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P2 Gold checking all the boxes

Every now and then, a precious metals mineral exploration company comes along that checks all…

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This article was originally published by Resource World

Every now and then, a precious metals mineral exploration company comes along that checks all the boxes for savvy resource investors–an experienced management team with a proven track record, a mix of advanced and grassroots projects located in safe jurisdictions, well-funded exploration programs generating continuous news flow, and a successful promotion machine to get the word out.

         P2 Gold Inc. (TSX-V: PGLD) was born out of Central Timmins Exploration Corp in 2020 and is led by Joseph Ovsenek, best known for his tenures in senior management roles with Sliver Standard Resources (now SSR Mining, TSX: SSRM) and Pretium Resources Inc (TSX: PVG) where he is credited for leading the team that brought the Brucejack Mine into operation.

Soon after taking the helm as Chief Executive Officer of Central Timmons Gold, Ovsenek focused his efforts on restructuring the company and acquiring a portfolio of prospective properties, both advanced stage and grassroots, in familiar, safe jurisdictions. After an extensive search he landed back in the familiar territory of Northwest British Columbia’s Golden Triangle with three properties, Southwest Oregon with two properties, and in early 2021, once the gold price normalized, with an advanced-stage gold-copper project in Nevada.

A new name, new focus

In mid-2020, the  Central Timmins Exploration Corp’s name was changed to P2 Gold, and Ovsenek started bringing his previous dream team back together, including: Ken McNaughton, the former Chief Exploration Officer at Pretium Resources appointed the Chief Exploration Officer and a Director, and early in 2021, Michelle Romeo, the former Executive Vice President, Corporate Affairs and Sustainability at Pretium Resources joined the team as Executive Vice President and Director, and in mid-year 2021, Grant Bond, the former Corporate Controller at Pretium Resources joined as the Chief Financial Officer.

The Board of Directors also started to take shape during this time with familiar names, including: Tom Yip, former Pretium Resources CFO, Olav Langelaar, Managing Director at Dundee Goodman Merchant Partners, Marcus Chalk, founder of GenCap Mining Advisory, Neville Dastoor, Principal with INFOR Financial, and former Deloitte tax specialist and Partner, Ron Macdonald.

Still, while getting all the corporate ducks in a row, Ovsenek knew from his experience inpatient resource investors expect results and quick return on their investments. So by July 2020, he’d raised C$2.5 million in flow through dollars, completed a private placement for C$2.3 million, and had three exploration programs underway. The exploration programs included a 1,315-metre drill program on the Silver Reef property north of Hazelton, British Columbia, another 1,027-metre program on the Todd Creek property, bordering the east side of Pretium Resources’ Bowser Claims in the Golden Triangle, and airborne geophysics, soil sampling, mapping and ground geophysics on the BAM property which is about 150 kilometers northwest of Stewart, British Columbia.

By October 2020, less than a year after the company’s renaissance, the results from the exploration programs started to roll in.  The soil geochemical sampling identified a gold anomaly almost 3.6 kilometers long on the BAM property, drilling at Todd Creek identified high-grade copper, and the surface sampling at Silver Reef had come back ranging in values up to 3.21 g/t gold and 3,885 g/t silver.

Early investors were rewarded handsomely after P2 Gold’s stock price rose to a high, averaging $0.50 a share on the exploration news flow from the $0.10 share price at the beginning of 2020. The share price settling at $0.30 by the close of the year, but there was still more news to come.

On the back of all the good exploration news, P2 Gold topped up the treasury and raised another C$1.424 million in a private placement and then released additional results from the phase two drill program at Silver Reef that expanded the known zone with the best drill hole intersecting  0.24 g/t gold, 188.5 g/t silver, 0.99% lead and 1.51% zinc over 7.49-meters, including a 1.68-meter interval grading 0.55 g/t gold, 410.69 g/t silver, 2.38% lead and 3.18% zinc.

Hunting for elephants in Nevada

While the rest of us rang in the New Year popping champagne corks, the P2 Gold management team was out looking for an advanced stage project to round out the company’s portfolio.

“At the beginning of 2021, with the shine coming off gold, the price of the projects we had looked at in 2020 were getting a little more realistic, and in February 2021, we signed a deal with Borealis Mining Company, an indirect, wholly owned subsidiary of Waterton Precious Metals Fund to purchase the Gabbs property located in the Fairplay Mining District of Nye County, Nevada. It’s a property we had looked at for a long time, mostly because of its gold and overlooked copper potential,” says Ovsenek.

To acquire the Gabbs Project, P2 Gold paid US$1 million to Waterton Precious Metals Fund and issued 15 million shares in its capital to Waterton. In addition, the company will pay to Waterton Nevada Splitter LLC US$4 million on the 12-month anniversary of closing and US$5 million on the earlier of the announcement of the results of a Preliminary Economic Assessment and the 24-month anniversary of closing. Borealis has reserved for itself a 2% net smelter returns royalty on production from the Gabbs Project, of which one percent can be repurchased at any time by P2 Gold for US$1.5 million and the remaining one percent of which can be repurchased for US$5 million.

With the completion of the transaction and through a private placement, Waterton owned approximately 27% of the issued and outstanding shares of P2 Gold.

The Gabbs Project has been through several hands over the years and has a 43-101-compliant Inferred Mineral Resource of 1.84 million ounces of Gold Equivalent or 1.26 million ounces of gold and 422.3 million pounds of copper (73.1 million tonnes grading 0.54 g/t gold and 0.26% copper). Yet up to now, the project was always viewed as a potential heap leach gold operation and considered uneconomic, as the cost of leaching the copper was not feasible in the former price environment. But in 2021, with copper prices hitting $9,500 per tonne in Q2 and the demand for copper expected to increase as the green economy grows and matures, the economics of Gabbs begins to look much better.

