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Nasdaq Futures Tumble As 10Y Yield Blows Out Over 1.60%

Nasdaq Futures Tumble As 10Y Yield Blows Out Over 1.60%

Nasdaq futures fell as much as 2% on Friday after rebounding more than 6% in the past three sessions, after a new spike in U.S. bond yields restarted inflation fears and sent investors..

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Nasdaq Futures Tumble As 10Y Yield Blows Out Over 1.60%

Nasdaq futures fell as much as 2% on Friday after rebounding more than 6% in the past three sessions, after a new spike in U.S. bond yields restarted inflation fears and sent investors scurrying to the perceived safety of the dollar, while hammering global stocks. A Bloomberg report that Beijing is expanding a crackdown on Tencent Holdings also weighed on the technology sector. S&P 500 futures were also dragged down after ending at record closing highs, and we last trading just above 3,910, down 16 points, or 0.4%, while Dow E-minis were up 12 points. 

Friday's selloff was sparked after the yield on the benchmark 10-year notes rose back above 1.60% on Friday to approach the one-year highs touched last week (more below).

Friday's caution followed the signing of a $1.9 trillion U.S. stimulus bill into law on Thursday and a further dovish tilt from the European Central Bank that had prompted a retreat in bond yields and eased global concerns about rising inflation. Biden had signed the stimulus legislation before giving a televised address in which he pledged aggressive action to speed vaccinations and move the country closer to normality by July 4.

"U.S. Treasury yields are still setting the tone,” said Piotr Matys, a strategist at Rabobank in Moscow. “That said, the 10-year yield faces a strong technical barrier. It’s reasonable to assume that this area should hold and prevent a further squeeze towards 2%, which in turn would bode well for emerging-market currencies.”

“The risks of inflation picking up have increased significantly due to a jump in money supply through stimulus and the anticipated demand that we might see as the economy slowly unlocks,” said Jonathan Bell, chief investment officer at Stanhope Capital in London.

High duration, yield-sensitive stocks like Facebook, Apple, Amazon, Netflix, Google, Tesla and Microsoft were all down between 1% and 3% in premarket trading. Big U.S. banks including JPMorgan, Bank of America and Citigroup were among the few gainers in early deals. U.S.-listed shares of China-based JD.com Inc dropped nearly 3% after three sources said it is in talks to buy part or all of a stake in brokerage Sinolink Securities worth at least $1.5 billion. Cosmetics retailer Ulta Beauty Inc slumped about 8% after its annual revenue forecast missed estimates, as demand for make-up products were under pressure due to extended work-from-home policies.

“We have recently seen some erratic market moves across asset classes, as well as within equity market sectors and styles. A period of digestion thus seems logical and healthy,” Barclays analyst Emmanuel Cau said in a note.

Despite today's drop, Wall Street - which is recovering after coming under pressure in recent weeks as a consistent rise in U.S. bond yields - is set for its best week in six after one of the largest U.S. fiscal stimulus was signed into law and data showed fewer-than-expected jobless claims numbers.

Europe’s Stoxx 600 Index was down 0.5%, with tech the biggest decliner. The Stoxx 600 Technology Index dropped as much as 2.1% to be the region’s worst-performing sub-index. Prosus is the biggest faller on the gauge as Tencent is said to face a China clampdown. Aside from tech, autos and miners are weak. A resurgence of the virus in Italy coupled with division over AstraZeneca Plc’s Covid-19 vaccine also hit sentiment. Burberry Group rose following an announcement that the rebound in its fourth quarter has been stronger than analysts expected. Here are some of the biggest European movers today:

  • Burberry shares jump as much as 10% after the British trench- coat maker said a rebound in its fourth quarter was stronger than analysts expected. “This is a strong recovery of performance,” said Jefferies.
  • SPIE shares rise as much as 9.6%, hitting the highest since March 2018, with Jefferies highlighting a strong performance on cash and de-leveraging in a note.
  • Barclays shares gain as much as 3.7% to be among best performers on Stoxx 600 Banks Index as Goldman Sachs upgrades the lender to buy from neutral with a Street-high price target.
  • Groupe Bruxelles Lambert jump as much as 2.8% to the highest since February 2020, as Degroof Petercam says the company produced a “solid performance.”

Earlier in the session, Asian stocks erased gains amid declines in financial companies led by AIA Group while technology shares rose across the region. Shares of chipmakers and related suppliers advanced, extending gains in global sector names following news that China’s main industry association will work with its U.S. counterpart to discuss supply-chain safety and trade restrictions. AIA Group lost more than 5%, contributing most to a near 1% drop in the MSCI Asia Pacific Financials Index. The insurer’s measure of future profitability of new policies sold declined 33% in 2020 to $2.8 billion, missing analysts’ estimates for a 30.5% slide. By country, benchmarks in Japan and South Korea led gains. SoftBank Group gave the Nikkei 225 a leg up after Coupang, in which SoftBank is a key investor, rose 41% in its U.S. trading debut. Hong Kong’s Hang Seng Index underperformed, weighed by financials

In rates, 10-year Treasury yields surged as much as eight basis points to breach the key technical level of 1.6% Friday, once again reminding investors that bond volatility has become the companion of go-big fiscal stimulus. As usual, bets that extra government spending could overheat the economy were out in full force after U.S. President Joe Biden signed off on $1.9 trillion of stimulus.

