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Trump’s tax cuts won’t pay for themselves: David Stockman

Former Reagan Budget Director David Stockman explains why President Trump’s tax plan is dead before arrival.

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  • Australia Plans to Loosen China’s Grip on Minerals Supply Chain

    (Bloomberg) -- Australia wants to leverage off its position as a top mineral producer by boosting processing and manufacturing, part of a plan to challenge China’s dominance in the supply of products key to the clean-energy transition.The government unveiled a 10-year road map on Thursday that includes A$1.3 billion ($1 billion) of funding to help businesses capitalize on the country’s abundant natural resources and exploit opportunities in a de-carbonizing world. It encourages growth in high-value products like batteries and solar cells, as well as technologies and equipment that make mining safer and more efficient.The Modern Manufacturing Initiative comes as the U.S. and Japan look to cut their dependence on China for minerals that are vital to many manufacturing sectors. Australia is the top exporter of lithium, a key component in batteries, and is also a major source of rare earths. Beijing is reviewing its rare earths policy and there are signs it may ban the export of refining technology to nations or firms that it deems are a threat to state security.See also: Biden’s Hopes for Rare Earth Independence at Least a Decade Away“It’s a sovereign and strategic priority for Australia to ensure that we are hard-wired into this supply chain around the world,” Prime Minister Scott Morrison said at a media briefing following the announcement. It has to be “a supply chain that Australia and our partners can rely on, because these rare earths and critical minerals are what pull together the technology that we will be relying on into the future,” he said.Lynas Rare Earths Ltd. currently sends rare earths from its operations in Australia to Malaysia for processing, but has plans to build a facility close to its Mt. Weld mine in the country’s west. Lynas’ rival Iluka Resources Ltd. is also assessing options to build processing capacity. Energy Renaissance, meanwhile, and other companies are looking to establish a domestic battery manufacturing industry on Australia’s east coast.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.

  • Nasdaq ends sharply lower after Powell comments

    Wall Street ended sharply lower on Thursday, leaving the Nasdaq down nearly 10% from its February record high, after remarks from Federal Reserve Chair Jerome Powell disappointed investors worried about rising longer-term U.S. bond yields. A decline of 10% from its February record high would confirm the Nasdaq is in a correction. The benchmark 10-year Treasury yield spiked to 1.533% after Powell's comments, which did not point to changes in the Fed's asset purchases to tackle the recent jump in yields.

  • Britain to loosen listing rules as Brexit puts London on back foot

    Britain will modernise its listing rules to attract more high-growth company and so-called blank cheque flotations, Finance Minister Rishi Sunak said after a government-backed review said London was on the back foot after Brexit. The London Stock Exchange is facing tougher competition from NYSE and Nasdaq in New York, and from Euronext in Amsterdam since Britain fully left the European Union on Dec. 31.

  • Bitcoin Extends Losses as Powell Dents Inflation Hedge Appeal

    (Bloomberg) -- Bitcoin’s appeal as a hedge against inflation is being put to the test, with the largest cryptocurrency slumping along with other risk assets after Jerome Powell failed to ease investor concern about rising price pressures.The digital token fell as much as 6.7% and traded at about $47,900 as of 2:38 p.m. in New York, after the Federal Reserve chairman said he is monitoring financial conditions and would be “concerned” by disorderly markets, but stopped short of offering specific steps -- which sent Treasury yields higher and stocks lower.“Once it feels like the market is in risk-off mode, which it clearly is, because if you’re selling everything except for energy, that’s very risk-off,” said Arthur Hogan, chief market strategist at National Securities Corp. “It really doesn’t matter whether you are Bitcoin or Ark or semis or banks -- every thing’s being thrown over the transom.”Bitcoin surged to more than $58,000 last month, with advocates such as MicroStrategy Inc. Chief Executive Officer Michael Saylor touting the token as alternative to cash because of the risk of rising inflation from government and central bank stimulus. Shares of the enterprise software maker, which has purchased over 90,000 Bitcoins, tumbled as much as 17% on Thursday. Critics say Bitcoin is in a giant, stimulus-fueled bubble that’s destined to burst like the 2017 boom and bust cycle. Bitcoin slid 21% last week but is still up more than fivefold in the past year. 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.

