Share markets turned mixed on Monday as the U.S. Senate passage of a $1.9 trillion stimulus bill augured well for faster global economic growth, but also put fresh pressure on Treasuries and tech stocks with lofty valuations. "Every $1 trillion of fiscal stimulus adds around $4-$5 to EPS, implying 6-7% upside for the remainder of the year." However, analysts also expected a sharp acceleration in inflation, stoked in part by the latest spike in oil prices, which was pushing up bond yields and stretching equity valuations, particularly in the high tech space.
Confusion over building safety rules has left many people unable to move home without hard-to-obtain checks.
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The direction of the April Comex gold market on Monday is likely to be determined by trader reaction to the major Fibonacci level at $1711.70.
We could see profit-taking this week as traders prepare for the release of the U.S. Federal Reserve’s monetary policy decisions on March 17.
Friday’s price action suggests the direction of the March U.S. Dollar Index on Monday will be determined by trader reaction to 92.310.
Asian shares rallied on Monday while the dollar held near three-month peaks after the U.S. Senate passage of a $1.9 trillion stimulus bill augured well for a global economic rebound, though it also put fresh pressure on Treasuries. BofA analyst Athanasios Vamvakidis argued the potent mix of U.S. stimulus, faster reopening and greater consumer firepower was a clear positive for the dollar. "Including the current proposed stimulus package and further upside from a second-half infrastructure bill, total U.S. fiscal support is six times greater than the EU recovery fund," he said.
(Bloomberg) -- Brent oil surged above $71 a barrel after Saudi Arabia said the world’s largest crude terminal was attacked, although output appeared to be unaffected after the missiles and drones were intercepted.Futures in London jumped as much as 2.9% after rising 4.9% last week. The kingdom said a storage tank at Ras Tanura in the country’s Gulf coast was targeted on Sunday by a drone from the sea. The terminal is capable of exporting roughly 6.5 million barrels a day -- nearly 7% of oil demand -- and, as such, is one of the world’s most protected installations.The assault follows a recent escalation of hostilities in the Middle East region after Yemen’s Houthi rebels launched a series of attacks on Saudi Arabia. The new U.S. administration has also carried out airstrikes in Syria last month on sites it said were connected with Iran-backed groups.Oil’s rally accelerated last week after Saudi Arabia and OPEC+ made a surprise pledge to keep output steady in April. The move prompted a raft of investment banks to raise their price forecasts, with Goldman Sachs Group Inc. estimating global benchmark Brent will top $80 a barrel in the third quarter.The broader market is also being supported by bullish Chinese export data and the outlook for U.S. stimulus. President Joe Biden is on the cusp of his first legislative win with the House ready to pass his $1.9 trillion Covid-19 relief plan, the second-biggest economic stimulus in American history.See also: Andurand Predicts Commodities Bull Run as Hedge Fund Soars 12%“It’s a perfect mix of bullish news at the moment,” said Warren Patterson, head of commodities strategy at ING Bank NV in Singapore. “It does seem that these attacks are picking up in frequency, so the market may need to price in some risk premium.”Brent’s prompt timespread at 70 cents a barrel in backwardation, a bullish market structure where the front-month contract trades higher than later shipments. It averaged 58 cents in backwardation last week.The Sunday attack is the most serious against Saudi oil installations since a key processing facility and two oil fields came under fire in September 2019, cutting oil production for several days and exposing the vulnerability of the Saudi petroleum industry. That assault was claimed by the Houthi rebels, although Riyadh pointed the finger at Iran.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Central banks helped save the world economy from depression as the pandemic struck. Now they are dealing with the hard part: managing the recovery amid a difference of opinion with investors.Optimism that Covid-19 vaccines and continued government stimulus offer an escape from the worst health crisis in a century has sent bond yields soaring and pushed bets on rising inflation in the U.S. to the highest in a decade.That’s shifting the ground underneath monetary policy makers who promise to maintain rock bottom borrowing costs and cheap money well into the expansion. In the next two weeks, the Federal Reserve and European Central Bank as well as their counterparts in Japan, U.K, and Canada are all likely to reiterate those pledges, eager to secure a rebound in hiring and avoid the mistakes of the last crisis when some withdrew support too early.The risk now seems skewed the other way. While policy makers welcome a modest rise in bond yields as a signal of confidence in the economic outlook, they worry an unchecked jump would undercut recoveries. They argue any resurgence in inflation will be based on a temporary correction from last year’s slide and that high unemployment will continue to restrain price pressures.It’s a stark turnaround from a year ago, when the world powered down to fight the Covid-19 pandemic and central banks responded with what’s amounted to an unprecedented $9 trillion of monetary support.