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Germany’s Institutional Funds Are Able To Invest 20% Of Portfolio In Crypto

Germany’s institutional funds are now able to invest 20% of their portfolios in crypto like bitcoin as are reading more in our latest cryptocurrency news. Germany’s institutional funds will be able to allocate up to 20% of their portfolios and according..

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Germany’s institutional funds are now able to invest 20% of their portfolios in crypto like bitcoin as are reading more in our latest cryptocurrency news.

Germany’s institutional funds will be able to allocate up to 20% of their portfolios and according to the new law coming into effect a week later, some German investment funds will be able to hold up their portfolio in digital assets which comes amid growing demand from various institutions to the industry. Spezialfonds- the German investment funds with fixed rules will be able to allocate about 20% of their holdings in digital assets and those funds manage around 1.8 trillion euros or $2.1 trillion and can be accessed by local institutional investors like pension companies or insurance companies.  Tim Kreutzmann is an expert on crypto at BVI, Germany’s fund industry body pointing out to the majority of the funds will prefer to start small at its beginning:

“Most funds will initially stay below the 20% mark. On the one hand, institutional investors such as insurers have strict regulatory requirements for their investment strategies. And on the other hand, they must also want to invest in crypto.”

Even though the initiative came after the rise in demand from numerous German institutions towards crypto products, Kamil Kaczmarski who is an executive at the management company Oliver Wyman LLC who said that many local investors are still skeptical because of the infamous volatility. He argued that the trend will remain for the next five years. Deutsche Bank’s AG asset manager DWS Group and DekaBank both showed interest in investing in crypto but so far haven’t made any decisions.

The German multinational financial institution Deutsche Bank showed support for virtual currencies and back then, its CIO- Christian Nolting outlined the growth of the asset experienced in the past few years after the COVID pandemic but he believes cryptos are here for the long haul:

“I think that by now, it is clear that cryptocurrencies (in some form) are here to stay, but I would argue that they are far from a mainstream asset class.nA widespread introduction of CBDCs accompanied by higher regulation of cryptocurrencies could create a more challenging environment for crypto assets as some of their advantages compared to traditional financial assets would fade in the longer term.”

Crypto Nears $2 Trillion, btc, bitcoin, dollar, filecoin

DB’s executive compared BTC to gold saying that the main cryptocurrency has all the needed qualities of precious metal and stated that one day BTC could ultimately replace gold as a store of value.

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Futures Bounce On Evergrande Reprieve With Fed Looming

Futures Bounce On Evergrande Reprieve With Fed Looming

Despite today’s looming hawkish FOMC meeting in which Powell is widely expected to unveil that tapering is set to begin as soon as November and where the Fed’s dot plot may signal one…

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Futures Bounce On Evergrande Reprieve With Fed Looming

Despite today's looming hawkish FOMC meeting in which Powell is widely expected to unveil that tapering is set to begin as soon as November and where the Fed's dot plot may signal one rate hike in 2022, futures climbed as investor concerns over China's Evergrande eased after the property developer negotiated a domestic bond payment deal. Commodities rallied while the dollar was steady.

Contracts on the S&P 500 and Nasdaq 100 flipped from losses to gains as China’s central bank boosted liquidity when it injected a gross 120BN in yuan, the most since January...

... and investors mulled a vaguely-worded statement from the troubled developer about an interest payment.  S&P 500 E-minis were up 23.0 points, or 0.53%, at 7:30 a.m. ET. Dow E-minis were up 199 points, or 0.60%, and Nasdaq 100 E-minis were up 44.00 points, or 0.29%.

Among individual stocks, Fedex fell 5.8% after the delivery company cut its profit outlook on higher costs and stalled growth in shipments. Morgan Stanley says it sees the company’s 1Q issues getting “tougher from here.” Commodity-linked oil and metal stocks led gains in premarket trade, while a slight rise in Treasury yields supported major banks. However, most sectors were nursing steep losses in recent sessions. Here are some of the biggest U.S. movers:

  • Adobe (ADBE US) down 3.1% after 3Q update disappointed the high expectations of investors, though the broader picture still looks solid, Morgan Stanley said in a note
  • Freeport McMoRan (FCX US), Cleveland- Cliffs (CLF US), Alcoa (AA US) and U.S. Steel (X US) up 2%-3% premarket, following the path of global peers as iron ore prices in China rallied
  • Aethlon Medical (AEMD US) and Exela Technologies (XELAU US) advance along with other retail traders’ favorites in the U.S. premarket session. Aethlon jumps 21%; Exela up 8.3%
  • Other so-called meme stocks also rise: ContextLogic +1%; Clover Health +0.9%; Naked Brand +0.9%; AMC +0.5%
  • ReWalk Robotics slumps 18% in U.S. premarket trading, a day after nearly doubling in value
  • Stitch Fix (SFIX US) rises 15.7% in light volume after the personal styling company’s 4Q profit and sales blew past analysts’ expectations
  • Hyatt Hotels (H US) seen opening lower after the company launches a seven-million-share stock offering
  • Summit Therapeutics (SMMT US) shares fell as much as 17% in Tuesday extended trading after it said the FDA doesn’t agree with the change to the primary endpoint that has been implemented in the ongoing Phase III Ri-CoDIFy studies when combining the studies
  • Marin Software (MRIN US) surged more than 75% Tuesday postmarket after signing a new revenue-sharing agreement with Google to develop its enterprise technology platforms and software products

The S&P 500 had fallen for 10 of the past 12 sessions since hitting a record high, as fears of an Evergrande default exacerbated seasonally weak trends and saw investors pull out of stocks trading at lofty valuations. The Nasdaq fell the least among its peers in recent sessions, as investors pivoted back into big technology names that had proven resilient through the pandemic.

