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Week Ahead – The Recovery Continues

Week Ahead – The Recovery Continues

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3 years ago

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The latest employment report had every economist scratching their head.  The stunning 2.51 million jobs created in May is leading many investors to become even more optimistic that the underlying economy is improving.  The worst might be behind us but risks remain to the outlook.  Some investors believe unprecedented stimulus from global central banks will drive the economic rebound and continue to support their dollar bearish bets.  If the global economic revival continues, a tall task at hand when you consider the China risk and coronavirus second wave concerns, the greenback losing streak could continue.

The week ahead will focus the Fed’s upcoming rate decision and reopening momentum across the globe. Two highly coveted reports will also be released by the World Bank and the OECD, which will only represent their best guess on how the global economic recovery will turn out.  Investors will also pay attention to the euro-area finance ministers’ next round of talks with the EU’s recovery package and the Eurogroup presidency succession.  US-China trade tensions will also remain a focal point as both sides continue to exchange jabs.

Country

US

After getting an A for their swift and strong response to the coronavirus pandemic, the Fed now needs to wait and see how the recovery unfolds.  Wednesday’s policy decision announcement should be an easy one for Powell and company.  The next natural step seems for them to consider adopting yield-curve control.  This would make the Fed target yields for possibly two-or five-year maturities.

Following a surprisingly robust nonfarm payroll report, many investors will start to doubt we may see another strong fiscal response by the US government.  Stimulus provided stocks a safety net, but now the next part of the rally will solely rely on improving economic activity.

The reopening of the US economy continues with New York City expected to reach their first phase of reopening on Monday.  While New York continues to have the right trajectory regarding new coronavirus cases, concerns are growing that the recent protests could result in a significant spike of cases.  Health experts are also growing cautious that many parts of the country are starting to see higher cases and that could eventually derail many states from reaching their next reopening phase.

US Politics

President Trump was always in re-election mode, but now he can resume in-person funding.  Trump’s first fundraiser in two months will take place on Thursday in Dallas with 25 attendees.  The election is under five months away and the recent trend has former-VP Biden slowly widening his lead.  It is still very early, but financial markets will soon need to start pricing in the possibility that Biden could win the Presidency and that the Democrats could take the Senate back.

UK

The economy is continuing to reopen, despite widespread concern about whether measures are being unwound too soon. Still, the numbers continue to improve. That will be tested in the coming weeks though, especially if the good weather continues and people flock to beaches and parks.

Europe

The ECB increased purchases under PEPP by €600 billion this week and extended it until June 2021, taking the program to €1.35 trillion and asset purchases under all programs this year to a record €1.4 trillion. The move comes on top of the proposed recovery package from the European Commission last week and no doubt contributed to the ongoing rally in equity markets this week. Central banks once again proving that any talk of policy tools being exhausted is extremely premature.

Turkey

The lira has steadied over the last few weeks. It’s more than 6% off its lows but still around 15% below January levels. The decline in the dollar recently may have alleviated some of the pressure on the currency, if that reverses, the lira’s good fortune could change fast. But the economy is emerging from the lockdown and reported coronavirus cases have fallen considerably. The crisis is far from over and the economy had major problems long before the pandemic but the situation appears to be improving.

China

China Balance of trade released on Sunday. Deterioration expected. Large miss either way will set the tone for Monday in Asia. Otherwise markets will be susceptible to increased trade/Hong Kong rhetoric.

Hong Kong

Protests have died down for now over the securities law. Possible resurgence this weekend. HSBC and Stan Chart under fire for backing China’s HK security law. No significant data this week.

India

Economy starts reopening this week which should be positive for markets. Standoff with China continues in the Himalayas and non-bank financial woes continue to impact sentiment. No significant data.

Australia

AUD and equity rally continue with strong momentum. NAB biz confidence Tuesday and Westpac cons. Confidence Wednesday. Neither are likely to have more than short-term impact. AUD and Aust. equities are a strong proxy for global recovery. Sentiment and news in that space will be the primary risk/driver.

