Good morning. Happy Friday.
The Asian/Pacific markets posted huge losses. Japan, Hong Kong, South Korea, India, Taiwan, Australia, New Zealand, Indonesia, Singapore and Thailand dropped 2-4% each. Europe, Africa and the Middle East are currently down big. The UK, Poland, France, Turkey, Germany Russia, Greece, South Africa, Finland, Switzerland, Norway Hungary, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are getting hit hard. Futures in the States point towards a huge gap down open for the cash market.
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The dollar is down. Oil and copper are down big. Gold is up; silver is down. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Friday turns black
Today’s shortened trading day was supposed to be a calm one, given the typically low trading volumes seen on Black Friday, but fears of a new COVID-19 variant found in South Africa is shaking up sentiment. Dow futures plunged more than 800 points overnight, while contracts linked to the S&P 500 and Nasdaq fell 1.8% and 1.2%, respectively, after stocks sold off in Europe and Asia. WTI crude oil futures (CL1:COM) also tumbled nearly 7% to under $73 as the U.K. imposed fresh travel restrictions, though Zoom Video (ZM) and Peloton (PTON) took off as the news revived the stay-at-home-trade.
New variant: Believed to have first emerged in Botswana, B.1.1.529 will be called as such until a Greek letter is assigned to it by the World Health Organization. The variant carries an unusually large number of mutations associated with increased antibody resistance and is “clearly very different” from previous incarnations. South African scientists have already detected 30 mutations to the spike protein, which play a big role in how the virus enters the body.
The biggest concern is whether the virus could lead to more serious illness or decrease the effectiveness of vaccines and treatments. While we don’t yet know whether it’s more infectious or deadly than other variants, it’s spreading across the globe. B.1.1.529 has been found in travelers arriving in Hong Kong, just as COVID cases surge around the world heading into the holiday season.
Go deeper: The World Health Organization has scheduled a special meeting for today to discuss whether to declare the new strain a “variant of concern.” “For the moment it is understood that the number of cases is small, but due to the thin liquidity levels in Asia trading as a consequence of the U.S. holiday the reaction does appear to be outsized,” said Michael Hewson, chief market analyst at CMC Markets. Other variants of concern include Delta, which is now dominant worldwide, as well as Alpha, which triggered a deadly wave of infections across Europe and the U.S. last winter and spring. (81 comments)
Robotaxi revolution
Baidu’s (NASDAQ:BIDU) robotaxi business, called Apollo, can now begin charging fees for passengers taking one of its 67 self-driving cars in Beijing. It’s the first time a large city in China has allowed companies to charge the public for robotaxi rides, and sets the stage for other cities like Shanghai, Shenzhen and Guangzhou to do the same. So far, Baidu can only offer public trips when a safety driver is accompanying passengers, but the company expects that to change in the next year or two.
Bigger picture: While Baidu didn’t reveal exact pricing of the new service, it said fares would be similar to other premium ride-hailing apps like DiDi (NYSE:DIDI) – which can cost twice as much as ordinary rides. The new autonomous regulatory permit also covers an area of 60 square kilometers, including a town called Yizhuang that features businesses like JD.com’s (JD) headquarters. On Nov. 16, Alibaba’s (NYSE:BABA) autonomous driving company AutoX claimed its fully driverless robotaxis now operate in the largest single region in China – 168 square kilometers located in Shenzhen’s Pingshan District.
Over in the U.S., Alphabet’s (GOOG, GOOGL) Waymo has been testing self-driving taxis primarily in California and Arizona. Waymo can currently charge the public for fares in a part of Phoenix, while its driverless vehicles don’t need a safety driver. General Motors (NYSE:GM) self-driving unit Cruise also said earlier this month that it applied for final approval to become the first robotaxi operator to commercialize fully autonomous rides in San Francisco.
