: UAW sets deadline for further possible strikes

United Auto Workers President Shawn Fain said Monday that if the union has not made substantial progress toward reaching an agreement with the Big Three automakers by Friday at noon Eastern time, it is prepared to call for additional strikes. About 13,000 auto workers from three UAW plants in three different states are currently on strike at Ford Motor F , General Motors GM and Stellantis STLA, and the union has said it is prepared to call on more workers to walk off their jobs if necessary. “We’ve been available 24/7 to bargain a deal that recognizes our members’ sacrifices and contributions to these record profits,” Fain said in a livestreamed update. “Still the Big Three failed to get down to business.” A GM spokesman said “we’re continuing to bargain in good faith with the union to reach an agreement as quickly as possible for the benefit of our team members, customers, suppliers and communities across the U.S.” Ford and Stellantis did not immediately respond to a request for comment.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit for more information on this news......»»

Category: topSource: marketwatchSep 18th, 2023

: UAW sets deadline for further possible strikes

United Auto Workers President Shawn Fain said Monday that if the union has not made substantial progress toward reaching an agreement with the Big Three automakers by Friday at noon Eastern time, it is prepared to call for additional strikes. About 13,000 auto workers from three UAW plants in three different states are currently on strike at Ford Motor F , General Motors GM and Stellantis STLA, and the union has said it is prepared to call on more workers to walk off their jobs if necessary. “We’ve been available 24/7 to bargain a deal that recognizes our members’ sacrifices and contributions to these record profits,” Fain said in a livestreamed update. “Still the Big Three failed to get down to business.” A GM spokesman said “we’re continuing to bargain in good faith with the union to reach an agreement as quickly as possible for the benefit of our team members, customers, suppliers and communities across the U.S.” Ford and Stellantis did not immediately respond to a request for comment.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit for more information on this news......»»