“We look at gold as a hedge against inflation and a store of wealth, and then on the other side copper as the metal that will drive the growth of the green economy, so the mix of gold and copper together is a great thing,” says Ovsenek.

Ovsenek and his team were also encouraged when they looked at the historical drill data, which includes 494 historical drill holes over four deposits, Sullivan, Lucky Strike, Car Body and Gold Ledge, with most of the drilling done on Sullivan.  Almost 40 percent of the holes drilled were shallow and ended in mineralization.

“When the property was being explored, people disregarded the copper because of the price environment, so the holes were shallow-drilled and often ended in mineralization. It is this potential to extend the mineralization in the 2021 price environment for copper that excites us,” says Ovsenek.

The Gabbs acquisition landed well with investors, also. P2 Gold closed a private placement for $5.949 million to fund the Gabbs acquisition and fund an initial exploration program. The program included an induced polarization (IP) geophysical survey over the Sullivan Zone to develop a signature profile of the known mineralization and to highlight any potential extensions of the mineralization; a satellite hyperspectral alteration survey over the property to assist with regional mapping and identify sources of known surface mineralization; and a drill program to better delineate the mineral resource.

The drill program began in July 2021 and includes almost 7,000 metres of reverse circulation drilling and 600 metres of diamond drilling to help confirm the geological model of the Sullivan and Car Body zones.

Metallurgical testing confirms gold and copper recoveries.

In August 2021, P2 Gold confirmed that viable options for the recovery of copper from the oxide mineralization exist at Gabbs.  The metallurgical program included testing for potential recoveries of copper and gold from oxide mineralization by using heap leach and conventional milling. The test work showed that gold and copper can be recovered by both process options, with extractions averaging 97.2% for gold and 95.2% for copper using conventional milling and grinding the sample to 100 microns.  This is important because P2 Gold believes the oxide copper, approximately 143.3 million pounds not included in the Gabbs Inferred Mineral Resource, could now be included in future estimates of the Mineral Resource and considered for recovery in the Preliminary Economic Assessment planned for 2022/23.

The metallurgical result was the news investors were waiting for, and P2 Gold’s stock price almost doubled overnight to $0.62 cents after the release.

The next step, according to Ovsenek, is to look at the Gabbs property holistically with a view to how best to recover both the copper and gold, so P2 Gold is currently completing a trade-off study to determine the most economical process.

“The factor leading in favour of a milling process is that the recoveries for both copper and gold are in the high 90th percentile, while heap leaching recoveries would be in the 75 to 80 percent range, and that’s a lot of metal we would be leaving in the ground.  But once we have the trade-off study it will determine how we move forward,” says Ovsenek.

In September 2021, P2 Gold released the results of two diamond drill holes located in the heart of the Sullivan Zone with results netting 1.15 g/t gold equivalent (0.81 g/t gold and 0.30% copper) over 140.67 meters, including 39.32 meters grading 2.71 g/t gold equivalent (2.12 g/t gold and 0.51% copper).

“We were confident the hole would net good results because of the historical data, but the width and assays exceeded our expectations. We are very positive about this property. Currently, the Inferred Mineral Resource is 1.84 million ounces of gold-equivalent, and we are confident we can get this up to 4 to 5 million ounces gold-equivalent just by drilling in known zones, and there is also plenty of upside opportunity for expansion on new zones over the 33- kilometer area of the property,” says Ovsenek.

There’s still lots of news to come on Gabbs. The reverse drilling is ongoing and assay results are expected to trickle in through the new year (2022).

The Biggest Discovery in the Golden Triangle this Year

While work was underway at the Gabbs project, drills were also turning on the BAM Property in northwest British Columbia, where a six-hole, 836-metre drill program tested the Monarch Gold Zone (BAM-001,002,003, and 005) and the Jan Copper zone (BAM-004 and 006).

“BAM delivered out of the gate,” said Ovsenek in the August 30, 2021 news release announcing the results of the first three drill holes on the property, with hole BAM-003 intersecting 2.63 g/t gold over 45.85 meters, including 9.20 meters grading 7.30 g/t gold.

The news again rewarded investors with P2 Gold’s stock price climbing to $0.50 on the release of the BAM drilling results, and from the general market excitement that a grassroots project may have identified a new major gold anomaly, “the things that fortunes in resource investing are made of,” says Robert Moriarty in his book Basic Investing in Resource Stocks.

“Essentially what we have on our hands is the biggest discovery in the Golden Triangle this year. I think we are on to something big,” says Ovsenek, who suggests BAM has a similar backstory to the Gabbs property.

The BAM property was explored in the 1960’s. There was work done looking for high-grade copper, because in the 1960’s people weren’t interested in bulk-tonnage low-grade copper. A small high-grade copper deposit was defined, but then nothing more was done on the property until Chevron went back in the 1980’s and did some trenching for high-grade gold and found a small zone south of the Monarch Gold Zone. Then after that nothing more happened on the property.

“This thing has been sitting here waiting for someone to take a systematic approach to looking for bulk tonnage gold and copper, and given the early indications we are really excited about this property,” says Ovsenek.

What’s more, BAM has excellent infrastructure for the Golden Triangle.  It’s not on top of a mountain, there’s no glacier to cross, a road is less than two kilometers from the property boundary and a transmission line is roughly 35 kilometers away.

Speculative Investors on Alert

P2 Gold is in an enviable position of year-round news flow, with exploration in the north during summer months and work on Gabbs during winter months. The company is well-financed with C$6 million in the treasury (June 30, 2021) and 59,854,395 shares issued and outstanding, 23,179,036 outstanding warrants priced between C$0.60 and C$0.85 and 4,559,166 share options with exercise prices between C$0.30 and C$0.72 predominantly owned by directors and management. Management owns 30 percent of the company, Waterton Precious Metals Fund owns 25 percent and retail investors the remaining 45 percent. At the time of writing, no other institutional funds have positions in P2 Gold.