Japan

Japan’s final GDP Q1 on Monday. Machinery orders and PPI Wednesday. Industrial Production Friday. Nikkei has performed strongly, but repeated outbreaks of COVID-19 in Tokyo could sap sentiment. Supplementary budget before Parliament this week.

Market

Oil

After much back and forth, it seems OPEC + is poised to meet over the weekend to finalize a production cut extension deal.  The holdup was Iraq and late on Thursday they announced they will fully implement their share of oil production cuts by the end of July.  Oil prices headed for a sixth weekly gain but are slightly softer as energy traders are taking the Iraqi announcement “with a grain of salt.” Iraq has a new government and is desperate for cash, so compliance is likely to be short-lived. A deadlock could have flooded the oil market and undermined the unprecedented oil price recovery.

Now that the Saudis and Russians are working together again, the focus for this next round of OPEC+ talks are with the cheaters, primarily Iraq (Nigeria, Angola and Kazakhstan).  The risk seems low that they will fail to reach an agreement to extend cuts for one more month, but if talks stall oil prices will tank.  There still could be a chance that they manage to stretch the cut deal to three months, but energy traders would be extremely skeptical that compliance would remain high beyond July. Floating oil storage levels have moderated over the past few weeks and tank top concerns have eased, but if the floodgates are released, we could see another major selloff.  OPEC+ should still be motivated to keep prices firm here, but if WTI crude rallies above $45, they will be saving the US shale industry.

A big part of yesterday’s oil rally came from American Airlines announcement that they will boost their July flights by 74% from the prior month, as the US consumer seems ready to return to travel.  The crude demand recovery expects air travel to lag, so any surprises with improving air travel will be very supportive for oil prices.  The 74% increase would however only represent about 40% of what was done last year.  Jet fuel and diesel products saw sharp increases. Some insiders are also questioning the inventory data and that the government may have overreported.  If we see a correction with the reporting of US inventories, that may help bring the market to balance a lot faster. Hurricane season is here, and fears are high this could be one of the worst ones since 2005 when we had Hurricane Katrina.  Tropical Storm Cristobal has already forced some oil platforms to be evacuated as it still has a chance of strengthening to a hurricane.  The US Gulf’s offshore energy region is bracing for Cristobal and it seems that unexpected disruptions to production could be a recurring theme this summer.

Gold

Gold prices have been under pressure after a miraculous stock market run that seems to be showing some signs of plateauing.  Friday’s surprisingly strong nonfarm payroll report also dealt a strong blow to gold bulls, taking prices well below the $1700 level.  Gold is looking vulnerable in the short-term, but should still be supported as a choppy global economic recovery will continue to see the majority of central banks remain accommodative. Despite some calls for the Fed to slow down, the amount of stimulus that is being pumped into the global economy will provide a nice safety-net for gold prices.

With the Presidential election under five months away, tensions with China are unlikely to be alleviated anytime soon and that should provide underlying support for gold.  Eventually the tit-for-tat trade war will force China to come down on US tech and that will put significant pressure with this historic stock market rebound.  The dollar is weakening, trade tensions are here to stay, risks for a second wave of the coronavirus are just a handful of reasons why it will be difficult for a downtrend to form for gold.

Bitcoin

Bitcoin traders had some humble pie after the latest attempt above $10,000 saw a main crypto-exchange deliver another key outage during another volatile trading day.  Bitcoin mania was making a comeback as institution interest grows and hedge funds scramble for risky bets to make up for underperformance.

Institutional traders will not tolerate exchange crashes, so it will be interesting to see if Bitcoin interest starts to fade again.  The only thing certain about Bitcoin is that volatility is likely to remain elevated.  Bitcoin’s true believers however seem determined to see this out until prices return to record territory, so extreme selloffs should not surprise anyone.

