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USD Remains Still as Markets Wait for US Leadership

Overview: The short squeeze that lifted the US dollar ahead of the weekend has seen limited follow-through buying, and instead a consolidative tone emerged.  Europe is searching for direction and perhaps waiting for US leadership after a quiet Asia Pacifi

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Overview: The short squeeze that lifted the US dollar ahead of the weekend has seen limited follow-through buying, and instead a consolidative tone emerged.  Europe is searching for direction and perhaps waiting for US leadership after a quiet Asia Pacific session, with several centers closed for holiday today (China, Hong Kong, Taiwan, and Australia).  Japanese and South Korean equities advanced.  Europe's Dow Jones Stoxx 600 is up for the seventh consecutive session.  Gains in information technology, energy, and utilities are helping to lift the benchmark to new record highs.  US equity futures are posting minor gains.  Benchmark 10-year yields are slightly firmer.  The US yield is at 1.46% after shedding 10 bp last week, the most since last June.  Outside of the Norwegian krone (~+0.25%) and sterling (~-0,20%), the major currencies are +/- less than 0.1%.  Emerging market currencies are also mostly quiet.  The Turkish lira is extending its recovery.  It is the seventh advancing session.  Most of the other freely accessible and liquid emerging market currencies have a heavier bias today. The JP Morgan Emerging Market Currency Index is off for a second consecutive session, something it has not done for a little over a month.  Gold dropped $21 ahead of the weekend and is off around another $20 today.  It tested support around $1855.  The 200-day moving average is near $1840.  Oil is trading higher, and the July WTI is at new highs approaching $72.00. Asia Pacific The G7 closed ranks just as the US political elite have done with a shared approach to the challenge presented by Beijing.  "America is back" would have little meaning if it did not have a mission, and the mission appears largely defined in the negative to check China.  US, Europe, Canada, and Japan's disapproval of Beijing's domestic and foreign policy is clear, and it does not appear to have much impact. An alternative to China's Belt Road Initiative is beginning to take shape.  It is a new infrastructure initiative for low and middle-income countries that mobilizes private investment for projects, which is consistent with the growing interest in ESG in high-income countries. The fact that China's loans are not at concessionary rates, and has taken possession of collateral (e.g., Hambantota Port), may create opportunities for the new initiative.  However, the conditionality often associated with the US, Europe, and the multilateral lenders, poses its own hurdles.   The G7 did come together to offer one billion vaccines to poor countries by the end of next year, directly or indirectly through COVAX, but this seemed to disappoint expectations because this represented only a new commitment of 613 mln doses.  The gap between this and the 11 bln vaccines that the World Health Organization says are needed seems stark for a virus that continues to mutate. China had hoped to neutralize Europe with the investment accord struck last year, a few weeks before Biden was sworn in.  Italy had signed on to the Belt Road Initiative.  The UK Tories have been pulled between the commercial opportunities offered and the abhorrence of Beijing's actions.  European politics are fluid, with German elections later this year and French elections next year. France holds local elections on June 20, with run-offs a week later.  Le Pen appears to be gaining on the center-right. Germany's Greens are emerging as the country's second-largest party and take a harder line against China than the CDU or SPD.  The investment treaty has been frozen and has no prospect of being approved any time soon.   Draghi, who is the latest in a storied history of unelected prime ministers in Italy, has taken a firmer line against Chinese companies acquiring Italian companies.  Still, China continues to take advantage of whatever fissures it can.  On his way to the NATO meeting in Brussels, Turkey's Erdogan announced that its currency swap line with Beijing increased to $6 bln from $2.4 bln.  After running down reserves defending the lira, Turkey sought help from Europe and the US with little success.  Although China has currency swap lines with around three dozen countries, they are hardly ever used.  Ankara tapped the yuan swap line last June. The dollar held last week's high of almost JPY109.85 and has retreated a little more than 20 pips.  Support was built last week in the JPY109.20-JPY109.30 area.  It likely will take higher US yields to spur a test on JPY110, where an $800 mln option the expires tomorrow is struck.  The Australian dollar is consolidating in the lower end of its pre-weekend range.  It, too, has been confined to a little more than a 20-pip range today, finding support near $0.7695.  A move above $0.7720 is needed to help lift the tone.  