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Futures On Edge As Quad-Watching Set To Wipe Out A Third Of Market Gamma

Futures On Edge As Quad-Watching Set To Wipe Out A Third Of Market Gamma

Quad-witching opex Friday has arrived, bringing with it the usual…

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This article was originally published by Zero Hedge

Futures On Edge As Quad-Watching Set To Wipe Out A Third Of Market Gamma

Quad-witching opex Friday has arrived, bringing with it the usual drama of gigantic gamma expiration, including $1.5trillion of SPX index,
$310bln of options on ES futs, $220bln of SPY options, $610bln of other index…

… a surge in market volumes, spike in volatility and now expected rebound in risk assetsWith over a third of market gamma set to expire today – specifically some 35% of SPX, 50% SPY, and 35% of QQQ gamma according to SpotGamma – brace for a bump ride as the absolutely gargantuan S&P pin at 4,500 is about to get much smaller, drastically reducing the market’s downside buffer.

What does this mean for markets so far? Well, overnight, stock-index futures dropped again, while European stocks erased gains as investors not only fretted about today’s quad-witch volatility, but as steady Treasury yields after strong economic data this week pointed toward more movement out of heavyweight technology stocks while next week’s FOMC meeting raised concerns about the coming taper and reduction in stimulus. Quantifying that, S&P 500 E-minis were down 11 points, or 0.25%, at 07:30 am ET; Dow E-minis were down 78 points, or 0.22%, while Nasdaq 100 E-minis were down 40 points, or 0.25%. 10-year TSY yields were slightly higher at 1.3429%, while the dollar was unchanged and cryptos dropped.

In overnight trading, FAANG stocks fell slightly in premarket trading. Losses in major tech stocks had pulled the S&P 500 lower on Thursday, after a jump in bond yields saw investors pivot into sectors most likely to benefit from an economic recovery this year. The retail sales reading came on the heels of data showing steady factory activity and a cooling in inflation, which suggested the U.S. economic recovery was resilient despite a recent rise in cases of the Delta COVID-19 variant. Here are some of the biggest movers today:

  • IronNet (IRNT US) drops 9.4% in U.S. premarket trading, paring some of its 114% rally over the past three sessions driven by retail traders; Other meme stock moves: Offerpad (OPAD US) also sinks after doubling this week, while SmileDirectClub (SDC US) rose 7.5%
  • AbCellera Biologics (ABCL US) soars 16% in premarket trading after it confirmed that the U.S. FDA expanded its emergency authorization to use a Lilly-partnered Covid-19 antibody cocktail for post-exposure prevention of infection or symptomatic disease
  • U.S. Steel (X US) dips 1.7% in premarket trading after reporting results on Thursday evening; European steel stocks traded a tad weaker alongside mining stocks, which were hurt sinking iron prices
  • Las Vegas Sands (LVS US) and Wynn Resorts (WYNN US), battered by a shift in policy in Macau, in focus after Jefferies puts out a bearish note. It cut Las Vegas Sands to hold and slashed Wynn’s PT to Street low.
  • Take-Two Interactive Software (TTWO US) slides 1.7% in premarket after it got downgraded to market perform from outperform at BMO on reduced confidence in previously Street- high earnings estimates
  • Tuesday Morning (TUEM US) rises 3.6% in premarket trading after CEO discloses share purchases on Thursday
  • Diamondback Energy (FANG US) climbs 3.7% in premarket trading after it announced a share buyback plan late on Friday
  • Shares gain about 1.8% postmarket
  • Usana Health (USNA US) fell 2.8% in postmarket trading Thursday after cutting its net sales forecast for the full year

Also overnight, China boosted its injection of short-term cash into the financial system in a sign the authorities are seeking to soothe market nerves frayed by concern over quarter-end funding needs and China Evergrande Group’s debt crisis. Still, price swings are almost certain to surge during today’s quadruple-witching session, in which a significant number of futures contracts and options expire at the same time, according to Pierre Veyret, technical analyst at ActivTrades. “Most market operators are looking towards the next Fed policy meeting due next week, which should decrease market directionality and increase volatility further,” Veyret said.

Focus now turns to a meeting of the Federal Reserve next week, with investors debating if a swathe of strong economic data this week could spur the bank into shortening its timeline for reducing monetary stimulus.

European shares faded early gains and the Stoxx 600 index traded down -0.1%, erasing a gain of as much as 0.8% as a rally in travel and retail shares was offset by a retreat for basic-resources companies after comments by a European Central Bank council member stoked inflation concerns. ECB Governing Council member Martins Kazaks said the euro area’s inflation outlook may turn out higher than currently anticipated if the coronavirus doesn’t inflict any further shocks. The region’s stabilizing economic recovery, persistent supply bottlenecks and rising expectations all point to possible faster-than-forecast price gains, he said. Maybe he finally got his electric bill?

Commerzbank gained as much as 4.9% after a report that Cerberus Capital would consider raising its stake if the German government was ready to sell its shares. Azelis SA, a distributor of food additives and specialty chemicals, surged in its Brussels trading debut after the biggest Belgian initial public offering since 2007. Anglo American fell 4.2% in London after the miner was downgraded at Morgan Stanley and UBS. European steel stocks traded a tad weaker alongside mining stocks, which were hurt sinking iron prices.

