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A generally weaker start for European equity indices this morning, with a sharp move lower for the DAX in particular versus where the futures had been pointing overnight. US stocks finished higher on Friday to notch their third week of gains, though futures are indicated a little lower. Asian markets were broadly higher overnight. Crude oil trades a little higher, with WTI at $100, holding its 50-day moving average for the time being. Crude prices slid 13% last week. The euro slipped to a 6-day low against the US dollar this morning….aggressive Fed tightening meets word soup of ECB jawboning and zero action. Turkey’s inflation rose to 61%. The FCA and Bank of England are looking into LME’s handling of the nickel trading debacle last month. 


On the geopolitical front, Orban easily won another term in Hungary in weekend elections. Macron’s lead in the polls narrow….can Le Pen do it? The commentators never saw Brexit happening, and there is nothing like inflation to topple a regime (Macron’s insipid brand of centrism) built on sand. Evidence of war crimes by Russia are emerging, which puts further pressure on the West to ‘do more’. There will be a reckoning over the town of Bucha and others. The only good news is that Ukraine seems to be expelling the invaders in places. Meanwhile the Russian gas keeps flowing …when do actions match the rhetoric? Poland accuses Germany of being the biggest barrier to imposing tougher sanctions on Russia. Germany’s defence minister said the EU must discuss banning Russian gas imports.


Yield curve bear flattening was the result as the nonfarm payrolls on Friday showed the Fed is way behind the curve…unemployment down big to just 3.6%, wages +0.4% month-on-month, only sets up a more aggressive Fed. How hot is the labour market. BofA says: “We expect the unemployment rate to drop to 3.1% by year end, marking the lowest since 1953.” 50bps hikes are nailed on now.


The US ISM Manufacturing PMI slipped to 57.1 in March from 58.6 in the prior month, signalling the slowest pace of expansion in 18 months. The Prices Index registered 87.1 percent, up 11.5 percentage points compared to the February figure of 75.6 percent. 


BofA says “Q2 contrarian “pain trade” is long bonds, short commodities as investors discount “growth shock” from ”rates shock”; March “pain trade” was up-in-yields, up-in-stocks…markets discounted end of Russia-Ukraine war = start of Fed’s war against inflation, multiple 50bps hikes in ’22 (with ECB in more mortifying position than Fed with 8% inflation, negative policy rates, Germany real rates more negative than at any time since 1951”. 


Morningstar’s slapping down of Cathie Wood’s ARK Innovation ETF was quite the spectacle. Wood had “doubled down on her perilous approach,” and “saddled the portfolio with greater risk by slashing its number of stocks to 35 from 60 less than a year ago — thereby amplifying stock-specific risk — and growing its aggregate exposure to companies in which ARK Investment Management is a large shareholder”, it said. 


“The strategy has effectively become less liquid and more vulnerable to severe losses,” analyst Robby Greengold wrote in the note accompanying the downgrade of ARKK from Neutral to Negative.  “Wood runs a variety of exchange-traded funds that often make shared bets on stocks and can’t close to new investors — an option open-end mutual fund rivals can use to preserve their liquidity and investment opportunity set. The firm has no risk management personnel.” Wood’s “reliance on her instincts to construct the portfolio is a liability” and the firm favours “companies that are often unprofitable and whose stock prices are highly correlated”. Worst of all, ARK uses past performance of the portfolio as “a guide to the future”. Mic drop. 


Anyway, more bad news for Cathie as the US Securities and Exchange Commission (SEC) rejected an application for a spot bitcoin exchange-traded fund (ETF) from Ark 21Shares. The SEC cited a lack of investor protections. “The Commission concludes that BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and in particular, the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices’ and ‘to protect investors and the public interest,’” the SEC wrote in its decision. 


Meanwhile, Tesla started 2022 with record deliveries despite the global supply shock. The company reported it had delivered 310,048 new cars in the first quarter, up 68% on last year. Only, it was pointed out that Tesla had dropped this sentence from its report: “we only count a car as delivered if it is transferred to the customer and all paperwork is correct”. Why? Could it be that Tesla is not reporting accurately…? 

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