Emergence of South African Covid variant triggers broad flight to safety:
Risk assets came under pressure Friday following the news that a new and worrying Covid variant was discovered in South Africa and had already spread to quarantined travelers in Hong Kong and Belgium. Scientists say the variant may be able to evade immune responses and could be the most significant variant to date, as it carries a high number of mutations in its spike protein which may make it easier to enter the human body. Citi analysts suggest the next two weeks will be critical to determine whether the new variant will displace Delta in countries with high rates like UK and Germany.
On Friday, the Dow fell 905 points, or 2.5%. It was the Dow’s biggest one-day percentage drop since October 2020. The S&P 500 lost 106 points, or 2.3%, and the Nasdaq dropped 353 points, or 2.2%. It was the worst Black Friday session on record for all three indexes. Worries about reduced demand caused oil to tumbled 13% to $68.15. Investors reached for safe havens pouring into treasuries, dropping the yield on the 10 year to 1.48% With all of this risk off sentiment one might expect precious metals to rally but that didn’t happen as both Silver and Gold ended lower for the week and Gold was up just slightly on Friday. Bitcoin was also part of the selling, falling over 7% on Friday.
Early indications suggest the Omicron variant may lead to mild cases, but many unknowns at this point. It’s not just South Africa, Omicron has been detected in some developed countries too, including the UK, Italy, and Germany (at the time of this writing). Travel bans may be too late to halt Omicron’s spread but according to senior Biden administration officials, The United States will restrict travel for non-U.S. citizens from South Africa and seven other countries beginning Monday. In addition to South Africa, the affected countries are Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi. It is not clear how long the restrictions will remain in place. Moderna says if new vaccine required for Omicron, it could be available in early 2022.
Let’s try to keep this in mind: Scientists are still trying to understand if this new variant causes any significant increase in hospitalization or deaths. At the moment there isn’t enough data to really know.
The Baker Hughes rig count increased by 6 this week. There are 569 oil and gas rigs operating in the US – Up 249 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims– Released Thursday 11/24/2021 – The week ending November 20th experienced a decrease of 71k in initial claims declining to 199k. This marks the lowest level of initial claims since November 15, 1969. The four-week moving average of initial jobless claims decreased 21k to 252.25k.
Job Openings & Labor Turnover Survey JOLTS – Released 11/12/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings was little changed at 10.4 million on the last business day of September. Over the month, hires were little changed at 6.5 million and separations were little changed at 6.2 million. Within separations, the quits rate increased to 3.0%. The layoffs and discharges rates were unchanged at 0.9%.
October Jobs Report–BLS SummaryReleased 11/5/2021 – The US Economyadded 531k nonfarm jobs in September and the Unemployment rate edged down to 4.6%. Average hourly earnings increased by 11 cents to $30.96. Hiring highlights include +164k Leisure and Hospitality, +100k Professional and Business Services, and +60 in Manufacturing.
Average hourly earnings increased by 11 cents or 0.4%.
U3 unemployment rate declined 0.4% to 4.8%. U6 unemployment rate declined to 8.5%.
The labor force participation rate was unchanged changed at 61.6%.
Average work week decreased 0.1 hours to 34.7 hours.
Employment Cost Index – Released 10/29/2021 – Compensation costs for civilian workers increased 1.3% for the 3-month period ending in September 2021. The 12-month period ending in September 2021 saw compensation costs increase by 3.7%. The 12-month period ending September 2020 increased 2.4%. Wages and salaries increased 4.2 percent over the year and increased 2.5 percent for the 12-month period ending in September 2020. Benefit costs increased 2.5 percent over the year and increased 2.3 percent for the 12-month period ending in September 2020. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Personal Income – Released 11/24/2021 – Personal income increased $93.4 billion or 0.5 percent in October according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $63.0 billion or 0.3 percent and personal consumption expenditures (PCE) increased $214.3 billion or 1.3 percent.