“Investors just should be prepared for the fact that returns are much more likely to be muted over the next five years than what we’ve really benefited and enjoyed over the last five,” Jim McDonald, Northern Trust Bank chief investment strategist, said on Bloomberg Television. That view incorporates the prospect of lower valuations for Chinese firms facing more government involvement, he said.

Earlier in the session, Asian stocks were mixed amid the debt crisis at China Evergrande Group and a short-term cash injection by the central bank to help soothe nerves. Stocks in China and Hong Kong bounced back following four straight days of losses. The MSCI Asia Pacific Index climbed as much as 0.4%. Technology was the best-performing sector on the gauge, led by Tencent and Alibaba Group. Stocks also gained in Japan, with the Topix halting a two-day decline. Friday’s advance helped pare the Asian benchmark’s losses this week to 1.6%. The gauge is still on course to snap a three-week rally, largely due to China-related concerns. Investors remain worried about the regulatory crackdown after Beijing targeted Macau’s casinos this week, with sentiment also hurt by weak economic data and the debt crisis at China Evergrande Group. Focus is also turning to the Federal Reserve’s policy meeting next week, with traders hoping to get more clues about the timeline for paring bond purchases.

You now you have a number of serious risks in China, especially the one around systemic risk with Evergrande,” Frank Benzimra, head of Asia equity strategy at SocGen, said on Bloomberg TV. “We see more upside on the onshore than offshore part of the market. It’s a little bit early for bottom-fishing in the internet space.”

Japanese stocks traded higher in the afternoon session, overcoming early fluctuations, with electronics makers and telecommunications providers driving gains in the Topix. The Topix rose 0.5% to 2,100.17 at the 3 p.m. Tokyo close, while the Nikkei advanced 0.6% to 30,500.05. SoftBank Group contributed the most to the Topix’s gain, increasing 1.8%. Out of 2,184 shares in the index, 1,422 rose and 644 fell, while 118 were unchanged.  More than 4 trillion yen worth of shares traded hands on the first section of the Tokyo Stock Exchange, the most since May.  Running shoes and sportswear maker Asics dropped 3.2% after local broadcaster NHK reported the Tokyo Marathon will be canceled this year due to Tokyo still being under a state of emergency. Asics is one of the sponsors for the race

In rates, yields on the benchmark 10-year notes held around levels touched yesterday, after an unexpectedly strong retail sales reading. Treasuries were steady with the curve slightly steeper, pivoting around an unchanged 7-year sector. Treasury yields remain within a basis point of Thursday’s close, trading slightly richer across long-end of the curve, marginally flattening 2s10s, 5s30s spreads; the 10-year yield at 1.3429% was near top of Thursday’s range, outperforming bunds and gilts by 2.5bp and 1bp respectively and little changed on the week. Bunds underperform over early European session, with futures contract gaining momentum after breaching Thursday’s low. 

In FX, the Bloomberg Dollar Spot Index was little changed even as the greenback was weaker against most of its Group-of-10 peers; commodity currencies led advances after rebounding in the Asian session. The pound was steady against the dollar, but underperformed most of its Group-of-10 peers after U.K. retail sales fell unexpectedly for a fourth month in August, the worst stretch of declines in at least 25 years. Attention turns to the Bank of England’s rate decision next week. Australia’s dollar rose against all its Group-of-10 peers as an absence of further negative news helped restore some confidence in the global recovery. New Zealand’s dollar was sold after the nation extended the suspension of a travel bubble with Australia for eight weeks, a trader said.

In commodities, oil slipped, while gold advanced. An index of commodity prices dipped, but remains in sight of a record hit in 2011, underscoring the inflation concerns rippling across the world economy.

Looking at the day ahead now, the only thing on the US calendar is the University of Michigan’s preliminary consumer sentiment index for September. Otherwise, central bank speakers include the ECB’s Makhlouf.

Market Snapshot

  • S&P 500 futures little changed at 4,476.00
  • STOXX Europe 600 up 0.56% to 468.57
  • MXAP up 0.3% to 203.41
  • MXAPJ up 0.3% to 650.76
  • Nikkei up 0.6% to 30,500.05
  • Topix up 0.5% to 2,100.17
  • Hang Seng Index up 1.0% to 24,920.76
  • Shanghai Composite up 0.2% to 3,613.97
  • Sensex up 0.2% to 59,256.49
  • Australia S&P/ASX 200 down 0.8% to 7,403.72
  • Kospi up 0.3% to 3,140.51
  • Brent Futures down 0.66% to $75.17/bbl
  • Gold spot up 0.5% to $1,762.19
  • U.S. Dollar Index down 0.13% to 92.815
  • German 10Y yield rose 2bps to -0.281%
  • Euro little changed at $1.1782

