Week Ahead – Reopening economies appear to be the only trade in town
Week Ahead – Reopening economies appear to be the only trade in town
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It seems financial markets continue to ignore the terrible economic data and focus on hopes that the economy will see a rapid turnaround. With over 85% of companies in the S&P 500 done with earnings season, Wall Street will remain fixated with efforts to reopen the economy and the spread of the virus. If additional COVID-19 spikes in the country are worse than the first wave, it will be hard for governors to keep moving forward with their reopening plans.
New York City appears to be finally ahead of the virus and optimism is growing that we could be seeing light at the end of the tunnel. Governor Cuomo will not loosen restrictions early, but if the daily number of hospitalizations, rate of new infections, and COVID-10 related deaths continue to decline, he could reopen parts of upstate on May 15th, and hopefully New York City later in the summer.
The bond market seems to be trying to tell us something after the 2-year yield Treasury yield fell to a record low on Friday. Risky assets have had a great week, with US stocks steadily climbing higher, while commodity currencies finished much stronger, but if the bond market is right, the risky asset rally might be ending soon.
The week ahead will have a tremendous amount of focus with the Chinese recovery, as critical April economic data will show how fast their economy is bouncing back. China’s pickup in economic activity will be the template many will use for outlining what will happen in Europe and the US. The easing of lockdown conditions globally along with the risk of a spike of new COVID-19 cases will also be critical for the next couple of months. All eyes will be on Fed Chair Powell on Wednesday morning as investors look for some clarity as to how much more stimulus can financial markets expect.
Key Economic Releases and Events
Saturday, May 9th
- Spain may release further details about easing lockdown restrictions
Sunday, May 10th
- K. Prime Minister Boris Johnson lays out a roadmap for easing the U.K.’s lockdown. Some measures are expected to be effective as soon as May 11.
- 7:50pm JPY BOJ summary of Opinions
- 9:00pmNZD ANZ Business Confidence: No est v -66.6 prior
Monday, May 11th
- Brexit talks resume with EU
- 4:00am EUR Italian Industrial Production M/M: -20.0%e v -1.2% prior
- 9:30pm AUD NAB Business Confidence: No est v -66 prior
- 9:30pm CNY Apr CPI Y/Y: 3.7%e v 4.3% prior; PPI Y/Y: -2.6%e v -1.5% prior
- 11:35pm JPY Japan to sell 10-year bonds
Tuesday, May 12th
- US Supreme Court to hear a set of cases involving subpoenas for President Donald Trump’s financial records
- Norway presents revised budget for 2020
- 1:00am JPY March Preliminary Leading Index: 84.0e v 91.7 prior
- 6:00am USD NFIB Small Business Optimism: 88.0e v 96.4 prior
- 8:30am USD Apr CPI M/M: -0.7%e v -0.4% prior; Y/Y: 0.4%e v 1.5% prior
- 10:00am Fed President Patrick Harker discusses the impact of Covid-19
- 10:00am Fed Vice Chair for Supervision Randal Quarles testifies before the Senate
- 1:00pm USD US to sell 10-year Notes
- 2:00pm USD Apr Monthly Budget Statement: No est v -$119.1B prior
- 8:30pm AUD Westpac Consumer Confidence SA M/M: No est v -17.7% prior
- 9:30pm AUD Wage Price Index Q/Q: 0.5%e v 0.5% prior
- 10:00pm New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to keep Cash Rate unchanged at 0.25%. Press conference to follow shortly afterwards
Wednesday, May 13th
- Earnings: Tencent Q1 results
- OPEC Monthly Report
- 2:00am GBP UK Q1 Preliminary GDP Q/Q: -2.6%e v 0.0% prior; Y/Y: -2.2%e v +1.1% prior
- 2:00am GBP Mar Manufacturing Production M/M: -6.0%e v +0.5% prior; Industrial Production M/M: -5.8%e v +0.1% prior
- 5:00am EUR Mar Industrial Production M/M: -12.0%e v -0.1% prior
- 5:30am EUR Germany to sell 30-year bonds
- 8:30am USD Apr PPI Final Demand M/M: -0.4%e v -0.2% prior
- 9:00am USD Fed Chair Powell speaks on economy
- 10:30am Crude Oil Inventories
- 1:00pm US to sell 30-year bonds
- 9:30pm AUD Apr Employment Change: -450Ke v +5.9K prior; Unemployment Rate: 7.8%e v 5.2% prior
- 10:00pm NZD New Zealand Government Budget
- 11:35pm JPY Japan to sell 30-year bonds
Thursday, May 14th
- IEA Monthly oil market report
- 2:00am JPY Apr Preliminary Machine Tool Orders Y/Y: No est v -40.7% prior
- 4:00am EUR ECB Economic Bulletin
- 6:30am GBP BOE Gove Bailey speaks on webinar
- 8:30am USD Weekly Initial Jobless Claims
- 8:30am CAD Manufacturing Sales M/M: No est v 0.5% prior
- 10:00am CAD Bank of Canada to release Financial System Review
- 2:00pm MXN Mexico Central Bank (Banxico) Interest Rate Decision: To cut Overnight Rate by 50 bps to 5.50%.