Author: Resource World

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Tesla Stock Has More Charge Left After Strong Q3 2021 Report

Tesla (NASDAQ:TSLA) shares closed at $909.68 last Friday, an all-time high. Things have gotten even hotter since, with TSLA stock climbing 45% year-to-date…

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Tesla (NASDAQ:TSLA) shares closed at $909.68 last Friday, an all-time high. Things have gotten even hotter since, with TSLA stock climbing 45% year-to-date to $1,055 (at the time of this writing).

A black Tesla (TSLA) Model S is parked between rows of charging stations.Source: Grisha Bruev /

The company now has a trillion-dollar market cap. Impressively, shares have now rallied more than 85% since hitting a 2021 low in early May. The company’s Q3 EV production was up 64% year-over-year, despite chip shortages that have roiled the industry.

Adding to the hype, the company announced record Q3 earnings results last week. TSLA stock seems unstoppable at this point.

So with all of that hype in mind, one question arises. Will this EV superstar stock run out of momentum?

Tesla CEO Elon Musk has said he thinks TSLA stock will hit $3,000 if employees “execute well.” However, the company is already worth more than the next six biggest automakers combined. Those automakers are turning to EVs as well, and already eating into Tesla’s marketshare.

Let’s consider if there’s still time to get onboard the Tesla stock train, or are its days of heady growth over.

TSLA Stock Rises on Record Third Quarter

Last week, Tesla reported its Q3 earnings. In a record quarter, the company reported $13.76 billion in revenue. That beat analyst expectations of $13.63 billion. Net income hit $1.62 billion, compared to $331 million a year ago. Analysts were looking for adjusted earnings-per-share of $1.59, but Tesla’s EPS of $1.86 beat that by a wide margin. Looking forward, the company says that it expects to hit 50% average annual growth in vehicle deliveries for multiple years.

Speaking of that growth, prior to the earnings Tesla released its Q3 vehicle update. The company produced 237,823 new EVs during the quarter (with deliveries of 241,300). That is a big increase over the 145,036 produced (and 139,300 delivered) a year ago.

TSLA stock ended up closing up 3.25% the following day.  

Switching Up Battery Formulation and Cybertruck

Two big factors could have a material impact on TSLA stock over the next year.

The first is the Cybertruck, Tesla’s hotly anticipated EV pickup truck. First announced in 2019, the Cybertruck was supposed to be entering production by late 2021. In September, Tesla delayed that until into 2022. The problem there is that North American auto makers — determined to protect their cash cow pickup truck business — have EV versions of their own coming next year. There are also EV startups hoping to make a splash with battery-powered pickup trucks.

If Tesla can have the same impact in the pickup truck world that it has with electrified cars and crossovers, TSLA stock is going to be sitting on dynamite. But if it gets beaten to market, the battle to win over pickup truck buyers is going to be a lot more difficult.

Another significant development in the Tesla story was the company’s announcement that it plans to switch all Standard Range vehicles to Lithium Iron Phosphate (LFP) batteries. This move has advantages and risks.

On the plus side, the LFP batteries are cheaper to produce and more stable — so they’re less prone to fires. However, they are heavier than current batteries, they don’t perform as well in cold weather and, at the moment, 95% of global production for LFP batteries is based in China.

The move is a gamble.

The Bottom Line on TSLA Stock

Tesla has more than its fair share of detractors. CEO Elon Musk’s behavior has cost the company credibility and cash in the past. As long as he is still running the company, he adds an element of volatility to TSLA stock. NYU Stern university professor Scott Galloway has been famously predicting Tesla’s comeuppance for years

It’s also impossible to overlook that fact that the EV market — that Tesla once had essentially to itself — is exploding. Will the company be able to continue to dominate, or will it eventually be left behind?

The company continues to defy doubters. 

I suspect this Portfolio Grader B-rated stock still has gas in the tank (or charge in the battery pack). Just be aware that now the EV age is truly launching and Tesla no longer has the playing field to itself. The days of heady growth are probably in the rear view mirror.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Louis Navellier, who has been called “one of the most important money managers of our time,” has broken the silence in this shocking “tell all” video… exposing one of the most shocking events in our country’s history… and the one move every American needs to make today.

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Neo Lithium Sitting on US$1.13B After-Tax NPV of “White Gold” in Argentina

Neo Lithium Corp. (TSXV: NLC) shared on Tuesday the results of its feasibility study for the production of lithium carbonate…

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Neo Lithium Corp. (TSXV: NLC) shared on Tuesday the results of its feasibility study for the production of lithium carbonate at its Tres Quebradas lithium brine project in Catamarca Province, Argentina. The results highlighted US$1.13 billion after-tax NPV8%.


Compared to the previous pre-feasibility study, the results of the feasibility study show mine life extends to 50 years from 35 years. After-tax IRR is expected to be at 39.5% and the payback period is expected to be after 2.25 years from the start of the production.

The property is estimated to have an annual average production of 20,000 lithium carbonate tonnes. Furthermore, the property is expected to incur cash operating costs of US$2,954 per lithium carbonate tonne.

On capital costs, the property’s initial spending came to US$370.5 million, and sustaining capital spending is expected to be US$143.5 million for the life of mine.

The study also reported measured & indicated resources of 1.75 million tonnes of lithium carbonate at 800 mg/L cut-off and 5.37 million tonnes of lithium carbonate at 400 mg/L cut-off.

Proven and probable reserves for the property are reported to be 0.77 million tonnes of lithium carbonate equivalent for the first 20 years of production and 1.67 million tonnes of lithium carbonate equivalent for the life of mine.