Top Overnight News from Bloomberg

  • British consumers expect inflation will remain above the Bank of England’s target for at least the next five years, a survey showed, in an indication that attitudes about rising prices are becoming entrenched
  • The Federal Reserve will probably hint at its meeting next week that it is moving toward scaling back monthly asset purchases and make a formal announcement in November, according a Bloomberg survey of economists
  • China boosted its injection of short-term cash into the financial system in a sign the authorities are seeking to soothe market nerves frayed by concern over quarter-end funding needs and China Evergrande Group’s debt crisis
  • The European Central Bank dismissed a Financial Times report that chief economist Philip Lane told analysts privately the institution expects to reach its 2% inflation target by 2025
  • “Market interest rates have relaxed in cumulative terms since our monetary policy meeting in June,” ECB Governing Council member Pablo Hernandez de Cos says. “However, this relaxation has been reversed in recent weeks, serving as a reminder that financing conditions remain highly volatile in the context of uncertainty and highly dependent on monetary policy support”
  • U.K. retail sales fell unexpectedly for a fourth month in August, the longest stretch of declines in at least 25 years, raising concerns about the economic recovery as a resurgence of coronavirus cases and supply shortages take a toll

A more detailed look at global markets courtesy of Newsquawk

Asian equity markets traded mixed with the region tentative ahead of several APAC market closures next week, albeit with the mood at a slight improvement from the negative bias stateside, where strong data supported taper calls approaching quad witching hour. The ASX 200 (-0.8%) underperformed with the index pressured by hefty losses in the mining-related sectors after recent declines in underlying commodity prices due to a firmer greenback and Chinese efforts to contain prices through its state reserves. The mood in Australia was also dampened by fears of a backlash from China to the recent AUKUS security pact and with M&A discussions between private equity and Iress failing to reach an agreement which resulted in double-digit percentage losses for shares in the latter. The Nikkei 225 (+0.6%) was positive and tested the 30,500 level with the index getting an uplift from a mostly weaker JPY, but with gains capped by the ongoing COVID outbreak and with the Cabinet Office lowering its overall economic assessment for the first time in four months. The Hang Seng (+1.0%) and the Shanghai Comp. (+0.2%) lacked firm commitment ahead of a four-day weekend in the mainland due to the Mid-Autumn Festival and with some brief support after the PBoC’s liquidity efforts involving a total CNY 100bln injection evenly split between 7-day and 14-day reverse repos. In addition, plenty of focus remained on China Evergrande with its shares severely hit again on default fears and reports that suggested the unlikelihood of a government bailout, although there was some reprieve to affiliate Evergrande Property Services as its shares rose around 8% which seems inconsequential compared to its near-50% decline YTD. Finally, 10yr JGBs were subdued following the spillover selling from USTs and gains in Japanese stocks, with demand also hampered by the lack of BoJ purchases in the market today with the central bank instead offering to buy JPY 75bln in 3yr-5yr corporate bonds from next Friday.

Top Asian News

  • HKEX Proposes SPAC Listing Fundraising to Be at Least HK$1b
  • China Mogul Loses $27 Billion in World’s Biggest Wealth Drop
  • Australia to Trial Home Quarantine for Vaccinated Arrivals
  • China Property, Tech Firms Stage Rebound on Bargain Hunting

Bourses in Europe has conformed to a mixed picture (Euro Stoxx 50 -0.3%; Stoxx 600 -0.3%) after failing to hold into the +1% gains seen at the open for the bellwether index, whilst Euro futures now mostly lower on Quad Witching Day. The FTSE 100 Dec contract fell under 7,000 as the Sep contract expired. US equity futures meanwhile have seen somewhat of a contained divergence before adopting a downside bias, with the RTY narrowly lagging. Back to Europe, the FTSE 100 (-0.1%) is among the straddlers in the region as the Basic Resource sector is once again under pressure – with the biggest losers in the index currently Anglo American (-3.5), Rio Tinto (-2.2%) and BHP (-1.7%) – with the former seeing a downgrade at Morgan Stanley, whilst Glencore (+0.1%) bucks the trend amid an upgrade at the bank. Euro-bourses see broad-based gains. Delving deeper into sectors, Autos and Parts are also on the backfoot amid the ongoing chip shortage. On the flip side, Travel & Leisure leads the gains with reports stating the UK travel red list could be more than halved from its current 62 for the double-jabbed, according to The Times. Turkey is tipped to be among those removed from the list. The UK Transport Minister is today expected to announce the scrapping of the amber list, thus there will only be red and green lists. In terms of individual movers, Commerzbank (+3.3%) holds onto gains after Handelsblatt reported that Cerberus is reportedly considering increasing its stake in the Co. from the current 5% mark via taking on the German state’s 15.6% interest in Commerzbank if the German state wishes to sell its holding.

Top European News

  • ECB Says FT Report on Inflation Target Outlook Not Accurate
  • U.K. Retail Sales Fall in Worst Stretch for Shops Since 1996
  • Europe’s Gas Resumes Gains on Concerns Over LNG Plants, Supply
  • How the Pandemic Left British Households $1.2 Trillion Richer

In FX, the Dollar has lost some of its retail sales vigour and Philly Fed fizz amidst signs of stabilisation in US Treasuries, both outright and from a yield curve perspective, while technical traders may also be a bit discouraged by the fact that the DXY did not quite have the legs to at least touch the psychological 93.000 mark when upside momentum was building yesterday. Hence, the index has drifted back down into a comparatively tight 92.639-760 range vs 92.965-467 extremes on Thursday and the Buck has unwound gains vs most major peers bar the Yen that is retreating closer to 110.00 again. Ahead, eyes on preliminary Michigan sentiment to see if the survey echoes upbeat regional vibes for September that kicked off with the Empire State, but also monitoring stocks over Quad Witching.

