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Futures Coiled Ahead Of Today’s Highly Anticipated Powell Announcement

Futures Coiled Ahead Of Today’s Highly Anticipated Powell Announcement

With the long-awaited Fed day finally here and Powell set to reveal the "turbo-taper" which doubles the pace of QE unwind to $30BN per month starting in January and ending

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Futures Coiled Ahead Of Today's Highly Anticipated Powell Announcement

With the long-awaited Fed day finally here and Powell set to reveal the "turbo-taper" which doubles the pace of QE unwind to $30BN per month starting in January and ending by March, and to publish updated summary of economic projections, so the Fed can hike in April or May as Goldman laid out over the weekend...

... S&P futures were flat, Nasdaq futures dropped as traders braced for another dose of hawkishness on the pace of the withdrawal of stimulus measures and rate increases. Treasury yields and the dollar were little changed. Europe’s Stoxx 600 Index gained after five days of losses, Asian stocks were mixed with Nikkei closing slightly higher, the Hang Seng tumbled by as much as 2.2%, with Semiconductor Manufacturing among the biggest contributors to its decline, as the U.S. is said to be considering tougher sanctions on China’s biggest chipmaker.

Shares in U.S.-listed Chinese firms retreated in premarket trading after the Biden administration was said to be considering tougher sanctions on China’s largest chipmaker, SMIC.  A pact between Trump Media & Technology Group and Rumble sent shares in Digital World Acquisition, a SPAC which has agreed to merge with TMGT, and CF Acquisition Corp. VI, which has agreed to merge with Rumble, soaring in U.S. premarket trading. Here are the biggest premarket movers:

  • A pact between Trump Media & Technology Group and Rumble sent shares in Digital World Acquisition (DWAC US +5%), a SPAC which has agreed to merge with TMTG, and CF Acquisition Corp. VI (CFVI US +10%), which has agreed to merge with Rumble, soaring in premarket trading.
  • U.S.-listed Chinese firms retreat in premarket trading after the Biden administration was said to be considering tougher sanctions on China’s largest chipmaker, SMIC. Alibaba (BABA US -2.3%), Baidu (BIDU US -1.9%).
  • SeaChange International (SEAC US) shares rise 19% in premarket trading, following better-than-forecast third-quarter revenue in a report late Tuesday.
  • The EU drug regulator’s human medicines committee concluded that a booster dose of Covid-19 Vaccine Janssen (JNJ US) may be considered at least two months after the first dose in people aged 18 years and above, according to statement.
  • EBay (EBAY US) is resumed at neutral at JPMorgan, while broker upgrades Booking.com (BKNG US) to overweight from neutral, saying that it expects internet stocks to continue to see more varied stock performance and lower levels of growth in 2022.
  • Albemarle Corp. (ALB US) is 4.4% lower in premarket trading after Goldman Sachs analyst Robert Koort cut the recommendation to sell from neutral.

Technology shares have been under persistent pressure, with the Nasdaq 100 down 2.6% this week, as hefty valuations face the threat of a likely tightening of monetary policy. Federal Reserve policy makers are poised to accelerate the removal of monetary stimulus on Wednesday as a step toward increasing interest rates in response to surging inflation. 

Then again, it could be worse, with the Nasdaq trading at just below its all time high despite just 40% of Nasdaq companies trading above their 200DMA.

“Belief is strong in the market and expectations of the Fed doubling the pace of its Fed purchases are having a ‘limited’ impact on Unicorns and the Nasdaq,” said Sebastien Galy, macro strategist at Nordea Funds.

Traders are looking to a wave of central bank decisions for clarity on the timing of a pullback, with the Fed decision due later on Wednesday, followed by the Bank of England and European Central Bank Thursday. As a reminder, the Fed monetary policy announcement is expected at 2pm ET, with Chair Powell news conference 30 minutes later. Policy makers are expected to double the pace of tapering to $30b a month, starting in January and ending by March, and to publish updated summary of economic projections, paving the way for the first interest-rate increases since 2018 as it pivots to restraining the hottest inflation in almost 40 years.

The mix of intense price pressures -- U.S. producer-price inflation hit a record of almost 10%, while U.K. inflation surged to its highest level in more than a decade -- diminishing central bank support and economic uncertainty around the omicron virus variant is testing markets.

“Even if other central banks opt for less hawkish communication this week, the Fed’s hawkish shift today will make it easier for its peers to follow suit,” ING Groep NV analysts led by Padhraic Garvey wrote in a note to investors. “The trend is resolutely towards higher rates globally.”

On the covid front, the omicron variant will likely be dominant in Europe by mid-January, European Commission President Ursula von der Leyen told the European Parliament on Wednesday, adding that the case numbers appear to be doubling every two or three days. Initial lab findings showed the vaccine made by Sinovac Biotech Ltd., one of the most widely used in the world, doesn’t provide sufficient antibodies in two doses to neutralize omicron and boosters will likely be needed to improve protection.

In Europe, the Stoxx 600 Index was 0.4% higher after posting its longest streak of daily losses since mid-March 2020. CAC outperforms. Tech, autos and chemicals are the best-performing sectors U.K. inflation surged to its highest level in more than a decade in November, exceeding 5% months before the Bank of England had expected.