Earlier this month, the mining firm announced that it will be acquired by Chinese mining company Zijin Mining Group Co. in a $960 million all-cash deal.

Neo Lithium last traded at $6.26 on the TSX Venture.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Neo Lithium Reports US$1.13 Billion After-Tax NPV For Tres Quebradas appeared first on the deep dive.

Author: ER Velasco

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Futures Slip From All Time High Amid Fresh China, Growth, Valuation Concerns

Futures Slip From All Time High Amid Fresh China, Growth, Valuation Concerns

One day after US equity futures hit an all time high, rising…

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Futures Slip From All Time High Amid Fresh China, Growth, Valuation Concerns

One day after US equity futures hit an all time high, rising to a record 4,590, risk sentiment has reversed and overnight index futures fluctuated and stocks in Europe retreated from a near-record on Wednesday after a flare up in U.S.-China tensions, signs of further regulatory crackdowns from Beijing, a decline in commodity prices, renewed concerns about economic growth and a rise in short-dated U.S. Treasury yields doused the equity market rally on Wednesday. At 7:45 a.m. ET, Dow e-minis were up 27 points, or 0.07%, S&P 500 e-minis were down 2.50 points, or -0.06%, and Nasdaq 100 e-minis were down 15.5 points, or 0.09%. Bonds and the dollar gained and bitcoin stumbled.

The overnight losses started earlier in Asia, where tech stocks suffered hefty falls after China’s internet watchdog said it planned stricter registration rules for younger net users, while Chinese tech shares slid on concerns about more scrutiny from Washington after the U.S. banned China Telecom’s American business. U.S. futures also turned negative as the bullish mood over Tuesday’s forecast-beating results from Google owner Alphabet and Microsoft started to wane.

Shares of energy firms including Exxon and Chevron tracked lower oil prices, while major lenders such as Bank of America slipped on a flattening U.S. yield curve. Microsoft Corp rose 2.1% in premarket trading after it forecast a strong end to the calendar year, thanks to its booming cloud business. Twitter gained 1.4% after the social networking site’s quarterly revenue grew 37% and avoided the brunt of Apple Inc’s privacy changes on advertising that hobbled its rivals. Google owner Alphabet also reported record quarterly profit for the third straight quarter on a surge in ad sales. However, its shares were down 0.6% after rising nearly 59% so far this year. Here are some of the biggest movers today:

  • Microsoft (MSFT US) shares gain 2.2% in premarket after first- quarter results that analysts said were very strong across the board, showing scale and justifying the valuation of the software giant.
  • Alphabet (GOOGL US) rises 1.3% after 3Q earnings earned a mostly positive reception from analysts, with at least three raising their price targets on the Google parent.
  • Twitter (TWTR US) adds 2% amid resilient third-quarter sales at the social media company as it weathers Apple’s new limits on consumer data collection.
  • Enphase Energy (ENPH US) gains 13% after its 3Q results and 4Q forecasts beat estimates. Analysts await more clarity on supply chain constraints.
  • Robinhood (HOOD US) slumps 12% as some analysts cut price targets after the retail brokerage reported 3Q revenue that missed estimates and flagged further weakness in 4Q.
  • Visa (V US) falls 2.4% as analysts flag a disappointing outlook from the payments company.
  • Texas Instruments (TXN US) declined 4% after a forecast that may disappoint some investors who are concerned about a potential slowdown in demand for electronic components. Watch peers for a readacross.
  • Angion (ANGN US) plunges 55% after company said a kidney transplant drug failed to meet primary end points in a phase three trial. European partner Vifor (VIFN SW) slips 6%.

“While some prominent earnings misses have clouded the picture, the reality is that on aggregate, the reporting season so far has been very solid,” said Max Kettner, a multi-assets strategist at HCBC Holdings Plc. “Everyone, literally everyone, in the market right now is worried about supply-chain constraints, higher input costs and the like, so headwinds from this side are now very well reflected in near-term earnings expectations.”

Concern over more tension between Beijing and Washington also weighed on markets after the U.S. Federal Communications Commission voted to revoke the authorization for China Telecom’s U.S. subsidiary to operate in the United States after nearly two decades, citing national security.

“We have good U.S. data in earnings which is very reassuring but valuation is very stretched in both the value as well as the growth sector,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “And people are also getting a bit hesitant and are a bit worried because the amount of money that is going through will slow down with the Fed slowly starting to taper – but that is not necessarily a bad thing.”

MSCI’s global equity benchmark hovered close to Monday’s seven-week high and is on track for the best month in almost a year.

However, European stocks softened, led by a 1.6% drop in mining and resource firms in the Stoxx Europe 600 index as prices of raw materials including aluminum and iron ore fell along with crude oil. Germany’s DAX underperformed after Europe’s biggest economy cut its 2021 growth forecast, citing the lingering effects of the pandemic and a supply squeeze. Bund yields dropped along with those on other European bonds. Bank shares also slipped, with Deutsche Bank down more than 5% despite forecast-beating earnings. Europe’s Stoxx 600 dropped about 0.3%, weighed down the most by miners and energy firms. FTSE 100 and DAX both down similar amounts. Here are some of Wednesday’s major earnings and corporate news from Europe

  • Deutsche Bank AG dropped more than 6% after disappointing earnings, while Banco Santander SA declined despite a bullish outlook.
  • Heineken NV fell after reporting a drop in demand for beer.
  • BASF SE slipped after flagging dwindling returns on its core suite of chemical products as sputtering global supply catches up with demand.
  • GlaxoSmithKline Plc rose after improving its profit outlook.
  • Dutch semiconductor equipment maker ASM International NV advanced after revenue forecasts beat analyst estimates.
  • Puma SE gained after raising full-year profit forecasts.
  • Temenos AG surged as much as 16% after Bloomberg reported EQT AB is exploring an acquisition of the Swiss banking software specialist.

Earlier in the session, the MSCI Asia Pacific Index was down 0.4% in late afternoon trading, paring an earlier drop of 0.7%, with Tencent, Alibaba and Meituan the biggest drags. Asian equities fell as risk-off sentiment fueled by renewed concerns over Evergrande’s debt woes and an escalation in China-U.S. tensions drove losses in Chinese tech giants. Benchmarks in Hong China and China led declines around the region. The Hang Seng Tech Index plunged as much as 3.9%, the most in over five weeks after Washington moved to ban U.S. business by China Telecom, following previous similar measures against Chinese tech firms including Huawei. Meanwhile, Secretary of State Antony Blinken called for a greater role by Taiwan in the United Nations, raising objections from Beijing. Chinese tech stocks have been rattled this year by a crackdown amid President Xi Jinping’s “common prosperity” campaign. There had been signs of a rebound recently, however, as the government signaled it would limit its restrictions. Investor confidence in beaten-down Chinese tech stocks hasn’t been fully restored “so they rush to dump those stocks at any negative news and signs of flow reversal,” said Castor Pang, head of research at Core Pacific-Yamaichi International Hong Kong. “This round of tech rebound has peaked,” he added. Key equity gauges also fell more than 0.5% in Indonesia and South Korea, while Vietnam’s benchmark climbed more than 2%.

Japanese equities fell, though they closed off intraday lows, as electronics makers and telecommunications providers drove losses. Auto and chemical makers provided support for the Topix which closed down 0.2%, paring an earlier drop of as much as 0.7%. The Nikkei 225 closed little changed, with a gain in Fast Retailing offsetting a drop in SoftBank Group. Asian stocks were broadly lower, as the U.S. moved to ban China Telecom and amid renewed concern over Evergrande’s debt woes. Meanwhile, Japan Exchange Group said Tokyo Stock Exchange will extend the trading day by 30 minutes in the second half of the fiscal year ending March 2025. 

In rates, the 10Y yield is down 1.2bp at 1.595%, trailing steeper declines for U.K. and German counterparts, which outperform by ~3bp as money markets trim expectations for BOE and ECB rate hikes. Long-end Treasuries continued to outperform vs front-end ahead of 5- and 7-year auctions Wednesday and Thursday, as well as month-end rebalancing expected to favor bonds over equities. Long-end yields are lower on the day by ~2bp, front-end yields higher by similar amounts, following selloff in Australia front-end bonds after strong 3Q CPI numbers. 5s30s curve breached 82bp for first time in a year. Gilts flatten further ahead of a revised gilt remit that is expected to report a GBP33b reduction. U.K. 10-year yield falls 5bps to 1.06%, the lowest since Oct. 14, outperforming bunds by ~1bp.

In FX, the Japanese yen strengthened ~0.5% against the U.S. dollar, leading G-10 majors and followed by the Swiss franc. All other G-10 peers are red against the dollar, which is up about 0.06%. The fading risk sentiment meanwhile pushed up the safe-haven Japanese yen which rose 0.4% against the U.S. dollar though the greenback in turn held just off a one-week high versus a currency basket.

The euro kept gravitating toward the $1.16 handle as overnight plays in the common currency as well as the loonie took the spotlight before the monetary policy meetings by the Bank of Canada and the ECB. The three-month Euro benchmark funding rate fell to -0.556%, matching the record low set on Jan. 6, as excess liquidity hovers near an all-time high seen earlier this month. The pound slipped and the Gilt curve bull-flattened ahead of the U.K. government’s budget announcement. The U.K. is expected to trim gilt sales to GBP33b, according to a Bloomberg survey of analysts at primary dealers.

Commodity currencies, led by the krone, fell and the Australian dollar erased an Asia-session gain in European hours. The Aussie earlier rallied while Australian 3-year yield surged as much as 24bps to briefly top 1% after core inflation accelerated back inside RBA’s target, and taking its game of chicken with the bond market to new heights. Kiwi trailed most G-10 peers following a record trade deficit. The Offshore Chinese renminbi fell against the U.S. dollar amid heightened U.S.-China tensions.

Currency and bond traders were looking to a slew of central bank meetings over the coming week for guidance. Canada is first up at 1400 GMT on Wednesday while the European Central Bank meets on Thursday, when the Bank of Japan also concludes its two-day meeting.

The Fed has all but confirmed it will soon start to whittle back its asset purchases, though has said that shouldn’t signal that rate hikes are imminent. Nevertheless, Fed funds futures are priced for a lift-off in the second half of next year.

“We updated our Fed call to show a hike in Q4 2022 and four hikes in 2023,” analysts at NatWest said in a note. “The inflation overshoot has been persistent,” they said. “There is (only) so much the Fed can tolerate before reacting … it feels inevitable that that conversation will be brought up more and more as we go into next year.”

Commodities are in the red. Brent crude down about 1.3% back to $85 a barrel, while WTI slips 1.7% to $83. Base metals drop. LME aluminium, copper, and nickel decline the most. Spot gold down $5 to trade around $1,787/oz.  The crypto space tumbled sharply shortly after the European close, pushing Bitcoin below $59,000 and wiping out much of the ETF launch gains. No changes are expected from Tokyo, but traders are expecting the ECB to push back on market inflation forecasts and are looking for hawkish clues from the Bank of Canada as prices put pressure on rates. Policymakers are facing a steady drip of evidence that there is no let-up from pressure on consumer prices. The latest came from Australia, where data showed core inflation hit a six-year high last quarter, raising the possibility of sooner-than-planned rate increases. The Australian dollar jumped after the data but soon pared the gains.

Looking at today’s busy calendar, we will get preliminary September wholesale inventories, durable goods orders and core capital goods orders from the US. In Europe, Germany November GfK consumer confidence, France October consumer confidence and Euro Area September M3 money supply are due. In central banks, monetary policy decisions from the Bank of Canada and Central Bank of Brazil will be released. On the corporate earnings front, companies reporting include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Elsewhere, the UK government announces Autumn Budget and Spending Review.

Market Snapshot

  • S&P 500 futures little changed at 4,569.75
  • STOXX Europe 600 down 0.3% to 474.38
  • MXAP down 0.4% to 199.65
  • MXAPJ down 0.8% to 656.34
  • Nikkei little changed at 29,098.24
  • Topix down 0.2% to 2,013.81
  • Hang Seng Index down 1.6% to 25,628.74
  • Shanghai Composite down 1.0% to 3,562.31
  • Sensex up 0.2% to 61,468.43
  • Australia S&P/ASX 200 little changed at 7,448.71
  • Kospi down 0.8% to 3,025.49
  • German 10Y yield fell 4 bps to -0.157%
  • Euro little changed at $1.1593
  • Brent Futures down 1.1% to $85.46/bbl
  • Gold spot down 0.5% to $1,784.14
  • U.S. Dollar Index little changed at 93.98

Top Overnight News from Bloomberg

  • Chinese authorities told billionaire Hui Ka Yan to use his personal wealth to alleviate China Evergrande Group’s deepening debt crisis, according to people familiar with the matter
  • Germany cut its 2021 growth outlook to 2.6% — compared with a prediction of 3.5% published at the end of April — reflecting a scarcity in some raw materials and rising energy prices, particularly for gas, Economy Minister Peter Altmaier said Wednesday in an interview with ARD television
  • China plans to limit the price miners sell thermal coal for as it seeks to ease a power crunch that’s prompted electricity rationing and even caused a blackout in a major city last month
  • The SNB stressed that in light of the highly valued currency and the degree of economic slack, expansive monetary policy needs to be maintained, according to an account of President Thomas Jordan’s meeting with Swiss govt
  • Sweden’s National Debt Office is reducing its bond borrowing in both kronor and foreign currency because central government finances are recovering faster than expected from the pandemic, according to a statement

A more detailed look at global markets courtesy of Newsquawk

Asian markets adopted a downside bias as sentiment waned following the mild gains on Wall Street, in which the S&P 500 and DJIA eked out record closes after easing off best levels. The US close also saw earnings from behemoths Microsoft, Alphabet and AMD – the former rose 2% after blockbuster metrics, whilst the latter two dipped after-market. Meanwhile, Twitter shares rose almost 4% after hours as the Co. highlighted the lower-than-expected Q3 impact from Apple’s privacy-related iOS changes. On the flipside, Robinhood slumped over 8% after reporting a steep decline in crypto activity. It’s also worth noting that Berkshire Hathaway Class A shares – the world’s most expensive shares – are quoted +51% after-market (+USD 223,614.00/shr); reasoning currently unclear. Overnight, US equity futures resumed trade flat before a mild divergence became evident between the NQ and RTY, whilst European equity futures’ losses were slightly more pronounced. Back to APAC, the ASX 200 (+0.1%) was buoyed by its tech sector amid the post-Microsoft tailwinds from the US, but the sector configuration then turned defensive, whilst Woolworths slumped some 4% after earnings and dragged the Consumer Staples sector with it. The Nikkei 225 (-0.1%) saw losses across most sectors, with Retail, Insurance and Banks towards the bottom. The KOSPI (-0.8%) conformed to the downbeat mood, whilst Hyundai shares were also pressured amid its chip-related commentary. The Hang Seng (-1.6%) and Shanghai Comp (-1.0%) declined despite another substantial CNY 200bln PBoC liquidity injection for a net CNY 100bln. The Hang Seng accelerated losses in the first half-hour of trade with Alibaba, Tencent and Xiaomi among the laggards. Meanwhile. PAX Technology slumped 45% after the FBI raided the Co’s Florida officers amid suspicion PAX’s systems may have been involved in cyberattacks on US and EU organizations. Finally, 10yr JGBs were lower amid spillover selling from T-notes and Bund futures, whilst the Aussie 3yr yield topped 1.00% for the first time since 2019 as the trimmed and weighted Australian CPI metrics moved into the RBA’s target zone.

Top Asian News

  • China Agrees Plan to Cap Key Coal Price to Ease Energy Crisis
  • China Tech Stocks Slump as Tensions With U.S. Spook Investors
  • Top Court Orders Probe Of India’s Alleged Pegasus Use
  • Tokyo Stock Exchange to Extend Trading Day by 30 Minutes

European equities (Stoxx 600 -0.3%) are trading moderately lower in a session which has been heavy on earnings and light on macro developments. The APAC session saw more pronounced losses in Chinese bourses (Shanghai Comp -1%, Hang Seng -1.8%) compared to peers despite ongoing liquidity efforts by the PBoC with Hong Kong stocks hampered by losses in Alibaba, Tencent and Xiaomi. Stateside, performance across US index futures were initially firmer before following European peers lower with more recent downside coinciding with the US Senate Finance Committee Chairman unveiling a tax proposal focused on unrealised gains of assets held by billionaires and impose a 23.8% capital gains rate on tradable assets such as stocks; ES -0.1%. The US close saw earnings from behemoths Microsoft, Alphabet and AMD – the former rose 2% after blockbuster metrics, whilst the latter two dipped after-market. Meanwhile, Twitter shares rose almost 4% after hours as the Co. highlighted the lower-than-expected Q3 impact from Apple’s privacy-related iOS changes. On the flipside, Robinhood slumped over 8% after reporting a steep decline in crypto activity. In the pre-market, upcoming earnings highlights include McDonalds, Boeing, GM, Bristol Myers and FTSE 100-listed GSK. Back to Europe, sectors are mostly lower with Basic Resources and Oil & Gas names at the foot of the leaderboard amid performance in underlying commodity prices. Banking names are also trading on a softer footing following earnings from Deutsche Bank (-5.4%) which saw the Co. report a decline in trading revenues whilst managing to make a profit for the 5th consecutive quarter. Spanish heavyweight Santander (-2.5%) is also acting as a drag on the sector despite reporting a net profit above expectations for Q3 with some desks highlighting softer performance for its US operations. Elsewhere, Sodexo (+5.6%) is the best performer in the Stoxx 600 after strong FY results, whilst Puma (+3.2%) trades on a firmer footing after reporting a beat on Q3 earnings and raising guidance. To the downside, BASF (-1.0%) shares are seen lower despite exceeding expectations for earnings with the Co. cautioning that the impact from higher Nat Gas prices in the first nine months of the year amounted to EUR 600mln costs and a significant increase in costs is expected following the October price hike.

