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Futures, Global Markets Start 2022 With A Bang

Futures, Global Markets Start 2022 With A Bang

If 2021 ended with a whimper, then 2022 is starting off with a bang, as futures on all major U.S. equity indexes rise on the first trading day of the year amid light volumes with markets includin

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Futures, Global Markets Start 2022 With A Bang

If 2021 ended with a whimper, then 2022 is starting off with a bang, as futures on all major U.S. equity indexes rise on the first trading day of the year amid light volumes with markets including the U.K., Japan China, Australia and New Zealand closed for holidays. Europe’s Stoxx 600 rose 0.6%. In Hong Kong, property shares dropped and China Evergrande Group halted trading without an explanation. The dollar rose, as did bond yields and bitcoin, while oil erased earlier gains.  At 745am, emini S&P futures traded 29 points, or 0.61% higher, and rising as high as 4,790, just inches away from all time highs of 4,799.75; Dow futs were 172 points or 0.48% higher and the Nasdaq was also in the green by 29 points or 0.6%.

Investors continue to weigh the impact of the rapid spread of the omicron Covid-19 variant on the economic recovery, even as it appears less severe than earlier strains. Investors are also focusing on the policy trajectory of the Federal Reserve and other central banks into 2022, particularly as inflation continues to present a challenge.

In premarket moves, Tesla’s shares climbed 6.8% in U.S. premarket trading after the company reported record quarterly deliveries.  Alibaba ADRs dropped in premarket trading with shares listed in Hong Kong on concern that some investors may pare stakes amid data showing the conversion of company’s ADRs into Hong Kong shares has picked up pace.

And with the new year, broad, sweeping assessments are hitting the tape, such as this one from Jefferies strategist Sean Darby who wrote that last year “was simply a period of ‘risk on,’” adding that “peering into 2022, we expect volatility to rise, meaning that the return per unit of risk comes to the forefront."

European equities rose on the first day of trading in 2022 and headed for a record on bets that the global economy can weather the impact of the omicron coronavirus variant. The Stoxx Europe 600 Index rose 0.5% to 490.47, above the record closing level set in November, led by gains by automakers and chemical sector companies. Meanwhile, the Euro Stoxx 50 climbed 0.9%. U.K. markets were closed for a holiday on Monday.

European stocks had climbed 22% last year and have posted seven consecutive quarters of gains -- the longest winning streak since 1998. Most strategists expect this year’s returns to be more muted, with an average target of 506 index points for the Stoxx 600. Among individual movers, Vestas Wind Systems A/S dropped after the company announced details of its fourth-quarter order intake. Sydbank AS said the order tally was “weak.”

Asian stocks were mixed on their first trading session of 2022, with Hong Kong’s benchmark gauge dropping on concerns over the spread of the omicron variant and the financial health of China’s real estate sector.    The MSCI Asia Pacific Index was little changed after rising as much as 0.3%, weighed down by consumer discretionary and health-care firms. Hong Kong’s Hang Seng Index slid 0.5%, with Chinese developers tumbling on media reports that China Evergrande Group has been ordered to tear down apartment blocks in Hainan province. Read: Property Stocks Sink After Demolition Order: Evergrande Update Shares in Hong Kong also dropped amid a fresh wave of infections tied to an outbreak at a local restaurant. The city administered more than 7,000 initial injections on both Saturday and Sunday, the most since the end of November. “Any further restrictions to curb virus spreads remain a key risk to watch, and more clarity will be sought from economic data over the coming weeks to validate the resilience of the economy” of the U.S., said Jun Rong Yeap, a strategist at IG Asia Pte in Singapore. Malaysia’s stock index was the region’s worst performer, dropping 1.2%, while South Korea and Taiwan equities rose.

Markets in mainland China, Japan, Australia and New Zealand were closed for holidays. Asia’s stock benchmark capped an annual loss of 3.4% in 2021 in its worst performance since 2018, lagging behind the U.S. and Europe.