  • Stocks Slump as Treasury Yields Top 1.5% on Powell: Markets Wrap

    (Bloomberg) -- Stocks and bonds sold off after Federal Reserve Chairman Jerome Powell underwhelmed markets by refraining from pushing back more forcefully against the recent spike in Treasury yields.The S&P 500 briefly erased its 2021 gains, notching its lowest close in about five weeks. Benchmark 10-year bond rates topped 1.5% and the dollar climbed. The Nasdaq 100 extended losses from a February peak to almost 10%, and the Russell 2000 of small caps slid 2.8%. Reddit users appeared to rush back into GameStop Corp., with the video-game retailer soaring.Powell said in an online event Thursday that he’d be “concerned” by disorderly markets, but stopped short of offering steps to curb heightened volatility. The surge in Treasury yields has triggered fears about elevated stock valuations after a torrid equity rally from the depths of the pandemic. While bulls have decided to view the jump in rates as a sign of economic strength that could lift corporate profits, there’s been mounting concern over a potential inflation pickup. For Bleakley Advisory Group’s Peter Boockvar, the Fed has put itself in a “tough situation.”“We are again seeing a market that is taking control of monetary policy from the Fed,” said Boockvar, the firm’s chief investment officer. “Long rates are rising right now because Powell is again very dovish. The more dovish they get in the face of market expectations of higher inflation, the more financial tightening we’ll see.”Stock-Market Momentum Comeuppance Gets No Sympathy From the FedDespite the lingering uncertainties about the impacts of rising bond yields, such fears are “misplaced,” according to Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital.“As long as the back-up in bond yields reflects stronger growth expectations (versus tighter monetary policy), then the long-term bull market will not be at risk,” she said. “The latest normalization in bond yields should be viewed as an encouraging sign that growth is healing, while the prospect for a hawkish turn from the Federal Reserve is clearly not in the cards today.”The U.S. Senate voted to take up a $1.9 trillion relief bill backed by President Joe Biden, setting off a debate expected to end this weekend with approval of the nation’s sixth stimulus since the pandemic-triggered lockdowns that began a year ago.Elsewhere, Bitcoin’s appeal as a hedge against inflation was put to the test, with the largest cryptocurrency joining a slump in other risk assets. Oil surged after the OPEC+ alliance surprised traders with its decision to keep output unchanged, signaling a tighter crude market in the months ahead.Some key events to watch this week:The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.These are some of the main moves in markets:StocksThe S&P 500 sank 1.3% at 4 p.m. New York time.The Stoxx Europe 600 Index fell 0.4%.The MSCI Asia Pacific Index dipped 2.5%.The MSCI Emerging Market Index declined 2.6%.CurrenciesThe Bloomberg Dollar Spot Index rose 0.7%.The euro decreased 0.8% to $1.1971.The Japanese yen depreciated 0.8% to 107.92 per dollar.BondsThe yield on 10-year Treasuries rose six basis points to 1.54%.Germany’s 10-year yield fell two basis points to -0.31%.Britain’s 10-year yield decreased five basis points to 0.731%.CommoditiesWest Texas Intermediate crude jumped 4.8% to $64.24 a barrel.Gold fell 0.8% to $1,698.21 an ounce.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.

  • Bitcoin Falls 4% as Fed’s Powell Sees ‘Concern’ Over Rising Bond Yields

    Federal Reserve Chair Jerome Powell disappointed some traders by offering few signs that the central bank might expand monetary stimulus.

  • The oil market’s wild pandemic ride is about to take another turn

    The oil industry is no stranger to boom-bust cycles, but the pandemic has been its wildest ride to date, and on March 4 it’s due to take another turn when OPEC meets to consider rolling back production cuts. As the world’s cars and airplanes idled, global oil demand bottomed out in April at levels 16.4% below the previous year, dragging the price into negative territory for the first time. White-knuckling through it all has been OPEC, the 13-member cartel that dictates quotas for most of the world’s biggest oil-producing countries (notably excluding the US).

  • Stock market news live updates: Stocks end lower, Nasdaq slides by 2.7% as tech stocks sink further amid rising rates

    Stocks dipped Wednesday, extending losses from a day earlier as investors weighed optimism over widespread post-pandemic business reopenings against concerns over economic overheating.