Top European News

  • Deutsche Bank Falls; Results Fail to Provide Fresh Catalyst
  • BASF Points to Chemical Price Surge Easing as Supply Increases
  • SNB’s Jordan Stressed Need for Loose Policy in Govt Meeting
  • U.K.’s Sunak Set to Cut Tax on Domestic Flights: The Independent

In FX, nearly, but not quite for the index in terms of turning full circle on Tuesday and matching the prior week high as it fell just shy at 94.024 vs 94.174 on October 18, while also narrowly missing 94.000 on a ‘closing’ basis with a last price of 93.956. Moreover, month end rebalancing factors are moderately bearish for the Greenback against G10 rivals, and especially vs the Yen that has a relatively large 1.6 standard deviation and appears to be playing out in the headline pair and Jpy crosses on spot October 29. Indeed, Usd/Jpy has recoiled further from yesterday’s peak circa 114.31 to sub-113.60 before taking cues from the BoJ tomorrow and Japanese retail sales in the run up, but decent option expiry interest between 113.55-50 (1.8 bn) may underpin and support the DXY by default within a narrow 94.008-819 band. More immediately for the Buck in particular and peers indirectly, US durable goods, advance trade, wholesale and retail inventories.

  • CHF/AUD – Also firmer vs their US counterpart, as the Franc clambers back above 0.9200 irrespective of a deterioration in Swiss investor sentiment and the growing chance that the SNB could be prompted to respond to a retreat in Eur/Chf from 1.0700+ to 1.0637 or so. Elsewhere, the Aussie has pared some of its post-core inflation inspired gains, but is holding close to 0.7500 and still outpacing its Antipodean neighbour as Aud/Nzd hovers around 1.0500.
  • NZD/CAD/GBP – A downturn in overall risk sentiment and the aforementioned cross headwinds are weighing on the Kiwi that has slipped under 0.7150 vs its US namesake, and it’s a similar tale for Sterling that failed to retain 1.3800+ status or breach 0.8400 against the Euro before the latest reports about France preparing retaliatory measures against the UK over the fishing rights dispute. On top of that, Eur/Gbp tides are turning into month end and the usual RHS flows seen into and around fixings, while the Pound may also be acknowledging a pull-back in Brent prices in advance of the Budget, like the Loonie in respect of WTI ahead of the BoC, with Usd/Cad back above 1.2400 compared to 1.2350 at one stage on Tuesday and a tad lower in the prior session. Note, the break-even via implied volatility indicates a 58 pip move on the policy meeting that comes with a new MPR and press conference from Governor Macklem.
  • EUR – Notwithstanding several gyrations and deviations of late, the Euro seems largely anchored to the 1.1600 mark vs the Dollar and yet more option expiries at the strike (1.5 bn today) may well be a contributing factor as the clock continues to tick down Thursday’s ECB convene that is seen as a dead rubber event in passing ahead of the big one in December – check out the Research Suite for a preview and other global Central Bank confabs scheduled this week.
  • SCANDI/EM – Hardly a surprise to see the Nok recoil alongside crude prices, but the Sek is holding up relatively well in wake of an uptick in Swedish household lending and a big swing in trade balance from deficit to surplus. Conversely, the Try’s stoic revival mission has been derailed to an extent by dip in Turkish economic confidence offsetting a narrower trade shortfall, the Rub and Mxn are also feeling the adverse effects of oil’s retracement, the Zar is tracking Gold’s reversal through 200 and 100 DMAs, and the Cny/Cnh have been ruffled by the latest US-China angst, this time on the telecoms front. Last, but not least, the Brl anticipates a minimum 100 bp SELIC rate hike from the BCB, if not 125 bp as some hawkish forecasts suggest.

In commodities, a softer start to the session for WTI and Brent seemingly stemming from the cautiously downbeat tone portrayed by broader risk and continuing to take impetus from last night’s Private Inventory report. For reference, the benchmarks are currently lower in excess of USD 1/bbl and WTI Dec’21 has been within touching distance of the USD 83.00/bbl figure, though is yet to test the level. Returning to yesterday’s crude report which printed an above consensus build of 2.318M for the headline print while the gasoline and distillate components were unexpectedly bearish, posting modest builds against expected sizeable draws. Looking ahead, the EIA release is expected to post a headline build. Aside from this, crude specific newsflow has been limited ahead of next week’s OPEC+ gathering though Iran remains on the radar given the latest release of constructive commentary on nuclear discussions. Albeit, we are still awaiting details on a return to full Vienna discussions. Moving to metals, spot gold and silver are softer on the session in a continuation of action seen around this time during yesterday’s session; metals pressured in wake of a choppy, but ultimately firmer, dollar. Elsewhere, China has reportedly agreed to set a price cap for thermal coal sales and comes as part of the ongoing crackdown by China on the commodity which spurred Zhengzhou thermal coal futures to hit limit-down overnight.

US Event Calendar

  • 8:30am: Sept. Durable Goods Orders, est. -1.1%, prior 1.8%; 8:30am: Durables Less Transportation, est. 0.4%, prior 0.3%
    • Sept. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.6%
    • Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.8%
  • 8:30am: Sept. Retail Inventories MoM, est. 0.2%, prior 0.1%; Wholesale Inventories MoM, est. 1.0%, prior 1.2%
  • 8:30am: Sept. Advance Goods Trade Balance, est. -$88.3b, prior -$87.6b, revised -$88.2b

DB’s Jim Reid concludes the overnight wrap

It’s day 42 out of 42 on crutches without any weight bearing on my left leg. Over that period I’ve been hopping, crawling, sliding, and using the crutches as a pole vault amongst other various forms of self transportation. So sadly today is the last day I get waited on. When I wake up tomorrow I’ll try to walk again and fend for myself.

Equities threw away their crutches a couple of weeks ago and haven’t looked back. US Earnings have helped and while they aren’t as good as the headline beats suggest, due to big unwinding of reserves for loan loss provisions at the banks, they are notably better than some of the stagflationary gloom stories that dominated in the weeks ahead of this season. A reminder that our equity guys did their state of play on earnings a couple of days back here.

Big tech was always going to be the swing factor between a slightly better than normal level of beats and a more aggressive one. Last night Alphabet, Microsoft, and Twitter all reported after hour. Alphabet and Microsoft beat on both sales and earnings, while Twitter’s revenue just missed expectations but traded higher after hours. Of the 41 S&P 500 companies that reported yesterday, 33 beat estimates. For the earnings season to date, 166 S&P companies have reported, with 139 beating earnings estimates.

Prior to this, markets continued to stay in their “new normal” of record or cyclical high equity prices and multi-year breakeven highs. Positive surprises for earnings on both sides of the Atlantic helped yesterday as did strong US consumer confidence numbers.

Starting with the US, along with strong earnings, a number of positive surprises in an array of economic data yesterday did just enough to push the S&P 500 (+0.18%) and the DJIA (+0.04%) to new record highs, while the Nasdaq (+0.06%) fell short of beating its record set on September 30th. The FAANG Index lagged on the day, dropping -0.33%, but managed new all-time highs intraday. On the other side of the Atlantic, European equities notched solid gains as well, with most major European markets finishing well in the green territory, lifting the STOXX 600 by +0.75% – a fraction below its record high. All index sectors but energy (-0.29%) finished higher on the back of strong earnings early in the session, particularly from UBS and Novartis.

Taking a closer look at the aforementioned economic data, October US consumer confidence came in at 113.8 versus 108.0 expected, while the Richmond Fed Manufacturing index rose to 12, beating expectations of 5. In housing, new home sales for September (800k) surpassed estimates (756k) by a decent margin, whereas the August FHFA House Price Index came in at +1.0% versus +1.5% expected. There were further signs of a tight US jobs market as the labour market differential in the Conference Board index improved to 45.0, the best reading since 2000.

Similar to Monday, breakevens climbed as real yields fell in the US and Germany. Nominal 10-year Treasuries were -2.3bps lower, while breakevens increased +2.6bps to 2.69%, still just a hair beneath all-time highs for the series. 10-year bunds declined -0.3bps while the breakeven widened +3.0bps. Breakevens took a breather in the UK, narrowing -8.6bps, whilst 10-year gilts were -3.0 bps lower.

In Asia, most major indices are down this morning. The Nikkei 225 (-0.61%), KOSPI (-0.92%), Hang Seng (-1.58%) and Shanghai Composite (-0.92%) are all trading lower. Sentiment soured after the real estate saga continued with Chinese authorities asking companies to get ready to repay offshore bonds, while also urging Evergrande’s founder to employ his own wealth to aid the struggling developer. Additionally, in geopolitics, the US Federal Communications Commission banned China Telecom (Americas) Corp. from operating in the US on the back of national security concerns.

Data releases from Asia continued to support the inflationary narrative amid rising commodity prices as we saw a +16.3% YoY growth in China’s industrial profits in September, up from +10.1% a month earlier. Meanwhile, Australia’s trimmed mean CPI (+2.1%) came in above expectations (+1.8%), sending the 3y yield higher by +14.5bps. The S&P 500 mini futures (0.00%) is broadly unchanged with the 10y Treasury at 1.622 (+1.4bps).

In commodities, oil futures were mostly mixed yesterday, but both WTI (+1.06%) and Brent (+0.48%) managed to rise by the European close, as Saudi Aramco said earlier in the session that oil output capacity is declining rapidly across the world. On the other hand, European weather forecasts that pointed at lower temperatures starting next week did little to propel natural gas prices, which declined both in the region (-0.33%) and in the US (-0.27%).

Briefly taking a look at the virus news, The FDA’s vaccines advisory committee voted 17-0 to back jabs for kids ages 5-11. The dose for the younger cohort amounts to one third of the current one given to those over the age of 12, which means that it could be more quickly distributed if the demand is there. The agency will give its final ruling soon, which is expected to follow the panel’s recommendation, and then the shots could be distributed within weeks to schools, pediatricians, and pharmacies. Elsewhere, Singapore will allow fully vaccinated travelers from Australia and Switzerland to enter without quarantine from November 8.

In terms of upcoming data releases today, we will get preliminary September wholesale inventories, durable goods orders and core capital goods orders from the US. In Europe, Germany November GfK consumer confidence, France October consumer confidence and Euro Area September M3 money supply are due. In central banks, monetary policy decisions from the Bank of Canada and Central Bank of Brazil will be released. On the corporate earnings front, companies reporting include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Elsewhere, the UK government announces Autumn Budget and Spending Review.

Tyler Durden
Wed, 10/27/2021 – 07:53

Author: Tyler Durden

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