India’s key equity gauges posted their best gain in nearly four weeks, led by a rally in banking and software stocks as investors shift focus to the upcoming corporate earnings season for the latest quarter.  The S&P BSE Sensex rose 1.6% to 59,183.22 in Mumbai, the most since Dec. 8. The benchmark also posted its biggest advance on the first trading day of a new year since 2009. The NSE Nifty 50 Index gained by a similar magnitude on Monday. All of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by gauges of banking and financial companies. The corporate earnings season for the December quarter will start with Infosys and Tata Consultancy Services announcing results on Jan. 12. Investors will be focusing on the software exporters’ commentary on demand amid rising cost pressures. HDFC Bank contributed the most to the index gain, increasing 2.7%. Out of 30 shares in the Sensex index, 25 rose and five fell

With much of Europe including the U.K. on bank holiday, Treasuries reopen around 7am ET with yields cheaper by 2bp to 4bp across the curve and losses led by belly.  U.S. 10-year yields around 1.535%, cheaper by ~2bp vs Friday’s close, while 5-year yields are higher by more than 3bp; 5s30s is flatter by ~1bp. Gains for most European stock benchmarks add to cheapening pressure on yields, as S&P 500 futures trade above Friday’s high.  Ahead of the cash open Treasury futures edged lower during Asia session European morning on light volume as S&P 500 futures advanced toward last week’s record highs.

In FX, the Bloomberg Dollar Spot Index inched up and the dollar traded mixed against its Group-of-10 peers in thin trading, with Japan, Australia and New Zealand markets shut for holidays. The Canadian dollar was the worst performer while the New Zealand dollar climbed against all of its Group-of-10 peers. The euro slipped to trade around $1.1350 and Bund yields rose, led by shorter maturities, while European peripheral spreads narrowed.

In commodities, in early trading oil rose towards $79 a barrel on Monday supported by tight supply and hopes of further demand recovery in 2022 spurred in part by a view that the Omicron coronavirus variant is unlikely to significantly dampen the outlook. Libyan oil output will be cut by 200,000 barrels per day for a week due to pipeline maintenance. OPEC and its allies, known as OPEC+, are expected to stick to a plan to raise output gradually at a meeting on Tuesday.

Brent crude rose 95 cents, or 1.2%, to $78.73 a barrel. West Texas Intermediate crude added $1.03 or 1.4%, to $76.24. Last year, Brent rose 50%, spurred by the global recovery from the COVID-19 pandemic and OPEC+ supply cuts, even as infections reached record highs worldwide.

"Infection rates are on the rise globally, restrictions are being introduced in several countries, the air travel sector, amongst others, is suffering, yet investors' optimism is tangible," said Tamas Varga of oil broker PVM. "It seems that the current strain produces less severe symptoms than its predecessors, which might just help us to struggle through the fourth wave of the pandemic."

Some see more gains in 20222: "Crude and oil product prices should benefit from oil demand moving above 2019 levels," said a report from UBS analysts including Giovanni Staunovo. "We expect Brent to rise into a $80–90 range in 2022."

Key U.S. events this week include minutes of the December FOMC meeting and non-farm payrolls; on deck today is the Flash Markit Manufacturing PMI read for December as well as the November construction spending data.

Market Snapshot

  • S&P 500 futures up 0.5% to 4,781.25
  • STOXX Europe 600 up 0.5% to 490.21
  • MXAP little changed at 193.17
  • MXAPJ little changed at 630.24
  • Nikkei down 0.4% to 28,791.71
  • Topix down 0.3% to 1,992.33
  • Hang Seng Index down 0.5% to 23,274.75
  • Shanghai Composite up 0.6% to 3,639.78
  • Sensex up 1.6% to 59,208.86
  • Australia S&P/ASX 200 down 0.9% to 7,444.64
  • Kospi up 0.4% to 2,988.77
  • Brent futures up 1.6% to $78.99/bbl
  • Gold spot down 0.1% to $1,827.19
  • U.S. Dollar Index up 0.1% to 95.80
  • German 10Y yield little changed at -0.18%
  • Brent futures up 1.4% to $78.83/bbl

