Market Leverage scares Earnings levels AND More...

1. As Wework was listed, after its merger with the SPAC, its earnings are out and they are no less grisly than expected. WeWork is a classic case of hidden cash burn. It is burning cash at a rate that if continued can soon dry all treasury and render them bankrupt. They lost $661mn on an existing $884mn loss in the previous quarter.

2. The only leverage data we do get on a monthly basis is margin debt at brokers, reported by FINRA. And we got another doozie: Stock market margin debt spiked by $33 billion in October from September to another all-time high of $936 billion, up by $277 billion, or by 42%, from a year ago, and up by 67% from October 2019. This makes the market even more vulnerable to flash sale, because if the prices start falling, margin calls would force emergency selling and then we would consequently enter the vicious circle of falling markets.

3. The resurgence of covid cases in European countries mandates the ECB to push harder on the brakes of stimulus release and continue to offer emergency aid for smoother recovery and sustenance. This pushed the bond yields lower by an inch and equities reflected this reshuffle to the safer bets in the turmoil. The recent spike in cases would further spur another episode of energy crisis and supply chain bottlenecks

4. Chinese dominance on the international markets and foreign capital flow into the country has pushed its currency to a 6 year high. PBOC thinks that this could soon break and the currency may start reverting to older levels and thus hedging for the fall would be prudent.

5. Current supply constraints are among the most severe of the last 75 years – see the chart – and are largely behind the high inflation prints we have seen over recent months. This unusual situation of supply-driven inflation is creating confusion among policymakers and markets. The usual logic for central banks to lean against inflation early doesn’t apply.

6. Since the Federal Reserve (Fed) has reiterated its plan to keep interest rates on hold for the foreseeable future, policy is on track to remain accommodative, and inflation high, for at least another year. Accelerating wage and rent inflation support the view that inflation will likely be higher, not lower, next year.

7. With ever high consumer demand firms are also experiencing rising pricing power to command higher margins on the same output and that puts them well positioned to cushion against potential supply chain and labour miseries.

8. Maersk currently consumes about 12 million tons of marine oil per year, which is roughly equal to all the oil produced in the world in a single day. the world’s biggest container-shipping company, has issued its first ever green bond in a sale that drew more interest than any other in Europe’s credit market.

9. EUR has fallen to a 16 month low against the greenback. It crossed the critical 1.15 level and now with lower chances of any rate hikes by ECB makes the situation triker for the currency. driven by higher realized volatility and short-dated put demand as downward momentum exposes trading barriers.

10. The Turkish lira tumbled to a record low after the central bank cut borrowing costs for a third straight month. Officials cut the one-week repo rate by 100 basis points to 15%. And this comes at a time when their inflation accelerated to almost 20% last month.

11. Interesting Charts: