If you were fortunate enough to keep your job during the pandemic, you probably noticed a financial benefit: you spent less. Amid restrictions, credit card spending on fun activities—like going out for dinner—became less frequent. Looking ahead, the majority of Americans plan to continue at least one budget change post-pandemic, including eating out less (49%), buying fewer clothes and shoes (41%), and traveling less (37%). Of course, the first step in budgeting is tracking where your money is going. In the graphic below from Personal Capital, we break down Americans’ monthly credit card spending by category.
Editor’s Note: If you found the above edited ([ ]) and abridged (…) version of the original article by Jenna Ross (visualcapitalist.com) informative and a fast and easy read, please DONATE something towards the costs involved in providing it. I find it demeaning to ask for money but it is either that or converting munKNEE.com into a fee-based subscription service which I don’t want to do. Any amount would be appreciated. It all adds up in the end. Thank you.
Oh yes, thank you Dom for your recent $50 donation!
The post How Does Your Credit Card Spending By Category Compare? appeared first on munKNEE.com.gold pandemic
S&P Futures Jump Above 4,000 As Fed Fears Fade
S&P Futures Jump Above 4,000 As Fed Fears Fade
After yesterday’s post-FOMC ramp which sent stocks higher after the Fed’s Minutes were…
After yesterday's post-FOMC ramp which sent stocks higher after the Fed's Minutes were less hawkish than feared and also hinted at a timeline for the Fed's upcoming pause (and easing), US index futures initially swung between gains and losses on Thursday as investors weighed the "good news" from the Fed against downbeat remarks on the Chinese economy from premier Li who warned that China would struggle to post a positive GDP print this quarter coupled with Apple’s conservative outlook. Eventually, however, bullish sentiment prevailed and even with Tech stocks underperforming following yesterday's disappointing earnings from Nvidia, e-mini futures rose to session highs as of 715am, and traded up 0.6% above 4,000 for the first time since May 18, while Nasdaq 100 futures were up 0.2% after earlier dropping as much as 0.8%. The tech-heavy index is down 27% this year. Treasury yields and the dollar slipped. Fed policy makers indicated their aggressive set of moves could leave them with flexibility to shift gears later if needed.
Investors took some comfort from the Fed minutes that didn’t show an even more aggressive path being mapped to tackle elevated prices, though central banks remain steadfast in their resolve to douse inflation. Still, volatility has spiked as the risk of a US recession, the impact from China’s lockdowns and the war in Ukraine simmer.
While the Fed minutes “provided investors with a temporary relief, today’s mixed price action on stocks mostly shows that major bearish leverages linger,” said Pierre Veyret, a technical analyst at ActivTrades in London. “The war in eastern Europe and concerns about the Chinese economy still add stress to market sentiment,” he wrote in a report. “Investors will want to see evidence of improvements regarding the pressure coming from rising prices.”
“We expect key market drivers to continue to be centered around inflation and how central banks react; global growth concerns and how China gets to grip with its zero-Covid policy; and the geopolitical conflict between Russia and Ukraine,” said Fraser Lundie, head of fixed income for public markets at Federated Hermes Limited. “Positive news flow on any of these market drivers could sharply improve risk sentiment; however, there is a broad range of scenarios that could play out in the meantime.”
In premarket trading, shares in Apple dropped 1.4% after a report said that the tech giant is planning to keep iPhone production flat in 2022, disappointing expectations for a ~10% increase. The company also said it was raising salaries in the US by 10% or more as it faces a tight labor market and unionization efforts. In other premarket moves, Nvidia dropped 5.3% as the biggest US chipmaker by market value gave a disappointing sales forecast. Software company Snowflake slumped 14%, while meme stock GameStop Corp. fell 2.9%. Among gainers, Twitter Inc. jumped 5.2% after billionaire Elon Musk dropped plans to partially fund his purchase of the company with a margin loan tied to his Tesla stake and increased the size of the deal’s equity component to $33.5 billion. Other notable premarket movers include:
- Shares of Alibaba and Baidu rise following results, sending other US-listed Chinese stocks higher in US premarket trading. Alibaba shares shot up as much as 4.5% after reporting fourth- quarter revenue and earnings that beat analyst expectations.
- Lululemon’s (LULU US) stock gains 2.4% in premarket trading as Morgan Stanley raised its recommendation to overweight, suggesting that the business can be more resilient through headwinds than what the market is expecting.
- Macy’s (M US) shares gain 15% in premarket trading after Co. increases its adjusted earnings per share guidance for the full fiscal year
- Williams-Sonoma (WSM US) shares jumped as much as 9.6% in premarket trading after 1Q sales beat estimates. The retailer was helped by its exposure to more affluent customers, but analysts cautioned that it may be difficult to maintain the sales momentum amid macroeconomic challenges.
