By Brian Watson, CFA

September brought energy market volatility that carried over to midstream equity prices. During the month, midstream sector participants continued placing growth projects into place, while also finding creative ways to reduce capital expenditure requirements. Bond investors have taken notice, but equity valuations continued to lag likely due to lackluster fund flows.

MLP market overview

Midstream MLPs, as measured by the Alerian MLP Index (AMZ), ended September down 13.6% on a price basis and once distributions are considered. The AMZ results underperformed the S&P 500 Index’s 3.8% total return loss for the month. The best performing midstream subsector for September was the Propane group, while the Gathering and Processing subsector underperformed, on average.

For the year through September, the AMZ is down 50.5% on a price basis, resulting in a 46.2% total return loss. This compares to the S&P 500 Index’s 4.1% and 5.6% price and total returns, respectively. The Propane group has produced the best average total return year-to-date, while the Gathering and Processing subsector has lagged.

MLP yield spreads, as measured by the AMZ yield relative to the 10-year U.S. Treasury bond, widened by 219 basis points (bps) over the month, exiting the period at 1,410 bps. This compares to the trailing five-year average spread of 665 bps and the average spread since 2000 of approximately 412 bps. The AMZ indicated distribution yield at month-end was 14.8%.

Midstream MLPs and affiliates raised no new marketed equity (common or preferred, excluding at-the-market programs) and $3.0 billion of debt during the month. No new asset acquisitions were announced in September.

Spot West Texas Intermediate (WTI) crude oil exited the month at $40.22 per barrel, down 5.6% over the period and 25.6% lower year over year. Spot natural gas prices ended September at $1.63 per million British thermal

Credit…Albert Gea/Reuters

What hopes remained that Europe was recovering from the economic catastrophe delivered by the pandemic have all but disappeared as the lethal virus has resumed spreading rapidly.

France, Europe’s second-largest economy, this week amplified the concern as the government downgraded its forecast pace of expansion for the last three months of the year from an already minimal 1 percent to zero. Overall, the statistics agency predicts the economy will contract by 9 percent this year.

The diminished expectations are a direct outgrowth of alarm over the revival of the virus. France reported nearly 19,000 new cases on Wednesday — a one-day record, and nearly double the number seen the day before. The surge prompted President Emmanuel Macron to announce new restrictions, including a two-month shutdown of cafes and bars in Paris and surrounding areas.

In Spain, the central bank governor this week warned that the accelerating spread of the virus could force the government to impose restrictions that would produce an economic contraction of as much as 12.6 percent this year.

The European Central Bank’s chief economist on Tuesday cautioned that the 19 countries that share the euro currency may not recover from the disaster until 2022, with those that are dependent on tourism especially vulnerable.

Summer increasingly feels like a distant memory.

In August, with infection rates down, lockdowns lifted, and many Europeans indulging in the sacred ritual of the summer holiday, signs of revival were abundant. Many European economies expanded dramatically as people returned to shops, restaurants and vacation destinations.

Hopes had also been buoyed by a landmark agreement forged by the European Union to raise a $750 billion ($883 billion) euro relief

Here’s what you need to know:

Credit…Vincent Tullo for The New York Times

Applications for jobless benefits remained high last week, even as the collapse of stimulus talks in Washington raised fears of a new wave of layoffs.

More than 804,000 Americans filed new claims for state unemployment benefits last week, the Labor Department said Thursday. That is up from 799,000 the week before, before accounting for seasonal patterns. Another 464,000 people applied for benefits under the federal Pandemic Unemployment Assistance program, which covers freelancers, self-employed workers and others left out of the regular unemployment system.

For the second week in a row, the reported number will carry a golden-state-sized asterisk: California last month announced that it would temporarily stop accepting new unemployment applications while it addresses a huge processing backlog and puts in place procedures to weed out fraud.

In the absence of up-to-date data, the Labor Department is assuming California’s claim number was unchanged from its pre-shutdown figure of more than 225,000 applications, or more than a quarter of the national total. The state began accepting new filings this week, and is expected to resume reporting data in time for next week’s report, though it isn’t yet clear how the backlog of claims filed this week will be reflected.

While the lack of data from California makes week-to-week comparisons difficult, the larger trend is clear: After falling swiftly from a peak of more than 6 million last spring, weekly jobless claims have stalled at a level far higher than the worst weeks of past recessions.

“The level of claims is still staggeringly high,” said Daniel Zhao,

Mercedes-Benz leadership team today unveiled a new long-term strategy outlining the brand’s plan for the next decade. The plan emphasizes six strategic pillars.

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In terms of electric vehicles, Mercedes-Benz says, “Our aim is to lead in electric drive,” adding that, “We will build the world’s most desirable electric cars.” Mercedes plans to do this through dedicated EV architectures for both large and compact/mid-size vehicles.

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However, when discussing the platforms in today’s presentation, Mercedes-Benz COO and head of R&D Markus Schäfer said, “We can fit an ICE engine in the front of the car if we need to, for as long as the market demands it,” demonstrating the brand’s hesitancy to overcommit to fully-electric vehicles. “This is a great economic equation,” Schäfer added.

Mercedes is targeting more than 50% of their vehicle production to be electrified by 2030, though they include plug-in hybrids in that total.

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Overall, improving profitability on their existing lineup and with their new models is a focus for Mercedes. As the industry goes through a period of transition, it may be difficult to manage to such a goal while also investing enough in new technology to compete with expanding offerings from Tesla and others.

For complete analysis of the strategy update as well as news and analysis on Tesla, please see the included video.

Timestamps:

  • 0:16 TSLA stock update
  • 1:00 Made-in-China Model Y production plans
  • 4:57 Tesla & BHP talk nickel supply
  • 6:04 Discussing Tesla’s PR strategy
  • 10:02 Chamath Palihapitiya talks Tesla
  • 11:39 Polestar 2 EPA rating
  • 12:59 Mercedes strategy update

Be sure to follow Tesla Daily on The Street for the latest on Tesla.

Disclosure: Rob Maurer is long TSLA stock and derivatives.

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  • President Trump upended a quiet day on Wall Street on Tuesday by announcing that he was ending negotiations over a new economic aid package with Democrats, after accusing Speaker Nancy Pelosi of “not negotiating in good faith.”

  • The S&P 500 had begun to climb before Mr. Trump’s announcement, on Twitter. It slid more than 1 percent soon afterward, and ended the day about 1.4 percent lower.

  • The tweet also sent shares of airlines reeling. Shares of American Airlines fell more than 4 percent, giving up early gains, while United Airlines stock fell more than 3 percent. Shares of Boeing, which had earlier said it was lowering long-term estimates for aircraft sales, fell nearly 7 percent.

  • Earlier in the day, the Federal Reserve chair, Jerome H. Powell, urged the government to take action to address the economic pain the pandemic has inflicted on millions of households. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Mr. Powell said in remarks before the National Association for Business Economics.

  • Since approving nearly $3 trillion in economic relief this spring, Congress and the White House have failed to reach agreement on another package, despite warnings from economists, including Mr. Powell, that follow-up aid is needed to maintain the country’s economic recovery.

  • Though talks all but collapsed in early August, Ms. Pelosi and Treasury Secretary Steven Mnuchin have resumed discussions in recent days as companies continue to furlough or