“The odds are that European fixed income outperforms as sovereign curves, particularly in the periphery, will flatten and that the spread between the U.S. and European interest rate curve will widen,” said Nordea analyst Sebastien Galy who added that "the U.S. 10-year yield has further room to go and could reach 1.80%. Growth stocks maintain a high sensitivity to rates, which continues to suggest that they are quite overvalued.”

Meanwhile, Bloomberg notes that European yields are lagging the move higher in Treasuries, prompting strategists to bet on greater divergence, unless the Fed does anything to change it. Most European Central Bank policy makers have no intention of expanding their 1.85 trillion-euro ($2.2 trillion) emergency stimulus program despite their pledge on Thursday to step up the pace of bond buying to keep yields in check, according to officials familiar with the matter.

Still, against that backdrop of super-loose monetary policy, analysts largely expect inflation to pick up as vaccine rollouts lead to a reopening, leading to worries that Biden’s stimulus package could overheat the economy.

“If inflation remains contained at low levels, then there will be little pressure on the Federal Reserve to raise rates and in such a scenario, robust growth and abundant liquidity may continue to drive markets higher,” said Mark Dowding, CIO at BlueBay Asset Management. “However, if inflation trends upwards, then bond yields and policy rates will rise and this may create a much more challenging market dynamic.”

In FX, the dollar gained 0.5% against the yen and 0.1% against the euro and pound, although the latter was helped by news the economy had contracted less than expected in January. The Bloomberg Dollar Spot Index rose for the first time in four days, with the greenback extending its advance in European trading; risk-sensitive currencies and the Swiss franc led declines while the euro neared $1.19. Emerging-market currencies snapped a two-day advance, heading for the longest streak of weekly losses since August 2019, as a spike in U.S. 10-year Treasury yield to 1.6% raised concern riskier assets will lose their appeal. Turkey’s lira and Mexico’s peso led declines among peers as investors dumped high-beta currencies that tend to move closely with global risk appetite.

Markets are likely to remain volatile in the second quarter, particularly for the dollar, which was much stronger than expected at the start of the year, said Cliff Zhao, chief strategist at China Construction Bank International. “So I think the strong U.S. dollar may weigh on some liquidity conditions in the emerging markets,” he said.

Oil prices retreated as the dollar gained, with U.S. crude dipping 0.5% to $65.68 a barrel. Brent crude lost 0.5% to $69.27 per barrel. Spot gold prices fell 1.1% to $1,702.9 an ounce.

Looking at the day ahead, we get the February PPI print and the March Michigan Sentiment indicator.

Market Snapshot

  • S&P 500 futures down 0.6% to 3,902.00
  • MXAP little changed at 208.04
  • MXAPJ down 0.4% to 695.44
  • Nikkei up 1.7% to 29,717.83
  • Topix up 1.4% to 1,951.06
  • Hang Seng Index down 2.2% to 28,739.72
  • Shanghai Composite up 0.5% to 3,453.08
  • Sensex down 0.8% to 50,856.39
  • Australia S&P/ASX 200 up 0.8% to 6,766.81
  • Kospi up 1.4% to 3,054.39
  • SXXP Index down 0.5% to 422.19
  • German 10Y yield up 2 bps to -0.32%
  • Euro down 0.5% to $1.1922
  • Brent futures little changed at $69.62/bbl
  • Gold spot down 1.1% to $1,703.77
  • U.S. Dollar Index up 0.51% to 91.89

Top Overnight News from Bloomberg

  • The ECB’s promise to “significantly” boost the pace of its bond purchases is threatening to turbo-charge a yield divergence with the U.S. that could drive money out of Europe, unless the Federal Reserve ramps up its commitment to ease policy at its own meeting next week
  • Bank of France Governor Francois Villeroy de Galhau says there was no discussion of changing the size of the PEPP asset purchase program at the European Central Bank‘s meeting Thursday
  • Most ECB policy makers have no intention of expanding their 1.85 trillion-euro ($2.2 trillion) emergency stimulus program despite their pledge on Thursday to step up the pace of bond buying to keep yields in check, according to officials familiar with the matter
  • An upstart contender to U.S. Treasuries has emerged in the wake of last month’s vicious debt rout. Chinese government bonds have defied the turbulence rocking peers from Australia to Europe, offering a port in the global reflation storm
  • The Treasury market selloff last week came amid signs investors are deleveraging. In a curious twist though, instead of dealer inventories rising as a consequence, they unexpectedly collapsed. One explanation for the disconnect is that dealers are taking steps to trim holdings before the expiry of a key regulatory exemption on March 31
  • At next week’s policy review, the Bank of Japan is considering releasing an analysis of the potential impact of lowering its negative interest rate to show its determination to use this option if needed, according to people familiar with the matter
  • U.K. Prime Minister Boris Johnson insists any friction suggested by more high-frequency data has been mere “teething problems,” but the evidence from the statistical agencies of Germany, France and Italy had suggested there was a hefty drop in shipments from the EU to Britain in the first month after the transition period ended
  • AstraZeneca Plc will supply less than half the planned number of Covid-19 vaccines to the European Union in the second quarter after the company’s efforts to remedy a slew of problems ran into further trouble
  • The government of Prime Minister Mario Draghi is weighing stringent new restrictions on as many as two- thirds of Italians, with the regions encompassing the country’s largest cities possibly heading into lockdown amid a resurgence in the pandemic

