the top weighted financials and with trade hampered by reduced liquidity due to bank holiday in New South Wales, while risk appetite was also weighed by a state of disaster declaration in Victoria with the state capital of Melbourne to be subjected to tougher restrictions including a curfew through to at least September 13th. Nikkei 225 (+2.2%) was the stellar performer as it coat-tailed on recent favourable currency flows and after Q1 Final GDP topped estimates, although there were some notable losses seen in Shinsei Bank and Mazda post earnings, as well as Seven & I on news it is to acquire Speedway convenience stores from Marathon Petroleum in a deal valued around USD 18.9bln. Hang Seng (-0.6%) and Shanghai Comp. (+1.8%) were mixed after PBoC inaction resulted to a CNY 100bln liquidity drain and as participants digested a more than 50% drop in HSBC HY profits, as well as the highest Chinese Caixin Manufacturing PMI reading since 2011. There was also plenty of focus around tech after reports that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft and will reportedly take action on Chinese software companies that threaten national security in the approaching days. Finally, 10yr JGBs were lower amid a surge in Japanese stocks and with the BoJ present in the market for JPY 450bln of JGBs predominantly focused on 1yr-3yr maturities, while the central bank recently announced its buying intentions for August in which it maintained the current pace of purchases for all maturities.
Top Asian News
Why Investors Keep Losing Money Betting Against the Hong Kong Dollar Peg
Goldman, BofA Left Off Ant IPO for Work With Alibaba Rivals
SoftBank, Naver to Start Joint Tender Offer for Line on Aug. 4
Mixed trade in the European equity sphere (Euro Stoxx 50 +0.6%) after a similar lead from APAC markets, as participants remain on standby for this week’s key risk events – including US ISM and labour market report alongside any updates on fiscal stimulus talks. Core EU bourses saw some upside in the run-up to the Final Manufacturing PMIs, potentially on optimism for higher revisions, but indices have since remained contained. UK’s FTSE 100 lags the core markets on currency dynamics, and with the Financial sector hit on the back of dismal earnings from HSBC (-5.1%) where Q2 profit slumped and loan loss provisions rose almost seven-fold. Furthermore, SocGen (-3.1%) adds to the woes in the sector after posting a surprise loss due to pandemic impact on equity trading. Energy names have also lost steam amid price action in the complex, but overall European sectors remain mixed with no clear risk tone to be derived. The sectoral breakdown sees Travel and Leisure at the bottom as second wave fears materialise in the sector. Elsewhere of note, AI company Shanghai Zhizhen Network Technology is suing Apple for around USD 1.4bln over virtual assistant patent violations, WSJ reported.
Top European News
U.K. Manufacturing Grows as Sector Starts Long Road to Recovery
Euro-Area Factories Returned to Growth Amid Severe Jobs Cuts
Real Estate Stocks Fall on Lockdown Concerns, Negative Sentiment
In FX, mixed macro impulses for the Franc as Swiss CPI was considerably firmer than forecast, but the manufacturing PMI fell short of expectations and the key 50.0 mark to leave Usd/Chf eyeing 0.9200 and Eur/Chf even closer to 1.0800 following yet another rise in weekly bank sight deposits. Moreover, the cross has rebounded amidst Eurozone manufacturing PMIs that beat consensus and underpinned EU stocks alongside economic recovery hopes. Conversely, the COVID-19 escalation in Melbourne, Victoria has prompted a state of disaster amidst tougher restrictions and a curfew in the capital until September 13, at the earliest, on the eve of the RBA policy meeting – full preview of the event available on the headline feed – to the detriment of the Aussie that is holding just above 0.7100 vs the Greenback compared to last Friday’s 0.7200+ new ytd peak.
USD – The Dollar has handed back some of its pre-month end gains after the DXY rebounded further from fresh 2020 lows (92.546) to 93.708 and is now pivoting 93.500, with additional support coming via M&A flows due to deals amounting to Usd 16.4 bn and Usd 21 bn for US companies from German and Japanese rivals respectively. Ahead, the final Markit manufacturing PMI, ISM equivalent and construction spending before a duo of Fed speakers (Bullard and Evans).