Apollo goes global? “We have partnered with many transportation companies in China and are trying to partner with similar companies in other places,” said Wei Dong, VP of Baidu’s intelligent driving group. “If there is such demand for autonomous driving in other markets, Baidu is willing to cooperate with overseas partners, whether it is an operating company, an automaker or another transportation company. We can export our technologies and experience, and jointly operate in certain areas on the basis of complying with local laws and regulations… Baidu is willing to open up for the international market.” (51 comments)
Busy holiday travel
The number of air travelers this week is expected to reach or even exceed pre-pandemic levels, according to AAA. That could be a boon for airlines like American (NASDAQ:AAL), Southwest (NYSE:LUV), Delta (NYSE:DAL), United (NASDAQ:UAL) and JetBlue (NASDAQ:JBLU), as long as they could avoid a repeat of massive flight cancellations. In recent months, staffing shortages, scheduling mismanagement and bad weather have all led to trouble for the biggest U.S. carriers.
Statistics: Over 2.3M people passed through U.S. airports on Wednesday, marking the most hectic day for air travel since February 2020. In terms of disruptions, less than 0.5% of U.S. domestic flights were canceled Monday through Wednesday, according to FlightAware, and only around 60 flights were scrapped as of Thursday afternoon. Sunday is expected to be even busier, and will prove to be the industry’s next challenge.
“The airlines are prepared for the holidays,” noted Helane Becker, an airlines analyst at Cowen. “They cut back the number of flights, the industry has enough pilots, they are putting more flight attendants through their [training] academies, and they are paying flight attendants a premium – what I’m going to call hazardous-duty pay – to encourage people not to blow off work.”
Going by car: AAA sees a total of 48.3M people traveling at least 50 miles from home over the holiday period – an increase of nearly 4M over last year – despite higher prices at the pump. The nationwide average for gasoline on Tuesday was $3.40 a gallon, according to AAA, up more than 60% from last Thanksgiving. President Biden has meanwhile ordered 50M barrels of crude from the Strategic Petroleum Reserve to help bring down energy costs, though that decision may spark a backlash from OPEC+. (9 comments)
Retail in focus
Today marks the unofficial start of the holiday shopping season as investors size up Black Friday to determine the current mood of the U.S. consumer. While fears of a new COVID variant are overshadowing the shopping bonanza, many consumers will still be looking around for bargains. A variety of reports have boosted and hampered the retail sector in recent weeks, making it hard to size up an industry heavily exposed to supply chain disruptions.
Flashback: Shares of Gap (GPS) and Nordstrom (JWN) slumped 20% in AH trading on Wednesday after slashing their outlooks on COVID-related factory closures and labor costs that cut into profits. On the other hand, Kohl’s (KSS) jumped more than 10% from a week ago – after reporting strong sales growth – while retail executives spoke extensively on how they were managing supply chain issues and inflation. Personal incomes and consumer spending for October also came in higher than expected, though core PCE, the Fed’s preferred inflation gauge, remained elevated at 4.1%.
Holiday shopping trends are on track to make a comeback this year, with 158.3M people (nearly 2M more people than last year) expected to shop from Thanksgiving Day through Cyber Monday. That’s according to the latest report from the National Retail Federation, which estimates consumers will shell out an average $997.73 on holiday sales during November and December. However, supply issues may have brought forward many holiday purchases, potentially denting Q4 sales. “I would not be surprised if that was a dynamic around the holiday season,” said Sarah Henry, a portfolio manager at Logan Capital Management.
Black Friday schedule: The stock market will shut early at 1 p.m. today, bond markets will close an hour later, and metals and U.S. crude oil will settle at 12:30 p.m. and 1:30 p.m., respectively. Some history… Back in 1992, the major U.S. exchange operators called for a 2 p.m. Eastern close for the Friday after Thanksgiving, two hours earlier than the regular close at 4 p.m. The following year, the NYSE and Nasdaq chose to shutter markets at 1 p.m., a schedule that is currently observed.
Today’s Economic Calendar
4:30 PM Fed Balance Sheet
NYSE Early Close 1:00 PM ET
SIFMA Early Close 2:00 PM ET
Companies reporting earnings today »
What else is happening…
China wants DiDi (NYSE:DIDI) to delist from U.S. on security fears – Bloomberg.