Focus now turns to the Fed's decision, due at 2 p.m. ET where officials are expected to signal a start to scaling down monthly bond purchases (see our preview here).  The Fed meeting comes after a period of market volatility stoked by Evergrande’s woes. China’s wider property-sector curbs are also feeding into concerns about a slowdown in the economic recovery from the pandemic.

“Chair Jerome Powell could hint at the tapering approaching shortly,” said Sébastien Barbé, a strategist at Credit Agricole CIB. “However, given the current uncertainty factors (China property market, Covid, pace of global slowdown), the Fed should remain cautious when it comes to withdrawing liquidity support.”

Meanwhile, confirming what Ray Dalio said that the taper will just bring more QE, Governing Council member Madis Muller said the  European Central Bank may boost its regular asset purchases once the pandemic-era emergency stimulus comes to an end.

“Dovish signals could unwind some of the greenback’s gains while offering relief to stock markets,” Han Tan, chief market analyst at Exinity Group, wrote in emailed comments. A “hawkish shift would jolt markets, potentially pushing Treasury yields and the dollar past the upper bound of recent ranges, while gold and equities would sell off hunting down the next levels of support.”

China avoided a major selloff as trading resumed following a holiday, after the country’s central bank boosted its injection of short-term cash into the financial system. MSCI’s Asia-Pacific index declined for a third day, dragged lower by Japan.

Stocks were also higher in Europe. Basic resources - which bounced from a seven month low - and energy were among the leading gainers in the Stoxx Europe 600 index as commodity prices steadied after Beijing moved to contain fears of a spiraling debt crisis. Entain Plc rose more than 7%, extending Tuesday’s gain as it confirmed it received a takeover proposal from DraftKings Inc. Peer Flutter Entertainment Plc climbed after settling a legal dispute.  Here are some of the biggest European movers today:

  • Entain shares jump as much as 11% after DraftKings Inc. offered to acquire the U.K. gambling company for about $22.4 billion.
  • Vivendi rises as much as 3.1% in Paris, after Tuesday’s spinoff of Universal Music Group.
  • Legrand climbs as much as 2.1% after Exane BNP Paribas upgrades to outperform and raises PT to a Street-high of EU135.
  • Orpea shares falls as much as 2.9%, after delivering 1H results that Jefferies (buy) says were a “touch” below consensus.
  • Bechtle slides as much as 5.1% after Metzler downgrades to hold from buy, saying persistent supply chain problems seem to be weighing on growth.
  • Sopra Steria drops as much as 4.1% after Stifel initiates coverage with a sell, citing caution on company’s M&A strategy

Despite the Evergrande announcement, Asian stocks headed for their longest losing streak in more than a month amid continued China-related concerns, with traders also eying policy decisions from major central banks. The MSCI Asia Pacific Index dropped as much as 0.7% in its third day of declines, with TSMC and Keyence the biggest drags. China’s CSI 300 tumbled as much as 1.9% as the local market reopened following a two-day holiday. However, the gauge came off lows after an Evergrande unit said it will make a bond interest payment and as China’s central bank boosted liquidity.  Taiwan’s equity benchmark led losses in Asia on Wednesday, dragged by TSMC after a two-day holiday, while markets in Hong Kong and South Korea were closed. Key stock gauges in Australia, Indonesia and Vietnam rose

“A liquidity injection from the People’s Bank of China accompanied the Evergrande announcement, which only served to bolster sentiment further,” according to DailyFX’s Thomas Westwater and Daniel Dubrovsky. “For now, it appears that market-wide contagion risk linked to a potential Evergrande collapse is off the table.”

Japanese equities fell for a second day amid global concern over China’s real-estate sector, as the Bank of Japan held its key stimulus tools in place while flagging pressures on the economy. Electronics makers were the biggest drag on the Topix, which declined 1%. Daikin and Fanuc were the largest contributors to a 0.7% loss in the Nikkei 225. The BOJ had been expected to maintain its policy levers ahead of next week’s key ruling party election. Traders are keenly awaiting the Federal Reserve’s decision due later for clues on the U.S. central banks plan for tapering stimulus. “Markets for some time have been convinced that the BOJ has reached the end of the line on normalization and will remain in a holding pattern on policy until at least April 2023 when Governor Kuroda is scheduled to leave,” UOB economist Alvin Liew wrote in a note. “Attention for the BOJ will now likely shift to dealing with the long-term climate change issues.”

In the despotic lockdown regime that is Australia, the S&P/ASX 200 index rose 0.3% to close at 7,296.90, reversing an early decline in a rally led by mining and energy stocks. Banks closed lower for the fourth day in a row. Champion Iron was among the top performers after it was upgraded at Citi. IAG was among the worst performers after an earthquake caused damage to buildings in Melbourne. In New Zealand, the S&P/NZX 50 index rose 0.3% to 13,215.80

In FX, commodity currencies rallied as concerns about China Evergrande Group’s debt troubles eased as China’s central bank boosted liquidity and investors reviewed a statement from the troubled developer about an interest payment. Overnight implied volatility on the pound climbed to the highest since March ahead of Bank of England’s meeting on Thursday. The British pound weakened after Business Secretary Kwasi Kwarteng warnedthat people should prepare for longer-term high energy prices amid a natural-gas shortage that sent power costs soaring. Several U.K. power firms have stopped taking in new clients as small energy suppliers struggle to meet their previous commitments to sell supplies at lower prices.