- Nutanix (NTNX US) shares shed about a third of their value in US premarket trading as analysts slashed their price targets on the cloud platform provider after its forecast disappointed.
- US airline stocks rise in premarket trading on Thursday, after Southwest and JetBlue provided upbeat outlooks for the second-quarter. LUV up 1.5% premarket, after raising its second-quarter operating revenue growth forecast. JBLU up 2% after saying it expects second-quarter revenue at or above high end of previous guidance.
- Cryptocurrency-tied stocks fall in premarket trading as Bitcoin snaps two days of gains. Coinbase -2.6%; Marathon Digital -2.3%; Riot Blockchain -1.2%. Bitcoin drops 1.9% at 6:11 am in New York, trading at $29,209.88.
It’s time to buy the dip in stocks after a steep global selloff in equity markets, according to Citi strategists. Meanwhile, Fidelity International Chief Executive Officer Anne Richards said the risk of a recession has increased and markets are likely to remain volatile, the latest dire warning on the outlook at the World Economic Forum.
“If inflation gets tame enough over summer, there may not be continued raising of rates,” Carol Pepper, Pepper International chief executive officer, said on Bloomberg TV, adding that investors should look to buy tech stocks after the selloff. “Stagflation, I just don’t think that’s going to happen anymore. I think we are going to be in a situation where inflation will start tapering down and then we will start going into a more normalized market.”
In Europe, the Stoxx Europe 600 Index rose 0.3%, pare some of their earlier gains but remain in the green, led by gains for retail, consumer and energy stocks. IBEX outperforms, adding 0.6%, FTSE MIB is flat but underperforms peers. Retailers, energy and consumer products are the strongest-performing sectors, with energy shares outperforming for the second day as oil climbed amid data that showed a further decrease in US crude and gasoline stockpiles. Here are the most notable European movers:
- Auto Trader rises as much as 3.5% after its full-year results beat consensus expectations on both top- and bottom-lines.
- Galp climbs as much as 4.1% as RBC upgrades to outperform, saying the stock might catch up with the rest of the sector after “materially” underperforming peers in recent years.
- Rightmove rises as much as 1.5% after Shore upgrades to hold from sell, saying the stock has reached an “appropriate” level following a 27% decline this year.
- FirstGroup soars as much as 16% after the bus and train operator said it received a takeover approach from I Squared Capital Advisors and is currently evaluating the offer.
- United Utilities declines as much as 8.9% as company reports a fall in adjusted pretax profit. Jefferies says full-year guidance implies a materially-below consensus adjusted net income view.
- Johnson Matthey falls as much as 7.5% after the company reported results and said it expects operating performance in the current fiscal year to be in the lower half of the consensus range.
- BT drops as much as 5.7% after the telecom operator said the UK will review French telecom tycoon Patrick Drahi’s increased stake in the company under the National Security and Investment Act.
- JD Sports drops as much as 12% as the departure of Peter Cowgill as executive chairman is disappointing, according to Shore Capital.
Earlier in the session, Asian stocks were mixed as traders assessed China’s emergency meeting on the economy and Federal Reserve minutes that struck a less hawkish note than markets had expected. The MSCI Asia Pacific Index was little changed after fluctuating between gains and losses of about 0.6% as technology stocks slid. South Korean stocks dipped after the central bank raised interest rates by 25 basis points as expected. Chinese shares eked out a small advance after a nationwide emergency meeting on Wednesday offered little in terms of additional stimulus. The benchmark CSI 300 Index headed for a weekly drop of more than 2%, despite authorities’ vows to support an economy hit by Covid-19 lockdowns. Investors took some comfort from Fed minutes in which policy makers indicated their aggressive set of moves could leave them with flexibility to shift gears later if needed. Still, Asia’s benchmark headed for a weekly loss amid concerns over China’s lockdowns and the possibility of a US recession.
“The coming months are ripe for a re-pricing of assets across the board with a further shake-down in risk assets as term and credit premia start to feature prominently,” Vishnu Varathan, the head of economics and strategy at Mizuho Bank, wrote in a research note.
Japanese stocks closed mixed after minutes from the Federal Reserve’s latest policy meeting reassured investors while Premier Li Keqiang made downbeat comments on China’s economy. The Topix rose 0.1% to close at 1,877.58, while the Nikkei declined 0.3% to 26,604.84. Toyota Motor Corp. contributed the most to the Topix gain, increasing 1.9%. Out of 2,171 shares in the index, 1,171 rose and 898 fell, while 102 were unchanged.
In Australia, the S&P/ASX 200 index fell 0.7% to close at 7,105.90 as all sectors tumbled except for technology. Miners contributed the most to the benchmark’s decline. Whitehaven slumped after peer New Hope cut its coal output targets. Appen soared after confirming a takeover approach from Telus and said it’s in talks to improve the terms of the proposal. Appen shares were placed in a trading halt later in the session. In New Zealand, the S&P/NZX 50 index fell 0.6% to 11,102.84.