“Central banks are facing a new challenge,” said Rob Carnell, chief economist for Asia Pacific at ING Bank NV. “How do they keep justifying easy policy as the recovery continues and the inflation figures pick up?”Canada, ECBThe Bank of Canada is first up with a meeting on March 10 when policy makers are likely to indicate they plan to maintain plenty of stimulus well into any strong recovery. It’s a case that Governor Tiff Macklem laid out last month when he argued policy needs to help foster not only the immediate pickup but also facilitate virus-driven structural changes like digitalization.ECB President Christine Lagarde convenes officials the next day when updated forecasts will highlight how the euro-area economy is lagging the U.S. because of slow vaccine rollouts and extended virus restrictions. That puts the bloc at risk should higher global yields spill over into borrowing costs for companies and households.ECB policy makers have surprised investors by downplaying their concerns so far, saying their bond-buying program is flexible enough to address unwarranted tightening but failing to provide any evidence that they’re accelerating purchases. At the back of their minds though is likely to be the experience of 2011 when interest rates were raised twice to combat faster inflation despite a worsening financial crisis, only for the euro zone to slide into a double-dip recession.Powell PressureAt the Fed’s policy meeting on March 16-17, Chairman Jerome Powell will likely reaffirm his looser for longer stance. Powell repeatedly stressed during remarks on Thursday that the Fed was a long way from its goals and was not close to tightening policy. He also played down a likely rise in inflation this year and ducked questions on a possible response to the recent sharp rise in yields.While the move had “caught’ his attention, he said Fed policy was currently appropriate, though it has tools to respond if there is a material change in the outlook.Transcripts of the Fed’s meetings from 2015, when it last began a tightening cycle, suggested policy makers overestimated the potential for accelerating inflation and underestimated the room still left in the economy to generate jobs.What Bloomberg Economics Says...For the U.S., rising bond yields are largely a reflection of confidence in the strength of the recovery. For much of the rest of the world, the spillover of higher borrowing costs is arriving too soon. The Reserve Bank of Australia has already reacted with bigger bond buys. Others may also have to tweak their policy settings.-- Tom Orlik, chief economist Click here for moreTaper TalkThe Bank of England convenes on March 18. It has lined up a further 150 billion pounds ($208 billion) of asset purchases over 2021 with plans to taper weekly buying later in the year.A hugely stimulative budget from Chancellor Rishi Sunak now has economists further discounting the prospect of negative interest rates and instead looking forward to a tightening of monetary policy.The central bank has said that won’t happen until there is clear evidence that spare capacity is being eliminated and it’s closer to sustainably achieving its 2% inflation target, but in February announced it was considering whether to alter previous guidance that it wouldn’t unwind its asset purchases until the bank rate reached 1.5%. Governor Andrew Bailey has indicated he would favor reducing the institution’s balance sheet before hiking rates instead.BOJ, PBOCThen it’s the Bank of Japan’s turn on March 18-19, when officials are scheduled to unveil details of a policy review that will look at how it controls yields, negative rates and asset buying. Governor Haruhiko Kuroda has said the central bank is seeking to make its policy framework more effective by fine tuning it rather than overhauling it. He has also signaled there won’t be any changes to the movement range around the 10-year yield target.While developed-world central banks will likely be unified in pledging ongoing stimulus, China’s officials are already signaling the opposite. Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission -- the top banking regulator -- said on March 2. he’s “very worried” about risks emerging from bubbles in global financial markets and the nation’s property sector, stoking expectations of policy tapering.That was followed by the government setting a conservative growth target of above 6% for the year, well below what economists forecast the nation will achieve, as Premier Li Keqiang on Friday opened the National People’s Congress in Beijing.The tension between inflation and cheap money is already forcing some emerging market central banks to move. Ukraine unexpectedly raised interest rates to counter the highest inflation in more than a year. Brazil is forecast to start raising borrowing costs on March 17 having promised in August to keep its 2% benchmark for the “foreseeable future.