Asian stocks were mixed ahead of a key Federal Reserve policy decision Wednesday, while renewed tensions between Beijing and Washington hammered Chinese stocks. The MSCI Asia Pacific Index was set to fall for a fourth day, dropping as much as 0.3%. Mainland Chinese equities edged lower after data showed the nation’s economy slowed further in November amid a housing market slump and weaker domestic consumption.  Sentiment soured further in afternoon trade as fears of more investment and export sanctions by Washington sent shares of China’s biggest chipmaker and several large pharmaceutical firms tumbling, dragging down Hong Kong’s benchmark. Read: China Healthcare, Tech Stocks Tumble on U.S. Sanction Escalation “The U.S.-China tensions are structural in nature and therefore, going to persist,” said Ben Powell, chief APAC investment strategist at the BlackRock Investment Institute in an interview with Bloomberg TV. “But in 2022, we could see something of a lessening of tensions, for both sides -- the U.S. and China -- are so busy domestically.” The risk-off mood pervaded much of Asia’s markets while investors awaited greater clarity from the Fed on the removal of monetary stimulus. The prospect of faster-than-expected interest rate hikes also weighed on the technology sector. Japan led regional gains Wednesday as the yen remained weak against the dollar, boosting export-related shares

Indian stocks completed their longest string of losses in three weeks ahead of the U.S. Federal Reserve’s rate-setting meeting amid uncertainty over the severity of the omicron coronavirus variant. The S&P BSE Sensex fell for a fourth session, dropping 0.6% to 57,788.03 in Mumbai, while the NSE Nifty 50 Index declined by a similar magnitude. Infosys Ltd contributed the most to the decline in both indexes, decreasing 1%. Of 30 shares in the Sensex index, 10 rose and 20 fell. Seventeen of 19 sector indexes compiled by BSE Ltd. fell, led by a measure of realty companies. The Fed’s last meeting of this year is expected to pave the way for interest-rate hikes in 2022. Lower borrowing costs in the U.S. have helped drive flows to higher-yielding emerging markets like India

Australian stocks dropped the most in three weeks as miners slump. The S&P/ASX 200 index fell 0.7% to close at 7,327.10, marking its biggest plunge in about three weeks. Miners contributed the most to the benchmark’s decline. PointsBet was among the worst performers, declining for a third day in a row. Alumina was among the top performers after it was upgraded to overweight at JPMorgan. In New Zealand, the S&P/NZX 50 index fell 0.5% to 12,869.41

In rates, Treasuries are slightly cheaper across the curve, lagging a wider selloff in gilts following a higher-than-expected November U.K. CPI print which brought forward BOE rate-hike expectations. U.S. 10-year yields steady around 1.445% with U.K. 10-year yield higher by 3.6bp; U.S. 2-year yields are higher by 0.5bp vs 6bp for U.K. front-end yields. US activity has been sidelined so far ahead of Fed policy announcement, with the central bank expected to double the pace of its asset-purchase tapering. Tuesday saw a wave of activity in eurodollar options, hedging a more dovish policy path than current expectations; overnight index swaps are pricing in around 29bp of rate hikes for the June meeting and 55bp by November next year

In FX, the Bloomberg Dollar Spot Index fell very gradually throughout the Asian and European sessions and the greenback weakened against most of its Group-of-10 peers, with the Australian dollar and some other risk-sensitive currencies leading gains. Treasury and euro-area sovereign bond yields were largely steady. The pound rose to the highest level against the dollar in a week and gilt yields rose by up to 5bps led by the front end, as markets bolstered bets on Bank of England rate hikes after data showed U.K. inflation topped 5% in November, the highest level in more than a decade. Traders are pricing in seven basis points of hikes for tomorrow’s BOE rate decision, from around five basis points on Tuesday. New Zealand’s bonds rallied after the government said it’ll sell NZ$31 billion less bonds over the next four years, as the economy recovers from the pandemic and there’s less need for stimulus. The yen traded in a narrow range as investors stayed on the sidelines ahead of the Fed’s policy review. Bonds were mostly steady.

In commodities, crude futures are in the red but off worst levels. WTI is down ~0.8% but regains a $70-handle; Brent drifts back above $73. Oil fell for a third day as further restrictions were imposed to counter the spread of omicron, while the outlook for demand in China dimmed and the International Energy Agency said the global market had already returned to surplus. European natural gas gained on Wednesday but there are signs that the rally that has sent prices surging 23% this week is starting to slow. Spot gold find support near Tuesday’s lows, recovering near $1,770/oz. Base metals are under pressure; LME zinc drops over 2%, underperforming peers.

Looking at the day ahead, the main highlight will be the aforementioned decision from the Fed tonight and Chair Powell’s subsequent press conference. We’ll also hear from Bank of Canada Governor Macklem and get CPI data for November from both the UK and Canada. In addition, data releases from the US include retail sales for November, the Empire State manufacturing survey for December and the NAHB’s housing market index for December.

Market Snapshot

  • S&P 500 futures little changed at 4,635.25
  • STOXX Europe 600 up 0.4% to 471.26
  • MXAP down 0.1% to 191.94
  • MXAPJ down 0.5% to 621.81
  • Nikkei little changed at 28,459.72
  • Topix up 0.5% to 1,984.10
  • Hang Seng Index down 0.9% to 23,420.76
  • Shanghai Composite down 0.4% to 3,647.63
  • Sensex down 0.4% to 57,864.45
  • Australia S&P/ASX 200 down 0.7% to 7,327.08
  • Kospi little changed at 2,989.39
  • Brent Futures down 0.9% to $73.05/bbl
  • Gold spot down 0.1% to $1,770.76
  • U.S. Dollar Index down 0.13% to 96.44
  • German 10Y yield little changed at -0.38%
  • Euro up 0.1% to $1.1273

Top Overnight News from Bloomberg

  • The upcoming monetary policy decisions by the Federal Reserve and the European Central Bank could shape the trading bias for 1Q 2022, and traders are taking no chances. Overnight volatility in euro-dollar advanced by more than 10 vols to 17.15%, highest since Nov. 4 2020, when the U.S elections were in focus
  • Federal Reserve policy makers are poised to accelerate their removal of monetary stimulus as a step toward the first interest-rate increases since 2018 as they pivot to restraining the hottest inflation in almost 40 years
  • The European Central Bank’s new projections show inflation below the 2% target in both 2023 and 2024, according to officials familiar with the matter, giving President Christine Lagarde ammunition to argue against a swift increase in interest rates
  • The omicron variant will likely be dominant in Europe by mid-January, European Commission President Ursula von der Leyen said Wednesday, adding that the case numbers appear to be doubling every two or three days
  • The vaccine made by Sinovac Biotech Ltd., one of the most widely used in the world, doesn’t provide sufficient antibodies in two doses to neutralize the omicron variant and boosters will likely be needed to improve protection, initial lab findings showed
  • China’s economy took a knock last month from an ongoing property market slump and sporadic Covid outbreaks, prompting economists to warn that recent easing measures may not be enough to stabilize growth
  • U.K. inflation surged to its highest in more than a decade in November, exceeding 5% months before the Bank of England expected. The soaring costs and staffing shortages plaguing the U.K.’s food-supply chain show little sign of ebbing next year
  • The Swiss National Bank could transfer some of its foreign exchange holdings to create a sovereign wealth fund in exchange for franc-denominated bonds, according to a proposal by a trio of leading economists
  • New Zealand Finance Minister Grant Robertson expressed confidence in central bank Governor Adrian Orr after a number of senior officials announced they are leaving the bank

