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Week Ahead – Markets play tug-of-war with Covid-19 concerns and reopening momentum

Week Ahead – Markets play tug-of-war with Covid-19 concerns and reopening momentum

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4 years ago

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US governors are trying to carefully navigate reopening plans to salvage as many businesses as possible, while several states continue to struggle containing the coronavirus spread.  New York City, once the epicenter of the coronavirus pandemic in the US enters its phase 2 reopening on Monday, with as many as 300,000 employees expected to return to their jobs.  In the UK, PM Boris Johnson will push for an easing of the two-meter social distancing rule if he can get the support from health experts.

The one-way trade of buying risky assets might be over and volatility should remain elevated since the US economic recovery is not accompanied with a stronger rebound in the labor market. Adding to the uncertainty are the current virus resurgence concerns, what to expect in the fall, end of month volatility from the rebalancing of the S&P and Russell indexes, and a wrath of geopolitical risks.

Right now, the Fed has the greenlight to keep deficits on an unsustainable path, but that will only become an issue once the economy improves.  It is amazing how irrational the risk-on rally has been for global equities as the US sees the virus continues its spread across the country and as a second wave hits Beijing, and concerns of a resurgence could trigger more restrictions and cripple consumer confidence.  Financial markets are also constantly fluctuating over every vaccine/treatment update.  The base case remains that a vaccine will be found this year, with high hopes on a few that will have phase 3 vaccine trials starting this summer.

US Politics

Presidential Trump is resuming campaign rallies while the coronavirus pandemic continues to intensify across several states and while protests against police brutality continue.  Public health officials remain skeptical of any mass gatherings and are very nervous over the June 20th rally at the BOK center in Tulsa, Oklahoma, an arena that could hold up to 20,000 people.  President Trump is likely to remain on the attack against China, but Wall Street doubts he will follow through on any of his threats given the vulnerable state of the economy.

Democrats are eagerly awaiting former-VP Biden’s decision on his running mate.  Prior to COVID-19, the Democratic National Convention was originally scheduled in July, meaning we should have found out his decision by June.  Since the convention was delayed till August 17th, he will have more time to evaluate his candidates.  Biden will turn 78 a few weeks after the election, so his VP selection will be critical for many voters.

UK

With the UK economy continuing to feel the devastating effects of the coronavirus pandemic and lockdown that it forced, the Bank of England expanded its asset purchase facility this week by another £100 billion, taking the total to £745 billion. The additional purchases should see it through to the end of the year, with the pace being allowed to slow due to the economic prospects improving since the May inflation report. The country is still in the midst of a severe recession and unemployment will soar as the furlough scheme draws to a close but the Bank is less pessimistic than it was.

Brexit

Brexit negotiations are going to intensify between now and the end of July in the hope that significant progress can be made on some of the more contentious issues, with the end of year deadline fast approaching. An extension was once again ruled out after a discussion between Boris Johnson and Ursula von der Leyen earlier this week.

European Union

Leaders will discuss the draft 2021-27 budget for the first time on Friday but no breakthrough is expected, with the “frugal four” still strongly against the inclusion of grants, rather believing that the recovery fund – which will be raised in the market by the European Commission – should be repaid in full. The current proposition from the EC includes €500 billion of grants and €250 billion of loans, on top of the €1.1 trillion budget. The hope is that discussions lay the groundwork for a deal before the summer recess in August.

Switzerland

The SNB left interest rates unchanged this week and vowed to maintain ultra loose monetary policy and currency interventions for some time, with inflation not expected to return until 2022, and then by only 0.2%. It expects the country to shrink by 6% this year. The central bank has no limit on currency interventions or explicit target levels.

Turkey

The CBRT has been on an interest rate cutting cycle since last July, with rates falling from 24% to 8.25%. Only a 25 basis point rate cut is expected at this meeting.   The cuts have naturally been getting much smaller and the weakness in the currency may act as a deterrent, but that hasn’t held them back before. If there is a cut, it seems unlikely that it would exceed the 50 basis points at the previous meeting.

China

China is embroiled in multiple diplomatic conflicts at the moment, from US/China trade, Hong kong’s security law to the standoff with India in the Himalayas. Any of these could quickly escalate and have negative repercussions across markets around the world.

Monday China announces its one and five-year loan prime rate decisions. Expected unchanged but a surprise cut could boost markets across the region.

No other significant data this week.

Hong Kong

The new security law provisions will be announced shortly and look set to be rammed through the legislature in double quick time. High chance of rapidly increasing protests disrupting the economy and markets in Hong Kong.

India

Economy continues reopening but Covid-19 cases are spiking, markets negative. Standoff with China continues in the Himalayas but negotiations continue. However the situation is tense and could escalate rapidly. No significant data.

