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June Starts with a Bang

June Starts with a Bang

Published

4 years ago

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Ironically, the pandemic and progress toward a vaccine will play second fiddle to more mundane concerns in the week ahead.  Still, investors have shown that the most strained relationship between the US and China in 30 years (Tiananmen Square) is insufficient in the first instance to derail the recovery equity markets.  Major benchmarks in the US, Europe, and Asia reached new recovery highs.

European heads of state will have a difficult situation later this month when they meet to find a compromise on the Recovery Plan.   The UK, in part, has left the EU because many felt it has lost its voice as more countries joined.  However, the shift to qualified majority voting from unanimity was not complete, and the decision about an EU-level response requires the assent of all members.  It used to be that when Germany and France agreed, it would drive Europe.  Not so quick this time.

The Berlin-Paris proposal has run into opposition by two blocs.  The first is a set of European countries that want loans not grants.  Some fear that those who clamored that the proposal was a step toward fiscal union, even though it is debatable and that many on the center-right in Germany, for example, perhaps even Merkel, does not believe it is, are right and do not want it.  Others, in Eastern and Central Europe, cringe at the Franco-German condominium and these proposals, ostensibly in their name, without consultation.

German officials, including Merkel herself, seemed to play down the likelihood that an agreement will be reached at the summit toward the middle of the month.  The funds proposed by the EU are relatively modest (750 bln euros) given the number of members (27) and the size of GDP (~17 trillion euros).  Still, for some countries, the funds could make more than a marginal difference.  Enthusiasm should be tempered by the fact what happens in an emergency or war cannot often be extrapolated to more normal times.  However, the lasting value may lay in the construction of scaffolding for the next fight over the European Project, including the strengthening of the role of the European Parliament.  The EU bonds could also provide a new benchmark for Europe, which can enhance the euro’s international role.   The ECB may not be the only central bank to buy them.  

Investors looked past this as well.  In Europe, the real and anticipated liquidity not only lifted equity markets but also narrowed the premium southern Europe pays to borrow over Germany.  The 10-year Italian premium narrowed by nearly 25 bp last week to less than 190 bp, the lowest since the crisis erupted.  It peaked near 280  bp in mid-March.  It finished last year near 160 bp.  In absolute terms, Italy's 10-year yield fell for 9 consecutive sessions until the last session, over which time it has fallen from 186 bp to nearly 140 bp.

Broadly the same is true for Spain.  The premium narrowed by 12 bp over the last week and to slip below 100 bp for the first since early March.  It was near 65 bp at the end of 2019.   It does not enjoy the same streak as Italy, but in the past two weeks, Spain's 10-year yield has fallen from 76 bp to almost 56 bp.

It is not just geopolitics or Europe's perennial challenge of joint action that investors are looking past.  Latin America, home to about 8% of the world's population, now accounts for 40% of the reported virus cases.  Brazil, Peru, Chile, and Mexico have been hit hard by the Covid-19.  Last week, the Brazilian real and Mexican peso were the strongest currencies in the world, gaining 3.8% and 3.2% respectively.  The real rose the best level since April 20, and the peso saw its best level since mid-March.

Three major central banks meet next week, the Reserve Bank of Australia, the Bank of Canada and the European Central Bank.  The first two will likely assure investors and businesses that they are prepared to do more if necessary, but are probably not going to take fresh initiatives.   On the other hand, the ECB is likely to move.  It will have the cover of new staff forecasts and ECB President Lagarde already warned that the more optimistic scenario has been superseded by events and the region's economy is between the medium and severe scenarios, which mean a contraction of around 10% this year.

The ECB is likely to increase the 750 bln euro Pandemic Emergency Purchase Program substantially.  An increase of less than 500 bln euros may be disappointing, but the reaction may also be a function of how long the program is extended. There are several other measures that the ECB may consider, but cutting interest rates deeper into negative territory is not one of them.

On the contrary, as part of a broader effort to help the financial system overcome the challenges, it could adjust the amount of deposits that are subject to negative rates.  It could broaden its corporate bond-buying program to include some bonds that recently lost their investment-grade status (fallen angels).  ECB President Lagarde is likely to stress the flexibility in its purchases and investments.  She will likely underscore the fact that EU's Recovery Bonds fit well into the ECB's bond-purchase programs.

The beginning of the monthly cycle of economic data, including the final PMI readings, may be of passing interest.  China's official and Caixin PMI will likely show a continued recovery in the world's second-largest economy.  The official PMI shows the manufacturing and service sectors have begun expanding, even if slowly, while the Caixin PMI, in which small businesses are more represented, has not confirmed it.

The US auto sales and employment data are two data highlights.  US auto sales averaged 16.9 mln last year.  It was the first year that the average was below 17 mln since 2014.  In shelter-in-place halved auto sales, which fell to 8.58 mln in April.  The recovery likely began in May with an increase to nearly 11 mln (seasonally-adjusted annual rate).   In May 2019, US auto sales were 17.3 mln.  The auto sales report will be among the first non-survey reports for May outside of the weekly jobless claims.

The US labor market remained distressed in May.  Of that, there is no doubt.  The median forecast in the Bloomberg survey calls for an 8 million decline in non-farm payrolls in May after the 20.5 mln job loss in March.  About 5% of the job loss (or 400k) is thought to come from the manufacturing sector.  The unemployment rate, derived from a different survey (households rather than establishments) may rise to almost 20% from 14.7% in April.  What the April income numbers seem to confirm (+10.5%) is that the government has replaced much of the wage income lost.