A quick look at global markets courtesy of Newsquawk

Asian equity markets mostly took impetus from the gains on Wall Street where the S&P 500 and the DJIA notched fresh record highs as sentiment was supported by incoming stimulus after US President Biden signed the USD 1.9tln COVID-19 relief bill and with outperformance in the Nasdaq amid a resurgence of the tech sector. ASX 200 (+0.8%) was positive with the gains in Australia led by tech stocks which found inspiration from their stateside counterparts and with strength across commodity-related sectors. Nikkei 225 (+1.7%) continued to coat-tail on currency moves and with speculation rife ahead of next week’s BoJ meeting with rumours that the BoJ plans to scrap its ETF target which is currently at JPY 6tln annually with a ceiling of JPY 12tln. Hang Seng (-2.2%) and Shanghai Comp. (+0.5%) lagged as US-China tensions persisted ahead of next week’s high-level meeting, with the US planning to address Uighur genocide and Secretary of State Blinken also stated the US condemns China's assault on democracy in Hong Kong. Furthermore, the US placed fresh restrictions on licenses for some Huawei suppliers in which it informed suppliers that Huawei licenses are not valid for 5G use and participants also digested weak earnings results including AIA Group, China Unicom and MTR Corp. Finally, 10yr JGBs traded rangebound with demand sapped by gains in Japanese stocks although downside was also cushioned by the BoJ’s presence in the market today for a total 950bln of JGBs with varying maturities.

Top Asian News

  • Rakuten to Raise $2.2 Billion as Japan Post, Tencent Invest
  • China Hits Out at New Huawei Curbs, Says U.S. Can’t Be Trusted
  • Ant Group Pledges to Keep Lid on Lending to Young People
  • China Pollution Crackdown Exposes Rule Breakers in Top Steel Hub

Equities in Europe have been drifting lower since the cash open (Euro Stoxx 50 -0.6%) in a reversal of the notable upside seen this week, and as the region failed to grapple onto the mostly positive APAC handover. The pressure across stocks is seemingly emanating from the increase in yields after US President Biden unsurprisingly signed the COVID relief bill into law and 30yr issuance, with the US 10yr oscillating around 1.60% and in turn weighing on US equity futures, namely the tech-laden and growth-heavy NQ (-1.7%) following this week's impressive rebound from technical correction territory. Back to Europe, news flow has remained light as attention remains on yield action, with European bourses modestly softer, but with losses less dire vs State-side futures. FTSE MIB (-0.3%) upside is capped by reports of fresh lockdown measures across Italy, whilst the IBEX (-0.1%) is cushioned by its banking exposures. Sectors in Europe are mostly lower but Banks reap rewards from the higher yields and thus outperform. In-fitting with the NQ performance, Tech resides at the foot of the pile. Autos are also pressured as DAX-heavyweight Daimler (-2.3%) is subdued after Renault (-0.4%) announced the successful sale of its entire Daimler Stake (1.54%) at EUR 69.50/shr, whilst Daimler is also to recall 2.6mln Mercedes-Benz vehicles in China, according to the Chinese Market Regulator. In terms of individual movers, Barclays (+2.2%) is bolstered by an upgrade at Goldman Sachs coupled with the high-yield environment, whilst Deutsche Bank (+0.6%) also sees some positive omens from a reaffirmation of its earnings. Burberry (+7%) stands as the European outperformer as the boost in Asia sales had been strong enough to lift its annual profit forecasts. On the flip side, Berkeley Group (-6.5%) plumbs the depths as the group anticipates the value of reservations to be some 20% lower Y/Y.

Top European News

  • Two-Thirds of Italians Set to Face Lockdown as Pandemic Worsens
  • Italy’s Asset Manager AMCO Set to Handle Soured Pandemic Debt
  • U.K. Economy Shrank Less Than Expected In January Lockdown
  • Homebuilder Berkeley Says Lockdown to Cut Sales Reservations

In FX, if there was any doubt about the power of yields in terms of an overarching force, the abrupt turnaround in direction for the Greenback and broad risk sentiment should remove all uncertainty. However, the catalyst for the latest reversion to bear-steepening in US Treasuries and other global bonds is less clear-cut, as the 30 year auction was not a flop and the fact that President Biden signed off on stimulus a day earlier than initially anticipated is neither here nor there, albeit cheques and direct back account credits will arrive more promptly. Hence, the rationale may actually lie elsewhere given a sharp fall from grace in Eurozone debt after a brief PEPP boost and even more pronounced reversal in UK Gilts in wake of mostly better than forecast data and details of Q2 DMO issuance. Moreover, the Buck may be benefiting from some supportive technical factors as the DXY stages an impressive comeback from 91.396 to 91.956 and back above 91.740 that remains a key pivot on many charts. Ahead, PPI data and the first look at Michigan sentiment for March.

