Closing changes for the main European bourses:
- UK FTSE 100 -0.3%
- German DAX 0.4%
- Italy MIB +0.2%
- French CAC -0.4%
- Spain IBEX +0.4%
The periphery did better today. In Spain stocks opened much lower but recouped the losses quickly and then finished at he highs of the day. The IBEX daily chart continues to consolidate but that’s a nice rejection of the lower trendline.
Producing plutonium will allow the country to expand its arsenal of nuclear weapons.
- “Since early July, there have been indications, including the discharge of cooling water, consistent with the operation of the reactor,” said the report by the International Atomic Energy Agency.
- and there are indications that North Korea is also using a nearby laboratory to separate plutonium from spent fuel previously removed from the reactor.
The agency described the twin developments as “deeply troubling” and a clear violation of United Nations Security Council resolutions.
North Korea’s plutonium-producing reactor is at Yongbyon
- appeared to have been inactive from December 2018 until the beginning of July 2021
Taper back on the table?
There’s a sweet spot for many markets where delta pushed back the taper but the economy remains solid and rates stay low.
Of course, that’s an impossible paradigm to hold. Yes, Powell probably won’t signal a taper this week but beyond that either delta will meaningfully hurt the global economy or delta will fade and the case for tapering will return.
At the moment, the bond market appears to be hinting at a fade in delta and rising odds of a September taper. Overall, I suspect this is more about delta and confidence this round of cases will fade quickly but I see the Fed argument too.
From where I stand, Powell’s best course of action is to preserve some optionality into the Sept meeting but emphasize that the Fed will do everything it can to support the recovery. Ultimately, a November taper hint and December announcement makes the most sense.
Despite the uptick in rates, the bond market certainly isn’t seeing any inflation.
Barkin is the president and CEO of the Federal Reserve Bank of Richmond, he has some comments crossing on the wires.
Speaking in a Bloomberg TV interview.
- you want yields to respond to what happening in the economy
- yields reflecting good news on vaccines, fiscal aid
- really hopeful that we’re at the back end of pandemic
- the Fed’s interest-rate dot plot is not Federal Open Market Committee policy
- Fed has tools to handle unwanted inflation
- inflation is not a one-year phenomenon, it’s multi-year
- expect to see price pressures in 2021
- expect strong demand, met by some supply-chain issues
- the US economy will have strong spring and summer
Re that headline I put in the, headline …. the dot plot is part of the Fed’s forward guidance. Barkin’s comments are in line with other comments from Fed officials, they are toeing the party line since Chair Powell laid down the law and told them all to shut up about tapering a month or so back.
The travel ban will stay in effect until 17 February at least
ICYMI, the restriction has gone into effect yesterday and covers land, air, and sea travel into the country, according to local media citing the German interior ministry.
The exceptions to the restriction is only for Germans living in those countries, those who have residency in Germany, and passengers in transit or the movement of goods.
“The German government has restricted air and sea travel to Germany at its external Schengen borders. Travellers from the UK are currently only permitted to enter Germany if they are returning to their place of residence, if they serve in an important role or if they have an urgent need, such as urgent medical treatment.”
Generally speaking, if more countries in the EU adopt similar restrictions, it isn’t quite a good look on how virus developments are playing out in Q1. And that also adds another negative point to the list for risk sentiment.
Yields quickly move back higher
The chart of 10-year yields is an interesting one. There was the consolidation pattern at the top that broke down this week but now it has rejected the first test of 1% and bounced 6 bps to 1.06%.
It’s now testing the bottom of the old range and we’ll soon find out of there will be a broader range of consolidation or it will range from 1.00%-1.06%.
Notably, the bond market was a step ahead of stocks this week and that break lower came well ahead of the rout in equities yesterday. There has been a great pass-through to FX, but keep an eye on yields from here.
The Federal Open Market Committee statement and Powell’s press conference on Wednesday US time were both non-eventful.
Responses are coming in, this a quick summary on what Oxford Economics have to say:
Powell signalled the FOMC would rather risk erring on the side of removing accommodation too slowly then removing it too rapidly, for several reasons:
- heightened uncertainty around the pandemic remains
- the economy and labour market are far from full recovery
- new policy framework is asymmetrically dovish
- policymakers want to avoid ‘taper tantrum’ that would send long-term rates higher
Oxford Economics forecast is for a ‘gradual’ QE taper to being in 2022. but by the end of that year, the Fed’s open market account will remain very elevated.
Elon Musk passes Jeff Bezos
Shares of Tesla are up another 4.2% today and with that, Tesla CEO Elon Musk has passed Jeff Bezos to become the world’s richest person, according to Bloomberg calculations. His net worth is $188 billion dollars, about $1.5 billion more than Bezos.
In the past 12 months, Musk’s net worth has risen by more than $150 billion on a 750% rise in Tesla’s share price. He owns 20% of the company but also holds options that are now worth $42 billion.
The Tesla chart is breathtaking
Tesla is now the world’s sixth-largest company.
It’s not just Musk, the 500 richest people in the world added 31% to their wealth last year, according to Bloomberg.