Australia

Australian Dollar remains under pressure as bull-market correction continues. High potential for more downside. Australia stocks and currency high vulnerability to sudden downside shift in sentiment as a proxy for global risk

No significant data.

Japan

Tuesday PMI expected to confirm Japan remains in recession. No other tier-1 data. Japanese Yen looks set to strengthen further on risk aversion flows. Geopolitical events elsewhere could rapidly accelerate that move.

Market

Oil

Oil prices rose after US economic data showed large parts of the economy are bouncing back strongly and after the OPEC+ group’s JMMC meeting saw Iraq and Kazakhstan deliver their strategies for bringing their production down to their quotas.  It seems OPEC+ might actually deliver with their biggest ever production cuts as most of the cheaters seem on board.  Nigeria, Angola, and Congo have yet to deliver reduction plans, but that might not matter if the larger producers seem committed.

WTI crude remains elevated but unlikely to break much past the $40 level as surging coronavirus cases across Texas, Florida and several other states raise the risk that reopening momentum will hit stall speed very soon.  Beijing seems they may have their second wave of the virus under control, but that does not seem like it will be the case for the US later in the summer or early Fall.  Global oil demand is recovering quickly but that seems like it might be poised to hit a few bumps as reopenings lose momentum as virus risks remain significant.

Gold

Gold prices continue to consolidate regardless of negative coronavirus headlines and more stimulus being pumped into the global economy.  Despite all the other positive economic releases, the recovery will not boost risky assets unless the Americans are quickly coming back to work.  Gold is in a tricky place but will ultimately see further support if the labor situation remains weak.  The stronger dollar theme will likely be short-lived, and gold should eventually make another attempt at $1750 in the short-term. The virus situation in the US should also provide steady demand for safe-havens such as Treasuries and gold.  Texas saw hospitalizations rise for a record seventh consecutive day, Florida had its largest increase with new cases, while California had their largest single-day increase with infections.

Bitcoin

Bitcoin continues to consolidate in what many crypto-fans are calling the typical accumulation phase that occurs after a halving event.  Bitcoin has struggled despite an overall resilient appetite for risky assets.  The world’s largest cryptocurrency has started to see some traders focus more so on Ether’s network as demand grows for decentralized finance (DeFi) applications.  Bitcoin may struggle as their rival continues to gain momentum.

Key Economic Releases and Events

Sunday, June 21st

11:00pm NZD May Credit Card Spending M/M: No est v -41.3% prior

Monday, June 22nd

10:00am EUR Eurozone June Advance Consumer Confidence: No est v -18.8 prior

10:00am USD May Existing Home Sales: 4.13Me v 4.33M prior

7:00pm AUD Australia Jun prelim CBA Manufacturing PMI: No est v 44.0 prior

8:30pm JPY Japan Jun Prelim Manufacturing PMII: No est v 38.4 prior

Tuesday, June 23rd

3:15am EUR France Jun Prelim Manufacturing PMI: 47.0e v 40.6prior

3:30am EUR Germany Jun Prelim Manufacturing PMI: 42.5e v 36.6 prior

4:00am EUR Eurozone Jun Prelim Manufacturing PMI:43.0e v 39.4 prior

4:30am GBP UK Jun Prelim Manufacturing PMI:45.5e v 40.7 prior

10:00am USD Jun Prelim Markit Manufacturing PMI: 47.8e v 39.8 prior

10:00am USD May New Home Sales: 630Ke v 623K prior

10:00am USD Jun Richmond Fed Manufacturing Index: No est v -27 prior

10:00pm New Zealand Central Bank (RBNZ) Interest Rate Decision: To keep rates unchanged

 Wednesday, June 24th

CNY Chinese banks observe Dragon Boat Festival

4:00am EUR Jun Germany IFO Business Climate: e v 79.5 prior

Thursday, June 25th

CNY Chinese banks observe Dragon Boat Festival

8:30am USD US May Prelim Durable Goods Orders: 11.2%e v -17.7% prior

8:30am USD US Q3 Final GDP Q/Q: -5.0%e v -5.0% prelim

8:30am USD Weekly Jobless Claims

Friday, June 26th

Russell reconstitution could deliver one of highest-volume stock-trading days of the year

8:30am USD May Personal Income: -5.8%e v 10.5% prior; Personal Spending: 8.7%e v -13.6% prior

10:00am USD University of Michigan Sentiment: 78.9e v 78.9 prelim

 

 

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International

Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

Published

2 hours ago

on

March 10, 2024

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It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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Government

Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

Published

17 hours ago

on

March 9, 2024

By

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Government

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

Published

17 hours ago

on

March 9, 2024

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

“The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

“By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

“This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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