Category: topSource: marketwatchSep 18th, 2023

Transcript: Peter Borish

  The transcript from this week’s, MiB: Peter Borish, Tudor Investments & Robin Hood, is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters… Read More The post Transcript: Peter Borish appeared first on The Big Picture.   The transcript from this week’s, MiB: Peter Borish, Tudor Investments & Robin Hood, is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, oh, I have an extra special guest. Peter Borish, founding partner number two at Tudor Investments where he worked directly with Paul Tudor Jones, most famously helping him put on a very aggressive short position heading into the ’87 crash. And then covering, not in the mayhem of that Monday, but pretty close to the bottom tick on Tuesday, really just a fascinating career, a unique perspective on markets. Not only did he serve on the Brady Commission looking at the ’87 crash, but his history of investing and trading and public service, both at the Fed and the Chicago Board of Trade and Treasury Department, really unparalleled, as well as just a pretty amazing track record as an investor and trader. And as a philanthropist, one of the co-founding trustees at Robinhood, really a fascinating character. I found this to be a master class in a humble approach to markets and being aware of your own limitations in order to obtain the best possible results as a trader and investor. Borish is a legend on Wall Street and I’m thrilled to have the opportunity to sit down with him and discuss his career and his approach to investing and trading and philanthropy. So with no further ado, my conversation with former director of research at Tudor Investments, Peter Borish. PETER BORISH, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, COMPUTER TRADING CORPORATION: Thank you so much. It just goes to show I can’t hold a job. RITHOLTZ: That’s right, that’s right. You are constantly on to the next gig. So I’m familiar with your work, but I bet a lot of younger listeners may not know of your infamy and what took place at the ’87 crash. We’ll get to that. Let’s start out with just your background. What got you interested in markets and trading? Well, I guess it’s sort of fortuitous. So when I finished graduate school, I always begin at Michigan because I’m a Michigan man. RITHOLTZ: Go Blue. BORISH: I went there for undergraduate and graduate school, and I finished graduate school in ’82, in what was really the real recession under President Reagan. And I was very fortunate to get a job at the Federal Reserve Bank of New York. RITHOLTZ: Doing what? BORISH: So I was doing, at that point, if you recall, it was the LDC, right, the Mexican crisis. RITHOLTZ: Sure. BORISH: And they were talking about, well, if Mexico increases a supply of oil, they’ll get a lot more revenue. I, being stupid, raised my hand and said, “Yeah, but if they increase the supply, isn’t that going to put downward pressure on prices?” And they’re kind of like, you know, you should be sort of thinking about research macroeconomic models. And that’s really where it went. And at that point, foreign exchange and futures and derivatives were just starting. 1982 was the year that S&P futures started. So I went down into that group and did some research. And being a little gearheady, I worked on the sort of internal Black-Scholes model for the Fed. And that’s how I got fortunate and started my career. As I say, Wall Street is littered with former Fed people. RITHOLTZ: That’s a good way of describing it. Littered with former Fed people. Because the Fed is a giant employer of economists and other technical researchers, and very often, they leave the Fed and go to big shops. You didn’t go that way. After you left the Fed, tell us about your next career move. BORISH: So it’s 1985, I’ve been there three years, it’s about the time you start looking for a job and I had some job offers from sort of white shoe Wall Street firms and then through an acquaintance, I met this guy that was coming off the cotton exchange by the name of Paul Tudor Jones. He asked me to help him out because he was chairman of the financial exchange of the subsidiary of the New York Cotton Exchange. And they wanted to start trading some futures contracts. I’m like, “Look, I’m young. I’m single. What a dynamic personality. Great person. I’m going to give it a shot.” and that’s how I started out at Tudor. RITHOLTZ: So Tudor Investments launches ‘85? ‘84? BORISH: Paul started in September of ‘84. I came on in the beginning of ‘85. RITHOLTZ: So literally number two at the firm? Is that where… BORISH: Well there were people and support staff but sort of I was the first real sort of research professional. RITHOLTZ: So tell us a little bit about what you guys were doing in ’86, ’87. What were you trading and what was he looking at? BORISH: So one of the geniuses of Paul in really understanding futures markets in general is that most of the innovative risk management approaches came out of the futures markets because of the using margin. RITHOLTZ: There’s no room for error. You can’t just, “Ah, let’s see if it comes back.” That’s not — and how you can trade futures. BORISH: No, not at all. And so with the advent and the development and the starting of new financial futures markets, he was taking his technique, his approach, his discipline, and applying that to the new futures markets and his commitment, and this I think people have to realize because what one can do today, right, I have the FRED app on my phone, I can download massive amounts of data in hundredths of a second. RITHOLTZ: Right. BORISH: You couldn’t do that there. And he had a huge commitment through me for data. We would hire summer interns to put data into spreadsheets, build models, work. He was willing to, and literally on the weekends, we would be on our hands and knees, taking out floppy drives, putting in hard drives, updating computers. And we were applying all that to the new markets with the discipline and approach that he had towards trading. RITHOLTZ: So that’s an interesting difference about Paul Tudor Jones regarding his process. Very quantitative driven, very mathematical. But there’s another side to his approach which was way ahead of its time, very behavioral. Tell us a little bit about the psychological approaches that he brought to both looking at markets but also managing himself. BORISH: So the strength of Paul at that time and even today still is that because he had always traded on the floor and understood that most market moves come in extremes fairly quickly. Markets spend a lot of time doing nothing and then they reprice. So you have to have that discipline, you have to have that patience. And if you think it’s going to be an acceleration point, then you try to get larger, but you have to have a really tight stop. It’s such a contradictory approach because people want to be right all the time. And the way that you probe and trade is understanding that that’s not the case. And he would always say, “Okay, they got me today, but I’m going to get them back with 100% interest.” RITHOLTZ: So people also should realize, for those of you who’ve never traded futures, it’s not like options where essentially you could put up your losses in advance and all they could do is go to zero. Options, you’re on the hook no matter where it goes. It’s not like, well, we’ll just see how this trades. If it keeps going against you, you’re fully responsible and hence the commitment to tight stop losses and a disciplined approach to managing the downside. BORISH: Yes, and the thing about futures is you must maintain your discipline. One of the problems I think with rookie options traders is that because if you’re buying them, all you can do is lose your premium. So if you have a belief in the market and you buy your premium and then it starts to go against you, you go, “Well, I still believe in it and I still have premium left.” So a lot of times when you’re doing that, you put the trade on and you’re mentally accepting the fact that you’re going to lose all your premium. RITHOLTZ: Put up your losses in advance. BORISH: And in the futures world, that you don’t do. You can’t lose your discipline because the market will discipline you regardless. RITHOLTZ: Yeah, no, it makes a lot of sense. So you’ve said, and as long as we’re talking about discipline and management of trades, one of your quotes that I really like is, “Trading and risk management are inherently unnatural characteristics.” Explain what that means. BORISH: With pleasure. So first of all, we always said, “Discipline before vision.” And by that, it means we can talk and I can think and we can gossip and the market’s going here. You know, it’s kind of like gossiping about sports. That’s not really trading. It’s a disciplined, rigorous approach. And so when I say it’s an unnatural feeling, is because we all, most of us, I’m used to it by now, want to be liked. And so you want to be there going, oh, you’re Long Apple, I’m Long Apple, oh, we’re all so smart. But you have to have that discipline to say, wait a second, it’s over, the move is there. So think about it this way, you got 100 people in a subway car who are all on something. If I get out and go into the other car, where I’m on the short side, I’m the one person in there. If I’m disciplined and I get stopped out, you can always squeeze one more back in the subway car. But when it turns, if I’m the only one there and they all come running out, that’s why markets go down faster than they go up. So it has to be, in a logical sense, the ability to take the other side of the trade. Now that doesn’t mean you should be contrarian for contrarian’s sake. And that’s the difference in all these different approaches. So there’s the trend following, which is go with the trend. There’s the wave strategy, which says we’re going to try to find an inflection point here. They’re all good strategies, but if you don’t have a disciplined risk management on top of it, you’re not going to make money. RITHOLTZ: Right, the challenge is the crowd is right. Most of the time, if you want to be a contrarian, you have to capture that two, three, four percent where the whole crowd is wrong, and get out before everybody heads for the doors. BORISH: Yes, you have to be very mindful of inflection points. And I go through this all the time. People are like, oh, you know, the market goes up over time and it’s a straight line. RITHOLTZ: That’s not trading, that’s investing. BORISH: Yes, but even then, and I ask people, I say, well, you know, you think I look any older today than I did yesterday? And they go, no. I go, well, you think I’m going to look any older tomorrow than I did today? And they go, no, I go, great, two points, a line, never going to get old, which is fantastic. RITHOLTZ: So let’s talk a little bit about ’87. The market had a huge run from ’82 through the beginning of ’87. Tell us a little bit about how you guys were positioned heading into that year. BORISH: Let’s step back for a second, because markets don’t go up in a straight line. RITHOLTZ: Right. BORISH: They think about, yes, the low was in August of ’82, but there was a serious correction in ’84. And then even in 1986, there were some really harrowing corrections, particularly after July 4th, ’86 and the September expiration of ’86. So it was really January of ’87 when it started to take off in that first part of the year. RITHOLTZ: Upwards, like a strong rally. BORISH: An incredibly strong rally. I think by the time we got to the high in August, right, it was up over 30% on the year. And again, going back to what I just said earlier, Paul gave me the opportunity to take sort of creative research imagination and spend it on some data. And we started being very early on collecting real-time data and also modeling. And I mentioned that we hired people. So we took people and back then there was a book, right, the Dow from 1897 to present. And we had to type that data in the spreadsheet. It was very complicated. RITHOLTZ: You have to keep updating it, right. BORISH: But, well, you couldn’t download it and you had to check it. And of course, when people are putting in a lot of numbers, there’s typos, so you had to have charts just to see all those different things. And we started modeling and thinking, given where we were with the new financial futures markets. And if you think about financial futures in general or new markets, we always sort of about it as if you have a kid and they’re five years, six years old, you think you could talk to them, you can think they’re rational, but they’re not. And they do throw tantrums. And that’s happened a lot in derivatives. By the time you got to ’87, right, the futures were five years old, people thought there was going to be portfolio insurance, that there was going to be this massive, always liquidity that you could stay longer stocks and that you could sell futures against it. And there’s this assumption of continuity of liquidity. So at the same time, we understand that there’s potential technical flaws underneath the model, underneath the markets, and we’re building this model, which is really tracking what happened from the low of 21, which we corresponded sort of to the low of 82, and what was going to happen. And when I first built this model I really thought that the top was going to occur in early 88 rather than August and the secondary top in October of 87 but then the technicals came together with the fundamentals and Paul being the great trader he was really had the opportunity to take advantage of that. RITHOLTZ: So before we get to Black Monday, around what time of the year did you start seeing cracks in the underlying market? At what point were you looking at this and saying, “Hey, we have some time to go,” but you could see the beginning of the end was coming up? BORISH: When the market started to pull back in August and into September expiration, remember back then there was only quarterly expirations. RITHOLTZ: Right. BORISH: So there was a lot more activity around that. And when we saw, and part of research is being able to replicate things, so you had always you had holidays and you see that. So you had Labor Day, you had three day weekends. So you could line these things up in terms of price activity, volume, and the likelihood. And if you go back to the ’29 scenario, you also saw what happened post-Labor Day, right? The top was September 3rd, ’29. Then you had the correction, then you had the rally. So when you sort of had the technical lining up with the fundamentals because of the issues that were taking place globally at that time, and at the same time, believe it or not, we a new chairperson in Greenspan at the Fed that had just come in. So here’s a rookie. Now you had Volker Prior and as I like to say, you know, young guys have all the moves, but old guys win championships. And so he was in a sense challenged what to do with regard to that. And that was something that we thought post-crash that he was going to be very aggressive in and reducing interest rates, which he did. RITHOLTZ: Well, let’s roll back pre-crash. So Friday before Black Monday, how were you positioned? How was Tudor Investments positioned heading into that weekend? BORISH: So the analog really was ringing a red, red bell sort of on that Wednesday, right? There was a decline, you got to technical levels, you had a bounce, and then you failed. RITHOLTZ: Right, a weak bounce that just had nothing behind it. BORISH: Right, and then on that Friday, we felt that it was there and we were short. RITHOLTZ: A little short, a lot short, what were you short? BORISH: I think people have to give perspective. Remember, we at that time were not a particularly large firm. So for us, we were large short. And then over the weekend with the news that was taking place and also the fact of the sentiment. There were still people that were very sort of bullish and people that felt that they could be protected and this is where most of these models, right, assume consistency, 24 hour trading, you’re going to be okay. And you could even go to 98, right, with long term capital where that was also part of their problem but on weekends, that’s not the case. RITHOLTZ: Right. BORISH: So you had a gap situation Monday morning. RITHOLTZ: Market gaps down pretty substantially. There’s no bids to be found. You can’t get people on the phone. Tell us what that day was like as an actual trader, short a collapsing market. BORISH: So, you know, it’s a very, very interesting perspective because when you think about it, and it’s also one of the advantages of why I say that it’s so important to have all these different markets. When you’re short something and it goes down, you’re a natural buyer. RITHOLTZ: Right. BORISH: So people think shorts are bad, no, they’re good. RITHOLTZ: They’re the first buyers in any crisis. BORISH: Yes, yes. And so then the question is, and as I like to say, here’s my definition of a quandary. Do you stay out of a market and watch everyone else make money, or get in and thereby cause it to immediately crash. RITHOLTZ: So, but you were on the right side of the crash. BORISH: Yes, we were on the right side. So there are a lot of people there that are in that quandary position because the market had been so strong and without discipline, the irony of markets is buyers are higher, sellers are lower. Right, everybody loved Bitcoin at 60,000, they all hated at 20. You know, that’s just– RITHOLTZ: That’s human nature. BORISH: Yes, so in this case, they didn’t know what to do. But then panic sets in and they were selling. So we learned from our experience. RITHOLTZ: Tell us about that because I recall you saying that historically when you’ve looked at other crashes and the best opportunity to cover is not the day of the crash but the next day. Tell us how you came down. BORISH: That’s correct. Because when I mentioned earlier about 1986 and July, in September we were short actually And then we covered on that Monday, and the market continued to go down until midday Tuesday. It also did that in September, I think it was September 13th, it’s a long time, so if I don’t have any exactly– RITHOLTZ: Right. But generally speaking, a bad day, and people the next day in the morning, like just let me get rid of this stuff. BORISH: And it’s changed a little bit now because of 24 hour trading, and so sometimes the extreme, you do close on the low and extreme, and there isn’t that much follow through the next day, but then there was definitely follow through. So we waited and we were patient and we were one of the buyers on that Tuesday, the 20th. And so we performed a function, I think, that exactly what you want in the marketplace, right? Shorts, we’re covering, we’re being buyers. I’d like to think that, knock on wood, that maybe some of our buying help put in the low. But what we really did, that it wasn’t just stock index futures. we felt that the Fed and under Greenspan was going to be massively cutting interest rates. Remember, the 10 year today is what, 370, 375? RITHOLTZ: Just under four, yep. BORISH: And back then it was well over six, I think it was closer to seven. And that historically, by the way, is thrown in the market today, I think the risk reward is we’re going more likely to there than back down to where we were. RITHOLTZ: You’re not buying it, we’ll talk later about everybody predicting lower rates, we’ll circle back to that. But not only were you short equities, what was your fixed income positions? BORISH: We started buying a lot of fixed income futures all across the curve, and particularly at that point one of the most liquid markets was the Eurodollar futures, and we felt that the Fed was going to provide liquidity, which they needed to do, and they did do. And the irony of that whole situation is it was after that crash that we started the Robinhood Foundation thinking that those who were less fortunate in New York were really going to be affected by the downturn in the markets. But the Fed stepped in. RITHOLTZ: Little did we know. Right. BORISH: Yes, the Fed stepped in. They provided liquidity. The economy wasn’t as dependent on the equity markets as necessarily as it is today, as we saw post ’08. And who knows what’s going to happen now. (ADVERTISEMENT) RITHOLTZ: So for those people who may not have seen it, there is a famous documentary, I believe it’s called “The Trader” that follows Paul Tudor Jones around. If you haven’t seen it, it’s on YouTube and Vimeo and elsewhere. How did he manage the chaos of ’87? What was his day like? BORISH: Well, it was a life changing day, really, for both of us. And there are good people and there are great people. And Paul is one of the great people, in my mind, not just as a trader, but as an individual, and why he’s so committed to New York City and philanthropy. So there’s always a little bit of sadness in the sense that when you are short something and it goes down and there are a lot of other people that may be getting hurt. So that’s one reason as well. Do you go in and you intellectually think, “Okay, yeah, maybe we’re going to crash and we’re going to do something.” But emotionally, you’re like, “Wow, at some point that’s it. We’re not going to benefit. We don’t want to participate. We are not going to be short anything more after that next day. We’re going to wait, we’re going to see, and we want to be supportive of the markets and the economic system. To me, again, we’re relatively young. Paul’s five years older than I am. But that’s a lot of wisdom, and that’s something I learned from that. RITHOLTZ: For a 30-year-old. And for those people who weren’t actively trading in ’87, the irony is, so not only is Black Monday down 22% and change on the Dow, markets finished the year flat to up 1%. It wasn’t a horrible year considering. And ’88, things just kind of took off again. Turns out we were early days of a long bull market and you’ve talked that very often you get that test early in a long secular bull phase. Tell us a little bit about what the thinking was going to be post-87 crash, what it looked like a decade out. BORISH: Well, there was one of the best divergences, technical buys in 1988. I think maybe the S&P made new lows for the Dow or the Dow Transports and it was unconfirmed and sentiment was so negative and this is where you have to be flexible as a trader because you’re like okay, the world is coming to an end and then I think we realized early on that it’s probably not coming to an end or at least not today. And so now you have to look for your opportunities because remember you’re managing other people’s money. You got to get rid of your own opinion, shake your head out of that intellectual fog that you’re in and say here’s what the markets are telling me. I need to listen to the markets. And that was 1988 and when it really took off. And if you think about cycles and period and going into ’91 with what happened in Iraq under Bush 1, and again the same thing, oh my God. And that was also a very interesting lesson because that was the first time in history we had a pre-announced date to start a war. So now what do you do with risk management? Right, you’ve got models, do you trade through it, do you not think it’s going to happen, do you not have risk on going into that? RITHOLTZ: You’re talking about Bush II and the Iraq war in ’03? BORISH: No, Bush I in ’91. RITHOLTZ: So there was a deadline and… BORISH: Right, and then he went in and the markets took off after that. You know, there’s a lot of good supportive, you know, material fundamentally, technically, around that time, because you were still recovering from the ’87, and people tend to remember the last thing that happened to them. So they’re always afraid because they think that the market’s going to go down, just as now, they’re afraid they’re going to miss out because the market was up. And I’m not so sure that they should be afraid of missing out. RITHOLTZ: Let’s stick with ’87, we’ll circle back to today’s market later. So post-mortem ’87, you get tapped by the Treasury Department to serve on the U.S. Presidential Task Force on market mechanisms, head by Brady, it became known as the Brady Commission. What did you find? What was the process like of looking at what caused the ’87 crash? BORISH: So first of all, it was an honor and of course I was the youngest person there and I’m still friends with a number of the people that were staffers. But I can just tell you in summary that we, Tudor, were so far ahead of every other firm on Wall Street, we didn’t even know. But all the data in the report, right, there’s a chapter on the market break, all that data came from us. None of the other firms had it, whether it was JP, Goldman, MS, Bear Stearns, you name it. And that’s a credit to Paul, as I said, the ability to not only want to do it but also to spend the capital to invest in data and computing at that time. And the real conclusion of that is where we are today that all these markets are linked you know New York wanted to blame Chicago, there was the options markets and they all were sort of disconnected and that’s where the Joint Task Force with the Treasury, the CFTC, and the SEC. And that was also where we put in the circuit breakers, you know, sort of price limits. There was no price limits in ’87. So that also– RITHOLTZ: Meaning when stuff falls, hey, down 22%, that’s just the market. Now what is it, 7%? BORISH: Yes. There’s a 3.5%, I think, a 7%, and a 15%. And the point is there’s a timeout, because we just mentioned a moment ago about emotion in markets, and you need to step back. futures markets have always had price limits. RITHOLTZ: Right. BORISH: From the… RITHOLTZ: Lock limit down. That’s all you could do in any given day. BORISH: And by the way, sometimes in the short run, right, that limit becomes a little bit of a magnet, because if the limit in soybeans is 35 cents and you’re down 33, do you really want to take a long position home overnight? RITHOLTZ: Right. So two cents. BORISH: But now you sit back and you have, in the case of the equities, it’s just a timeout. Let’s get it together. Let’s see what’s happening there. Market makers and it’s been, knock on wood, effective, right? Even in ’08 where you reached that. RITHOLTZ: Or the flash crash in 2010 and 2011. We had those sort of… BORISH: Yes, but we time out, we bounced, and now of course I look at some of those things and I look at the data as potential interesting technical indicators, but that’s for another day. RITHOLTZ: So let’s stay with the concept of interrelated markets. I recall reading Tim Metz’s book, “Black Monday”, and he talked about how, I think it was the New York Stock Exchange put the Chicago futures index up on the wall so traders could actually see what was going on in index futures. And it took a while before people realized all the specialists were lowering their bids because they were looking at the index futures. How interrelated are all of these markets? BORISH: They’re completely interrelated because the key for liquidity is the ability to arbitrage, and you had risk managers. So the S&P 500 stocks, or at that time you had a smaller index which was about 28 of the Dow contracts and so you could buy all the underlying, you could sell the futures or vice versa or you could spin it any way you wanted. If you liked 27 of them you could do that and sell the futures and be implicitly short the one instrument that’s not there. So this stuff is all linked and that is important because to have a successful market you need investors, you need speculators, of course, you need natural buyers and hedgers, but you need market makers and arbitragers to tighten the market up so that there’s plenty of liquidity on both sides of it. RITHOLTZ: So you mentioned a lot of the changes that were put in place post-1987. We’re still enjoying that. What was the fallout from ’08-’09? Are we still dealing with the aftershocks of that event? I mean, obviously, 2020 and 2021 and 2022, we’re still in the midst of, but is there still an echo of ’08-’09 today? BORISH: I don’t know if I would say it’s an echo. There’s always a learning process when it comes to markets and liquidity events. And it’s always, in the short run, all markets move because of supply and demand for money. And in ’08, there was issues, needless to say, but there was also some things which have been recently sprung up. For example, regulators saying, “Oh no, we shouldn’t be allowed to short financial institutions.” Now if you remember, part of the chaos in ’08 was associated with that because they banned short selling. It was incredibly smart, I guess, on the part of the regulators doing it right before an expiration. So you had this massive covering of eliminating short positions, but then you got rid of the market makers. Some of these financial stocks had 10-year ranges in 24 hours. That’s going to eliminate a lot of liquidity, and then the market’s going to find its own natural level, which at that point was a lot lower. RITHOLTZ: Right. You want people stepping in as buyers to cover those short positions. You don’t want whisper campaigns mentioning companies are going out of business when they’re not. So that not shorting financial institutions kind of brings us forward to what’s been going on in the regional banks in 2023. How do you look at the First Republics and Silicon Valley banks? Are these one-offs or is this part of something that’s more systemic? Or is this just the Fed raising rates so quickly that they’re breaking things? BORISH: Wow. So that’s such an interesting question. So is it systemic? I don’t think it’s systemic. I think that it has a lot to do with the way that the management of these companies were running them. SVB was a particular case because you had this massive inflow of VC capital. RITHOLTZ: Right. BORISH: And the problem is those are always naturally getting taken out because you’re investing. At the same time, they decided to go, as the Fed is embarking