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Spread & Containment

Enguard Lagarde

Overview: The rally in US shares yesterday, ostensibly fueled by strong earnings reports, is helping to encourage risk appetites today.  The MSCI Asia Pacific Index is posting its biggest gain in around two weeks, though Japan’s markets are closed today..



Overview: The rally in US shares yesterday, ostensibly fueled by strong earnings reports, is helping to encourage risk appetites today.  The MSCI Asia Pacific Index is posting its biggest gain in around two weeks, though Japan's markets are closed today and tomorrow.  The Dow Jones Stoxx 600 is building on yesterday's rally, and with today's ~0.8% gain, it is up on the week.  US equities are also trading with a firmer bias.  The 10-year US yield that spiked to nearly 1.125% on Tuesday is knocking on 1.30% today.  European bond yields are mostly softer, and Italy's benchmark yield has slipped to a new three-month low (~67 bp).  The foreign exchange market is quiet.  The Norwegian krone and Australian dollar lead the majors today, while the euro and Canadian dollar are little changed. The JP Morgan Emerging Market Currency Index is advancing for the third consecutive session, though it is still about 0.3% lower for the week.   Gold is finding support ahead of the two-week low near $1791.  Oil is firm, and the September WTI contract is building on yesterday's 4.6% rally.  Around $70.70, it is still about 1.2% lower on the week.  Copper is rising for the third day.  The wildfires in Canada are raising new concerns about lumber supply, and the possible impact on sawmills sent the September lumber up 7.75% yesterday, the most in a year.  

Asia Pacific

SWIFT reported that China's yuan share rose to 2.46% in June (1.90% in May), just shy of the March high of 2.49%.   It puts the yuan in fifth place overall, the same as last year.  The highest share accounted for by the yuan was 2.79% in August 2015. The US dollar's share rose to about 40.6%, the highest in a year.  The euro's share slipped to 37.9%.  It is not clear that a digital yuan will bolster the use of the yuan.  Separately, we note that the Institute for International Finance estimates that foreign central banks accumulated yuan reserves accounted for nearly a third of the inflows last year and as much as 60% of China's inflows in Q1 21.  

China is stepping up its efforts to ease the pressure on commodities.  It is planning on increasing the sales for copper, aluminum, and zinc from its strategic reserves. In addition, Beijing has announced plans to sell a quarter of its coal reserves or around 10 mln tons.  It has also announced intentions to sell 22 mln barrels of oil to its refiners.  The US reported its first oil build since May as inventories rose by about two million barrels, though storage at Cushing slipped to its lowest level since January 2020.  Gasoline imports are rising and stand at their highest level in a decade, with Saudi and Spanish shipments reported.  

The rise in US yields is helping the greenback recovery against the yen.  The dollar had traded to almost JPY109 at the start of the week and is now flirting with the JPY110.30 area. The 20-day moving average is near JPY110.40, and the US dollar has not closed above this average for two weeks.  Initial support is seen around JPY110.  The Australian dollar is firm and appears to be working through option-related offers.  There are options for almost A$1.6 bln in the $0.7370-$0.7375 area.  Support may be found in the $0.7340-$0.7360 band.  The Chinese yuan has edged higher for the third consecutive session.  The dollar remains in the CNY6.45-CNY6.50 range that has dominated for several weeks.  The reference rate continues to be set tightly in line with expectations (CNY6.4651 vs. CNY6.4648).   Its steady performance against the dollar should not obscure the fact that the yuan is trading at five-year highs against the trade-weighted basket (CEFTS).  


The ECB is center stage today.  The new symmetrical 2% inflation target requires an adjustment in the forward guidance in a somewhat more dovish direction.  Still, this has been well-telegraphed, and the decision on the pace of bond-buying, which, as we have noted, does not seem to be the key to interest rate or exchange rate developments, will be made in September.  Officials have the better part of the next six months to forge a strategy of what will follow the Pandemic Emergency Purchase Program.  The ECB was buying bonds before the pandemic struck and most likely will buy them after the PEPP winds down, currently in March 2022.  The change of the inflation target was said to be a unanimous decision, but the devil is in the details (of implementation), and this is likely to prove more contested terrain.  