A more detailed look at global markets courtesy of Newsquawk

Asian equity markets were mixed with price action rangebound as participants remained cautious following the losses in US where a hot PPI report further supported the case for the Fed to speed up its tapering heading into today’s FOMC meeting and with participants in the Asia-Pac region also digesting mixed Chinese activity data. ASX 200 (-0.7%) was led lower by tech after similar underperformance of the sector stateside and as weak Westpac Consumer Sentiment data and a continued surge in domestic COVID-19 cases also contributed to the uninspired mood. Nikkei 225 (+0.1%) was steady with price action contained by resistance around the 28.5k level and amid the lack of direction in the domestic currency, although Toyota shares were among the top performers after its recent commitment to spend trillions of Yen to boost its electrification. Hang Seng (-0.9%) and Shanghai Comp. (-0.4%) were choppy amid several opposing forces including mixed data in which Industrial Production topped estimates but Retail Sales disappointed and with the PBoC’s previously announced 50bps RRR cut taking effect. The PBoC also announced to inject CNY 500bln via a 1-year MLF operation and Chinese press noted that China may lower Loan Prime Rates ahead of the holiday season, although the central bank’s decision to maintain the 1-year MLF rate suggested a reduction in the benchmark LPR next week was unlikely. Furthermore, US-China frictions lingered after the House passed the Uyghur bill which targets China and the White House also noted that China must be held accountable for genocide, while it was also reported that President Biden's team is considering imposing harsher sanctions on China's largest chipmaker SMIC. Finally, 10yr JGBs were kept afloat above the psychological 152.00 level amid the BoJ’s presence in the market for more than JPY 1.3tln of JGBs under its regular Rinban operations and with the central bank also conducting a 3rd consecutive injection via repurchase agreements, although upside was limited as markets brace for a potential faster Fed taper.

Top Asian News

  • Putin, Xi Stand Together as U.S., EU Worry About Ukraine Threat
  • China Hikes Copper Blister Export Tariff, Cuts Some Import Rates
  • China Power Giants Call Wind Commandos to Hit Subsidy Cutoff
  • BNPL Firm Net Protections Slips on Tokyo Trading Debut

The equities complex remains mixed in Europe (Euro Stoxx 50 +0.4%; Stoxx 600 +0.4%), but the mood has tilted more towards a cautious one as the clock ticks down to the FOMC policy announcement. The focus of the announcement will be on the pace of the tapering process, with the Fed is widely expected to double the pace of its asset purchase unwind to USD 30bln/mth, taking asset purchases from USD 90bln in December to USD 60bln in January, then to a final 30bln in February, for them to conclude mid-March (full preview available in the Newsquawk Research Suite). US equity futures have seen downticks in early hours with the NQ (-0.1%) narrowly lagging the RTY (+0.1%), ES (+0.1%) and YM (-0.1%). Back to Europe, exporters in the FTSE 100 (-0.4%) are pressured by the inflation-induced gains in the Sterling, whilst the sector configuration is also unfavourable for the UK benchmark with Oil & Gas and Basic Resources towards the bottom of the bunch. Spain’s IBEX (-0.6%) is the regional underperformer with heavyweight Inditex (-3.0%) slumping at the open but rebounding off worst levels as sales hit records, but nonetheless weighing on the broader Retail sector. The upside meanwhile sees Tech – following its recent underperformance, Healthcare, Autos and Personal & Household Goods. In terms of individual movers, Cineworld (-27%) plumbed the depths after a Canadian judge ruled Cineworld must pay USD 965mln in damages to Cineplex after the former backed out of takeover talks amid the pandemic. Cineworld said it will appeal the decision. Sanofi (+0.2%) and GlaxoSmithKline (-0.3%) announced positive prelim. Phase 3 booster data for their COVID-19 vaccine; Omicron variant was not in circulation during the trial. H&M (-3.2%) is pressured after Q4 revenue missed forecasts. Finally, UK electronics retailer Currys (-11%) saw pressure after highlighting a softer market in the Christmas run-up.

Top European News

  • Omicron to Become Dominant in Europe by Mid-January, EU Warns
  • U.K. Food Costs Set to Keep Climbing After Festive Season
  • UBS Said to Plan Shutting Its Global Banking Office in India
  • Fortress Buys Punch Pubs & Co. From Patron; No Terms

In FX, the Buck extended yesterday’s post-US PPI gains with added momentum from safe-haven demand as Wall Street wobbled on renewed Omicron-related jitters, but has drifted back down in what looks like typical pre-FOMC cautious and consolidative trade. However, the index remains within a firmer range around 96.500 compared to recent extremes either side of 96.000 in anticipation of faster Fed tapering and a more hawkish tightening path portrayed by new dot plots, at the very least. More immediately, NY Fed manufacturing and retail sales provide distractions or fillers before the main event. Notwithstanding the Greenback’s firm underlying bid (DXY holding between 96.405-96.569), the Pound and Aussie are both outperforming and vying for top spot among majors, with the former boosted by hot UK inflation prints as headline CPI smashed consensus and the BoE’s MPR forecast to revive rate hike bets for the MPC on Thursday. Cable is just shy of new w-t-d highs circa 1.3283 and Eur/Gbp is pivoting 0.8500, while Aud/Usd looks more comfortable on the 0.7100 handle as the Aud/Nzd cross rebounds from sub-1.0550 lows with some traction from better than expected Chinese ip rather than a retail sales miss or dip in Westpac consumer sentiment.