Apple’s (NASDAQ:AAPL) iPhone supply seen improving with Black Friday on deck.
OPEC panel says U.S. crude release will swell surplus in 2022.
Goldman pinpoints rising and falling stars held by hedge funds.
NYT’s (NYSE:NYT) Wirecutter staff walk off the job before Black Friday.
Disney (NYSE:DIS) annual report presages monster content spending for coming year.
Warburg Pincus cuts the valuation of Alibaba (NYSE:BABA) affiliate Ant Group.
Deere (NYSE:DE) forecasts strong growth after Q1 marred by strike impacts.
Micron (MU) and UMC (UMC) reach settlement deal; withdraw complaints.
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Good morning. Happy Wednesday.
The Asian/Pacific markets were quiet. Japan and India were weak; otherwise there were no outstanding movers. Europe, Africa and the Middle East are mixed. Turkey, Hungary, Austria and Saudi Arabia are up; Germany, South Africa and Norway are down. Futures in the States point towards a down open for the cash market.
————— My interview with WorldClassPerformer.com —————
The dollar is up. Oil is flat; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Strategic Petroleum Reaction
Happy Thanksgiving! Many thanks to all of our Wall Street Breakfast readership as we go into the holiday season. WSB won’t be published with markets closed tomorrow, but tune back in Friday.
WTI crude rose more than 4% over the last 24 hours to retake $79/bbl after the Biden administration announced plans to release 50M barrels of oil from the U.S. Strategic Reserve, along with China, Japan, India, South Korea and the U.K. While the move was meant to lower prices, the volumes announced were much less than the market was expecting and would need to be sustained over a longer period of time. Many of the barrels will also need to be returned by the refiners who buy them, leaving traders forecasting tighter balances.
Quote: “I told you before that we’re going to take action on these problems. That’s exactly what we’re doing,” President Biden said from the White House. “It will take time, but, before long, you should see the price of gas drop where you fill up your tank, and in the longer term, we will reduce our reliance on oil as we shift to clean energy.”
Meanwhile, a large portion of the barrels is set to be exported to China and India. That’s because the supplies will comprise of sour crude, a type of oil that many American refiners are avoiding due to its high sulfur content, which makes it more expensive to process. Foreign buyers are also attracted to the oil since it’s cheaper than the global Brent benchmark.
Go deeper: Following the decision, some are even referring to the U.S. emergency stockpile as the Strategic Political Reserve, with the president under pressure to tamp down inflation. OPEC+ is also scheduled to meet in a few weeks and could unveil a counterpunch if the group feels threatened. The cartel would need to give up two months of output increases to offset the 50M barrel release, after snubbing several requests from Washington to pump more oil. The U.S. national average price for a gallon of gas was $3.40 on Tuesday, according to AAA, more than a $1 increase from a year ago.
Thanksgiving spending
Holiday shopping trends are on track to make a comeback this year, with 158.3M people (nearly 2M more people than last year) expected to shop from Thanksgiving Day through Cyber Monday. That’s according to the latest report from the National Retail Federation, which estimates consumers will shell out an average $997.73 on holiday sales during November and December. At those levels, it would mean a growth rate of between 8.5% and 10.5% over 2020 to a total of $843.4B-$859B, setting records for both the expansion and total amount spent.
By the numbers: 75% of American adults will conduct their e-commerce through big retailers like Amazon (NASDAQ:AMZN) or Walmart (NYSE:WMT), which will be similar to or increase relative to the 2020 holiday season. However, some still prefer brick-and-mortar for the holidays. Among those shopping on Thanksgiving Day, 65% are likely to do so in stores, up from 50% last year, when COVID-19 concerns kept many people at home. On Black Friday, 64% are likely to shop in stores, up from 51% last year.
“Pandemic-related supply chain disruptions have caused shortages of merchandise and most of this year’s inflationary pressure,” NRF Chief Economist Jack Kleinhenz declared. “With the prospect of consumers seeking to shop early, inventories may be pulled down sooner and shortages may develop in the later weeks of the shopping season. However, if retailers can keep merchandise on the shelves and merchandise arrives before Christmas, it could be a stellar holiday sales season.”
