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Oil prices continued to rise last week for the fifth week in a row. Last Friday, Brent temporarily exceeded $ 85 / b (Fig 1) amid a global energy crisis exacerbated by rising gas and coal prices, which is pushing power producers to turn to petroleum products while stocks are at their lowest. Despite Brent prices close to $ 85 / b, the activity of non-commercial players (speculators) in the financial markets remains relatively low compared to 2018 (Fig. 10), which could mean that, unlike what had happened then, a sharp drop in prices does not seem possible in the short term. On a weekly average, Brent on the London futures market gained + $ 2.0 / b (+ 2.4%), reaching $ 83.8 / b. WTI followed the same trend and amplified it, gaining + $ 2.7 / b (+ 3.5%) to reach $ 81.0 / b (Fig. 1 & 2). The consensus of economists polled by Bloomberg as of October 15 on the price of Brent is stable at $ 69.0 / b in 2021 and $ 68.3 / b in 2022, in sharp discrepancy (+ $ 10.1 / b) with the current futures prices (Fig. 3). #Oilnews16102021. Unprecedented situation: the gas market is impacting the oil market, the effect of the rise in natural gas prices in Europe and Asia on the oil market, heavy fuel oil type petroleum products are becoming more competitive than natural gas (75 to $ 90 / MWh September 24 in Europe and Asia) for electricity production. In its latest monthly report, the EIA estimates that the surge in natural gas prices induces the consumption of products additional oil tankers of 500 kb / d, which leads it to revise upwards its demand forecasts for the second half of the year 2021 and the first quarter of 2022 by 330 kb / d on average. Global oil demand is now expected to increase 5.5 mb / d in 2021 to reach 96.3 mb / d and 3.3 mb / d in 2022 to reach 99.6 mb / d, thus regaining its level of 2019 before the crisis (see Table). Growth prospects are solid, supported by strong demand global gasoline market (down just 2% from pre-pandemic levels) and the resumption of jet consumption (the United States has just announced the lifting of the ‘Travelban’). However, the upward revision of outlook for oil demand growth due to the natural gas crisis masks a slowdown in economic activity in all regions. Economic growth decelerates in Europe and most countries Asia, and appears weaker than expected in the United States. Beyond the price of electricity, the increase in the price of gas has also an impact on other sectors such as ammonia production, fertilizer factories and refining. In Europe, several large industrial companies have announced in recent days significant reductions in production, even temporary closures of certain sites (BASF, Yara, CF Industries, etc.). Regarding oil production, the EIA indicates that it fell by 260 mb / d in September to reach 96 mb / d, the 720 kb / d increase in OPEC + production not having offset the drop of nearly one million barrels per day of production in other countries (passage of Hurricane Ida in the United States, maintenance operations in Canada and Norway, and seasonal decline in biofuel production). In October, world production should pick up again on the rise, with an estimated increase of +2.7 mb / d, distributed between OPEC + countries (+1.5 mb / d) and non-OPEC countries (+1.2 mb / d). For 2021, world oil production is expected to increase on average by 1.4 mb / d (including 1 mb / d for OPEC +) to reach 95.3 mb / d. By 2022, the EIA expects the global oil supply to increase by more than 6 mb / d, two-thirds of which come from OPEC + countries, provided they end their production cuts as expected. US production should return to its pre-crisis level by the end of next year. In the end, the oil balance (difference between production and consumption) should remain negative until the end of the year (deficit of 1 mb / d over the year) to become positive again from 2022 with an estimated surplus of 2 mb / d, which should help rebuild oil stocks. Stocks in OECD countries actually fell for the third month consecutive in August at 2,824 mb below the five-year range (Fig. 9). Preliminary data for September confirm a further decline expected in all regions. According to weekly EIA data for the week of October 8, U.S. crude inventories rose +6 mb, supported by lower refinery production as utilization rate fell to 87% from peak 90% of the previous week. On the product side, gasoline inventories fell by -2.0 mb (compared to +1.0 for the consensus), while the stocks of distillates remained unchanged (against -1.0 for the consensus) (Fig. 7 & 8). The crude oil production increased slightly from +100 kb / d to 11.4 mb / d with a number of drilling platforms in activity up from 12 to 445 units. In Europe (ARA), stocks of petroleum products are down (-1%), supported by the drop in gasoline stocks (-5%) and diesel (-2%) (Fig. 6). On the Rotterdam market, the prices of petroleum products followed and amplified the evolution of the crude oil price with an increase of + 4.6% for gasoline and + 3.2% for diesel (vs. 2.4% for crude - Fig. 4). Since the start of the year, gasoline and diesel prices have increased by + 72% and 73.5% respectively for a increase in the price of crude oil by + 63.5%. In this context, refining margins increase sharply in all regions of the world (Fig. 5). In Europe, the Brent FCC margin increases + 10.8% to $ 5.4 / b, the highest since the end 2019. In Asia, the Dubai HCK margin is also up sharply (+ 9.1%) to $ 5.7 / b. Last week, the EIA released its "World Energy Outlook" (WEO) report. Four scenarios are presented: a) The scenario "net zero emissions by 2050" (NZE). This is a normative scenario that shows a narrow but achievable path for the global energy sector to achieve net zero CO2 emissions by 2050; b) the scenario of sustainable development (SDS). In this scenario, all current commitments are fully realized and efforts significant efforts are being made to achieve short-term emission reductions; advanced economies reach net zero emissions by 2050, China by 2060 and all other countries by 2070 at the latest; c) The scenario of Announced Commitments (APS) which appears for the first time in the WEO. This scenario takes into account all climate commitments made by governments around the world as well as longer-term zero-emission goals net, and assumes that they will be complied with in their entirety and on time. It represents global ambitions in in the fight against climate change in mid-2021; d) The Stated Policy Scenario (STEPS), plus curator who explores the direction the energy system could take without further guidance major share of policy makers In the STEPS scenario, global oil demand peaks at 103 mb / d in 2030 before stabilizing. In the APS scenario, global oil demand peaks shortly after 2025, then decreases by around 1 mb / d per year until 2050. In the NZE scenario, demand falls by more than 2 mb / d per year between 2020 and 2050. The difference between the APS and NZE scenarios is 24 mb / d in 2030 and 55 mb / d in 2050. To achieve a reduction in emissions compatible with limiting warming to 1.5 ° C (NZE scenario), the EIA estimates that it annual investments in clean energy projects and infrastructure should be tripled, which would reach nearly 5,000 billion dollars per year by 2030 (which would represent about 4.5% of global GDP) (Fig. 12).

Sturday 11/09: On the sidelines of her summit in Warsaw, German Chancellor Angela Merkel tried on Saturday to allay fears about the Nord Stream 2 gas pipeline WARSAW (Reuters): «German Chancellor Angela Merkel on Saturday tried to allay fears over the Nord Stream 2 gas pipeline, during a farewell visit to Poland». Content German Chancellor Angela Merkel on Saturday tried to allay fears over the Nord Stream 2 gas pipeline, during a farewell visit to Poland in which she also adopted a conciliatory tone on the conflict between Warsaw and the European Union on judicial reforms. As Angela Merkel's term comes to an end, the issue of the gas pipeline from Russia has degraded relations with countries in Central and Eastern Europe, including some EU members, according to which the project will increase dependency of Europe vis-à-vis Russian gas and could be used by Moscow as a means of pressure. The Russian company Gazprom announced on Friday that it had completed construction of the gas pipeline, located in the Baltic Sea, which could allow it to bypass Ukraine and thus avoid a transit zone representing billions of dollars in revenue for Kiev. The five-year gas transit agreement between Russia and Ukraine expires after 2024. Russian President Vladimir Putin has said Ukraine must show goodwill if it is to continue playing its role. "I have made it clear that it is our concern that Ukraine remains a transit land for Russian gas," Angela Merkel said at a joint press conference with Polish Prime Minister Mateusz Morawiecki. The latter for his part declared that ensuring that gas still passes through Ukraine despite Nord Stream 2 would reduce the risk of "blackmail" from Russia. Poland - along with Hungary - has also long been at odds with the European Union on issues such as judicial independence, press freedoms and LGBT rights, a dispute that has escalated. with a legal action in Brussels against Warsaw and Budapest. The European Commission has therefore asked the highest court in the EU to impose a fine on Poland for the activities of a disciplinary chamber for magistrates set up by Warsaw as part of a judicial reform. "On the rule of law, we have talked about it in depth. We prefer it to be resolved through talks," Angela Merkel said on Saturday, after being criticized for not having fought enough against democratic setbacks in the East. of the European Union during his tenure. "Solving problems with court cases is of course always a possibility in a country where the rule of law reigns, but politics is not limited to going to court", she added, thus defending the idea of ​​consensus building