With the mainland closed, the onshore yuan has not traded, but the offshore yuan was sold, and its 0.3% loss is the largest in over a month.  The dollar is trading near CNH6.4165 to poke above the 20-day moving average (~CNH6.40) for the first time since mid-April. Europe Tensions over Brexit were not resolved at the G7 meeting.  If anything, tensions escalated.  The UK is threatening to invoke emergency measures to continue delaying key provisions of the trade agreement.  The focus is on the Northern Irish border.  The UK wants to renegotiate the agreement that draws the regulatory border in the Irish Sea, which Prime Minister Johnson campaigned vigorously for and based a victorious election on it.  Separately, a formal decision on postponing the economy-wide re-opening that had been penciled in for a week from now is awaited.  Reports suggest that rather than a two-week delay that had been floated last week, a four-week delay is likely. The EU will issue its first joint bond for the post-pandemic recovery fund this week. The recovery fund is 800 bln euros, but member governments appear reluctant to tap the loan component (~385 bln euros) and show a clear preference for the grant facility.  Reports suggest that only Italy has drawn up plans to borrow from the recovery fund.  Although many astute observers see this as a "Hamiltonian moment,"  we are less sanguine.  The decision to make the effort permanent has still not been made.  The EU remains a supranational rather than a sovereign borrower. Also, without the "joint and several guarantee" clause, each member is responsible for only their part in case of default. Biden and Putin are to meet on Wednesday.  Ahead of the meeting, Putin offered to extradite cybercriminals to the US, but only on a reciprocal basis.  Just like Nixon and Kissinger opened relations with Beijing to check the Soviet Union, the Biden Administration seems to be holding out the possibility that it can convert Russia to a good actor on the international stage, with the right inducements to drive a wedge between it and China.  It seems like a stretch.  Moreover, while the US has been a victim of Russian-based cyber-attacks, the US engagement has not been pressed or covered by the media. News that industrial output in the eurozone rose by 0.8% in April, or double what the median forecast in the Bloomberg survey anticipated and that the March series was revised to show a 0.4% gain instead of 0.1%, failed to have much impact on the euro.  The euro held the pre-weekend low (~$1.2093) but has been capped near $1.2120.  There is nearly a 1.1 bln euro option at $1.2150 that expires today.  Sterling briefly slipped through last week's lows, set on June 10, near $1.4074.  The $1.4120-$1.4130 area offers nearby resistance. America The busy week for the US begins slowly.  No data is on tap for today, and Fed officials are in the quiet period ahead of the conclusion on Wednesday of the FOMC meeting.  Tomorrow, the US reports May retail sales, and a decline in both the headline and core measures are expected. Industrial production and manufacturing output are expected to have expanded in May.  Headline producer prices may stabilize on a year-over-year basis (~6.2%), but the core measure is projected to have increased. While the Fed is not expected to change its policies, the consensus on no hike until after 2023 may fray further.  The December 2022 Eurodollar futures contract implies that the market is discounting a strong chance of a rate hike at the end of next year. The highlight this week for Canada is the May CPI on Wednesday.  The pace is expected to tick up slightly from the headline of 3.4% in April.  The underlying core measures may also rise slightly.  The Bank of Canada's decision next month, whether to continue to gradually taper its bond purchases, is seen as dependent on the stabilization of the labor market.  Canada has lost jobs in April and May.  Canada reports housing starts and existing home sales tomorrow its monthly portfolio flow data on Thursday. Mexico's economic calendar is light this week.  Brazil's central bank meets on Wednesday and has already committed itself to a 75 bp hike, which would bring the Selic rate to 4.25%.  It began the year at 2.0%.   Inflation is running a little hotter than 8% year-over-year.  The Brazilian real is up almost 1.6% this year, the strongest in the region. The Mexican peso is virtually flat this year. The US dollar reached its highest level since mid-May against the Canadian dollar ahead of the weekend  (~CAD1.2180).  It is consolidating just below it so far today.  A break of CAD1.2120-CAD1.2145 would suggest a high may be in place. Still, inside a CAD1.20-CAD1.22 trading range, the greenback appears comfortable.  Similarly, the US dollar traded briefly and narrowly above MXN20.00 before the weekend but settled below MXN19.88. It has been confined to a tight range around its settlement level.  Support is seen near MXN19.75. The dollar tested the BRL5.0-area several times last week before bouncing ahead of the weekend to almost BRL5.14.  Resistance is seen around BRL5.20.   Disclaimer  