Second Estimate of 3rd Quarter 2021 GDP – Released 11/24/2021 – Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the third quarter of 2021, according to the second estimate released by the Bureau of Economic Analysis. The second estimate is based on source data that are more complete than the data available for the advance estimate. Real GDP increased 2.0% in the advance estimate. The increase in real GDP in the third quarter reflected increases in private inventory investment, personal consumption expenditures (PCE), state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment, federal government spending, and exports. Imports, which are a subtraction in the calculation of GDP, increased. The second estimate primarily reflects upward revisions to personal consumption expenditures (PCE) and private inventory investment.
Durable Goods –Released 11/24/2021 – New orders for manufactured durable goods in October decreased $1.2 billion or 0.5% to $260.1 billion. Transportation equipment led the decrease falling $2.0 billion or 2.6% to $75.3 billion.
New Residential Sales–Released 11/24/2021 – Sales of new single-family homes increased 0.4% to 745k, seasonally adjusted, in October. The median sales price of new homes sold in October was $407,700 with an average sales price of $477,800. At the end of October, the seasonally adjusted estimate of new homes for sale was 389k. This represents a supply of 6.3 months at the current sales rate.
Existing Home Sales–Released 11/22/2021 – Existing home sales increased in October. Sales rose 0.8% to a seasonally adjusted rate of 6.34 million in October. Sales are currently down 5.8% from one year ago. Housing inventory sits at 1.25 million units. Down 0.8% from September’s inventory. Down 12.0% over last year. Unsold inventory sits at a 2.4-month supply. The median existing home price for all housing types was $353,900.
Recent Economic Data
Links take you to the data source
Housing Starts–Released 11/17/2021 – New home starts in October were at a seasonally adjusted annual rate of 1.520 million; down 0.7% below September, but 0.4% above last October’s rate. Building Permits were at a seasonally adjusted annual rate of 1.650 million, up 4.0% compared to September, and up 3.4% over last year.
Industrial Production and Capacity Utilization – Released 11/16/2021 – In October Industrial production increased 1.6%. Manufacturing increased 1.2%. Utilities output increased 1.2%. Mining output increased 4.1%. Total industrial production was 5.1% higher in October than a year ago. Total capacity utilization increased 1.2% to 76.4% in October which is 3.2% below its long run average.
Retail Sales– Released 11/16/2021 – U.S. retail sales for October increased 1.7% to $638.2 billion and retail sales are 16.3% above October 2020. U.S. retail sales for the August 2021 through October 2021 period were up 15.4% from the same period a year ago.
Consumer Price Index –Released 11/10/2021 – Consumer prices rose 0.9% m/m in October following a 0.4% gain in September. Core consumer prices increased 0.6% m/m in October following a 0.2% gain in September.
Producer Price Index–Released 11/9/2021 – The Producer Price Index for final demand increased 0.6% in October. PPI less food and energy increased 0.5% in October. The change in PPI for final demand has increased 8.6% year/y.
US Light Vehicle Sales – Released 11/5/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 12.989 million units in October.
Consumer Credit–Released 11/5/2021 – Consumer credit increased at a seasonally adjusted annual rate of 5.6 percent in August. Revolving credit increased at an annual rate of 7.4 percent, while nonrevolving credit increased at an annual rate of 5.1 percent.
U.S. Trade Balance–Released 11/4/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in September by $8.1 billion to $80.9 billion. September exports were $207.6 billion, $6.4 billion less than August exports. September imports were $288.5 billion, $1.7 billion more than August imports. Year to date the goods and services deficit increased $158.7 billion or 33.1%, from the same period in 2020. Year to date exports and imports increased $274.1 billion or 17.4% and increased $432.8 billion or 21.1% respectively.
PMI Non-Manufacturing Index–Released 11/3/2021 – Economic activity in the non-manufacturing sector grew in October for the 17th consecutive month. ISM Non-Manufacturing registered 66.7 percent, which is 4.8 percentage points above the adjusted September reading of 61.9 percent.
