Stéphan
Oct 3, 20235 min
On this day 33years ago...
Q4 starts where we left off in Q3 (apart from last day fix..), with higher duration yields, 10's UST 4.7% and USDollar has a strong leg higher, AUDUSD breaking down through recent months lows around 0.6350/75 area, USDCAD 1.37+, USDMXN not too far, USDCNH 7.3250 again too >>> Fed's Barr's focus is on how long to hold rates high, Fed's Mester 'one more rate hike may be needed this year',
URA : often discussed Uranium with you last 2-3years, ok so the ETF has rallied form 10 to 30 last 3years, it's still a long way down from the Fukushima levels (chart below), imho, it was always going to be near impossible to do without nuclear
TSLA reported 435k deliveries in Q3, 25K below expectations, and the 1st decline in deliveries in 2 years >>> planned factory closures were to blame
JPMorgan's Lebovitz: “If rates continue to rise the way they’ve been rising, there will be a financial accident. Something will break and that will get the Fed moving in the other direction."
"Rivian vehicles sell for over $80,000 on average. Yet they’re so expensive to build that in the second quarter the company lost $33,000 on every one it sold. That’s roughly the starting price of a base model Ford F-150." - WSJ
Cleveland Fed President Loretta Mester: “We are likely near or possibly at the peak of the fed funds tightening cycle. Now our task turns to ensuring that we keep monetary policy restrictive for long enough” to get inflation to 2% in a timely way
Crude : that's a different view from most in markets : Citigroup with a renewed bearish call for oil, arguing that Brent would drop to the low ~$70 in 2024 on "more oil coming into the market." , “OPEC+ cuts have driven oil higher in a prolonged bull run, but 4Q ‘23 is set to move lower, with further 2024 downside”
Credit default swaps of the biggest US banks are rising - again the surprise is that they haven't really done too much, up until last couple of weeks
Swiss inflation : SNB in a good spot, smaller rebound in expected headline CPI in Sep, with core easing to 1.3% YoY
Gaetz files motion to remove Speaker McCarthy from leadership position
Markets :
Equity markets hanging in here, mostly (only) on the magnificent 7's (been all along the new 'defensive play for Mr Market'..)... European markets through looking pretty soft and 6months lows (would respect the lag effect, first pops up in large caps vs small caps, and can reach a broad sell-off if/when jobs are hit, which is what Powell focuses on now for any signs of economic weakness (inflation we know is topping out but will remain sticky, for now anyway), we remain defensive and watch those 200dma now : A god number of indices have fallen through 200dmas (Dax, MSCI EMG, Shanghai composite, stocxx600 and even the Dow jones, the big SPX500 is trading 2% or so above that threshold (around 4200), QQQ holding up on large cap 7's, while underneath, it looks MUCH worse, China property stocks keep sliding to the lowest since 2008
XLU - SPX500 utilities sector dropped sharply again yesterday, lowest point since June 2020 (interest sensitive sectors hit again, Reits, and energy down on softer Oil)
USDollar remains on a firm trend higher, bar any big change from somewhere
Bonds : all the moves are about Reals, so in effect tighter conditions, higher & steeper >>> The latest yield surge shows Treasuries are detached from their fundamental drivers: JPMorgan analysts. Ed Yardeni says the selloff shows broad concern about the US's fiscal policy of escalating federal budget deficits >>> BBG - the Bond vigilantes are back and we could get a BoJ pivot sooner or later ...(JPN yield curve is steepest in history..), Japan's 10-year government bond yield hasn't been this high since the 2013 "taper tantrum" in the US
Copper hitting March lows, Crude 3week lows too - good news
Metals got hit as well, GOLD fell hard through 200dma in late Sep (1935$) and in fact Silver got butchered since Friday, liquidity tightening-event ?
Few signs of capitulation in few places other than the Mag 7 !
Speech by Governor Bowman on the economy and bank regulation - Federal Reserve Board >>>A Timely Journey Back to Price Stability: Are We There Yet? No. Will We Get There? Yes. A Timely Journey Back to Price Stability: Are We There Yet? No. Will We Get There? Yes. (clevelandfed.org)
Fed's Barr says his focus is on how long to hold rates high | Reuters
How the Fed Made a Worrisome Economic Signal Go Away (msn.com)
Quote from article to explain the magic of the Fed's accounting: "The Fed’s losses don’t represent a direct hit to the economy, since the way Fed accounting works the central bank just carries losses on its books, to be washed away when it starts making profits again. When the Fed turns a profit, on the other hand, it makes payments to the Treasury Department, which can help offset budget deficits. However, the Fed’s recent accumulated losses do mean that, even if it returns to profitability, it won’t be contributing to the Federal budget right away, as it first has to dig itself out of a hole."
Robin Brooks on X: "Markets are very negative on China. That's odd because China's manufacturing PMI is better than the US or Euro zone (lhs) and its services PMI is also just slightly better (rhs). Markets instead should focus on the Euro zone, where manufacturing and services look very weak... https://t.co/JzhJfVR3fB" / X (twitter.com) there is always a point where markets get über bullish or too bearish - are we there ?
Will Berlin's monument to German Unity ever be completed? (msn.com)
Japan to stress-test banks for risk of Silicon Valley Bank-style crisis - Nikkei Asia
Gaetz files motion to remove Speaker McCarthy from leadership position (yahoo.com)
NextEra Energy plunges despite Buy rating reiterated at Goldman, as drop overdone (msn.com) >>> lag of financial headwinds with higher rates and the cost of capital on renewables etc
Kochie’s big rates call: ‘As bad as it will be’ (yahoo.com)
RBA - bar any surprised, looks like we are done, as always the question is whether/when rates will come down in this environment of stick inflation (high for longer)
Sam Bankman-Fried must now convince a jury that the former crypto king was not a crook (qz.com)
Mali in meltdown as militants advance and U.N. withdraws | Reuters terrible state of affairs
URA ETF in perspective