on a rate hike campaign, not to have a risk manager. RITHOLTZ: But they did have hedges on in 2022. They just decided, hey, these are so profitable, we should ring the bell. BORISH: Well, yeah, that’s always, if you’re hedging, you’re hedging for a reason. And are you hedging to trade? There’s a difference, right? RITHOLTZ: Well, they’re a bank, so one would assume their hedging interest rate duration risk, they just saw the win and said, hey, everybody’s going to get a good bonus this year. BORISH: Right, but then they move from hedgers to speculators. RITHOLTZ: Right. BORISH: And if that’s not your professional job, that becomes extraordinarily challenging. RITHOLTZ: As we learned. BORISH: And, you know, First Republic, which was a different type of institution, and they were basically, think about it in the old days, they were giving away the toaster to try to get accounts and then when rates started to go up. So think about this, right? The 10 year at its low in 20 was 20 basis points. Now we’re at three seven. But historically, three seven isn’t very high. And it goes back to my earlier statement that people anchor to sort of the high or the low, so they assume it’s going back there. That’s a big risk management mistake to make that assumption. RITHOLTZ: Let’s talk a little bit about computerized trading, helping traders become better at their jobs, and hiring traders. Let’s start with that. What sort of traits should hedge funds be looking for if they want to hire a successful trader. BORISH: If you’re referring to a discretionary trader, right, so that’s one bucket versus sort of a model-based quantitative trader where you’re looking at their track record. RITHOLTZ: Tell us about both. BORISH: Well, so I’m going to start first with the quantitative, it’s a little easier. I’ve never had a quantitative trader come to me with a bad simulated track record. RITHOLTZ: Right, well models are always fantastic. BORISH: I’m waiting for the guy to come in with a minus two sharp going “Wait, it can only get better.” Then I — RITHOLTZ: But by the way, what backtest ever is bad? BORISH: Yes, yeah, well, I’m super. I can predict yesterday perfectly. I’m very good at that. I try to, you know, come on here, I’ll tell you what happened, no problem. RITHOLTZ: Who has a better track record than Hindsight Capital? They’re the best. BORISH: Yeah, and it’s the hedge fund is there, but it’s why, in seriousness, that, you know, the first line of every disclosure document is past performance is not indicative of future results, but everybody looks at past performance. RITHOLTZ: Right. BORISH: So on the quant side, you have to look at real-time data, and you also have to segment it to sort of its strategy relative to market. So if you look at last year, a lot of CTAs and trend followers did really well, and you’d have a great real-time track record associated. RITHOLTZ: So you had a defined move in a specific direction that was sustained? BORISH: Yes. So there’s two things about that. One they’ll come to me and go, “Oh man, man, we just had the best year since ’08. Another year where there’s a lot of dislocations.” And I’m like, “Man, that’s fantastic. Once every 15 years, do me a favor. Come back in ’13, I don’t want to be late.” RITHOLTZ: Right. (LAUGHTER) BORISH: But the reality is if you want to dig deeper in that, then you start looking at, “Well, what markets did you trade? Why did you do that? Why did you exclude COCO? Well COCO is not a good trend following market. How do you know that? Well then you’ve over optimized. So you really have to start digging deep, asking very, very tough questions when it comes to these quantitative strategies. Frequency of trading, volatility, draw downs, it’s, and all this is more of an art than it is a science. And that also applies on the discretionary trading side. But on the discretionary trading side, you have that other element that you have to put on top of that, which is the emotional and the psychological. And one of the things I always say is that every successful trader has a near-death experience. I just hope they have it before we’ve allocated to them. RITHOLTZ: Right. (LAUGHTER) BORISH: And so it’s not that they’ve had it, it’s how you recover from it. And so it’s one of these things that math works. And so sometimes there’s a trader and he’ll come into my office and I’ll go, “Pete, I can’t believe it. I just had my worst day ever.” And I’m like, “Well, I’ve got good news and bad news for you.” And he goes, “Well, what’s the good news?” I go, “Well, you’re still within your risk parameters. You didn’t violate any of our trading rules. So you still have a job.” And they go, “Well, then what’s the bad news?” I go, if you’re in business long enough, you’re going to have a worse trade. Because that’s just the law of large numbers. Records are made to be broken. If I told you 20 years ago that someone was going to break Kareem’s scoring record in basketball, unbelievable. RITHOLTZ: You would have left him, right. BORISH: And here we are, LeBron James did it this year. All the credit in the world for him. But it’s a little bit like trading options. So if you continually buy premium, thinking a record’s going to be broken, you probably run out of money before it does. And if you continually sell premium, thinking the record’s never going to be broken, you go broke when it is broken. So you have to have that discipline and it’s an extraordinarily tough business. RITHOLTZ: To say the very least. Let’s talk about a quote of yours that I happen to really like. “Fundamentals aren’t wrong, you are.” Explain what that means. BORISH: It means that the market is the scoreboard. And if you think you’re right and you think the fundamentals are wrong, you’re going to take a small loss and turn it into a large loss. Trading works best when the fundamentals and the technicals intersect. Too often, one just looks at either one or the other. So we could say today, “Well, we think the fundamentals are deteriorating. There’s no way the S&P should be at 4,200. I’m going to get short.” But there’s no technical indication in the markets today that you should be short. RITHOLTZ: Right. The number of 52-week lows is falling, the breadth is pretty good, and when you look, especially outside of the U.S., a lot of positive uptrends. People have a tendency to ignore that, and they’re just focused at what’s going on. Look at the Russell small cap in the U.S. It’s doing terrible. We’re due to crash. BORISH: That’s correct. So what you do for me in that case, I’m looking for, if you want to look to sell it and pick level then you look for the Russell to start doing better and reaching key technical levels and then you can probe and you look for divergences all the time. So you look at the transports which have been lagging for today but these are all signs they’re not things in which you should be taking action, you have to be patient and a lot of times you talk about traders and discretionary traders in particular and I’ll speak to them, not trading is a trade. RITHOLTZ: Right. BORISH: And just because you’re sitting in front of the screen doesn’t mean you have to do something and that takes tremendous discipline because particularly if you get paid a share of the profits and you’re like there’s nothing going on. Now some of the best traders I know they’ll be like okay I did something it’s 10:30 I’ve made some money I’m out of here for the day. And that’s fine. However you do it, however you force your own self-discipline, but just trading to trade is a terrible strategy. RITHOLTZ: That’s the great Warren Buffett quote, “Unlike baseball there are no cold strikes in markets.” You could sit there with a bat on your shoulder and just wait for your pitch. BORISH: That’s correct. RITHOLTZ: So let’s talk a little bit… BORISH: But a lot of people are in the business because they love the action and sitting… RITHOLTZ: Oh well we’re all junkies we’re all looking for that dopamine. BORISH: So sitting with your bat on your shoulder is really tough for some people. RITHOLTZ: Yes, yes, absolutely. I’m always surprised at traders who are also gamblers like to go to Vegas like to play blackjack it’s like don’t you get enough excitement from traders? BORISH: I don’t gamble at all I don’t bet on — I’m a fan right so I’m a Michigan fan I’m a Nick fan, God I’m a Jets fan I’m a Mets fan so we can… RITHOLTZ: So you are a glutton for punishment. BORISH: Yes, we could have a whole psychological segment. RITHOLTZ: Although at least Michigan has been doing, football’s been doing better. BORISH: Yes, and they had a good run in basketball. But I’m a fan, I enjoy, I never bet on sports. (ADVERTISEMENT) RITHOLTZ: Let’s talk about betting on natural gas. We have had a kind of wild market in energy over the past couple of years. Not just the Russian invasion of Ukraine, but all the things that have been happening in both oil and gasoline and natural gas. You’re a natural gas trader. How do you look at what’s going on in that market, and tell us where the price of energy is going to be in a couple of weeks or months? BORISH: So, for everybody that’s listening, whatever I do, do the opposite, and you may have a chance of success. So natural gas, in terms of how it’s behaved, it’s had a round trip. So where the price is today is close to where oil was when it was zero in April of ’20, just to give you a sense. So natural gas– – RITHOLTZ: Crude oil is also round trip, and gasoline is almost a round trip. BORISH: Yeah, but not nearly to the extent. So this again becomes listen to the markets, don’t listen to the gossip. And so where we are right now, in my mind, in natural gas, which is different than crude, is a little bit counter cyclical because we’ve had warmer than normal weather, we had extra storage, and that put downward pressure in winter. Now it looks like that’s going to reverse and we’re going to have a sort of really hot summer, and you can ascribe that to climate change, or — RITHOLTZ: El Nino and that stuff. BORISH: Right, yeah, you can decide whatever you want to call it, but the facts are the facts, right? If it’s hot and we’re going to be burning and you’re going to need to be cooling, at the same time, a lot of this thought that natural gas and the economy was going to weaken, And in general, we were taught to try to buy low and sell high. We just talked earlier how most times in the markets, buyers are higher and sellers are lower. So we’re sitting there trying to put a position on sort of spreading summer natural gas and hedging it a little bit by being short winter next year. RITHOLTZ: So we’re recording this at the end of May 2023. How do you look at macro events, the Russian invasion of Ukraine just being one example, does that affect the way you look at what the market is telling you, or is that just gossip by the time it’s in the newspaper it’s already in the price? BORISH: No, you have to look at all these things. I think there’s an important lesson here. When there’s tremendous amount of market uncertainty, you need to trade smaller. Because that’s what kills you. Periods of low volatility, which we’re in now, then tend to be followed by higher volatility. A lot of models are predicated on looking backwards over recent volatility, and then you’re trading too large. And I really want to distinguish, because people talk all the time about black swans. And they go, “Oh, this black swan could happen,” or, “That black swan could happen.” And I’m like, “If you’re talking about it, it’s not a black swan.” That’s risk management. That’s smart. A black swan is when you wake up in the morning and a condo in Florida has collapsed or you wake up in the morning and Abe’s been assassinated. These aren’t things that you put into your risk management models. But if you survive, you win. So you should really probably at these periods of uncertainty. So is there going to be a Ukrainian offensive? What is that going to do? And how is that going to affect the situation with Russia? Are they going to be threatening? They are a nuclear power. Is that just a threat to try to keep them? Or God forbid, something worse happens. I have no idea. I don’t think anybody can have that idea because you can’t get into the head of the leaders of Russia to decide how they’re going to act. But from a trading perspective, I think that you need to trade smaller. Now, one of the things that I find really interesting right now, this time of year, is that because if there is climate change and you have grain prices that are pre-pandemic levels, it could be really fascinating and exciting to have sort of a summer rally in soybeans and corn. And the risk reward of buying them right here is fantastic. Because you’ve had a wet period of time, if you get dry and you don’t have good growing conditions in the Midwest here, at the same time you have uncertainty in the Ukraine, which is a large producer of grains. RITHOLTZ: Big breadbasket, yes. BORISH: So, yes. So this could be, and there’s nothing more fun than a summer bull market in grains. RITHOLTZ: So I’ve never quite heard that sentence before. Nothing more fun than a bull market in the summer and grains. You’ve pointed out the psychology and self-discipline. How can you teach traders to manage their emotions and to not allow either their enthusiasm or despair to affect their trading behavior? BORISH: The best teacher, unfortunately, is failure. And how you deal with that failure. So many times, people would come into my office after a really bad day, they sit down, they put their hands on their head, and they go, “Oh, why the hell am I in this business?” Now, what you can do, and we’ve all done this, if you get out of all your positions, you emotionally cleanse yourself. But are you able to get back in the game? Because you can emotionally cleanse yourself and leave the game, and you’ll never be able to make your money back. So how do you handle that adversity? Success, okay, most people enjoy success. RITHOLTZ: But it doesn’t teach you anything. BORISH: Correct, in the trading business, it’s how you deal, what did you do? And you have to really be self-aware. Did I hold on to the position too long? Was I too big? Was I gossiping with other people and I lost my discipline? You really have to break it down and it all comes back to the fact that you have to admit that it’s my fault as a trader. I’m the one that screwed up. RITHOLTZ: Wait, you mean it’s not the Fed’s fault? Because I’ve spent the past decade listening to managers and economists and traders tell me, “Well, my P&L would be much better, but this QE and the Fed doing this, how can anybody trade in that environment?” BORISH: Yeah, as the years have gone on, I’ve gotten a lot better at taking credit for success and blaming others for my failure. And, yeah, it’s a good way to go, but you’re living in Lalaland if that’s how you think. You are what your track record is and it’s the sports scenario. If you’re playing baseball and the team gives you a shot and you’re batting 150 and they take you out of the lineup, it’s not the manager’s fault. RITHOLTZ: It’s the umpire. The umpire is calling those outside pitches strikes. How can anybody get a fair shot at the plate with that? BORISH: That’s true but if he is just like in the markets, you have to adjust to it. RITHOLTZ: That’s exactly right. So let’s talk a little bit about Robinhood. It could be one of the more famous Wall Street-based philanthropies in New York, especially given its longevity. How did the idea come about? How big a factor was the ’87 crash in the creation of Robinhood? BORISH: So it’s probably, of all the things, something I’m most proud about, being associated with that since the beginning. And again, really kudos to Paul for his leadership in doing that. So as I said earlier, we really thought that there could be some economic struggles following ’87. And one of the things about trickle down, and I need to fully disclose, yeah, I’m a Democrat that believes in markets, is that when things go bad, it’s those at the bottom that get hurt first. And we’ve seen that repeatedly. And so when we thought about helping New York, now you have to realize, 1988, we gave away $65,000. RITHOLTZ: Right. Not exactly a huge amount of money. BORISH: No, last year we gave away 130 million. RITHOLTZ: That’s a chunk of change. BORISH: Yes, and — RITHOLTZ: And you guys have been doing this every year for 35 years. BORISH: Yes, and the model was different, and why did we start it? Because Paul’s an entrepreneur, and the one thing, and we’re market people, and we said, you know what, if we do a good job, we’ll be able to raise the money, and I don’t want people to give us money and us not spend it. So we have two rules. One is if you give us a dollar, we’re going to put it out the door in the next 12 months. And two, we’re paying for the overhead, the board. So if you give us a dollar, it’s getting paid. It’s not being paid — RITHOLTZ: 100 cents on the dollar goes out from donated cash. BORISH: That’s correct. RITHOLTZ: And who are the donors to the Robinhood Foundation besides you and Paul Tudor Jones and that original crew? BORISH: There’s literally thousands and after 9/11 and Sandy and during the pandemic, tens of thousands of donors from all different sizes. Now we’re sitting here in Bloomberg and Mayor Mike through the Bloomberg Philanthropies is one of the largest donors and supporters of New York. Now Robinhood focuses on sort of the overriding goal is mobility from poverty. RITHOLTZ: Meaning economic mobility, the ability to pull yourself out from a bad condition. BORISH: That’s correct and within that you know we’re we were the first funders of charter schools in New York City. We’re the largest funders of food pantries. You have to have a holistic approach and if you walk around New York and if you love New York City, what are the four issues? Right, you see them. There’s homelessness, there’s mental health, there’s food insecurity, and there’s immigration. And that together, if you could do that through job training, through education, through support systems, and we do that also, we have, try to use technology to help that to put people on a path of a better life. Is it a challenge? Absolutely. But we go back about the trading business and talking about how bad a day can be. But the thing that keeps it always in perspective, no matter how bad a day I have, the people that we’re helping, their days are far worse. And if you keep that in perspective, you’re going to help others who are less fortunate. RITHOLTZ: How do you measure success for a charity? as a trader you get a P&L, you know exactly whether you’re right or wrong, how can you tell the impact of your dollars whether or not they’re successful or not? BORISH: So that’s a really outstanding question and that’s something that Robinhood has been particularly innovative in, in trying to measure metrics. So if it’s a job training program, it’s not just a number of people that are in there for example. how once they graduate, where’s their starting salary relative to where they were beforehand? Do they still have that job a year later? How are they making more money? Are they at some percentage above the poverty level? If you’re funding charter schools, where are they? Are the kids graduating? Are they going to college? Are you tracking them? Are they getting employment? So it’s all very data intensive and metric intensive. Now there are some things, right, if you’re, if unfortunately, if you’re a woman and you’ve been battered, and you have kids, before they can go to job training or education, they need to have a safe place to stay. So we fund shelters and where we are, and we do food support, because it has to be a holistic approach, this movement from poverty. And as a parent, just as you’re dealing with your own children, that’s what you’re doing. It’s a holistic approach. It’s not, okay, here’s one magic bullet. I wish that were the case, but it isn’t. And like any organization, the key is not me, not Paul, not the other board members. It’s the quality of the staff. And we have committed, innovative staff that has really pushed Robinhood along the way. And that started with our leaders and president from David Saltzman to Wes Moore, who’s now the governor of Maryland, to our newest one, Rich Buery. And so we’re really fortunate to have excellent team. RITHOLTZ: You mentioned charter schools. Tell us a little bit about the KIPP Charter School in the Bronx and why Robinhood has been so active in promoting and developing charter schools in some of the poorer neighborhoods in New York City? BORISH: Well, we’re markets people. So we think that competition is a good thing. We know that charter schools aren’t going to be a replacement for all public schools, but if you think about technology in general, right, it’s innovation and change. And if you think about the KIPP model, it’s really like a parent. So if you have a child and they’re not doing well, what do you do? You give them extra resources, you give them extra homework. And so they may come home from school and you’re working with them. Now if you have parents who are working the overnight shift in a hospital, they don’t have that ability to give their children that extra time because they’re working. So these schools do that. RITHOLTZ: Meaning extended hours, tutors, et cetera. BORISH: Exactly, they’re providing the resources and the opportunities for those students who they wouldn’t normally have in a traditional public school model. RITHOLTZ: Let’s talk about what you guys do for, at Robinhood, for public schools. Tell us about Math for America that seeks to improve math education in US public schools. BORISH: So Robinhood Foundation, Math for America, those are the two not-for-profit boards that I sit on. And I’ve been blessed, really, because Math for America was started by Jim Simons. And we all know what a legend Jim Simons is in the hedge fund world. In the education space, that model was predicated in how do we keep better math and science teachers in public schools? The assumption being, which isn’t rocket science even though he is a rocket — RITHOLTZ: Pay them more. BORISH: Well, yes, but for the students — RITHOLTZ: Give them the tools, give them the resources, yeah. BORISH: If you have really good teachers, you’re likely to have better outcomes. So how do you keep really good teachers in schools when there’s a lot of competition for them? So we’ve done two things at Math for America. We’ve established a community of master math science teachers where they can come together and learn and teach and also we provide them a stipend so there’s an incentive for them to stay in their schools and it’s really fascinating because even though all the teachers in the schools aren’t there, a good captain, good player makes the players around them better. And so what they’re doing and what they’ve taken back from, you know, coming down to Math for America for the sessions and bringing it back to school, I think helps all the teachers, which helps all the students. RITHOLTZ: Before we get to our favorite questions, let me throw a curveball at you, which I find intriguing. You like to quote Captain E.J. Smith, who famously said, quote, “When anyone asks me how I can best describe my experience in nearly 40 years at sea, I merely say, ‘uneventful.'” Why is that quote so intriguing to you? BORISH: Well, not only did he say that, but he said it sort of just before the launching of the Titanic. And I think if you’ve listened at all to– RITHOLTZ: And he was the captain of the Titanic. Yes, he was the captain of the Titanic. If you listen to anything or taken anything out of this podcast, is that complacency in anything but particularly in the markets is extraordinarily dangerous. And one should take away from that that bad things can and will happen in the markets. That means trade smaller, have really good risk management, and don’t believe your success when you’re trading successfully. (ADVERTISEMENT) RITHOLTZ: Let’s jump to our favorite questions that we ask all of our guests, starting with, tell us what you’ve been entertaining yourself with. What are you listening to or watching, be it Netflix or podcasts or whatever? BORISH: Well, so we have a sort of group consideration at home. course we’re finishing “Succession” right there’s two left and at the same time, Barry, and “Ted Lasso” so those post Memorial Day, I think we’re going to have to find some new things. RITHOLTZ: I’ll make a recommendation to you it’s only eight episodes and I’m only halfway through it but “The Diplomat” yes that’s next on our list. BORISH: Yes, that’s next – that’s next on our list. RITHOLTZ: Really well done really fascinating characters I’m really I’m really enjoying it. BORISH: And when I’m sitting around and trying to clear the ahead and reading. I try, I like historical novels. RITHOLTZ: Well we’re going to come up to books in a moment so put a pin in that. Tell us about your early mentors who helped shape your career. BORISH: Well I was very, very fortunate as I said being at the Fed and in the research people there and of course there’s Paul who was a mentor and because we’re together on the board of the Robinhood Foundation is still a mentor because I think you can always learn different things. And believe it or not, a lot of the mentors now are people I read and listen to. And for example, I had the opportunity to be here at Bloomberg Philanthropies a few weeks ago and listen to Mayor Mike. And I try to take away things that I find insightful. And sometimes I run into people and I’ll say to them, you know, you may not remember this, because to you it was a throwaway line, but it had a lot of meaning to me. And I probably stole it and didn’t give attribution to it. But I try, it doesn’t matter who it is across the board. And it can be from a “Ted Lasso”, it could be from a book, it could be from a politician, it could be from anybody. RITHOLTZ: Let’s talk about books. What are some of your favorites and what are you reading right now? BORISH: So as I mentioned, I read a lot of historical novels and there’s an author by the name of David Liss who writes about England and coffee trading and those type of markets in the 1800s and that’s kind of what I’m reading right now because the psychological aspect, even then, applies to today. RITHOLTZ: What else have you read recently that you enjoyed? BORISH: I’m going to read Michael Lewis’s new book, of course. RITHOLTZ: Yeah, I’m excited. Coming out in September, October, something like that. BORISH: Yes. RITHOLTZ: Yes, that’s going to be great. So, our final two questions. What sort of advice would you give to a recent college grad who is interested in a career in either trading or running a fund? BORISH: So I think all college grads, all young people, you have to be willing to pay your dues. But the trading aspect, the hedge fund aspect, it’s a lot like sports. The chances of being a pro is a low probability. So you should try and then if you have a chance of success, continue, but if not, then you need to pivot because what you don’t want to be doing is saying, okay, I’m going to be a lifetime player in the triple A’s. And so, as in the minor leagues. But if you want to pursue it, you have to pursue it. But do your own work, right? Coming in, and I do a lot of global macro and risk-consulting and I always tell them, I go, “You’re not paying me to read you “the Wall Street Journal or from Bloomberg.” I go, “If you want to have story time, it’s great. “I’ll pull up all the Bloomberg articles you want “and I’ll read them to you.” So don’t rehash other things that people can easily get and think you’re being innovative. Do your own work and you really need to be analytical. RITHOLTZ: And our final question, what do you know about the world of trading and investing today? You wish you knew 50 years or so ago when you were first getting started? 50 or 40? Let’s call it 40 years. BORISH: Yeah, let’s say 40. RITHOLTZ: I just put a decade on yourself. (LAUGHTER) So 40 years ago, when you graduated in the 80s, what do you wish you knew then that you know now? BORISH: I think it’s always the same. I wish we didn’t go through our own near-death experiences. We had that, as I said, every successful traders, We had big volatility in ’86, at Tudor that I mentioned earlier. I wish I knew how difficult it would be running my own CTA. So when I left Tudor, they seeded me. I bought the team of research. It was sort of the first quant trading on the street. And the whole business aspect of raising money, compliance, I wish I had a better understanding of that because it’s just not your track record. And that’s another big problem for graduates today. They think, “Oh, I have a great track record.” This isn’t Field of Dreams. If you build it, they don’t come. You need to have a really, really important process and I wish I was better at that at that time. RITHOLTZ: My colleague Ben Carlson calls that “organizational alpha” and I love that phrase. BORISH: It is a great phrase. RITHOLTZ: Right. Thank you, Peter, for being so generous with your time. We have been speaking with Peter Borish, founding trustee at Robinhood and formerly director of research at Tudor Investments. If you enjoy this conversation, well, check out any of the previous 500 or so we’ve done over the past eight and a half years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcasts. Sign up for my daily reading list at Follow me on Twitter @ritholtz. Follow all of the Bloomberg fine family of podcasts @podcasts. I would be remiss if I did not thank the crack team who helps put these conversations together each week. Robert Bragg is my audio engineer. Atika Valbrun is our project manager. Paris Wald is my producer. Sean Russo is my researcher. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio. END ~~~   The post Transcript: Peter Borish appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureJun 27th, 2023