  • Bond Market Turns Attention to Risk of U.S. Yields Cracking 2%

    (Bloomberg) -- The Treasury market may be just one spark away from exploding and sending 10-year yields all the way up to 2%, suggesting that the rout of 2021 may not yet be over and raising the chances that other assets like emerging-market bonds might also be living on borrowed time.Analysts are now putting the target on Treasury yields around half a percentage point higher than current levels following the rapid, reflation-fueled selloff that took the market by storm last week. Should that happen, it’s not just developed markets that will be left reeling. Developing-market bonds are increasingly at risk as investor concern grows about stretched valuations and the chances of a policy misstep by the Federal Reserve.“The velocity of the moves in U.S. Treasury yields are now intensifying at a time when both hard currency and local emerging-market bonds are more vulnerable to such a move,” said Lisa Chua, a New York-based portfolio manager on the emerging-markets debt team at Man Group Plc’s hedge-fund unit Man GLG.The reason 2% is on the radar for many is the market is in the midst of a rapid repricing back to a normal economy. What still hasn’t been priced in, among other things, are a much-sooner-than-expected cycle of interest-rate hikes and a real yield -- which strips out inflation -- closer to zero than the current level of around minus 0.8%. The record-breaking rally in stock markets meanwhile has been buffeted by the pick up in bond rates.More analysts are sounding the alarm that there’s little to stop yields surging higher. ING Groep NV says investors’ attitude toward holding longer-dated Treasuries has grown cautious, “to put it mildly,” exacerbating the potential for rapid selling on any sign of weakness in the market. They see yields on 10-year Treasuries rising another 50 basis points, joining the likes of BNP Paribas SA who also expect 2% by year-end.Investor jitters were on display again Wednesday, when a bigger-than-expected bond sale plan from the U.K. caused ructions globally. The U.S. 10-year yield jumped to around 1.49%, closing in again on the one-year high above 1.60% that it reached last Thursday in the wake of a sloppy seven-year Treasury auction. The rate was around 1.47% Thursday morning in New York.Concern over supply hitting the market is adding to fears inflation is set to accelerate, which could force central banks to begin tightening policy. Then there’s the risk liquidity evaporates to fuel sharper moves.“The bond market has been sitting on a powder keg since last week,” wrote ING strategists led by Padhraic Garvey in a note to clients. “In this context, we do not blame investors for exiting at the first sign of a selloff.”Liquidity in the $21 trillion Treasury market, which underpins the global financial system, is under scrutiny following last week’s startling gyrations and weak auction demand. The gap between bid and offer prices for 30-year bonds hit the widest since the panic of March 2020.All eyes will be on an appearance on Thursday by Federal Reserve Chairman Jerome Powell to see if he hints at possible action by the central bank to cap recent moves. In comments last week -- before the violent gyrations on Thursday -- he indicated that the Fed sees rising yields as a sign of economic health. But that message could well be shifted.The European Central Bank, meanwhile, has indicated it sees no need for drastic action to curb the rise in longer-term borrowing rates.For ING, the five-year U.S. bond is the key barometer for where rates are going. Mizuho International Plc agrees, having signaled the 0.75% level -- broken a week ago -- as the threshold that could signal a sharp correction in riskier stock and credit markets. That yield was hovering at 0.72% Thursday.Emerging markets, though, are starting to tell a different story. For bonds there, the crunch point could come with 10-year Treasury yields holding north of 1.5%. For Lisa Chua at Man GLG, that could trigger “major outflows” in both hard-currency and local assets.Not all investors see the path higher for yields. Some, like PGIM Fixed Income’s Robert Tipp, are betting on Treasuries going the other way and sending rates back down to 1% on the belief that the stimulutive effect from U.S. President Joe Biden’s $1.9 trillion spending package will fade and the economy will slow.Right now, the selling momentum seems hard to shake, with the eagerness of investors to borrow and short 10-year securities creating a rush within the market for repurchase agreements that’s sent rates there deeply negative.BNP strategists see the market pricing in an interest-rate hike from the Fed at the end of 2022, leading them to raise their year-end Treasury yield forecast to 2%. While they see the Fed sticking with dovish rhetoric, their risk scenario is that doesn’t work and the central bank has to increase the pace of bond purchases beyond the current $120 billion per month.“A break in asset market correlations and collapse in UST market liquidity (all out taper tantrum or “T”) would likely facilitate a Fed response to limit the deterioration in financial conditions,” wrote BNP strategists including Sam Lynton-Brown. While no Fed rate hikes are expected until the end of 2022, “this does not prevent the market from pricing it in.”(Updates with stocks in fourth 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.

  • Stock market news live updates: Nasdaq erases year-to-date gains as tech selloff persists and Treasury yields climb

    Stocks traded lower on Thursday after another technology-led selloff on Wednesday. A new report on weekly unemployment claims came in better than expected, helping boost sentiment after a disappointing print on private payroll growth came in just a day earlier.