  • EUR/NZD/JPY/CAD/CHF - Very familiar terrain for the Euro, Kiwi, Yen, Loonie and Franc in relation to their US rival, as Eur/Usd meanders from around 1.1280 to 1.1254 and well above decent option expiry interest at the 1.1200 strike (1 bn). Meanwhile, Nzd/Usd is still straddling 0.6750 amidst mixed NZ fiscal impetus via bigger than anticipated Q3 current account deficits, but a bullish HYEFU based on stronger tax revenue than previously envisaged. Elsewhere, Usd/Jpy has moved up from the 113.50 mark that has been a focus, but could be hampered by a clutch of option expiries spanning 113.75-114.20 totalling 3.7 bn, Usd/Cad is now above 1.2850 awaiting Canadian CPI and manufacturing sales in hope of some protection from further weakness in WTI (down to Usd 69.58/brl at one stage) and Usd/Chf is hovering within a 0.9250-24 band alongside Eur/Chf in a 1.0400-26 range on the eve of the SNB.
  • SCANDI/EM - The Sek and Nok are both churning inside Tuesday’s extremes against the Eur with little reaction to steady Swedish money market expectations on balance or a narrower Norwegian trade surplus, but the Try is succumbing to more selling pressure ahead of the CBRT tomorrow and Zar looks significantly less relieved with the Omicron situation following the latest WHO assessment. In short, the global body says prelim evidence suggests that there may be a reduction in vaccine efficacy and effectiveness against Omicron, alongside a greater risk of reinfection, though more data is needed.

In commodities, WTI and Brent front-month futures posted initially modest losses with the contracts on either side of USD 70/bbl and USD 73/bbl respectively; however, as the session has progressed and we near the arrival of US participants this has dipped further to circa USD 69.50/bbl and USD 72.50/bbl respectively. Complex-specific news flow has remained light and thus the crude markets have derived impetus from the cautious mood seen across markets. In terms of an Omicron update, and in-fitting with the South African study yesterday, WHO’s preliminary evidence suggests that there may be a reduction in vaccine efficacy and effectiveness against Omicron, alongside a greater risk of reinfection – but more data is needed on Omicron. In terms of geopolitics, European leaders are meeting to discuss the Russian situation, with the European Commission earlier reiterating the threat of stricter sanctions in the face of Russian aggression. Meanwhile, Iranian nuclear talks are showing little progress, with the prospect of a legal return of Iranian barrels to the market diminishing, albeit Iran has achieved an agreement with the IAEA to assist in addressing nuclear concerns. Elsewhere, spot gold and silver are trading sideways with the former still within recent ranges around USD 1,770/oz (vs high USD 1,774/oz), with the yellow still above a support zone touted to be around USD 1,760-65/oz. Meanwhile, copper prices are under pressure with the LME contact testing USD 9,250/t to the downside. Overnight, Chinese steel saw modest gains after gaining momentum from the Chinese industrial production data.

US Event Calendar

  • 8:30am: Nov. Import Price Index YoY, est. 11.4%, prior 10.7%; Import Price Index MoM, est. 0.6%, prior 1.2%
  • 8:30am: Nov. Export Price Index YoY, prior 18.0%; Export Price Index MoM, est. 0.5%, prior 1.5%
  • 8:30am: Nov. Retail Sales Advance MoM, est. 0.8%, prior 1.7%
  • 8:30am: Nov. Retail Sales Ex Auto MoM, est. 0.9%, prior 1.7%
  • 8:30am: Nov. Retail Sales Control Group, est. 0.7%, prior 1.6%
  • 8:30am: Dec. Empire Manufacturing, est. 25.0, prior 30.9
  • 10am: Oct. Business Inventories, est. 1.1%, prior 0.7%
  • 10am: Dec. NAHB Housing Market Index, est. 84, prior 83
  • 2pm: Dec. FOMC Rate Decision
  • 4pm: Oct. Total Net TIC Flows, prior - $26.8b

DB's Jim Reid concludes the overnight wrap

I’m booked in to get my booster this morning. My wife had hers on Sunday and she’s suffering with a dead arm and flu-like symptoms still. The UK has gone booster crazy with queues of several hours reported across many walk-in centres. My wife got boosted as soon as she could as she wanted to minimise the risk of having to self isolate over Christmas and miss all the family stuff. I’m getting boosted as soon as I can to minimise the risk of missing a golf tournament this weekend. Having said that my current injury list is as follows; 1) recovering left knee from recent big operation; 2) new intermittent stabbing pain in right knee over the last week after re-starting squats and lunges - need to go for a scan; 3) bad back - injection two weeks ago hasn’t done much good; and 4) a compressed nerve in my shoulder (painful) which has come back again after doing weights three weeks ago - I’ve been seeing a physio. The likely dead arm after today’s booster might help distract me from the above.

With just 10 days to Christmas now, I’ve asked Santa for a new body but markets will be asking for better virus news-flow and a relatively sanguine week of central banks meetings. Up first are the Fed at 19:00 tonight London time, who are gathering amidst mounting inflationary pressures, with last month’s CPI print of +6.8% being the fastest since 1982. Yesterday’s PPI release only added to that drumbeat, with a stronger-than-expected +9.6% jump in producer prices over the last year (vs. +9.2% expected). And on top of that there’s been a further tightening of the labour market in recent weeks, with unemployment down to a post-pandemic low of 4.2%, the quits rate hovering around a record high, and the weekly initial jobless claims last week at a half-century low.

At their last meeting in November, the Fed announced they would start to taper their asset purchases, but there’s strong anticipation that just 6 weeks later they’ll be accelerating that pace today. Indeed, Fed Chair Powell explicitly alluded to this in his recent congressional testimony, saying that “it is appropriate to consider wrapping up a few months sooner.” In their preview (link here), our US economists expect that the Fed will be announcing a doubling in the tapering pace, which would bring the monthly drawdown for Treasuries and MBS to $20bn and $10bn respectively. That would end the process in March and give them greater optionality for an earlier liftoff, which Fed funds futures are currently pricing in for June, although investors are also pricing in a decent 76% chance of one as early as the May meeting. Bear in mind though that even as the Fed have started to taper purchases, so long as the purchases are still happening they’re actually easing policy rather than tightening, albeit at a slower rate. Given CPI is almost at 7% it’ll be fascinating to see what future economic historians have to say about this.