  • CHF - Far from alone in context of literally yielding to the resurgent Dollar, but bearing the brunt after reinforcement from the SNB that negative rates and intervention are essential to curb Franc strength. Usd/Chf is over 0.9300 again and Eur/Chf probing 1.1100 to the upside.
  • NZD/AUD - Little chance for the Kiwi to appreciate a further easing of COVID-19 restrictions in Auckland as Nzd/Usd retreats from circa 0.7233 towards 0.7170 and Aud/Nzd edges closer to 1.0800 even though the Aussie is also flagging against its US peer having touched 0.7800 before waning to sub-0.7750. At this stage, more decent option expiry interest in the cross at the 1.0730 strike (1.3 bn) looks safe, but Aud/Usd is currently at the lower end of 0.7745-60 expiries (1.2 bn) and not too far from similar size sitting between 0.7725-20 (1.1 bn).
  • EUR/JPY/GBP - The Euro remains very volatile in wake of Thursday’s ECB policy meeting and unexpected QE shift designed to keep financing conditions favourable in the face of higher yields, if not put a lid on long term rates explicitly. Eur/Usd is now trying to retain hold of the 1.1900 handle after getting to within a whisker of yesterday’s 1.1990 high that aligned with a Fib retracement from recent peak to y-t-d low (38.2% of the move from 1.2243-1.1836 to be precise). Note also, heavy option expiry interest protects the upside as 2.6 bn sits from 1.1995 to 1.2000, while 1 bn at 1.1930 may offer the Euro some support. Elsewhere, the Yen is eyeing Tuesday’s 2021 trough after falling through 109.00 again and failing to extend beyond 108.50 every day so far this week or gleaning any lasting traction from the numerous BoJ reports via sources touting clarity around YCT at the upcoming policy review meeting. Conversely, the BoE is still more inclined to let the market determine the path for yields, but Cable has been unable to breach 1.4000 convincingly for psychological reasons and a major Fib level in keeping with the Euro, as 1.4010 represents a 50% retracement of the fall to 1.3779 from 1.4240.
  • CAD - Another rebound in crude prices has helped the Loonie resist Greenback advances to a degree, as Usd/Cad straddles 1.2550, but Canadian jobs data looms hot on the heels of the BoC’s Economic Progress Report that essentially echoed Wednesday’s policy meeting assessment of the economy and outlook.

In commodities, WTI and Brent front month futures have nursed overnight losses despite a distinct lack of pertinent news, but potentially on the aforementioned reflation/fiscal narrative. WTI May has returned to its pre-APAC level above USD 66/bbl (vs low USD 65.40/bbl), whilst its Brent counterpart gains further ground north of USD 69.75/bbl (vs low USD 69.03/bbl). The only notable news thus far emanated from Saudi Aramco who lowered oil supplies to some Northern Asian purchasers in April, according to sources, and maintained average monthly oil supply to Indian refineries in April, rejecting calls for additional volumes. Elsewhere, precious metals bear the brunt of rising yields and a firmer Buck, with spot gold briefly giving up the USD 1,700/oz in early European trade (vs high USD 1,728/oz), whilst spot silver trades subdued on either side of USD 25.50/oz. Turning to base metals, LME copper future are pressured by the overall downbeat tone and firmer Buck, with the red metal briefly dipping below USD 9,000/t. Finally, Dalian iron ore futures saw another session of losses amid the ongoing pollution-curbs imposed by China's top steel-making city Tangshan.

US Event Calendar

  • 8:30am: Feb. PPI Final Demand MoM, est. 0.5%, prior 1.3%; YoY, est. 2.7%, prior 1.7%;
  • 8:30am: Feb. PPI Ex Food, Energy, Trade MoM, est. 0.3%, prior 1.2%; YoY, est. 2.5%, prior 2.0%
  • 8:30am: Feb. PPI Ex Food and Energy MoM, est. 0.2%, prior 1.2%; YoY, est. 2.6%, prior 2.0%
  • 10am: March U. of Mich. Current Conditions, est. 88.3, prior 86.2; Expectations, est. 72.0, prior 70.7

DB's Jim Reid concludes the overnight wrap

The beast has been starved for a month but yesterday we saw the S&P 500 (+1.04%) climb to its first new record close since February 12th. Tech continued this week’s comeback as the NASDAQ rose +2.52% and the NYSE FANG added +3.92% following the whipsaw in technology stocks in recent sessions. Tesla (+4.72%), Amazon (+1.83%) and Apple (+1.65 %) all advanced further. Small-caps didn’t miss out on the fun as the Russell 2000 (+2.31%) also hit a record high. In terms of sectors, Semiconductors (+3.63%), Media (+2.42%) and Software (+1.83%) were once more the leading industry groups in the S&P, while Banks (-0.48%) and Telecoms (-2.01%) were among the laggards. The rotation trade overall has slowed somewhat this week though on a YTD basis US banks are up +22.8% to the NYFANG’s +6.0% gain. Bitcoin (+1.22%) rose to a new record close of its own yesterday, closing at 57,624.