Futures Dip As Tech Rally Faces First Major Test With Microsoft Earnings

Futures Dip As Tech Rally Faces First Major Test With Microsoft Earnings The rally in US tech stocks and European markets paused on Tuesday as investors prepared for earnings updates from industry giants, including Microsoft and Texas Instruments. US equity futures fell after the tech-heavy Nasdaq 100 posted its best two-day gain since November, as traders braced for the worst tech earnings slump since 2016. Europe’s region’s Stoxx 600 Index erased an early advance to fall into the red. At 7:30am ET, S&P 500 futures were 0.2% lower and Nasdaq futures were down 0.3%; the tech-heavy benchmark is up8.5% in January, on pace for its best month since July even as profit estimates are declining and as Federal Reserve officials advocate for more policy tightening to combat inflation if at a slower, 25bps pace. The USD rose; Treasuries were unchanged while commodities were mixed with strength in natgas, nickel, oil and precious metals. In pre-market trading, Alphabet shares fell slightly after a Bloomberg News report that the US Justice Department could file an antitrust lawsuit against Google as soon as Tuesday regarding the search giant’s dominance over the digital advertising market. Microsoft, which reports results today, was little changed. Yesterday the world’s largest software maker confirmed it is investing $10 billion in OpenAI, the owner of artificial intelligence tool ChatGPT. Advanced Micro Devices fell in pre-market trading, after Bernstein downgraded the stock to market perform from outperform, citing a worsening PC climate and “semi-destructive behavior” by rival Intel Corp. Here are the other notable pre-market movers: 3M forecast adjusted earnings per share for 2023; the guidance missed the average analyst estimate. Shares decline 4.9%. GE forecast adjusted earnings per share for 2023; the guidance missed the average analyst estimate. Shares gain 1.8%. Johnson & Johnson guided to stronger earnings for 2023 than analysts were expecting after a year in which the pharma division suffered because of waning demand for its unpopular Covid-19 shot. Shares rise 0.5%. Lyft shares gain 3.4% after KeyBanc upgrades the ride- hailing firm to overweight from sector weight, with broker saying data indicates that the firm is turning a corner, while cost-cutting could boost Ebitda. HighPeak Energy shares rise 15% after the oil producer’s board voted to initiate a process to evaluate strategic alternatives including a potential sale. Zions shares drop 2.7% after the bank’s total deposits fell short of Wall Street estimates, with analysts also disappointed by the firm’s forecast for net interest income which they said could put pressure on estimates amid a tough macroeconomic backdrop. Watch oil and gas stocks as Morgan Stanley says it’s increasingly selective in the sector as it continues to see a “mixed setup” for North American shares ahead of earnings. Upgrades Marathon Oil to overweight, and cuts APA and Ovintiv to equal-weight. Keep an eye on Target shares as Oppenheimer begins coverage at outperform, seeing potential for a “strong multi-year profit recovery” and opportunity for the discount retailer to capture market share. KeyBanc initiates coverage of Virgin Galactic Holdings at sector weight, saying the company could be highly profitable if it succeeds in ramping up its “next-generation” spaceship fleet, but that its performance hinges on execution. Amazon’price target and 2024 outlook cut at Telsey Advisory Group as the spending environment becomes more challenging and growth rates normalize after a couple of years of acceleration during Covid. Shares decline 0.3%. Cheesecake Factory downgraded at Raymond James to market perform from outperform reflecting concerns about the restaurant chain operator’s ability to recover pre-Covid margins. The brokerage also cut its rating on Dine Brands Global, the parent company of Applebee’s Neighborhood Grill + Bar and IHOP restaurants. Shares decline 1.8%. Cymabay Therapeutics gains 11% in premarket trading after the offering priced via Piper Sandler, Raymond James, Cantor Fitzgerald. Halliburton Co. boosted its dividend 33% as the world’s biggest provider of fracking services follows its oil-and-gas clients by expanding shareholder returns amid tight global supplies for crude. Shares gain 0.3%. HighPeak Energy (HPK) shares rise 17% after the oil producer’s board voted to initiate a process to evaluate strategic alternatives including a potential sale. Lululemon Athletica Inc. (LULU) falls as much as 2.1% after Bernstein analyst Aneesha Sherman cut her recommendation on the athleticwear maker to underperform from market perform. PennantPark Floating (PFLT) drops 6.4% after an offering of 4.25m shares raised proceeds of $47.6 million, or $11.20 apiece, representing a discount to last close. Verizon Communications Inc.’s profit outlook trailed Wall Street estimates in a sign that consumer wireless business continues to weigh down performance as the company turns to costly phone giveaways to compete with its peers. Shares decline 2%. In previewing this week's barrage of tech earnings, JPMorgan writes that with MSFT earnings coming today, and the balance of the FANG+ complex next week, "many are asking whether the US can reverse its underperformance. In the near-term, the answer seemingly lies with Tech earnings, which are expected to experience their largest decline since 2016, according to Bloomberg. Longer-term, a Fed pause may not be enough given the difference in growth rates of regions economies. The weakening USD has been a bigger benefit to international Equities than it has to create a domestic earnings tailwind. It may also be the case where the US is more vulnerable to margin compression than its international counterparts. Longer-term, if we do experience a Fed pivot this year, then would anticipate a strong, positive buying impulse for Tech." Wall Street has been slashing earnings estimates for months for the tech sector, which is projected to be the biggest drag on S&P 500 profits in the fourth quarter, data compiled by Bloomberg Intelligence show. The danger for investors, however, is that analysts still prove too optimistic, with demand for the industry’s products crumbling as the economy cools. “We do not see much scope for markets to rally in the near term, especially given our outlook for continued pressure on corporate profit growth,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note echoing what is now a consensus view with identical sentiment shared by his peers at Goldman, JPM, and Bank of America. Haefele noted that UBS GWM’s S&P 500 target for both June and December, at 3,700 points and 4,000 points, were both below Monday’s 4,020 close. “In our view, the risk-reward trade-off remains unfavorable for broad US indexes, and we retain a least preferred stance on US equities and the technology sector,” he added. European stocks also traded lower with the Stoxx 600 down 0.3%. Energy, miners and personal care are the worst performing sectors while insurance and media rise. The risk-off tone has benefited bonds with UK and German benchmarks rising and 10-year borrowing costs falling by 5bps and 2bps respectively. Here are the most notable European movers: Norwegian salmon farmers surge after a politician told newspaper Dagbladet the party is open to modifying a proposed resource tax to be levied on seafood producers in Norway Logitech shares edge up by as much as 2.4% as analysts highlighted better sell- through figures, market-share gains and solid 3Q cash flow from the computer-equipment maker Swatch shares rise 2.1% after analysts said China’s ending of its zero-Covid stance should mean a robust rebound in demand Topdanmark shares bounce as much as 4.9%, the most since February 2022, with a higher-than- expected special dividend the highlight of the Danish insurer’s results Marston’s shares gain as much as 8.7%, with analysts saying the trading update from the UK pub company shows some encouraging sales trends Senior Plc gains as much as 12% in early trading, after the company issued a trading update Monday showing a “strong finish” to the year, with profits ahead of expectations Ericsson shares fall as much as 2.9% after being cut to sell from neutral at Goldman Sachs with the broker bearish on the telecoms-equipment group’s ongoing downside risks Associated British Foods shares slip as much as 1.7% after the food processing and retailing company posted a trading update noting a softer sugar segment offsetting strong performances elsewhere Direct Line shares fall as much as 3.2% as Citi switches to a new system to better value European insurance stocks, cutting the company to sell Dometic slides as much as 4.4% after Pareto Securities cut the Swedish recreational vehicle equipment maker to hold, with US demand in “free fall” in the short term Meanwhile, European flash business activity data, while better than expected, highlighted ongoing weakness across the euro bloc and in Britain, while US figures later in the day will offer investors a snapshot of how the world’s largest economy is faring.  Commenting on today's PMI data, which came out as follows... Germany Jan. Flash Manufacturing PMI 47; Est 48 Germany Jan. Flash Services PMI 50.4; Est 49.5 France Jan. Flash Manufacturing PMI 50.8; Est 49.5 France Jan. Flash Services PMI 49.2; Est 49.8 UK Jan. Flash Services PMI 48; Est 49.5 UK Jan. Flash Manufacturing PMI 46.7; Est 45.5 ... Goldman writes that "the January flash PMIs showed significant improvements in future expectations and other forward-looking indicators like new orders also improved on the margin." And some more details: The Euro area composite flash PMI increased by 0.9pt to 50.2 in January, above consensus expectations. The increase in the composite index was broad-based across sectors, with the services sector surpassing the 50 threshold for the first time since July. Across countries, the improvement was led by the periphery and Germany, offset partially by a moderation in France. In the UK, the composite flash PMI decreased by 1.2pt to 47.8, well below consensus expectations. We see three main takeaways from today's data. First, the upside surprise in the data today and the Euro area composite PMI surpassing the 50 threshold confirm our view that Euro area growth prospects have improved significantly recently. Second, cost inflation is moderating but the increase in output prices released today provided another reminder that underlying inflation remains sticky. Third, today's data reinforce our expectation that the UK will underperform the Euro area even with falling energy prices. PMI data aside, the upcoming wave of US corporate earnings — from tech giants such as Microsoft Corp. and Texas Instruments Inc. as well as industrials such as GE — is likely to dominate attention. “It’s all about earnings,” said Peter Kinsella, head of FX strategy at asset manager UBP. “Given that equities are trading at elevated levels, any earnings disappointment would justify a shift lower in stocks.” Kinsella said there was scope for bonds to rally and reckons that the dollar, already down about 1.7% this year against a basket of rivals, has likely seen its peak as the Federal Reserve approaches the end of its rate-hiking cycle. The US central bank bank is expected to cut rates by a smaller 25 basis points at a Jan. 31-Feb. 1 meeting. “The market is saying inflation is done and dusted, which justifies a turn in tone from the Fed,” Kinsella added. “Overall I am off the view we saw the multi-year dollar peak last year.” Earlier in the session, Asian stocks extended their recent rise in holiday thinned trading, as investors looked beyond expected near-term earnings weakness and rising US interest rates. The MSCI Asia Pacific Index rose 0.8%, poised for a third straight day of gains, driven by industrial and technology shares. Japan led the advance for a second session, with China and much of the region still shut for Lunar New Year. “With job cuts proceeding apace, the markets likely continue to ignore short-term earnings and look into next year,” a bullish scenario, analyst Mark Chadwick wrote in a note on Smartkarma. Growth stocks also benefit with “Fed hike risks out of the headlines and consensus now around peak rates at 5%.” Major Asian tech stocks reporting results this week include South Korean EV battery maker LG Energy Solution and Japanese robot maker Fanuc. In addition to the rebound in global peers, local shares have also gained on optimism over China’s reopening and easing corporate crackdowns Japanese stocks rose Tuesday, gaining traction after a tech rally drove gains in US peers and amid growing optimism that the Federal Reserve will be less hawkish than previously expected. The Topix Index rose 1.4% to 1,972.92 at the market’s close in Tokyo, while the Nikkei advanced 1.5% to 27,299.19. Sony Group Corp. contributed the most to the Topix’s advance, increasing 1.9%. Mitsubishi UFJ Financial and Toyota Motor were other notable gainers. Among 2,161 stocks in the index, 1,713 rose, 369 fell and 79 were unchanged. “The rise in US stocks is positive to Japanese equities, especially with a fairly strong sentiment that US interest rate hikes might come to an end soon,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management. “In Japan, exporters are rebounding as concerns over yen’s appreciation cool and inbound demand continues to contribute to the rally.” Australian stocks rose for a fifth session; the S&P/ASX 200 index rose 0.4% to close at 7,490.40, led by gains in mining and real estate shares. The benchmark closed at the highest since April 21, extending gains for fifth session.  In New Zealand, the S&P/NZX 50 index fell 0.1% to 11,932.92 In FX, the Bloomberg Dollar Spot Index swung to a gain in European session and the greenback rose against all of its Group-of-10 peers apart from the yen and the Swedish krona. The pound fell to the bottom of the G-10 pile after PMI data highlighted the looming risk of a recession in the UK economy. Readings from France and Germany were more mixed but enough to prompt the euro to reverse an earlier advance.  Traders position for a series of US data releases and the next meetings by the world’s major central banks, and the dollar meets topside demand through options. The euro climbed toward $1.09 only to reverse its gain after Germany’s manufacturing PMI unexpectedly fell. Germany’s composite PMI however came in better than forecast, at 49.7, and the composite for the whole euro zone entered expansionary territory after rising to 50.2, versus expected 49.8. Separately, German February GfK consumer confidence improved to -33.9 versus estimate -33.3 The pound fell against all of its G-10 peers and gilts outperformed Treasuries and bunds after S&P Global’s UK PMI fell to 47.8 in January from 49 the month before, well below economists’ forecasts for little change The yen advanced for the first time in three days and bonds fell. Investors were waiting for the Bank of Japan’s summary of opinions from its January meeting and Tokyo inflation data later this week to see if a further policy change was in store Australian sovereign bonds pared opening losses as markets parsed improved National Australia Bank business confidence, instead focusing on how components to business conditions softened. Australian and New Zealand dollars swung to losses in European trading In rates, Treasuries are slightly richer with yields shedding 1-3bps across the curve, supported by a wider rally in gilts after lower-than-estimated UK PMI services gauge. The 10Y TSY is around 3.50%, richer by 1bp vs Monday’s close while lagging gilts by 2bp in the sector. The risk-off tone has benefited bonds with UK and German benchmarks rising and 10-year borrowing costs falling by 5bps and 2bps respectively. In core European rates gilts outperform in bull-steepening move where front-end and belly yields are richer by 5bp on the day. The US auction cycle begins at 1pm with $42b 2-year note sale, ahead of $43b 5- year and $35b 7-year notes Wednesday and Thursday. Focal points of US session also include January PMIs, along with 2-year note auction, first of this week’s three coupon sales.   In commodities, crude futures are little changed while spot gold rises 0.3% to trade near $1,938/oz. FBI said two hacker groups associated with North Korea were behind the USD 100mln theft from US crypto firm Harmony Horizon Bridge last June, according to Reuters. Looking to the day ahead now, the main data highlight will be the January flash PMIs from Europe and the US. Elsewhere, central bank speakers include ECB President Lagarde, along with the ECB’s Knot and Vujcic. Earnings releases include Microsoft, General Electric, Danaher, Johnson & Johnson, Lockheed Martin, Texas Instruments, Union Pacific and Verizon Communications. Market Snapshot S&P 500 futures down 0.1% to 4,031.75 STOXX Europe 600 down 0.1% to 453.95 MXAP up 0.6% to 168.43 MXAPJ little changed at 551.68 Nikkei up 1.5% to 27,299.19 Topix up 1.4% to 1,972.92 Hang Seng Index up 1.8% to 22,044.65 Shanghai Composite up 0.8% to 3,264.81 Sensex up 0.1% to 61,016.22 Australia S&P/ASX 200 up 0.4% to 7,490.40 Kospi up 0.6% to 2,395.26 German 10Y yield little changed at 2.18% Euro little changed at $1.0867 Brent Futures down 0.5% to $87.73/bbl Gold spot up 0.2% to $1,935.75 U.S. Dollar Index down 0.11% to 102.03 Top Overnight News From Bloomberg The UK government sank deeper into debt in December as rising debt-interest payments and the cost of insulating consumers and businesses from the energy-price shock strained the public finances. The budget deficit stood at £27.4 billion ($34 billion), a record for the month and almost triple the £10.7 billion shortfall a year earlier Some UK homes are requested to curb power demand on Tuesday evening as the nation’s grid struggles for a second day to plug the gap left by a drop in wind generation The immense wealth coming from Norway’s gas and oil fields is underpinning a new refrain among market experts: it’s time for a big rebound in the krone A more detailed summary of overnight events courtesy of Newsquawk Asia-Pacific stocks were positive and took impetus from the tech rally on Wall Street but with trade quiet amid a lack of fresh catalysts and as many participants in the region remained absent with markets in China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia and Vietnam all closed for the holiday. ASX 200 was underpinned by strength in the real estate, tech and mining industries albeit with gains capped after a mixed NAB business survey and soft PMI data which showed a contraction in the manufacturing and services.  Nikkei 225 continued its outperformance and climbed above the 27,000 level with the index unaffected by the latest preliminary PMI data in which Manufacturing PMI contracted for the 3rd consecutive month although Services and Composite PMIs improved with the latter back in expansionary territory, while reports also noted that Japan is considering early May for its planned downgrade of COVID policy. Top Asian News US President Biden's Administration reportedly confronted China's government with evidence that suggested some China SOEs may be providing assistance to Russia's war effort, according to Bloomberg. The first three days of the Chinese Spring Festival holidays saw bookings for domestic hotel and scenic spots increase by 56% and 79% Y/Y, according to data by online travel agency Tongcheng Travel cited by these Global Times; Domestic air ticket bookings rose by 30%, China's passenger trips via railway, road, waterway and plane amounted 23.53 million on Monday, up 67.7% Y/Y. BoJ Governor Kuroda says markets moves are becoming more stable, via Reuters. European bourses are a touch softer overall, Euro Stoxx 50 -0.2%, and relatively unreactive to better-than-expected EZ Flash PMIs. Albeit, the FTSE 100 -0.4% is lagging slightly following its own PMIs, which point to a particularly grim start to the UK economy for 2023. Stateside, futures are a touch softer but contained overall, ES -0.2% but above 4k, ahead of data points and key earnings including MSFT. Top European News Euro-Area Business Activity Unexpectedly Grows at Start of Year Britain and the EU are unlikely to make major changes to the underlying Brexit deal, according to a report by the academic body UK in a Changing Europe cited by Reuters. ECB's Nagel said ECB is not done on far too high inflation, according to L'Express; additionally, Villeroy said the ECB probably will reach peak rates by summer. Judge Removed From HSBC Dispute Over Loan to Hot Yoga Studio UK Homes Asked to Curb Power for Second Day as Wind Fades Ukraine Latest: Stoltenberg Confident of Solution on Tanks Soon Notable data EU S&P Global Composite Flash PMI (Jan) 50.2 vs. Exp. 49.8 (Prev. 49.3); “The region is by no means out of the woods yet, however, as demand continues to fall – merely dropping at a reduced rate – and an upturn in the rate of inflation of selling prices for both goods and services will add encouragement to the hawks to push for further monetary policy tightening. The case for higher interest rates is fuelled further by the upturn in employment growth recorded during the month and signs of higher wages driving the latest upturn in price pressures." EU S&P Global Manufacturing Flash PMI (Jan) 48.8 vs. Exp. 48.5 (Prev. 47.8); Services Flash PMI (Jan) 50.7 vs. Exp. 50.2 (Prev. 49.8) German S&P Global Composite Flash PMI (Jan) 49.7 vs. Exp. 49.6 (Prev. 49.0); Click here for more detail. German S&P Global Manufacturing Flash PMI (Jan) 47.0 vs. Exp. 47.9 (Prev. 47.1); Services Flash PMI (Jan) 50.4 vs. Exp. 49.6 (Prev. 49.2) UK Flash Composite PMI (Jan) 47.8 vs. Exp. 49.1 (Prev. 49.0): "Jobs also continued to be lost as firms tightened their belts in the face of these headwinds, though many other firms reported being constrained by an ongoing lack of available labour." UK Flash Services PMI (Jan) 48.0 vs. Exp. 49.7 (Prev. 49.9); Manufacturing PMI (Jan) 46.7 vs. Exp. 45.5 (Prev. 45.3) German GfK Consumer Sentiment (Feb) -33.9 vs. Exp. -33.0 (Prev. -37.8, Rev. -37.6) FX The USD has benefitted from a PMI-induced decline in Sterling, with the DXY lifted to a 102.17 peak and Cable testing 1.23 to the downside. In contrast, the EUR was underpinned by Monday's late-doors ECB speak though EUR/USD stalled on a test of 1.09 before contrasting EZ/regional PMIs. JPY is the marked outperformer having been below 130.00 against the USD, though it has given back some of this recovery momentum in face of the above USD action. CAD is contained pre-BoC with the Antipodeans equally rangebound ahead of inflation data. Brazil's Finance Minister Haddad said President Lula and Argentina's President Fernandez requested the creation of a clearing house with a common currency to settle accounts, but added it has no name or deadline and their idea does not seek monetary unification as is the case with the Euro, according to Reuters. Fixed Income EGBs perhaps gleaned initial support on technical factors, though subsequent action was driven by a marked spike in Gilts to near 105.00. Much of the UK move was driven by the region's PMI release though subsequent bearish fiscal developments served as a fleeting headwind for Gilts and, to a lesser extent, peers more broadly with Bunds continuing to slip post-PMIs. USTs are a touch firmer given the above action and ahead of its own data release and 2yr issuance. UK sells GBP 6bln 2053 Gilt via syndication, order book closed in excess of GBP 65bln, according to a bookrunner. Commodities The crude benchmarks are little changed/slightly softer as a GBP-induced lift to the USD weighs on the complex. However, WTI and Brent remain underpinned overall by the broader improving demand picture amid the Lunar New Year holiday. US is weighing the cancellation of the next SPR sale, according to sources cited by Energy Intel. Dubai sets the official crude differential to DME Oman for April at a USD 0.20/bbl discount. Norwegian Energy Ministry plans a 2023 APA oil and gas licensing round, adding acreage to the Norwegian and Barents sea. 5.4 magnitude earthquake strikes Nepal, via EMSC. Spot gold has slipped from its intraday peak given USD action, though the yellow metal continues to glean support from the slightly softer equity tone while LME Copper has slipped from best but remains in proximity to USD 9.5k/T. Geopolitics Russian Chief of the General Staff Gerasimov said the new army plan considers threats such as Finland and Sweden's desire to join NATO, and the use of Ukraine as a tool of hybrid war against Russia, according to TASS. Polish Defence Minister said Germany has now received Poland's official request to re-export Leopard tanks to Ukraine; following the German Defence Minister saying there is no new position on the Leopard tanks. US Event Calendar 08:30: Jan. Philadelphia Fed Non-Manufactu, prior -17.1, revised -12.8 09:45: Jan. S&P Global US Composite PMI, est. 46.4, prior 45.0 09:45: Jan. S&P Global US Services PMI, est. 45.0, prior 44.7 09:45: Jan. S&P Global US Manufacturing PM, est. 46.0, prior 46.2 10:00: Jan. Richmond Fed Index, est. -5, prior 1 DB's Jim Reid concludes the overnight wrap Risk assets got the week off to a very strong start yesterday, with the S&P 500 (+1.19%) at a 7-week high as investors awaited a raft of earnings reports over the coming days. However, just as equities were surging to fresh highs for 2023, there were also growing concerns about a potential US recession, with the Conference Board’s leading index for December falling by a larger-than-expected -1.0% (vs. -0.7% expected). So that’s a further negative signal after last week’s downbeat releases on retail sales and industrial production, and one that will increase the focus on today’s flash PMIs for January. In many respects, this divergence between more positive markets and weak economic data echoes what Jim and I published last week in our “Sweet Spot” note (link here). We pointed out how it was consistent to be tactically positive on risk assets whilst maintaining our (very) bearish view for H2 2023. In essence, since October markets have been less concerned about inflation and where rates might need to go, with terminal pricing for the Fed funds remaining steady around the 5% mark for a few months now. But we also haven’t reached the US recession that we’re forecasting for H2, which is giving markets scope to rally in the meantime. Indeed, we show in the piece this is also consistent with the historic pattern, with the S&P 500 only tending to turn significantly lower a few weeks before the recession on average. When it came to that release from the Conference Board, the -1.0% decline in December marked the 10th successive monthly decline for the leading index. Furthermore, it means that it’s now down -6.0% on a year-on-year basis, the most since June 2020. Bear in mind that on every other occasion the index has been down by that amount in a single year, the US economy has either been in a recession or was just emerging from one. So clearly not a positive sign by historic standards. For the time being at least, investors put aside their caution on a recession, with equities seeing a strong rally on both sides of the Atlantic. Tech stocks led the advance, which continues their very strong performance in January so far. The NASDAQ was up +2.01%, thus bringing its YTD gains to +8.58%. Meanwhile the FANG+ index of megacap tech stocks saw even larger gains, with a +4.03% advance that brought its own YTD performance to +14.80%, and puts it on track for its best monthly performance since August 2020. After the close there was a Bloomberg report that the US Justice Department was set to sue Google’s parent company Alphabet as soon as today about their digital ad dominance. Alphabet shares were down -0.9% in after-market trading, but futures for the NASDAQ 100 more broadly saw little reaction, and are only down -0.02% this morning. Elsewhere, the cyclical sectors outperformed in line with the risk-on tone for the day, but there was a broader underperformance in Europe, with the STOXX 600 only up +0.52%. Whilst equities were buoyant, sovereign bonds lost ground amidst the risk-off tone, with yields on 10yr Treasuries up by +3.1bps yesterday to 3.51%, followed up by a +0.7bps move overnight to 3.52% as we go to print. That was echoed in Europe too, with yields on 10yr bunds (+2.9bps), OATs (+3.2bps) and BTPs (+3.4bps) seeing similar rises of their own. Those moves came as there was some pushback from ECB speakers about the idea of slowing their rate hikes down from 50bps after the February meeting, with Slovakia’s Kazimir saying yesterday that “we need to deliver two more 50 basis-point moves”. After the close, we also heard from President Lagarde, who said that “We will stay the course to ensure the timely return of inflation to our target”. Looking forward, the main highlight today will be the flash PMIs for January, since they’ll provide an initial steer on how the global economy is performing into 2023. Last month both the US and the Eurozone composite PMIs were in contractionary territory, thus adding to fears about a potential recession. However, the year so far has brought some relatively good news, with European natural gas currently around its lowest in over a year, alongside clear signs that consumer confidence has begun to recover. When it comes to the PMIs, our European economists think the positive impact of easing uncertainty is more likely to come in services than manufacturing. Overnight, we’ve already had some initial PMI numbers from Japan and Australia, which have added to that picture that the global economy might be faring worse than feared. Starting with Japan, the composite PMI moved back into expansionary territory at 50.8, following two months beneath the 50 mark. The manufacturing PMI did remain in contractionary territory at 48.9, but services saw a stronger move higher to 52.4. Meanwhile in Australia, there was also a rise in the composite PMI overnight to 48.2 (vs. 47.5 previously), so still in contractionary territory but a change from three consecutive declines in the PMI. Those more positive PMI releases along with the US equity rally has boosted sentiment in Asian markets this morning, with the Nikkei (+1.52%) as well as the S&P/ASX 200 (+0.44%) both trading in positive territory. However, several major markets across the region remained closed for the Lunar New year holiday. Elsewhere, equity futures suggest that US stocks will hold onto yesterday’s gains, with those on the S&P 500 basically stable at +0.02%. Otherwise yesterday, there was a fair amount of optimism across different asset classes. For instance, Brent crude oil closed above $88/bbl for the first time in 2023 (+0.64% yesterday), which is a decent jump after trading beneath $78/bbl at the lows around the start of the month. Elsewhere, Bloomberg’s index of US financial conditions showed they were at their most accommodative levels since last February. And we also saw the Euro move above $1.09 in trading for the first time since April, before closing back at $1.087. Finally in other data yesterday, the European Commission’s preliminary consumer confidence indicator for the Euro Area in January rose to -20.9 (vs. -20.0 expected). That was beneath expectations, but still the strongest that reading has been since last February. To the day ahead now, and the main data highlight will be the January flash PMIs from Europe and the US. Elsewhere, central bank speakers include ECB President Lagarde, along with the ECB’s Knot and Vujcic. Earnings releases include Microsoft, General Electric, Danaher, Johnson & Johnson, Lockheed Martin, Texas Instruments, Union Pacific and Verizon Communications. Tyler Durden Tue, 01/24/2023 - 08:06.....»»