Shopping carts: Apparel continued to top the NRF list, expected to be scooped up by 53% of shoppers, followed by gift cards at 46%, toys at 39%, books/music/movies/video games at 35% and food/candy at 31% as the top five categories.
‘Everything’s $1.25’
After 35 years of selling merchandise for a buck, Dollar Tree (DLTR) is raising its standard price point to $1.25. The change will take place by the end of April and follows hot inflation numbers over the last six months. Despite acknowledging those market conditions, Dollar Tree said its move was “not a reaction to short-term or transitory market conditions,” but would rather help mitigate historically high costs like freight, distribution and wage increases.
Bigger picture: Following a test on 200 stores conducted in September, a survey showed that 77% of shoppers were almost immediately aware of the price increase, but 91% suggested they would still continue shopping at Dollar Tree with the same frequency. Dollar Tree also related that its new strategy will allow stores to carry a wider array of merchandise that couldn’t be sold for $1. The chain is separately instituting $3 and $5 pricing levels, though the move won’t come along with a name change.
“We think the company’s decision to operate at a single $1.25 price point across all stores and most SKU’s is a subtle, yet critical distinction, that significantly augments the odds of success in 2022 (and beyond), in our view,” said Gordon Haskett analyst Chuck Grom. “Moreover, the higher price point will allow for the Tree to drive an improved assortment (via new items + lapsed products) over time that should translate into improved traffic trends, which have been under duress for a couple of years now.”
Market movement: Investors cheered the raised prices, sending DLTR shares up 9.2% on Tuesday, as the move will allow the company to defend its margins against inflation pressures. Earnings for the third quarter also showed that net sales grew 3.9% Y/Y in the three months that ended in October.
Sounding the alarm
The retail news flow did not stop coming yesterday as a flurry of earnings dominated the headlines. Shares of Gap (GPS) slumped 20% in AH trading after slashing its outlook as COVID-related factory closures led to significant product delays, while Nordstrom (JWN) collapsed 27% as labor costs cut into profits and sales. Abercrombie & Fitch (ANF) was also among the biggest losers in the sector, with mall retailers feeling investors’ wrath amid worries about margins and slowing growth.
Snapshot: Another interesting story that made waves was a remark from Best Buy (BBY) CEO Corie Barry on a post-earnings interview. She told CNBC that the rise of organized crime is a “horrible change” for the “trajectory of the business” and the electronics retailer is “working hard to try to stem” loosely organized bands of thieves who have targeted the firm’s locations. Barry also noted that Best Buy was among many retailers who have faced a spike in these attacks and has put measures in place to prevent the thefts, such as locking up certain products and working with local law enforcement.
Shares of BBY also tumbled 12% following the gross margin decline, but the stock is up 17% in the six weeks before earnings, so it now stands where it traded in the middle part of October.
Outlook: Kroger previously highlighted organized crime as a reason for its reduced margins when it reported quarterly results back in September. Over in San Francisco, Louis Vuitton (OTCPK:LVMHF), Burberry (OTCPK:BBRYF) and Hermes (OTCPK:HESAF) stores were ransacked last weekend, while a raid on a Nordstrom in nearby Walnut Creek was even more brazen. Just before closing time, some 80 people jumped out of a group of cars and assaulted two employees before escaping with hands full of merchandise.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Durable Goods
8:30 GDP Q3
8:30 International Trade in Goods (Advance)
8:30 Initial Jobless Claims
8:30 Corporate profits
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
10:00 New Home Sales
10:00 Personal Income and Outlays
10:00 Consumer Sentiment
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
12:00 PM EIA Natural Gas Inventory
1:00 PM Baker-Hughes Rig Count
2:00 PM FOMC Minutes
Companies reporting earnings today »
What else is happening…
Walgreens (NASDAQ:WBA), CVS (NYSE:CVS), Walmart (NYSE:WMT) held liable in opioid trial.
Palantir (NYSE:PLTR) CEO: California will benefit from people leaving.