  • AUD/CAD/NZD – No surprise to see the Aussie strike while the Greenback is waning after its sharp decline on multiple factors this week (dovish RBA rate guidance, ongoing slump in iron ore, poor jobs data and heightened tensions with China), as Aud/Usd reclaims 0.7300+ status and the Aud/Nzd cross also regains some composure on the 1.0300 handle as the Kiwi lags below 0.7100 against its US counterpart in wake of a marked deterioration in NZ manufacturing PMI into contractionary territory. However, the Aussie may find further upside progress capped by decent option expiry interest at the 0.7325 strike (1 bn) or even get drawn back to similar size at the round number (1.1 bn to be precise), and the same goes for the Loonie given expiries between 1.2635-50 (1 bn) and at 1.2700 (1 bn), not to mention the loss of bullish impetus from WTI crude that is consolidating around Usd 72/brl. Nevertheless, Usd/Cad has retreated a bit further from w-t-d peaks to pivot 1.2650 between 1.2708-1.2600 parameters.
  • EUR/CHF/GBP – All marginally firmer vs the Dollar, but unconvincingly and still on course to end the week with net losses as the Euro meanders below 1.1800 and above 1.1750 where hefty option expiries reside (1.2 bn and 1.8 bn trailing down to 1.1745), the Franc straddles 0.9270 and Sterling rotates either side of 1.3800 following disappointing UK retail sales data and a pick-up in inflation expectations via the latest BoE/Kantar Attitudes Survey. Note also, Cable appears contained to an extent by technical levels in the form of the 50 and 21 DMAs that are situated at 1.3803 and 1.3780 respectively today, while Eur/Gbp is flirting with its 50 DMA at 0.8543 after rejecting or respecting 0.8500 on Thursday.
  • JPY – As noted at the outset, the Yen is underperforming having narrowly failed to breach 109.00 and Usd/Jpy now looks intent on testing resistance/offers at the big figure above pending any further repatriation for month, Q3 and Japanese half FY end or another change in chart and fundamental dynamics.
  • SCANDI/EM – The Nok does not look too fazed by the pull-back in Brent as it eyes a Norges Bank hike, but the Rub, Mxn and Zar are on a weaker footing, while the Try has fallen further in advance of September’s CBRT policy meeting as year end inflation projections rise again. Conversely, the Cnh and Cny are on an even keel into a long Chinese holiday weekend with 7 and 14 day liquidity provided by the PBoC.

In commodities, WTI and Brent front month futures have been trimming the gains seen since yesterday’s European close, with the former now threatening a breach of USD 72/bbl to the downside (vs high 72.72/bbl) and the latter just north of USD 75/bbl (vs high 72.78/bbl). News flow has been light, but prices saw crude prices saw leg lower heading into the European cash open, seemingly in tandem with NatGas prices as Europe reacted to Biden’s commentary suggesting that there is evidence that gas prices should be falling and his admin is investigating why that was not the case. Aside from that, crude price action has been dictated by the overall market mood and price action in stocks. Turning to metals, spot gold and silver consolidate following yesterdays deep declines which saw the yellow metal briefly dip under USD 1,750/oz. Base metals meanwhile nurse yesterday’s losses, with, but LME copper remains sub-USD 9,500/t. Base metals, name iron and copper, are on the watch for any retaliation by China on Australia following the AUKUS security pact.

US Event Calendar

  • 10am: Sept. U. of Mich. Sentiment, est. 72.0, prior 70.3; Current Conditions, prior 78.5; Expectations, prior 65.1
  • 10am: Sept. U. of Mich. 1 Yr Inflation, est. 4.7%, prior 4.6%; 5-10 Yr Inflation, prior 2.9%

DB’s Jim Reid concludes the overfnight wrap

If someone looks at my browser history over the last 18 hours they will see a stream of entries along the lines of “will my golf be affected if I have to have knee replacement surgery”. I’ve been quite discouraged by some of the articles but have decided to focus on the YouTube clips of 80 year olds with fake knees hitting it as far as I do now. So after having microfracture surgery yesterday I was told the hole in my knee was far bigger than was thought and that I likely have arthritis in some form and will probably need a knee replacement relatively soon. So I’m looking for inspirational stories from my readers today, who may have been through this sort of thing, preferably telling me how I can not only get back on the golf course, but actually have the chance to still get better and better. Only positive answers or lies will be read.

There are a few aching joints in markets at the moment but for now it’s mild and still heavily medicated by prior fiscal and monetary medicine. There is certainly a whiff of stagflation fears in the air though but I would stress that real-time growth is still pretty high but it’s just that expectations are coming down from even higher levels earlier in the summer. Inflation forces have remained almost exclusively firmer over this period notwithstanding a slight miss on US CPI this week at what are still very elevated levels.

Talking of inflation, there was an interesting article in the FT last night saying that the ECB expects the region to reach its 2% inflation target by 2025, which would suggest that the central bank could raise interest rates as soon as 2023. This might get a little traction today but the market will likely think that there’s a lot of water that needs to flow under the bridge before we get to 2023, let alone 2025. However, if a path to such a number does appear in their forecasts soon it will impact ECB messaging going forward which will be important to markets. The Euro rose +0.13% following the article’s release, but still fell -0.42% on the day versus the dollar, which was its worst day in nearly a month. Overnight, the ECB has rejected the accuracy of the FT report as they released a statement saying “The FT story is not accurate”, and that ECB Chief Economist Philip Lane said that he “didn’t say in any conversation with analysts that the euro area will reach 2% inflation soon after the end of the ECB’s projection horizon”.