Friday 10/09, After years of controversy, the Nord Stream 2 gas pipeline is now complete, increasing tensions between Ukraine and Russia. AFP: « Russia announced, Friday, September 10, the completion of the Nord Stream 2 gas pipeline under the Baltic Sea. This long tube of more than a thousand kilometers will supply Germany with Russian gas, after years of controversy. Former United States President Donald Trump, in particular, has long opposed it.». Content Russia announced Friday, September 10, the completion of the Nord Stream 2 gas pipeline under the Baltic Sea. This long tube of more than a thousand kilometers will supply Germany with Russian gas, after years of controversy. Former United States President Donald Trump, in particular, has long opposed it. Nord Stream 2, explanation by French television France 24 This gas pipeline, 1,230 kilometers long under the Baltic Sea, follows the same route as its twin Nord Stream 1, operational since 2012. Nord Stream 2 has a capacity of 55 billion cubic meters of gas per year. It should make it possible to double deliveries of Russian gas to Germany, the main promoter of the project, bypassing Ukraine. The route will increase the possibilities of delivering Russian gas to Europe at a time when production within the European Union is declining. Operated by Gazprom, the project, estimated at more than 10 billion euros, was co-financed by five European energy groups (OMV, Engie, Wintershall Dea, Uniper, Shell). The work is coming to an end as gas prices in Europe hit record highs in the face of low stocks before winter. The price of regulated gas thus increased by 8.7% in September in France, after an increase of 10% in July and 5.3% in August. According to statements by Gazprom CEO Alexeï Miller, the first gas deliveries via Nord Stream 2 should take place this year, possibly as early as October. Why was it a source of tension? For its detractors, the gas pipeline will durably increase European energy dependence on Russia. In addition, by bypassing the traditional gas delivery route via Ukraine, Nord Stream 2 will deprive this ally of the West of approximately one billion euros per year in transit costs. After the announcement of the completion of the site, the Ukrainian presidency hastened to proclaim that "Ukraine would fight against this Russian political project until its completion, after it and even after the start of gas deliveries ". Former United States President Donald Trump had made the fight against the project one of his priorities, especially since he was also seeking to sell American shale gas. He had also dealt serious blows to the work by passing a law in 2019 imposing sanctions against companies involved in construction. Several companies, because of these pressures, had withdrawn from the project, in particular on the side of the insurers covering the site. Started in April 2018, the work was therefore interrupted in December 2019 when only 150 kilometers of tube remained to be laid in German and Danish waters. It resumed a year later and Gazprom was able to announce on September 10 that the pipeline was completed. Who defended the project? Russia, of course, but within the European Union, Germany has been the main promoter of the pipeline. She presented it as an economic project necessary to accomplish its energy transition and to sustain deliveries to all of Europe. She ultimately won her case following a turnaround in Washington after Joe Biden came to the White House. The Democratic president, who had started his mandate on a line extremely hostile to Nord Stream 2, in the tradition of his predecessors, allowed the development of a German-American compromise to try to close this dispute. The American administration announced at the end of May 2020 that it was giving up sanctioning the company Nord Stream 2 AG, responsible for operating the gas pipeline, thus removing an essential obstacle to its commissioning. The United States then announced in July an agreement with the German government to end their dispute. Among its main provisions: possible sanctions against Moscow in the event of a slippage and a commitment by Washington and Berlin to plead together for the ten-year extension of measures guaranteeing the transit through Ukraine of Russian gas. Joe Biden gave up blocking the project, believing that it was too late and that it was better to bet on the alliance with Germany, whose cooperation Washington wishes to ensure in other cases, in particular in the face of the China.