Overnight volatility in the euro rises above 10% for the first time since July ahead of the Federal Reserve’s monetary policy decision announcement. The Aussie jumped as much as 0.5% as iron-ore prices rebounded. Spot surged through option-related selling at 0.7240 before topping out near 0.7265 strikes expiring Wednesday, according to Asia- based FX traders.  Elsewhere, the yen weakened and commodity-linked currencies such as the Australian dollar pushed higher.

In rates, the dollar weakened against most of its Group-of-10 peers. Treasury futures were under modest pressure in early U.S. trading, leaving yields cheaper by ~1.5bp from belly to long-end of the curve. The 10-year yield was at ~1.336% steepening the 2s10s curve by ~1bp as the front-end was little changed. Improved risk appetite weighed; with stock futures have recovering much of Tuesday’s losses as Evergrande concerns subside. Focal point for Wednesday’s session is FOMC rate decision at 2pm ET.   FOMC is expected to suggest it will start scaling back asset purchases later this year, while its quarterly summary of economic projections reveals policy makers’ expectations for the fed funds target in coming years in the dot-plot update; eurodollar positions have emerged recently that anticipate a hawkish shift

Bitcoin dropped briefly below $40,000 for the first time since August amid rising criticism from regulators, before rallying as the mood in global markets improved.

In commodities, Iron ore halted its collapse and metals steadied. Oil advanced for a second day. Bitcoin slid below $40,000 for the first time since early August before rebounding back above $42,000.  

To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September.

Market Snapshot

  • S&P 500 futures up 0.4% to 4,362.25
  • STOXX Europe 600 up 0.5% to 461.19
  • MXAP down 0.7% to 199.29
  • MXAPJ down 0.4% to 638.39
  • Nikkei down 0.7% to 29,639.40
  • Topix down 1.0% to 2,043.55
  • Hang Seng Index up 0.5% to 24,221.54
  • Shanghai Composite up 0.4% to 3,628.49
  • Sensex little changed at 59,046.84
  • Australia S&P/ASX 200 up 0.3% to 7,296.94
  • Kospi up 0.3% to 3,140.51
  • Brent Futures up 1.5% to $75.47/bbl
  • Gold spot up 0.0% to $1,775.15
  • U.S. Dollar Index little changed at 93.26
  • German 10Y yield rose 0.6 bps to -0.319%
  • Euro little changed at $1.1725

Top Overnight News from Bloomberg

  • What would it take to knock the U.S. recovery off course and send Federal Reserve policy makers back to the drawing board? Not much — and there are plenty of candidates to deliver the blow
  • The European Central Bank will discuss boosting its regular asset purchases once the pandemic-era emergency stimulus comes to an end, but any such increase is uncertain, Governing Council member Madis Muller said
  • Investors seeking hints about how Beijing plans to deal with China Evergrande Group’s debt crisis are training their cross hairs on the central bank’s liquidity management

A quick look at global markets courtesy of Newsquawk

Asian equity markets traded mixed as caution lingered ahead of upcoming risk events including the FOMC, with participants also digesting the latest Evergrande developments and China’s return to the market from the Mid-Autumn Festival. ASX 200 (+0.3%) was positive with the index led higher by the energy sector after a rebound in oil prices and as tech also outperformed, but with gains capped by weakness in the largest-weighted financials sector including Westpac which was forced to scrap the sale of its Pacific businesses after failing to secure regulatory approval. Nikkei 225 (-0.7%) was subdued amid the lack of fireworks from the BoJ announcement to keep policy settings unchanged and ahead of the upcoming holiday closure with the index only briefly supported by favourable currency outflows. Shanghai Comp. (+0.4%) was initially pressured on return from the long-weekend and with Hong Kong markets closed, but pared losses with risk appetite supported by news that Evergrande’s main unit Hengda Real Estate will make coupon payments due tomorrow, although other sources noted this is referring to the onshore bond payments valued around USD 36mln and that there was no mention of the offshore bond payments valued at USD 83.5mln which are also due tomorrow. Meanwhile, the PBoC facilitated liquidity through a CNY 120bln injection and provided no surprises in keeping its 1-year and 5-year Loan Prime Rates unchanged for the 17th consecutive month at 3.85% and 4.65%, respectively. Finally, 10yr JGBs were flat amid the absence of any major surprises from the BoJ policy announcement and following the choppy trade in T-notes which were briefly pressured in a knee-jerk reaction to the news that Evergrande’s unit will satisfy its coupon obligations tomorrow, but then faded most of the losses as cautiousness prevailed.