Will a month-long strike weigh on Deere’s (NYSE:DE) earnings?
Texas wins contest for Samsung’s (OTC:SSNLF) new $17B chip plant.
Apple (NASDAQ:AAPL) sues NSO Group, saying U.S. citizens were targeted.
China pressures Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) to crack down on cloud fraud.
JPMorgan (NYSE:JPM) likely to last longer than China’s Communist Party – Dimon.
Allbirds (NASDAQ:BIRD) descends for third session, shoe brand still up 26% from IPO.
Rocket Lab (NASDAQ:RKLB) plans to use helicopter to catch rocket booster.
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Good morning. Happy Tuesday.
The Asian/Pacific markets were mixed – India, Australia, New Zealand and the Philippines up; Hong Kong, South Korea, Taiwan and Indonesia down. Europe, Africa and the Middle East are currently mostly down. Turkey, Russia and Saudi Arabia are up; Denmark, Germany, Greece, Finland, Switzerland, Norway, the Netherlands, Italy, Israel and Sweden are down. Futures in the States point towards a flat-to-down open for the cash market.
————— My interview with WorldClassPerformer.com —————
The dollar is down. Oil is down; copper is up. Gold and silver are down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Powell stays on
Treasuries yields and the dollar spiked, gold sold off and stocks rose and fell towards the end of the session on Monday after Jerome Powell was nominated for another four-year term at the Federal Reserve. The central bank is now expected to maintain its current course on tapering economic support as it grapples with rising inflation and lingering economic impacts of the pandemic. Less dovish or hawkish monetary policies typically coincide with higher interest rates as the cost of borrowing increases due to a tightness in financial conditions.
2 for 1 deal: In another big announcement, Fed Governor Lael Brainard was elevated to vice chair, the bank’s No. 2 role. There had been much speculation that she could have even taken the top job in recent weeks, with Brainard meeting with President Biden and progressive lawmakers calling for her appointment. By nominating both, the administration is able to rely on a steady hand at the Fed, while also addressing the need for taking regulatory concerns more seriously. Brainard is seen as the Democratic party’s most accomplished economic policymaker, spearheading campaigns on big bank oversight and finding a path to address climate change through the Fed’s financial stability mission.
In terms of future policy, many have pointed to Powell’s success in navigating the U.S. economy through COVID-19 and one of the worst contractions since the Great Depression. That doesn’t mean he’s without criticism, though he has largely been able to overshadow his detractors and opponents. We’re starting to see a slight pivot from “inflation is transitory” and moves to policy normalization would “begin in a slow fashion,” giving a greater sense of urgency and command of the economic backdrop.
Next steps: The nominations of Powell and Brainard must be formally submitted to the Senate, which will refer them to the Senate Banking Committee. Confirmation hearings will then be scheduled, and the 100-member Senate will vote on their appointments, with both expected to be approved despite some partisan disagreements. “Our base case is that they will be cleared by the full Senate this year,” said BTIG analyst Isaac Boltansky. Biden also has three vacancies to fill at the Fed’s seven-member Board of Governors, including the vice chair for supervision role recently vacated by Randal Quarles.
Lowering prices
As the Biden administration faces mounting frustration over inflation, the president will “deliver remarks on the economy and lowering prices for the American people” at 2 p.m. ET. That’s according to a statement from the White House, which gave no other details on the expected content. Later today, Biden will travel to Nantucket, Massachusetts, where he and first lady Jill Biden will celebrate Thanksgiving.
Bigger picture: Inflation has emerged as a big threat for Biden amid supply chain bottlenecks and other factors that still have to be brought under control. Take gasoline prices for example, which are at seven-year highs. While the White House has blamed OPEC+ for the surge, it’s evaluating all tools to quell rising prices after the cartel snubbed its request to pump more. Biden may announce a release of oil from the U.S. Strategic Petroleum Reserve today, which would come in conjunction with India, Japan and South Korea.