Category: blogSource: zerohedgeJan 24th, 2023

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases

BTFDers Unleashed: Futures, Yields, Oil Jump As Omicron Panic Eases As expected over the weekend, and as we first noted shortly after electronic markets reopened for trading on Sunday, S&P futures have maintained their overnight gains and have rebounded 0.7% while Nasdaq contracts jumped as much as 1.3% after risk sentiment stabilized following Friday’s carnage and as investors settled in for a few weeks of uncertainty on whether the Omicron variant would derail economic recoveries and the tightening plans of some central banks. Japan led declines in the Asian equity session (which was catching down to Friday's US losses) after the government shut borders to visitors. The region’s reopening stocks such as restaurants, department stores, train operators and travel shares also suffered some losses.  Oil prices bounced $3 a barrel to recoup some of Friday's rout, while the safe haven yen, Swiss franc and 10Y Treasury took a breather after its run higher. Moderna shares jumped as much as 12% in pre-market trading after Chief Medical Officer Paul Burton said he suspects the new omicron coronavirus variant may elude current vaccines, and if so, a reformulated shot could be available early in the new year. Which he would obviously say as his company makes money from making vaccines, even if they are not very efficient. Here are some of the other notable premarket movers today: BioNTech (BNTX US) advanced 5% after it said it’s starting with the first steps of developing a new adapted vaccine, according to statement sent by text. Merck & Co. (MRK US) declined 1.6% after it was downgraded to neutral from buy at Citi, which also opens a negative catalyst watch, with “high probability” the drugmaker will abandon development of its HIV treatment. A selection of small biotechs rise again in U.S. premarket trading amid discussion of the companies in StockTwits and after these names outperformed during Friday’s market rout. Palatin Tech (PTN US) +37%, Biofrontera (BFRI US) +22%, 180 Life Sciences (ATNF US) +19%. Bonds gave back some of their gains, with Treasury futures were down 11 ticks. Like other safe havens, the market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks. Needless to say, Omicron is all anyone can talk about: on one hand, authorities have already orchestrated a lot of global panic: Britain called an urgent meeting of G7 health ministers on Monday to discuss developments on the virus, even though the South African doctor who discovered the strain and treated cases said symptoms of Omicron were so far mild. The new variant of concern was found as far afield as Canada and Australia as more countries such as Japan imposed travel restriction to try to seal themselves off. Summarizing the fearmongering dynamic observed, overnight South African health experts - including those who discovered the Omicron variant, said it appears to cause mild symptoms, while the Chinese lapdog organization, WHO, said the variant’s risk is “extremely high”. Investors are trying to work out if the omicron flareup will a relatively brief scare that markets rebound from, or a bigger blow to the global economic recovery. Much remains unanswered about the new strain: South African scientists suggested it’s presenting with mild symptoms so far, though it appears to be more transmissible, but the World Health Organization warned it could fuel future surges of Covid-19 with severe consequences. "There is a lot we don't know about Omicron, but markets have been forced to reassess the global growth outlook until we know more," said Rodrigo Catril, a market strategist at NAB. "Pfizer expects to know within two weeks if Omicron is resistant to its current vaccine, others suggest it may take several weeks. Until then markets are likely to remain jittery." "Despite the irresistible pull of buying-the-dip on tenuous early information on omicron, we are just one negative omicron headline away from going back to where we started,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “Expect plenty of headline-driven whipsaw price action this week.” The emergence of the omicron strain is also complicating monetary policy. Traders have already pushed back the expected timing of a first 25-basis-point rate hike by the Federal Reserve to July from June. Fed Bank of Atlanta President Raphael Bostic played down economic risks from a new variant, saying he’s open to a quicker paring of asset purchases to curb inflation. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday. “We know that central banks can quickly switch to dovish if they need to,” Mahjabeen Zaman, Citigroup senior investment specialist, said on Bloomberg Television. “The liquidity playbook that we have in play right now will continue to support the market.” European stocks rallied their worst drop in more than a year on Friday, with travel and energy stocks leading the advance. The Stoxx 600 rose 0.9% while FTSE 100 futures gain more than 1%, aided by a report that Reliance may bid for BT Group which jumped as much as 9.5% following a report that India’s Reliance Industries may offer to buy U.K. phone company, though it pared the gain after Reliance denied it’s considering a bid. European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant Japanese shares lead Asian indexes lower after Premier Kishida announces entry ban of all new foreign visitors. Hong Kong’s benchmark Hang Seng Index closed down 0.9% at the lowest level since October 2020, led by Galaxy Entertainment and Meituan. The index followed regional peers lower amid worries about the new Covid variant Omicron. Amid the big movers, Galaxy Entertainment was down 5.4% after police arrested Macau’s junket king, while Meituan falls 7.1% after reporting earnings. In FX, currency markets are stabilizing as the week kicks off yet investors are betting on the possibility of further volatility. The South African rand climbed against the greenback though most emerging-market peers declined along with developing-nation stocks. Turkey’s lira slumped more than 2% after a report at the weekend that President Recep Tayyip Erdogan ordered a probe into foreign currency trades. The Swiss franc, euro and yen retreat while loonie and Aussie top G-10 leaderboard after WTI crude futures rally more than 4%. The Bloomberg Dollar Spot Index hovered after Friday’s drop, and the greenback traded mixed against its Group-of-10 peers; commodity currencies led gains. The euro slipped back below $1.13 and Bunds sold off, yet outperformed Treasuries. The pound was steady against the dollar and rallied against the euro. Australian sovereign bonds pared an opening jump as Treasuries trimmed Friday’s spike amid continuing uncertainty over the fallout from the omicron variant. The Aussie rallied with oil and iron ore. The yen erased an earlier decline as a government announcement on planned border closures starting Tuesday spurred a drop in local equities. The rand strengthens as South African health experts call omicron variant “mild.” In rates, Treasuries were cheaper by 4bp-7bp across the curve in belly-led losses, reversing a portion of Friday’s sharp safe-haven rally as potential economic impact of omicron coronavirus strain continues to be assessed. The Treasury curve bear- steepened and the benchmark 10-year Treasury yield jumped as much as 7 basis points to 1.54%; that unwound some of Friday’s 16 basis-point plunge -- the steepest since March 2020.  Focal points include month-end on Tuesday, November jobs report Friday, and Fed Chair Powell is scheduled to speak Monday afternoon. Treasuries broadly steady since yields gapped higher when Asia session began, leaving 10-year around 1.54%, cheaper by almost 7bp on the day; front-end outperformance steepens 2s10s by ~3bp. Long-end may draw support from potential for month-end buying; Bloomberg Treasury index rebalancing was projected to extend duration by 0.11yr as of Nov. 22 In commodities, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday. "The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December," wrote analyst at ANZ in a note. "Such headwinds are the reason it's been only gradually raising output in recent months, despite demand rebounding strongly." Brent rebounded 3.9% to $75.57 a barrel, while U.S. crude rose 4.5% to $71.24. Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce . SGX iron ore rises almost 8% to recoup Friday’s losses. Bitcoin rallied after falling below $54,000 on Friday. Looking at today's calendar, we get October pending home sales, and November Dallas Fed manufacturing activity. We also get a bunch of Fed speakers including Williams, Powell making remarks at the New York Fed innovation event, Fed’s Hassan moderating a panel and Fed’s Bowman discussing central bank and indigenous economies. Market Snapshot S&P 500 futures up 0.6% to 4,625.00 MXAP down 0.9% to 191.79 MXAPJ down 0.4% to 625.06 Nikkei down 1.6% to 28,283.92 Topix down 1.8% to 1,948.48 Hang Seng Index down 0.9% to 23,852.24 Shanghai Composite little changed at 3,562.70 Sensex up 0.4% to 57,307.46 Australia S&P/ASX 200 down 0.5% to 7,239.82 Kospi down 0.9% to 2,909.32 STOXX Europe 600 up 0.7% to 467.47 German 10Y yield little changed at -0.31% Euro down 0.3% to $1.1283 Brent Futures up 3.8% to $75.49/bbl Gold spot up 0.3% to $1,797.11 U.S. Dollar Index up 0.13% to 96.22 Top Overnight News from Bloomberg The omicron variant of Covid-19, first identified in South Africa, has been detected in locations from Australia to the U.K. and Canada, showing the difficulties of curtailing new strains While health experts in South Africa, where omicron was first detected, said it appeared to cause only mild symptoms, the Geneva-based WHO assessed the variant’s risk as “extremely high” and called on member states to test widely. Understanding the new strain will take several days or weeks, the agency said All travelers arriving in the U.K. starting at 4 a.m. on Nov. 30 must take a PCR coronavirus test on or before the second day of their stay and isolate until they receive a negative result. Face coverings will again be mandatory in shops and other indoor settings and on public transport. Booster shots may also be approved for more age groups within days, according to Health Secretary Sajid Javid The economic effects of the successive waves of the Covid pandemic have been less and less damaging, Bank of France Governor Francois Villeroy de Galhau says Italian bonds advance for a third day, as investors shrug off new coronavirus developments over the weekend and stock futures advance, while bunds are little changed ahead of German inflation numbers and a raft of ECB speakers including President Christine Lagarde A European Commission sentiment index fell to 117.5 in November from 118.6 the previous month, data released Monday showed Spanish inflation accelerated to the fastest in nearly three decades in November on rising food prices, underscoring the lingering consequences of supply-chain bottlenecks across Europe. Consumer prices jumped 5.6% Energy prices in Europe surged on Monday after weather forecasts showed colder temperatures for the next two weeks that will lift demand for heating ECB Executive Board member Isabel Schnabel took to the airwaves to reassure her fellow Germans that inflation will slow again, hours before data set to show the fastest pace of price increases since the early 1990s Russia’s ambassador to Washington said more than 50 diplomats and their family members will have to leave the U.S. by mid-2022, in the latest sign of tensions between the former Cold War enemies China sent the biggest sortie of warplanes toward Taiwan in more than seven weeks after a U.S. lawmaker defied a Chinese demand that she abandon a trip to the island A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded cautiously and US equity futures rebounded from Friday’s hefty selling (S&P 500 -2.3%) as all focus remained on the Omicron variant after several countries announced restrictions and their first cases of the new variant, although markets took solace from reports that all cases so far from South Africa have been mild. Furthermore, NIH Director Collins was optimistic that current vaccines are likely to protect against the Omicron variant but also noted it was too early to know the answers, while Goldman Sachs doesn’t think the new variant is a sufficient reason to adjust its portfolio citing comments from South Africa’s NICD that the mutation is unlikely to be more malicious and existing vaccines will most likely remain effective at preventing hospitalizations and deaths. ASX 200 (-0.5%) is subdued after Australia registered its first cases of the Omicron variant which involved two people that arrived in Sydney from southern Africa and with the government reviewing its border reopening plans. Nikkei 225 (-1.6%) whipsawed whereby it initially slumped at the open due to the virus fears and currency-related headwinds but then recouped its losses and briefly returned flat as the mood gradually improved, before succumbing to a bout of late selling, and with mixed Retail Sales data adding to the indecision. Hang Seng (-1.0%) and Shanghai Comp. (Unch) weakened with Meituan the worst performer in Hong Kong after posting a quarterly loss and with casino names pressured by a crackdown in which police detained Suncity Group CEO and others after admitting to accusations including illegal cross border gambling. However, the losses in the mainland were cushioned after firm Industrial Profits data over the weekend and with local press noting expectations for China to adopt a more proactive macro policy next year. Finally, 10yr JGBs shrugged off the pullback seen in T-note and Bund futures, with price action kept afloat amid the cautious mood in stocks and the BoJ’s presence in the market for over JPY 900bln of JGBs mostly concentrated in 3yr-10yr maturities. Top Asian News Hong Kong Stocks Slide to 13-Month Low on Fresh Virus Woes Li Auto Loss Narrows as EV Maker Rides Out Supply-Chain Snarls Singapore Adds to Its Gold Pile for the First Time in Decades China Growth Stocks Look Like Havens as Markets Confront Omicron Bourses in Europe are experiencing a mild broad-based rebound (Euro Stoxx 50 +1.0%; Stoxx 600 +0.9%) following Friday's hefty COVID-induced losses. Desks over the weekend have been framing Friday's losses as somewhat overstretched in holiday-thinned liquidity, given how little is known about the Omicron variant itself. The strain will likely remain the market theme as scientists and policymakers factor in this new variant, whilst data from this point forth – including Friday's US labour market report - will likely be passed off as somewhat stale, and headline risk will likely be abundant. Thus far, symptoms from Omicron are seemingly milder than some of its predecessors, although governments and central banks will likely continue to express caution in this period of uncertainty. Back to price action, the momentum of the rebound has lost steam; US equity futures have also been drifting lower since the European cash open – with the RTY (+0.9%) was the laggard in early European trade vs the ES (+0.8%), NQ (+1.0%) and YM (+0.7%). European cash bourses have also been waning off best levels but remain in positive territory. Sectors are mostly in the green, but the breadth of the market has narrowed since the cash open. Travel & Leisure retains the top spot in what seems to be more a reversal of Friday's exaggerated underperformance as opposed to a fundamentally driven rebound – with more nations announcing travel restrictions to stem the spread of the variant. Oil & Gas has also trimmed some of Friday's losses as oil prices see a modest rebound relative to Friday's slump. On the other end of the spectrum, Healthcare sees mild losses as COVID-related names take a mild breather, although Moderna (+9.1% pre-market) gains ahead of the US open after its Chief Medical Officer suggested a new vaccine for the variant could be ready early next year. Meanwhile, Autos & Parts reside as the current laggard amid several bearish updates, including a Y/Y drop in German car exports - due to the chip shortage and supply bottlenecks – factors which the Daimler Truck CEO suggested will lead to billions of Euros in losses. Furthermore, auto supbt.aplier provider Faurecia (-5.9%) trades at the foot of the Stoxx 600 after slashing guidance – again a function of the chip shortage. In terms of Monday M&A, BT (+4.7%) shares opened higher by almost 10% following source reports in Indian press suggesting Reliance Industries is gearing up for a takeover approach of BT – reports that were subsequently rebuffed. Top European News U.K. Mortgage Approvals Fall to 67,199 in Oct. Vs. Est. 70,000 Johnson Matthey Rises on Report of Battery Talks With Tata Gazprom Reports Record Third-Quarter Profit Amid Gas Surge Omicron’s Spread Fuels Search for Answers as WHO Sounds Warning In FX, the Buck has bounced from Friday’s pullback lows on a mixture of short covering, consolidation and a somewhat more hopeful prognosis of SA’s new coronavirus strand compared to very early perceptions prompted by reports that the latest mutation would be even worse than the Delta variant. In DXY terms, a base above 96.000 is forming within a 93.366-144 band amidst a rebound in US Treasury yields and re-steepening along the curve following comments from Fed’s Bostic indicating a willingness to back faster QE tapering. Ahead, pending home sales and Dallas Fed business manufacturing along with more Fed rhetoric from Williams and chair Powell on the eve of month end. AUD/CAD/NZD - No surprise to see the high beta and risk sensitive currencies take advantage of the somewhat calmer conditions plus a recovery in crude and other commodities that were decimated by the prospect of depressed demand due to the aforementioned Omicron outbreak. The Aussie is back over 0.7150 vs its US counterpart, the Loonie has pared back losses from sub-1.2750 with assistance from WTI’s recovery to top Usd 72/brl vs a Usd 67.40 trough on November 26 and the Kiwi is hovering above 0.6800 even though RBNZ chief economist Ha has warned that a pause in OCR tightening could occur if the fresh COVID-19 wave proves to be a ‘game-changer’. JPY/EUR - The major laggards as sentiment stabilses, with the Yen midway between 112.99-113.88 parameters and hardly helped by mixed Japanese retail sales data, while the Euro has retreated below 1.1300 where 1.7 bn option expiry interest resides and a key Fib level just under the round number irrespective of strong German state inflation reports and encouraging pan Eurozone sentiment indicators, as more nations batten down the hatches to stem the spread of SA’s virus that has shown up in parts of the bloc. GBP/CHF - Both narrowly divergent vs the Dollar, as Cable retains 1.3300+ status against the backdrop of retreating Gilt and Short Sterling futures even though UK consumer credit, mortgage lending and approvals are rather conflicting, while the Franc pivots 0.9250 and meanders from 1.0426 to 1.0453 against the Euro after the latest weekly update on Swiss bank sight deposits showing no sign of official intervention. However, Usd/Chf may veer towards 1.1 bn option expiries at the 0.9275 strike if risk appetite continues to improve ahead of KoF on Tuesday and monthly reserves data. SCANDI/EM - Although Brent has bounced to the benefit of the Nok, Sek outperformance has ensued in wake of an upgrade to final Swedish Q3 GDP, while the Cnh and Cny are deriving support via a rise in Chinese industrial profits on a y/y basis and the Zar is breathing a sigh of relief on the aforementioned ‘better’ virus updates/assessments from SA on balance. Conversely, the Try is back under pressure post-a deterioration in Turkish economic sentiment vs smaller trade deficit as investors look forward to CPI at the end of the week. Meanwhile, Turkish President Erdogan provides no reprieve for the Lira as he once again defending his unorthodox view that higher interest rates lead to higher inflation. In commodities, WTI and Brent front-month futures consolidate following an overnight rebound – with WTI Jan back on a USD 71/bbl handle and Brent Feb just under USD 75/bbl – albeit still some way off from Friday's best levels which saw the former's high above USD 78/bbl and the latter's best north of USD 81/bbl. The week is packed with risks to the oil complex, including the resumption of Iranian nuclear talks (slated at 13:00GMT/08:00EST today) and the OPEC+ monthly confab. In terms of the former, little is expected in terms of progress unless the US agrees to adhere to Tehran's demand – which at this point seems unlikely. Tehran continues to seek the removal of US sanctions alongside assurances that the US will not withdraw from the deal. "The assertion that the US must 'change its approach if it wants progress' sets a challenging tone", Citi's analysts said, and the bank also expects parties to demand full access to Iranian nuclear facilities for verification of compliance. Further, the IAEA Chief met with Iranian officials last week; although concrete progress was sparse, the overall tone of the meeting was one of progress. "We remain of the opinion that additional Iranian supplies are unlikely to reach the market before the second half of 2022 at the earliest," Citi said. Meanwhile, reports suggested the US and allies have been debating a "Plan B" if talks were to collapse. NBC News – citing European diplomats, former US officials and experts – suggested that options included: 1) a skinny nuclear deal, 2) ramp up sanctions, 3) Launching operations to sabotage Iranian nuclear advances, 4) Military strikes, 5) persuading China to halt Iranian oil imports, albeit Iran and China recently signed a 25yr deal. Over to OPEC+, a rescheduling (in light of the Omicron variant) sees the OPEC and JTC meeting now on the 1st December, followed by the JMMC and OPEC+ on the 2nd. Sources on Friday suggested that members are leaning towards a pause in the planned monthly output, although Russian Deputy PM Novak hit the wires today and suggested there is no need for urgent measures in the oil market. Markets will likely be tested, and expectations massaged with several sources heading into the meeting later this week. Elsewhere, spot gold trades sideways just under the USD 1,800/oz and above a cluster of DMAs, including the 50 (1,790.60/oz), 200 (1,791.30/oz) and 100 (1,792.80/oz) awaiting the next catalyst. Over to base metals, LME copper recoups some of Friday's lost ground, with traders also citing the underlying demand emanating from the EV revolution. US Event Calendar 10am: Oct. Pending Home Sales YoY, prior -7.2% 10am: Oct. Pending Home Sales (MoM), est. 0.8%, prior -2.3% 10:30am: Nov. Dallas Fed Manf. Activity, est. 17.0, prior 14.6 Central Bank speakers: 3pm: Fed’s Williams gives opening remarks at NY Innovation Center 3:05pm: Powell Makes Opening Remarks at New York Fed Innovation Event 3:15pm: Fed’s Hassan moderates panel introducing NY Innovation Center 5:05pm: Fed’s Bowman Discusses Central bank and Indigenous Economies DB's Jim Reid concludes the overnight wrap Last night Henry in my team put out a Q&A looking at what we know about Omicron (link here) as many risk assets put in their worst performance of the year on Friday after it exploded into view. The main reason for the widespread concern is the incredibly high number of mutations, with 32 on the spike protein specifically, which is the part of the virus that allows it to enter human cells. That’s much more than we’ve seen for previous variants, and raises the prospect it could be a more transmissible version of the virus, although scientists are still assessing this. South Africa is clearly where it has been discovered (not necessarily originated from) and where it has been spreading most. The fact that’s it’s become the dominant strain there in just two weeks hints at its higher level of contagiousness. However the read through to elsewhere is tough as the country has only fully vaccinated 24% of its population, relative to at least 68% in most of the larger developed countries bar the US which languishes at 58%. It could still prove less deadly (as virus variants over time mostly are) but if it is more contagious that could offset this and it could still cause similar healthcare issues, especially if vaccines are less protective. On the other hand the South African doctor who first alerted authorities to the unusual symptoms that have now been found to have been caused by Omicron, was on numerous media platforms over the weekend suggesting that the patients she has seen with it were exhausted but generally had mild symptoms. However she also said her patients were from a healthy cohort so we can’t relax too much on this. However as South African cases rise we will get a lot of clues from hospitalisation data even if only 6% of the country is over 65s. My personal view is that we’ll get a lot of information quite quickly around how bad this variant is. The reports over the weekend that numerous cases of Omicron have already been discovered around the world, suggests it’s probably more widespread than people think already. So we will likely soon learn whether these patients present with more severe illness and we’ll also learn of their vaccination status before any official study is out. The only caveat would be that until elderly patients have been exposed in enough scale we won’t be able to rule out the more negative scenarios. Before all that the level of restrictions have been significantly ramped up over the weekend in many countries. Henry discusses this in his note but one very significant one is that ALL travellers coming into (or back to) the UK will have to self isolate until they get a negative PCR test. This sort of thing will dramatically reduce travel, especially short business trips. Overnight Japan have effectively banned ALL foreign visitors. I appreciate its dangerous to be positive on covid at the moment but you only have to look at the UK for signs that boosters are doing a great job. Cases in the elderly population continue to collapse as the roll out progresses well and overall deaths have dropped nearly 20% over the last week to 121 (7-day average) - a tenth of where they were at the peak even though cases have recently been 80-90% of their peak levels. If Europe are just lagging the UK on boosters rather than anything more structural, most countries should be able to control the current wave all things being equal. However Omicron could make things less equal but it would be a huge surprise if vaccines made no impact. Stocks in Asia are trading cautiously but remember that the US and Europe sold off more aggressively after Asia closed on Friday. So the lack of major damage is insightful. The Nikkei (-0.02%), Shanghai Composite (-0.14%), CSI (-0.22%), KOSPI (-0.47%) and Hang Seng (-0.68%) are only slightly lower. Treasury yields, oil, and equity futures are all rising in Asia. US treasury yields are up 4-6bps across the curve, Oil is c.+4.5% higher, while the ZAR is +1.31%. Equity futures are trading higher with the S&P 500 (+0.71%) and DAX (+0.84%) futures in the green. In terms of looking ahead, we may be heading into December this week but there’s still an incredibly eventful period ahead on the market calendar even outside of Omicron. We have payrolls on Friday which could still have a big impact on what the Fed do at their important December 15 FOMC and especially on whether they accelerate the taper. Wednesday (Manufacturing) and Friday (Services) see the latest global PMIs which will as ever be closely watched even if people will suggest that the latest virus surge and now Omicron variant may make it backward looking. Elsewhere in the Euro Area, we’ll get the flash CPI estimate for November tomorrow (France and Italy on the same day with Germany today), and we’ll hear from Fed Chair Powell as he testifies (with Mrs Yellen) before congressional committees tomorrow and Wednesday. There’s lots of other Fed speakers this week (ahead of their blackout from this coming weekend) and last week there was a definite shift towards a faster taper bias, even amongst the doves on the committee with Daly being the most important potential convert. Fed speakers this week might though have to balance the emergence of the new variant with the obvious point that without it the Fed is a fair bit behind the curve. Importantly but lurking in the background, Friday is also the US funding deadline before another government shutdown. History would suggest a tense last minute deal but it’s tough to predict. Recapping last week now and the emergence of the new variant reshaped the whole week even if ahead of this, continued case growth across Europe prompted renewed lockdown measures and travel bans across the continent. Risk sentiment clearly plummeted on Friday. The S&P 500 fell -2.27%, the biggest drop since October 2020, while the Stoxx 600 fell -3.67%, the biggest one-day decline since the original Covid-induced risk off in March 2020. The S&P 500 was -2.20% lower last week, while the Stoxx 600 was down -4.53% on the week. 10yr treasury, bund, and gilt yields declined -16.1bps, -8.7bps, and -14.5bps, undoing the inflation and policy response-driven selloff from earlier in the week. The drop in 10yr treasury and gilt yields were the biggest one-day declines since the original Covid-driven rally in March 2020, while the drop in bund yields was the largest since April 2020. 10yr treasury, bund, and gilt yields ended the week -7.3bps lower, +0.7bps higher, and -5.4bps lower, respectively. Measures of inflation compensation declined due to the anticipated hit to global demand, with 10yr breakevens in the US and Germany -6.8bps and -8.8bps lower Friday, along with Brent and WTI futures declining -11.55% and -13.06%, respectively. Investors pushed back the anticipated timing of rate hikes. As it stands, the first full Fed hike is just about priced for July, and 2 hikes are priced for 2022. This follows a hawkish tone from even the most dovish FOMC members and the November FOMC minutes last week. The prevailing sentiment was the FOMC was preparing to accelerate their asset purchase taper at the December meeting to enable inflation-fighting rate hikes earlier in 2022. Understanding the impact of the new variant will be crucial for interpreting the Fed’s reaction function, though. The impact may not be so obvious; while a new variant would certainly hurt global demand and portend more policy accommodation, it will also likely prompt more virus-avoiding behaviour in the labour market, preventing workers from returning to pre-Covid levels. Whether the Fed decides to accommodate these sidelined workers for longer, or to re-think what constitutes full employment in a Covid world should inform your view on whether they accelerate tapering in December. It feels like a lifetime ago but last week also saw President Biden nominate Chair Powell to head the Fed for another term, and for Governor Brainard to serve as Vice Chair. The announcement led to a selloff in rates as the more dovish Brainard did not land the head job. In Germany, the center-left SPD, Greens, and liberal FDP agreed to a full coalition deal. The traffic-light coalition agreed to restore the debt break in 2023, after being suspended during the pandemic, and to raise the minimum wage to €12 per hour. The SPD’s Olaf Scholz will assume the Chancellorship. The US, China, India, Japan, South Korea, and UK announced releases of strategic petroleum reserves. Oil prices were higher following the announcement, in part because releases were smaller than anticipated but, as mentioned, prices dropped precipitously on Friday on the global demand impact of the new Covid variant. The ECB released the minutes of the October Governing Council meeting, where officials stressed the need to maintain optionality in their policy setting. They acknowledged growing upside risks to inflation but stressed the importance of not overreacting in setting policy as they see how inflation scenarios might unfold. Tyler Durden Mon, 11/29/2021 - 08:01.....»»