Confusing the growth picture a little was the stronger US retail sales yesterday which brought forward a little taper risk back into the equation ahead of the Fed meeting next week. This sparked a mini sell off in US yields and left treasuries not far off where they were before the CPI miss on Tuesday.

Running through those themes in more depth, US retail sales unexpectedly rose +0.7% in August (vs. -0.7% expected), whilst the measure excluding autos also jumped +1.8% (vs. unch expected), so a solid outperformance. That said, the release wasn’t quite as strong as the headline figures suggested, since the July retail sales reading was revised down to show a larger -1.8% contraction (vs. -1.1% previously), so a bit less solid than on first inspection. Nevertheless, Treasury yields spiked higher in response, seeing an intraday peak of 1.350%, before falling back to close at 1.338%. The overall move left them up +3.9bps on the previous day, as investors moved to accelerate the likely path of future rate hikes.

The prospect of less monetary stimulus weighed on US equities yesterday with the S&P 500 falling back -0.16% (but comfortably off the lows) after moving between gains and losses for much of the session. Retailing stocks (+0.69%) and consumer services (+0.23%) outperformed on the better-than-expected retail print, while tech stocks also outperformed slightly with the NASDAQ eking out a +0.13% gain. One sector that really outpaced the market was airline stocks, which gained +1.56% – partly on news that the UK will be easing travel restrictions on at least 30 countries currently on the UK’s “red list”. European equities topped their US peers, with the STOXX 600 up +0.44% as bourses across the continent moved higher, but much of that was a catch-up to the previous day’s rally in the US, which took place shortly after the European close.

Amidst the broader selloff, commodities also lost ground for the first time this week, with Bloomberg’s Commodity Spot Index (-1.00%) moving off its high for the decade thanks to a broad decline across the asset class. One decline in particular came from European natural gas prices, which fell by a massive -10.54% as they paused for breath following their blistering run higher. That said, even that decline still leaves them up +9.21% for the week so far, so we’re hardly out of the woods yet on that front. Otherwise, oil prices just about maintained their upward momentum as Brent Crude (+0.28%) saw a moderate daily move, whilst gold (-2.25%) fell to a 1-month low as it experienced its worst daily performance since early-August.

Asian markets are mostly trading higher this morning, with the Nikkei (+0.53%), Hang Seng (+0.47%) and Kospi (+0.15%) all advancing. Chinese bourses are a bit mixed though with the CSI (+0.27%) up, whereas the Shanghai Comp (-0.59%) and Shenzhen Comp (-0.65%) have lost ground, which comes in spite of the PBoC increasing its cash injections into the financial system as risks associated with the debt crisis at the Evergrande Group are dampening sentiment. The injection totalled CNY 90bn of funds, which is the most since February. Outside of Asia, yields on 10y USTs are broadly stable along with futures on the S&P 500 (+0.01%), but those on the Stoxx 50 are up +0.56%.

In Germany, there’s now just a week on Sunday remaining until the federal election, and a fresh round of polls continue to indicate a pretty consistent lead for the centre-left SPD, with Chancellor Merkel’s CDU/CSU bloc trailing behind, and the Greens then in 3rd place. One from YouGov yesterday gave them 25%, ahead of the CDU/CSU on 20% and the Greens on 15%. Then another from Kantar put the SPD on 26%, ahead of the CDU/CSU on 20% and the Greens on 17%. And finally, another came from Infratest dimap that put the SPD on 26%, the CDU/CSU on 22%, and the Greens on 15%. These polls have been remarkably consistent over the last couple of weeks.

Elsewhere in Europe, sovereign bond yields also spiked following the US retail sales release, but they then fell back with yields on 10yr bunds (+0.4bps), OATs (-0.0bps) and BTPs (-0.8bps) all near unchanged by the end of the session. The main exception were gilts, where the short end of the curve saw yields press higher still, with those on 2yr (+2.1bps) and 5yr (+3.7bps) gilts climbing to fresh post-pandemic highs as investors continued to bring forward the timing of potential BoE rate hikes. Meanwhile, 10yr gilt yields rose +3.9bps to 0.817%, their highest level since the start of June and just over +30bps higher than its early-August lows.

Turning to the pandemic, there were further signs of a return to normality after the World Economic Forum said that they planned to return to Davos in person for their annual meeting in January. I certainly missed the uniqueness of the event last year. Separately, the UK’s ONS reported that 93.6% of adults in England were estimated to have Covid antibodies in the week ending August 29, but this was actually down four-tenths on the previous week’s peak of 94.0%. Furthermore, among those in their 70s, the decline in antibodies over recent months is now statistically significant, with the 75-79 age bracket seeing levels fall from a peak of 96.6% in late-May to 90.2% in late-August. Indicators like these can be expected to lead to further calls for boosters for those who were vaccinated some months ago. In the US, boosters could be authorised as soon as next week by federal regulators, especially for those over the age of 65 and other at-risk individuals. The FDA is meeting today to discuss Pfizer’s application for a third shot of its vaccine, with the CDC holding a two-day meeting next week on booster shots in general.