JPY/GBP/NZD – All intiailly firmer against the Buck, or off worst levels to be more precise, as the Yen regains composure following its aggressive reversal from the low 104.00 area to 106.40+, while Sterling revisited 1.3100 from not far off 1.3050 even though the final UK manufacturing PMI was revised down a tad and the coronavirus outbreak in Northern England has reached ‘major incident’ proportions in Greater Manchester. Elsewhere, the Kiwi is benefiting from the aforementioned Aussie travails to an extent given Aud/Nzd pulling back below 1.0750 to keep Nzd/Usd more buoyant on the 0.6600 handle despite reports that hedge funds are implementing bearish positions ahead of the RNBZ later in August.
EUR/CAD/SEK/NOK – Some traction for the Euro within 1.1796-42 parameters vs the Greenback in wake of the better than prelim/anticipated Eurozone manufacturing PMIs, but no confirmed breach of resistance in the form of the 100 HMA (1.1779), while the Loonie is sub-1.3400 amidst another downturn in crude prices that is also hampering the Norwegian Krona relative to its Swedish counterpart after the manufacturing PMI reclaimed 50.0+ status and retail sales picked up pace. Indeed, Eur/Nok is hovering around 10.7500 in contrast to Eur/Sek testing 10.3100 vs highs of 10.7860 and 10.3515 respectively.
EM – The Yuan is keeping its head above 7.0000 on the back of China’s Caixin manufacturing PMI exceeding forecast at 52.8 for the strongest print since January 2011 and the Rouble is consolidating off recent lows circa 74.0000 awaiting the latest CBR MPR, but the Rand is lagging near 17.3000 after a steep decline in SA tax receipts for the fy through end July.
In commodities, WTI and Brent front-month futures remain subdued in early European trade with little by way of fresh fundamental catalysts, but with that being said, OPEC+ are poised to ease the magnitude of the agreed-upon cuts this month which will see an additional 1.9mln BPD of supply entering the market – this was reflected by the Russian oil and gas condensate output for the first half of August. It is also worth bearing in mind that the extra supply comes against the backdrop of rising second-wave fears which have prompted some cities to re-enter lockdown, whilst others deferred their reopening plans. Elsewhere, spot gold remains uneventful after testing support at USD 1970/oz (vs. fresh high 1987.94), with the yellow metal decoupled from Dollar dynamics (for now) as prices remain near record highs. Spot silver sees similar lacklustre action sub 24.50/oz. Turning to base metals, Dalian iron ore futures rose in excess of 4% to hit 12-month highs on a firm demand outlook. Conversely, copper touched a three-week low despite the strong Chinese factory data, with some citing second wave fears.
US Event Calendar
9:45am: Markit US Manufacturing PMI, est. 51.3, prior 51.3
10am: ISM Manufacturing, est. 53.5, prior 52.6
10am: Construction Spending MoM, est. 1.0%, prior -2.1%
Wards Total Vehicle Sales, est. 14m, prior 13.1m
DB’s Jim Reid concludes the overnight wrap
A happy August to you all. This morning’s EMR is brought to you by the powers of paracetamol and ibuprofen as I played my one and only game of cricket this season over the weekend. It was President’s Day and I’m the President of my club so I couldn’t really avoid coming out of semi-retirement for a game I played pretty much every summer weekend from around 1983 to 2011. Running, diving, throwing, bowling, eating a big tea all took a big toll out of me.
My performance certainly wasn’t as good as markets were in July, unless the dollar was my benchmark. Craig (who is still in a state of shock after Arsenal won the FA Cup final on Saturday) has already published July’s performance review this morning (link here) where the highlights were a bumper month for Silver and Gold and a poor month for the dollar. Silver (c.+35%) had its best month since December 1979 and the dollar the worse for a decade. US equities had a good month in spite of rising virus caseloads due to a strong earnings season relative to expectations, especially in tech towards the end of the month. YTD Silver, Gold and the NASDAQ have been the three best performers while at the bottom of the leaderboard Brent, WTI and European Banks are all down at least 30%.
In terms of how August is faring so far, it’s been a mixed start in Asia with the Nikkei (+1.95%) and Shanghai Comp (+1.08%) both posting decent gains, the Hang Seng (-0.95%) down and the Kospi and ASX little changed. Meanwhile, yields on 10yr USTs are up +1.3bps and futures on the S&P 500 are down -0.08%. In terms of data releases, China’s June Caixin manufacturing PMI came in at 52.8 (vs. 51.1 expected) which was the highest reading since Jan 2011 while Japan’s final manufacturing PMI reading was confirmed at 45.2 (vs. 42.6 in preliminary read). We also got Japan’s final annualized 1Q GDP print this morning, printing at -2.2% qoq (vs. -2.8% qoq expected).