Top Asian News

  • Gold Steady as Traders Await Outcome of Fed Policy Meeting
  • Evergrande Filing on Yuan Bond Interest Leaves Analysts Guessing
  • Singapore Category E COE Price Rises to Highest Since April 2014
  • Asian Stocks Fall for Third Day as Focus Turns to Central Banks

European equities (Stoxx 600 +0.5%) trade on a firmer footing in the wake of an encouraging APAC handover. Focus overnight was on the return of Chinese participants from the Mid-Autumn Festival and news that Evergrande’s main unit, Hengda Real Estate will make coupon payments due tomorrow; however, we await indication as to whether they will meet Thursday’s offshore payment deadline as well. Furthermore, the PBoC facilitated liquidity through a CNY 120bln injection whilst keeping its 1-year and 5-year Loan Prime Rates unchanged (as expected). Note, despite gaining yesterday and today, thus far, the Stoxx 600 is still lower to the tune of 0.7% on the week. Stateside, futures are also trading on a firmer footing ahead of today’s FOMC policy announcement, at which, market participants will be eyeing any clues for when the taper will begin and digesting the latest dot plot forecasts. Furthermore, the US House voted to pass the bill to fund the government through to December 3rd and suspend the debt limit to end-2022, although this will likely be blocked by Senate Republicans. Back to Europe, sectors are mostly firmer with outperformance in Basic Resources and Oil & Gas amid upside in the metals and energy complex. Elsewhere, Travel & Leisure is faring well amid further upside in Entain (+6.1%) with the Co. noting it rejected an earlier approach from DraftKings at GBP 25/shr with the new offer standing at GBP 28/shr. Additionally for the sector, Flutter Entertainment (+4.1%) are trading higher after settling the legal dispute between the Co. and Commonwealth of Kentucky. Elsewhere, in terms of deal flow, Iliad announced that it is to acquire UPC Poland for around USD 1.8bln.

Top European News

  • Energy Cost Spike Gets on EU Ministers’ Green Deal Agenda
  • Travel Startup HomeToGo Gains in Frankfurt Debut After SPAC Deal
  • London Stock Exchange to Shut Down CurveGlobal Exchange
  • EU Banks Expected to Add Capital for Climate Risk, EBA Says

In FX, trade remains volatile as this week’s deluge of global Central Bank policy meetings continues to unfold amidst fluctuations in broad risk sentiment from relatively pronounced aversion at various stages to a measured and cautious pick-up in appetite more recently. Hence, the tide is currently turning in favour of activity, cyclical and commodity currencies, albeit tentatively in the run up to the Fed, with the Kiwi and Aussie trying to regroup on the 0.7000 handle and 0.7350 axis against their US counterpart, and the latter also striving to shrug off negative domestic impulses like a further decline below zero in Westpac’s leading index and an earthquake near Melbourne. Next up for Nzd/Usd and Aud/Usd, beyond the FOMC, trade data and preliminary PMIs respectively.

  • DXY/CHF/EUR/CAD - Notwithstanding the overall improvement in market tone noted above, or another major change in mood and direction, the Dollar index appears to have found a base just ahead of 93.000 and ceiling a similar distance away from 93.500, as it meanders inside those extremes awaiting US existing home sales that are scheduled for release before the main Fed events (policy statement, SEP and post-meeting press conference from chair Powell). Indeed, the Franc, Euro and Loonie have all recoiled into tighter bands vs the Greenback, between 0.9250-26, 1.1739-17 and 1.2831-1.2770, but with the former still retaining an underlying bid more evident in the Eur/Chf cross that is consolidating under 1.0850 and will undoubtedly be acknowledged by the SNB tomorrow. Meanwhile, Eur/Usd has hardly reacted to latest ECB commentary from Muller underpinning that the APP is likely to be boosted once the PEPP envelope is closed, though Usd/Cad is eyeing a firm rebound in oil prices in conjunction with hefty option expiry interest at the 1.2750 strike (1.8 bn) that may prevent the headline pair from revisiting w-t-d lows not far beneath the half round number.
  • GBP/JPY - The major laggards, as Sterling slips slightly further beneath 1.3650 against the Buck to a fresh weekly low and Eur/Gbp rebounds from circa 0.8574 to top 0.8600 on FOMC day and T-1 to super BoE Thursday. Elsewhere, the Yen has lost momentum after peaking around 109.12 and still not garnering sufficient impetus to test 109.00 via an unchanged BoJ in terms of all policy settings and guidance, as Governor Kuroda trotted out the no hesitation to loosen the reins if required line for the umpteenth time. However, Usd/Jpy is holding around 109.61 and some distance from 1.1 bn option expiries rolling off between 109.85-110.00 at the NY cut.
  • SCANDI/EM - Brent’s revival to Usd 75.50+/brl from sub-Usd 73.50 only yesterday has given the Nok another fillip pending confirmation of a Norges Bank hike tomorrow, while the Zar has regained some poise with the aid of firmer than forecast SA headline and core CPI alongside a degree of retracement following Wednesday’s breakdown of talks on a pay deal for engineering workers that prompted the union to call a strike from early October. Similarly, the Cnh and Cny by default have regrouped amidst reports that the CCP is finalising details to restructure Evergrande into 3 separate entities under a plan that will see the Chinese Government take control.

In commodities, WTI and Brent are firmer this morning though once again fresh newsflow for the complex has been relatively slim and largely consisting of gas-related commentary; as such, the benchmarks are taking their cue from the broader risk tone (see equity section). The improvement in sentiment today has brought WTI and Brent back in proximity to being unchanged on the week so far as a whole; however, the complex will be dictated directly by the EIA weekly inventory first and then indirectly, but perhaps more pertinently, by today’s FOMC. On the weekly inventories, last nights private release was a larger than expected draw for the headline and distillate components, though the Cushing draw was beneath expectations; for today, consensus is a headline draw pf 2.44mln. Moving to metals where the return of China has seen a resurgence for base metals with LME copper posting upside of nearly 3.0%, for instance. Albeit there is no fresh newsflow for the complex as such, so it remains to be seen how lasting this resurgence will be. Finally, spot gold and silver are firmer but with the magnitude once again favouring silver over the yellow metal.