Friday 10/09, Gazprom has announced the end of the construction of this gas pipeline which connects Russia to Germany under the Baltic Sea. «Why the Nord Stream 2 gas pipeline, which must supply Germany with Russian gas, is a source of tension». Content The giant Gazprom has announced the end of the construction of this controversial gas pipeline through which Moscow intends to increase its natural gas exports to Europe by bypassing Ukraine. The pipeline, a 1,230-kilometer tube under the Baltic Sea to Germany, which critics say will increase European dependence on Moscow. Construction of the 1,200 km gas pipeline began five years ago and has encountered many political obstacles, including sanctions imposed by former US President Donald Trump that led to the temporary halt in 2019. Work resumed a year later after Russia sent its own drilling ships, with Moscow determined to complete the project at an estimated cost of $ 11 billion. "The chairman of Gazprom board, Alexeï Miller, announced during the morning Gazprom meeting that the construction of Nord Stream 2 was fully completed this morning at 08:45 Moscow time." The capacity of the new infrastructure, combined with that of the Nord Stream gas pipeline, which is already operational, will enable Russia to export 110 billion m3 of natural gas per year, or half of its deliveries to Europe. Moscow nevertheless specified Thursday that Nord Stream 2 would only enter service after receiving the green light from the German regulator. Gazprom's partners in this project are the Germans Uniper and Wintershall Dea, a subsidiary of BASF (DE: BASFN), the Anglo-Dutch Shell (AS: RDSa), the French Engie (PA: ENGIE) and the Austrian OMV . This announcement has a taste of triumph for Russia, while the diplomatic tensions generated by this project of 11 billion euros were for a time so strong that some believed that it would never see the light of day. For its detractors, in Europe as in the United States, the gas pipeline will durably increase Europe's energy dependence on Russia, the West's great strategic rival, and constitutes a betrayal of Ukraine's interests. , ally of the West against Moscow. Ukraine "will fight" Ukraine announces on Friday that it will fight against the exploitation of this gas pipeline bypassing its territory, despite the completion of the construction, told Agence France-Presse presidential spokesman Sergiy Nykyforov. "The president (Volodymyr Zelensky) has always stressed that Ukraine will fight against this Russian political project until its completion and after it and even after the start of gas deliveries", he indicated. This project will eventually deprive Ukraine of at least $ 1.5 billion per year it currently receives for the transit of Russian gas through its territory. A risk of "powerful escalation on the part of Russia" Kiev also fears that the transit stop will facilitate a possible Russian invasion, as Moscow will no longer have to worry about Ukraine's gas infrastructure to supply its main European customers with gas. “A powerful escalation on the part of Russia is the worst thing that can happen. Unfortunately, there is such a risk, ”President Zelensky said at the Yalta European Strategy international forum in Kiev on Friday. An ally of the West, Ukraine, the former Soviet Republic, has been the scene of a pro-Russian separatist war in the East since 2014, unleashed in the wake of Moscow's annexation of Ukraine's Crimean peninsula. Widely regarded as the godfather of the separatists and accused of sending them troops and weapons, Moscow earlier this year massed tens of thousands of troops on the Ukrainian border. The Kremlin on Friday called for an "urgent" commissioning of Nord Stream 2.

Friday 10/09, On Friday 09/10, on the New York Mercantile Exchange, Natural gas futures for October delivery were trading at $ 5.022 per million BTU (British thermal units), up 0.18%. «Natural gas futures rose during the session in Europe on Friday 10/09. ». Content Natural gas futures rose during the session in Europe on Friday. On the New York Mercantile Exchange, Natural Gas futures for October delivery were trading at $ 5.022 per million BTU (British thermal units) at the time of writing, up 0.18% . Earlier, per million BTUs (British thermal units) traded in a bullish dollar session. Natural gas was likely to find support at $ 4.557 and resistance at $ 5.047. The US Dollar Futures Index, which tracks the performance of the greenback against six other major currencies, fell 0.14% to trade at $ 92.347. Elsewhere on the Nymex, Crude oil for October delivery rose 1.60% and traded at $ 69.23 per barrel while Oil for October delivery rose 1.19% to trade at $ 2.1388 per gallon.

