The question still resounding in financial markets is to what extent the $ 1.9 trillion coronavirus fight will be spent, either immediately, or whether the virus pulls out enough to let shoppers go and want.
Rather, this column pointed to studies of how the initial $ 600 stimulus measure was used, as well as plans for the $ 1,400 that has come in for many households, to suggest that much of it won’t be put to use in the economy.
Another way to look at it is whether households see the incentive as extra income or extra wealth. Studies have shown that the propensity to spend from wealth is only 5%, while the propensity to spend from income ranges from 10% to 50%, according to a recent speech by Gertjan Vlieghe, a voting member of the Bank of England’s Monetary Policy Committee. .
Dhaval Joshi, chief strategist at BCA Research, says whether the new incentive is considered wealth or income depends on whether the household receiving it has a low or high income to begin with. But looking at previous stimulus controls, there were no meaningful shifts in consumption or inflation.
Accordingly, he thinks market expectations about inflation are getting carried away. He also says – in a note written before the fall in crude oil prices on Thursday – that inflation expectations are positively correlated with high commodity prices, although actual inflation tends to decline when commodity prices are high.
“Given that the bond market is useless in forecasting inflation, it is also useless in assessing real interest rates,” he says. If the bond market is exaggerating future inflation levels, then the appropriate inflation-adjusted bond yield should be even higher. “The main tradeoff at the moment is that stocks and other risky assets are even more expensive than they appear compared to real bond yields.”
Icy talks in China
Talks between the US and China got off to an icy start in Alaska, with public criticism from both sides in the opening words.
FedEx FDX,
may rise after the delivery service said third-quarter revenues rose more than analysts expected and led to a stronger current quarter than expected.
Nike,
could slip after the apparel manufacturer reported slower sales growth than expected in its fiscal third quarter.
Chubb CB,
made a $ 65 per share offer to buy rival insurer Hartford Financial Services Group HIG,
The Bank of Japan scrapped its targets for buying exchange-traded funds and real estate mutual funds and broadened the band in which 10-year bonds can be traded.
Oil recovers a bit
After Thursday’s 7% drop in crude oil prices, slightly sweet crude oil futures CL.1,
have slowed their decline but remain below $ 59.80 a barrel. Oil futures traded between $ 64 and $ 65 a barrel earlier this week. UBS analysts say they should focus on the pace of COVID-19 vaccinations, which should help ease restrictions and support oil demand.
The return on the 10-year treasury TMUBMUSD10Y,
decreased slightly to 1.69%. US Stock Market Futures YM00,
ES00,
NQ00,
were higher as stocks across Europe fell UKX,
DAX,
PX1,
Asian stocks ended the trading week in the red, with indices in Tokyo NIK,
Hong Kong HSI,
and Shanghai SHCOMP,
fall around 1.5%.
Bitcoin flows reflect inventory flows
Is bitcoin BTCUSD,
a diversification? It’s a huge debate in the markets that several major banks have had in the past two weeks. Sven Henrich, the technical analyst who runs the Northman Trader website, created this chart, which shows that the correlation between weekly flows to bitcoin and stocks is at its highest level ever.
Random reads
The tulip madness of the 1600s is often cited by financial market analysts when discussing speculative manias. For ironic aficionados, intangible tulips – that is, illustrations of tulips sold on the blockchain – are available for purchase.
A shark with wings? Scientists were amazed at fossils found in Mexico.
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