US Event Calendar

  • 10am: Aug. Existing Home Sales MoM, est. -1.7%, prior 2.0%
  • 2pm: Sept. FOMC Rate Decision (Lower Boun, est. 0%, prior 0%

DB's Jim Reid concludes the overnight wrap

All eyes firmly on China this morning as it reopens following a 2-day holiday. As expected the indices there have opened lower but the scale of the declines are being softened by the PBoC increasing its short term cash injections into the economy. They’ve added a net CNY 90bn into the system. On Evergrande, we’ve also seen some positive headlines as the property developers’ main unit Hengda Real Estate Group has said that it will make coupon payment for an onshore bond tomorrow. However, the exchange filing said that the interest payment “has been resolved via negotiations with bondholders off the clearing house”. This is all a bit vague and doesn’t mention the dollar bond at this stage. Meanwhile, Bloomberg has reported that Chinese authorities have begun to lay the groundwork for a potential restructuring that could be one of the country’s biggest, assembling accounting and legal experts to examine the finances of the group. All this follows news from Bloomberg yesterday that Evergrande missed interest payments that had been due on Monday to at least two banks. In terms of markets the CSI (-1.11%), Shanghai Comp (-0.29%) and Shenzhen Comp (-0.53%) are all lower but have pared back deeper losses from the open.

We did a flash poll in the CoTD yesterday (link here) and after over 700 responses in a couple of hours we found only 8% who we thought Evergrande would still be impacting financial markets significantly in a month’s time. 24% thought it would be slightly impacting. The other 68% thought limited or no impact. So the world is relatively relaxed about contagion risk for now. The bigger risk might be the knock on impact of weaker Chinese growth. So that’s one to watch even if you’re sanguine on the systemic threat. Craig Nicol in my credit team did a good note yesterday (link here) looking at the contagion risk to the broader HY market. I thought he summed it up nicely as to why we all need to care one way or another in saying that “Evergrande is the largest corporate, in the largest sector, of the second largest economy in the world”. For context AT&T is the largest corporate borrower in the US market and VW the largest in Europe.

Turning back to other Asian markets now and the Nikkei (-0.65%) is down but the Hang Seng (+0.51%) and Asx (+0.58%) are up. South Korean markets continue to remain closed for a holiday. Elsewhere, yields on 10y USTs are trading flattish while futures on the S&P 500 are up +0.10% and those on the Stoxx 50 are up +0.21%. Crude oil prices are also up c.+1% this morning. In other news, the Bank of Japan policy announcement overnight was a non-event as the central bank maintained its yield curve target while keeping the policy rate and asset purchases plan unchanged. The central bank also unveiled more details of its green lending program and said that it would immediately start accepting applications and would begin making the loans in December.

The relatively calm Asian session follows a stabilisation in markets yesterday following their rout on Monday as investors looked forward to the outcome of the Fed’s meeting later today. That said, it was hardly a resounding performance, with the S&P 500 unable to hold on to its intraday gains and ending just worse than unchanged after the -1.70% decline the previous day as investors remained vigilant as to the array of risks that continue to pile up on the horizon.

One of these is in US politics and legislators seem no closer to resolving the various issues surrounding a potential government shutdown at the end of the month, along with a potential debt ceiling crisis in October, which is another flashing alert on the dashboard for investors that’s further contributing to weaker sentiment right now.

Looking ahead now, today’s main highlight will be the latest Federal Reserve decision along with Chair Powell’s subsequent press conference, with the policy decision out at 19:00 London time. Markets have been on edge for any clues about when the Fed might begin to taper asset purchases, but concern about tapering actually being announced at this meeting has dissipated over recent weeks, particularly after the most recent nonfarm payrolls in August came in at just +235k, and the monthly CPI print also came in beneath consensus expectations for the first time since November. In terms of what to expect, our US economists write in their preview (link here) that they see the statement adopting Chair Powell’s language that a reduction in the pace of asset purchases is appropriate “this year”, so long as the economy remains on track. They see Powell maintaining optionality about the exact timing of that announcement, but they think that the message will effectively be that the bar to pushing the announcement beyond November is relatively high in the absence of any material downside surprises. This meeting also sees the release of the FOMC’s latest economic projections and the dot plot, where they expect there’ll be an upward drift in the dots that raises the number of rate hikes in 2023 to 3, followed by another 3 increases in 2024.

Back to yesterday, and as mentioned US equity markets fell for a second straight day after being unable to hold on to earlier gains, with the S&P 500 slightly lower (-0.08%). High-growth industries outperformed with biotech (+0.38%) and semiconductors (+0.18%) leading the NASDAQ (+0.22%) slightly higher, however the Dow Jones (-0.15%) also struggled. Europe saw a much stronger performance though as much of the US decline came after Europe had closed. The STOXX 600 gained +1.00% to erase most of Monday’s losses, with almost every sector in the index ending the day in positive territory.

With risk sentiment improving for much of the day yesterday, US Treasuries sold off slightly and by the close of trade yields on 10yr Treasuries were up +1.2bps to 1.3226%, thanks to a +1.8bps increase in real yields. However, sovereign bonds in Europe told a different story as yields on 10yr bunds (-0.3bps), OATs (-0.3bps) and BTPs (-1.9bps) moved lower. Other safe havens including gold (+0.59%) and silver (+1.02%) also benefited, but this wasn’t reflected across commodities more broadly, with Bloomberg’s Commodity Spot Index (-0.30%) losing ground for a 4th consecutive session.