Temporary drop in the price of Brent spot oil Brent prices down 4% in the middle of last week, followed by a sharp rise on July 9 (Fig. 1). Spot oil prices have fallen significantly over the past week, dropping from $ 78.3 / b to $ 74.0 / b for Brent ($ 75.9 / b to $ 72 / b for WTI) , before rising sharply on July 9 ($ 77 / b for Brent). On a weekly average, 1-month futures prices are down slightly by around 1% for Brent ($ 74.4 / b) and WTI ($ 73.3 / b). The oil market has been shaken by the two postponements of the OPEC + meeting initially scheduled for July 1 and by the lack of a decision on July 5 due to the opposition expressed by the United Arab Emirates (see TB of July 5). The market was initially bullish after this meeting, probably accepting the hypothesis of a shortage of supply due to a lack of decision on the part of OPEC +. The oil market, supported by the latest US statistics, was hit harder from July 6 for two main reasons. The first is due to the one-off corrections observed on the financial markets (Fig. 2) under the effect of various uncertainties (recovery considered fragile (ECB), increase in contamination; Fig. 3 & 4). The second is related to the uncertainty about the future oil policy of OPEC + which may follow two scenarios: choice of compromise to define a new agreement or uncoordinated policy. Two scenarios with opposite consequences for the price of oil, which explains the volatility observed last week. The idea of ​​an agreement nevertheless seems privileged if one refers to the American declarations. At the end of the week, the analyzes of the FED and the ECB also reassured the markets.

Friday 10, Crude Oil futures rose during the session in Europe. Also « Oil prices continue to consolidate in the near term after recovering to a one-month high. The economic outlook should be decisive for the future». Content On the New York Mercantile Exchange, Crude Oil futures for October delivery were trading at $ 69.28 per barrel on 9/10, up 1.67%. Earlier, the barrel was trading in a bullish dollar session. Crude oil was likely to find support at $ 67.56 and resistance at $ 69.89. The US Dollar Futures Index, which tracks the performance of the greenback against six other major currencies, fell 0.11% to trade at $ 92.382. Elsewhere on the ICE, Brent oil for November delivery rose 1.60% and traded at $ 72.59 per barrel as the spread between the value of Brent and Crude oil contracts s 'stands at $ 3.31 per barrel.

Thusday 09, Oil prices continue to consolidate in the near term after recovering to a one-month high. The economic outlook should be decisive for the future. « OIL PRICES STALL AS WORLD GROWTH CONCERNS CONTINUE». Content Oil prices continue to consolidate this week. WTI and Brent crude oil prices have been rocketing for almost two weeks, after last week hitting a one-month high near $ 70 and $ 74 respectively. On the one hand, oil prices are supported by the recovery of the world economy (GDP) and the freeze on OPEC + production which, although it has decreased in intensity, continues to leave the market in deficit. (demand exceeds supply). On the other hand, the oil market has been penalized since the beginning of the summer by the endless extension of health restrictions in Asia, more particularly in Japan and Australia, and by the more marked slowdown in the Chinese and American economies. Indeed, the majority of economic data for the two largest world economies has been disappointing for several weeks. The growth outlook for the US economy has been revised downwards by many models, such as the Atlanta Fed's GDPNow indicator, which currently forecasts a third quarter growth rate of 3.7%, down from 6. % a month ago. From a technical analysis point of view, the trend for Brent oil is bullish in the short term, but the risk / reward ratio does not favor purchases given the fact that the price of a barrel is the upper bound of the descending channel in which it has been evolving for almost two months. The outlook is therefore neutral in the near term between the recent high of around $ 74 and the recent low of $ 70.50. An exit from the top of the channel and breaching the recent high would be signals for a further leg up in oil prices that could extend to the year high of around $ 78 for the Brent ($ 76 for WTI). Conversely, a dip below the recent low at $ 70.50 would pave the way for a continuation of the underlying downtrend and a possible return to the bottom of the downtrend channel. Upcoming economic statistics and developments in health restrictions are expected to continue to be the main catalysts for oil prices in the weeks to come. The resumption of production in the Gulf of Mexico after Hurricane Ida will also be a catalyst to watch in the short term. So far, another 75% of US and Mexican offshore oil wells have yet to resume operation since the hurricane hit

Thursday 02/09. Even for the most skeptical, Natural gas will trade at $ 5 or more and may even double in the event of a freeze in the United States. «Natural gas gained nearly 12% in August, increasing for the seventh time in eight months, which propelled it to the rank of the highest earning commodity this year, with a total return of 50%». Content Our forecast is for natural gas at around $ 5 or more if the winter was early in the United States. The price of natural gas has been on the rise since January and is not about to stop, this is especially true after Hurricane Ida hit last week, which cut off about 85% of natural gas production. in the Gulf of Mexico. Before this hurricane, the supply was barely sufficient to meet the demand which is considerable, first for air conditioning in summer and now for heating in winter 20/21. With the hurricane causing power outages in the Gulf of Mexico, reports say it may be weeks before power is restored to the entire region and the oil and gas industry of the Gulf of Mexico does not fully resume its activities. 