India’s key stock indexes snapped three sessions of decline to post their first advance this week on recovery in banking and metals shares. The S&P BSE Sensex rose 0.9% to 54,252.53 in Mumbai, while the NSE Nifty 50 Index advanced by a similar measure. Both benchmarks posted their biggest single-day gain since May 20 as monthly derivative contracts expired today. All but one of the 19 sector sub-indexes compiled by BSE Ltd. gained. HDFC Bank and ICICI Bank provided the biggest boosts to the two indexes, rising 3% and 2.2%, respectively. Of the 30 shares in the Sensex, 24 rose and 6 fell. As the quarterly earnings season winds up, among the 45 Nifty companies that have so far reported results, 18 have trailed estimates and 27 met or exceeded expectations. Aluminum firm Hindalco Industries is scheduled to post its numbers later today.
In FX, the Bloomberg Dollar fell 0.3%, edging back toward the lowest level since April 26 touched Tuesday. The yen jumped to an intraday high after the head of the Bank of Japan said policymakers could manage an exit from their decades-long monetary policy, and that U.S. rate rises would not necessarily keep the yen weak. Commodity currencies including the Australian dollar fell as China’s Premier Li Keqiang offered a bleak outlook on domestic growth. The Chinese economy is in some respects faring worse than in 2020 when the pandemic started, he said.
Central banks were busy overnight:
- Russia’s central bank delivered its third interest-rate reduction in just over a month and said borrowing costs can fall further still, as it looks to stem a rally in the ruble and unwinds the financial defenses in place since the invasion of Ukraine.
- The Bank of Korea raised its key interest rate on Thursday as newly installed Governor Rhee Chang-yong demonstrated his intention to tackle inflation at his first policy meeting since taking the helm. New Zealand’s central bank has also shown its commitment this week to combat surging prices.
In rates, Treasuries bull-steepen amid similar price action in bunds and many other European markets and gains for US equity index futures. Yields richer by ~3bp across front-end of the curve, steepening 2s10 by ~2bp, 5s30s by ~3bp; 10-year yields rose 2bps to 2.76%, keeps pace with bund while outperforming gilts. 2- and 5-year yields reached lowest levels in more than a month, remain below 50-DMAs. US auction cycle concludes with 7-year note sale, while economic data includes 1Q GDP revision. Bund, Treasury and gilt curves all bull-steepen. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing 5.1bps to 194.6bps.
The US weekly auction calendar ends with a $42BN 7-year auction today which follows 2- and 5-year sales that produced mixed demand metrics, however both have richened from auction levels. WI 7-year yield at ~2.735% is ~17bp richer than April’s, which tailed by 1.7bp. IG dollar issuance slate includes Bank of Nova Scotia 3Y covered SOFR; issuance so far this week remains short of $20b forecast, is expected to remain subdued until after US Memorial Day.
In commodities, WTI trades within Wednesday’s range, adding 0.6% to around $111. Spot gold falls roughly $7 to trade around $1,846/oz. Cryptocurrencies decline, Bitcoin drops 2.5% to below $29,000.
Looking at the day ahead now, and data releases from the US include the second estimate of Q1 GDP, the weekly initial jobless claims, pending home sales for April, and the Kansas City Fed’s manufacturing index for May. Meanwhile in Italy, there’s the consumer confidence index for May. From central banks, we’ll hear from Fed Vice Chair Brainard, the ECB’s Centeno and de Cos, and also get decisions from the Central Bank of Russia and the Central Bank of Turkey. Finally, earnings releases include Costco and Royal Bank of Canada.
- S&P 500 futures little changed at 3,974.25
- STOXX Europe 600 up 0.2% to 435.16
- MXAP little changed at 163.17
- MXAPJ down 0.3% to 529.83
- Nikkei down 0.3% to 26,604.84
- Topix little changed at 1,877.58
- Hang Seng Index down 0.3% to 20,116.20
- Shanghai Composite up 0.5% to 3,123.11
- Sensex up 0.4% to 53,975.57
- Australia S&P/ASX 200 down 0.7% to 7,105.88
- Kospi down 0.2% to 2,612.45
- German 10Y yield little changed at 0.90%
- Euro little changed at $1.0679
- Brent Futures up 0.5% to $114.55/bbl
- Gold spot down 0.3% to $1,847.94
- U.S. Dollar Index little changed at 102.11
Top Overnight News from Bloomberg
- Federal Reserve officials agreed at their gathering this month that they need to raise interest rates in half-point steps at their next two meetings, continuing an aggressive set of moves that would leave them with flexibility to shift gears later if needed.
- Russia’s central bank delivered its third interest-rate reduction in just over a month and said borrowing costs can fall further still, halting a rally in the ruble as it unwinds the financial defenses in place since the invasion of Ukraine.