PMI Manufacturing Index – Released 11/1/2021 – October PMI decreased 0.3% to 60.8% down from September’s reading of 61.1%. The New Orders Index was 59.8% down 6.9% from September’s reading of 66.7%. The Production Index registered 59.3%, down 0.1%.
U.S. Construction Spending–Released 11/1/2021 – Construction spending declined 0.5% in September measuring at a seasonally adjusted annual rate of $1,573.6 billion. The September figure is 7.8% above the September 2020 estimate. Private construction spending was 0.5% below the revised August estimate at $1,229.9 billion. Public construction spending was 0.7% below the revised August estimate at $343.7 billion.
Chicago PMI– Released 10/29/2021 – Chicago PMI increased to 68.4 points in October, following two months of decline. Among the main five indicators, four were higher, led by Order backlogs and Employment. Only Production fell across the month.
Consumer Confidence–Released 10/26/2021 – The Consumer confidence index increased in October. The Index now stands at 113.8, up from 109.8 in September.
Next week we get data on Consumer Confidence, Chicago PMI, U.S. Construction Spending, PMI Manufacturing, PMI Services, and the November Jobs Report.
Emergence of South African Covid variant triggers broad flight to safety:
Risk assets came under pressure Friday following the news that a new and worrying Covid variant was discovered in South Africa and had already spread to quarantined travelers in Hong Kong and Belgium. Scientists say the variant may be able to evade immune responses and could be the most significant variant to date, as it carries a high number of mutations in its spike protein which may make it easier to enter the human body. Citi analysts suggest the next two weeks will be critical to determine whether the new variant will displace Delta in countries with high rates like UK and Germany.
On Friday, the Dow fell 905 points, or 2.5%. It was the Dow’s biggest one-day percentage drop since October 2020. The S&P 500 lost 106 points, or 2.3%, and the Nasdaq dropped 353 points, or 2.2%. It was the worst Black Friday session on record for all three indexes. Worries about reduced demand caused oil to tumbled 13% to $68.15. Investors reached for safe havens pouring into treasuries, dropping the yield on the 10 year to 1.48% With all of this risk off sentiment one might expect precious metals to rally but that didn’t happen as both Silver and Gold ended lower for the week and Gold was up just slightly on Friday. Bitcoin was also part of the selling, falling over 7% on Friday.
Early indications suggest the Omicron variant may lead to mild cases, but many unknowns at this point. It’s not just South Africa, Omicron has been detected in some developed countries too, including the UK, Italy, and Germany (at the time of this writing). Travel bans may be too late to halt Omicron’s spread but according to senior Biden administration officials, The United States will restrict travel for non-U.S. citizens from South Africa and seven other countries beginning Monday. In addition to South Africa, the affected countries are Botswana, Zimbabwe, Namibia, Lesotho, Eswatini, Mozambique and Malawi. It is not clear how long the restrictions will remain in place. Moderna says if new vaccine required for Omicron, it could be available in early 2022.
Let’s try to keep this in mind: Scientists are still trying to understand if this new variant causes any significant increase in hospitalization or deaths. At the moment there isn’t enough data to really know.
Table of Contents
Fixed Income
September FOMC Statement Credit, Liquidity and Balance Sheet Federal Reserve Dot Plots Sep 21′
US Corporate Debt Tops 7 Trillion. Treasury.gov yields FOMC Policy Normalization Statement Longer Run Goals August 2020
Global Bond Yields
Daily US Treasury Yields
Foreign Exchange Market
Energy Complex
The Baker Hughes rig count increased by 6 this week. There are 569 oil and gas rigs operating in the US – Up 249 over last year.
Metals Complex
Employment Picture
Weekly Unemployment Claims – Released Thursday 11/24/2021 – The week ending November 20th experienced a decrease of 71k in initial claims declining to 199k. This marks the lowest level of initial claims since November 15, 1969. The four-week moving average of initial jobless claims decreased 21k to 252.25k.