Top Overnight News from Bloomberg

  • Senate Majority Leader Chuck Schumer is vowing to bring a revised version of the $2 trillion tax, climate and spending package to the floor for a vote as soon as this month, despite unresolved differences within his party that have stalled the legislation
  • President Joe Biden reaffirmed U.S. support for Ukraine’s sovereignty on Sunday in a call with the country’s president, Volodymyr Zelenskiy
  • Germany’s Finance Minister Christian Lindner said the new government is working on tax relief measures of more than 30 billion euros ($34 billion)
  • Turkish inflation surged to a 19-year high in December, propelled by a slump in the lira and President Recep Tayyip Erdogan’s push for cheaper borrowing
  • Asia’s factory activity continued its expansion in December, lifted by resilient demand and easing supply-chain bottlenecks as the omicron strain begins to spread in the region

Top Asian News

  • North Korean Defector Likely Crossed DMZ Twice, Seoul Says
  • Property Stocks Sink After Demolition Order: Evergrande Update
  • Alibaba Drops on Concern Over Conversion of ADRs to H.K. Shares
  • Hong Kong’s Stock Benchmark Marks Its Worst Start in Three Years
  • Star China Stock Fund Manager Suffers a Disastrous 2021
  • Tokyo Finds 103 New Covid Cases, Most in Nearly Three Months

Top European News

  • Nordea Analysts Who Wrote Retracted Report to Leave Bank
  • Iveco Valued at $4.4 Billion in Spinoff to Navigate Truck Shift
  • Germany Heads Toward New Pandemic Measures as Omicron Threatens

US Event Calendar

  • 9:45am: Dec. Markit US Manufacturing PMI, est. 57.7, prior 57.8
  • 10am: Nov. Construction Spending MoM, est. 0.7%, prior 0.2%
Tyler Durden Mon, 01/03/2022 - 08:02

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Bitcoin Back Below $30,000 After A Record 8 Weeks In The Red

Bitcoin decoupled from equity markets to the downside on Monday after ending last week as the eighth consecutive weekly loss.

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Bitcoin decoupled from equity markets to the downside on Monday after ending last week as the eighth consecutive weekly loss.

Bitcoin has failed to hold the $30,000 level on Monday after scoring its eighth consecutive week in the red for the first time ever.

During these eight weeks, which began in late March and ended on Sunday, bitcoin has lost over 35% of its U.S. dollar value according to TradingView data. Before the beginning of the losing streak, BTC was trading at around $46,800.

Bitcoin has scored losses for eight consecutive weeks for the first time in its history and it is starting the ninth with yet another red candle. Image source: TradingView.

Bitcoin is changing hands slightly below $30,000 at the time of writing. The peer-to-peer currency climbed as high as $30,600 earlier on Monday to trade at around $29,400 as the trading in equity markets nears its end in New York.

While bitcoin turns south, major U.S. stock indices have been in the green. The Nasdaq, which is said to be highly correlated with bitcoin, decoupled from the digital money along with the S&P 500 to denote modest gains near market close on Monday, per TradingView data.

While bitcoin, Nasdaq and S&P 500 were trading in tandem for some time on Monday, the P2P currency saw a sharp sell-off decouple it from the two indices and take it to a more than 3% loss for the day. Image source: TradingView.

A Tough Year For Bitcoin

Despite making two new all-time highs in 2021, bitcoin already erased nearly all of those gains in 2022.

Bitcoin’s choppy trading year so far can be partly attributed to a broader sentiment of economic uncertainty as the Federal Reserve tightens the U.S. economy, withdrawing liquidity from the market after almost two years of quantitative easing.

The central bank has already raised its basic interest rates two times this year, the last of which was double the magnitude of the previous one and represented the largest hike in two decades: While the Fed increased interest rates by 0.25% in March, it raised them by 0.50% earlier this month.

Image source: Federal Reserve Economic Data (FRED).

When the Fed raises or lowers interest rates through its Federal Open Markets Committee (FOMC), what it is actually doing is setting a target range. The graph above depicts the lower and upper bounds of that target range in red and blue, respectively.

While the U.S. central bank system sets the target, it cannot mandate that commercial banks use it — rather, it serves as a recommendation. Therefore, what banks end up using for lending and borrowing excess cash between them overnight is called the effective rate. This is shown by the green line in the graph above.