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Government

Top Stories This Week: Gold Manipulators Go to Court, Silver’s Industrial Side in Focus

Catch up and get informed with this week’s content highlights from Charlotte McLeod, our editorial director.
The post Top Stories This Week: Gold Manipulators Go to Court, Silver’s Industrial Side in Focus appeared first on Investing News Network.

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The gold price held above US$1,800 per ounce this week, finishing the period around that level, which is down from last week’s July high point of around US$1,830. 

Marc Lichtenfeld of the Oxford Club is one market watcher who’s struggling to understand why gold isn’t doing better this year. We had the chance to speak this week, and he pointed to money printing, the impact of COVID-19 and inflation as factors that should be pushing gold to record highs.

So far in 2021 those elements have have failed to do the trick, and Marc said he sees a disconnect between the yellow metal’s traditional fundamentals and what’s happening in the market.

 

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“There just seems to be a disconnect between what are the traditional gold fundamentals and what’s happening out in the world … it’s really difficult to try to figure out what is happening with gold and why gold isn’t at record highs” — Marc Lichtenfeld, the Oxford Club

Of course, some would argue that price manipulation is the reason gold isn’t moving, and this week there was more news on that front. Chat logs were released in a spoofing trial for two former precious metals traders from the Bank of America’s (NYSE:BAC) Merrill Lynch unit, and they show one of the traders bragging about how easy it is to manipulate the price of gold. The trial isn’t over yet, but in its opening arguments that trader’s attorney said he stopped spoofing after he found out it was illegal.

Looking over to silver, I heard this week from Collin Plume of Noble Gold Investments, who thinks industrial demand will help push the white metal above the US$40 per ounce mark in the next 12 to 18 months. Silver has struggled to pass US$30 so far this year.

Solar panels are one of silver’s key uses, but it’s also found in other high-tech applications such as electronics and electric vehicles. Collin isn’t aware of any commodities that can replace silver in its end-use markets, and with demand “through the roof,” he expects to see shortages of silver by next year.

With silver in mind, we asked our Twitter followers this week if they think its industrial or precious side is driving the most demand right now. By the time the poll closed, about 70 percent of respondents said they think the precious angle is more important.

 

Uranium Soared Last Year While Other Resources Tumbled

 
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We’ll be asking another question on Twitter next week, so make sure to follow us @INN_Resource or follow me @Charlotte_McL to share your thoughts.

We’re going to finish up with the cannabis space, where there was a major announcement last week.

A group of Democratic senators headed by Senate Majority Leader Chuck Schumer introduced a draft of the Cannabis Administration and Opportunity Act, which among other things would remove cannabis from the Controlled Substances Act. The long-awaited bill will need 60 votes to get through the Senate, and opinion is split on whether that will actually happen.

INN’s Bryan Mc Govern spoke with Dan Ahrens of AdvisorShares Investments, who thinks it has “no chance of passing,” but remains optimistic about prospects for American cannabis companies.

“No one should expect US (cannabis) legalization anytime soon. We should expect reforms; they’re not coming as fast as anyone would like to see, but everybody agrees we’re going to get some form of banking reform in the near future … we’ll see baby steps” — Dan Ahrens, AdvisorShares Investments

Why? In his opinion, these stocks remain undervalued compared to their Canadian counterparts, and are operating well even without federal cannabis approval. Any legalization progress would be a bonus.

Want more YouTube content? Check out our YouTube playlist At Home With INN, which features interviews with experts in the resource space. If there’s someone you’d like to see us interview, please send an email to cmcleod@investingnews.com.

