Overnight markets moved up to start the day and week, with cyclicals leading the way. Semis are up, hoping for some good numbers on Wed from Nvidia. Crude is up due to tightening oil markets given a potential strike in Australia (a 10% producer of global LNG exports). European benchmark gas prices jumped as much as 18%. Woodside reports its results this week, so that should be interesting.
Without a lot of macro data this week, traders will be reading the tea leaves again when Powell gives a speech at the Jackson Hole Symposium on Friday.
Bond bulls like JPM, Allianz and Columbia Threadneedle are doubling down after taking a relative beating on their bond calls YTD. They point to the Fed’s eventual pause and potential recession as catalysts. Sometimes, though, the cost of being early outweighs being right eventually.
The yield on 10-yr TIPS is above 2% for the 1st time since 2009. Markets for UST will be tested this week for 2 auctions: 20-yr bonds and 30-yr TIPS, which typically don’t garner consistent demand. If the auctions don’t go well, it means that rates will have to increase to attract buyers.
While you’re unwinding at the pool, Goldman is unwinding another Solomon deal. Its looking to sell its personal financial mgmt. biz overseeing $29bn in assets born out of its $750mm acquisition of United Capital in 2019. Solomon had bought the CA-based RIA in his move down market. That’s alongside its sale of GreenSky just over a year after buying the lending business.
BBG is out with a story on how Xi is intentionally running the economy “cold” to break the pattern of his predecessors that fueled China’s growth with speculative real estate construction and low-return projects funded by opaque local borrowing. The $18 trillion economy is slowing, consumers are hoarding cash because of their concerns, exports are down, prices are falling, youth are unemployed, and major companies are halting payments. But the government is helping support areas it cares about: EVs, solar and wind power, and batteries, which have solid exports and investment—which it calls the “new economy.” Xi is going to have to weigh political risks with economic ones. Sometimes calculated bets don’t pay off.
MS says investor sentiment will weaken. GS says investors will increase bullish bets. Only one will be right.
Bloomberg reported that US consumers have drawn down more than $2T in pandemic-fueled excess savings, which will be a headwind to future consumer spending.
BBG reported that NY and CA lost investment firms that managed close to $1 trn of assets to the Sun Belt over the past 3 yrs. Lower taxes. Warm weather. New beginnings for the industry.
In Japan, the BoJ is buying JGBs at a record pace this year, which probably gave them confidence in loosening its yield control. Doubling the effective cap on benchmark yields has not slowed their buying, so we’ll have to stay tuned to see what changes lie ahead.
Amazon relaunched its shipping service that competes with FedEx and UPS, per ABC.