The Fed previously hiked interest rates consistently from 2016 to 2019, until plunging it near zero in the aftermath of the COVID-19 pandemic outbreak, as noted in the graph.

Bitcoin’s higher sensitivity to liquidity and therefore interest rates can be explained by a greater participation of institutional investors in the market, whose allocations are based on the availability of capital and broader economic conditions, Morgan Stanley reportedly said.

Therefore, while Bitcoin was able to sustain a bull market in the midst of the Fed increasing interest rates in 2017, raising nearly 2,000% from January to December that year, the odds aren’t on the side of the bulls this year.

For two weeks, bitcoin has now closed below a level of weekly support it formed over a year ago and had respected since, indicating it might be turning into a zone of resistance. Image source: TradingView.

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Here’s What Will Be Open And Closed on Memorial Day

Rite Aid, Best Buy and Pizza Hut will be open. Not so much with the Stock Market, though.

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Rite Aid, Best Buy and Pizza Hut will be open. Not so much with the Stock Market, though.

Just in case you forgot to remember, Memorial Day will take place on Monday, May 30th.

Memorial Day is one of the most American of all holidays, second only to the Fourth of July. 

The holiday was created to honor people who served in the United States military. 

The first Memorial Day took place in 1868, though it is a holiday with a surprisingly murky history. 

The U.S. Department of Veterans' Affairs says that 25 different cities and towns have claimed to have invented the holiday. 

Still, Memorial Day weekend has long served as the unofficial kick off of summer, with friends gather in backyards and public parks to hold BBQs and flout open container laws.

As with many federal holidays, it can be a bit unclear what business and government agencies will be open. 

Maybe you’re the type that always needs to buy some last minute potato dip at the grocery store, or if you’d prefer to go to a restaurant rather than deal with all that sunshine.

Either way, we’ve put together a list of what definitely won’t be open on Memorial Day, and what likely will be.

There is also the caveat that some chain restaurants and stores give their franchises the flexibility to set their own hours and days of operation.

What Will Be Open On Memorial Day?

Public Parks And Beaches

It just wouldn’t be Memorial Day without people grilling in the park and on the beach. 

While some public parks closed down during the pandemic, that is thankfully behind us. 

Some parks might close on the early side, but you should be all set for an afternoon picnic.

Movie Theaters

Memorial Day is the unofficial start of summer, as well as the unofficial start of summer movie season. If you’re curious about checking out “Top Gun: Maverick,” most theaters will be open.

Subways and Buses

While a lot of government employees get the day off, subway and buses will continue to run, though in reduced capacity in some cities. 

Rite Aid, CVS and Walgreens

Chain drug stores seemingly never take the day off, just in case you really need to buy some shampoo from Rite Aid  (RAD) - Get Rite Aid Corporation Report, CVS  (CVS) - Get CVS Health Corporation Report or Walgreens  (WBA) - Get Walgreens Boots Alliance Inc Report

Kohl’s, Lowe’s, Big Lots, Sam’s Club, Walmart, Target and Home Depot

All the major big box stores will be open on Memorial Day, though some locations might close early.

Shopping Malls

Nearly all shopping malls will be open on Memorial Day, and many of them will be having sales.

Trader Joe’s, Publix, Walmart, Wegmans 

Most chain grocery stores like Walmart  (WMT) - Get Walmart Inc. Report and Trader Joe's will be open, though some might close on the early side. 

Barnes and Noble

Need to find a bathroom? Most Barnes and Noble  (BKS) - Get Barnes & Noble, Inc. Report book stores will be open on Memorial Day weekend.

Starbucks and Dunkin

Do you need coffee before the day drinking commences? Both Starbuck  (SBUX) - Get Starbucks Corporation Report and Dunkin  (DNKN) - Get Dunkin' Brands Group, Inc. Report will have you covered.

The Apple Store

If you want to spend your day off at the Apple Store  (APPL) , that is an option available to you, as most locations will be open that day.

Fast Food

Not in the mood to make your own hamburger? More of a taco kind of person? 