Category: dealsSource: nytNov 29th, 2021

Why TV and Film Workers Just Authorized One of the Biggest Strikes in Hollywood History

“A few times a week, you’re facing the issue of if you’re going to fall asleep and die driving home or not,” says film worker Paul Rodriguez More than 50,000 film and television workers voted to authorize a union strike this weekend, calling attention to exhausting working conditions in Hollywood and setting the stage for a massive potential shutdown of film and TV sets across the country. The International Alliance of Theatrical Stage Employees (IATSE) represents an array of film professionals, including cinematographers, camera operators, hair stylists, makeup artists and script coordinators. Union members say that working conditions, which have long been difficult, have been exacerbated by the pandemic and a streaming era in which demand for content has skyrocketed. Through this strike authorization, they are demanding better wages, longer rest periods, a bigger cut of streaming profits, and a level of respect they say they are not treated with. [time-brightcove not-tgx=”true”] “Our people have basic human needs like time for meal breaks, adequate sleep, and a weekend,” IATSE president Matthew Loeb said in a statement. “For those at the bottom of the pay scale, they deserve nothing less than a living wage.” The strike comes at the end of a three-year contract between IATSE and the Alliance of Motion Picture and Television Producers (AMPTP). Negotiations for a new contract turned acrimonious this summer before falling apart, with each deadline (July 31, then Sept. 10) sailing by without an agreement. Between Oct. 1 and 3, members of IATSE voted overwhelmingly for the strike: the union announced that 90% of the 60,000 IATSE members who received a ballot voted, and that 98% of those ballots were cast in favor. Ballots were cast by 36 of IATSE’s local unions, including in California, Georgia and New Mexico, with none of them voting less than 96% in favor of the strike. If the strike moves forward, it would be the first major walkout of Hollywood workers since World War II, when a work stoppage led to violent clashes with strikebreakers outside the Warner Bros. Burbank studio. It would also be one of the biggest labor strikes overall of the last two decades. In the lead-up to the vote, IATSE received support on social media from high-profile actors including Kerry Washington, Seth Rogen and Ryan Reynolds, as well as politicians like Elizabeth Warren. Perhaps even more impactful than the celebrity support, however, was an Instagram account that posted anonymous stories from crew members. IA_Stories, which now has 142,000 followers, posted stories of 20-hour days, of not being allowed to use the bathroom and of being on call 24/7. One writer recounted a time when producers refused to shut down a production despite someone dying from an untreated health condition in the middle of the season. The account and the ensuing campaign have emboldened others to speak up publicly. Some have described not having lunch breaks for 40 days. Others have focused on the routine experience of driving sleep-deprived after spending hours of being on their feet. Paul Rodriguez is a film worker who has worked for 15 years in camera and lighting departments as a gaffer, grip and more; he’s recently worked on shows like Insecure and The L Word. He says that in his experience, being on set for 12 hours is “a light day of work.” “A few times a week, you’re facing the issue of if you’re going to fall asleep and die driving home or not,” he says. Rodriguez also says that safety is a major concern for crew workers. (Improved benefits are also one of the main contentions in the current negotiation.) In January, he hurt his back and wrist from holding heavy cameras nonstop, which put him out of commission for three months. “When I came back, I was in excruciating pain,” he says. “It makes me wonder, why am I even doing this?” While film workers like Rodriguez say that working conditions have always been difficult to handle, the combined pressures of the pandemic and the current streaming market have exacerbated things considerably. At the onset of the streaming industry over a decade ago, IATSE negotiated with ascendant streaming platforms to allow them worker subsidies and flexibility around work rules, hoping that they would provide more jobs for workers. But while those discounts are still in place, streamers are now as powerful as anyone in the industry—and platforms like Netflix, Amazon and Disney made billions of dollars in profit with everyone stuck at home during the pandemic, proving that demand for content is higher than ever. ”IATSE members have contributed their skill and artistry to these projects while the budgets have exploded,” the union wrote in an August statement. But “on some New Media projects, members are not even paid a specific scale wage or credited with pension hours.“” After lying dormant for months, studios and TV networks are anxious to make up for lost time, and have restarted productions in full force. IATSE members say that companies are trying to squeeze productions into half the amount of time they used to allow. A strike isn’t necessarily imminent: there will be several more weeks of negotiations, or attempted negotiations, between IATSE and the AMPTP. The AMPTP says that the pandemic severely cut industry profits last year, and they are hoping to receive concessions from the union, like not having to pay a fine for when workers miss their lunch break. Political pressure is mounting on the AMPTP to make a deal: more than 200 state and federal Democratic lawmakers have signed letters to the organization’s president Carol Lombardini to sign a deal averting a labor stoppage. But if negotiations fall through, an IATSE strike would halt a wide array of productions across the U.S., including Netflix shows, daytime soaps, and recurring shows like Saturday Night Live and The Tonight Show. (Workers for cable networks like HBO and Showtime operate under separate contracts.) As Rogen wrote on Twitter: “Our films and movies literally would not exist without our crews.”.....»»

Category: topSource: timeOct 4th, 2021

Estes" $1.525BN Stalking Horse Bid For Yellow"s Terminals Wins Out

Estes' $1.525BN Stalking Horse Bid For Yellow's Terminals Wins Out By Todd Maiden of FreightWaves An order was entered in a Delaware bankruptcy court Thursday naming less-than-truckload carrier Estes Express Lines’ $1.525 billion stalking horse bid as the winning offer of Yellow Corp.’s portfolio of owned terminals. Bid protections for Estes were also approved, including a $7.5 million breakup fee and expense reimbursement up to $1.6 million. Yellow filed for bankruptcy on Aug. 6 after failing to reach terms with its union workers on a proposed change of operations it said was vital to its survival. Last week Estes submitted the bid, which eclipsed a $1.5 billion offer from rival LTL carrier Old Dominion Freight Line. Estes’ proposal also came with lower bid protections. The carrier kicked off the bidding with an initial offer of $1.3 billion. The bid sets the price floor for Yellow’s service centers. Estes is unlikely to walk away with all 174 terminals as a full sales process will still occur. The bid deadline for the terminals is set for Nov. 9, with an auction expected to take place on Nov. 28 if needed. A hearing held last week revealed that initial indications of interest for some of the real estate has been as much as two to 11 times the appraised value. At the hearing, counsel for Yellow also said that the proceeds from the terminal sales will likely be more than enough to repay all outstanding amounts due to secured creditors. The company’s unsecured claims, however, may garner more interest moving forward. A recent filing with the Securities and Exchange Commission said Yellow’s pension fund withdrawal liabilities could top $6.5 billion. The International Brotherhood of Teamsters, which represents roughly 22,000 former Yellow workers, was vocal this week, calling for the U.S. Senate to investigate the company’s bankruptcy as a judiciary committee looks more broadly at bankruptcy reform. Up next on the auction block is Yellow’s owned rolling stock, which includes nearly 12,000 tractors and 35,000 trailers. A deadline for equipment bids has been set for Oct. 13, with an auction set to occur on Oct. 18 if needed. Tyler Durden Thu, 09/21/2023 - 21:00.....»»

Category: blogSource: zerohedgeSep 21st, 2023

The Permanent Strikes Continue: GM Joins Ford, Stellantis With Mass Layoffs As Result Of UAW Action

The Permanent Strikes Continue: GM Joins Ford, Stellantis With Mass Layoffs As Result Of UAW Action As the ill effects of the ongoing UAW strike continue, we will continue to document them.  First, we wrote about Stellantis looking to close 18 facilities as part of contract negotiations. Then, we wrote about Ford laying off 600 employees due to the strike. On Thursday morning we reported that Stellantis was laying off 68 employees and furloughing another 300 as a result of the strike. Now, the "permanent strike" numbers are moving even higher: GM has announced it is laying of 2,000 workers as a result of the strike.  On Wednesday, General Motors took the step of suspending operations at a manufacturing facility located in Kansas, resulting in the layoff of nearly all of its workforce, comprising approximately 2,000 individuals, according to NBC.  In its official statement, the automaker clarified that the reason behind this decision stems from the absence of available tasks for the majority of employees stationed at the Fairfax assembly plant. This scarcity of work is a direct consequence of a strike initiated by workers at another GM facility this past Friday. Furthermore, the company conveyed that it is unable to offer supplemental unemployment benefits in this instance, citing the unique circumstances surrounding the situation. These layoffs come in the wake of the United Auto Workers union initiating a strike on Friday, following the expiration of its previous contract with Stellantis, Ford, and GM. This strike saw approximately 12,700 workers walk off the job. As the first week of the strike nears its end, these layoffs serve as a clear indication that both sides involved are becoming increasingly steadfast in their positions. On Tuesday, the head of United Auto Workers, Shawn Fain, declared he will unleash additional strikes across manufacturing facilities of General Motors Co., Ford Motor Co., and Stellantis NV on Friday. This move is contingent on the three automakers not properly addressing the union's demands for a new four-year labor contract for its 146,000 members.  "Either the Big Three get down to business and work with us to make progress in negotiations, or more locals will be called on to stand up and go out on strike," UAW boss Fain said in a YouTube video published Monday evening.  Fain said, "We're not waiting around, and we're not messing around. So, noon on Friday, Sept. 22 is a new deadline."  Keep "holding out", UAW - pretty soon there will be no auto industry left and you can claim victory over the evil executives who work there. Except, no one will have jobs, of course... Tyler Durden Thu, 09/21/2023 - 12:05.....»»

Category: blogSource: zerohedgeSep 21st, 2023

Mitek Systems, Inc. (NASDAQ:MITK) Q2 2023 Earnings Call Transcript

Mitek Systems, Inc. (NASDAQ:MITK) Q2 2023 Earnings Call Transcript September 14, 2023 Operator: Good day, and welcome to the Mitek Fiscal 2023 Second Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being […] Mitek Systems, Inc. (NASDAQ:MITK) Q2 2023 Earnings Call Transcript September 14, 2023 Operator: Good day, and welcome to the Mitek Fiscal 2023 Second Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead. Todd Kehrli: Thank you, operator. Good afternoon, and welcome to Mitek’s fiscal 2023 second quarter and first six months earnings conference call. With me on today’s call are Mitek’s CEO, Max Carnecchia; and Interim CFO, Fuad Ahmad. Before I turn the call over to Max and Fuad, I’d like to cover a few quick items. This afternoon, Mitek issued a press release announcing its fiscal 2023 financial results for its second quarter and first six months. This release is available on the company’s website at This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company’s website. I want to remind everyone that on today’s call, management will discuss certain factors that are likely to influence the business going forward. Any factors discussed today that are not historical facts, particularly comments regarding our long-term prospects and market opportunities, should be considered forward-looking statements. These forward-looking statements may include comments about the company’s plans and expectations of future performance. Forward-looking statements are subject to a number of risks and uncertainties, which could cause actual results to differ materially. We encourage all of our listeners to review our SEC filings, including our most recent 10-K and 10-Q for a complete description of these risks. Our statements on this call are made as of today, September 14, 2023, and the company undertakes no obligation to revise or update publicly any of the forward-looking statements contained herein, whether as a result of new information, future events, changes in expectations or otherwise. Additionally, throughout this call, we’ll be discussing certain non-GAAP financial measures. Today’s earnings release and the related current report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present the reconciliation between the two for the periods reported in the release. With that said, I’ll now turn the call over to Mitek’s CEO, Max. Max Carnecchia: Thanks, Todd. Good afternoon, everyone. Thank you for joining us today. We’re very excited to be talking with you today, having just released our fiscal 2023 second quarter and first six months results. We expect to file our 10-Q for the second quarter soon and anticipate filing our 10-Q for the third quarter before the expiration of our NASDAQ extension deadline of October 13. With that filing, we will be current with our SEC filings. Before I review the second quarter results, I want to take this opportunity to recognize and thank the Mitek nation for their tremendous efforts, which has resulted in an exceptionally strong quarter. You have shown resilience despite the disruptions and distractions presented through the rigorous audit process. Thank you for your commitment to building a stronger Mitek. Now let me talk about fiscal 2023 second quarter results. We recorded record second quarter revenue of $45.3 million, representing growth of 35% year-over-year. We delivered GAAP net income of $4.4 million for the second quarter and non-GAAP net income of $13.1 million. Also, we delivered cash flow from operations of $6.3 million during the quarter. These stellar Q2 results, coupled with our record first quarter results, reflect some of our major accomplishments in the first six months of fiscal 2023, including being first to market with a multimodal biometric solution to elevate the fight against growing fraud. Beyond just our record revenue and earnings performance in the first six months of the fiscal year, we have distinguished ourselves as a critical solution in the fight against fraud. So let’s dive a bit deeper into our two lines of business, starting with Deposits. The two major products, Mobile Deposit and Check Fraud Defender, continue to yield strong revenue growth with deposits revenue increasing 35% year-over-year. Mobile Deposit continues to gain traction with consumers due to its convenience and ease of use, and the adoption of our Check Fraud Defender product showed positive momentum as bank losses associated with check fraud continued to sky rocket. Check Fraud Defender is a secure, cloud-based consortium that strengthens the financial institution’s existing fraud prevention. Check Fraud Defender uses proprietary image analysis to extract data from stolen checks, account screens and identification documents sold in criminal channels to provide alerts of potentially compromised accounts. As it is a consortium-based, relevant data is shared with all participating banks, making it a powerful offering. We believe Check Fraud Defender will continue to grow its growth trajectory and be a growth driver for our Deposits business for years to come. Before we move on to our Identity business, I’d like to provide a quick update on the USAA litigation situation. While Mitek is not a party to any of the USAA lawsuits, we continue to pursue our declaratory judgment action against USAA to prove that our products do not infringe the four auto capture patents at issue in the USAA lawsuits as we look to provide support to our banking clients. Our declaratory judgment action is currently on appeal to the U.S. Court of Appeals for the Federal Circuit after the District Court found it did not possess jurisdiction to adjudicate our claims. Oral arguments on our appeal are expected late this year or early next year. Along with our efforts, there have been some positive developments in the matters related to USAA as the U.S. Patent Trial and Appeal Board, the PTAB has invalidated five of the USAA patents that they have been relying on to sue various financial institutions, two of which are related to auto capture. We expect the PTAB to invalidate more of USAA’s patents in the coming months as they continue their review of additional USAA patents, including one additional USAA patent related to auto capture. We also intend to continuously — to continue to vigorously prosecute our case, as Mitek invented all of its core technology, and we believe our products do not infringe on any USAA patents. Turning our focus now to the Identity line of business. We are pleased to report a robust 35% year-over-year growth in Identity revenue, which is a remarkable achievement considering the challenging macroeconomic conditions we face. This outstanding performance underscores the increasing importance of identity verification in today’s digital landscape. In the era of ongoing digital transformation, organizations are constantly striving to deliver seamless and secure online experiences for their customers. Identity verification has emerged as a crucial component of every customer interaction and journey. It plays a pivotal role in ensuring regulatory compliance, detecting and preventing attempted impersonation fraud and enhancing the success rate of customers onboarding with minimal friction. We have positioned ourselves strategically to meet the growing demands of our customers, whether it’s at the point of initial customer onboarding or during the reverification and authentication process for returning customers. MiVIP, our leading identity verification and authentication solution, leverages the power of AI with multimodal biometrics to provide our customers — consumers with the utmost convenience and highest levels of security to meet the growing demands of the digital savvy consumer. Mitek’s Verified Identity Platform, MiVIP, is a fully integrated identity platform that leverages our IP in biometrics, capture, computer vision and data intelligence and present it to the customer via a low-code implementation platform. In the first half of fiscal 2023, we added MiPass to its capabilities. MiPass is the industry’s first multimodal biometric solution for continuous identity authentication. MiPass combines voice, and face recognition using sophisticated live (ph) detection technology to defend against digital and deep fake attacks in real time. With the onslaught of machine-driven fraud attacks, voice and face biometrics used together with built-in likeness checks are becoming the strongest and most effortless means to authenticate someone’s identity online. Combining the two biometrics is a significant security improvement beyond the face recognition only system many use today. Authenticating digital identities with MiPass also reduces the risk associated with on-device stored biometrics, which can easily be compromised, shared between people or overwritten with a simple passcode. MiPass is delivered for Mitek (ph) developer-friendly SDK, which makes it easy to embed into a variety of customer use cases such as simple account information updates, password resets, device rebinding and high-risk financial transactions. Experts estimate that more than 80% of hacking breaches involve the use of stolen passwords or credentials, fraud that can cost a large company millions of dollars a year. By moving to a more secure password-less approach to digital account authentication, companies can both increase customer loyalty and reduce their own risk for identity theft and account takeover attacks. Staying with account takeover, the high list — and highlighting our tremendous work in biometrics, Gartner predicts that in 2023, 20% of successful account takeover attacks will leverage seat base. Mitek’s latest innovation, IDLive Face Plus, addresses the growing security threat posed to the institutions and consumers by deep fakes and digital injection attacks. IDLive Face Plus has detection of digital injection attacks where fraudsters use hardware and software hacks to substitute a biometric capture with a fake digital image. It is the first known product to help ensure proper selfie capture on both desktop and mobile devices with a frictionless approach that eliminates user abandonment caused by complicated security checks. As deep fakes have become more realistic and easier to produce, injection attacks are an increasingly common method used to spoof biometrics. The innovative approach to combating deep fakes utilized by IDLive Face Plus will help our customers stay ahead of this increasing problem. Also in the first half of the fiscal year, a patent was awarded to Mitek’s ID R&D subsidiary for their novel approach to securing virtual assistant and chatbot sessions on a mobile device. The method involves the collection of multiple biometrics throughout the chat session without added comps or tasks for the user. It provides a unique method to enable an intelligent chatbot to continuously confirm a person’s identity, and that they are, in fact, a live human being while maintaining a natural user experience. The timing of the patent award coincides with the launch and rise of the popularity of Chat GPT, a chatbot prototype that demonstrates dramatic advancements in conversational intelligence. The technology opens the door to a variety of new applications where interactive human-to-machine collaboration is productive. From a large multinational bank to government agencies, our customers and partners use our identity verification solutions to enable effortless and safe experiences for new and returning consumers. To quote our customer, Virgin Money, who are a proud digital-first bank with a clear ambition to disrupt the status quote, it is of paramount importance that Virgin Money platform and the digital experiences the bank’s customers encounter are world-class. We want our smart digital tools to put our customers in control. And with Mitek, the journey helps our customers to successfully pass KYC where traditional name address checks have failed. We at Mitek are proud of the positive impact we are making and we remain dedicated to advancing our technologies and delivering even greater value to our customers in the fight against digital identity fraud. During the first half of the year, our marketing efforts are concentrated on building momentum. We bolstered our digital presence and increased brand visibility through a series of global events, resulting in thousands of meaningful customer engagements. Our sales and marketing teams are not simply product sellers. They are dedicated to cultivating relationships and crafting tailored solutions. We firmly believe that this approach sets Mitek apart and is a vital element of our future ready strategy. As we continue to innovate and adapt to the evolving digital landscape, our Identity line of business remains a cornerstone of our success. We are committed to delivering solutions that exceed our customers’ expectations in an increasingly interconnected and security conscious world. Looking ahead, I want to acknowledge the difficult macroeconomic environment and its impact on new enterprise spending. While we have delivered significant growth in the first half of our fiscal year, due to the timing of large deals, we do not expect the same type of growth to continue in the second half of our fiscal year. We, along with many other enterprise software companies are seeing customers in our pipeline extend sales cycles and delay new purchases in an effort to control expenses in this challenging environment. While this posture continues, we will experience slower growth than we have, but we remain well positioned to capitalize on new business — on our new business pipeline and the significant market opportunity ahead of us once conditions begin to improve. Having said all of that, we are reiterating our annual guidance, which calls for revenue growth of 18% year-over-year at the midpoint and for the non-GAAP operating margin in the range of 30% to 31% for the full fiscal year. Now I’ll turn the call over to Fuad to discuss the financial results in more detail. Following Fuad’s remarks, we’ll open the call to questions. Fuad, please go ahead. Fuad Ahmad: Thanks, Max, and thank you, everyone for joining us this afternoon. I’ll start with our Q2 of fiscal 2023 revenue and operating results. For the second quarter of fiscal ’23, Mitek generated $45.3 million of revenue, a 35% increase year-over-year. Software and hardware revenue was $25.3 million, up 39% year-over-year. The increase in software and hardware revenue is primarily due to the growing contribution of ID R&D and continuing mobile deposit reorders. As we have previously noted, ID R&D is transactional in nature and is part of our Identity business. However, since it is offered on-premise, we put that revenue into software line for accounting purposes. Services and other revenue, which includes transactional SaaS revenue, maintenance and professional services was $20.1 million for the quarter, up 31% year-over-year. Moreover, our transactional SaaS revenue increased 33% year-over-year to $13.9 million, driving this growth in the transactional SaaS strategy was increased Mobile Verify volume as well as the addition of HooYu revenue. Deposits revenue for the second quarter increased 35% year-over-year to $28.8 million, driven by mobile deposit reorders. Identity revenue also increased 35% year-over-year to $16.6 million, driven by the addition of HooYu SaaS revenue and strong contribution from ID R&D and Mobile Verify products. We delivered software and hardware gross margin up 99% for the quarter. Gross margin on services and other revenue was 72%, and total gross margin for the quarter was 87%, consistent with gross margins in the last year of the second quarter. Total GAAP operating expenses, including concept revenues were $37.4 million compared to $30.8 million in Q2 of last year. This increase is due to the investments to grow our Identity business and additional costs associated with the acquisition of HooYu, as well as higher G&A expenses related to enhancing our back office systems and teams. Sales and marketing expenses for the quarter were $9.6 million compared to $9.2 million a year ago. R&D expenses were $7.5 million compared to $7.1 million last year, and our G&A expenses were $10.1 million compared to $6.1 million a year ago. The increase in G&A expenses was primarily a result of increased onetime fees associated with our delayed filings, additional resources to our corporate services team to accommodate a rapidly scaling business and certain onetime restructuring and executive separation expenses. GAAP net income for the quarter was $4.4 million or income of $0.10 per diluted share. Our diluted share count was 45.6 million compared to 46.1 million a year ago. Turning to non-GAAP results. Non-GAAP net income for Q2 of fiscal ’23 was $13.1 million or $0.29 per diluted share compared to a non-GAAP net income of $9.7 million or $0.21 per share for the same period last year. We believe non-GAAP net income provides a useful measure of the company’s operating profitability and cash flow by excluding amortization and acquisition-related costs, stock compensation expense, onetime or non-recurring litigation expenses, amortization of debt discounts and issuance costs, restructuring costs and the related tax impact of those items. A reconciliation of GAAP to non-GAAP presentation is provided in our press release issued earlier today. Now turning to the balance sheet. We generated $6.3 million in cash flow from operations during the second quarter, bringing our total cash and investments to $114.5 million as of March 31, 2023. For the first six months of fiscal 2023, which includes the record first quarter results we reported earlier this month, we report $91 million of revenue, a 38% increase year-over-year. Deposits revenue for the first six months increased 47% year-over-year to $59 million, driven by solid mobile deposit reorders and signing of a large multiyear contract in the first quarter has locked in favorable pricing for us over four years. Due to the unique terms of this contract, we recognized additional license revenue related to the future periods of approximately $7 million in the first quarter. Identity revenue for the first six months increased 24% year-over-year to $32 million, driven by addition of HooYu revenue and strong contribution from ID R&D and Mobile Verify products. Moving on to guidance. As Max noted, we are reiterating the fiscal 2023 guidance we provided earlier this month. We expect revenue for the fiscal year ending September 30, 2023 to be in the range of $169 million to $171 million, an increase of approximately 18% year-over-year from the midpoint of the guidance range. In addition, we expect full year fiscal 2023 non-GAAP operating margin to be in the range of 30% to 31%. In closing, we are pleased with the second quarter results, which included a record second quarter revenue, as well as solid operating margins. Operator that concludes our prepared remarks. Please open the line for questions. See also 11 Best Vanguard Funds to Buy for Retirees and 25 Passive Income Ideas to Make Money & Build Wealth in 2023. Q&A Session Follow Mitek Systems Inc (NASDAQ:MITK) Follow Mitek Systems Inc (NASDAQ:MITK) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jake Roberge with William Blair. Please go ahead. Jacob Roberge: Hey. Thanks for taking the questions and congrats on the results. I know the check business is lumpy and you expect growth to decelerate through the year just given the timing of deals, but growth in that segment has been very durable. If you had to stack rank growth drivers, what could be the highest contributors between the conversion of more checks to mobile deposit, Check Fraud Defender layering deeper into the model or are price increases starting to be more meaningful? Just would love to kind of really understand what’s driving growth in that segment this year? Max Carnecchia: Sure, Jake. I would stack ranks from highest impact to lowest impact, mobile check deposit adoption, so the online banking apps on your phone and use of that for depositing checks instead of going down the branch, number one. Number two, Check Fraud Defender, and number three, price increases, in that order. I think over time, Check Fraud Defender, as it becomes a more significant part of our business certainly has an opportunity to move up that lead table. Jacob Roberge: Okay. Helpful. And then given these results for the quarter ended March, could you talk more about when you started to really feel the impact from the macro on those transactional volumes? Did you actually see any headwinds in Q2 or did that become a lot more pronounced in Q3 and Q4? And then from your comments, it seems like ID verification may be getting more impacted than Mobile Deposit, but would love to kind of hear the puts and takes that you’re seeing in each business as it relates to the macro. Max Carnecchia: Yeah. I think we’ve probably seen it going all the way back to — you may not see it in the numbers, but the revenue numbers, but we’ve seen it probably going all the way back to November, December of last year, just the nature of how revenue gets formed meets those businesses being so different, there’s kind of a lag in the way some of the contracts come up for deposits. So it’s not as pronounced there. But I think those are contextualization I would give you for both lines of business. Jacob Roberge: Great. Sounds good. Thanks for taking my questions. Operator: Our next question comes from Mike Grondahl with Northland Securities. Please go ahead. Michael Grondahl: Hey, guys. Thanks. Mobile ID and Mobile Deposits both grew 35%. Is there really anything to call out for either of those high growth rates, sort of what drove it or anything one-time? Max Carnecchia: Yeah. I wouldn’t say there’s anything onetime. It seems like Q2 FY ’23 was the quarter of 35, right? 35% growth in both lines of business and then overall for the company. In the mobile identity business, I would tell you on the Mobile Verify business, the Identity business, we definitely had greater impact in the revenue from long-time existing customers that had increased volumes and increased usage. I think that was a contributor there for sure. We have some — the banks that had some real big successful marketing campaigns for acquiring new customers. And then in Mobile Deposit, we had — I wouldn’t call it an outlier, we had a couple of big contracts. But every quarter, we typically have a — the team has just done a wonderful job of smoothing out as best as possible the big contracts that come in that way. Michael Grondahl: Got it. And then going back to the March quarter, you had that contract extension with a large reseller and they got a four-year price lock. Can you talk about the price increase that you got there? And are there other large retailers where you think you could get a similar price increase? Max Carnecchia: Yeah. I’d remind you, Mike, we’ve been on the — I want to call it just — it’s principled approach to pricing, right? If we kind of go back to four years ago when we — when the team undertook this endeavor, we primarily sell the Mobile Deposit solution through a channel of resellers. And the historical nature of those relationships was very inconsistent, and it was kind of hard to see a true line as to how pricing works. And as we’ve adjusted pricing and those contracts have come up, we’ve done it on a much more principled approach, and that’s allowed us, in many instances to increase pricing. What you saw in the Q1 number and Fuad reiterated today in the prepared remarks, this kind of outside contract that we ended up with that we’re very proud to have, it was the reengineering of a long-standing contract that had probably been not one of our best. And so I’m not going to go into any of the specifics other than to say we got them to what we think the general market for our product and our resellers is. And that’s good for the market, and we think it’s good for the partner, and certainly, it’s good for Mitek and our shareholders. Michael Grondahl: Got it. Are there other large retailers, you got to play catch up on? Max Carnecchia: We’re four years into this. There may be one or two left, but I don’t think you’d — I wouldn’t model in anything like as extreme as what we saw in the Q1 results. Michael Grondahl: Got it. And lastly, Max, now that you’re almost caught up with your filing, what two things are you going to be most focused on? Max Carnecchia: I’m going to Disney World. Just kidding around there, Mike. Yes, certainly, we’re coming up on the end of our fiscal year. So not only do we want to get current, but we want to finish our FY ‘23 strong. So focused on that, focused on getting our annual operating plan in place. And then we’re going to be focused on kicking off, right, getting everybody armed, aimed and excited about the opportunity that’s before us and the adjustments and the improvements that we have to make for FY ‘24......»»

