The question that still resonates in financial markets is to what extent the relief of $ 1.9 billion coronavirus will be spent, either immediately or if the virus subsides enough so that the buyer can be allowed to go.
This column earlier pointed to surveys of both the use of the initial $ 600 stimulus and plans for the $ 1,400 that had arrived for many households, indicating that much of it would not be used in the economy.
Another way to look at it is if households view the stimulus as supplementary income or additional wealth. Studies have shown that the propensity to spend from wealth is only 5%, while the propensity to spend from income varies 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 stimulus is considered wealth or income depends on whether the household receiving it has a low or high income to begin with. But if we look at the previous stimulus tests, there were no significant shifts in consumption or inflation.
As a result, he believes that market expectations about inflation are being carried along. He also says – in a note written before Thursday’s fall in crude oil prices – that inflation expectations are positively correlated with high commodity prices, although real inflation tends to fall when commodity prices are high.
“Since the bond market is useless in predicting inflation, it is also useless to judge real interest rates,” he says. If the bond market exceeds the future inflation level, the correct inflation-adjusted bond yield should be even higher. “The important takeaway unit right now is that equities and other risk assets are even more expensive than they appear to be compared to real bond yields.”
Frosty talks in China
Talks between the US and China had an icy start in Alaska, with public criticism leveled by both sides in the opening speech.
FedEx FDX,
may climb after the delivery service said fiscal earnings rose more than analysts expected in the third quarter and a stronger current quarter than expected.
Nike NKE,
may decline after the clothing manufacturer reported slower sales growth in its third fiscal quarter.
Chubb CB,
made an offer of $ 65 per share to buy rival insurer Hartford Financial Services Group HIG,
The Bank of Japan has removed targets for the purchase of exchange-traded funds and real estate investment funds and increased the bond with which it will be able to trade bonds for 10 years.
Oil recovery, a little
After the 7% drop in crude oil prices on Thursday, light-sweet crude futures CL.1,
slowed their fall but remained below $ 59.80 a barrel. The oil futures traded between $ 64 and $ 65 a barrel earlier this week. UBS analysts say they are focusing on the rate of COVID-19 vaccinations, which would help ease restrictions and support oil demand.
The yield on the ten-year treasury TMUBMUSD10Y,
it dropped slightly to 1.69%. US stock market futures contract YM00,
ES00,
NQ00,
was higher as shares across Europe fell UKX,
DAX,
PX1,
Asian stocks closed the trading week in the red, with indices in Tokyo NIK,
Hong Kong HSI,
and Shanghai SHCOMP,
falls about 1.5%.
Bitcoin flow mirror stock flow
Is bitcoin BTCUSD,
a diversifier? This is a major debate in the markets that several major banks have embarked on over the past two weeks. Sven Henrich, the technical analyst who runs the Northman Trader website, compiled this chart and showed that the correlation between the weekly flow to bitcoin and stocks is at the highest level ever.
Random reading
The tulip fad in the 1600s is often quoted by financial analysts when discussing speculative mania. For irony lovers, there are non-flammable tulips – that is, illustrations of tulips sold on the blockchain – for sale.
A shark with wings? Scientists were surprised by fossils found in Mexico.
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