Take heart: all the major fast food chains, including McDonald’s  (MCD) - Get McDonald's Corporation Report, Wendy’s  (WEN) - Get Wendy's Company Report, Taco Bell  (YUM) - Get Yum! Brands, Inc. Report, Subway, Chipotle  (CMG) - Get Chipotle Mexican Grill, Inc. Report and Pizza Hut will all be open. 

Chain Restaurants

Are you a fan of air-conditioning and having other people cook for you? 

Well as an American, you are entitled to go eat at Ruth’s Chris Steakhouse, The Cheesecake Factory  (CAKE) - Get Cheesecake Factory Incorporated Report, Bonefish Grill, Applebee's, Chili's or Olive Garden  (DRI) - Get Darden Restaurants, Inc. Report on Memorial Day.

Most chain restaurants will be open for takeout, delivery and dining in. Many will offer discounts to service members and veterans. 

Total Wine

If it’s your job to bring a six-pack to the BBQ, Total Wine will be open on Memorial Day, as will the majority of locally-owned liquor stores.

What Will Be Closed On Memorial Day?

The Federal Government

Memorial Day is a federal holiday, so federal courts and government offices will be closed. 

The State Government

Most non-essential state government offices will be closed, including the Post Office and most courthouses. 

Banks

Some local banks may choose to remain open for part of the day. But generally, national banks such as Bank of America  (BAC) - Get Bank of America Corp Report, Capital One  (COF) - Get Capital One Financial Corporation Report, Chase  (CCF) - Get Chase Corporation Report and PNC  (PNC) - Get PNC Financial Services Group, Inc. Report will be closed.

The Stock Market

The New York Stock Exchange, Dow Jones, NASDAQ will all be closed on Memorial Day. Go eat some hotdogs, day traders.

Schools

(Alice Cooper Voice) School’s is out for the summer! 

Though in some cities, schools may be open until June, especially if it is trying to make up for time lost because of covid-19. 

But even then, students will have Memorial Day off.

The Department of Motor Vehicles

The DMV is a state agency, and not a federal one. They are generally closed on Memorial Day in most cities.

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Top Gas ETFs to Buy in 2022 with Soaring Gas Prices

To grab your piece of the rising energy costs, below are the top gas ETFs to buy in 2022. Let’s get started.
The post Top Gas ETFs to Buy in 2022 with…

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All anyone wants to talk about anymore is the soaring price of gasoline. After all, the cost to fill your tank has never been higher. With industry profits piling up, get your share with the best gas ETFs to buy before the second half (2H) of 2022.

First, the pandemic severely strained the industry as demand fell off from global lockdowns. As a result, over 100 oil and gas companies went out of business.

Then, as the economy reopened and demand started catching up, Russia’s invasion of Ukraine stoked a fire under an already strained market. So, demand is outpacing supply as nations look elsewhere to fill the supply gap left by Russia’s massive presence in the commodity market.

Nonetheless, gasoline is essential to keep the economy running smoothly. You need gas for fuel to get to work and back. Not to mention, businesses rely on gas for transporting goods, which influences prices. To grab your piece of the rising energy costs, below are the top gas ETFs to buy in 2H of 2022.

What Are the Best Gas ETFs to Buy Right Now?

The top gas ETFs to buy are outperforming the market right now as soaring energy costs boost profits. For example, Natural Gas Futures (NG1) are up over 120% YTD and almost 200% over the past year.

Meanwhile, all major indexes are down significantly this year, with the Nasdaq 100 Index (NDX) slipping almost 30% YTD. On top of this, researchers at J.P. Morgan predict gas prices could remain elevated “even as far back as 2024” as supply disruptions will be hard to overcome.

No. 3 Barclays iPath Series B Bloomberg Natural Gas Subindex (NYSE: GAZ)

  • YTD Return: 124%
  • Expense Ratio: 0.45%

Although the Natural Gas Subindex is set up as an Exchange Traded Note (ETN), it can help you gain exposure to the surging gas market. An ETN differs from an ETF in that the fund consists of unsecured debt notes rather than holding a group of stocks.

The GAZ ETN seeks to replicate the returns of the Bloomberg Natural Gas Subindex by investing in futures contracts. That said, the ETN does not pay a dividend. Therefore, GAZ is best as a short-term tool.