There are three areas in which the UK and EU are wrestling. First, the UK is proposing not just a change in how the Northern Ireland protocol is enforced, but even its chief negotiator Frost has acknowledged it seeks changes to the protocol itself.  It now appears that Johnson's strategy was to secure Brexit at any cost and renegotiate the agreement later.  He ran a campaign that was partly predicated on the Northern Ireland configuration (remaining part of the EU common market). Second, the UK is seeking to eliminate many of the checks of goods shipped from the rest of the UK into Northern Ireland.  The UK's behavior put the EU in a poor mood for the second issue, and that is the post-Brexit relationship with Gibraltar, which it has controlled for more than two centuries.  The EC is seeking a negotiating mandate to formally begin talks.  Thirdly, the British are seeking more help from the French to control the migration over the Channel.  It is paying France around GBP54 mln to hire more enforcement officers, but it does not appear a sufficient check. 

The euro has not traded above $1.1805 since Monday.  It has found support today near $1.1780 after testing the $1.1750-level yesterday and Tuesday.  The market seems prepared for a dovish tone from the ECB.  The week's high was set on Monday near $1.1825.  Above there, offers in the $1.1850-$1.1875 may cap it.  The single currency has not traded with a $1.19-handle so far this month.  Sterling snapped a four-day slide yesterday with a 0.6% gain, the most in almost two weeks.  It has marginally extended those gains today and is trying to reestablish the foothold above the 200-day moving average (~$1.3710). Resistance is pegged near $1.3775. 


The surge in US housing starts (6.3% vs. a median forecast for a 1.2% gain) may bode well for today's existing-home sales report.  Existing home sales have softened since January and fell for the four months through May.  Still, the 5.8 mln seasonally adjusted annual pace represents an elevated pace, which is above all but the most recent pace since 2007.  Weekly jobless claims are expected to have slipped to a new pandemic-era low near 350k.  It would be the fourth consecutive week below 400k.  Leading indicators and the KC Fed manufacturing survey tend not to attract much market attention.  Meanwhile, there may be another attempt to proceed with a bipartisan infrastructure bill early next week, according to press reports.   We also note that more industry reports suggest that the used car market, which has been accounting for around a third of the monthly increase in CPI, is normalizing.  Previously, the wholesale market seemed to have peaked, and the most recent reports estimate that inventories have returned to pre-pandemic levels.  

Canada's economic diary remains light ahead of tomorrow's May retail sales report.  A sharp decline (3% after the 5.7% decline in April) is forecast in the Bloomberg survey.  Partly, this needs to be understood in the contact of more than a 10% increase in February and March.  Also, the news seems somewhat dated and, outside of headline reaction, is unlikely to have policy implications.  Next week, Canada reports June CPI and May GDP.  

Mexico reports biweekly CPI figures today.  The year-over-year increase may ease slightly from 5.74% previously.  It would still leave expectations biased toward another rate hike as early as the August 12 Banxico meeting.  Mexico reports May retail sales tomorrow.  A 0.5% increase is expected after a 0.4% decline in April (which followed a bit more than a 6% increase in February and March).  Next week's highlights include unemployment, trade, and Q2 GDP.  

The US dollar fell by nearly 1% against the Canadian dollar yesterday, the most since June 2020.  There has been no follow-through selling so far today as the market appears to be waiting for the North American session.  Key support is seen near CAD1.2500.  A break of it will boost confidence that a top is in place and set the initial sights on CAD1.2400.  Resistance may be encountered in the CAD1.2600-CAD1.2620 area.  The greenback flirted with the 200-day moving average against the Mexican peso yesterday (~MXN20.21) but settled below it and is also confined to a narrow range today (~MXN20.1120-MXN20.1760). Initial support may be found near MXN20.08 and then MXN20.04.  A break of MXN20.00 would encourage ideas that a top has been recorded.  The greenback settled on its lowes against Brazil's real yesterday (BRL5.1880).  Look for a test on the gap from earlier this week between Monday's high near BRL5.1270 and Tuesday's low close to BRL5.1530.  