“I think we do have to be concerned about inflation. It’s reached the levels that concern most Americans who are seeing it and their pocketbook when they go to the store to buy food or to fill up their cars,” said Treasury Secretary Janet Yellen, who chaired the Fed from 2014 to 2018. “Over the longer run, the Fed needs to play an important role to make sure that [inflation] doesn’t become endemic. And I know they can be counted on to do that.”
Other threats: Surging coronavirus cases in Europe has also seen countries reimpose lockdowns this week, but the U.S. is not thinking about those tools to put a damper on infections. “We are not headed in that direction. We have the tools to accelerate the path out of this pandemic; widely available vaccinations, booster shots, kid shots, therapeutics,” White House COVID-19 response coordinator Jeff Zients told reporters. “We can curb the spread of the virus without having to in any way shut down our economy.”
Riding high
Uber Canada (UBER) customers in Ontario will soon be able to order cannabis online through the Uber Eats app in a first-of-its-kind partnership with dispensary Tokyo Smoke (CGC). Orders will be fulfilled within an hour of order placement, marking the ride-hailing giant’s foray into the booming business. Canada legalized marijuana for adult use in 2018, with financial institutions and payment processors legally allowed to accept marijuana transactions.
Note: For now, Uber won’t be delivering the cannabis products. Users will have to pick up the orders at one of Tokyo Smoke’s 56 locations in Ontario (the Uber app will verify a person’s age, while staff will check ID when a customer arrives).
Uber has also been thinking about how it will enter the U.S. cannabis industry, which is forecast to hit $29B in annual sales by the end of this year. Back in April, CEO Dara Khosrowshahi commented on those plans, announcing that the company was waiting for government legalization to enter the American market. “When the road is clear for cannabis, when federal laws come into play, we’re absolutely going to take a look at it,” he said during an interview with CNBC.
Go deeper: Canada’s illegal weed market still takes in more than 40% of all non-medical marijuana sales, meaning there’s plenty of room for growth for law-abiding corporations.
Lira low
Emerging markets are on watch after the Turkish lira suffered one of its worst days since a currency crisis in August 2018. The freefall was prompted by comments from President Recep Tayyip Erdogan, who praised a third consecutive monthly interest rate cut and asserted that his country was fighting an “economic war of independence.” Erdogan believes in an unorthodox approach that higher rates cause inflation, rather than prevent it, but despite the beliefs the annual figure reached nearly 20% in October.
By the numbers: The lira plunged as much as 8.8% and broke through the symbolic threshold of 12 to the dollar, hitting an all-time low of 12.50. The currency is down almost 40% against the greenback this year and has fallen for the last 10 days in a row.
Over the last two years, Erdogan has fired three central bank chiefs due to disagreements over monetary policy. In his latest speech, he contended that Turkey would not give in to “opportunists” and “global financial acrobats” that are calling for rate hikes. Instead, his government is prioritizing growth to boost investment, production, exports and employment. “That’s why we pay no attention to the clamor of the doomsayers,” he declared.
Commentary: “It’s a dangerous game the Turks are playing,” noted Uday Patnaik, head of emerging-market debt at Legal & General Investment Management. “As people lose faith in the value of the currency, you could see a potential run on the banks. This would be hugely problematic, we haven’t seen that yet as far as I know.” Turkey has already spent billions of dollars to support the lira, and interventions could return again if investors continue to pull funds from developing markets.
Today’s Economic Calendar
8:55 Redbook Chain Store Sales
9:45 PMI Composite Flash
10:00 Richmond Fed Mfg.
11:30 Results of $24B, 2-Year FRN Auction
1:00 PM Results of $59B, 7-Year Note Auction
1:00 PM Money Supply
Companies reporting earnings today »
What else is happening…
Zoom (NASDAQ:ZM) sees revenue growing at slower rate in months ahead.
Payment stocks slump amid COVID worries, regulatory outlook.
Authentic Brands (AUTH) abandons IPO, sells $12.7B stake to private investors.
AT&T (NYSE:T), Verizon (NYSE:VZ) gain in wake of big telecom merger deals.
Health tech boom… H&F and Bain Capital to acquire athenahealth for $17B.
Tesla (NASDAQ:TSLA) Model S Plaid set to hit China around March.
