Today
 

Futures are pointing to a weak open to kick off the third quarter as the risk-off tone continues with the “wall of worry” building in the US. After capping off a volatile month, investors remain on edge as inflation fears, slowing growth, and rising rates stay front of mind. The S&P 500 finished the month down -4.8%, breaking a seven-month winning streak while the Dow and Nasdaq both suffered its worst month of the year. 

In a headline that reads like an Onion article, El Salvador just started mining bitcoin with volcanoes for the first time ever – and they’ve already made $269. President Nayib Bukele who has banked his political future on a nationwide bitcoin experiment tweeted early today that this is the country’s maiden voyage into volcano-powered bitcoin mining. He indicated that the mining project was still a work in progress and that they are in the process of “testing and installing” new mining equipment. 

Airlines have been forced to adjust their business model since the beginning of the pandemic, and they have done that by making room in the middle. For decades, ferrying tourists to vacation destinations has helped major airlines cover basic costs, but the front of the plane is where they’ve racked up the bulk of their profits. But when the pandemic whacked business travel, carriers were left looking for another way to pad the bottom line and increasingly they’re finding it in the premium economy. Airlines have found that a number of leisure travelers are willing to splash out for a bit of extra elbow room at fares that are frequently more than double the cheapest economy seats. 

While US legislators managed to get the debt ceiling debate pushed out to December, they continue to negotiate about a tax-and-spend package worth as much as $3.5 trillion.  White House reps insist the deal is close, but this is President’s Biden’s first attempt at a substantial bi-partisan legislation and they will look pretty bad if it does not fly.  The markets will love it if it passes.  It is no secret to investors that fiscal spending came to the rescue over the past 18 months and much of it found its way eventually into housing, stocks and bonds.  The debt it creates?  That’s the kids’ problem!! YOLO! 

Diversion: With the cold weather approaching and the golf season coming to an end, let’s watch one of the best holes in one ever.  
 

Commodities

Oil fell this morning on the prospect that OPEC+ producers might step up a planned increase in output to ease supply concerns, although crude remains in sight of a three-year high reached this week. At the time of writing, NYM WTI Crude futures are down -0.49% to US$74.66/bbl and ICE Brent Crude futures are down -0.17% to US$78.18/bbl. Oil closed the month with its largest monthly increase since June spurred by ongoing supply disruptions in the US Gulf of Mexico and an ongoing energy crunch that many expect will prompt a shift to burning oil for power generation as coal and natural gas prices skyrocket. Some options traders are even betting prices could reach US$200. 

Gold eased this morning as the dollar firmed on bets for interest rate increases but bullion still held above the pivotal $1,750 technical support level en route to a small weekly gain as worries about rising inflation and growth hurt risk sentiment. Gold Spot is down -0.16% to US$1,753.85/oz this morning. 

Fixed income and economics

It’s a new month and quarter and markets are hoping to put the September volatility firmly in the rear window (punctuated with a feverish forty point selloff by the S&P 500 in the last twenty minutes of yesterday’s session). Global market sentiment is in mild risk-off mode though North American futures are trying to kick off the final quarter of 2021 with some buying. Treasury and Canada benchmark yields are modestly higher with the latter catching up from yesterday’s closure. Across the Atlantic, the front end of most European curves are slightly richer following a Eurozone inflation report that was mostly on the screws --- the +1.9% annualized core reading matched consensus and +3.4% year-over-year headline topped the +3.3% consensus. That was released in tandem with German retail sales up +1.1% in August to rebound from the -4.5% swoon prior. Domestically, this morning we’ll get Canadian GDP for July but more importantly advance guidance for August. Consensus is calling for a -0.2% drop that would be a far cry from the +0.7% June print. Preliminary indicators such as flash guidance for retail sales (+2.1%), wholesale trade (+0.5%), manufacturing sales (+0.5%), and hours worked (+0.1%) suggest an upside surprise. There are several U.S. releases on tap today starting with PCE inflation during August that should largely follow what we already saw in the softer CPI print. Personal income growth should largely shake off the prior month’s introduction of child benefit payments while consumer spending should follow higher the already known gain in retail sales. 

Chart of the day
 

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Quote of the day
 

What's another word for Thesaurus? Steven Wright