Across the Atlantic, the STOXX 600 (+0.48%) also rose with Travel and Leisure stocks (+2.53%) leading the way, followed closely by Technology (+2.35%) and Basic Resources (+2.15%). The rally in the STOXX 600 Travel and Leisure stocks took the index within 1% of its pre-pandemic levels, in a sign that markets are increasingly pricing in normality. The outlier was European banks, which fell -1.36% after an ECB meeting that encouraged lower yields.

Before we go through the ECB in more detail let’s look at the impact on fixed income. 10y bund yields fell -5.3bps to three week lows just after the initial announcement before reversing some of the gains to finish -2.1bps lower at -0.33%. Italian 10y BTP yields briefly dropped to their lowest level since 22 February before stabilising at 0.60%, down -7.4 basis points on the day. The spread between the Italian and German 10y yields tightened to 93.5 basis points, the lowest since 22 February as well.

While in the US, 10y Treasury yields were +0.7bps higher to finish at 1.544% after spending most of the session lower in yield. The results of a $24bn auction of 30-year US government bonds went smoothly, which tailed by around half a basis point with notably strong direct bidding. Staying with fixed income supply, Verizon sold $25bn of bonds - the largest bond sale of 2021 - in order to finance its 5G and spectrum expansion. It was met with at least $109bn of orders which helped sentiment to some degree. That level of demand could bring other issuers to market in the coming weeks. Elsewhere, the US dollar weakened -0.49% for its third straight daily decline and its biggest one day pullback in just over a month. However, the US dollar is trading up +0.15% this morning.

The highlight of the day was the ECB meeting and their response to the recent rise in government bond yields. The central bank said in its monetary policy decision that “Based on a joint assessment of financing conditions and the inflation outlook, the governing council expects purchases under the PEPP (pandemic emergency purchase programme) over the next quarter to be conducted at a significantly higher pace than during the first months of this year.” Our Chief Economist Mark Wall and team put out a note last night (link here) where they highlight that the way the ECB is implementing the flexibility of the PEPP could have unintended consequences. President Lagarde implied that the Governing Council would only consider adjusting the pace of purchases once per quarter based on financing conditions and inflation metrics.

In speaking to a few people about this yesterday, many were confused as to why the ECB had set themselves a quarterly review framework for PEPP rather than continuing to have a more opaque and flexible approach. The view is that they’ve now given the market something specific to focus on and tapering becomes a more binary issue rather than more gradual. Our rates Strategy Francis Yared thinks this ECB decision is likely to mark the high watermark for ECB purchases for several reasons. This include the fact that the key relevant market indicators (GDP weighted real yields, GDP-weighted nominal yields, euro, peripheral spreads and breakevens) are at levels at which the ECB is implicitly or explicitly comfortable with. Also the ECB revised up the risks to the outlook without taking into account the impact of the US fiscal stimulus so that should make a difference over the next three months. See the blog here.

On the topic of that stimulus bill, President Biden signed the American Rescue Plan into law yesterday, a day earlier than originally planned. White House Press Secretary Psaki told reporters that Americans will begin to receive direct payments “as early as this weekend.” This came ahead of the President’s prime-time address overnight where he outlined the benefits of the bill but then made headlines by directing all states to make all US adults eligible for vaccinations by May 1, with a soft goal of having Americans be able to celebrate July 4th in small groups. This comes as he announced that the US would reach his administration’s goal of 100m shots in his first 100 days by his 60th day instead.

Overnight in Asia, markets are mostly trading higher with the Nikkei (+1.77%), Kospi (+1.46%), Shanghai Comp (+0.17%) and Asx (+0.79%) all advancing. The Hang Seng (-0.34%) is an exception to this pattern. Meanwhile, futures on the S&P 500 are up +0.15% but those on the Nasdaq (-0.03%) are showing signs of pausing for breath. European futures are pointing to a mixed open. Yields on 10y USTs are up +1.1bps and those on Australia’s 10yr are up +5.1bps.

We also saw some headlines on the BoJ’s ongoing policy review with the Mainichi newspaper reporting that the central bank is likely to eliminate its annual target to buy JPY 6tn of exchange-traded funds while keeping a ceiling of JPY 12tn on possible annual purchases. This is likely to give more flexibility to the BoJ in its buying but is unlikely to be a game changer for markets.

In other overnight news, Bloomberg has reported that the White House has informed some suppliers to Huawei of tighter conditions on previously approved export licenses, prohibiting items for use in or with 5G devices. The report added that the 5G ban is effective as of this week. Meanwhile, Reuters reported that India is on its way to blocking Huawei equipment.

In terms of the pandemic, Denmark, Norway and Iceland have suspended use of the AstraZeneca vaccine in a “precautionary” move after a Danish woman died with blood clots following inoculation. Though Danish and EU authorities said it could not yet be concluded whether there was a link between the blood clots and the vaccine. At least five other European countries also have halted the use of a specific batch of the vaccine this week, after reports of blood clots sparked a safety probe from the European drugs watchdog. Overnight, Thailand has also temporarily suspended use of the AZ vaccine until there’s more clarity from investigations of possible blood clots. Meanwhile, the European Union’s drugs regulator on Thursday approved Johnson & Johnson’s single dose COVID-19 vaccine. The shot is the fourth to be endorsed for use in the EU after vaccines from Pfizer-BioNTech, AstraZeneca-Oxford University and Moderna, and is recommended for those over 18 years of age, the European Medicines agency (EMA) said. The United States, Canada and Bahrain have also approved the shot.

