David Fuller and Eoin Treacy's Comment of the Day
Category - General

    ICBC Leads State Banks to Offer $129 Billion to China Builders

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    China’s mega banks, led by Industrial & Commercial Bank Ltd., pledged financing support of at least 925 billion yuan ($129 billion) to property developers as part of a push to ease turmoil in the nation’s real estate market. 

    ICBC, the world’s largest bank by assets, on Thursday said it would provide 655 billion yuan in credit lines to 12 developers, including Country Garden Holdings Co. That came after Bank of China Ltd., Bank of Communications Co., Postal Savings Bank of China Ltd. and Agricultural Bank of China Ltd. also disclosed they would also extend credit lines. 

     

    Read entire article

    Gold Gains After Fed Officials Back Slower Interest-Rate Hikes

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    old rose for a third day as the dollar continued to decline, with the Federal Reserve’s latest meeting minutes showing officials support moderating the pace of interest-rate increases. 

    A “substantial majority” of policymakers believe slowing the pace of rate hikes will probably soon be appropriate, the minutes show. Investors now expect the Fed to opt for a 50-basis-point increase next month, instead of the super-sized increases seen at previous meetings.

    Aggressive monetary tightening by the US central bank has weighed on bullion throughout the year by pushing up the dollar and bond yields. The metal has recovered about 8% this month, driven by bets on a slowdown in rate hikes following two cooler-than-expected inflation prints.

    Read entire article

    Equinor Says EU Price Cap Unlikely to Limit Natural Gas Exports

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Equinor ASA, Norway’s biggest energy company, said a European Union proposal to cap natural gas prices is unlikely to dampen exports of the fuel to the region.

    “The intention behind the proposed mechanism is to avoid episodes of excessively high gas prices and not to implement a permanent intervention in market mechanisms,” Equinor spokesperson Magnus Frantzen Eidsvold said in an email Wednesday. “Our immediate assessment is that this will not have substantial consequences for our exports.”

    Norway is Europe’s biggest supplier of natural gas, after Russian flows were slashed following the invasion of Ukraine. Norwegian Oil and Energy Minister Terje Aasland said in October that the country expects to sell about 8% more gas this year than it did in 2021, much of it to continental Europe.

    After months discussing how to prevent gas from skyrocketing again, the European Commission on Tuesday proposed an emergency brake on prices. However, the cap is only triggered when benchmark Dutch futures exceed €275 per megawatt-hour for two weeks and the gap between TTF and liquefied natural gas prices is greater than €58 for 10 trading days.

    Read entire article

    US Business Activity Contracts for a Fifth-Straight Month

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The manufacturing PMI sank nearly 3 points to 47.6 this month. And when excluding the early months of the pandemic, the production and orders measures both retreated at the steepest rates since 2009.

    On a more comforting note, the composite measure of input prices eased for a sixth-straight month, though it remains historically elevated. The prices-received gauge fell for a seventh month.

    Output expectations over the next year picked up, the report showed, in part reflecting more stability in supply chains. The index, however, remains softer than it was a year ago.

    “November even saw increasing numbers of suppliers, factories and service providers offering discounts to help boost flagging sales,” Williamson said. 

    “In this environment, inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession,” he said.

    Read entire article

    Oil Sinks as EU Discusses a Softer Russian Price Cap at $65-$70

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Oil stumbled as traders assessed a higher-than-expected price cap on Russian crude between $65 and $70 a barrel and a surprising build in US products.

    The European Union’s proposed range would be well above Russia’s cost of production and higher than some countries have been paying for its oil. As Russia is already selling its crude at discounts of $20 a barrel in recent months, a high cap may have minimal impact on trading, keeping the nation’s supplies flowing into the global market.

    West Texas Intermediate traded around $77 a barrel as investors digested rising US product stockpiles, accelerating a selloff in thin trading. Gasoline stockpiles rose by 3 million barrels, the largest build since July, with demand plunging by the most in nearly two months heading into the Thanksgiving holiday.  