Looking at yesterday’s other data, the weekly initial jobless claims for the week through September 11 rose to 332k (vs. 322k expected), but that didn’t stop the 4-week moving average falling to 335.75k, which is its lowest level since the pandemic began. The claims number will be impacted by recent auto production shutdowns due to the worldwide chip shortage. Otherwise, the Philadelphia Fed’s business outlook for September rose to 30.7 (vs. 19.0 expected).

To the day ahead now, and data highlights include UK retail sales for August, the final Euro Area CPI reading for August, and the University of Michigan’s preliminary consumer sentiment index for September. Otherwise, central bank speakers include the ECB’s Makhlouf.

Tyler Durden
Fri, 09/17/2021 – 08:04

Author: Tyler Durden

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Energy & Critical Metals

Pegasus Resources Expands Its Uranium Assets In Saskatchewan

Pegasus Resources Inc. (TSXV:PEGA) continues to make its presence in the prolific Athabasca Basin uranium camp with the recently announced
The post Pegasus…

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Pegasus Resources Inc. (TSXV:PEGA) continues to make its presence in the prolific Athabasca Basin uranium camp with the recently announced acquisition of three uranium properties at the northwest edge of the Basin. The 54,026 hectare properties comprising 13 mineral claims contain a cumulative total of 535,718 lbs of uranium, and significantly, includes a historic resource estimate of 202,200 tons at 0.119% U308 at an average width of 4.8 metres.

These new properties add to the previously announced Pine Channel uranium property which consists of six mineral claims covering 6,028 hectares and is located at the northern edge of the Athabasca basin, roughly 40 km west of the town of Stony Rapids. The Athabasca Basin in Northern Saskatchewan is host to several of the world’s largest and highest-grade uranium mines, including Cameco’s (TSX: CCO) McArthur River Mine and Cigar Lake Mine.

The Wollaston Northeast property is located in the 20A zone within the prolific Wollaston Domain, 45 kilometres northeast of the Eagle Point Uranium Mine. The property has at least eight known base metals showings and five previously documented uranium occurrences, and is considered highly prospective for basement hosted uranium mineralization.

Much of the recent renewed interest in uranium in the region is due to recent discoveries within the Wollaston Domain where the Eagle Point deposits are hosted within its basement rocks. In addition to the Eagle Point Mine, the area also hosts the historic Rabbit Lake Mine and Cameco/Orano Key Lake Mine, the world’s largest high-grade uranium mine.

The 12,397 hectare Bentley Lake Uranium Property consisting of three mineral claims, and is located 35 kilometres northeast of the edge of the Athabasca Basin, within a transition zone between the Wollaston and Mudjatic Domains. This trend is host to several major uranium deposits, including Cigar Lake, Roughrider, McArthur River and Midwest. It is located at the transition zone between the Wollaston and Mudjatik geological domains.

The third property is located approximately 40 kilometres northeast of the edge of the Athabasca Basin and within the Charlebois-Higginson Lake Uranium District. The 6,908 hectare Mozzie Lake Uranium Property consists of three mineral claims and has a historical resource estimate of 204,200 tons at 0.119% U308, with an average width of 4.8 metres, and containing 535,718 lbs of uranium. What makes the Mozzie Lake Property particularly compelling, aside from the historical resource estimate that Pegasus’s exploration efforts may be able to increase significantly, are the pegmatite deposits of the Charlebois-Higginson Lake Uranium District.

Since being initially explored from the 1940’s through to the 1960’s, there has been virtually no exploration on the property. Previous work in the region, as well as on the Pinkham Lake property at Mozzie Lake, indicated that the pegmatite deposits may also host mineralization which contains rare-earth-element bearing minerals. Rare earth minerals are in high demand today due to the needs of the various technology, consumer electronics, and electric vehicle manufacturing industries. PEGA plans to examine the property’s rare earth potential as part of its uranium exploration program at Mozzie Lake.

Pegasus will next review the historical data on the properties to determine an exploration strategy and work programs, and will provide shareholders with updates in the near future. The company’s recent announcements of the uranium assets have certainly rekindled interest in PEGA shares, and its market capitalization has increased by almost 50% to $7.98 million in recent weeks, signifying that investors are enthused about the direction management has taken.

PEGA last traded at $0.095 on the TSX Venture exchange.

FULL DISCLOSURE: Pegasus Resources is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Pegasus Resources on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.

The post Pegasus Resources Expands Its Uranium Assets In Saskatchewan appeared first on the deep dive.

Author: Phil Gracin

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Energy & Critical Metals

The Ethical Investor: ESG moves, lessons from the energy crisis and JP Equities’ stock tips

The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is JP Equity … Read More
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The Ethical Investor is Stockhead’s weekly look at ESG moves on the ASX. This week’s special guest is JP Equity Partners’ director and partner, Nic Brownbill.

The world is in the grip of an ongoing global power crisis that has seen energy prices soaring by thousands of percentage points.

From China to Europe and now India, the cost of energy is surging drastically. The price of natural gas has even quadrupled in some parts of the world.