Since the ETN is not tied to any companies, only futures, it can carry additional risks. For example, investors are left with little or nothing if the issuer defaults. In comparison, ETFs hold several companies, helping to diversify and spread risk.

At the same time, the ETN moves alongside the price of natural gas contacts. So, if you are looking for direct exposure to gas prices, the GAZ ETN may be for you.

Keep reading for more on gas ETFs to buy.

No. 2 United States Natural Gas Fund (NYSE: UNG)

  • YTD Return: 128%
  • Expense Ratio: 1.11%

The United States Natural Gas Fund is another way investors can invest in natural gas prices without physically trading futures. For one thing, UNG is a commodity pool. Or in other words, it pools investor money to invest in futures, swaps and forward contracts.

The fund aims to give investors access to daily changes in natural gas deliveries at the Henry Hub, a distribution center. As a result, the daily changes resemble changes in natural gas prices.

However, since management is consistently active, it will cost more to invest. Though the higher expense is not slowing UNGs momentum, up close to 130% YTD. Likewise, UNG is more geared for short-term trading as it holds near-month contracts.

No. 1 United States 12 Month Natural Gas Fund (NYSE: UNL)

  • YTD Return: 113%
  • Expense Ratio: 0.90%

Similarly, the United States 12 Month Natural Gas Fund is a commodity pool targeting the price of natural gas. But, UNL differs in that it holds futures contracts for the nearest 12 months.

In other words, UNL buffers itself from short-term movements. As a result, investors can gain exposure to changes in natural gas prices with less risk than short-term contracts.

If you wish to capture your piece of the soaring energy prices but want less risk of contango (higher spot price), UNL may be a better choice.

Best Leveraged Gas ETFs to Buy

To maximize your returns, you can opt for a leveraged ETF to multiply the changes in an underlying index. For example, the ProShares Ultra Bloomberg Natural Gas ETF (NYSE: BOIL) targets to return 2X the daily performance of a natural gas index.

As a result, investors can earn double the daily returns of natural gas changes. With this in mind, the BOIL ETF is up 322% in 2022 alone.

However, there is a significant risk of investing in leveraged ETFs. Though you can earn double the returns, you can also double your losses. Investing in these funds is only recommended if you are comfortable with the significant fluctuations.

Best Inverse (Short) Gas ETFs to Buy

For those that think gas prices will ease soon, finding an inverse gas ETF to buy in 2022 may be for you. Or, if you have earned a pretty penny on gas and oil stocks already, you may want to protect your downside.

Nevertheless, the ProShares Ultrashort Bloomberg Natural Gas ETF (NYSE: KOLD) is a way to earn (-2X) the daily performance of a natural gas index.

In comparison, the KOLD ETF is down 90% YTD while natural gas prices soar. So, it gives you an idea of how quickly earnings can dry up in these types of investments.

What Gas ETFs to Buy for Passive Investors

The funds listed above are the best gas ETFs to buy for capturing the explosive rise in gas prices. But, for passive investors, these may not be the best option. For one thing, the gas and oil market can change rapidly.

During the pandemic, oil prices plunged below $0 for the first time. Then, two years later, we are looking at record high prices of over $130. As a result, oil and gas ETFs are having wild swings.

Nonetheless, research from J.P. Morgan shows the cost burden of higher gas prices is around $7 billion per month. As a result, consumers have less to spend in other areas of the economy. We already see the evidence with companies like Walmart (NYSE: WMT) and Target (NYSE: TGT) missing earnings estimates while blaming transportation costs.

In short, profits are being pulled from other parts of the economy to compensate for the lack of supply and rising demand. With this in mind, the energy sector looks ready to continue its run.

The Energy Select Sector SPDR Fund (NYSE: XLE) is an excellent option for passive investors looking to gain exposure with less risk. The XLE ETF is up 48% YTD while investing in top gas and oil companies like Exxon Mobile (NYSE: XOM). No matter your investing style, with the price at the pump holding steady, these are the top gas ETFs to buy this year to get your share.

The post Top Gas ETFs to Buy in 2022 with Soaring Gas Prices appeared first on Investment U.

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