Democratic Party leaders plan to vote on the Senate-approved $500bn bipartisan infrastructure bill next Monday, even with no resolution to the $3.5tr budget reconciliation measure that encompasses the remainder of the Biden Administration’s economic agenda. Democrats continue to work on the reconciliation measure but have turned their attention to the debt ceiling and government funding bills.Congress has fewer than two weeks before the current budget expires – on Oct 1 – to fund the government and raise the debt ceiling. Republicans yesterday noted that the Democrats could raise the ceiling on their own through the reconciliation process, with many saying that they would not be offering their support to any funding bill. Democrats continue to push for a bipartisan bill to raise the debt ceiling, pointing to their votes during the Trump administration. If Democrats are forced to tie the debt ceiling and funding bills to budget reconciliation, it could limit how much of the $3.5 trillion bill survives the last minute negotiations between progressives and moderates. More to come over the next 10 days.

Staying on the US, there was an important announcement in President Biden’s speech at the UN General Assembly, as he said that he would work with Congress to double US funding to poorer nations to deal with climate change. That comes as UK Prime Minister Johnson (with the UK hosting the COP26 summit in less than 6 weeks’ time) has been lobbying other world leaders to find the $100bn per year that developed economies pledged by 2020 to support developing countries as they reduce their emissions and deal with climate change.

In Germany, there are just 4 days to go now until the federal election, and a Forsa poll out yesterday showed a slight narrowing in the race, with the centre-left SPD remaining on 25%, but the CDU/CSU gained a point on last week to 22%, which puts them within the +/- 2.5 point margin of error. That narrowing has been seen in Politico’s Poll of Polls as well, with the race having tightened from a 5-point SPD lead over the CDU/CSU last week to a 3-point one now.

Turning to the pandemic, Johnson & Johnson reported that their booster shot given 8 weeks after the first offered 100% protection against severe disease, 94% protection against symptomatic Covid in the US, and 75% against symptomatic Covid globally. Speaking of boosters, Bloomberg reported that the FDA was expected to decide as soon as today on a recommendation for Pfizer’s booster vaccine. That follows an FDA advisory panel rejecting a booster for all adults last Friday, restricting the recommendation to those over-65 and other high-risk categories. Staying with the US and vaccines, President Biden announced that the US was ordering 500mn doses of the Pfizer vaccine to be exported to the rest of the world.

On the data front, there were some strong US housing releases for August, with housing starts up by an annualised 1.615m (vs. 1.55m expected), and building permits up by 1.728m (vs. 1.6m expected). Separately, the OECD released their Interim Economic Outlook, which saw them upgrade their inflation expectations for the G20 this year to +3.7% (up +0.2ppts from May) and for 2022 to +3.9% (up +0.5ppts from May). Their global growth forecast saw little change at +5.7% in 2021 (down a tenth) and +4.5% for 2022 (up a tenth).

To the day ahead now, and the main highlight will be the aforementioned Federal Reserve decision and Chair Powell’s subsequent press conference. Otherwise on the data side, we’ll get US existing home sales for August, and the European Commission’s advance consumer confidence reading for the Euro Area in September.

Tyler Durden Wed, 09/22/2021 - 08:05

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Spread & Containment

Evidence shows that, yes, masks prevent COVID-19 – and surgical masks are the way to go

Since the coronaviurs first began spreading around the globe, people have debated how effective masks are at preventing COVID-19. A year and a half in, what does the evidence show?

Published

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What type of mask is best? Brais Seara/Moment via Getty Images

Do masks work? And if so, should you reach for an N95, a surgical mask, a cloth mask or a gaiter?

Over the past year and a half, researchers have produced a lot of laboratory, model-based and observational evidence on the effectiveness of masks. For many people it has understandably been hard to keep track of what works and what doesn’t.

I’m an assistant professor of environmental health sciences. I, too, have wondered about the answers to these questions, and earlier this year I led a study that examined the research about which materials are best.

Recently, I was part of the largest randomized controlled trial to date testing the effectiveness of mask-wearing. The study has yet to be peer reviewed but has been well received by the medical community. What we found provides gold-standard evidence that confirms previous research: Wearing masks, particularly surgical masks, prevents COVID-19.

Laboratory studies help scientists understand the physics of masks and spread.

Lab and observational studies

People have been using masks to protect themselves from contracting diseases since the Manchurian outbreak of plague in 1910.

During the coronavirus pandemic, the focus has been on masks as a way of preventing infected persons from contaminating the air around them – called source control. Recent laboratory evidence supports this idea. In April 2020, researchers showed that people infected with a coronavirus – but not SARS-CoV-2 – exhaled less coronavirus RNA into the air around them if they wore a mask. A number of additional laboratory studies have also supported the efficacy of masks.

Out in the real world, many epidemiologists have examined the impact of masking and mask policies to see if masks help slow the spread of COVID-19. One observational study – meaning it was not a controlled study with people wearing or not wearing masks – published in late 2020 looked at demographics, testing, lockdowns and mask-wearing in 196 countries. The researchers found that after controlling for other factors, countries with cultural norms or policies that supported mask-wearing saw weekly per capita coronavirus mortality increase 16% during outbreaks, compared with a 62% weekly increase in countries without mask-wearing norms.

A man wearing a surgical mask handing a mask to a woman working at a vegetable stand.
Researchers gave surgical masks to adults in 200 villages in Bangladesh to test whether they reduce COVID-19. Innovations for Poverty Action, CC BY-ND

Large-scale randomized mask-wearing

Laboratory, observational and modeling studies, have consistently supported the value of many types of masks. But these approaches are not as strong as large-scale randomized controlled trials among the general public, which compare groups after the intervention has been implemented in some randomly selected groups and not implemented in comparison groups. One such study done in Denmark in early 2020 was inconclusive, but it was relatively small and relied on participants to self-report mask-wearing.