- China’s trade-weighted yuan fell below 100 for the first time in seven months as Premier Li Keqiang’s bearish comments added to concerns that the economy may miss its growth target by a wide margin this year.
- Bank of Japan Governor Haruhiko Kuroda said interest rate increases by the Federal Reserve won’t necessarily cause the yen to weaken, saying various factors affect the currency market.
A more detailed breakdown of global markets courtesy of Newsquawk
Asia-Pac stocks were indecisive as risk appetite waned despite the positive handover from Wall St where the major indices extended on gains post-FOMC minutes after the risk event passed and contained no hawkish surprises. ASX 200 failed to hold on to opening gains as weakness in mining names, consumer stocks and defensives overshadowed the advances in tech and financials, while capex data was mixed with the headline private capital expenditure at a surprise contraction for Q1. Nikkei 225 faded early gains but downside was stemmed with Japan set to reopen to tourists on June 6th. Hang Seng and Shanghai Comp were mixed with early pressure after Premier Li warned the economy was worse in some aspects than in 2020 when the pandemic began, although he stated that China will unveil detailed implementation rules for a pro-growth policy package before the end of the month, while the PBoC issued a notice to promote credit lending to small firms and the MoF announced cash subsidies to Chinese airlines.
Top Asian News
- PBoC issued a notice to promote credit lending to small firms and is to boost financial institutions' confidence to lend to small firms, according to Reuters.
- BoK raised its base rate by 25bps to 1.75%, as expected, via unanimous decision. BoK raised its 2022 inflation forecast to 4.5% from 3.1% and raised its 2023 forecast to 2.9% from 2.0%, while it sees GDP growth of 2.7% this year and 2.4% next year. BoK said consumer price inflation is to remain high in the 5% range for some time and sees it as warranted to conduct monetary policy with more focus on inflation, according to Reuters.
- Morgan Stanley has lowered China's 2022 GDP estimate to 3.2% from 4.2%.
- CSPC Drops After Earnings, Covid Impact to Weigh: Street Wrap
- China Builder Greenland’s Near-Term Bonds Set for Record Drops
- Debt Is Top Priority for Diokno as New Philippine Finance Chief
European bourses are firmer across the board, Euro Stoxx 50 +0.7%, but remain within initial ranges in what has been a relatively contained session with much of northern-Europe away. Stateside, US futures are relatively contained, ES +0.2%, with newsflow thin and on familiar themes following yesterday's minutes and before PCE on Friday. Apple (AAPL) is reportedly planning on having a 220mln (exp. ~240mln) iPhone production target for 2022, via Bloomberg. -1.4% in the pre-market. Baidu Inc (BIDU) Q1 2022 (CNY): non-GAAP EPS 11.22 (exp. 5.39), Revenue 28.4bln (exp. 27.82bln). +4.5% in the pre-market. UK CMA is assessing whether Google's (GOOG) practises in parts of advertisement technology may distort competition.
Top European News
- UK Chancellor Sunak's package today is likely to top GBP 30bln, according to sources via The Times; Chancellor will confirm that the package will be funded in part by windfall tax on oil & gas firms likely to come into effect in the autumn. Subsequently, UK Gov't sources are downplaying the idea that the overall support package is worth GBP 30bln, via Times' Swinford; told it is a very big intervention.
- UK car production declined 11.3% Y/Y to 60,554 units in April, according to the SMMT.
- British Bus Firm FirstGroup Gets Takeover Bid from I Squared
- Citi Strategists Say Buy the Dip in Stocks on ‘Healthy’ Returns
- The Reasons to Worry Just Keep Piling Up for Davos Executives
- UK Unveils Plan to Boost Aviation Industry, Passenger Rights
- Pakistan Mulls Gas Import Deal With Countries Including Russia
- Dollar drifts post FOMC minutes that reaffirm guidance for 50bp hikes in June and July, but nothing more aggressive, DXY slips into lower range around 102.00 vs 102.450 midweek peak.
- Yen outperforms after BoJ Governor Kuroda outlines exit strategy via a combination of tightening and balance sheet reduction, when the time comes; USD/JPY closer to 126.50 than 127.50 where 1.13bln option expiries start and end at 127.60.
- Rest of G10, bar Swedish Crown rangebound ahead of US data, with Loonie looking for independent direction via Canadian retail sales, USD/CAD inside 1.2850-00; Cable surpassing 1.2600 following reports that the cost of living package from UK Chancellor Sunak could top GBP 30bln.
- Lira hits new YTD low before CBRT and Rouble weaker following top end of range 300bp cut from CBR.
- Yuan halts retreat from recovery peaks ahead of key technical level, 6.7800 for USD/CNH.