In terms of weekend news, US Secretary of State Michael Pompeo has said that the White House will announce measures against “a broad array” of Chinese-owned software deemed to pose national-security risks. This follows President Trump saying on Friday that he intends to ban music-video app TikTok from the US. Meanwhile, on the fiscal stimulus negotiations in the US, there are reports that Democrats and Republicans continue to remain far apart on the plan to restore a $600-per-week jobless benefit that expired last week. Negotiations will continue today.
Looking at coronavirus numbers for the weekend, growth rates for new cases slowed in the US to an average of 1.13% per day (vs. average growth of 1.70% over last 5 weekends). The same was true for the most populous states like Texas, Florida, California and Arizona. The fatalities growth rate also slowed in Texas (1.35% vs. 1.89%) and Arizona (0.96% vs. 2.45%) but continues to remain high in Florida (1.75% vs. 1.34%) and California (1.13% vs. 0.73%). Meanwhile, the White House coronavirus task force head Deborah Birx said the pandemic is in a “new phase” as it spreads across U.S. rural and urban areas. In Asia, Australia’s Victoria state declared a state of disaster and has ordered Melbourne’s residents to stay home except for work, medical care, provisions or exercise. The city is now under curfew between 8 p.m. and 5 a.m and the new restrictions will be in force for six weeks. The state reported 671 new cases in the past 24 hours. Please see the regular case and fatalities table in the PDF for more. Finally, the latest on a possible vaccine is that the Serum Institute of India received approval for conducting phase two and three clinical trials of the Covid-19 vaccine candidate developed by the University of Oxford and AstraZeneca in the country.
Looking ahead to this week now, the release of PMIs from around the world (today and Wednesday mostly) will set the tone, before the July US jobs report on Friday rounds out the week. On the central bank front, we will hear the monetary policy decision from the Bank of England and Governor Bailey’s ensuing press conference on Thursday. The market also enters the second half of Q2 earnings season, which has already seen a record number of beats in the S&P 500.
Going through in more detail now, the majority of manufacturing PMIs are out on today, before services and composite PMIs come out on Wednesday for the most part. There’ll also be the ISM manufacturing index from the US (today). The key here will be to see how differentiated PMIs are given that some governments around the world are cautiously easing restrictions with others needing to tighten. For the countries where we already have a flash PMI reading, they generally showed that the recovery has more momentum in Europe than in the US. Many of the flash European levels were the strongest in at least two years, while both manufacturing and services PMIs in the US failed to meet expectations. As ever caution is required as these are diffusion indices which simply monitor whether activity is better or worse than the previous month. Remember that the US was never as shutdown as Europe so momentum was always likely to be more in the latter’s favour regardless of the recent rise in cases.
In terms of payrolls on Friday, markets are generally expecting a third straight month of gains, though likely at a slower rate than we saw in June. DB are looking for a further +900k gain in the headline, below consensus estimates at +1.578m. This follows last month’s blowout +4.8m increase. Our economists also see the unemployment rate falling to 10.5% from 11.1%, in line with the median estimate. This data will give some insight into how the renewed spread of the coronavirus through the US, especially in the South and West have affected the US economy. The rest of the key data can be found in the day by day week ahead guide at the end.
On the central bank front, one highlight will be the Bank of England meeting and Governor Bailey’s ensuing press conference on Thursday. While our DB economists are not expecting any change to the policy rate this meeting, there is a chance for a dovish surprise on the overall commentary and tone. Focus will be on the central bank’s economic projections, the ongoing review of the effective lower bound, and the path of QE. See their preview here .
Elsewhere in central banks, India and Brazil are also releasing their policy decisions on Wednesday and Thursday, respectively. The two countries have the highest confirmed coronavirus caseloads outside the US, and are expected to lower interest rates in light of the continued economic impact of the pandemic. Following the FOMC last week and the lifting of the blackout period, we will hear from the Fed’s Bullard, Evans, Mester and Kaplan.