American Airlines (NASDAQ:AAL), JetBlue (NASDAQ:JBLU) push for antitrust suit to get tossed.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were mixed – China and South Korea up, Hong Kong, India and New Zealand down. Europe, Africa and the Middle East currently lean down. Turkey and South Africa are up. The UAE and Russia are down big; Denmark, Germany, Greece, Hungary and the Czech Republic are also weak. Futures in the States point towards a positive open for the cash market.
————— My interview with WorldClassPerformer.com —————
The dollar is up. Oil and copper are down. Gold is down; silver is up. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Covid curbs
With surging coronavirus infections across the country, Austria has become the first western European nation to reimpose a national lockdown on its citizens since COVID-19 vaccines became widely available. The unpopular measure will shutter restaurants, bars, theaters, Christmas markets and non-essential shops for 10 days initially, but could be expanded to as many as 20 as intensive care beds run short. The government has also made it compulsory for all citizens to get vaccinated as of Feb. 1. Austria has the lowest vaccination rate in western Europe, with 66% of its population fully vaccinated, though that compares to 59% in the U.S.
Quote: “It is a situation where we have to react now,” Health Minister Wolfgang Mueckstein told ORF TV. “A lockdown, a relatively tough method, a sledgehammer, is the only option to reduce the numbers [of infections] here.”
Overnight, the euro dropped below $1.13 to a fresh 16-month low as investors bet Europe’s economic recovery will lag behind the U.S. Oil also pointed lower, with Brent and U.S. crude hitting seven-week lows of $78.05 and $74.76, respectively, as fresh COVID restrictions prompted demand concerns and protests. Tens of thousands marched through Vienna on Saturday, Dutch police opened fire on protesters in Rotterdam (resulting in seven injured) and demonstrations took hold in Switzerland, Italy, Belgium and Northern Ireland.
Go deeper: The number of reported U.S. COVID-19 deaths for 2021 reached 385,457 on Saturday, according to the CDC, topping the total figure recorded last year. That’s despite broad vaccination campaigns and precautionary measures, though many epidemiologists attribute the alarming statistic to the highly contagious Delta variant and the spread of the disease among the unvaccinated. Comparing the two pandemic years is also not identical (scarcity of tests, first deaths weren’t recorded until February 2020, etc.), though a death toll that surpassed 2020 is still catching infectious-diseases doctors by surprise. (39 comments)
‘Bitcoin City’
El Salvador is doubling down on its bet on Bitcoin (BTC-USD), detailing plans to build a modern Alexandria called “Bitcoin City.” The metropolis would be circular, with an airport, residential and commercial areas, and feature a central plaza designed to look like a Bitcoin symbol from the air. Geothermal energy would be provided from the Conchagua volcano in southeastern El Salvador, while the city would not levy any taxes (property, income or capital gains) except for VAT.
Flashback: In June, El Salvador passed a law making it the first country in the world to accept Bitcoin as legal tender, while the plan took effect in September with the launch of the Chivo Wallet (a government-sponsored digital wallet designed to facilitate transactions). Despite the hype, dollars remain by far the main medium of exchange, as well as the currency coming into the country. In September and October, Salvadoreans abroad sent only $32M in remittances back home using the Chivo Wallet, representing about 2.5% of the total remittances.
“This is going to make El Salvador the financial center of the world,” President Nayib Bukele declared. “Invest here and make all the money you want… This is a fully ecological city that works and is energized by a volcano.”
Construction of “Bitcoin City” will begin in 2022 and will be funded initially by sovereign bonds backed by the cryptocurrency. The first 10-year issue would be worth $1B, and carry a coupon of 6.5%, with half of the sum going to buy Bitcoin on the market and the other half used for infrastructure and Bitcoin mining. After a five-year lock-up, El Salvador would start selling some of the Bitcoin used to fund the bond to give investors an “additional coupon,” and other bonds would follow.
Volatility watch: Bitcoin has slipped about 16% from its record high of $68,990 which it reached earlier this month, but it is still up more than 90% this year.