- Debt wanes after early rebound on Ascension Day lifted Bunds beyond technical resistance levels to 154.74 vs 153.57 low.
- Gilts fall from grace between 119.17-118.19 parameters amidst concerns that a large UK cost of living support package could leave funding shortfall.
- US Treasuries remain firm, but off peaks for the 10 year T-note at 120-31 ahead of GDP, IJC, Pending Home Sales and 7 year supply.
- Crude benchmarks inch higher in relatively quiet newsflow as familiar themes dominate; though reports that EU officials are considering splitting the oil embargo has drawn attention.
- Currently WTI and Brent lie in proximity to USD 111/bbl and USD 115/bbl respectively; within USD 1.50/bbl ranges.
- Russian Deputy PM Novak expects 2022 oil output 480-500mln/T (prev. 524mln/T YY), via Ria.
- Spot gold is similarly contained around the USD 1850/oz mark, though its parameters are modestly more pronounced at circa. USD 13/oz
- CBR (May, Emergency Meeting): Key Rate 11.00% (exp. ~11.00/12.00%, prev. 14.00%); holds open the prospect of further reductions at upcoming meetings.
- BoJ's Kuroda says, when exiting easy policy, they will likely combine rate hike and balance sheet reduction through specific means, timing to be dependent on developments at that point; FOMC rate hike may not necessarily result in a weaker JPY or outflows of funds from Japan if it affects US stock prices, via Reuters.
US Event Calendar
- 08:30: 1Q PCE Core QoQ, est. 5.2%, prior 5.2%
- 08:30: 1Q Personal Consumption, est. 2.8%, prior 2.7%
- 08:30: May Continuing Claims, est. 1.31m, prior 1.32m
- 08:30: 1Q GDP Price Index, est. 8.0%, prior 8.0%
- 08:30: May Initial Jobless Claims, est. 215,000, prior 218,000
- 08:30: 1Q GDP Annualized QoQ, est. -1.3%, prior -1.4%
- 10:00: April Pending Home Sales YoY, est. -8.0%, prior -8.9%
- 10:00: April Pending Home Sales (MoM), est. -2.0%, prior -1.2%
- 11:00: May Kansas City Fed Manf. Activity, est. 18, prior 25
DB's Jim Reid concludes the overnight wrap
A reminder that our latest monthly survey is now live, where we try to ask questions that aren’t easy to derive from market pricing. This time we ask if you think the Fed would be willing to push the economy into recession in order to get inflation back to target. We also ask whether you think there are still bubbles in markets and whether equities have bottomed out yet. And there’s another on which is the best asset class to hedge against inflation. The more people that fill it in the more useful so all help from readers is very welcome. The link is here.
For markets it’s been a relatively quiet session over the last 24 hours compared to the recent bout of cross-asset volatility. The main event was the release of the May FOMC minutes, which had the potential to upend that calm given the amount of policy parameters currently being debated by the Fed. But in reality they came and went without much fanfare, and failed to inject much life into afternoon markets or the debate around the near-term path of policy. As far as what they did say, they confirmed the line from the meeting itself that the FOMC is ready to move the policy to a neutral position to fight the current inflationary scourge, with agreement that 50bp hikes were appropriate at the next couple of meetings. That rapid move to neutral would leave the Fed well-positioned to judge the outlook and appropriate next steps for policy by the end of the year, and markets were relieved by the lack of further hawkishness, with the S&P 500 extending its modest gains following the release to end the day up +0.95%.
As the Chair said at the meeting, and has been echoed by other Fed officials since, the minutes noted that the hawkish shift in Fed communications have already had a noticeable effect on financial conditions, with Fed staff pointing out that “conditions had tightened by historically large amounts since the beginning of the year.” Meanwhile on QT, which the Fed outlined their plans for at the May meeting, the minutes expressed some trepidation about market liquidity and potential “unanticipated effects on financial market conditions” as a result, but did not offer potential remedies.
With the minutes not living up to hawkish fears alongside growing concerns about a potential recession, investors continued to dial back the likelihood of more aggressive tightening, with Fed funds futures moving the rate priced in by the December meeting to 2.64%, which is the lowest in nearly a month and down from its peak of 2.88% on May 3. So we’ve taken out nearly a full 25bp hike by now, which is the biggest reversal in monetary policy expectations this year since Russia’s invasion of Ukraine began. That decline came ahead of the minutes and also saw markets pare back the chances of two consecutive +50bp hikes, with the amount of hikes priced over the next two meetings falling under 100bps for only the second time since the May FOMC. Yields on 10yr Treasuries held fairly steady, only coming down -0.5bps to 2.745%.