On top of the policy decision, we’re also set to get a fresh set of dots from the FOMC, along with a new round of economic projections. Last month, only half of the dots saw any hikes in 2022, but this time around our economists anticipate the median dot having two hikes next year, with the risk of more. It’ll also be important to look at their updated inflation forecasts, and how they see that evolving into 2022 and 2023. As it happens, the FOMC have upgraded their median projections for inflation in 2021 and 2022 in every round of inflation forecasts over the last year, and our economists expect this pattern to continue today, with the PCE inflation projection for 2021 up to +5.2%, and the 2022 projection at +2.3%.

With all that to look forward to, the risk-off tone continued in markets yesterday as investor concern grew about a more rapid pace of monetary tightening over the coming months, particularly in light of that strong PPI print mentioned at the top. By the close of trade, the S&P 500 had shed a further -0.74%, with tech stocks in particular leading the declines. Indeed, the NASDAQ was down -1.14% yesterday, bringing its losses to more than -2.5% since the start of the week, whilst the VIX index of volatility rose another +1.4pts to 21.71pts, its highest closing level in a week. In Europe it was much the same picture, with the STOXX 600 (-0.84%) losing ground for a 5th consecutive session, the longest streak since the first wave of Covid in March 2020. And other risk assets like oil prices witnessed similar declines, with Brent Crude (-0.74%) and WTI (-0.60%) struggling, not least as growing Omicron restrictions raised questions as to whether global mobility would see a more sustained decline over the coming weeks.

Speaking of Omicron, yesterday saw a further rise in South African hospitalisations, which hit 6,895. For comparison that’s up from 3,798 just a week earlier, so an increase of over +80% in a week, albeit still well beneath peak hospitalisations of almost 20k in previous waves, even as cases match record highs, so all eyes will be on this figure to see how that progresses and what that means for elsewhere. We also got some news from Discovery Health, which is South Africa’s largest medical-insurance provider, who said that a double-dose of Pfizer still offered 70% protection against hospitalisation when it came to the Omicron variant, which is promising in the sense that it implies that even non-boosted populations elsewhere should have protection against severe disease, even if the protection against symptomatic illness is lower for those with just two doses. Separately, data from Pfizer confirmed that their antiviral pill was able to reduce hospitalisation or death by 89% among high-risk adults, while an interim analysis in standard risk adults pointed to a 70% reduction in hospitalisations.

Looking elsewhere, there were continued signs of Omicron spreading. In the US, the CDC said that Omicron had now been detected in 33 states, and now made up 3% of sequenced cases. And in the UK, a total of 59,610 Covid-19 cases were reported yesterday, which is the highest daily number since January.

Overnight in Asia stocks are trading mixed with the Hang Seng (+0.21%), the Nikkei (+0.11%), and the Shanghai Composite (+0.07%) trading in the green while the KOSPI (-0.23%) and CSI (-0.30%) are losing ground. The data dump from China for November showed a slowing economy with retail sales at 3.9% year on year, against a consensus of 4.7%, industrial production at 3.8% against 3.7% consensus, and fixed assets investments growth slowed to 5.2% YTD against a 5.4% consensus and 6.1% last month. We also learnt overnight that China's Sinovac vaccine doesn’t protect adequately against Omicron with none of the 25 subjects in a Hong Kong study showing sufficient antibodies. Omicron could be a real challenge for China if they maintain their zero Covid approach, especially in light of the vaccine news. It still might be a mild variant but it’s seems so virulent that any containment strategy will be economically tough.

Staying on China, the Biden administration overnight blacklisted eight Chinese companies including the world's largest drone manufacturer DJI. Futures markets are pointing a more positive start in DM markets with S&P 500 (0.14%) and DAX (+0.27%) futures both trading higher.

Back to yesterday and sovereign bond yields moved higher ahead of the various central bank decisions, with yields on 10yr Treasuries up +2.6bps to 1.44%. That was driven by a +3.0bps rise in real rates, which saw it close back above -1% for the first time in 3 weeks. In Europe, yields on 10yr bunds (+1.3bps), OATs (+1.5bps) and BTPs (+2.6bps) all moved higher as well. Notably as well in Europe, there was a further rise in natural gas prices, with the benchmark future up +10.52% to hit a fresh record of €128.30 per megawatt-hour. Bear in mind that a year earlier on December 14 2020, it was at just €16.61, so we’ve seen an absolutely massive rise over the last year that won’t be welcomed by central banks.

Congress finally passed legislation to raise the debt ceiling. The limit will be increased by $2.5 trillion, which should cover spending through the midterm elections and into early 2023. Hopefully we don’t have to cover the debt ceiling again until then. See you in just over a year!!

Looking at yesterday’s other data, the UK unemployment rate fell to 4.2% as expected in the three months to October, and the number of payrolled employees rose by +257k in November. In the Euro Area, industrial production grew by +1.1% in October (vs. +1.2% expected), and in the US the NFIB’s small business optimism index rose to 98.4 as expected.

To the day ahead now, and the main highlight will be the aforementioned decision from the Fed tonight and Chair Powell’s subsequent press conference. Otherwise, we’ll hear from Bank of Canada Governor Macklem and get CPI data for November from both the UK and Canada. In addition, data releases from the US include retail sales for November, the Empire State manufacturing survey for December and the NAHB’s housing market index for December.

Tyler Durden Wed, 12/15/2021 - 07:52

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Six Commodities Investments to Buy as Putin Wages War on Ukraine

Six commodities investments to buy amid the sustained attack of Ukraine by Russia’s President Vladimir Putin and rising inflation provide potential to…

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Six commodities investments to buy amid the sustained attack of Ukraine by Russia’s President Vladimir Putin and rising inflation provide potential to profit even as the market has been pulling back so far in 2022.