Earnings will continue to be in focus, with 133 companies reporting from the S&P 500 and a further 95 from the STOXX 600. Among the releases include HSBC, Heineken, Siemens, Berkshire Hathaway, and Ferrari today. Then tomorrow markets will hear from Bayer, Diageo, Fidelity, BP, Walt Disney and Activision Blizzard. Wednesday will see Deutsche Post, Allianz, Humana, Bayerische Motoren, Regeneron Pharmaceuticals, CVS Health, MetLife and Fiserv release earnings. Following that, Thursday includes Merck, AXA, Siemens, adidas, Bristol-Myers Squibb, Novo Nordisk, Becton Dickinson & Co, Zoetis, T-Mobile, Illumina. Finally on Friday, Standard Life Aberdeen, Norwegian Cruise Line, Royal Caribbean Cruises and Ventas. So another busy week.
To review last week now, global equity markets were bifurcated with US stocks outperforming after beating low earning expectations, particularly in tech. The S&P 500 rose +1.73% (+0.77% Friday) led primarily by the mega cap tech stocks which reported towards the end of last week. With Apple, Facebook, and Amazon in particular surprising on earnings, the tech-focused Nasdaq outperformed this week as the index rose +3.69% (+1.49% Friday). Over 60% of the S&P have now reported and the index has seen a record of just under 85% of companies beat EPS estimates. Remember that the issue with this earnings season was that analysts didn’t increase their estimates in June as macro surprises beat. This left a great set up for earnings versus expectations.
Risk assets in Europe did not fare as well with European equities down -2.98% (-0.89%) over the 5 days, pushing the index down -1.11% for July. It was the first monthly loss since March as cyclical sectors led the declines following more concerns on the economic outlook and small rises in cases across the continent.
Even as US equities rose, core sovereign bonds fell with US 10yr Treasury yields falling -6.1bps (-1.8bps Friday) to a record closing low of 0.528%. Similarly, UK 10yr gilts rose +1.6bps on Friday to be just off Thursday’s all-time closing lows to fall -4.0bps overall on the week to 0.10%. German bunds fell -7.6bps to -0.52%, while a souring risk appetite saw wider peripheral spreads to bunds in Italy (+9.2bps), Spain (+6.3bps), Portugal (+7.1bps) and Greece (+9.7bps). The dollar fell over -1.0% on the week for the second week in a row, and has not seen a weekly rise since mid-June when economic data and US cases started getting worse again. With yields and the greenback falling, gold continued its breakneck rally. The metal rose +3.88% (+0.98% Friday) to another all-time record of $1975.86/oz.
On Friday, we received Q2 GDP data from the majority of Europe. This came following Thursday’s data out of the US, Germany and China. We learned that Euro Area quarterly GDP fell by -12.1%, right in-line with estimates and the largest decline on record. France GDP shrank -13.8% (vs. -15.2% expected), with the construction sector seeming to be hit the hardest after falling about -24% in the second quarter. Italy similarly showed a slightly ‘better’ GDP print than expected, coming in at -12.4% (vs. -15.5%). Unlike France and Italy, Spain’s data came in under projections with the economy contracting -18.5% (vs. -16.6% expected). In other data, German retail sales fell -1.6% MoM, better than the expected -3.3% drop, but somewhat expected given the +12.7% rise last month. In the US, July MNI Chicago PMI surprised by rising into expansionary territory at 51.9 vs 36.6 last month and well above the 44.0 estimate. Finally, the preliminary July University of Michigan survey showed sentiment fall -0.7pts to 72.5, just below estimates of 72.9. The slight drop in sentiment was driven by a -2.7pt move lower in current conditions even in light of a slight rise in expectations.
via ZeroHedge News https://ift.tt/2DfCyML Tyler Durden
Blain: “Massive Consequences Are Coming…” Tyler Durden
Mon, 08/03/2020 – 07:58
Authored by Bill Blain via MorningPorridge.com,
“Wait a minute. You just flash that thing, it erases her memory, and you just make up a new one?”
A new month and what new madness for markets is the question? Non Farm Payrolls is the big one due on Friday… What will it tell us about the state of the US economy and indicate for the globe?
More of the same I expect. We will remain constantly looking over our shoulders and wondering about market risks – disbelieving the current euphoric valuations versus the frankly miserable outlook. We’ll keep trying to guess how the global economy is changing and where the threats and opportunities lie, all-the-while working out what central banks will do next and wondering how to arbitrage their actions. AND trying to overlay our outlooks with… The Virus.. What about the Virus?