Ahead of the Fed minutes, markets had already been on track to record a steady performance, and the S&P 500 (+0.95%) extended its existing gains in the US afternoon. That now brings the index’s gains for the week as a whole to +1.98%, so leaving it on track to end a run of 7 consecutive weekly declines, assuming it can hold onto that over the next 48 hours, and futures this morning are only down -0.13%. That said, we’ve seen plenty of volatility in recent weeks, and after 3 days so far this is the first week in over two months where the S&P hasn’t seen a fall of more than -1% in a single session, so let’s see what today and tomorrow bring. In terms of the specific moves yesterday, it was a fairly broad advance, but consumer discretionary stocks (+2.78%) and other cyclical industries led the way, with defensives instead seeing a much more muted performance. Tech stocks outperformed, and the NASDAQ (+1.51%) came off its 18-month low, as did the FANG+ index (+1.99%).
Over in Europe, equities also recorded a decent advance, with the STOXX 600 gaining +0.63%, whilst bonds continued to rally as well, with yields on 10yr bunds (-1.5bps) OATs (-1.5bps) and BTPs (-2.7bps) all moving lower. These gains for sovereign bonds have come as investors have grown increasingly relaxed about inflation in recent weeks, with the 10yr German breakeven falling a further -4.2bps to 2.23% yesterday, its lowest level since early March and down from a peak of 2.98% at the start of May. Bear in mind that the speed of the decline in the German 10yr breakeven over the last 3-4 weeks has been faster than that seen during the initial wave of the Covid pandemic, so a big shift in inflation expectations for the decade ahead in a short space of time that’s reversed the bulk of the move higher following Russia’s invasion of Ukraine. Nor is that simply concentrated over the next few years, since the 5y5y forward inflation swaps for the Euro Area looking at inflation over the five years starting in five years’ time has come down from aa peak of 2.49% earlier this month to 2.07% by the close last night, so almost back to the ECB’s target. To be fair there’s been a similar move lower in US breakevens too, and this morning the 10yr US breakeven is down to a 3-month low of 2.56%.
That decline in inflation expectations has come as investors have ratcheted up their expectations about future ECB tightening. Yesterday, the amount of tightening priced in by the July meeting ticked up a further +0.2bps to 32.7bps, its highest to date, and implying some chance that they’ll move by more than just 25bps. We heard from a number of additional speakers too over the last 24 hours, including Vice President de Guindos who said in a Bloomberg interview that the schedule for rate hikes outlined by President Lagarde was “very sensible”, and that the question of larger hikes would “depend on the outlook”.
Overnight in Asia, equities are fluctuating this morning after China’s Premier Li Keqiang struck a downbeat note on the economy yesterday. Indeed, he said that the difficulties facing the Chinese economy “to a certain extent are greater than when the epidemic hit us severely in 2020”. As a reminder, our own economist’s forecasts for GDP growth this year are at +3.3%, which if realised would be the slowest in 46 years apart from 2020 when Covid first took off. Against that backdrop, there’s been a fairly muted performance, and whilst the Shanghai Composite (+0.65%) and the CSI 300 (+0.60%) have pared back initial losses to move higher on the day, the Hang Seng (-0.13%) has lost ground and the Nikkei (+0.07%) is only just in positive territory. We’ve also seen the Kospi (-0.08%) give up its initial gains overnight after the Bank of Korea moved to hike interest rates once again, with a 25bp rise in their policy rate to 1.75%, in line with expectations. That came as they raised their inflation forecasts, now expecting CPI this year at 4.5%, up from 3.1% previously. At the same time they also slashed their growth forecast to 2.7%, down from 3.0% previously.
There wasn’t much in the way of data yesterday, though we did get the preliminary reading for US durable goods orders in April. They grew by +0.4% (vs. +0.6% expected), although the previous month was revised down to +0.6% (vs. +1.1% previously). Core capital goods orders were also up +0.3% (vs. +0.5% expected).
To the day ahead now, and data releases from the US include the second estimate of Q1 GDP, the weekly initial jobless claims, pending home sales for April, and the Kansas City Fed’s manufacturing index for May. Meanwhile in Italy, there’s the consumer confidence index for May. From central banks, we’ll hear from Fed Vice Chair Brainard, the ECB’s Centeno and de Cos, and also get decisions from the Central Bank of Russia and the Central Bank of Turkey. Finally, earnings releases include Costco and Royal Bank of Canada.
JPMorgan Says Bitcoin Is 25% ‘Undervalued’, Terra FUD Overdone
JPMorgan Says Bitcoin Is 25% ‘Undervalued’, Terra FUD Overdone
As we detailed previously, the collapse of the Terra USD and the Luna token,…
As we detailed previously, the collapse of the Terra USD and the Luna token, within a year of the collapse of Iron Finance and the TITAN token, once again brought out the obituaries for crypto broadly, and raised the FUD over the stabilisation mechanisms of stablecoins (most specifically 'algorithmic' style). As a reminder, we can classify stablecoins into three broad categories: fiat-backed, crypto-backed, and algorithmic.