And don’t forget to follow us @INN_Resource for real-time updates! 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

 

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The post Top Stories This Week: Gold Manipulators Go to Court, Silver’s Industrial Side in Focus appeared first on Investing News Network.

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Economics

Top 5 Rubber Stocks to Buy in 2021

Here are some of the best rubber stocks to buy right now. Increased demand and supply chain disruptions are putting pressure rubber prices.
The post Top 5 Rubber Stocks to Buy in 2021 appeared first on Investment U.

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When it comes to investing, all the attention tends to go to healthcare, tech and increasingly renewable energy. But these aren’t the only stocks on the block, and some old mainstays can also add value to your portfolio. One of those old, reliable industries is rubber: it always has some level of demand, and that won’t likely change anytime soon. But recent economic conditions make rubber even more intriguing than usual. One of the biggest uses of rubber is car tires, and sharp economic recovery is likely to mean a sharp demand for new cars. Hence, we may also see a sharp increase in demand for rubber as many people head to the dealer to buy a new car. There’s more to it than just the auto industry, of course. CNBC reported that disruptions in the supply chain are also causing major disruptions. And we use rubber for many different essential items, including personal protective equipment and countless other items. With increased demand and supply chain disruptions, rubber stocks are poised for a rise. Here are some of the best rubber stocks to buy:
  • Goodyear Tire & Rubber (Nasdaq: GT)
  • Trinseo (NYSE: TSE)
  • Michelin (OTC: MGDDY)
  • Carlisle Companies (NYSE: CSL)
  • Protolabs (NYSE: PRLB)
If you’ve never invested in rubber stocks before, you might be wondering if they are a good investment. Let’s consider that question before looking at each stock more closely. And if you want to see how your investment portfolio might grow, check out our free investment calculator.

Is Rubber a Good Investment?

Rubber can certainly be a good investment because it is nearly ubiquitous; it is used in many different products, including tires, footwear, pharmaceuticals, textiles and many other products. As Zacks notes, rubber is among the most profitable industries when it comes to natural resources. But rubber isn’t exactly the most innovative product. Perhaps it was decades ago, but these days, it’s something most of us are just used to seeing. We don’t really demand rubber so much as the products that contain it. Hence, it’s only when demand for those products increases that the demand for rubber spikes. And as mentioned earlier, we are at a point right now where many people are looking to buy new cars, and rubber’s use in tires could cause a surge in demand. However, these things can be very cyclical. The Zacks page linked above highlights this very well. There, you can see the rubber tires industry has a YTD performance of 42.90% compared to 16.09% for IVV, an S&P 500 fund. But as good as that sounds, the 5-year performance for rubber tires is -33.71% compared to 112.67 for IVV. Given the downside risk, rubber is probably best used as part of a balanced portfolio containing more well-round assets, such as funds like IVV.

Rubber Stocks to Buy Now

If you want to “bounce” your returns upward with rubber stocks, here are some of the best rubber stocks to buy right now. Keep an eye on them as the situation with the auto industry progresses.

Goodyear Tire & Rubber

Goodyear Tire & Rubber is a tire manufacturer that makes tires for a variety of uses. Tires for automobiles are one of the biggest uses of Goodyear tires. However, they are also used on buses, trucks, aircraft, motorcycles, mining equipment, industrial equipment and farm equipment. In addition to the Goodyear name, it also has Dunlop and Kelly tires under its belt. Goodyear has been around since 1898 and was the first global tire manufacturer to enter the Chinese market. It produces a range of tires, rubber products and chemicals across the U.S. and Canada.

Trinseo

Trinseo is a global materials company that manufactures latex, plastics and synthetic rubber. Notably, it produces plastic for Lego. When it comes to rubber, Trinseo produces styrene-butadiene rubber (SSBR). This material is primarily used in high-performance tires. In addition to Legos, its plastic is used in automotive applications, LED lighting and medical devices. Trinseo is growing rapidly, with 17 manufacturing and 11 research facilities worldwide. In addition, it is already seeing healthy revenue increases as it continues to grow. Its website notes Trinseo is “dedicated to making a positive impact on society,” and it will support the “sustainability goals of our customers in a wide range of end-markets.”