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Spread & Containment

A rapid, highly sensitive method to measure SARS-CoV-2 in wastewater

Wastewater-based epidemiology (WBE) has been shown to be an excellent means of understanding the spread of SARS-CoV-2 in communities. It is now used in…



Wastewater-based epidemiology (WBE) has been shown to be an excellent means of understanding the spread of SARS-CoV-2 in communities. It is now used in multiple areas across the world to track the prevalence of the virus, serving as a proxy for determining the status of COVID-19. Of particular importance is that WBE can be used to estimate the prevalence of COVID-19, including asymptomatic cases. However, one of the major drawbacks of WBE for SARS-CoV-2 has been that the traditional method was not very sensitive, and low viral loads could not be reliably detected.

Credit: Hiroki Ando, et al. Science of the Total Environment. August 8, 2022

Wastewater-based epidemiology (WBE) has been shown to be an excellent means of understanding the spread of SARS-CoV-2 in communities. It is now used in multiple areas across the world to track the prevalence of the virus, serving as a proxy for determining the status of COVID-19. Of particular importance is that WBE can be used to estimate the prevalence of COVID-19, including asymptomatic cases. However, one of the major drawbacks of WBE for SARS-CoV-2 has been that the traditional method was not very sensitive, and low viral loads could not be reliably detected.

A team of scientists from Hokkaido University and Shionogi & Co, Ltd., have developed a simple, rapid, highly sensitive method for the detection of SARS-CoV-2 in wastewater. The method, EPISENS-S, which does not require specialised equipment, was described in the journal Science of the Total Environment.

During the COVID-19 pandemic, Japan has had the lowest number of cases per capita. Thus, the viral loads in sewage have also been lower, and much more difficult to evaluate using established WBE methods—due to their low sensitivity. Prior work by the research team showed that the SARS-CoV-2 virus was associated with solids in sewage, so they focused on developing a method to analyse the solid phase of wastewater.

The method they developed, EPISENS-S, involves centrifuging collected wastewater samples to separate all the solids in the samples. The solids were then treated with a commercially available kit to extract all the RNA; the RNA was then reverse transcribed and amplified to obtain a substantial amount of DNA copies. A separate set of samples was subjected to treatment with polyethylene glycol followed by RNA extraction and reverse transcription to synthesize DNA: the method that is currently widely implemented in Japan. The DNA obtained from each of these methods was subjected to quantitative PCR (qPCR).

The team found that the EPISENS-S method is approximately 100 times more sensitive than the polyethylene glycol method. They used EPISENS-S to conduct a long-term analysis of wastewater from two sewage treatment plants in Sapporo city, and found that there was a high correlation between changes in RNA concentrations in the collected samples and changes in the number of reported cases in the city. EPISENS-S can also detect and quantify the Pepper mild mottle virus (PMMoV), which is associated with fecal matter and is used as an internal control.

EPISENS-S provides a way to track COVID-19 cases that are asymptomatic, as well as those that have not been clinically confirmed. In addition, it has great potential to continue tracking the prevalence of SARS-CoV-2 as vaccination rates increase. Finally, EPISENS-S could also be adapted to track other viral diseases with low infection numbers and viral loads.

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Spread & Containment

Mish’s Daily: Step Back to the Monthly Chart on Transportation

Last Friday, I spoke on Women of Wall Street Twitter Spaces and Fox Business’s Making Money with Charles Payne to talk about a key monthly moving average.What…



Last Friday, I spoke on Women of Wall Street Twitter Spaces and Fox Business's Making Money with Charles Payne to talk about a key monthly moving average.