Job Openings & Labor Turnover Survey JOLTS – Released 11/12/2021 – The U.S. Bureau of Labor Statistics reported the number and rate of job openings was little changed at 10.4 million on the last business day of September. Over the month, hires were little changed at 6.5 million and separations were little changed at 6.2 million. Within separations, the quits rate increased to 3.0%. The layoffs and discharges rates were unchanged at 0.9%.
October Jobs Report – BLS Summary Released 11/5/2021 – The US Economy added 531k nonfarm jobs in September and the Unemployment rate edged down to 4.6%. Average hourly earnings increased by 11 cents to $30.96. Hiring highlights include +164k Leisure and Hospitality, +100k Professional and Business Services, and +60 in Manufacturing.
Employment Cost Index – Released 10/29/2021 – Compensation costs for civilian workers increased 1.3% for the 3-month period ending in September 2021. The 12-month period ending in September 2021 saw compensation costs increase by 3.7%. The 12-month period ending September 2020 increased 2.4%. Wages and salaries increased 4.2 percent over the year and increased 2.5 percent for the 12-month period ending in September 2020. Benefit costs increased 2.5 percent over the year and increased 2.3 percent for the 12-month period ending in September 2020. This report is published quarterly.
This Week’s Economic Data
Links take you to the data source
Personal Income – Released 11/24/2021 – Personal income increased $93.4 billion or 0.5 percent in October according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $63.0 billion or 0.3 percent and personal consumption expenditures (PCE) increased $214.3 billion or 1.3 percent.
Second Estimate of 3rd Quarter 2021 GDP – Released 11/24/2021 – Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the third quarter of 2021, according to the second estimate released by the Bureau of Economic Analysis. The second estimate is based on source data that are more complete than the data available for the advance estimate. Real GDP increased 2.0% in the advance estimate. The increase in real GDP in the third quarter reflected increases in private inventory investment, personal consumption expenditures (PCE), state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment, federal government spending, and exports. Imports, which are a subtraction in the calculation of GDP, increased. The second estimate primarily reflects upward revisions to personal consumption expenditures (PCE) and private inventory investment.
Durable Goods – Released 11/24/2021 – New orders for manufactured durable goods in October decreased $1.2 billion or 0.5% to $260.1 billion. Transportation equipment led the decrease falling $2.0 billion or 2.6% to $75.3 billion.
New Residential Sales – Released 11/24/2021 – Sales of new single-family homes increased 0.4% to 745k, seasonally adjusted, in October. The median sales price of new homes sold in October was $407,700 with an average sales price of $477,800. At the end of October, the seasonally adjusted estimate of new homes for sale was 389k. This represents a supply of 6.3 months at the current sales rate.
Existing Home Sales – Released 11/22/2021 – Existing home sales increased in October. Sales rose 0.8% to a seasonally adjusted rate of 6.34 million in October. Sales are currently down 5.8% from one year ago. Housing inventory sits at 1.25 million units. Down 0.8% from September’s inventory. Down 12.0% over last year. Unsold inventory sits at a 2.4-month supply. The median existing home price for all housing types was $353,900.
Recent Economic Data
Links take you to the data source
Housing Starts – Released 11/17/2021 – New home starts in October were at a seasonally adjusted annual rate of 1.520 million; down 0.7% below September, but 0.4% above last October’s rate. Building Permits were at a seasonally adjusted annual rate of 1.650 million, up 4.0% compared to September, and up 3.4% over last year.
Industrial Production and Capacity Utilization – Released 11/16/2021 – In October Industrial production increased 1.6%. Manufacturing increased 1.2%. Utilities output increased 1.2%. Mining output increased 4.1%. Total industrial production was 5.1% higher in October than a year ago. Total capacity utilization increased 1.2% to 76.4% in October which is 3.2% below its long run average.
Retail Sales – Released 11/16/2021 – U.S. retail sales for October increased 1.7% to $638.2 billion and retail sales are 16.3% above October 2020. U.S. retail sales for the August 2021 through October 2021 period were up 15.4% from the same period a year ago.
