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23 April 2021
Video commentary for April 22nd 2021
Eoin Treacy’s view
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discused include: capital gains tax increases and where pressure will be felt, agriculture commodities continue to firm, oil stable,
Stocks Drop on Biden Plan to Lift Capital-Gain Tax
This article may be of interest to subscribers. Here is a section:
“Sticker shock over some of these tax figures will be hard to shake off for some investors,” Edward Moya, senior market analyst at Oanda Corp, wrote in a note. “Some traders are looking for an excuse to lock in profits and they might choose to use this tax story as their catalyst.”
Eoin Treacy’s view
The rationale is clear. Do you want to sell now and pay 23% or later and pay 43%? Another way of asking that question is do you believe the stock market is going to rally another 36%, imminently, to compensate you for the additional tax you will pay on the higher future figure? That implies an S&P500 level of 5631 versus the current value of 4141.
Eoin’s personal portfolio: both long and short positions opened
Eoin Treacy’s view
One of the most commonly asked questions by subscribers is how to find details of my open traders. To make it easier I will simply repost the latest summary daily until there is a change.
ECB’s Failure to Communicate Frustrates Markets
This note from Bloomberg may of interest to subscribers.
Frankfurt, we have a communication problem. And that could feed into a growing ECB credibility issue — even as European bond markets are shrugging off details of today’s confab.
Markets crave clarity on pandemic bond buying, and instead are getting ambiguity. Madame Lagarde again warned against reading too much into weekly PEPP purchases. They are not the most relevant — what matters more are the monthly numbers, she said, and accounting for redemptions, those reveal that “significant” increase pledged in March. They have “readily implemented” that ramp up as of March 16 — and are continuing to do so clearly and without any wavering, according to Lagarde.
Except the data suggests otherwise looking at the recent run-rate. There is no “normal” pace of bond purchases given the need for flexibility and the ongoing pledge to preserve favorable financing conditions — no wonder ECB-watchers are exasperated. Sure, risks to the outlook remain balanced in the medium-term and Europe remains an “economy on crutches” — but so much for any clarity on the semantics around “significant” and what exactly front-loading means.
At least Lagarde confirmed that policy won’t be in tandem with the Fed. That much seemed obvious. As for significant PEPP purchases, guidance remains a case of constructive ambiguity — let’s wait for those monthly numbers, and maybe more excitement in June.
Eoin Treacy’s view
The ECB has opted to talk their way through providing assistance rather than actually doing it. That’s the only signal we can gain from their unwillingness to put numbers of the purchases they are willing to make while at the same time saying they will be as large as needed.
China Blasts Australia’s Decision to Cancel Belt and Road Deal
This article by Jason Scott for Bloomberg may be of interest to subscribers. Here is a section:
The Australian federal government scrapped both the memorandum of understanding and framework agreement signed between Victoria and China’s National Development and Reform Commission, Beijing’s top economic planning body, Foreign Minister Marise Payne said in an emailed statement Wednesday. She described the deals as “inconsistent with Australia’s foreign policy or adverse to our foreign relations.”
The step “is another unreasonable and provocative move taken by the Australian side against China,” the Chinese embassy in Canberra said in an emailed statement. “It further shows that the Australian government has no sincerity in improving China-Australia relations — it is bound to bring further damage to bilateral relations, and will only end up hurting itself.”
Australia “basically fired the first major shot against China in trade and investment” conflicts, Chen Hong, director of the Australian Studies Center at East China Normal University in Shanghai, told the Communist Party-backed Global Times. “China will surely respond accordingly.”
China has lodged stern representations with Australia over the issue and reserved the right to take more action, Foreign Ministry spokesman Wang Wenbin said at a regular press briefing Thursday in Beijing.
Eoin Treacy’s view
China may successfully be able to cow smaller countries into submission by following a carrot and stick approach to infrastructure and trade development. Australia is a different story.
Corn, Soybeans, Wheat Surge on Chinese Demand, Weather Woes
This article by Bre Bradham and Megan Durisin for Bloomberg may be of interest to subscribers. Here is a section:
Corn jumped by the exchange limit and soybeans topped $15 a bushel for the first time since 2014 as China’s rampant demand and adverse weather around the world threaten to further tighten supply.
Brazil’s second-corn crop is suffering from drought, and U.S. planting has been slowed by a record cold snap that may also have damaged some winter wheat. Meanwhile, western Europe lacks moisture for early growth of the grain, helping push up wheat futures and adding to worries about global food-price inflation as consumers still contend with the coronavirus pandemic.
The weather concerns in major growers come amid signs of continued strong demand, particularly in China, which the U.S. Department of Agriculture expectsto import a record 28 million metric tons of corn. The country is already scooping up the next U.S. crop. Soybean oil futures jumped by the most allowed, amid growing demand for renewable diesel.
“It’s an incredible rally. It is primarily the weather and demand and low stocks that are really driving this thing, and the realization that Brazil could have a poor second corn crop,” said Jack Scoville, a vice president for Price Futures Group in Chicago. “There’s just nothing going on that says sell the market.”
Eoin Treacy’s view
The supply disruptions resulting from the pandemic continue to represent challenges for the global supply chain. That’s particularly true for the agriculture sector where weather is having an outsized influence after years of low prices and less investment in additional new supply.
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