In terms of restrictions, governments in both France and Germany are resisting tightening restrictions or enacting lockdowns even as the former is seeing 350 cases per 100k inhabitants weekly and the latter the most cases since late-January. Meanwhile curbs on movement and social behaviour continue to be relaxed in the US, where New York will no longer require quarantining by domestic travellers as of April 1 and North Carolina looks to open all schools this month.

Looking at yesterday’s data releases, the most important filing was the US jobless claims data. They dropped to a 4-month low last week as an improving public health environment allows more segments of the economy to reopen. Initial claims for state unemployment benefits decreased 42,000 to a seasonally adjusted 712,000 for the week ended March 6, the lowest level since early November. Still, a full recovery will probably take some time as the weekly unemployment claims report from the Labor Department on Thursday also showed a whopping 20.1 million Americans collecting unemployment checks in late February.

To the day ahead now, the calendar is full with economic data releases. Germany and Spain are due to report final inflation data for February. While the UK is expected to release GDP data, construction output and industrial and manufacturing production for January, along with trade balance data. The eurozone will post industrial production for January, Canada will release employment data for February. And the US will offer up February PPI and the March Michigan Sentiment indicator.

Tyler Durden Fri, 03/12/2021 - 08:02

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Home buyers must now navigate higher mortgage rates and prices

Rates under 4% came and went during the Covid pandemic, but home prices soared. Here’s what buyers and sellers face as the housing season ramps up.

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Springtime is spreading across the country. You can see it as daffodil, camellia, tulip and other blossoms start to emerge. 

You can also see it in the increasing number of for sale signs popping up in front of homes, along with the painting, gardening and general sprucing up as buyers get ready to sell. 

Which leads to two questions: 

  • How is the real estate market this spring? 
  • Where are mortgage rates? 

What buyers and sellers face

The housing market is bedeviled with supply shortages, high prices and slow sales.

Mortgage rates are still high and may limit what a buyer can offer and a seller can expect.  

Related: Analyst warns that a TikTok ban could lead to major trouble for Apple, Big Tech

And there's a factor not expected that may affect the sales process. Fixed commission rates on home sales are going away in July.

Reports this week and in a week will make the situation clearer for buyers and sellers. 

The reports are:

  • Housing starts from the U.S. Commerce Department due Tuesday. The consensus estimate is for a seasonally adjusted rate of about 1.4 million homes. These would include apartments, both rentals and condominiums. 
  • Existing home sales, due Thursday from the National Association of Realtors. The consensus estimate is for a seasonally adjusted sales rate of about 4 million homes. In 2023, some 4.1 million homes were sold, the worst sales rate since 1995. 
  • New-home sales and prices, due Monday from the Commerce Department. Analysts are expecting a sales rate of 661,000 homes (including condos), up 1.5% from a year ago.

Here is what buyers and sellers need to know about the situation. 

Mortgage rates will stay above 5% 

That's what most analysts believe. Right now, the rate on a 30-year mortgage is between 6.7% and 7%. 

Rates peaked at 8% in October after the Federal Reserve signaled it was done raising interest rates.

The Freddie Mac Primary Mortgage Market Survey of March 14 was at 6.74%. 

Freddie Mac buys mortgages from lenders and sells securities to investors. The effect is to replenish lenders' cash levels to make more loans. 

A hotter-than-expected Producer Price Index released that day has pushed quotes to 7% or higher, according to data from Mortgage News Daily, which tracks mortgage markets.

Home buyers must navigate higher mortgage rates and prices this spring.

TheStreet

On a median-priced home (price: $380,000) and a 20% down payment, that means a principal and interest rate payment of $2,022. The payment  does not include taxes and insurance.

Last fall when the 30-year rate hit 8%, the payment would have been $2,230. 

In 2021, the average rate was 2.96%, which translated into a payment of $1,275. 

Short of a depression, that's a rate that won't happen in most of our lifetimes. 

Most economists believe current rates will fall to around 6.3% by the end of the year, maybe lower, depending on how many times the Federal Reserve cuts rates this year. 

If 6%, the payment on our median-priced home is $1,823.

But under 5%, absent a nasty recession, fuhgettaboutit.

Supply will be tight, keeping prices up

Two factors are affecting the supply of homes for sale in just about every market.

First: Homeowners who had been able to land a mortgage at 2.96% are very reluctant to sell because they would then have to find a home they could afford with, probably, a higher-cost mortgage.

More economic news:

Second, the combination of high prices and high mortgage rates are freezing out thousands of potential buyers, especially those looking for homes in lower price ranges.

Indeed, The Wall Street Journal noted that online brokerage Redfin said only about 20% of homes for sale in February were affordable for the typical household.

And here mortgage rates can play one last nasty trick. If rates fall, that means a buyer can afford to pay more. Sellers and their real-estate agents know this too, and may ask for a higher price. 