Consumer Price Index – Released 11/10/2021 – Consumer prices rose 0.9% m/m in October following a 0.4% gain in September. Core consumer prices increased 0.6% m/m in October following a 0.2% gain in September.
Producer Price Index – Released 11/9/2021 – The Producer Price Index for final demand increased 0.6% in October. PPI less food and energy increased 0.5% in October. The change in PPI for final demand has increased 8.6% year/y.
US Light Vehicle Sales – Released 11/5/2021 – U.S. light vehicle sales were at a seasonally adjusted annual rate (SAAR) of 12.989 million units in October.
Consumer Credit – Released 11/5/2021 – Consumer credit increased at a seasonally adjusted annual rate of 5.6 percent in August. Revolving credit increased at an annual rate of 7.4 percent, while nonrevolving credit increased at an annual rate of 5.1 percent.
U.S. Trade Balance –Released 11/4/2021 – According to the U.S. Census Bureau of Economic Analysis the goods and services deficit increased in September by $8.1 billion to $80.9 billion. September exports were $207.6 billion, $6.4 billion less than August exports. September imports were $288.5 billion, $1.7 billion more than August imports. Year to date the goods and services deficit increased $158.7 billion or 33.1%, from the same period in 2020. Year to date exports and imports increased $274.1 billion or 17.4% and increased $432.8 billion or 21.1% respectively.
PMI Non-Manufacturing Index – Released 11/3/2021 – Economic activity in the non-manufacturing sector grew in October for the 17th consecutive month. ISM Non-Manufacturing registered 66.7 percent, which is 4.8 percentage points above the adjusted September reading of 61.9 percent.
PMI Manufacturing Index – Released 11/1/2021 – October PMI decreased 0.3% to 60.8% down from September’s reading of 61.1%. The New Orders Index was 59.8% down 6.9% from September’s reading of 66.7%. The Production Index registered 59.3%, down 0.1%.
U.S. Construction Spending – Released 11/1/2021 – Construction spending declined 0.5% in September measuring at a seasonally adjusted annual rate of $1,573.6 billion. The September figure is 7.8% above the September 2020 estimate. Private construction spending was 0.5% below the revised August estimate at $1,229.9 billion. Public construction spending was 0.7% below the revised August estimate at $343.7 billion.
Chicago PMI – Released 10/29/2021 – Chicago PMI increased to 68.4 points in October, following two months of decline. Among the main five indicators, four were higher, led by Order backlogs and Employment. Only Production fell across the month.
Consumer Confidence – Released 10/26/2021 – The Consumer confidence index increased in October. The Index now stands at 113.8, up from 109.8 in September.
Next week we get data on Consumer Confidence, Chicago PMI, U.S. Construction Spending, PMI Manufacturing, PMI Services, and the November Jobs Report.
Data Sources:
Bureau of Economic Analysis (BEA)
Congressional Budget Office (CBO)
U.S. Bureau of Labor Statistics (BLS)
Federal Reserve Economic Data (FRED Charts)
CME Fed Watch
U.S. Treasury – Yields
U.S. Census Bureau
Institute for Supply Management (ISM)
Weekly DOL Employment Data
BLS Monthly Jobs Report
JOLTS
US Energy Admin (EIA)
BLS Consumer Price Index CPI
BLS Producer Price Index PPI
Atlanta Fed GDPNOW
NY Fed Nowcast GDP
US Census Bureau Housing Starts
Consumer Credit
USCB Retail Sales
Construction Spending
Federal Reserve Dot Plots
NY Empire Index
Philadelphia Federal Reserve
P/E Ratio Data -Yardeni Research
Technical Analysis Info:
StockCharts.com – Financial Charts
Exponential vs Simple moving average
Other Links:
1973 Arab Oil Embargo
Hunt Brothers Silver
Long-Term Capital bailout
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