Key Economic Releases and Events

Saturday June 6th

Possible OPEC+ meeting 

Sunday, June 7th

Possible OPEC+ meeting

Australian Markets observe Queen’s Birthday

CNY China May Trade Balance: $40.0Be v $45.3B prior; Exports Y/Y: -6.5%e v +3.5% prior; Imports Y/Y: -7.8%e v -14.2% prior

7:50pm JPY Japan Q1 Final GDP Q/Q: -0.5%e v -0.9% prelim; Annualized SA Q/Q: -2.1%e v -3.4%prelim

7:50pm JPY Japan Apr Current Account (JPY): 360Be v 942.3B prior

Monday, June 8th

ECB President Lagarde attends European Parliament hearing

2:00am EUR Germany Apr Industrial Production M/M: -15.5%e v -9.2% prior

4:30am EUR Eurozone Jun Sentix Investor Confidence: No est v -41.8 prior

8:15am CAD Housing Starts: No est v 171.3K prior

9:00pm NZD Jun Prelim ANZ Business Confidence: No est v -41.8 prior

9:30pm AUD May NAB Business Confidence: No est v -46 prior

Tuesday, June 9th

OPEC Meetings

5:00am EUR Eurozone Q1 Final GDP Q/Q: -3.8%e v -3.8% prelim; Y/Y: -3.2%e v -3.2% prior

6:00am USD NFIB Small Business Optimism: 91.5e v 90.9 prior

9:30pm CNY May CPI Y/Y: 2.6%e v 3.3% prior; PPI Y/Y: -3.2%e v -3.1% prior

9:30pm AUD Jun Westpac Consumer Confidence M/M: No est v 16.4% prior

Wednesday, June 10th

OPEC+ Meetings

The OECD releases its economic outlook

2:45am EUR France May Industrial Production M/M: No est v -16.2% prior

8:30am USD Apr CPI M/M: 0.0%e v -0.8% prior; Y/Y: 0.3%e v 0.3% prior

10:30am Crude Oil Inventories

2:00pm FOMC Interest Rate Decision: No changes to interest rates expected; could discuss yield curve control

2:30pm Fed Chair Powell Press Conference 

Thursday, June 11th       

Euro-area finance ministers meet to discuss the EU’s recovery package and Eurogroup presidency succession.

2:30am EUR May Bank of France Ind. Sentiment: No est v 48 prior

8:30am USD Weekly Initial Jobless Claims

6:30pm NZD New Zealand May Business Manufacturing PMI: No est v 26.1 prior

6:45pm NZD New Zealand May Food Prices M/M: No est v 1.0% prior

Friday, June 12th

5:00am EUR Eurozone April Industrial Production M/M: -20.0%e v -11.3% prior; Y/Y: -30.0%e v -12.9% prior

10:00am USD Jun Preliminary Michigan Sentiment: 76.0e v 72.3 prior

1:00pm Baker Hughes US rig count

Sovereign Rating Updates after the close:

–        Fitch on Germany

–        Fitch on Spain

–        DBRS on UK

–        Moody’s on Norway

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Nike Making a Surprising Return to Macy’s

After a brief break, Nike and Macy’s rekindle their partnership.

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24 mins ago

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June 4, 2023

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Retail is a tough industry and it’s really fickle right now post covid pandemic. Macy’s  (M) - Get Free Report retail footprint has been similar to the likes of recently failed retailers like Sears, Kmart, Bed Bath and Beyond, but also similar to Target  (TGT) - Get Free Report, who is considered a leader in the retail industry. How is it that similar business models fail, and others seem to succeed at the same time?

The struggles Macy’s is facing is multifaceted as it lost its wholesale partnership with Nike  (NKE) - Get Free Report to sell the brand’s apparel in 2021. Nike was focused on selling directly to customers rather than having retailers reach their customer base, according to Retail Dive. Macy’s like all retailers was already struggling after 2020 and the pandemic, and losing a major brand like Nike would prove to be a hard hit. Customers were definitely disappointed that they could no longer buy the Nike brand apparel at Macy’s stores, according to Jeff Gennette, Macy’s CEO.