From November 2020 to April 2021, my colleagues Jason Abaluck, Ahmed Mushfiq Mobarak, Stephen P. Luby, Ashley Styczynski and I – in close collaboration with partners in the Bangladeshi government and the research nonprofit Innovations for Poverty Action – conducted a large-scale randomized controlled trial on masking in Bangladesh. Our goals were to learn the best ways to increase mask-wearing without a mandate, understand the effect of mask-wearing on COVID-19, and compare cloth masks and surgical masks.

The study involved 341,126 adults in 600 villages in rural Bangladesh. In 300 villages we did not promote masks, and people continued wearing masks, or not, as they had before. In 200 villages we promoted the use of surgical masks, and in 100 villages we promoted cloth masks, testing a number of different outreach strategies in each group.

Over the course of eight weeks, our team distributed free masks to each adult in the mask groups at their homes, provided information about the risks of COVID-19 and the value of mask-wearing. We also worked with community and religious leaders to model and promote mask-wearing and hired staff to walk around the village and politely ask people who were not wearing a mask to put one on. Plainclothes staff recorded whether people wore masks properly over their mouth and nose, improperly or not at all.

Both five weeks and nine weeks after starting the study, we collected data from all adults on symptoms of COVID-19 during the study period. If a person reported any symptoms of COVID-19, we took and tested a blood sample for evidence of infection.

A woman exiting a store with signs showing mask requirements on the door.
Based on current evidence, many places across the U.S. have some form of mask requirements. AP Photo/LM Otero

Mask-wearing reduced COVID-19

The first question my colleagues and I needed to answer was whether our efforts led to increased mask-wearing. Mask usage more than tripled, from 13% in the group that wasn’t given masks to 42% in the group that was. Interestingly, physical distancing also increased by 5% in the villages where we promoted masks.

In the 300 villages where we distributed any type of mask, we saw a 9% reduction in COVID-19 compared with villages where we did not promote masks. Because of the small number of villages where we promoted cloth masks, we were not able to tell whether cloth or surgical masks were better at reducing COVID-19.

We did have a large enough sample size to determine that in villages where we distributed surgical masks, COVID-19 fell by 12%. In those villages COVID-19 fell by 35% for people 60 years and older and 23% for people 50-60 years old. When looking at COVID-19-like symptoms we found that both surgical and cloth masks resulted in a 12% reduction.

The body of evidence supports masks

Before this study there was a lack of gold-standard evidence on the effectiveness of masks to reduce COVID-19 in daily life. Our study provides strong real-world evidence that surgical masks reduce COVID-19, particularly for older adults who face higher rates of death and disability if they get infected.

Policymakers and public health officials now have evidence from laboratories, models, observations and real-world trials that support mask-wearing to reduce respiratory diseases, including COVID-19. Given that COVID-19 can so easily spread from person to person, if more people wear masks the benefits increase.

So next time you are wondering if you should wear a mask, the answer is yes. Cloth masks are likely better than nothing, but high-quality surgical masks or masks with even higher filtration efficiency and better fit – such as KF94s, KN95s and N95s – are the most effective at preventing COVID-19.

Laura (Layla) H. Kwong does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Get Ready for the Coming Oil Crisis (SBOW, VKIN, CPE, RRC, XOM, CVX, SM, CEI, OIH)

The landscape is in place for a coming supply shortage crisis in the oil market, and the only place to hide for investors may be in small-cap oil stocks. The world is adjusting to the next chapter – the post-pandemic period – and global oil demand…

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The landscape is in place for a coming supply shortage crisis in the oil market, and the only place to hide for investors may be in small-cap oil stocks.

The world is adjusting to the next chapter – the post-pandemic period – and global oil demand is recovering powerfully, on pace to hit new all-time highs by early next year. 

At the same time, non-OPEC oil supply is falling, down over 2 million barrels per day from its 2019 peak. Even more to the point, non-OPEC oil supply growth will turn negative over coming years, according to new forecasts from the IEA.

That inflection will foster a gap between supply and demand with structural implications. By just 12 months from now, demand will encroach on total production potential for the first time in 160 years – since we first started ramping up the oil industry in the 19th century.

This may well become the most important investment theme over coming years. But it won’t just impact the fortunes of the world’s major integrated producers like Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX). It will define the landscape for the entire market, and the biggest beneficiaries will likely be the small-cap oil players now trading at cheap levels.

With that in mind, we take a look at a few of the more interesting names in the space and cover some recent catalysts.

SilverBow Resources Inc (NYSE:SBOW) is a growth-oriented independent oil and gas company in the dead-center of what you might call the small-cap growth niche in the US shale energy space.

The company engages in the acquiring and developing assets in the Eagle Ford Shale.