    “The effectiveness of price caps as a mechanism to tighten the screws on Russia remains a big question for the market,” said Michael Tran, an analyst at RBC Capital Markets. “What such policy measures does do is raise the degree of positioning paralysis for oil traders that are already grappling with an anti-risk taking period of low liquidity.”

    Russia has previously said that it won’t sell crude to nations that use the cap, which is designed to punish Moscow for its invasion of Ukraine while keeping the nation’s oil flowing. 

    EU ambassadors are meeting on Wednesday with the aim of approving the cap mechanism and a proposed price level. On Tuesday, the EU already watered down its latest sanctions proposal by delaying its full implementation and softening key shipping provisions.

    Crude prices have suffered several sharp downturns in recent days. Demand in China, the world’s largest importer, remains weak as the country presses on with Covid-Zero curbs. Beijing asked residents not to leave the city unless necessary, to stem the spread of the virus.

    As the oil market has softened in recent days, both Brent and WTI have at times traded in a bearish contango structure for the first time in months. WTI’s nearest timespread flipped back into contango once again. 

    Read entire article

    Violent Protests Erupt at Apple's Main IPhone Plant in China

    This article for Bloomberg may be of interest to subscribers. Here is a section:

    In one video, irate workers surrounded a silent, downcast manager in a conference room to voice grievances and question their Covid test results. It wasn’t clear when the meeting took place.

    “I’m really scared about this place, we all could be Covid positive now,” a male worker said. “You are sending us to death,” another person said.

    The Zhengzhou campus was operating normally as of Wednesday evening, a Foxconn spokesperson said. The violence had erupted after a portion of recently arrived employees raised complaints about “work subsidies” -- bonuses or payments on top of usual wages, Foxconn said in a statement. But the company stressed that it handles all such compensation in strict accordance with its contractual obligations. 

    “With regards to the violence, we are continuing to communicate with workers and the government, to avoid a recurrence,” the company said without elaborating.

    Read entire article

    Feedback on Our Tactical Views and 2023 Outlook

    Thanks to a subscriber for this report from Morgan Stanley which may be of interest. Here is a section:

    Technicals over Fundamentals for now…our tactically bullish call was always more about the technicals than the fundamentals. Today, we provide an update to those factors, some of which no longer justify higher prices although they provide support at current levels. The deciding factor is market breadth, which has improved greatly over the past month and argues for us to remain bullish into year end before the fundamentals take us to lower lows next year. Feedback on our call for the S&P 500 to reach a price trough of 3,000-3,300 in Q1 '23…we've gotten a fair amount of pushback on that our forecast on this front is too aggressive both from a magnitude and timing standpoint. While directionally bearish, many investors struggle to see even a retest of 3,500. In our view, what was priced at the October lows was peak Fed hawkishness, not material earnings downside. If we were forecasting a modest 5% forward EPS decline and a reacceleration off of those levels, we'd concede that the earnings risk is probably priced, but we're modeling a much more significant 15-20% forward earnings downdraft, which should demand a more recessionary type 13.5-15x multiple on materially lower EPS.

    Read entire article

    Inside a Crypto Nemesis' Campaign to Rein In the Industry

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “There were a lot of entrepreneurs that grew up in this field and chose to be noncompliant,” Mr. Gensler said in an interview last month at the S.E.C. headquarters in Washington. “We will be a cop on the beat.”

    Mr. Gensler’s central claim is simple: For all their novel attributes, most cryptocurrencies are securities, like stocks or other investment products. That means the developers who issue cryptocurrencies must register with the U.S. government and disclose information about their plans. In Mr. Gensler’s view, exchanges like Coinbase and FTX, where customers buy and sell digital coins, should also have to obtain S.E.C. licenses, which come with increased legal scrutiny and disclosure obligations.

    The crypto industry has fought the government’s efforts to classify digital assets as securities, arguing that the legal requirements are overly burdensome. Even before FTX’s collapse, the debate was reaching an inflection point: A federal judge is expected to rule in the coming months in a lawsuit brought by the S.E.C. that charges the cryptocurrency issuer Ripple with offering unregistered securities. A victory for the government would strengthen Mr. Gensler’s hand, establishing a precedent that could pave the way for more lawsuits against crypto companies.

    Read entire article