Category: topSource: insidermonkeySep 20th, 2023

Stellantis Could Shutter 18 Facilities Under Latest Offer To UAW

Stellantis Could Shutter 18 Facilities Under Latest Offer To UAW If you're looking for further proof that union extortion isn't the greatest idea in history, behold Stellantis. In a recent bargaining move with the United Auto Workers union, the automaker has floated a contract proposal -- that could result in the shuttering of 18 American facilities, according to CNBC, citing sources familiar with strike discussions.  The plan may also involve the rejuvenation of one dormant vehicle assembly plant in Illinois, hardly a silver lining for the planned "efficiency" cuts Stellantis is floating.  The proposal stands to impact thousands of unionized workers and reduce Stellantis' operational reach in North America. Both sides of the negotiating table appear divided over the company's ambition to modernize its parts and distribution network. Central to the proposal is the idea to discontinue 10 existing "Mopar" distribution centers spread throughout the U.S., consolidating them into larger, Amazon-esque hubs. One such "Mega Hub" is being considered for the Belvidere Assembly plant, which has been inactive since last February. “We continue to listen to the UAW to identify where we can work together and will continue to bargain in good faith until an agreement is reached. We look forward to getting everyone back to work as soon as possible,” said about ongoing talks, according to CNBC.  They described negotiations as “constructive and focused on where we can find common ground.” In 2021, Stellantis expressed a desire to transition the majority of its salaried workforce—including approximately 17,000 employees in North America—to remote work for the greater part of their schedules. In line with this, the automaker confirmed it was "assessing the way we operate to maximize innovation, creativity, and efficiency among our teams, including possible changes to our property assets." The company reiterated, however, that its existing facilities would continue to serve as the North American headquarters and technical center. The potential shutdown of 18 facilities was included in Stellantis' most recent Thursday evening contract proposal to the UAW. On Tuesday, the head of United Auto Workers, Shawn Fain, declared he will unleash additional strikes across manufacturing facilities of General Motors Co., Ford Motor Co., and Stellantis NV on Friday. This move is contingent on the three automakers not properly addressing the union's demands for a new four-year labor contract for its 146,000 members.  "Either the Big Three get down to business and work with us to make progress in negotiations, or more locals will be called on to stand up and go out on strike," UAW boss Fain said in a YouTube video published Monday evening.  Fain said, "We're not waiting around, and we're not messing around. So, noon on Friday, Sept. 22 is a new deadline."  The union said Ford, General Motors, and Stellantis have "failed to put fair contract offers on the table." A union representative told Bloomberg "no new offers" have come from the automakers "since the union made its latest proposals on Sept. 14, right before its strike began."  Tyler Durden Wed, 09/20/2023 - 05:45.....»»

Category: personnelSource: nytSep 20th, 2023

Permanent Strike: Ford Lays Off 600 Workers Due To UAW Strike

Permanent Strike: Ford Lays Off 600 Workers Due To UAW Strike As a result of the UAW strikes, 600 Ford employees will now be taking a permanent strike.  Just hours after it was reported that Stellantis could be shuttering 18 facilities as part of a new "improved" contract with the UAW, Ford faces additional realities of the ongoing strike: it has laid off 600 workers at the Michigan Assembly Plant's body construction department, ABC Detroit reported.  The company said this week: “Our production system is highly interconnected, which means the UAW’s targeted strike strategy will have knock-on effects for facilities that are not directly targeted for a work stoppage. In this case, the strike at Michigan Assembly Plant’s final assembly and paint departments has directly impacted the operations in other parts of the facility." "Approximately 600 employees at Michigan Assembly Plant’s body construction department and south sub-assembly area of integrated stamping were notified not to report to work Sept. 15. This is not a lockout. This layoff is a consequence of the strike at Michigan Assembly Plant’s final assembly and paint departments, because the components built by these 600 employees use materials that must be e-coated for protection. E-coating is completed in the paint department, which is on strike," it continued. At the stroke of midnight last Friday, the United Auto Workers initiated their labor strike, focusing their initial efforts on three facilities—Ford's Michigan Assembly Plant in Wayne, Stellantis' Toledo Assembly Complex in Toledo, and a General Motors factory in Missouri. To add insult to collateral-damage-injury, Stellantis, in a recent bargaining move with the United Auto Workers union, has floated a contract proposal -- that could result in the shuttering of 18 American facilities, according to CNBC, citing sources familiar with strike discussions.  On Tuesday, the head of United Auto Workers, Shawn Fain, declared he will unleash additional strikes across manufacturing facilities of General Motors Co., Ford Motor Co., and Stellantis NV on Friday. This move is contingent on the three automakers not properly addressing the union's demands for a new four-year labor contract for its 146,000 members.  "Either the Big Three get down to business and work with us to make progress in negotiations, or more locals will be called on to stand up and go out on strike," UAW boss Fain said in a YouTube video published Monday evening.  Fain said, "We're not waiting around, and we're not messing around. So, noon on Friday, Sept. 22 is a new deadline."  The union said Ford, General Motors, and Stellantis have "failed to put fair contract offers on the table." A union representative told Bloomberg "no new offers" have come from the automakers "since the union made its latest proposals on Sept. 14, right before its strike began."  Tyler Durden Tue, 09/19/2023 - 19:05.....»»

Category: worldSource: nytSep 19th, 2023

UAW Boss Warns "Strikes Will Expand" Friday If Automakers Fail To Make "Substantial Progress" In Labor Talks 

UAW Boss Warns "Strikes Will Expand" Friday If Automakers Fail To Make "Substantial Progress" In Labor Talks  The head of United Auto Workers, Shawn Fain, has declared he will unleash additional strikes across manufacturing facilities of General Motors Co., Ford Motor Co., and Stellantis NV on Friday. This move is contingent on the three automakers not properly addressing the union's demands for a new four-year labor contract for its 146,000 members.  "Either the Big Three get down to business and work with us to make progress in negotiations, or more locals will be called on to stand up and go out on strike," UAW boss Fain said in a YouTube video published Monday evening.  Fain said, "We're not waiting around, and we're not messing around. So, noon on Friday, Sept. 22 is a new deadline."  The union said Ford, General Motors, and Stellantis have "failed to put fair contract offers on the table." A union representative told Bloomberg "no new offers" have come from the automakers "since the union made its latest proposals on Sept. 14, right before its strike began."  A Deutsche Bank note shows the automakers have offered around 20% pay hike increase over a new four-year labor contract. At the same time, the union demands 46%. This means talks between the union and automakers are still far apart.  UAW continued, "If the automakers fail to make progress in negotiations and bargain in good faith going forward, more locals will be called on to Stand Up and join the strike."  Here's an excerpt from Fain's remarks: "We've been available 24/7 to bargain a deal that recognizes our members sacrifices and contributions to these record profits. Still the Big Three failed to get down to business.   That's why, last week, our brave union family at Wentzville Assembly, Toledo Assembly, and final assembly and paint departments at Michigan Assembly were called on to Stand Up and go out on strike. And that's exactly what they did.   Just as importantly, all the rest of you stayed on the job. That is the only way this strategy works. We're going to keep hitting the company where we need to, when we need to. And we're not going to keep waiting around forever while they drag this out.  I have been clear with the Big Three every step of the way. And I'm going to be crystal clear again right now. If we don't make serious progress by noon on Friday, Sept. 22, more locals will be called on to Stand Up and join the strike. That will mark more than a week since our first members walked out. And that will mark more than a week of the Big Three failing to make progress in negotiations toward reaching a deal that does right by our members.  Autoworkers have waited long enough to make things right at the Big Three. We're not waiting around, and we're not messing around. So, noon on Friday, Sept. 22 is a new deadline.  Either the Big Three get down to business and work with us to make progress in negotiations or more locals will be called on to Stand Up and go out on strike. Between now and then, UAW members will keep organizing actions. Those on strike will remain on strike. And those on the job will keep monitoring for unilateral changes made by management, which are NOT allowed under an expired contract.  Keep organizing rallies. Keep organizing red shirt days. Keep up the energy and keep showing the companies that you are ready to join the strike if necessary.  This is our generation's defining moment.  So be ready to Stand Up." Full video of Fain's remarks. So, who is the winner after the dust settles? Well, it might not be all UAW members.  CNBC cited anonymous sources that warned the most recent contract proposal by Stellantis could lead to the closure of 18 US plants.  The plans would likely affect thousands of UAW members, shrink the automaker's North American footprint and create a new "modernized" parts and distribution network, which company and union leaders were at odds over, the sources said. As we've pointed out numerous times, according to The Wall Street Journal, the winner is Elon Musk's Tesla Motors: "Whatever the UAW Strike Outcome, Elon Musk Has Already Won."  Tyler Durden Tue, 09/19/2023 - 08:25.....»»

Category: smallbizSource: nytSep 19th, 2023

The 31 Biggest Worker Strikes in American History

Today, the United Auto Workers (UAW), one of the largest unions in the United States, went on strike after a negotiation deadline passed without an agreement. Beginning at midnight, 13,000 workers walked off three auto plants, each owned by one of the nation’s big three automakers: Ford, GM, and Stellantis. If the strike drags on, […] Today, the United Auto Workers (UAW), one of the largest unions in the United States, went on strike after a negotiation deadline passed without an agreement. Beginning at midnight, 13,000 workers walked off three auto plants, each owned by one of the nation’s big three automakers: Ford, GM, and Stellantis. If the strike drags on, the UAW could mobilize more of its 146,000 members to close down additional plants. One estimate suggests that the union could pay its entire membership $500 a week for 11 weeks. This strike has the potential to become one of the largest in the nation’s history. One of the most powerful tools in a union’s arsenal is a labor stoppage, or strike, in which all members agree to stop working until certain demands are met. Replacing all employees would be costly for a business, and strikes can often compel companies to meet union demands. While the intention is to achieve a quick resolution, strikes can stretch for months and even years, resulting in millions of cumulative lost working days for the thousands of workers on strike and their places of work. 24/7 Wall St. reviewed data from the Bureau of Labor Statistics as well as media and archive reports on historic work stoppages to determine the largest worker strikes in American history.  Many elements of gainful employment that Americans may take for granted, such as health benefits, a living wage, and the 40-hour workweek, were won by organized labor. These are the highest paying jobs in America. Despite the periodic labor stoppages, such as the Writers Guild of America strike earlier this year, membership has been declining for decades. This pattern can be seen in our ranking of strikes by cumulative work stoppage days, with the nation’s largest worker actions tending to have occurred earlier than the less massive strikes. For a geographical perspective on union strength, here are the states with the strongest and weakest unions.  Click here to see the 31 largest worker strikes in American history. Sponsored: Tips for Investing A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit......»»

Category: blogSource: 247wallstSep 15th, 2023

UAW president sets strike into motion in 3 cities, including Wentzville

The United Auto Workers Union announced the General Motors Assembly plant in Wentzville was one of three factories to go on strike overnight Thursday after a contract was not reached by union officials negotiating with Big 3 automakers in Detroit. UAW International President Shawn Fain in a live social media post Thursday night, one hour before the contract deadline, called on one plant in three states – General Motors assembly plant in Wentzville, Missouri; a Ford plant in Wayne, Michigan, in….....»»

Category: topSource: bizjournalsSep 15th, 2023

UAW strikes three automotive plants after contract deadline passes

Thousands of UAW members at Ford, GM, and Stellantis have walked out, marking the beginning of what the union is calling its Stand Up Strike......»»