For every economic release that seems to suggest underlying global economic resilience, it feels like there will be an “equal and opposite” force in the form of renewed social distancing, travel restrictions or even lockdowns as second waves or hot-spots threaten. Renewed restrictions feel likely to strangle any real recovery. It’s not just me that’s wondering if this is any way to run an economy…
Headlines everywhere are about how the insidious little Virus-beast is wrecking our lives and economies. I can’t help but wonder… what if some tech genius could invent a gizmo that automatically deleted every file, clip or meme that mentions the virus or pandemic from the internet, the media and wiped our memories… would we have a problem? Where is Will Smith when you need him…
This morning the UK government is in a flap about the possibility of mandating over 50’s to “shield”. Since I passed that particular milestone a while ago, I’ve already had the heart attack (result of a botched operation), and remain somewhat “cuddly” according to my wife and morbidly obese according to my doctor.. I suppose 50 plus shielding means me… Darn.. I was so looking forward to going back to the office.
I’m struck by investment analyst headlines warning: “markets can’t deny economic gravity indefinitely..”. Actually… they can. The reality of the last five months, since March, is that you can’t fight global central banks. QE Infinity version 2.1 distorts markets even more dramatically than the original QE 1.1 – which simply distorted markets by keeping rates artificially low. When it all goes inevitably wrong – because it will – then QE X-Power 3.1 will see markets bailed out again.. and again.
The problem is.. there are consequences.. Massive consequences are coming…
Last week I wrote about how QE has created Financial Asset Stagflation – meaning savers, and particularly pension savers, are in serious trouble as returns have essentially flatlined. To reiterate a point I’ve made many times: 10-years ago a £1 million pension fund would buy you a very comfortable retirement income. Today, it won’t even buy a train season ticket to keep working up in London. That’s a serious issue in terms of dis-incentives to save, but also a rising social issue likely to trigger dissent and unrest as unions and workers demand retirement benefits. If we’ve just paid £2 trillion to bail out the economy from Covid, how much will the unfunded pensions crisis cost the economy?
What will that pensions and Covid spending crowd out? If we are using the nations resources to fund retirement, then how much is not being spent on desperately required reform of the NHS or Education, and how much is not being allocated to required infrastructure projects?
This morning, let’s talk about another consequence of QE distortion – on the economy directly by distorting businesses.
I was struck by Facebook CEO/Founder Mark Zuckerberg pointing out that only 3 of the 10 largest companies today were on the same list 10 years ago. It shows dynamic capitalism works – but it only works where it is free to do so. Where evolutionary capitalism doesn’t work, and new bright young entrepreneurial companies don’t replace tired old dinosaurs, the result is inevitable stagnation. If it’s not happening, it will be due to distortions – which can cover a host of competitive issues.
We all know that replacing the invisible hand of markets with the dead hand of state control is one route to disaster. But there are plenty of others. All distortions lead to inefficiencies – the rise of bureaucratic mindset and “satisficing” strategies where companies are free to milk revenues with little regard to cost or customer choice.
A number of readers came back to me last week following my comments on the Airbus/Boeing duopoly – suggesting the only way to break out and reinvent air-transport is a revolution with new aviation companies. That’s unlikely to happen due to fixed cost disincentives to entry into the market, and the degree to which they are protected behind defence contracts. Yet, these two companies and the multiplier effects they have on the economy in terms of jobs and wealth creation in the aerospace sector are enormous.
QE 2.1 is likely to prove even more distorting than QE 1.1 because its directly supporting decrepit corporates through Fed and ECB corporate bond buying. At least under the original version of QE, it was left to markets to chose with corporate bonds made sense. Today… buy anything.. Even Junk – which is back to record tight levels. That can’t be healthy.
As the global economy continues to real from Covid-septic shocks, I suspect it’s only a matter of time before we see QE 3.1 “Max Power” propel markets even higher when Global Central Banks cut the bluff and just start buying company equity directly. There will be subsequent iterations, including purchase of commercial property, and maybe even real assets…
Who knows where it all eventually leads.. but if you are trying to understand where today’s markets are headed, then understand the reality: it’s going to remain about desperate distortion as Central Banks keep playing whatever cards are left to stay in the game. While this crisis lasts playing markets is all about playing that distortion. Listen politely to what analysts and city-writers are saying about “over-bought markets” and “financial resets”… and follow what the central banks actually do.
At some point… the penny will drop or the dam will burst…
via ZeroHedge News https://ift.tt/3i3MmbG Tyler Durden