Covid's last laugh: An inflation surge

Mortgage rates jumped to 8% or higher because since 2022 the Federal Reserve has been fighting to knock inflation down to 2% a year. Raising interest rates was the ammunition to battle rising prices.

In June 2022, the consumer price index was 9.1% higher than a year earlier. 

The causes of the worst inflation since the 1970s were: 

  • Covid-19 pandemic, which caused the global economy to shut down in 2020. When Covid ebbed and people got back to living their lives, getting global supply chains back to normal operation proved difficult. 
  • Oil prices jumped to record levels because of the recovery from the pandemic recovery and Russia's invasion of Ukraine.

What the changes in commissions means

The long-standing practice of paying real-estate agents will be retired this summer, after the National Association of Realtors settled a long and bitter legal fight.

No longer will the seller necessarily pay 6% of the sale price to split between buyer and seller agents.

Both sellers and buyers will have to negotiate separately the services agents have charged for 100 years or more. These include pre-screening properties, writing sales contracts, and the like. The change will continue a trend of adding costs and complications to the process of buying or selling a home.

Already, interest rates are a complication. In addition, homeowners insurance has become very pricey, especially in communities vulnerable to hurricanes, tornadoes, and forest fires. Florida homeowners have seen premiums jump more than 102% in the last three years. A policy now costs three times more than the national average.

Related: Veteran fund manager picks favorite stocks for 2024

 

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Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Westbrook Partners, which acquired the San…

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Default: San Francisco Four Seasons Hotel Investors $3 Million Late On Loan As Foreclosure Looms

Westbrook Partners, which acquired the San Francisco Four Seasons luxury hotel building, has been served a notice of default, as the developer has failed to make its monthly loan payment since December, and is currently behind by more than $3 million, the San Francisco Business Times reports.

Westbrook, which acquired the property at 345 California Center in 2019, has 90 days to bring their account current with its lender or face foreclosure.

Related

As SF Gate notes, downtown San Francisco hotel investors have had a terrible few years - with interest rates higher than their pre-pandemic levels, and local tourism continuing to suffer thanks to the city's legendary mismanagement that has resulted in overlapping drug, crime, and homelessness crises (which SF Gate characterizes as "a negative media narrative).

Last summer, the owner of San Francisco’s Hilton Union Square and Parc 55 hotels abandoned its loan in the first major default. Industry insiders speculate that loan defaults like this may become more common given the difficult period for investors.

At a visitor impact summit in August, a senior director of hospitality analytics for the CoStar Group reported that there are 22 active commercial mortgage-backed securities loans for hotels in San Francisco maturing in the next two years. Of these hotel loans, 17 are on CoStar’s “watchlist,” as they are at a higher risk of default, the analyst said. -SF Gate

The 155-room Four Seasons San Francisco at Embarcadero currenly occupies the top 11 floors of the iconic skyscrper. After slow renovations, the hotel officially reopened in the summer of 2021.

"Regarding the landscape of the hotel community in San Francisco, the short term is a challenging situation due to high interest rates, fewer guests compared to pre-pandemic and the relatively high costs attached with doing business here," Alex Bastian, President and CEO of the Hotel Council of San Francisco, told SFGATE.

Heightened Risks

In January, the owner of the Hilton Financial District at 750 Kearny St. - Portsmouth Square's affiliate Justice Operating Company - defaulted on the property, which had a $97 million loan on the 544-room hotel taken out in 2013. The company says it proposed a loan modification agreement which was under review by the servicer, LNR Partners.

Meanwhile last year Park Hotels & Resorts gave up ownership of two properties, Parc 55 and Hilton Union Square - which were transferred to a receiver that assumed management.

In the third quarter of 2023, the most recent data available, the Hilton Financial District reported $11.1 million in revenue, down from $12.3 million from the third quarter of 2022. The hotel had a net operating loss of $1.56 million in the most recent third quarter.

Occupancy fell to 88% with an average daily rate of $218 in the third quarter compared with 94% and $230 in the same period of 2022. -SF Chronicle

According to the Chronicle, San Francisco's 2024 convention calendar is lighter than it was last year - in part due to key events leaving the city for cheaper, less crime-ridden places like Las Vegas

Tyler Durden Sun, 03/17/2024 - 18:05

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Mistakes Were Made

Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that…

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Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that a bit during these past few years, but, if there’s one thing they’re exceptionally good at, it’s taking responsibility for their mistakes. Seriously, when it comes to acknowledging one’s mistakes, and not rationalizing, or minimizing, or attempting to deny them, and any discomfort they may have allegedly caused, no one does it quite like the Germans.

Take this Covid mess, for example. Just last week, the German authorities confessed that they made a few minor mistakes during their management of the “Covid pandemic.” According to Karl Lauterbach, the Minister of Health, “we were sometimes too strict with the children and probably started easing the restrictions a little too late.” Horst Seehofer, the former Interior Minister, admitted that he would no longer agree to some of the Covid restrictions today, for example, nationwide nighttime curfews. “One must be very careful with calls for compulsory vaccination,” he added. Helge Braun, Head of the Chancellery and Minister for Special Affairs under Merkel, agreed that there had been “misjudgments,” for example, “overestimating the effectiveness of the vaccines.”