The six commodities investments to buy include those involved in oil, gold and grain due to current supply shortages that are showing no signs of abating anytime soon. Putin’s order for Russian troops to invade Ukraine on Feb. 24 has disrupted the neighboring nation’s agricultural production, led to the theft of grain and imposed an ongoing blockade in the Black Sea to stop farmers from exporting their crops.

Crude oil inventories are down to a “dangerously low point” across Europe, North America and Organisation for Economic Co-operation and Development (OECD) Asia, just as spare production capacity from OPEC+ nations slid to the lowest levels since April 2020, according to BofA Global Research. Inventories of petroleum products also have fallen to “precarious levels” for middle distillates and even gasoline as the market heads into the peak of the U.S. summer driving season, the investment firm added.

As a result, refined petroleum cracks — the differences between crude oil and the prices of the wholesale petroleum products such as gasoline — recently have “spiked to record levels,” contributing to volatility, BofA wrote. In addition, strategic oil barrels held by OECD governments already are low and likely to decline steeply going forward, leaving consumers exposed to future negative supply shocks, BofA predicted.

Pension Fund Chairman Recommends Broad Commodity Funds

Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter, recommended Cohen & Steers MLP & Energy Opportunity Fund (MLOAX) to all the portfolios in his June 2022 issue. 

Oil and natural gas should be good investments as Europe looks to reduce dependence on Russian exports, Carlson told me. Plus, energy producers in the United States are focused on increasing cash flow and earnings, not maximizing drilling expenses in the short run to increase output, he added.

Bob Carlson, who leads Retirement Watch, meets with Paul Dykewicz.

Good investment opportunities can be found with companies that provide the pipelines, storage facilities and other infrastructure needed to supply the world with oil, natural gas and other energy sources, Carlson continued. 

“One of the attractive qualities of these investments is that their revenues are independent of the prices of the commodities,” Carlson counseled. “The firms charge fees for their services, and the fees often are adjusted for inflation. Their revenues and earnings depend on the volume of commodities passing through their facilities, not the price of the commodity.”

Key energy service companies provide total returns, aided by current income and price appreciation, through investments in energy-related master limited partnerships (MLPs) and securities of industry companies, Carlson pointed out. Those businesses are expected to derive at least 50% of their revenues or operating income from exploration, production, gathering, transportation, processing, storage, refining, distribution or marketing of natural gas, crude oil and other energy resources.

Chart courtesy of www.stockcharts.com

Cohen & Steers Fund Leads List of Six Commodities Investments to Buy

Cohen & Steers MLP & Energy Opportunity Fund recently held 53 positions and had 50% of its portfolio in the 10 largest positions. Top holdings of the fund included Enbridge (NYSE: ENB), Cheniere Energy (NYSEAMERICAN: LNG), Williams Companies (NYSE: WMB), TC Energy (NYSE: TRP) and Energy Transfer (NYSE: ET).

The fund has achieved strong returns since April 2020. Indeed, it has been on an upward trajectory since the second half of December 2021.

“Crucially, oil prices have held up well even in the face of a slowing Chinese economy and widespread lockdowns,” according to BofA. “Given that most China indicators point to a major decline in mobility across the country, any improvement in the COVID-19 situation in large Chinese cities could send oil prices much higher.”

Carlson’s Chooses DBA to Join Six Commodities Investments to Buy

Despite the evils of war, investors still can profit from the rise in grain prices and other commodities through the futures markets, even as many other equities slip. Instead of buying futures directly, investors can purchase diversified agriculture commodities through Invesco DB Agriculture Fund (DBA), Carlson said.

That ETF seeks to track changes in the DBIQ Diversified Agriculture Index Excess Return. The ETF also earns interest income from cash it invests primarily in treasury securities, while holding them as collateral for the futures contracts.

The major holdings in the index are soybeans, wheat, corn, coffee and live cattle. The index is reconstituted each November.

Chart courtesy of www.stockcharts.com

Gold Funds Featured Among Six Commodities Investments to Buy

Carlson also is recommending gold through iShares Gold Trust (IAU). He described it as the “cheapest, most liquid way” to invest in the shiny yellow metal.

Gold has had its ups and downs in the face of rising global inflation, Russia’s invasion of Ukraine, China’s increasing military flyovers of nearby Asian nations and other geopolitical conflicts. At the same time, the U.S. dollar has been appreciating amid high inflation after the Fed recently raised interest rates by 0.5% and promised additional increases later in 2022.

However, there are many risks for the U.S. dollar, so continuing to hold gold remains a good hedge, Carlson counseled.

IAU has retreated since early March, so investors seeking to buy it now that it is rebounding still may do so. Those who believe inflation may stay through 2022 can try to capture gains before the trend no longer is a friend.

Chart courtesy of www.stockcharts.com

Skousen Calls GLD One of the Six Commodities Investments to Buy

“Gold has done far better than stocks, which are down 15-25% this year,” said Mark Skousen, who is recommending SPDR Gold Shares (NYSE Arca: GLD) in his Forecasts & Strategies investment newsletter. 

Mark Skousen, head of Forecasts & Strategies, meets with Paul Dykewicz.

GLD has risen nearly 16% since Skousen recommended it about two years ago. Gold climbed 2021 in anticipation of rising inflation, but its performance has been flat so far this year. If gold truly is an indicator of inflation, the previous yellow metal’s stagnant price may be signaling that price inflation will wane heading into 2023.

The investment objective is for the GLD shares to reflect the performance of the price of gold bullion, after subtracting the trust’s expenses. The trust, formed on November 12, 2004, physically holds gold bars.

The trust’s shares are designed for investors who want a cost-effective and convenient way to invest in gold, according to the company’s prospectus. Skousen, who also leads the Five Star Trader, Home Run Trader, TNT Trader and Fast Money Alert services, recently was a featured speaker at the Vancouver Resource Investment Conference and advised attendees that he recommended gold as a minor holding in every portfolio.

Chart courtesy of www.stockcharts.com

EPD Is Another of the Six Commodities Investments to Buy

Oil has done much better as an inflation hedge than gold, Skousen said. One example is his recommendation of Enterprise Products Partners (EPD, $27, 7% yield), up 27% year to date.