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Commodity currencies are rising while haven assets decline as the U.S. Senate’s approval of a $1.9 trillion economic stimulus and a surge in China’s exports drive a risk-on bid in markets Monday.The Australian dollar and Norwegian krone led gains among major currencies while stocks in Asia advanced as Covid-19 relief legislation exceeded many Wall Street estimates. Yet increasing optimism for growth is also fueling concern about central banks curbing stimulus and borrowing costs rising, with benchmark 10-year Treasury yields edging higher in Asian trading.“Firmer U.S. data and the passage of President Biden’s $1.9 trillion fiscal bill by the Senate is helping to support markets, but stabilization may prove to be temporary,” said Mitul Kotecha, senior emerging markets strategist at TD Securities in Singapore. “The Fed is not even close to stepping in to end the bond rout and yields may go higher.”Kotecha said the 10-year yield may reach 1.75% in the near term and 2% by year end. It rose two basis points to 1.59% at 9:30 a.m. in Singapore, putting it just short of the high reached Friday after stronger-than-expected U.S. jobs data and around levels last seen in February 2020.While the relief measure still needs to go back to the House for a final vote expected Tuesday, economists are already boosting their forecasts for growth. Almost exactly a year after the spread of the coronavirus ripped its way through global markets, traders are betting that the rollout of vaccines and additional government stimulus will all but guarantee an economic recovery -- as well as faster inflation.Although on the surface the advance in Treasury yields is a sign of economic strength, the pace of the move also points to mounting concern that the Federal Reserve will have to raise rates sooner than expected to rein in surging inflation.Risk assets have seen pressure in the past few weeks even as officials like Treasury Secretary Janet Yellen have played down concern that the recent surge in U.S. yields reflects expectations for an outsize breakout in inflation. Federal Reserve Chairman Jerome Powell also did little last week to indicate that the central bank might step in to assuage concerns about rising inflation.(Updates with latest asset moves in third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
As institutional appetite for bitcoin grows, "incumbent banks" will look for ways to satisfy that demand, a Goldman Sachs industry lead says.
(Bloomberg) -- It’s not just in meme stocks that the fate of short sellers is a key theme. Short bets are increasingly in vogue in the $21 trillion Treasuries market, with crucial implications across asset classes.The benchmark 10-year yield reached 1.62% Friday -- the highest since February 2020 -- before dip buying from foreign investors emerged. Stronger-than-expected job creation and Federal Reserve Chair Jerome Powell’s seeming lack of concern, for now, with leaping long-term borrowing costs have emboldened traders. In one telltale sign of which way they’re leaning, demand to borrow 10-year notes in the repurchase-agreement market is so great that rates have gone negative, likely part of a move to short the maturity.The trifecta of more fiscal stimulus ahead, ultra-easy monetary policy and an accelerating vaccination campaign is helping bring a post-pandemic reality into view. There are of course risks to the bearish bond scenario. Most prominently, yields could rise to the point that they spook stocks, and tighten financial conditions generally -- a key metric the Fed is focused on for guiding policy. Even so, Wall Street analysts can’t seem to lift year-end yield forecasts fast enough.“There’s a lot of tinder being put now on this fire for higher yields,” said Margaret Kerins, global head of fixed-income strategy at BMO Capital Markets. “The question is what is the point that higher yields are too high and really put pressure on risk assets and push Powell into action” to try and tamp them down.Share prices have already shown signs of vulnerability to increasing yields, especially tech-heavy stocks. Another area at risk is the housing market -- a bright spot for the economy -- with mortgage rates jumping.The surge in yields and growing confidence in the economic recovery prompted a slew of analysts to recalibrate expectations for 10-year rates this past week. For example, TD Securities and Societe Generale lifted their year-end forecasts to 2% from 1.45% and 1.50%, respectively.Asset managers, for their part, flipped to most net short on 10-year notes since 2016, the latest Commodity Futures Trading Commission data show.Auction PressureIn the days ahead, however, BMO is eyeing 1.75% as the next key mark, a level last seen in January 2020, weeks before the pandemic