2.1 billion cubic feet per day is estimated to have been interrupted during the last four days of August due to the storm, which may affect deliveries of Natural Gas, however compensation is expected as it is also unlikely that there will be a 'slowdown in ships leaving Gulf Coast ports'. LNG export volumes should therefore remain strong, with an average of 9.8 Bpc / d in 2021, even in the event of partial disruptions in feed gas volumes. According to Mr. Kilduff: "There will be no downturn in this gas recovery. This loss of production in the Gulf of Mexico, while temporary, has only made matters worse." "Five dollar gas is the minimum we can look at. But if you have an early cold snap in late November / December then you can look at double-digit prices." On Wednesday alone, futures on the New York Mercantile Exchange's Henry Hub rose nearly 6% at one point, taking October's spot contract to a high of $ 4.65 per mmBtu, or million British thermal units, a gain of 25 cents. According to Dan Myers analyst at Gelber & Associates “While there is still a long time to go before the eventual October contract settlement, historically no October contract has closed above $ 4 since 2008, which closed at a final price of 7.47. dollars / mmBtu. " "Fears of winter under-supply, exacerbated by production issues linked to the currently ongoing Tropical Depression Ida, injected a dose of adrenaline into the market, which led to the high prices we are seeing today. . " Changes in Natural gas LNG stocks Source: Gelber & Associates The week of 08/27, an injection of 25 bcf, or billion cubic feet, into storage was expected from what remains of the new unburned production for power generation and cooling. Although this figure is slightly lower than the 29 billion cubic feet recorded in the previous week (August 20), it is less than half of the five-year average of 53 billion cubic feet of injections. This drop in gas supply came during a week of sweltering temperatures in the northeastern United States, which spiked demand for cooling in the larger air conditioning and heating market. gas. The rise in natural gas will continue in the coming weeks, our forecast is around $ 5 for October.

The upturn in traffic in China, United States and more recently in Europe mainly concerns low-cost airlines, however, long-haul flights are experiencing a lasting decline in activity. Due to the resumption of traffic in China, United States and, more recently, Europe Airbus and Boeing sales resisted the crisis better than expected in the first half of the year. Airbus has revised its targets upwards in anticipation of a faster-than-expected rebound in medium-haul traffic, which would offset the lasting decline in long-haul flights. « The long-awaited upturn in air traffic is on the cards this summer, especially in Europe, where the most optimistic scenario has been passed. But this summer upturn remains globally limited to medium-haul flights and is clearly threatened by the resurgence of the epidemic in certain areas.». Despite many clouds, the summer of 2021 is indeed that of the recovery for air transport. Not only for airlines, which have seen passengers return to all destinations reopened to tourism. But also for civil aeronautics manufacturers, Airbus and Boeing in the lead, whose upturn and the most optimistic forecasts are confirmed. Ryanair bounces back July nevertheless confirmed that low cost airlines are recovering more quickly than others. They are less dependent on long-haul and business trips, which are still down. Ryanair was able to carry 9.6 million passengers across its network, or 73% of July 2019 traffic. It hopes to reach 100 million for the financial year ending in March 2022, even dreaming of a break even. Wizzair, one of the most important low cost after Ryanair, recorded 2.956 million passengers in July, or 76% of July 2019 traffic. But the ups and downs of the pandemic could still hold some surprises.

The Nasdaq closed Wednesday at a record high, technology stocks finished higher. Apple Inc, Facebook Inc, Amazon.com Inc and Google. The Nasdaq closed Wednesday at a record high, and the S&P 500 rose but just missed a fresh peak, as September kicked off with renewed buying of technology stocks and private payrolls data, which supported the case for dovish monetary policy. Nasdaq dashboard. Content Utilities and real estate - sectors considered as bond-proxies or defensive - were the top performers. "Given there's going to be some choppiness in the economic recovery because of COVID, people will look for where they can find the best future growth potential," said Chris Graff, co-chief investment officer at RMB Capital. Wall Street's main indexes have hit record highs recently, with the benchmark S&P 500 notching seven straight monthly gains as investors shrugged off risks around a rise in new coronavirus infections and hoped for the Fed to remain dovish in its policy stance. Each new data release though is viewed by investors through the prism of whether it could push the Fed to taper sooner rather than later. A report by ADP, published ahead of the U.S. government's more comprehensive employment report on Friday, showed private employers hired far fewer workers than expected in August. Another set of data on Wednesday showed U.S. manufacturing activity unexpectedly picked up in August amid strong order growth, but a measure of factory employment dropped to a nine-month low, likely as workers remained scarce. "We've got the jobs report on Friday, but what's become more important is t ..