  • A $21 Trillion Treasuries Mystery Is Bedeviling Global Markets

    (Bloomberg) -- Bond traders have been saying for years that liquidity is there in the world’s biggest bond market, except when you really need it.Last week’s startling gyrations in U.S. Treasury yields may offer fresh backing for that mantra, and prompt another bout of soul-searching in a $21 trillion market that forms the bedrock of global finance. While stocks are prone to sudden swings, such episodes are supposed to be few and far between in a government-debt market that sets the benchmark risk-free rate for much of the world.Yet jarring moves occur periodically in Treasuries, forming a bit of a mystery as no two events have been the same. Some point to heightened bank regulations in the wake of the 2008 financial crisis. Scrutiny over liquidity shortfalls intensified in October 2014 when a 12-minute crash and rebound in yields happened with no apparent trigger. Panic selling during the pandemic-fueled chaos a year ago, exacerbated when hedge funds’ leveraged wagers blew up, brought the issue to the fore again.And then came last week, when the gap between bid and offer prices for 30-year bonds hit the widest since the panic of March 2020.The latest events “are a stark reminder what happens when liquidity suddenly vanishes in the deepest, largest bond market,” said Ben Emons, managing director of global macro strategy at Medley Global Advisors.At issue is whether this vast market is more vulnerable to sudden bouts of turbulence thanks to measures that have made it more difficult for banks to hold Treasuries. Some analysts say the tumult last week was magnified by questions over whether the Federal Reserve will extend an easing of bank capital requirements, which is set to end March 31. Put in place early on in the pandemic, the measure is seen as making it easier for banks to add Treasuries to their balance sheets.The 2014 episode triggered a deep dive into the market structure, and regulators have pushed through some changes -- such as increased transparency -- and speculation has grown that more steps to bolster the market’s structure may be ahead.“While the scale and speed of flows associated with the COVID shock are likely pretty far out in the tail of the probability distribution, the crisis highlighted vulnerabilities in the critically important Treasury market that warrant careful analysis,” Fed Governor Lael Brainard said Monday in prepared remarks to the Institute of International Bankers.There are plenty of potential culprits in last week’s bond-market tumble -- which has since mostly reversed -- from improving economic readings to more technical drivers. Ultra-loose Fed policy and the prospect of fresh U.S. fiscal stimulus have investors betting on quicker growth and inflation. Add to that a wave of convexity hedgers, and unwinding by big trend-following investors -- such as commodity trading advisers.Based on Bloomberg’s U.S. Government Securities Liquidity Index, a gauge of how far yields are deviating from a fair-value model, liquidity conditions worsened recently, though it was nothing like what was seen in March.For Zoltan Pozsar, a strategist at Credit Suisse, the action began in Asia with bond investors reacting to perceived hawkish signs from the central banks of Australia and New Zealand. That sentiment then carried over into the U.S. as carry trades and other levered positions in the bond market were wiped out. A disastrous auction of seven-year notes on Thursday added fuel to the unraveling.Last week’s drama “brings to mind other notable episodes in recent years in which a deterioration in the Treasury market microstructure was primarily to blame,” JPMorgan & Chase Co. strategist Henry St John wrote in a note with colleagues.One key gauge of Treasury liquidity -- market depth, or the ability to trade without substantially moving prices -- plunged in March 2020 to levels not seen since the 2008 crisis, according to data compiled by JPMorgan. That severe degree of liquidity shortfall didn’t resurface last week.The bond-market rout only briefly took a toll on share prices last week, with equities surging to start this week, following a sharp retreat in Treasury yields amid month-end buying.The Fed cut rates to nearly zero in March 2020, launched a raft of emergency lending facilities and ramped up bond buying to ensure low borrowing costs and smooth market functioning. That breakdown in functioning has sparked calls for change from regulators and market participants alike.GLOBAL INSIGHT: Recovery? Yes. Tantrum? No. Yield Driver ModelFor now, Treasuries have settled down. Pozsar notes that the jump in yields has provided an opportunity for some value investors to swoop in and pick up extra yield, effectively helping offset the impact of the leveraged investors who scrambled for the exits last week.“Some levered players were shaken out of their positions,” Pozsar said in a forthcoming episode of Bloomberg’s Odd Lots podcast. “It’s not comfortable -- especially if you’re on the wrong side of the trade -- but I don’t think that we should be going down a path where we should redesign the Treasury market.”Why Liquidity Is a Simple Idea But Hard to Nail Down: QuickTake(Updates with details on Bloomberg’s liquidity index in 10th paragraph, and a chart)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.

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