Macy’s is facing changes in leadership as well; its long-term CEO is retiring after four decades with the company and Macy’s has already selected his replacement. Bloomingdale’s CEO Tony Spring will replace Gennette to lead the department store. Spring also has a long retail tenure, he has been with Bloomingdale’s for 35+ years, according to CNN Business.

Image source: Shutterstock

Macy’s Brings Back Nike

Nike and Macy’s are bringing the Nike apparel back to the department store as well as online. Both Nike and Macy’s have been faced with retail challenges, and working togethe,r both companies may benefit during this tumultuous time for retailers.

“It is imperative that we have the right assortment, including the appropriate mix of private and national brands that our customers care about, with compelling value and price points that appeal to our diverse, fashion-conscious base,” said Macy’s CEO and Chairman Jeff Gennette in the most recent earnings call. “Value does not mean the lowest price. It means offering the right brands, fashion content, and elevated omnichannel shopping experiences.”

“This morning, we are excited to share that we are bringing Nike back to the Macy's nameplate this fall. This mutually beneficial relationship reflects our strategy to provide customers with an enhanced and elevated offering. Starting in October, an expanded Nike selection including apparel, plus size women's, big and tall men's, kids' bags, and gear will be available online and in key locations nationwide. Footwear will continue to be sold in our Finish Line licensed locations,” Gennette said.

Retail chains and department stores alike are struggling to work through staffing their stores during this unprecedented labor shortage. Other retail chains like Dollar General  (DG) - Get Free Report have noted that they have inventory, but not the staff to be able to move it to the retail floor. Staffing continues to be an ongoing challenge across industries. Building and maintaining positive business partnerships and relationships may be the right choice to help weather the storm for the long-term success of both Nike and Macy’s.

Making the Most of Competitions Downfalls

Macy’s and Nike have the opportunity to make the most of rivals’ challenges right now. Nike has the chance to step ahead while Adidas  (ADDDF)  was stuck figuring out what to do with its unsold inventory of shoes from its terminated partnership with Kayne West, aka “Ye.” Adidas decided to sell the rest of the Yeezy inventory exclusively through its website and donate the proceeds to the charities that were hurt by the antisemitic statements he made on social media.

Macy’s sells similar products that Bed Bath and Beyond sold, which filed for bankruptcy and will close all of its stores. Bed Bath and Beyond closures include its Buy Buy Baby stores. As the home goods store winds down its operations and sells off the remaining inventory, shoppers will have one less storefront to visit when it comes to buying products for the home.

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This Hack Makes Flying Spirit Better Than JetBlue Or Southwest

It’s possible to make the no-frills, low-cost carrier as nice as flying much more expensive airlines (for less money).

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3 hours ago

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June 4, 2023

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It may seem impossible that the low-cost, no-frills air carrier could be an improvement over Southwest Airlines or its would-be merger partner JetBlue, but it’s possible.

Before the covid pandemic, I flew Southwest Airlines fairly religiously in order to maintain my A-List status. You need 25 one-way flights each year (or 35,000 miles) to keep that status and I flew just enough to keep eking out my renewal each year.

A-List has some meaningful perks for Southwest Airlines  (LUV) - Get Free Report passengers. You get same-day standby for free, which was very convenient when I was flying for work and a meeting got canceled allowing me to leave earlier. In addition, A-List members can change their flights with no fees or penalties, and most importantly, they get priority boarding status.

Southwest boards based on its A, B, and C boarding groups with 60 slots in each group. A-List members got checked in early and were guaranteed that if they don’t get an “A” spot, they could check in between the A and B groups. They can also do that if they fly standby and missed the check-in window altogether.

Every year, I tried really hard to keep those perks, but in 2022, it simply was not possible. I didn’t travel anywhere close to the amount I did before covid and had to let my A-List status expire as the year ended.

I was not super happy about it, but as my travel ramped up, I was being forced to fly like a regular person with no status. That changed, however, when Spirit Airlines ran a quick promotion where people with top-tier status at a number of major airlines and hotels could buy Spirit’s top-tier Gold loyalty status for $100.

It’s the best $100 I have ever spent because it elevates the experience on the no-frills airline.