- 6:30pm NZD Apr Business Manufacturing PMI: No est v 53.2 prior
- 7:50pm JPY Apr PPI Y/Y: -1.4%e v -0.4% prior
- 10:00pm CNY China Apr Industrial Production Y/Y: 1.5%e v -1.1% prior; Retail Sales Y/Y: -6.0%e v -15.8% prior; Fixed Asset Ex Rural YTD Y/Y: -9.0%e v -16.1% prior
Friday, May 15th
- 2:00am EUR Germany Q1 Prelim GDP Q/Q: -2.3%e v 0.0% prior; WDA Y/Y: -2.0%e v +0.4% prior
- 5:00am EUR Eurozone Q1 Prelim GDP Q/Q: -3.8%e v -3.8% prior; WDA Y/Y: -3.3%e v -3.3% prior
- 8:30am USD Apr Retail Sales Advance M/M: -11.0%e v -8.7% prior
- 8:30am USD May Empire Manufacturing: -65.0e v -78.2 prior
- 9:15am USD Apr Industrial Production M/M: -11.4%e v -5.4% prior; Capacity Utilization: 65%e v 72.7% prior
- 10:00am USD May Preliminary Michigan Sentiment: 67.5e v 71.8 prior
Sovereign Rating Updates after the close:
- Fitch on Austria
- Fitch on France
- S&P on Iceland
- S&P on Israel
- Moody’s on Austria
- S&P on Netherlands
Country
US
Financial markets remain primarily focused on the spread of COVID-19 and as US states reopen economies and ease coronavirus lockdowns. The economic data devastation is mostly priced in and risk appetite seems like it will remain healthy as long the Fed and US government continue to signal more monetary and fiscal stimulus is in the pipeline.
US-Chinese relations are also providing some uncertainty for the global economic rebound story. Tensions between the world’s two largest economies could derail much of the reopening optimism that has eased demand for safe-havens. President Trump appears focused with the November election and will likely keep up the verbal pressure on China but fail to deliver any harsh action that will threaten the second half economic recovery.
US Politics
The Presidential election is less than six months away and former VP Joe Biden needs to pick who will be his running mate. Biden has promised his VP selection would be a woman, but it should not be ruled out that he might have to cave on the idea and go with Governor Cuomo. The New York Governor handling of the handling of coronavirus has made him a favorite among many on the East Coast, but his likeability is questionable for the Midwest. Biden will turn 78 a few weeks after the election, so his VP selection will be critical for many voters.
UK
Boris Johnson is expected to announce on Sunday that the lockdown will remain in place for another three weeks but restrictions will be eased a little, the first step towards the new normal.
The Bank of England opted against easing monetary policy on Thursday, despite moving the announcement to earlier in the day, which led to speculation that more easing was coming. The BoE stands ready to do more and will meet multiple times before June, when the additional bond purchases announced in March are completed.
Europe
Europe continues to see restrictions being gradually lifted in various countries and all eyes will be on the experience here in the coming weeks to see what can be expected elsewhere. But the data is heading in the right direction and governments are acting with strong caution which will give people hope that further restrictions won’t be needed in the future.
Turkey
The currency slumped to its lowest level ever against the US dollar as concerns grew about the Turkish economy in the face of the coronavirus crisis. The economy was already in a bad way and the latest developments forced the banking regulator to restrict access to lira transactions, an attempt to prevent short speculation in the currency. Not only did this shore up the currency, it exacerbated the declines. Challenging times ahead for the country.
China
The economic recovery is expected to continue in China, and a wrath of data is supposed to confirm it. China’s big economic releases this week should show improvements to industrial production, retail sales and property investment, while the PBOC maintains monetary easing and support with credit expansion.
India
India’s government has loosened up lockdown rules and financial markets will carefully watch to see how bad the next wave of cases will be. India will see some inflation in April, but it is expected to be short-lived. The RBI remains committed to easing and should not be switching stances anytime soon.
Australia
Australia is expected to have lost over a half-a-million jobs in April. The coronavirus pandemic has crippled the Australian economy, but hopes are growing that they will reopen by July.
Japan
Japan has extended the nationwide state of emergency to the end of May, but will reassess the situation on May 14th. Japan seems poised to lift some measures in some areas that are showing no new cases. PPI data from Japan will likely confirm the deflationary pressures that have persisted this year.
Market
Oil
Oil prices have staged quite the rebound as more countries signal further curtailment of crude production and as crude demand begins to comeback after several states and countries begin to reopen. Oil prices seem to finally be settling on a range after a constructive two weeks of steady gains. Energy markets are becoming confident the market will return to balance this summer and that we won’t have a repeat of last month’s contract expiry volatility.
Gold
Gold remains stuck in a range as dismal economic data continues to get shrugged off on reopening hopes. Gold is waiting to see if the next round of stimulus will be significant and that will depend on how the next few weeks go in both Europe and the US.
The consolidation phase still remains with $1,660 providing the floor and $1,750 the ceiling.
Bitcoin
Bitcoin must thank Paul Tudor Jones. Bitcoin’s bullish momentum was supposed to be attributed to a halving event that is finally upon us but growing institutional interest could support significantly higher prices from here. Bitcoin is likely to see a ‘buy the rumor, sell the news’ reaction following the upcoming halving event. Bitcoin could see a major pullback, but growing interest should provide major support as long financial markets do not see any major risk aversion selling days.
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.
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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.
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.
bankruptcy pandemic canadaGovernment
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…
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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.
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.”
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…
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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.
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.
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