Michelin

Michelin is another name that is big in the tire manufacturing business, and the demand for new cars places it squarely on this list. In addition to the Michelin tire brand, the company also owns BFGoodrich and Uniroyal. BFGoodrich is a premium tire brand for sports cars, offroad vehicles and light trucks. Michelin is the largest tire manufacturer in the US and the second-largest in the world. It has 34 plans in two countries and had over $8 billion of sales in 2020. Its revenue has been increasing, as has its stock price. As the situation with the auto industry evolves, it will be interesting to see how Michelin fares.

Carlisle Companies

Founded in 1917 and based in Scottsdale, Arizona, Carlisle Companies is about more than just rubber. It is more of an umbrella under which there are a number of different operations. Its products and services include healthcare, commercial roofing, aerospace and electronics, lawn and garden, agriculture, energy, mining and construction equipment, and dining. Of course, there are many uses for rubber and plastic across these industries. In 2018, Carlisle Companies released a plan called Vision 2025 in which it detailed how it will continue to grow over the next 100 years.

Protolabs

Protolabs is an intriguing company. It produces low-volume 3D printed, CNC-machining, sheet metal fabrication and injection-molded custom parts. These parts are then used for short-run production and in prototypes. The company describes itself as the “world’s fastest digital manufacturing service.” It also provides rubber, metal and commercial plastics. Given its business model, it was able to produce several items during the coronavirus pandemic, including face shields, plastic clips and items used in test kits. They were in turn used in Minnesota hospitals, where the company is based.

More Investing Opportunities

The rubber stocks above might produce some big returns for investors. Although, there are many industries and stocks to choose from. So, here are some more investing opportunities and research… If you’re looking for expert analysis delivered straight to your inbox, consider signing up for Profit Trends. It’s a free e-letter that’s packed with investing tips and tricks. Whether you’re new or already an experienced investor, there’s something for everyone. The post Top 5 Rubber Stocks to Buy in 2021 appeared first on Investment U.

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Government

Biden Says New Cuba Sanctions Are “Just The Beginning” 

Biden Says New Cuba Sanctions Are "Just The Beginning" 

President Biden says the newly announced sanctions against Cuba are "just the beginning" after rare widespread protests took over multiple cities on the communist-run island starting…

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Biden Says New Cuba Sanctions Are "Just The Beginning" 

President Biden says the newly announced sanctions against Cuba are "just the beginning" after rare widespread protests took over multiple cities on the communist-run island starting earlier in July. In the Thursday fresh sanctions announcement Biden condemned "the mass detentions and sham trials that are unjustly sentencing to prison those who dared to speak out in an effort to intimidate and threaten the Cuban people into silence," according to a White House statement

Specifically these latest sanctions target the defense minister and the National Special Brigade of Cuba’s Interior Ministry (on top of broader decades-long US sanctions against the government and economy).

Cuban Americans at a protest in Miami, via AP

Biden said these two officials in particular are spearheading the crackdown on Cuban protesters. He suggested there's much more to come.

"This is just the beginning — the United States will continue to sanction individuals responsible for oppression of the Cuban people," Biden said.

The administration further said it's working to "restore internet access" in Cuba after widespread shutdowns were reported over this month as Cuban security forces struggle to gain control of the demonstrations, largely driven by an economy in tatters, food and fuel shortages, and severe mismanagement of the pandemic crisis. 

Currently, the US even prohibits remittances, barring Cuban-Americans from sending money to their families, with last year Western Union also shutting down all money-sending services to Cuba after the Trump administration re-imposed sanctions. 

The Biden White House since he took office has vowed to "review" Trump era policies, but so far has kept them in place and now even appears to be ramping up the pressure once again. He again hinted this week that there could be a policy change toward "easing" restrictions. 

Cuba has for its part alleged a foreign hand behind the recent protests, especially following the so-called "Cuban Twitter" initiative of the past decade, which was long ago exposed as part of Washington's covert efforts to stir unrest on the island. 

Tyler Durden Fri, 07/23/2021 - 20:40

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