EPD has been the “best performer” in the Forecasts & Strategies investment newsletter so far this year, Skousen said. Enterprise Products Partners is one of the largest publicly traded partnerships and a key North American provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products and petrochemicals. 

The company’s services include natural gas gathering, treating, processing, transportation and storage. In addition, Enterprise Products Partners provides NGL transportation, fractionation, storage and import and export terminals. It further offers crude oil gathering, transportation, storage and terminals, along with petrochemical and refined products transportation, storage and terminals, as well as a marine transportation business.

I personally have owned Enterprise Products Partners since shortly after the 2020 stock market crash when I bought the stock as it started to recover. The stock has been trending upward since the end of 2021.

Chart courtesy of www.stockcharts.com

Money Manager Picks One of Six Commodities Investments to Buy

A seasoned investment professional told me that she likes farm machinery company Deere (NYSE: DE) to profit from agriculture. Michelle Connell, a former portfolio manager who now serves as president of Dallas-based Portia Capital Management, said she still likes Deere despite its 14% drop after it reported results last week.

Michelle Connell, CEO, Portia Capital Management

Deere’s key issues are supply-related, since demand for agricultural equipment remains strong, especially for the company’s machinery that is more environmentally friendly than its rivals, Connell continued.

Deere is also focused on providing the farming industry with autonomous equipment, Connell counseled. Wall Street analysts expect Deere to have a better story and performance in the second half of 2022 and in full-year 2023.

Connell cited the following to support her recommendation of Deere: 

-More than half its revenues come from large agriculture.

-If the war in Ukraine continues, U.S. farmers will benefit from higher prices for their crops.

-Increased agricultural profits mean that that farmers and farming corporations will be more likely to buy large, expensive farm equipment.  

Deere has fallen back since its recent high on April 20, so investors should be able to purchase shares at reduced prices, Connell continued.

Chart courtesy of www.stockcharts.com

Supply Chains May Improve as China Starts to Lower COVID Curbs

China is easing its COVID-19 restrictions and it could allow goods produced there to start flowing normally again in the coming weeks. China’s lockdowns have affected an estimated 373 million people, including roughly 40% of its gross domestic product (GDP). Disrupted supply chains have affected products such as rice, oil and natural gas.

Shanghai, home to the world’s largest port and 25 million residents, has strained to unload cargo due to strict regulations that have caused shipping containers to stack up. Some Shanghai residents posted videos online to complain about needing food, even though government officials sought to block such public expressions of frustration.

Chinese authorities also drew public criticism for forcibly separating young children with COVID-19 from their parents to prioritize stopping the spread of a new, contagious subvariant of Omicron, BA.2. The variant also has been causing new infections in European nations such as Germany, the Netherlands and Switzerland.

U.S. COVID Deaths Climb Past 1-Million Mark

U.S. COVID-19 deaths crossed the 1-million mark last week and have climbed further to 1,002,726 as of May 24, according to Johns Hopkins University. Cases in the United States, as of that date, hit 83,501,455. America retains the dubious distinction as the country with the highest numbers of COVID-19 deaths and cases.

COVID-19 deaths worldwide totaled 6,280,342 on May 24, according to Johns Hopkins. Cases across the globe have climbed to 526,664,642.

Roughly 77.8% of the U.S. population, or 258,562,059, have obtained at least one dose of a COVID-19 vaccine, as of May 24, the CDC reported. Fully vaccinated people total 221,001,614, or 66.6%, of America’s population, according to the CDC. The United States also has given at least one COVID-19 booster vaccine to 102.9 million people, up about 500,000 in the past week.

New data on so-called “long-haul” COVID patients released on May 24 reported that even though some symptoms improve others may persist, according to the Northwestern Medicine Neuro COVID-19 Clinic. Most of the 52 patients monitored in the Northwestern study reported “brain fog,” numbness or tingling, headache, dizziness, blurred vision and fatigue, even 15 months after initial diagnoses of COVID-19.

The six commodities investments to buy are intended to profit from rising energy, gold and grain prices. Despite the market’s volatility, the highest inflation in 40 years, the Fed’s plan for further interest rate hikes to curb price hikes and increasing federal deficits, investors are finding profitable opportunities in energy, gold and grains.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.

 

The post Six Commodities Investments to Buy as Putin Wages War on Ukraine appeared first on Stock Investor.

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At least 19 children killed in Texas elementary school – 3 essential reads on America’s relentless gun violence

A school shooting in a small Texas town was almost as deadly as the worst such event in US history. Such shootings have increased in frequency over the…

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Friends and families gather outside the civic center after the mass school shooting on May 24, 2022 in Uvalde, Texas. Allison Dinner/AFP via Getty Images)

At least 19 children and one teacher were killed when a teenage gunman shot them at a Texas elementary school on May 24, 2022 – the latest mass shooting in a country in which such incidents have become common.

A lot remains unknown about the attack at Robb Elementary School in Uvalde, a small, predominantly Latino town in South Texas. Police have not as yet revealed a possible motive behind the attack, in which the 18-year-old went classroom to classroom dressed in body armor and carrying two military-style rifles, according to reports.

As the graph below shows, the frequency of school shootings in the U.S. has increased dramatically over the last few years.

Here are three stories from The Conversation’s archives to help fill in the recent history of mass shootings in the U.S. - and explain why the government has failed to take action on gun control, despite the carnage.

1. School shootings are at a record high

The attack at Robb Elementary School was, according to the data, the 137th school shooting to take place in the U.S. so far this year. In 2021, there were 249 school shootings – by far the worst year on record.

James Densley, of Metropolitan State University, and Hamline University’s Jillian Peterson log such incidents in a database of U.S. mass shootings. It has helped them build a profile of the typical school shooting suspect – some of which appears to apply to the suspect in the latest massacre. School shooters overwhelmingly tend to be current or former students of the school they attack. And they are “almost always” in a crisis of some sort prior to the incident, as evidenced by changes in their behavior. Suspects are also often inspired by other school shooters, which could go some way in explaining the rapid growth in such attacks in recent years.