It has also soured sentiment among crypto investors...
As JPMorgan's Nikolaos Panigirtzoglou notes in his latest report, most flow and positioning metrics also turned very negative.
The chart below shows the 4-week rolling flow into bitcoin and ethereum publicly traded funds. These funds capture a significant component of the institutional impulse as many institutional investors are either not willing or not permitted to invest directly in crypto assets via digital wallets.
In the fund space bitcoin funds including ETFs saw the largest outflow since May 2021.
The crypto fund flow impulse has been normalizing over the past year after peaking at the beginning of 2021 and has been mostly negative this year.
In the futures space, JPM's position proxy for CME bitcoin futures is approaching oversold territory. The equivalent indicator for ethereum has also declined to below neutral...
These flow and positioning metrics, Panigirtzoglou suggests, provides a good entry point for long term investors.
The JPM strategist also notes that, thus far, however, there seems to have been relatively limited spillovers to other stablecoins and the Total Value Locked in DeFi projects beyond Terra appears to have been relatively resilient.
Panigirtzoglou concludes by noting that the past month’s crypto market correction looks more like capitulation relative to last January/February and going forward JPM sees upside for bitcoin and crypto markets more generally.
Our previous projection that the bitcoin-to-gold vol ratio will settle to around 4x this year stills holds...
Our fair value for bitcoin based on a volatility-ratio of bitcoin-to-gold of around 4x would be $38k significantly above its current price.
Additionally, JPMorgan's bullish stance is reinforced by Glassnode's MVRZ Z-Score, which assesses when Bitcoin is undervalued/overvalued based on its "fair value", and is nearing the green zone that had preceded the crypto's massive rebound rallies, as shown in the chart below...
JPMorgan reiterates four reasons behind the emergence of crypto as an alternate institutional asset class.
First, the pandemic by inducing unconventional monetary policies and by boosting money supply created additional demand for an “alternative” currency. After the Lehman crisis, the role of an “alternative” currency was played by gold. After the virus crisis, this role was played by both bitcoin and gold.
Second, the fact that bitcoin and cryptocurrencies survived the long winter of 2018/2019 and their market value did not go down to zero as many crypto critics were predicting at the time, increased confidence among institutional investors that there is enough residual demand ascribing value to cryptocurrencies.
Third, the corporate sponsorship of bitcoin that started emerging in the summer of 2020 with Microstrategy, Square, PayPal, Tesla further boosted institutional investors’ confidence into bitcoin and other cryptocurrencies.
Fourth, the pandemic accelerated the shift towards digitization and cryptocurrencies are expanding in tandem with the adoption of Distributed Ledger Technology (DLT) as they represent the fuel for powering DLT networks.
Going forward Panigirtzoglou believes that the trajectory for VC funding would be crucial in helping the crypto market to avoid the long winter of 2018/2019. If VC funding dries up from here as a result of the loss of confidence from the collapse of Terra’s ecosystem, then a return to the long winter of 2018/2019 would look more likely for crypto markets.
Thus far there is little evidence of VC funding drying up post Terra’s collapse.
Of the $25bn VC funding YTD, almost $4bn came after Terra. Panigirtzoglou ends on a positive note, saying that "our best guess is the VC funding will continue and a long winter similar to 2018/2019 would be averted."
On the same day, major venture capitalist Andreessen Horowitz announced the closing of its fourth cryptocurrency fund at $4.5 billion. Also on Wednesday, crypto-focused venture firm NGC Ventures launched its third blockchain fund with $100 million raised from investors that included Babel Finance, Huobi Ventures and Nexo Ventures.
Long COVID: vaccination could reduce symptoms, new research suggests
A study of more than 28,000 UK adults has found that vaccination after having COVID is linked to a decrease in long COVID symptoms.
Graham was a healthy 34-year-old until he developed COVID in July 2020. Along with his wife and children, he had a fever, a cough, breathlessness, profound fatigue and he lost his sense of smell.
But instead of getting better like the rest of his family, Graham found that his breathlessness persisted. Even minor physical exertion or intellectual tasks like making shopping lists left him exhausted.
Against his better judgment, Graham returned to his job as a schoolteacher after six weeks. But he quickly crashed – essentially he became so tired he could barely get out of bed – and had to go on sick leave again.
Graham is fictitious but his story is typical of someone with long COVID – defined as COVID symptoms that are not better after four weeks (“post-acute COVID”) and especially after 12 weeks (“chronic COVID”).
Data from the UK’s Office for National Statistics (ONS) shows that 1.8 million people in the UK (2.8% of the population) self-report symptoms of long COVID. Of these, 791,000 (44% of all long COVID patients) have been unwell for more than a year and 235,000 (13%) for more than two years. These groups are sometimes referred to as “long haulers”.
