Nickel? o/n; 30yy (and S&P)triangulating; 'Earl; biz as UNusual
Good morning. Tech difficulties this end (lost original post) likely a sign. Short version ahead of today’s 3yr auction, then, it is!
NICKEL? Yep.
… Meanwhile, there’s been a staggering surge in the price of nickel, which soared as much as 250% in two days before the London Metal Exchange suspended trading in the commodity this morning.
Thomas Biesheuvel and Craig Trudel have a great explainer on the ramifications of the surge, but one big source of demand for nickel is the batteries that go into EVs. In fact, one mine in northern Siberia supplies 17% of “Class 1” nickel, which is particularly well suited for batteries. So while moving away from standard cars may reduce reliance on expensive oil, right now it runs headfirst into expensive nickel. In fact, basically every metal or commodity that’s related to new energy tech is expensive right now. Manganese, lithium, cobalt, manganese, it’s all up and to the right.
It’s not just that these commodities are expensive, they’re also extremely tight. There’s just only so much of the stuff out there. In a note published yesterday, talking about Ford’s EV ambitions, Morgan Stanley’s Adam Jonas wrote that it’s not a question of near-term investment as “no amount of capital can create new nickel mines by 2024.”
Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart
Meanwhile, Long bond yields are UP now a couple days in a row and (daily) moment pointing higher still…
TLINES are drawn as fanciful challenges of support and resistance and I’ve offered a couple just above. As the facts of today unfolds, lines will most certainly be redrawn and narratives recreated. I’m reminded that in more ‘normal’ of times, the selloff might be viewed as a concession for supply of bonds in ‘The Land of the BIG 01s’. Not a(nother)seminal moment for bond bears ‘round the world.
And let us NOT forget about stocks — also triangulating. KIMBLE,
Let’s continue to watch WEEKLY closes and 2.10 for RED ALERTS as they develop.
And NOW, as far as what happened …
WHILE YOU SLEPT
Treasuries have been led lower by the belly as global commodity markets go unhinged with trading in the world's 5th most common element (nickel) halted at the LME after a 250% daily run-up in prices. DXY is lower (-0.2%) while front WTI futures have extended gains (+3%). Asian stocks fell, EU and UK share markets have rebounded (SX5E +1.45%, SX7E +6.1%) while ES futures are showing +0.6% here at 7:10am. Our overnight US rates flows saw better long-end selling during Asian hours with London's opening seeing more selling after the EU announced possible joint issuance to fund energy and defense initiatives. Overnight Treasury volume was about average overall with some relatively elevated activity seen in 5yrs (127%).
… and for some MORE of the news you can use » IGMs Press Picks for today (08 March) to help weed thru the noise (some of which can be found over here at Finviz).
Here are a few bullets, excerpts of things which hit my inbox and which may be of interest …
First, DBs Jim Reid puts move in commods into some visual context,
The biggest week on record…
The week has started with a major increase in oil on the back of weekend comments from US Secretary of State Blinken raising the prospect of banning Russian crude imports. This follows the biggest week on record for our Commodity index (+13.4%) as our CoTD shows, eclipsing anything seen in the 1970s…
REMINDER — for more see: “Comparing the 2020s with the 1970s” (link here) and a “Back to the 1970s?” (link here) chart book back in October.
Barclays stock jockey:
Impact of Oil Supply shocks on Equities. Oil has been driven higher by supply factors, the largest supply shock since the Gulf War. We find during supply-driven oil shocks consumer exposed industries lag as higher energy/gas costs are absorbed and spending is curtailed elsewhere. Value/Yield have tended to outperform during Oil supply shocks, while Growth lags…Figure 3 shows the 3M change in oil prices overall, as well as the 3M change in oil prices due to supply changes. From here was can clearly differentiate between major oil price changes that were driven by demand factors (e.g. the 2020/21 economic recovery) and those driven by supply factors (e.g. the 1990 Gulf War).
For somewhat MOAR on ‘Earl, this from … well, you know who
In other words, head TO the pumps this morning on our way TO work. And again on the way home. Tomorrow, lather, rinse and repeat. You know, Business as UNUSUAL
Got 3s?
… that’s all for now. Off to the day job…