As We Approach The Open. - 9/16/21

Please excuse typos. As a side note, after talking with some followers, I'm going to try to make this a little 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.

Will start a small glossary at the start also.

SPX = S&P 500

Naz = Nasdaq Composite

NDX = Nasdaq 100 (100 largest stocks in the Naz)

RUT = Russell 2000 (smaller stocks)

DMA = Daily Moving Average (the moving average over the given time period (20, 50, 100, 200 days normally)).

MACD = Moving Average Convergence Divergence (basically a trend indicator)

RSI = Relative Strength Index (basically what it sounds like)

BBG = Bloomberg

WSJ = Wall Street Journal

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As We Approach The Open... - 9/16/21

As we approach the open of US equity trade in NY, global equities trade mixed (Asia generally down, Europe generally up), and U.S. equities look to start the day in the red although off the lowest levels of the session after a much stronger than expected retail sales report, with large growth lagging a bit. NDX indicated down around a quarter percent, SPX less than a tenth, and RUT trades around flat levels.

In today's U.S. corporate news (Argus):

Cisco (CSCO 58.58, +1.02):+1.8% after the stock was upgraded to Outperform from Neutral at Credit Suisse. American Express (AXP 162.25, +0.91): +0.6% after the stock was upgraded to Neutral from Underperform at BofA Securities. Beyond Meat (BYND 107.58, -3.23): -2.9% after the stock was downgraded to Underweight from Neutral at Piper Sandler. Timken (TKR 67.20, -3.22): -4.6% after withdrawing full-year guidance and saying it expects lower sales and earnings in 2H21 relative to prior expectations. InterDigital (70.75, +0.83): +1.2% after issuing upside Q3 revenue guidance.

Asia

Major equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. The Hang Seng is down by at least 1% for the fourth consecutive day. Japan's Nikkei: -0.6% Hong Kong's Hang Seng: -1.5% China's Shanghai Composite: -1.3% India's Sensex: +0.7% South Korea's Kospi: -0.7% Australia's ASX All Ordinaries: +0.5%.

In news, China's National Development and Reform Commission expects 2021 GDP growth of at least 6.0%. President Biden announced the formation of a new security alliance with the U.K. and Australia, in-line with reports from yesterday(discussed in last night's report). Japan's chief cabinet secretary said that an extraordinary session of parliament may be convened for October 4th to select the new prime minister. North Korea conducted another missile test (showing its ability to fire rockets from moving railcars).

As China is the latest to address natural gas prices.

In economic data, Japanese exports were under, imports over expectations. Australian employment came in well under expectations with a large drop (it had been positive last month) due to lockdowns, although the unemployment rate dropped as participation pulled back.

China's August FDI 22.3% YTD (last 25.5%)

Japan's August trade deficit JPY635.40 bln (expected deficit of JPY47.70 bln; last surplus of JPY439.40 bln). August Imports 44.7% yr/yr (expected 40.0%; last 28.5%) and Exports 26.2% yr/yr (expected 34.0%; last 37.0%)

Australia's August employment change -146,300 (expected -90,000; last 2,200) and full employment change -68,000 (last -4,200). August Unemployment Rate 4.5% (expected 4.9%; last 4.6%) and August Participation Rate 65.2% (expected 65.7%; last 66.0%). August HIA New Home Sales 5.8% m/m (last -20.5%)

New Zealand's Q2 GDP 2.8% qtr/qtr (expected 1.3%; last 1.4%); 17.4% yr/yr (expected 16.3%; last 2.9%)

Hong Kong's August Unemployment Rate 4.7% (last 5.0%)

So does Kuroda at this point just use the same speech over and over and change the dates?

Europe

Major European indices trade on a firmly higher note. STOXX Europe 600: +0.7% Germany's DAX: +0.6% U.K.'s FTSE 100: +0.5% France's CAC 40: +1.1% Italy's FTSE MIB: +1.1% Spain 's IBEX 35: +0.9%.

In news, there has been continued focus on rapidly rising electricity and gas prices across the region, inviting concerns about a new headwind to growth. Germany's DIW Institute lowered its forecast for growth in Germany to 2.1% from 3.2% while Switzerland's growth forecast was cut to 3.4% from 3.6%. Finland's central bank raised its forecast for domestic growth to 3.5% from 2.9%. France sold 3- and 5-yr debt while Spain sold 3-, 5-, and 10-yr debt to good demand.

In economic data, EU's July trade surplus improved. Exports were up 11.4% y/y and imports 17.1%.

Eurozone's July trade surplus EUR20.70 bln (last surplus of EUR17.70 bln)

Italy's July trade surplus EUR8.762 bln (last surplus of EUR5.673 bln)

Noted the UK-Australia-US security alliance in last night's report (this morning both France (due to not being included in submarine contract) and China (for obvious reasons) are complaining. In a similar vein US and EU will work together on screening foreign investments. BBG.

As issues keep on coming for the embattled UK power sector with a key French connector offline for a month due to a fire. BBG.

Which caused prices to spike yesterday...

... but hopefully seeing some relief today as prices seem to be coming back a bit. John Kemp, a noted energy analyst, notes (from yesterday) that there are signs of peaking in European power prices.

Commodities/Currencies/Bonds

Bonds - Yields moving higher again this morning with 10-year yields trading up around three basis points at 1.340%. 2-year yield is around flat levels at 0.21%.

Dollar (DXY) - Firmer this morning again testing the highs of last week over the the 20-DMA at $92.910. This was enough to turn the daily technicals positive.

VIX - Trading mildly up this morning to 18.70.

Crude (/CL) - After four day win streak pulling back a little this morning around a half percent at $72.30 WTI. Technicals remain positive on daily chart, next real resistance is August highs at around $74.25. Support is back around the $71 level.

Natural Gas (/NG) - We noted the large wick last night, but continues to move higher, up another 1% to $5.519. It's up 46% since Aug 19th. Technicals remain positive but very overbought (RSI over 80 now). Feel like some consolidation has to be coming soon.

Gold (/GC) - Moving solidly down this morning, almost 2% to $1760 as it just couldn't break the 50-DMA and 1800 level for any sustained period. Not a good looking chart right now. Technicals are now firmly negative.

Copper (/HG) - Also down around 2% but unlike gold has good support here. Technicals remain positive daily chart but are close to turning.

US Data

So far this morning we've gotten weekly jobless claims, August Retail Sales (the big report of the day), and Philly Fed Manufacturing. I'll have reports out on all three this morning. Here are the headlines - jobless claims ticked up, Philly Fed followed NY State Index in popping back up to July levels (but 6-month outlook fell to lowest in 5 years), and retail sales came in much stronger than expectations (which were for a decline - they were up +0.7%) bouncing back from a -1.1% decline in July.

Initial Jobless Claims: +20K to 332K vs. 315K consensus, 312K prior (revised from 310K

US Philadelphia Fed Business Outlook Sep: 30.7 (est 19.0; prev 19.4)

US Retail Sales Advance (M/M) Aug: 0.7% (est -0.7%; prev -1.1%)

US Retail Sales Ex-Auto (M/M) Aug: 1.8% (est 0.0%; prev -0.4%)

US Retail Sales Ex-Auto, Gas Aug: 2.0% (est 0.0%; prev -0.7%)

Business Inventories for July (Briefing.com consensus 0.5%) will be released at 10:00 a.m. ET. I might put a report out on that depending how the day goes. If not it will be covered in the evening wrap.

Misc.

Random stuff:

As US, UK, and Australia create a "security partnership" to counter China (even if they say it's not for that purpose).

And FWIW, BofA released a report of “radical technologies that could change our lives and accelerate the impact of global megatrends," that is getting some buzz. Here they are (from Seeking Alpha):

• 6G: “The next generation of telecom networks will be needed in less than a decade as data continues to grow exponentially and 5G reaches its upper limit capacity.”
• Brain Computer Interfaces: “As we reach a point where humans are unable to keep up with computers and AI, brain computer interfaces could help ‘level up’ humans with computers. Shorter term, brain computer interfaces hold solutions for paralyzed individuals and promise a new wave of innovation in gaming.”
• Emotional Artificial Intelligence: Also “known as 'Affective Computing' and 'Cognitive Computing' (IT) is designed to capture, analyze and respond to human emotions and simulate human thoughts. EAI can potentially collect, analyze and respond to completely new varieties of data and situations and predict or simulate human thought, leading people to take action.”
• Synthetic Biology: “At its core, 'synbio', as the field is commonly referred to, takes advantage of the vast diversity of nature to make biomolecules that traditional chemistry cannot.”
• Immortality: “Traditionally, aging has not been viewed as a disease that can be treated but this is changing. Actors in this space are increasingly looking to tackle the hallmark of aging via pathways such as genomic instability, telomere attrition, mitochondrial dysfunction, and cellular senescence among others.”
• Bionic humans: “This could be invasive (e.g. implants) or non-invasive (e.g. exoskeleton). Biohacking is also an associated field which is essentially applying DIY biology to boost oneself e.g. RFID chip in hand for contactless payments.”
• eVTOL: “Electrical vertical take-off and landing vehicles that could provide an alternative mobility transportation solution to outdated infrastructure and overly stressed roads in urban settings.”
• Wireless Electricity: “As the IoT takes off, automating and creating near continuous charging solutions could provide convenience for consumers, while solving charging problems for the rollout of EVs and secure electricity supplies for remote communities.”
• Holograms: “A technology capable of creating a simulated environment through light imagery projections that will allow everyone to come together in one virtual room, without having to leave their physical location.”
• Metaverse: “A future iteration of the Internet, made up of persistent, shared, 3D-shared spaces linked into a virtual universe. It could comprise countless persistent virtual worlds that interoperate with one another, as well as the physical world and transforming markets such as gaming, retail, entertainment etc.”
• Nextgen Batteries: “Whilst lithium batteries are the major EV technology, this does not necessarily need to stay true with alternatives such as solid state, vanadium flow, sodium ion etc provide promising additional attributes.”
• OceanTech: “It seeks to answer: ‘How do we increase sustainability of the ocean economy while harnessing its benefits?’ Solutions could include ocean energy, land based aquaculture, and precision fishing using AI.”
• Green Mining: “Transitioning away from a carbon-intensive economy will mean moving to a metal-intensive one. Green mining solutions like deep-sea mining, agromining, mining of wastewater and asteroid mining could provide less polluting and destructive solutions as the green economy’s thirst for metals grows.”
• Carbon Capture and Storage: “All current zero-carbon pathways require some form of CO2 removal. CCS, alongside other geoengineering solutions, could act as part of the solution with long-term permanent removal of CO2 vs afforestation.”

To see more content, including summaries of most major U.S. economic reports and my morning and nightly updates go to Cbus Neil's Blog Posts for more recent or Sethi Associates for the full history.