There is currently no known cure for long COVID, though even long haulers may improve with multidisciplinary rehabilitation. This involves physiotherapy and help with prioritising and planning to make the most of limited energy.
Graham caught COVID before vaccines became available. When invited for his jab ten months after his initial illness, he wanted to know if it would make him better, worse or have no effect. At the time, his doctors couldn’t answer that question – but now we know more.
While evidence suggests that people who are vaccinated before they get COVID are less likely to develop long COVID than unvaccinated people, the effectiveness of vaccination on existing long COVID has been less clear.
Scientifically, the best way to test the impact of a vaccine on long COVID would be to take a few hundred unvaccinated people with long COVID, measure their illness severity (ranking each symptom on a scale of one to ten, for example), and randomly allocate half of them to receiving a COVID jab. The other half would get a placebo (a saline injection, for example). After a few months, the symptom scores would be collected again before revealing who had had which jab.
This design is known as a randomised controlled trial. Unfortunately there have been no such studies (perhaps because scientists have been busy on other aspects of this new disease), so the “gold standard” answer to Graham’s question is lacking.
At the other end of the scientific spectrum, there are anecdotes – stories of people like Graham’s neighbour whose long COVID improved after a vaccine. But one individual’s experience doesn’t speak for the population. And even if the anecdote is accurate, who is to say that the vaccine led to the improvement, as opposed to it being a coincidence? Association is not causation.
Thousands of people with long COVID have joined online communities, some of which invite their members to take part in survey studies. In one such study of around 800 people, a little over half of respondents felt improved after one jab, around one in six felt worse and the remainder reported no change in their symptoms.
But since certain kinds of people – white, educated, female, affluent, health-conscious – are more likely to join online communities (and respond to surveys) than others, these types of studies aren’t necessarily a good reflection of the population as a whole.
A new study published in the BMJ looked at more than 28,000 UK adults who were part of the ONS COVID-19 Infection Survey. All had tested positive for COVID and at a later date (varying in time since their infection) underwent a course of COVID vaccination.
Participants filled out symptom questionnaires before taking the COVID test, before vaccination and a few weeks after each dose. Overall, one in four people still reported some symptoms four weeks after their initial COVID infection. In one in six, symptoms were severe enough to limit their activities.
On average, the first vaccine was associated with a 13% reduction in the chances that a person still had long COVID symptoms (which wasn’t sustained after 12 weeks) and the second with a further 9% reduction (which was sustained). But this overall figure masks wide variation between people. In the survey mentioned above, we know that while some people improved, a few got worse and some stayed the same.
In the BMJ study, improvement was greater the sooner the jab was given after COVID infection. There were small differences between different vaccines which may have been due to chance.
So what’s the bottom line? As we argue in this commentary, people like Graham with long COVID are more likely to improve (or stay the same) than deteriorate if they receive a vaccination. Although, as some patients have reported deterioration of long COVID symptoms after vaccination, more research into possible reasons for this will be important.
That said, the benefits of COVID vaccination significantly outweigh the risks in most people. With the UK having recently declared two new variants of concern (omicron BA4 and BA5), there are strong grounds for making sure you’re fully vaccinated whether you have long COVID or not.
Trish Greenhalgh receives funding from National Institute for Health Research (BRC-1215-20008, Remote by Default 2 132807, LOCOMOTION COV-LT2-0016), ESRC (ES/V010069/1), Wellcome Trust (WT104830MA), Health Data Research UK (HDRUK2020.139). She is a member of Independent SAGE.
Brendan Delaney receives funding from - LOng COvid Multidisciplinary Consortium: Optimising Treatments and services Across the NHS (LOCOMOTION) NIHR, RECAP (Remote COVID-19 Assessment in Primary Care) Imperial Community Jameel Excellence Fund, ESRC, Imperial and Oxford BRC, Cancer risk tools and their influence on clinical judgement. Cancer Research UK."Modernising public health" research initiative: pan-London Health Data Research UK Medical Research Council, Demonstrating the feasibility of a Learning Health System for cancer diagnosis in Primary Care. :C37891/A25310 Cancer Research UK. He is affiliated with 'Doctors with ME (Honorary Fellow).
Manoj Sivan receives funding from National Institute for Health Research NIHR (Ref COV-LT-0016) Covid Multidisciplinary consortium: Optimising Treatments and servIces acrOss the NHS (LOCOMOTION), Engineering and Physical Sciences Research Council EPSRC (Ref:112538.121) training using Heart Rate Variability Biofeedback (HRV-B) in home settings for Long COVID management, and Medical Research Council CiC (Ref: 121999.014) Validation of C19-YRS (COVID-19 Yorkshire Rehabilitation Scale): a new self-report digital outcome measure for long COVID syndrome. Manoj Sivan is also an advisor to the World Health Organisation (WHO) for Long COVID policy in Europe.default covid-19 vaccine gold europe uk
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