What makes this moving average so important right now is that three of the Economic Modern Family members are testing it. The three members, Granddad Russell 2000 (IWM), Grandma Retail (XRT) and Transportation (IYT), well deserve their status as what Stanley Druckenmiller calls the "inside" of the U.S. economy. In fact, the components of the modern family were put together before we heard Druckenmiller's viewpoint. We have observed how predictive they all are in helping us see in advance the next big market direction. Hence, these "inside" indicators -- right now -- are all sitting just above a 6–7-year business cycle low.

For the purposes of this daily and because we have featured this sector a lot lately, the chart of IYT is a perfect example of this moving average and what to watch for. Except for the brief blip in 2011 when the government shut down, and then again during the pandemic, IYT has sat above the dark blue line for 11 years. Currently, that line sits at the 195 area. The same is true with IWM and XRT, both marginally holding their monthly MAs.

So, watch IYT to either hold, and begin a rally possibly back closer to 220, or for IYT to fail 195, in which case we see the whole market selling off further.

To note, the other family members, such as Sister Semiconductors (SMH) and Prodigal Son Regional Banks (KRE) are still sitting well above the monthly MA. Big Brother Biotechnology (IBB), however, is now trading below it. And not in the family, but still notable, is the REIT sector (IYR), also sitting below it. SPY has the same MA, only that one sits at 310 (a long way off).

Incidentally, junk bonds broke down under this moving average in November 2021. The market has been slow to take junk bond's hint.

For more information on how to invest profitably in sectors like biotech, please reach out to Rob Quinn, our Chief Strategy Consultant, by clicking here.

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Mish in the Media

A business cycle is about 6-7 years - where are the indices now and what should you watch for? Mish discusses this question in this appearance on Fox's Making Money with Charles Payne.

ETF Summary

  • S&P 500 (SPY): Testing the previous low; 362 support, 370 resistance.
  • Russell 2000 (IWM): Broke the June low of 165.18; 162 support, 170 resistance.
  • Dow (DIA): Broke June low -289 support, 298 resistance.
  • Nasdaq (QQQ): Testing the June low;269 support, 280 resistance.
  • KRE (Regional Banks): Relative outperformer; 57 support, 61 resistance.
  • SMH (Semiconductors): 187 support, 194 resistance.
  • IYT (Transportation): 196 support, 200 resistance.
  • IBB (Biotechnology): 112 support, 118 resistance.
  • XRT (Retail): 55 support, 60 resistance.

Mish Schneider

Director of Trading Research and Education

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We can turn to popular culture for lessons about how to live with COVID-19 as endemic

As COVID-19 transitions from a pandemic to an endemic, apocalyptic science-fiction and zombie movies contain examples of how to adjust to the new norm…




An endemic means that COVID-19 is still around, but it no longer disrupts everyday life. (Shutterstock)

In 2021, conversations began on whether the COVID-19 pandemic will, or even can, end. As a literary and cultural theorist, I started looking for shifts in stories about pandemics and contagion. It turns out that several stories also question how and when a pandemic becomes endemic.

Read more: COVID will likely shift from pandemic to endemic — but what does that mean?

The 2020 film Peninsula, a sequel to the Korean zombie film, Train to Busan, ends with a group of survivors rescued and transported to a zombie-free Hong Kong. In it, Jooni (played by Re Lee) spent her formative years living through the zombie epidemic. When she is rescued, she responds to being informed that she’s “going to a better place” by admitting that “this place wasn’t bad either.”

Jooni’s response points toward the shift in contagion narratives that has emerged since the spread of COVID-19. This shift marks a rejection of the push-for-survival narratives in favour of something more indicative of an endemic.

Found within

Contagion follows a general cycle: outbreak, epidemic, pandemic and endemic. The determinants of each stage rely upon the rate of spread within a specified geographic region.