Spirit is a low-cost carrier.

Image source: Shutterstock

Why Spirit Airlines Gold Status Is So Valuable

A low-cost carrier, Spirit charges for everything. Your basic fare gives you the right to get on the plane with a personal item (think a purse or a small backpack). Fares are very low because you pay for everything from checked bags to a full-size carry-on to getting an actual seat assignment. Spirit passengers even pay for water and soda, and they can opt to pay for snacks and perks like being able to get through airport security faster.

As a Gold member, I pay the basic fare price and then get bags and a premium seat assignment for free. On the three Spirit flights I have booked, I was able to get an exit row seat, with much more legroom for no extra charge. I also got access to a priority security line at the airport and got to board in the first group.

In addition, I also got one flight change (for each leg of my trip) free (which I did not need to use on this trip).

What It’s Like Flying As a Spirit Gold Member

Spirit tends to fly out of the least convenient terminal at every airport (at least that has been my experience). That was true of my Fort Lauderdale flight where the airline flies from Terminal 4, which has a small parking lot that never seems to have any spaces. That forces you to park in a garage that’s farther away, but it’s well marked and walkable or there’s a tram if you are willing to wait.

My flight was a 9:30 p.m. non-stop to Las Vegas on a Saturday night. There were very few people in the security line and while I had access to a priority Spirit line, I’m also a Clear member and opted to go with that experience instead.

Once I cleared security, I made my way to my gate passing a few shops and some restaurants. I stopped to buy some snacks, as my first boss drilled the idea of never getting onto a plane without an emergency snack into my head before my first business trip 30 years ago (I was 19).

The gate had plenty of seats and we were scheduled to board at 8:45. When boarding was called, at roughly 8:47, the woman at the desk called for people needing extra assistance, families flying with kids under two, and active military members. There were none of those, so she then called for Group 1 and since I was standing near the gate, I was literally the first person on the plane.

In my multiple years of being Southwest A-List, I had never had fewer than 20 people board before me. I found my seat and while the actual seat was hard and not all that comfortable (Spirit skimps on the padding to save on fuel) the exit row legroom was impressive. In fact, the distance between my seat and the seat in front of me was so great that I actually had to lean forward to type on my laptop given the very narrow fold-down tray.

My flight was not without problems. It did not have WiFi, which the airline did not announce until we were in the air (so I could not text my wife to let her know I would be out of touch for five hours). Aside from that, however, my Gold status also got me a free soda, water, coffee, or juice, as well as a choice of snacks.

So, for my very lucky $100 purchase of Gold status, I had a roomier seat than I have ever had on Southwest. I was also paying a price that was less than half what I would have paid on Southwest or JetBlue, neither of which offered a comparable direct flight.

Spirit may be no-frills for infrequent flyers, but for its elite passengers, the airline offers value and meaningful perks. It also offers 10X points for Gold members, so even with the cheap fares I’m paying, the first two Spirit flights I have booked will earn enough points to allow me to keep my status for another year.

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Who Can You Trust?

Who Can You Trust?

Authored by James Howard Kunstler via Kunstler.com,

“I’m sick and tired of hearing Democrats whining about Joe Biden’s…

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4 hours ago

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June 4, 2023

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Who Can You Trust?

Authored by James Howard Kunstler via Kunstler.com,

“I’m sick and tired of hearing Democrats whining about Joe Biden’s age. The man knows how to govern. Just shut up and vote to save Democracy.”

- Rob Reiner, Hollywood savant

Perhaps you’re aware that the World Health Organization (WHO) is cooking up a plan to impose its will over all the sovereign nations on this planet in the event of future pandemics.

That means, for instance, that the WHO would issue orders to the USA about lockdowns, vaccines, and vaccine passports and we US citizens supposedly would be compelled to follow them.

Why the “Joe Biden” regime would go along with this globalist fuckery is one of the abiding mysteries of our time - except that they go along with everything else that the cabal of Geneva cooks up, such as attacks on farmers, and on oil production, and on relations between men and women, and on personal privacy, and on economic liberty throughout Western Civ, as if they’re working overtime to kill it off. And all of us with it.