he unsung hero of modern investing spends his days on the sunny vineyards of Sonoma, California -- a world away from Wall Street. John “Mac” McQuown never helmed a big bank, crafted policy from Washington D.C., nor enjoyed name recognition like his kindred spirit Jack Bogle. Stock Market Is as Active as Before $11 Trillion Index Invasion Content It goes without saying that I’m an anarchist,” McQuown, 86, said in an interview. With his disruptive zeal, the team at Wells Fargo & Co. sought to shake up the investing orthodoxy. The charge: Money managers left to their own devices are typically undiversified, expensive and unfit for purpose. “In the 50 years since then, we’ve demonstrated that’s right,” said McQuown. Nobel Winners He’s quick to share credit for the first fund with others. The president of Wells Fargo, Ransom Cook, hired him and the bank lavished millions on the endeavor. Meanwhile the theories that underpinned index investing were laid out by academics like Harry Markowitz, William Sharpe and Eugene Fama, many of whom collaborated on the project. “We had a dozen academics working with us,” McQuown said. “Six of them have Nobel prizes now.” Yet it was McQuown who had the gumption to harness their groundbreaking ideas in the real world with his financial-engineering acumen. Wells Fargo used about $6 million from the Samsonite pension pot to create an equal-weight gauge tracking all the shares on the New York Stock Exchange, which back then numbered around 1,500. It was not a big success, in fact. The complexity and cost of constantly re-weighting the fund’s constituents was a huge drag, and in 1976 the Samsonite product was rolled into another fund that held members of the S&P 500 Index in proportion to their market values. But the low-key ending to the first-ever fund belied what it set off: Wells Fargo continued to grow its index business as clients staged a revolt against active money managers failing to beat benchmarks. The unit would go from strength to strength and become Barclays Global Investors, which launched iShares and was bought by BlackRock Inc. -- making it a pillar of the largest money manager in the world. Meanwhile, Bogle brought indexing to the masses, launching the first fund accessible to retail investors in 1976 at his then-fledgling investment company Vanguard. Big Legacy It is hard to overstate the legacy of the July, 1971 milestone. It’s largely thanks to index funds -- which demystified the investing process and lowered costs for returns -- that more than half of all Americans are invested in the stock market today. McQuown recognized that potential 50 years ago, according to David Booth, co-founder of the pioneering quant asset manager Dimensional Fund Advisors and a member of the legendary Wells Fargo team. Maybe not the scale -- their early estimates were they could attract about $10 billion, Booth said -- but certainly the capacity to improve the way humanity invests. It was McQuown who helped deploy the brightest minds in academic finance in a bid to change the investing game, including Fischer Black, Mike Jensen, Jim Lorie and Myron Scholes. “The people who did the research were the catalyst,” Booth said. “But they needed somebody to stand up and say, ‘Okay, enough of the theory. We need to get this supplied. This is important. We can make lives better.’” The revolution they all kicked off isn’t without detractors. Critics fear passive ownership is getting so large -- more than 50% of equity mutual funds and ETFs are now passive -- is rocking price discovery, volatility markets, corporate governance and more. But today, the oenophile in Sonoma is more worried about “subjective” investors. Technology made the benchmarking boom possible, he says. But it’s also increased the power of market players prone to bias and unpredictability. Not that you’ll catch McQuown criticizing the Reddit army wielding day-trading apps, who whipsawed the stock market this year. “You’ve got to accept some of the downside if you want some of the upside” of tech progress, he said. McQuown, who has a mechanical-engineering background, remains an innovator at heart. He’s currently coordinating a second micro grid to help power his estate, which lies between two mountain ranges north of San Francisco. His love affair with wine making is as old as index investing itself -- he made his first investment while at Wells Fargo, and even took a month off from the bank to learn about wine in France. Back then, McQuown and the finance academics he worked with never contemplated making history. He says their work was just about solving problems as they come. “I was having an incredibly good time,” McQuown said. “The stars don’t get lined up that way very often.”