This display of the German authorities’ unwavering commitment to transparency and honesty, and the principle of personal honor that guides the German authorities in all their affairs, and that is deeply ingrained in the German character, was published in a piece called “The Divisive Virus” in Der Spiegel, and immediately widely disseminated by the rest of the German state and corporate media in a totally organic manner which did not in any way resemble one enormous Goebbelsian keyboard instrument pumping out official propaganda in perfect synchronization, or anything creepy and fascistic like that.

Germany, after all, is “an extremely democratic state,” with freedom of speech and the press and all that, not some kind of totalitarian country where the masses are inundated with official propaganda and critics of the government are dragged into criminal court and prosecuted on trumped-up “hate crime” charges.

OK, sure, in a non-democratic totalitarian system, such public “admissions of mistakes” — and the synchronized dissemination thereof by the media — would just be a part of the process of whitewashing the authorities’ fascistic behavior during some particularly totalitarian phase of transforming society into whatever totalitarian dystopia they were trying to transform it into (for example, a three-year-long “state of emergency,” which they declared to keep the masses terrorized and cooperative while they stripped them of their democratic rights, i.e., the ones they hadn’t already stripped them of, and conditioned them to mindlessly follow orders, and robotically repeat nonsensical official slogans, and vent their impotent hatred and fear at the new “Untermenschen” or “counter-revolutionaries”), but that is obviously not the case here.

No, this is definitely not the German authorities staging a public “accountability” spectacle in order to memory-hole what happened during 2020-2023 and enshrine the official narrative in history. There’s going to be a formal “Inquiry Commission” — conducted by the same German authorities that managed the “crisis” — which will get to the bottom of all the regrettable but completely understandable “mistakes” that were made in the heat of the heroic battle against The Divisive Virus!

OK, calm down, all you “conspiracy theorists,” “Covid deniers,” and “anti-vaxxers.” This isn’t going to be like the Nuremberg Trials. No one is going to get taken out and hanged. It’s about identifying and acknowledging mistakes, and learning from them, so that the authorities can manage everything better during the next “pandemic,” or “climate emergency,” or “terrorist attack,” or “insurrection,” or whatever.

For example, the Inquiry Commission will want to look into how the government accidentally declared a Nationwide State of Pandemic Emergency and revised the Infection Protection Act, suspending the German constitution and granting the government the power to rule by decree, on account of a respiratory virus that clearly posed no threat to society at large, and then unleashed police goon squads on the thousands of people who gathered outside the Reichstag to protest the revocation of their constitutional rights.

Once they do, I’m sure they’ll find that that “mistake” bears absolutely no resemblance to the Enabling Act of 1933, which suspended the German constitution and granted the government the power to rule by decree, after the Nazis declared a nationwide “state of emergency.”

Another thing the Commission will probably want to look into is how the German authorities accidentally banned any further demonstrations against their arbitrary decrees, and ordered the police to brutalize anyone participating in such “illegal demonstrations.”

And, while the Commission is inquiring into the possibly slightly inappropriate behavior of their law enforcement officials, they might want to also take a look at the behavior of their unofficial goon squads, like Antifa, which they accidentally encouraged to attack the “anti-vaxxers,” the “Covid deniers,” and anyone brandishing a copy of the German constitution.

Come to think of it, the Inquiry Commission might also want to look into how the German authorities, and the overwhelming majority of the state and corporate media, accidentally systematically fomented mass hatred of anyone who dared to question the government’s arbitrary and nonsensical decrees or who refused to submit to “vaccination,” and publicly demonized us as “Corona deniers,” “conspiracy theorists,” “anti-vaxxers,” “far-right anti-Semites,” etc., to the point where mainstream German celebrities like Sarah Bosetti were literally describing us as the inessential “appendix” in the body of the nation, quoting an infamous Nazi almost verbatim.

And then there’s the whole “vaccination” business. The Commission will certainly want to inquire into that. They will probably want to start their inquiry with Karl Lauterbach, and determine exactly how he accidentally lied to the public, over and over, and over again …

And whipped people up into a mass hysteria over “KILLER VARIANTS” …

And “LONG COVID BRAIN ATTACKS” …

And how “THE UNVACCINATED ARE HOLDING THE WHOLE COUNTRY HOSTAGE, SO WE NEED TO FORCIBLY VACCINATE EVERYONE!”

And so on. I could go on with this all day, but it will be much easier to just refer you, and the Commission, to this documentary film by Aya Velázquez. Non-German readers may want to skip to the second half, unless they’re interested in the German “Corona Expert Council” …

Look, the point is, everybody makes “mistakes,” especially during a “state of emergency,” or a war, or some other type of global “crisis.” At least we can always count on the Germans to step up and take responsibility for theirs, and not claim that they didn’t know what was happening, or that they were “just following orders,” or that “the science changed.”

Plus, all this Covid stuff is ancient history, and, as Olaf, an editor at Der Spiegel, reminds us, it’s time to put the “The Divisive Pandemic” behind us …

… and click heels, and heil the New Normal Democracy!

Tyler Durden Sat, 03/16/2024 - 23:20

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