Source: IEA via Reuters


But economists are now warning this might be just the first of many power crunches the world will see as we transition into the new economy.

According to a research paper by CommBank’s analyst Vivek Dhar, there are two main root causes that led to the crisis — a strong demand recovery from the pandemic, and an acute shortage of two key power-producing fuels – natural gas and thermal coal.

As economies reopen, there is a sudden pent up demand from consumers which meant that factories were forced to switch on their production capacity at short notice. This was exacerbated by a colder than usual European autumn, as the continent potentially faces a more-freezing-than-usual winter season.

In China, the crisis mainly stemmed from an undersupply in local production of coals, according to Dhar, adding that coal supply has been hampered in China because of the government’s own environmental protection regulations.

So what can we learn from all this?

Dhar reckons that we are transitioning into the new economy too fast, too soon.

“What the recent energy crisis has shown is that the energy transition needs to be planned carefully,” Dhar wrote.

“This will mean significant investment in renewable generation, batteries, electricity grids and hydrogen.”

But he thinks the roll-out of a decarbonised grid and role of gas need to be clearly defined too.

“Under-investing in gas infrastructure relative to its role in coming years will only serve to make Europe’s energy market more vulnerable to prolonged gas shortages, and increase dependence on Russia.”

Like Europe, China’s decarbonisation ambition will need to be planned as well, Dhar said.

“If coal mines and coal power plants are closed before a renewable replacement is in place, power shortages in China could be an ongoing concern.”

What’s happening in Australia

Australians have chosen climate change as the top ESG priority, according to the latest survey conducted by global ESG consultant, SEC Newgate.

And more than half of the 1,000 Aussies surveyed said they were happy with the direction the government is taking on the environment.

Source: Survey by SEC Newgate


Aussie respondents also nominated retailers Coles Group (ASX:COL) and Woolworths (ASX:WOW) as the top local companies when it came to doing well on ESG metrics.

These results should provide food for thought for PM Scott Morrison, who’s currently caught in a political wrangle with the Nationals in setting our 2050 climate goals.

The PM has told Liberal colleagues that he wants to bring a binding 2050 net zero commitment to the COP26 Summit in Glasgow next month, without having to upgrade Australia’s 2030 commitments.

Nationals Leader and also Deputy PM, Barnaby Joyce, said however that he was willing to back the 2050 targets only if funding for regional producers and farmers were made as part of the deal.

Special guest JP Equities’ Nic Brownbill shares his views and ESG stocks

Nic Brownbill, a partner at JP Equity, told Stockhead that decarbonisation is a mega global investment opportunity, one that JP Equity wants to be all in on.

How big is the potential for ESG investing?

“We see the whole decarbonisation theme as the next mega global investment opportunity. An estimated $41 trillion is required to decarbonise the planet. It’s going to be a bigger opportunity than the crypto market, because unlike cryptos, the carbon market is going to be mandated by governments, major asset managers and pension funds.”

Which segment of the ESG market do you see outperforming?

“Some companies will fall short in trying to make their carbon targets, so the balance will need to be met with carbon credits. I think carbon emissions will eventually be metricated, and the carbon offset market is going to be a way for major companies to offset their emissions.”

Would that investment opportunity catch on in Australia?

“I believe the Australian market hasn’t really caught on to the opportunity of this yet. But I think something will really start to emerge from the COP26 conference in November, where you’ll see a sustained mega theme starting to unfold in this country.

“I think we will start to see a complete emergence of Australian companies in the carbon space over the next few months and beyond.”

What are the ASX stocks that JP Equity likes in the carbon credit space?

One ASX stock that we’ve been watching very closely is  Fertoz (ASX:FTZ). They’re a leading North American fertiliser manufacturer that produces a unique low-emission rock phosphate product that increases crop yield by 15%.

“Importantly, it can generate significantly lower CO2 emissions in manufacturing compared with other commercial fertilisers.

“This presents a really significant opportunity because agriculture as a sector accounts for 24% of all human generated greenhouse emissions. Fertoz is one of the first movers in the carbon credit market, and since May this year has been issuing carbon offset credit certificates.

“It’s not a matter of if, but when disclosure of carbon emissions will become metricated. And as a result, Fertoz is getting some strong enquiries from other companies looking to offset their footprints by buying carbon credits.”

Any other ASX stocks you like in the ESG space?

“We’re also bullish on Mpower (ASX:MPR). The company is Australia’s leading specialist in renewable energy, battery storage and micro-grid business. It has a focus on five megawatt solar farms, and is in the process of creating an initial portfolio of 20 sites across Australia in the coming years.

“That gives them an aggregate capacity of around 100 megawatts, and an estimated value of more than $150 million. It’s now down to what the team can deliver in some of those projects to build up the portfolio.”


Notable ASX ESG-related news during the week

Rio Tinto (ASX:RIO)

The energy giant announced that it was targeting a 50% reduction in Scope 1 and 2 emissions by 2030, and a 15% reduction by 2025 from a 2018 baseline of 32.6Mt.

Around $7.5 billion in direct capital expenditure will be spent on decarbonising Rio Tinto’s assets from 2022 to 2030, including $0.5 billion per year from 2022 to 2024.

Strandline Resources (ASX:STA)

The company released its Sustainability Report for 2021, outlining its commitment to the United Nations Sustainable Development Goals (UNSDGs).