The workweek may have ticked back up to 34.3 hours, where it was at the end of 2019, after slipping to 34.1 hours in March.  Given that the 133 mln employees in the US in April, a 0.1% hour increase is the equivalent of about 380k full-time equivalents.  Average hourly earnings seem distorted by the composition of the workforce, with lower-paid workers service sector workers hit particularly hard by the shutdowns.

Canada will also report May jobs data at the end of on June 5, two days after Governor Macklem chairs his first policy meeting at the central bank.  In April, Canada lost nearly two million jobs, twice the number of jobs lost in March.  The unemployment rate rose to 13% in April from 7.8% in March, and 5.6% at the end of last year.  Canada's "hourly wage rate for permanent workers" is being distorted by the composition of the workforce.  Canada's economy was harder hit than the US in Q1.  While the US economy contracted a revised 5% at an annualized rate, the Canadian economy contracted 8.1% after barely growing in Q4 19 (0.6%).

Karin Kimbrough, chief economist at Linkedin recently shared the platform's global hiring data.  China's hiring rate has recovered over the past few months and is now near last year's levels.  Europe looks several weeks behind China.  France, Kimbrough says, is seeing hiring rates rise for the depress April lows.  The US hiring rate has leveled out about a third below year-ago levels.  Nearly a quarter of US professionals expect their earned income or wages to decline over the next six months.




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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

Published

7 hours ago

on

March 9, 2024

By

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

“When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

“It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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Walmart joins Costco in sharing key pricing news

The massive retailers have both shared information that some retailers keep very close to the vest.

Published

10 hours ago

on

March 9, 2024

By

As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

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Walmart has really good news for shoppers (and Joe Biden)

The giant retailer joins Costco in making a statement that has political overtones, even if that’s not the intent.

Published

11 hours ago

on

March 9, 2024

By

As we head toward a presidential election, the presumed candidates for both parties will look for issues that rally undecided voters. 

The economy will be a key issue, with Democrats pointing to job creation and lowering prices while Republicans will cite the layoffs at Big Tech companies, high housing prices, and of course, sticky inflation.

The covid pandemic created a perfect storm for inflation and higher prices. It became harder to get many items because people getting sick slowed down, or even stopped, production at some factories.

Related: Popular mall retailer shuts down abruptly after bankruptcy filing

It was also a period where demand increased while shipping, trucking and delivery systems were all strained or thrown out of whack. The combination led to product shortages and higher prices.

You might have gone to the grocery store and not been able to buy your favorite paper towel brand or find toilet paper at all. That happened partly because of the supply chain and partly due to increased demand, but at the end of the day, it led to higher prices, which some consumers blamed on President Joe Biden's administration.

Biden, of course, was blamed for the price increases, but as inflation has dropped and grocery prices have fallen, few companies have been up front about it. That's probably not a political choice in most cases. Instead, some companies have chosen to lower prices more slowly than they raised them.

However, two major retailers, Walmart (WMT) and Costco, have been very honest about inflation. Walmart Chief Executive Doug McMillon's most recent comments validate what Biden's administration has been saying about the state of the economy. And they contrast with the economic picture being painted by Republicans who support their presumptive nominee, Donald Trump.

Walmart has seen inflation drop in many key areas.

Image source: Joe Raedle/Getty Images

Walmart sees lower prices

McMillon does not talk about lower prices to make a political statement. He's communicating with customers and potential customers through the analysts who cover the company's quarterly-earnings calls.

During Walmart's fiscal-fourth-quarter-earnings call, McMillon was clear that prices are going down.

"I'm excited about the omnichannel net promoter score trends the team is driving. Across countries, we continue to see a customer that's resilient but looking for value. As always, we're working hard to deliver that for them, including through our rollbacks on food pricing in Walmart U.S. Those were up significantly in Q4 versus last year, following a big increase in Q3," he said.

He was specific about where the chain has seen prices go down.

"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," he said. "In food, prices are lower than a year ago in places like eggs, apples, and deli snacks, but higher in other places like asparagus and blackberries."

McMillon said that in other areas prices were still up but have been falling.

"Dry grocery and consumables categories like paper goods and cleaning supplies are up mid-single digits versus last year and high teens versus two years ago. Private-brand penetration is up in many of the countries where we operate, including the United States," he said.

Costco sees almost no inflation impact

McMillon avoided the word inflation in his comments. Costco  (COST)  Chief Financial Officer Richard Galanti, who steps down on March 15, has been very transparent on the topic.

The CFO commented on inflation during his company's fiscal-first-quarter-earnings call.

"Most recently, in the last fourth-quarter discussion, we had estimated that year-over-year inflation was in the 1% to 2% range. Our estimate for the quarter just ended, that inflation was in the 0% to 1% range," he said.

Galanti made clear that inflation (and even deflation) varied by category.

"A bigger deflation in some big and bulky items like furniture sets due to lower freight costs year over year, as well as on things like domestics, bulky lower-priced items, again, where the freight cost is significant. Some deflationary items were as much as 20% to 30% and, again, mostly freight-related," he added.

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