sent markets into a chaotic frenzy.A fresh dose of long-end supply next week may make short positions even more attractive, especially after record-low demand for last month’s 7-year auction served as a trigger to push 10-year yields above 1.6%. The Treasury will sell a total of $62 billion in 10- and 30-year debt.With expectations for inflation and growth taking flight, traders are signaling that they anticipate the Fed may have to respond more quickly than it’s indicated. Eurodollar futures now reflect a quarter-point hike in the first quarter of 2023, but they’re starting to suggest that it could come in late 2022. Fed officials have projected they’d keep rates near zero until at least the end of 2023.So while the market is leaning toward loftier yields, the interplay between bonds and stocks is bound to be a huge focus going forward.“There’s definitely that momentum, but the question is how well risky assets adjust to the new paradigm,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. “We’ll be watching next week, when the dust settles after the payrolls data, how Treasuries react and how risky assets react to the rise in yields.”What to WatchThe economic calendarMarch 8: Wholesale trade sales/inventoriesMarch 9: NFIB small business optimismMarch 10: MBA mortgage applications; CPI; average weekly earnings; monthly budget statementMarch 11: Jobless claims; Langer consumer comfort; JOLTS job openings: household change in net worthMarch 12: PPI; University of Michigan sentimentThe Fed calendar is empty before the March 17 policy decisionThe auction calendar:March 8: 13-, 26-week billsMarch 9: 42-day cash-management bills; 3-year notesMarch 10: 10-year notesMarch 11: 4-, 8-week bills; 30-year bondsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Is the market telling us that in the not too distant future, oil will no longer be sine qua non for Exxon, or even that Exxon will be driven out of business? Maybe to both, though not quite yet.
U.S mortgage rates climb back through to 3% levels for the first time since July. Further increases will begin to test buyer demand on a more significant scale…
The top cryptocurrency is changing hands near $50,500 at press time, representing a 4% gain on the day, having clocked a high of $51,320 early today, according to CoinDesk 20 data.
Personal finance guru Suze Orman said the receipt of a tax refund indicates "something's radically wrong," since the money returned to filers could otherwise have accrued value over the period it stood in the government's possession.
This week, investors will be eyeing new inflation data, which will offer a look at whether prices have already begun to creep up as some have feared ahead of a major economic reopening. A highly anticipated direct listing for the vide0 game company Roblox is also on deck.
(Bloomberg) -- Apple Inc. has slumped 15% since late January. Tesla Inc. has lost more than a quarter-trillion dollars in market value in three weeks. And more than $1.5 trillion has been wiped off the Nasdaq 100 in less than a month.And yet, none of it has been enough to rattle the retail investor.Instead, to borrow a Reddit phrase describing bullish gumption, they’ve had diamond hands. Since the market peaked a few weeks ago, retail traders have plowed cash into U.S. stocks at a rate 40% higher than they did in 2020, which was a record year. They’re opting for parts of the market that have suffered the most, doubling down in arguably risky ways with triple-leveraged tech funds and options galore.A year out from the Covid-19 stock crash, with individual traders now making up nearly a quarter of U.S. volume on any given day, battle lines are forming. Some of the favored speculative bets that minted money on the way up -- electric-vehicle stocks, special purpose acquisition companies and green energy plays to name a few -- are the same securities that are buckling now as bond yields rise.Retail traders, many of them newbie investors, have consistently held strong, buying virtually every dip during what’s been the best start to a bull market in nine decades. But now the world is wondering how much it’ll take for them to call it quits, especially after a year in which retail traders were right way more often than wrong.“Historically it’s been a bad signal that retail investors are piling into the market and a signal of a top,” said Arthur Hogan, chief market strategist at National Securities Corp. “And every time we tried to call a top in 2020 because of retail participation, it was wrong.”As stocks swooned over the last three weeks, retail investors snapped up an average of $6.6 billion in U.S. equities each week, according to data from VandaTrack, an arm of Vanda Research that monitors retail flows in the U.S. market. That’s up from an average $4.7 billion in net weekly purchases in 2020.They’ve doubled down on areas of the market that have been hit the hardest. Apple, which has plunged 15% since late January, was the most-popular retail buy this past week. NIO Inc., the electric-vehicle maker down almost 40% since Feb. 9, was the second-most popular. Next up were exchange-traded funds tied to the Nasdaq 100, the Invesco QQQ Trust Series 1 (ticker QQQ) and a triple leveraged version (ticker TQQQ).On Thursday, when the Nasdaq 100 fell as much as 2.9%, almost 32 million bullish call options traded across U.S. exchanges, the fifth-most on record. The other four have all occurred within the last four months.Equity ETFs added almost $7 billion of fresh money during the first four days of March, building on a record $83 billion that flooded in last month, data compiled by Bloomberg Intelligence show. In fact, even before March began, flows into U.S.