Etymologically, the word “endemic” has its origins with the Greek words én and dēmos, meaning “in the people.” Thus, it refers to something that is regularly found within a population.

Infectious disease physician Stephen Parodi asserts that an endemic just means that a disease, while still prevalent within a population, no longer disrupts our daily lives.

Similarly, genomics and viral evolution researcher Aris Katzourakis argues that endemics occur when infection rates are static — neither rising nor falling. Because this stasis occurs differently with each situation, there is no set threshold at which a pandemic becomes endemic.

Not all diseases reach endemic status. And, if endemic status is reached, it does not mean the virus is gone, but rather that things have become “normal.”

Survival narratives

We’re most likely familiar with contagion narratives. After all, Steven Soderbergh’s 2011 film Contagion, was the most watched film on Canadian Netflix in March 2020. Conveniently, this was when most Canadian provinces went into lockdown during the early stages of the COVID-19 pandemic.

A clip from the film Contagion showing the disease spreading throughout the world.

In survival-based contagion narratives, characters often discuss methods for survival and generally refer to themselves as survivors. Contagion chronicles the transmission of a deadly virus that is brought from Hong Kong to the United States. In response, the U.S. Centers for Disease Control is tasked with tracing its origins and finding a cure. The film follows Mitch Emhoff (Matt Damon), who is immune, as he tries to keep his daughter safe in a crumbling Minneapolis.

Ultimately, a vaccine is successfully synthesized, but only after millions have succumbed to the virus.

Like many science fiction and horror films that envision some sort of apocalyptic end, Contagion focuses on the basic requirements for survival: shelter, food, water and medicine.

However, it also deals with the breakdown of government systems and the violence that accompanies it.

A “new” normal

In contrast, contagion narratives that have turned endemic take place many years after the initial outbreak. In these stories, the infected population is regularly present, but the remaining uninfected population isn’t regularly infected.

A spin-off to the zombie series The Walking Dead takes place a decade after the initial outbreak. In the two seasons of The Walking Dead: World Beyond (2020-2021) four young protagonists — Hope (Alexa Mansour), Iris (Aliyah Royale), Silas (Hal Cumpston) and Elton (Nicolas Cantu) — represent the first generation to come of age within the zombie-infested world.

The four youth spent their formative years in an infected world — similar to Jooni in Peninsula. For these characters, zombies are part of their daily lives, and their constant presence is normalized.

The trailer for the second season of AMC’s The Walking Dead: World Beyond.

The setting in World Beyond has electricity, helicopters and modern medicine. Characters in endemic narratives have regular access to shelter, food, water and medicine, so they don’t need to resort to violence over limited resources. And notably, they also don’t often refer to themselves as survivors.

Endemic narratives acknowledge that existing within an infected space alongside a virus is not necessarily a bad thing, and that not all inhabitants within infected spaces desire to leave. It is rare in endemic narratives for a character to become infected.

Instead of going out on zombie-killing expeditions in the manner that occurs frequently in the other Walking Dead stories, the characters in World Beyond generally leave the zombies alone. They mark the zombies with different colours of spray-paint to chronicle what they call “migration patterns.”

The zombies have therefore just become another species for the characters to live alongside — something more endemic.

The Walking Dead, Fear the Walking Dead (2015-), Z Nation (2014-18), and many other survival-based stories seem to return to the past. In contrast, endemic narratives maintain a present and sometimes even future-looking approach.

Learning from stories

According to film producer and media professor Mick Broderick, survival stories maintain a status quo. They seek a “nostalgically yearned-for less-complex existence.” It provides solace to imagine an earlier, simpler time when living through a pandemic.

However, the shift from survival to endemic in contagion narratives provides us with many important possibilities. The one I think is quite relevant right now is that it presents us with a way of living with contagion. After all, watching these characters survive a pandemic helps us imagine that we can too.

Krista Collier-Jarvis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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