STA said it’s focused on managing development risks at its Coburn project in WA to safeguard workers and ensure environmental compliance.

Lithium Power (ASX:LPI)

The company has appointed global consulting firm Deloitte to ensure a robust ESG program at its Maricunga project in Chile.

Deloitte has been tasked to imbed sustainable protocols in LPI’s lithium extraction operations, and to establish ambitious standards for LPI to become a carbon neutral producer, while keeping high standards on the social aspects.

Jadar Resources (ASX:JDR)

The company also said it has completed its maiden Sustainability Plan, with strategies aligned to the UNSDGs.


The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

The post The Ethical Investor: ESG moves, lessons from the energy crisis and JP Equities’ stock tips appeared first on Stockhead.

Author: Eddy Sunarto

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Emerita Sees Continued Success In Spain

Emerita Resources Corp (TSXV:EMO) continues to report excellent results from the Infanta drill program at its Iberia Belt West Project
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Emerita Resources Corp (TSXV:EMO) continues to report excellent results from the Infanta drill program at its Iberia Belt West Project in Spain, which hosts three previously identified high-grade deposits: La Infanta, Romanera and El Cura. These are all open for expansion along strike and at depth.

On October 22, the company announced assays for the first step-out drill hole from the Infanta drill program and also the final in-fill drill holes. The significance of the in-fill program was to verify the historical drill results. They will now enable a proper 3D modelling of the deposit and will also provide additional data to be used for future metallurgical testing.

At Infanta, the step-out was conducted to expand the outer perimeter of the deposit, and the in-fill drilling was intended to confirm historical drill data within Infanta’s known mineralization zone. Step-out drill hole IN018 was drilled 40 metres to the west of the historical limits of the deposit and intersected 8.2 metres with a grade of 2.5% copper, 8.7% lead, 17.3% zinc, 223.5 g/t silver and 0.5 g/t gold. A second step-out hole was drilled 50 metres to the west of hole IN018 and intersected two zones of massive sulfide but assays have not been returned yet.

In-fill drill hole IN014 intersected 5.7 metres of 2.4% copper, 7.3 %lead, 13.4% zinc, 225 g/t silver and 0.6 g/t gold. The ongoing geophysical survey, which was suspended along with other exploration activities for the region’s hunting season, is expected to resume by the end of October.

Emerita plans to have five drill rigs operating by the end of 2021 and will include the Romanera deposit, El Cura, and other targets identified by previous geophysics work. The two drills currently on site will now focus on step-out drilling to increase the size of the deposit.

Emerita also recently provided investors with an update on the legal proceedings for the Aznalcóllar Project and the company is expecting a ruling by the Administrative Court of Andalucia in Emerita’s favour in the near future.

The Aznalcóllar Zinc Project is located in the prolific Iberian Pyrite Belt in the Andalusia region of southern Spain and is considered to be one of the world’s largest and most productive volcanogenic massive sulfide (VMS) structures. It has been mined for over a thousand years and has produced over 2000 million tons of ore.

Aznalcóllar is considered to be one of the world’s top undeveloped zinc deposits, and the project is essentially a world-class pre-production development asset. Here, the main deposit is referred to as Los Frailes, which contains a historical open pit mineral resource. Two other deposits exist on the property as well, which require further development. The Los Frailes mine operated during the 1990s until it closed due to a combination of tailings-related environmental failure and low metal prices.

After the Aznalcóllar site was rehabilitated, the government initiated a public tender process for the rights to the project and it was initially awarded to another major mining company, however Emerita believed that their bid was superior. It subsequently requested an investigation into the tender process for the property and filed a lawsuit in 2015.

In early 2021, the Spanish court concluded that the process was fraught with corruption, fraud and other malfeasance and rescinded the rights that were awarded and criminal charges were sought for the perpetrators and their enablers. In July 2021, a Spanish judge issued additional criminal indictments against the mining company and government officials who participated in undermining the public tender process for the project.

Under Spanish law, if a crime was committed during the tender process, the rights are then awarded to the next best qualified competing bid, which in this case was Emerita. Subsequently, Emerita has been waiting for the Administrative Court to conclude the process to formally award the rights to the Aznalcóllar Project to the company, which brings us to present day.

The company is planning to develop the deposit into an underground mining operation focused on mining the high-grade zones, which are estimated to contain 20 million tonnes at a grade of 6.65% zinc, 3.87% lead, 0.29% copper and 84 ppm silver. As a requirement of the project’s public tender process, Emerita submitted comprehensive. engineering, environmental and water management studies to the government, and now the company is expecting to be given the green light to proceed developing the Aznalcóllar project into an eventual producer.

Emerita is well financed, having completed a $20 million bought deal private placement in July 2021. Emerita has 182.42 million shares outstanding and due to the recent increase in the Company’s share price, a market capitalization now of $556.38 million. Even so, barring any unforeseen negative developments regarding the legal issues, Emerita Resources Corp still appears to be potentially undervalued relative to the potential value of the world-class assets it is developing.

Shares of Emerita Resources Corp last traded at $3.05.

FULL DISCLOSURE: Emerita Resources is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Emerita Resources on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.

The post Emerita Sees Continued Success In Spain appeared first on the deep dive.

Author: Phil Gracin

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