-listed ETFs were off to their best start to a year on record, out-pacing the prior best start -- which was in 2017 -- by over 74%, according to Matt Bartolini, State Street Global Advisors’ head of SPDR Americas Research.“There’s a lot of excess liquidity and we just had this $600 check going to many families in January,” said Jimmy Chang, chief investment officer of Rockefeller Global Family Office. “We’re going to get an additional liquidity injection in the $1,400 check and part of that money is going into risk assets.”Karim Alammuri, a 31-year-old marketing strategy manager, is one of many retail investors who’s been snapping up stocks. In recent days, he bought shares of fuboTV Inc. and SPAC Churchill Capital Corp IV. Fubo TV has plunged more than 50% since a December peak. Churchill Capital has lost almost 60% of its value in 11 trading sessions.“I plan on sticking around because I don’t want to take a loss,” he said by phone from New York. “A lot of very attractive stocks are on crazy discount right now, so I’m just looking to see how I can re-shuffle things to be able to buy them.”With an army of retail investors standing ready to buy any dip, those declines have grown shallower and shallower. The S&P 500 has gone without a 5% pullback since early November, or 83 straight days, the longest streak in a year.The end result of persistent dip buying is a market with little downside. At its lowest closing level of 2021, the S&P 500 was only down 1.5% year-to-date. That’s the smallest drawdown at this time of a year since 2017.If past is precedent, that could mean the sell-off has more room to run. Retail investors tend to buy the initial dips, and it’s not until they capitulate and sell that markets ultimately bottom, according to Eric Liu, co-founder and head of research at Vanda Research. The firm’s data show that was the case in both selloffs in 2018, as well as roughly a year ago during the Covid crash.To Victoria Fernandez, chief market strategist for Crossmark Global Investments, their continued presence in the markets likely means elevated volatility will persist. Still, that doesn’t mean retail investors’ efforts are misguided.“Is there some dumb money in retail trades? Yes. But not all of it,” she said. “Some of these people are doing their homework, looking for opportunities and trying to take advantage of it. Some win, some lose -- it’s really not that different than what professionals do on an institutional basis.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Brent crude now trades above fiscal breakeven prices for the four biggest oil producers in the Middle East after Saudi Arabia convinced fellow OPEC+ members to keep output largely unchanged.The shock move by OPEC+ triggered a rally in Brent prices, which rose to almost $70 a barrel. That’s higher than annual average levels needed for the cartel’s largest producers, including Saudi Arabia, to balance their budgets this year.If oil prices stay at current levels, “we would see fiscal surpluses for the larger Gulf Cooperation Council economies,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “This provides more fiscal space to support economic activity and recovery.”Analysts at Goldman Sachs Group Inc. and JPMorgan Chase & Co. raised their price forecasts for Brent after the OPEC decision, while Citigroup Inc. said crude could top $70 before the end of this month.Budget deficits in the Arab Gulf, where economies are reliant on oil, widened after prices crashed in 2020. OPEC+ agreed last year to take about 10% of global supply off the market to stem the plunge and while the group has slowly rolled back some of those cuts, it is curtailing more than 7 million barrels of daily production.Still, Brent prices have averaged just over $59 so far this year -- below the breakeven level for most gulf countries. Saudi Arabia, the Arab world’s largest economy and OPEC’s biggest producer, has posted successive budget shortfalls in the past seven years, a trend expected to continue into 2024, according to projections from the International Monetary Fund.Despite higher oil prices, “key non-oil sectors will continue to be impacted by the pandemic,” Malik said. “It will also be a balancing act for oil producers to manage the tightening in the oil market, whilst not halting the global recovery outlook.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
And will you even get a payment this time, under the new limits the president agreed to?