Holiday-shortened week
Turkey prices are going up ahead of Thanksgiving, but what about the stock market? Despite inflation figures coming in hot, equities continue to notch fresh record highs, with investors offering their thanks before taking some time off this Thursday. Financial markets will close Nov. 25 for the holiday, while the New York Stock Exchange and the Nasdaq will be open on Friday until 1 p.m.
If history is any guide: “The entire week of Thanksgiving has averaged a 60 basis point, or 0.60 percentage point, advance for the S&P 500, with the best returns coming on Wednesday and Black Friday, and the only decline on average on Monday,” said Bespoke Investment Group, citing data that goes back to 1945. Lately, the gains have swung to Mondays in Thanksgiving week, with small declines on Tuesday and rallies on the last two days of the session.
The week is also typically characterized by some of the lowest trading volumes of the year. That could change this time around, with President Biden expected to announce his pick for Fed Chair in the coming days. “If [Lael] Brainard is nominated, it wouldn’t be a surprise to me to see some near-term volatility,” noted said Jeff Schulze, investment strategist at ClearBridge Investments. “Usually, the market tests a Fed chair.”
At the register: Average turkey prices cost 24% more than last year, according to the Farm Bureau, coming in at $23.99 for a 16-pound turkey. That’s not all. Cranberries are up 11%, dinner rolls cost 15% more, pie crusts are 20% higher, while russet potatoes and sweet potatoes are up 16% and 4%, respectively.
Transaction fees
Visa (V) expects to resolve its differences with Amazon.com (AMZN) in the U.K. and hopes that the e-commerce giant keeps the payment network on as partner for its co-branded credit card. “We’ve resolved these things in the past, and I believe we’ll resolve them in the future,” CFO Vasant Prabhu announced in an interview. Amazon recently told its British customers it was acting because of Visa’s high fees, though Mastercard (MA) and Visa set nearly identical transactions fees in the U.K., according to payments firm Bambora.
Backdrop: Shares of Visa slid last Wednesday after Amazon said it would stop accepting UK-issued Visa credit cards for purchases made in Amazon.co.uk. It also offered affected customers £20 off their next purchase using an alternative payment method, which followed a report that Amazon was considering switching its co-branded credit card deal to Mastercard. Earlier this year, the retail giant moved to limit Visa’s use in markets like Singapore, where a 0.5% transaction surcharge was added, as well as Australia.
The whole spat is putting a spotlight on credit card transaction fees, and could provide an opening for other payment options, especially upcoming fintech players. Account-to-account payments and ‘buy now, pay later’ option have been growing in popularity – compared to the payment rails and traditional systems of Visa and Mastercard – and Amazon has been experimenting in the space, offering BNPL options to U.S. shoppers through third-party provider Affirm (AFRM).
Commentary: “This should not be considered a shock, as Amazon has been using every negotiating tactic available to bring down the cost of processing payments,” said Kenneth Suchoski, equity research analyst at Autonomous Research, adding that the move would have little impact on Visa’s bottom line.
Today’s Economic Calendar
8:30 Chicago Fed National Activity Index
10:00 Existing Home Sales
11:30 Results of $58B, 2-Year Note Auction
1:00 PM Results of $59B, 5-Year Note Auction
Companies reporting earnings today »
What else is happening…
Ford (NYSE:F), Rivian (NASDAQ:RIVN) abandon plans to jointly develop electric vehicle.
Activision (NASDAQ:ATVI) CEO would consider stepping down if issues not fixed.
Monster Beverage (NASDAQ:MNST), Constellation Brands (NYSE:STZ) explore deal.
Goldman picks best high-growth stocks for rising rates in ’22.
Disney World (NYSE:DIS) puts COVID-19 vaccine mandate on hold.
U.S. and China discuss release of strategic oil reserves.
Pfizer (NYSE:PFE) hits 52-week high as CDC endorses boosters for all adults.
Ericsson (NASDAQ:ERIC) pays $6.2B for cloud-based services group Vonage.
KKR (NYSE:KKR) said to make takeover offer for all of Telecom Italia.
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