Thursday, December 9, 2021

Morning Note: A Little China-Induced Angst, Maybe?

Just a quick one this morning, as I'm technically out of the office till Monday, physically so right after I send this note. ⛷ 😎

Woke up this morning to news that weekly jobless came in at an amazingly low 184k! Clearly, employers who remain starved for workers are keeping the ones they have, and, make no mistake, paying them more for the privilege.

So, certainly nothing negative there (save for maybe added [inflationary] pressure for the Fed to desist faster in their ongoing generous support of asset prices), thus I was surprised to see all things commodities and global equities taking a bit of a hit this morning.

I expected some worrisome headline, frankly around COVID, but nothing really Earth shattering. Although I should note that there are rumblings of potential work from home "guidance" hitting the UK, for example...

Digging a bit deeper I find that China's troubled property giant Evergrande Group has been officially labeled a "defaulter", although that had to be expected, and that China took overnight measures to try and stem the rising tide in the home currency. 

While not entirely ruling out COVID, I suspect the China news, and a corresponding rise in the US dollar, has something to do with this morning's action.

This makes for another one of those stinky (and troubling) breadth days: 

I.e., while the SP500 is only off 0.27%, it's declining members are outpacing advancers by 4 to 1. Its excessive weighting in tech (flat so far this morning) explains the S&P's minor (compared to virtually all things energy, and materials [save for MP]) decline.

Remember, and we expect to see this play out in the months/years to come, tech will shine (relatively) on deflationary news/developments, and fade on the opposite...

Asian equities leaned green overnight (although they're giving it all back in the futures session this morning), with 13 of the 16 markets we track closing higher.

Europe's a mess this morning, with 15 of the 19 bourses we follow in the red, as I type.

US major averages are leaning lower: Dow down 74 points (0.21%), SP500 down 0.27%, SP500 Equal Weight down 0.28%, Nasdaq 100 down 0.37%, Nasdaq Comp down 0.43%, Russell 2000 down 0.56%.

The VIX sits at 19.99, up 0.45%.

Oil futures are down 0.77%, gold's down 0.59%, silver's down 2.12%, copper futures are down 1.83% and the ag complex is down 0.80%.

The 10-year treasury is up (yield down) and the dollar is up 0.36%.

Led by MP (rare earth miner), Nokia, healthcare stocks and treasury inflation protected securities -- but dragged by carbon credits, silver, AMD, solar stocks and Latin American equities -- our core portfolio is off 0.46% to start the session.

Here's The Wall Street Journal's Lingling Wei this morning on China:   emphasis mine...

"Beijing’s leaders are increasingly worried about the property sector’s knock-on effects on other parts of the economy. A senior gov adviser told me the government will “make a big effort to stabilize growth” next year."

That ("make a big effort to stabilize growth next year") is our take on China going forward as well.

Per my opening line, there'll be no macro update or weekend commentaries to clog your inbox the next few days.

Have a great weekend!

No comments:

Post a Comment