A crowd of people in uniforms and safety vests, standing near an ambulance and empty gurney.
Emergency personnel gather near Robb Elementary School following the shooting on May 24, 2022, in Uvalde, Texas. AP Photo/Dario Lopez-Mills

Densley and Peterson write that the “overwhelming number of shootings and shooting threats” have left schools struggling to respond, resulting in a patchwork of different measures that have failed to slow the frequency of attacks across the states. The two scholars contrast this local response to school shooting in the U.S. to the national legislative action taken in countries such as the U.K., Finland and Germany, concluding: “School shootings are not inevitable. They’re preventable. But practitioners and policymakers must act quickly because each school shooting feeds the cycle for the next one, causing harm far beyond that which is measured in lives lost.”


Read more: School shootings are at a record high this year – but they can be prevented


A uniformed officer walks past a sign saying 'Welcome Robb Elementary School Bienvenidos'
An officer in uniform walks past a sign that says ‘Welcome Robb Elementary School Bienvenidos.’ Allison Dinner/AFP via Getty Images

2. More guns within reach of would-be school shooters

While some of the traits that make up a “typical” U.S. school shooter may appear in those living in other countries, too, there is one area in which the U.S. stands alone – access to guns.

The suspect in the Robb Elementary School reportedly bought his military-style rifles shortly after his 18th birthday. That he was able to do so apparently with ease is likely due to the lax gun control laws in place in Texas, where the alleged shooter lived, and in the U.S. That lack of substantive regulation has led to an ever-increasing number of firearms in the hands of U.S. residents – a trend that has only accelerated in recent years, as University of Michigan’s Patrick Carter and Marc A. Zimmerman and Rebeccah Sokol of Wayne State University note.

“Since the onset of the public health crisis, firearm sales have spiked. Many of these firearms have ended up in households with teenage children, increasing the risk of accidental or intentional injury or fatalities, or death by suicide,” they write. It also makes it easier for would-be school shooters to get their hands on firearms that left unsecured around the house.

“Most school shooters obtain the firearm from home. And the number of guns within reach of high school-age teenagers has increased during the pandemic,” they write.


Read more: Most school shooters get their guns from home – and during the pandemic, the number of firearms in households with teenagers went up


3. Why popular support for gun control isn’t enough

In response to the killings in Texas, calls for stronger gun control laws are already being made, including by President Joe Biden in his speech the night of the shooting. But as evidenced by the lack of meaningful political action after the Sandy Hook massacre, in which 20 children and six school staff members were killed, the chances of getting anything through Congress appear slim.

This is despite polling that shows that a majority of Americans actually support stronger gun laws such as a ban on assault weapons.

So why doesn’t the government do what the people want? Harry Wilson, a professor of public affairs at Roanoke College, has a three-part answer.

First, the United States is not a direct democracy and, as such, citizens do not make decisions themselves, Wilson writes. Instead, the power to make laws lies in the hands of their elected representatives in Congress. But “the composition and rules of Congress are also crucial, especially in the Senate,” he writes, “where each state has two votes. This allocation of senators disproportionately represents the interests of less populous states.”

Secondly, “polling and public opinion are not as straightforward as they seem. Focusing on only one or two poll questions can distort the public’s views regarding gun control,” says Wilson.

And finally, the influence of voters and interest groups acts as a counterbalance to popular opinion.

“Gun owners are more likely than non-owners to vote based on the issue of gun control, to have contacted an elected official about gun rights, and to have contributed money to an organization that takes a position on gun control,” writes Wilson.

Meanwhile lobbying groups representing huge membership, like the NRA, put further pressure on elected representatives. “Elected officials want votes. There is no doubt that money is essential for political campaigns, but votes, not money or polls, are what determine elections. If a group can supply votes, then it has power,” writes Wilson.


Read more: If polls say people want gun control, why doesn't Congress just pass it?


Editor’s note: This story is a roundup of articles from The Conversation’s archives.

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Moderna CEO Laments ‘Throwing 30 Million Doses In The Garbage Because Nobody Wants Them’

Moderna CEO Laments ‘Throwing 30 Million Doses In The Garbage Because Nobody Wants Them’

Moderna CEO Stéphane Bancel is complaining about…

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Moderna CEO Laments 'Throwing 30 Million Doses In The Garbage Because Nobody Wants Them'

Moderna CEO Stéphane Bancel is complaining about having to 'throw away' 30 million doses of Covid-19 vaccine because 'nobody wants them.'

"It's sad to say, I'm in the process of throwing 30 million doses in the garbage because nobody wants them. We have a big demand problem," Bancel told an audience at the World Economic Forum, adding that attempts to contact various governments to see if anyone wants to pick up the slack was a total fail.

"We right now have governments - we tried to contact ... through the embassies in Washington. Every country, and nobody wants to take them."

"The issue in many countries is that people don't want vaccines."

Watch:

Bancel's comments come days after Bloomberg reported that EU health officials want to amend contracts with Pfizer and other vaccine makers in order to reduce supplies

During a virtual meeting organized by Polish Health Minister Adam Niedzielski, governments shared a joint letter to the EU Commission which reads: "We hope that the discussion with the commission and among member states will allow flexibility in the vaccine agreements," adding "We are also counting on vaccine producers to show understanding to the exceptional challenges that Poland is facing supporting Ukraine and giving shelter to millions of Ukrainian citizens fleeing the war."

Some countries are seeking to amend so-called advanced purchase agreements signed with producers, as demand for shots wanes and budgets come under strain from the fallout of the war in Ukraine and the costs of accommodating refugees.

Adjusting deals with suppliers could grant member states the right to “re-phase, suspend or cancel altogether vaccine deliveries with short shelf life,” Estonia, Latvia and Lithuania’s prime ministers wrote in a joint letter to Commission President Ursula Von Der Leyen late last month.

Meanwhile, in a separate letter the health ministry of Bulgaria called for an "open dialog" with the commission and pharmaceutical companies, arguing that the current arrangement forces member states to "purchase quantities of vaccines they don’t need."

Tyler Durden Tue, 05/24/2022 - 21:45

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