I think they are working overtime at that because the sore-beset citizens of Western Civ are onto their game, and getting restless about it. So, the Geneva cabal is in a race against time before the center pole of their circus tent collapses and the nations of the world are compelled to follow the zeitgeist in the direction of de-centralizing, foiling all their grand plans.

The “Joe Biden” regime is pretending to ignore the reality that this WHO deal is actually a treaty that would require ratification by a two-thirds vote in the senate, an unlikely outcome. In any case, handing over authority to the WHO — in effect, to its chief Tedros Adhanom Ghebreyesus — to push around American citizens like a giant herd of cattle would be patently unlawful.

That center pole of the circus tent is the wobbling global economy. It’s barely holding up the canvas over the three rings of the circus. In the center ring, the death-defying spectacle of the Biden Family crime case is playing out before a huge audience (us). This week, a gun went off at the FBI and smoke is curling out of the barrel. FBI Director Christopher Wray was forced to verify that he’s been sitting on an incriminating document for three years from a “trusted” confidential human source, i.e., an informant, stating that the Biden Family received a $5-million bribe from a foreign entity when “JB” was vice-president.

That’s only one bribe of many others, of course, as documented in the Hunter Biden laptop, and it must be obvious it represents treasonous behavior that will demand resignation or impeachment. As this spools out in the weeks and months ahead, do you think Americans will be in the mood to accept further insults such as “Joe Biden” surrendering our national sovereignty to the WHO?

Anyway, you must ask yourself: why on earth should I trust the WHO about anything? Did they not participate in laying a trip on the world with Covid-19? How did those lockdowns work out? Do you think they destroyed enough businesses and ruined enough households? How’s the vaccination program doing? Effective? Safe? Yeah, maybe not so much. Maybe killing a lot of people, wrecking immune systems, sterilizing reproductive organs, causing gross disabilities, shattering lives.

Of course, in over three years neither the WHO nor the US medical authorities showed the slightest interest in helping to figure out how the Covid-19 virus was made in a lab, and exactly how it got loose in the world. Lately, Dr. Ghebreyesus has warned the world about much worse future pandemics supposedly coming down at us. Oh? Really? What does he know that we don’t? That possibly new efforts to concoct chimeric diseases are ongoing in labs around the world? (You know that dozens of such labs were discovered in Ukraine as the war got underway there in 2022.) What’s Dr. Ghebreyesus doing to stop that?

If US orgs and citizens are involved in this “research,” why doesn’t the WHO alert our government leaders so they can stop it? (Would they? I’m not so sure.) And, who is behind it this time? The Eco-Health Alliance again, like with Covid-19? By the way, that outfit got another whopping grant last fall from the NIH to “study” bat viruses — right after the NIH terminated a previous grant on account of The Eco-Health Alliance failing to turn over notebooks and other records.

No, you cannot trust the WHO about anything. The “trust horizon” (a concept introduced by the great Nicole Foss, late of The Automatic Earth dot com) is shrinking. You can no longer trust any distant authorities. You also cannot trust the US federal government (especially the executive branch behind “Joe Biden”). And notice: the trust horizon is shrinking just as the world is de-centralizing. This, you see, is the main contradiction behind all the Globalists’ twisted ambitions to control everything, including you. They are working against the current tide of human history which is pushing everything toward down-scaling, re-localization, and re-assertion of the sovereign individual person.

That trend will become increasingly evident as things organized at the giant scale start to implode — giant retail chains, medical behemoths, hedge funds, big banks, you name it. The world no longer has the mojo for globalism. There’s reason to wonder these days whether the USA has the mojo to remain a unified national polity of states. Our federal government is not only financially bankrupt beyond any coherent reckoning, it is also morally bankrupt, and it has decided to make war against its own people. None of this is satisfactory and none of this is working. It’s time to figure out who and what you can trust and act accordingly.

Tyler Durden Sun, 06/04/2023 - 09:20

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