SilverBow Resources Inc (NYSE:SBOW) recently announced it has entered into definitive agreements to acquire oil and gas assets in the Eagle Ford from an undisclosed seller. Acquisition Highlights include: All stock Transaction for approximately $33 million, consisting of approximately 1.5 million shares of SilverBow common stock, 45,000 total net acres in the Eagle Ford, bolstering SilverBow’s gas position in McMullen and Live Oak counties, while adding new oil positions in Atascosa, Lavaca, and Fayette counties, and April 2021 net production of approximately 1,580 barrels of oil equivalent per day, 39% liquids. Net oil production of 569 barrels per day

Sean Woolverton, SilverBow’s Chief Executive Officer, commented, “We continue to execute on accretive opportunities and bolster our balanced oil and gas portfolio. This marks the second acquisition we have announced since the beginning of August. Our first deal increased our high-return Eagle Ford and Austin Chalk locations, as well as incremental working interest in producing wellbores, in our La Mesa position. Today’s announcement expands our gas portfolio in the Western Eagle Ford, while also adding oil acreage in three new counties. Each transaction is accretive to Adjusted EBITDA and further reduces our pro forma leverage ratio(1) via the assets’ incremental cash flow. Our ability to use stock as consideration reflects the constructiveness of Eagle Ford partners to share in SilverBow’s long-term value creation.”

The stock has suffered a bit of late, with shares of SBOW taking a hit in recent action, down about -9% over the past week. Shares of the stock have powered higher over the past month, rallying roughly 13% in that time on strong overall action. 

SilverBow Resources Inc (NYSE:SBOW) managed to rope in revenues totaling $69.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 181.2%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($2.1M against $101.9M, respectively).

Viking Energy Group Inc (OTC US:VKIN) is an emerging small-cap player in the oil and gas space with assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. Viking also has firm financial backing from its majority owner, Camber Energy Inc (NYSEAMERICAN:CEI), which recently raised $15 million in non-toxic financing that is convertible well above current share pricing.

That suggests Viking has a lot of expansion opportunity here as well, which is a big factor in presenting the stock. Shares have started to heat up as it gets involved in carbon capture technology, which is a very nice addition to the narrative.

Viking Energy Group Inc (OTC US:VKIN), to expand on that point, recently entered into an Exclusive Intellectual Property License Agreement with ESG Clean Energy regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide. This has the potential to catapult VKIN into a key position in the clean energy space.

According to the release, the ESG Clean Energy System is designed to generate clean electricity from internal combustion engines and utilize waste heat to capture ~ 100% of the carbon dioxide (CO2) emitted from the engine without loss of efficiency, and in a manner to facilitate the production of precious commodities (e.g., distilled/ de-ionized water; UREA (NH4); ammonia (NH3); ethanol; and methanol) for sale.    

James Doris, President and Chief Executive Officer of Viking, commented, “In my view this transaction positions us as an industry leader in terms of being able to assist with the power generation needs of commercial and industrial organizations while at the same time helping them reduce their carbon footprint to satisfy regulatory requirements or to simply follow best ESG-practices. We are excited to be able to use the platform of Simson-Maxwell Ltd., our recently acquired majority-owned subsidiary, to promote the ESG Clean Energy System.”

Viking Energy Group Inc (OTC US:VKIN) is a small but growing oil play with improving financial metrics, and it should be taken seriously as a player in a space that could be heading for a major windfall. The company recently posted double-digit growth in revenues, current assets, and EBITDA for its calendar Q2, and its move to gain exposure to the carbon capture theme is likely to help it gain greater visibility, as evidenced by the stock’s recent 200% multi-week rally.

Callon Petroleum Company (NYSE:CPE) engages in the exploration, development, acquisition and production of oil and natural gas properties in the United States.

The company focuses on unconventional oil and natural gas reserves in the Permian Basin. 

Callon Petroleum Company (NYSE:CPE) recently announced an agreement to acquire the leasehold interests and related oil, gas, and infrastructure assets of Primexx Energy Partners and its affiliates. Primexx is a private oil and gas operator in the Delaware Basin with a contiguous footprint of 35,000 net acres in Reeves County and second quarter 2021 net production of approximately 18,000 barrels of oil equivalent per day (“Boe/d”) (61% oil). The cash and stock transaction is valued at approximately $788 million[1], representing a headline purchase price multiple of approximately $43,800 per Boe/d, based on second quarter production.

Callon President and Chief Executive Officer Joe Gatto commented: “The Primexx transaction checks every operational and financial box on the list of compelling attributes of consolidation. The asset base adds substantial current oil production and a top-tier inventory to our Delaware portfolio, and fits squarely into our model of scaled, co-development of a multi-zone resource base. Our integrated, future development plans will benefit greatly from the combined Delaware scale and we expect to generate approximately 30% more adjusted free cash flow[2] from the third quarter of 2021 through year-end 2023 under our conservative planning price assumptions[3]. The infusion of over $550 million of equity from the acquisition and Kimmeridge’s exchange further heightens the overall benefits, immediately reducing leverage metrics and creating a visible path to net debt to adjusted EBITDA of below 2.0x next year.”

And the stock has been acting well over recent days, up something like 7% in that time. Shares of the stock have powered higher over the past month, rallying roughly 22% in that time on strong overall action. 

Callon Petroleum Company (NYSE:CPE) managed to rope in revenues totaling $440.4M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 180.1%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($3.8M against $813.8M, respectively).

Other key stocks in the small-cap oil space include Range Resources Corp. (NYSE:RRC), Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), SM Energy Co (NYSE:SM), and VanEck Oil Services ETF (NYSEARCA:OIH).

Please make sure to read and completely understand our disclaimer at https://www.wallstreetpr.com/disclaimer. We may be compensated for posting this content on our website by EDM Media LLC. For questions, comments or suggestions please contact ir@edm.media.

The post Get Ready for the Coming Oil Crisis (SBOW, VKIN, CPE, RRC, XOM, CVX, SM, CEI, OIH) appeared first on Wall Street PR.

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