Neil's Morning Update - 12/22/21
Neil's Morning Update - 12/22/21
Please excuse typos. Mornings are tilted more international, evenings more U.S. Continuing to try to make this more digestible for those who are not as familiar with the markets, lingo, etc. Feel free to leave your thoughts in the comments section, they are appreciated. Also, I don't discuss crypto extensively as I don't consider myself knowledgeable enough to talk intelligently on the subject (and there are plenty of other sources for that). As are reminder, this is a free blog I put out to try to help people get information, so no editors, etc.
A small glossary.
Carmax (KMX 144.50, +7.51): +5.5% after beating Q3 expectations. Merck (MRK 76.56, +1.02): +1.4% after announcing that the British government agreed to purchase 1.75 mln courses of Molnupiravir. CalAmp (CAMP 8.36, -1.53): -15.5% after missing Q3 expectations.
Asia
Major Asian markets ended near their flat lines. Japan's Nikkei +0.2%, Hong Kong's Hang Seng +0.6%, and China's Shanghai Composite -0.1%
In economic data: Australia's MI Leading Index +0.1% m/m (last +0.3 %) In news: BOJ minutes from October meeting suggest the bank is likely to keep easy policy until inflation hits 2% The Bank of Thailand left its policy rate unchanged at 0.50%, as expected, sticking to view that inflation pressures will be temporary Reuters reports the Chinese government suspended its cooperation agreement with Alibaba's cloud computing group.
In December 2021, the DG ECFIN flash estimate1 of the consumer confidence indicator decreased further in both the EU (1.4 points down compared to November 2021) and the euro area (1.5 points down). At -9.6 points (EU) and -8.3 points (euro area), the indicator is now well below its pre-pandemic level and approaching its long-term average in both areas.
As UK announces further support measures.
European gas and power prices eased after surging to a fresh record on Tuesday as Russia keeps shipments to Europe capped. Benchmark European gas dropped 7.1% to 167.50 euros a megawatt-hour by 10:23 a.m. in Amsterdam. German power for next year, a benchmark for European power, fell as much as 8% to 290 euros per megawatt-hour after reaching a record of 315.99 euros in the previous session.Russian gas flows into Germany’s Mallnow compressor station remained halted and the key Yamal-Europe pipeline was instead flowing gas eastward to Poland for a second day, according to network operator Gascade. The so-called reverse flows are likely the result of lower requests from buyers in Europe.Still, constrained supplies from Russia mean Europe has to rely on its already depleted storage sites, as nuclear outages in France mean more gas is needed to generate electricity. Inventories in Europe are expected to end the heating season at record-low levels, extending this year’s crunch.
The halt to Yamal flows, heavy nuclear outages and colder-than-average weather in northwest Europe “may sustain this rally into year-end,” Goldman Sachs Group Inc. analysts including Samantha Dart said in a report. “We expect that the price spike will lead to both demand destruction and higher LNG imports from January, gradually bringing prices lower.” The bank raised its forecast for January to $45 a million British thermal units and the February projection to $25 per mmBtu from a previous forecast of $17.60. The Dutch January price traded at equivalent of about $55.40 per mmBtu on Wednesday.
Commodities/Currencies/Bonds
Bonds - Some mild bull flattening this morning with 2-year bond yields flat at 0.7%, while the 10-year is down three basis points at 1.46%.
Dollar (DXY) - Remains just above the now flat 20-DMA. Looks like I can throw out the uptrend line that stretches back around 7 weeks. Currently at $96.29. Remains in intermediate-term uptrend. Daily technicals negative.
Crude (/CL) - Trading up slightly but enough to get it over the downtrend line and 20-DMA. 21-DEMA (red line) appears to be more important resistance though (which can happen sometimes) which it remains below. Currently at $71.21 WTI. Daily technicals continue to tilt positive.
More than 23 million barrels of certain crude options traded since Dec. 10, suggesting a major player is hedging against lower oil prices to protect 2022 revenues.According to Bloomberg’s analysis of trading data, a significant volume of average-price option put spreads traded during that period. These trades involve simultaneously buying a higher-priced put option -- giving the holder the right to sell at a pre-determined level -- and selling a lower price put, acting as insurance in case prices collapse.Although there’s no way to determine who initiated the trades from the data alone, people familiar with the deals who weren’t authorized to discuss the transactions publicly said the moves were consistent with Petroleos Mexicanos’ annual oil price hedging program, which traditionally takes place in the final weeks of the year. Pemex didn’t reply to requests for comment.The trades had a differential in strikes of either $5 or $6, data compiled by Bloomberg show. The higher strikes bought were between $66 and $68 a barrel, while the lower strikes sold were between $61 and $63. In total, those spread options would cost the buyer over $40 million in premium.
US Data
“Mortgage applications fell last week, driven by a 3 percent decline in purchase applications. Both conventional and government purchase applications were down, while the average purchase loan increased for the second straight week to $416,200 – the second highest amount ever. The elevated loan size is an indication that activity is more on the higher end of the market,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Home-price appreciation growth remains faster than historical averages and inventory, particularly for starter homes, continues to trail strong demand.”Added Kan, “The 30-year fixed rate decreased to 3.27 percent – its lowest level in four weeks – and helped spur an increase in refinances across all loan types. FHA and VA refinances jumped 4 percent and 12 percent, respectively.”
Misc.
Random stuff:
And payments for taking your medicine are back.
And UK health officials to confirm Omicron causes more mild symptoms than Delta.
As seems S Africa has reached its peak. Another study noted that hospitalizations were 80% less than with Delta.
As Libya still has not resolved the fact that elections are scheduled for Friday with no candidates set which is concerning the UN as military tensions rise. Argus.
The UN Support Mission in Libya (UNSMIL) has expressed concerns about the deteriorating security situation in Tripoli, saying it does "not bode well" for the holding of the country's presidential election on 24 December.
"The current mobilisation of forces affiliated with different groups creates tensions and increases the risk of clashes that could spiral into conflict," UNSMIL said today. "The developments in Tripoli do not bode well for the ongoing efforts to maintain stability and establish security and political conditions conducive to peaceful, credible, inclusive, free, and fair elections."
A recent flare-up in militia tensions in the Libyan capital Tripoli has added to uncertainty already hanging over the country's plan to hold an election this week. Libya's ability to carry out the poll on schedule was already under threat from a fractious electoral legal framework and a delayed list of approved nominees.
UNSMIL said today the disagreements should be resolved through dialogue, "particularly at this stage when the country is navigating through a difficult and complex electoral process that should usher in a peaceful transition". There has been no official announcement about the cancellation or postponement of the election, and UNSMIL called "on all Libyan actors… to work together to create a security and political atmosphere that preserves Libya's progress and enables peaceful elections and a successful transition."
As Manchin did join the Democratic caucus call last night which is a positive sign for mending his relationship with some of the other members.
As it appears Biden needs to work on connecting with the masses (this is apolitical, I'm a firm independent and no fan of either party (but am a fan of many politicians on both sides of the aisle who know they're in Washington to do the work of the people and act accordingly)).
Like this guy (it would appear).
And noted yesterday that the population growth was the lowest in over a century in the US. Here's some visuals from the WSJ.
To see more content, including summaries of most major U.S. economic reports and my morning and nightly updates go to https://seekingalpha.com/user/15085872/instablogs for more recent or https://sethiassociates.blogspot.com for the full history.
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