Category: topSource: bizjournalsSep 15th, 2023

It"s official: Auto workers at Ford, GM, and Stellantis are on strike

The UAW labor union did not reach an agreement with the Detroit 3 before its deadline. Members of the United Auto Workers union last week on strike in 2019.ReutersAfter weeks of negotiations with Ford, GM, and Stellantis, United Auto Workers are on strike.The labor union did not reach an agreement with the Detroit 3 before its deadline.The strike is indefinite until workers feel they have an agreement for better wages and more.As of Friday at midnight Eastern time, auto workers for the Detroit 3 automakers are mounting targeted strikes at three plants after both sides failed to reach new four-year labor agreements.The United Auto Workers made the announcement just after midnight on Friday.The strike came after the union did not reach tentative agreements with Ford, General Motors, and Stellantis (the owner of brands including Chrysler and Jeep) before the current contract expired at 11:59 p.m. on Thursday, September 14. As a result, auto workers are engaging in a historic labor stoppage that could cost the automakers as much as $5 billion within just 10 days — and experts anticipate the movement will go on for much longer than that.The union will go on strike at three vehicle locations: a GM plant in Wentzville, Missouri, a Stellantis complex in Toledo, Ohio, and a Ford plant in Wayne, Michigan, said UAW President Shawn Fain on Thursday."For the first time in our history, we will strike all three of the 'Big Three' at once," said Fain in a live stream about two hours before the midnight deadline.The UAW represents about 150,000 at the three automakers and the strike is likely to impact 13,000 workers at the three plants, per the Associated Press.Tensions have grown over the past several weeks as UAW leaders and the Detroit 3 negotiated over union proposals that included significant pay increases, cost of living adjustments, a shorter work week, and the return of pensions.Led by newcomer president Fain, the union was also looking for increased protections as the industry electrifies, which could potentially threaten job security given electric cars require less labor to assemble than internal combustion engine vehicles.Many of the union's demands came on the heels of the handful of highly profitable years automakers had during the height of the pandemic. With new and used inventories low as a result of COVID supply chain disruptions, car companies, including the Detroit 3, cashed in on above-sticker price sales and stopped spending on purchase incentives.Auto workers argued they deserved a slice of those (albeit, unprecedented) high profits, as they build the products that feed the company's bottom line.Looming impactThe strike is sure to impact more than just the union workers and the Detroit 3. Detroit 3 car buyers are likely to see a prolonged period with low vehicle inventory and few deals to be had on car purchases, — though that won't happen right away.Eventually, a strike is likely to impact the entire auto supply chain and could be a boon for non-domestic automakers and Tesla as deals on domestic lots dry up.Experts also suggest the additional costs Ford, GM, and Stellantis could incur as a result of the negotiations could trickle down to consumers, particularly through EV pricing.Wedbush Securities analyst Dan Ives said in a note on Monday, September 11 that a strike would be "a potential nightmare situation for GM and Ford as both 313 stalwarts are in the early stages of a massive EV transformation path for the next decade that will define future success."Historic momentThe last time the UAW and Detroit 3 companies negotiated a contract in 2019, union workers went on strike against GM for 40 days. This is the first time the union has bypassed the "lead company" approach to instead target all three automakers at once for a work stoppage.Fain has called this a "Stand Up" strike, a play on the sit-down strikes used at the birth of the UAW in the 1930s.Car companies late Thursday were bracing for impact, though this particular work stoppage is uncharted territory for the industry. Especially in the last decade or so as the automotive industry has globalized its supply chain, each individual factory has become a crucial piece in a delicate web of manufacturing.Just one factory shutting down can send a domino effect across the industry, as displayed by frequent factory shutdowns during the heat of the Covid-19 pandemic.The UAW and the three automakers did not immediately respond to requests for comment from Insider sent outside regular business hours.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 15th, 2023

Ford CEO Farley Calls Upon UAW To Negotiate A Deal Before Strike Deadline

Ford Motor Co (NYSE: F) is on the precipice of facing one of the largest strikes in its history, as CEO Jim Farley expressed frustration over the lack of counteroffers from the United Auto Workers (UAW) union ahead of the imminent strike deadline read more.....»»

Category: blogSource: benzingaSep 14th, 2023

Futures Rise Ahead Of Data Dump, ECB Decision

Futures Rise Ahead Of Data Dump, ECB Decision US equity futures rose ahead of a data dump that includes retail sales, PPI and jobless claims, tracking Asian markets higher while European bourses struggled for direction before the ECB's rate decision (which will most likely be Europe's last hike despite the continent slumping into a deep stagflationary recession) at 8:15am ET Thursday. At 7:45am ET, Nasdaq 100 contracts rose 0.4% ahead of Arm’s trading debut, S&P 500 Futures were up 0.37%. Oil neared a 10-month high; short-end Treasuries nudged up as did the euro. The dollar is flat, gold slipped and bitcoin jumped. Escalating strikes in Australia caused European LNG prices to swing. In premarket trading, megacap tech names are higher with NVDA +1% and AAPL, AMZN, GOOGL, META, MSFT, and TSLA are all higher. AMC Entertainment rose 7.7% as the cinema chain disclosed that it raised about $325.5 million through the sale of 40 million shares. Visa fell 2.3% as the company takes the first step to let the biggest US banks sell their shares in the world’s largest payments network. Here are some other notable premarket movers: CS Disco shares fell as much as 2.3%, after MoffettNathanson downgraded the legal software company to market perform from outperform. Carnival gains 1.9% and Norwegian Cruise Line (NCLH) is up 2% after Redburn Atlantic lifts both stocks to buy from neutral, saying the cruise line sector has now “exited intensive care.” Carrier Global slides 1.7% after Mizuho analyst Brett Linzey cut the recommendation to neutral from buy, citing the HVAC firm’s outperformance amid a 34% rally this year and plans for shifts in the company’s portfolio. First Solar rose as much as 3.3% on Thursday as BMO Capital Markets raised the stock to outperform from market perform noting that the stock’s continued pullback following its analyst day makes for a particularly attractive entry point. HP Inc. fell 2.5% after Warren Buffett’s Berkshire Hathaway disclosed that it sold $158.5m worth of shares of the PC maker. Ivanhoe Electric said it priced its offering of about 11.9m shares at $13.50 per share via BMO Capital Markets, JPMorgan. Its shares slump 14% in premarket trading. PureCycle Technologies shares are down 10% after the plastics recycling company said its facility in Ironton, Ohio, is in the process of restarting following a series of problems since Aug. 7. RTX Corp. drops 1.2% after BofA gives the aerospace and defense company its only sell-equivalent rating, moving to underperform from neutral based on near-term GTF engine-related risks. Semtech shares are up 2.4% after the chipmaker reported second-quarter results that beat expectations. While it gave a revenue outlook that was below expectations, this prompted Susquehanna to upgrade the stock. Vital Energy (VTLE) shares fall 7.6% after the company said it signed three agreements for Permian Basin assets with a total transaction consideration of about $1.17b. The long-awaited Arm Holdings IPO priced at $51/share, the top end of the range, and will start trading on Thursday, marking the biggest initial public offering of the year. The stock is going to be closely watched by investors as a bellwether of big tech. In Europe, the Stoxx 50 is little changed with gains led by energy as WTI futures climb 1.4% to new YTD highs. FTSE 100 outperforms peers, adding 0.6%, DAX lags, dropping 0.1%. Autos, consumer products and retailers are the worst performing sectors, while basic resources and energy outperform in Europe. Here are the biggest movers: Deliveroo shares jump as much as 6.4% after Bloomberg reported that activist investor Sachem Head Capital Management has taken a stake, indicating the food delivery company could become a takeover target. Trainline shares surge as much as 16%, the most in more than four months, after the train ticket-selling platform posted ticket sales ahead of estimates in the first half and began a share buyback. Analysts see the buyback as key positive, and upside to guidance even as Trainline reiterated its previous outlook. Hilton Food shares rise as much as 7% to a one-year high after the British food-packaging company signed a long-term supply agreement with Walmart Canada. Applus shares gain as much as 5.7% to €9.99 after I Squared Capital Advisors and TDR Capital LLP offered to buy 100% of the Spanish company for €9.75/share in cash, topping Apollo’s €9.50/share offer from June. Uranium miner Yellow Cake rises as much as 5.3%, to a record high, after a surge in the metal that fuels nuclear reactors. Asian peers also rallied. THG shares drop as much as 20%, the most since May 12, after the e-commerce company lowered its sales forecast for the year. The guidance downgrade will trigger negative sentiment on the stock over the next few months, according to JPMorgan. Esker shares fall as much as 15%, the most since March 2022, after the software company reduced full-year margin guidance after a 26% drop in net income in the first half. Stifel said the profit decline was “disappointing” and largely a result of poor cost control. Italian bank shares fall, leading declines among European lenders, as Prime Minister Giorgia Meloni said a windfall tax on banks’ profits could be tweaked as long as the state receives the same expected inflow. Ipsos shares declined as much as 3.3% after the French market research firm cut its organic revenue growth forecast for the full year to a range of 3-4% from about 5%. Autoneum shares drop as much as 5.3% to its lowest value intraday since March, after the auto-components maker set the offer price for its capital increase at CHF90.75 a share. The price is a 30% discount to Wednesday’s closing level. ZBK said the stock’s valuation premium against peers appears unjustified. The euro fluctuated with money markets pricing in a two-thirds chance of another increase at the European Central Bank’s meeting. Crude climbed after a report from the International Energy Agency added to warnings of a supply shortfall. Soaring global oil prices are exacerbating persistent cost pressures in Europe even as economic growth flounders. By contrast, Wednesday’s US inflation report was in line with estimates, fanning hopes the Federal Reserve will pause rate hikes. “The market is split on the ECB right now and we have to acknowledge the hawkish shift in expectations over the last two weeks,” said Geoffrey Yu, senior strategist at BNY Mellon. “The risk-reward heading into the decision is not good for the euro.” Earlier in the session, Asian stocks rose on the back of a rally in tech shares, as US inflation data overnight increased bets that the Federal Reserve would hold interest rates next week. The MSCI Asia Pacific Index rose as much as 0.8%, poised to end a two-day losing streak, led higher by chip names such as TSMC, Samsung and Tokyo Electron. The tech sector was the biggest contributor to the gauge’s gain as investors in Asia dialed down expectations for Fed rate hikes next week after the latest reading on US inflation was broadly in line with estimates. Equities in Japan also advanced, but those in Hong Kong and China dropped as distressed developer Country Garden is approaching another yuan bond vote deadline Thursday night and European officials launched a probe into Beijing’s EV subsidies. Energy shares gained as oil climbed toward a 10-month high. In FX, the euro is marginally higher on the session ahead of the much-anticipated ECB decision, with market watchers split on whether the central bank will hike or hold later Thursday. The Bloomberg dollar spot index is down 0.1%. GBP and NOK are the weakest performers in G-10 FX, AUD and CAD outperform. USD/JPY dropped as much as 0.3% to 147.02 before steadying near 147.30, after a key 20-year JGB auction EUR/USD is little changed at 1.0728 after erasing earlier gains of as much as 0.2% ahead the ECB decision, in which either outcome may be unlikely to offer sustainable support to the euro GBP/USD traded in a narrow range, 0.1% lower at 1.2474 The Australian dollar printed a fresh intraday high on a headline beat in employment change for August The yuan traded in a tight range as traders waited for China’s economic data due Friday for further cues In rates, treasuries little changed across the curve, lagging gains across core European rates ahead of ECB policy decision at 8:15am New York time, followed by President Christine Lagarde’s press conference. Money markets price in around 17bps of rate-hike premium for the decision. German 10-year bonds outperform comparable USTs and gilts. US yields are within 1bp of Wednesday’s closing levels, off session low; 10-year near 4.25% trails bunds and gilts in the sector by 2bp-3bp. Dollar IG issuance slate includes a couple of 5Y, 10Y deals; moderate session Wednesday saw around $2b price, with another quiet session expected Thursday. US economic data slate includes August retail sales, PPI, weekly jobless claims (8:30am) and July business inventories (10am). Demand for Japanese 20-year bonds at auction was the strongest since May 2020, soothing concerns about a potential normalizing of monetary policy by the Bank of Japan. In commodities, WTI trades within Wednesday’s range, adding 0.6% to trade around $89. Most base metals trade in the green. Spot gold is little changed at $1,907/oz. Spot silver loses 1.1% near $23. Bitcoin is incrementally firmer and continues to hold above the $26k mark with specifics sparse and overall action limited ahead of a packed agenda. Looking to the day ahead now, and the main highlight will be the ECB’s latest monetary policy decision, along with President Lagarde’s subsequent press conference. Otherwise, US data releases US include retail sales and PPI for August, along with the weekly initial jobless claims. Market Snapshot S&P 500 futures up 0.2% to 4,476.50 STOXX Europe 600 little changed at 453.86 MXAP up 0.9% to 162.80 MXAPJ up 0.6% to 505.40 Nikkei up 1.4% to 33,168.10 Topix up 1.1% to 2,405.57 Hang Seng Index up 0.2% to 18,047.92 Shanghai Composite up 0.1% to 3,126.55 Sensex down 0.1% to 67,382.96 Australia S&P/ASX 200 up 0.5% to 7,186.55 Kospi up 1.5% to 2,572.89 German 10Y yield little changed at 2.65% Euro little changed at $1.0739 Brent Futures up 0.8% to $92.59/bbl Gold spot down 0.1% to $1,906.47 U.S. Dollar Index little changed at 104.69 Top Overnight News Beijing has attacked the EU’s anti-subsidies investigation into China’s electric car industry as a “naked protectionist act” and warned that it will have a negative impact on relations in its first official comments on the probe. FT Moody's cut China's crisis-hit property sector's outlook to negative from stable, citing economic growth challenges the ratings agency said would dampen sales despite government support. RTRS China cuts the RRR rate by 25bp as the country's economic outlook brightens. This cut is minor in isolation, but it’s just the latest in a long series of steps aimed at bolstering growth. RTRS Sweden’s CPI in Aug drops to +4.7%, down from +6.4% in Jul and below the Street’s +4.9% forecast. RTRS The ECB's hike-or-hold decision will settle what's become a cliffhanger as inflation and growth signals spook officials. Money markets are pricing in a 64% chance of a 25-bp increase, while economists are almost evenly split on the outcome. Bloomberg Economics' base case is for a hike, though not a strong conviction call. BBG UAW strikes at America's Big Three automakers may go ahead as unions and employers remain far apart before tonight's deadline. The companies are offering a 17.5% to 20% raise over the next four-and-a-half years. Joe Biden has few options left to avert industrial action. BBG Ray Dalio doesn't want bonds in his portfolio as the huge US deficit makes it harder to keep rates at levels that are attractive for creditors, but not too high to harm the issuer. The debt situation is at a "turning point of acceleration," he said. Right now, "cash I think is good." BBG House Republicans failed to move forward on a procedural vote advancing a bill to fund the Defense Department after it became clear they did not have enough votes to secure its passage. The inability to move forward on a basic step to fund the government — the House’s top responsibility enshrined in the Constitution — offered an example of just how difficult it will be for McCarthy and the ideologically fractured Republican majority to find consensus, keep the government open and avert blame if a shutdown is triggered. Wa Po Visa may amend its share structure to allow the biggest US banks to eventually sell their shares, currently valued at $96 billion. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks were predominantly firmer and mostly shrugged off the indecision seen on Wall St in the aftermath of a somewhat hawkish-leaning US inflation report. ASX 200 was marginally higher amid strength in the commodity-related and financial sectors, while the latest employment data provided encouragement but was predominantly fuelled by an increase in part-time jobs. Nikkei 225 outperformed and rose back above the 33,000 level amid anticipation of incoming stimulus and with the index unfazed by disappointing machinery tool orders. Hang Seng and Shanghai Comp were choppy after a substantial liquidity drain by the PBoC and with strength in energy and power names offset by the pressure on EV makers after reports the European Commission is to begin an anti-subsidy investigation into Chinese EVs. Top Asian News China Passenger and Car Association head said China's EV industrial chain is highly competitive and urges the EU to take an objective view of the industry's development, while he added that China's strong EV exports are not the outcome of heavy state subsidies. Japan's new economy minister Shindo said they will mobilise all possible policy measures to support the economy and will consider bold measures to ease the pain of price hikes, according to Reuters. Chinese Commerce Ministry says the EU's move to probe Chinese EV imports has a negative impact on China-EU economic trade and relations; China is to pay close attention to EU measures on EVs. European bourses are contained with an incremental positive bias emerging after a relatively mixed open, Euro Stoxx 50 +0.1% Newsflow has been limited ahead of the ECB with action primarily a continuation of the marginally firmer APAC session after initial Wall St. indecision. Sectors remain mixed with outperformance in Basic Resources after broker action for Rio Tinto and Anglo American, Energy benefits from benchmark action while Autos lag given pressure in BMW following a Barclays downgrade. The strong action in Mining and Energy names is leading to outperformance in the FTSE 100 +0.7%, with support also coming via a bounceback in BP. Stateside, futures are faring a touch better than European peers, ES +0.3%, in post-CPI trade as we look towards numerous key data points incl. Retail Sales, IJC and PPI. Top European News French Energy Watchdog CRE says the next theoretical calculation of electricity tariffs should lead to a ~10% increase at the beginning of 2024. Norges Bank Regional Network Survey: Regional network: Prospects for weak growth; In the period to winter, contacts expect growth to slow. Click here for more detail & analysis. Germany VCI Chemical Industry Association says Q2 production fell 8% Y/Y (-14% Y/Y ex-pharma). FX Aussie underpinned by a hot headline and higher labour participation rate on 0.6400 handle vs. Buck. DXY regains poise after post-US CPI flip-flop within a 104.550-80 range. Euro elevated above 1.0700 against the Dollar awaiting a twist or stick ECB rate call. Loonie firm vs. Greenback between 1.3555-25 bounds and supported by WTI ahead of Canadian wholesale trade. Sterling lags after slump in RICS UK house price balance, with Cable sub-1.2500 and leaning on circa 1bln option expiries at 1.2475. PBoC set USD/CNY mid-point at 7.1874 vs. exp. 7.2784 (prev. 7.1894). PBoC asked some banks to hold off on immediate dollar purchases in the interbank market to square FX positions with banks told to hold such open FX positions until net exposure hits a certain level, according to Reuters sources. Turkey introduced 25% required reserves for FX-protected Lira deposits with maturities of up to 6 months, according to the Official Gazette. Click here for more detail. RBA watcher McCrann, following the Australian jobs data, says "Likely no more rate hikes but don’t hold your breath for cuts", via the Herald Sun. Fixed Income Debt futures narrowly divergent ahead of ECB and more tier one US data. Bunds and Gilts back above par between 130.84-41 and 95.75-37 respective bounds. T-note marginally softer within 110-05+/109-29 confines. Commodities WTI Oct and Brent Nov futures remain firm in European trade with sentiment underpinned by this week’s trio of oil market reports which all ultimately flagged a tighter market in Q4. Dutch TTF is currently modestly softer intraday after rallying some 6% yesterday. Desks cite another extension to the Norwegian Troll field maintenance. Furthermore, Chevron’s Australian LNG operations are under threat of an escalation in strikes. Spot gold treads water just above USD 1,900/oz but around yesterday's lows, with price action contained ahead of upcoming risk events, with the next notable level to the downside under 1,900/oz being the August low at USD 1,884.89/oz. Base metals are mixed/mostly firmer following the constructive tone from the APAC region and the softer Dollar, although price action is contained by the looming risk events Australian union official noted a significant escalation in industrial action at Chevron's (CVX) Australian LNG facilities on Thursday and said the decision on whether to strike for the full 24 hours is being taken on a case-by-case basis across the 3 facilities involved, according to Reuters. Chevron (CVX) says a fault has impacted 25% of LNG production at Australia's Wheatstone plant, according to a spokesperson; the cause has been identified and restart activities have commenced, domestic gas facility unaffected. Subsequently, Australia's Offshore Alliance Union 1411 turbine on the Wheatstone downstream facility and one of the trains is now down to 50% capacity. Cochilco says average silver price to reach USD 24.60/oz this year, supply will go 1.8%; global silver demand to fall 9.4% in 2023; market will maintain a deficit. Geopolitics North Korean leader Kim said the meeting with Russian President Putin brought bilateral ties to a new level, while they agreed to further strengthen strategic and tactical cooperation and to step up cooperation to fight imperialists' military threats, provocations and tyranny, while Kim was briefed on technical details about Russian space vehicles and invited Putin to visit North Korea which Putin accepted, according to KCNA. Taiwan's Defence Ministry says 13 Chinese military aircraft entered Taiwan's air defence zone on Thursday. US Event Calendar 08:30: Aug. PPI Final Demand MoM, est. 0.4%, prior 0.3% Aug. PPI Final Demand YoY, est. 1.3%, prior 0.8% Aug. PPI Ex Food and Energy MoM, est. 0.2%, prior 0.3% Aug. PPI Ex Food and Energy YoY, est. 2.2%, prior 2.4% 08:30: Sept. Initial Jobless Claims, est. 225,000, prior 216,000 Sept. Continuing Claims, est. 1.69m, prior 1.68m 08:30: Aug. Retail Sales Ex Auto and Gas, est. -0.1%, prior 1.0% Aug. Retail Sales Control Group, est. -0.1%, prior 1.0% Aug. Retail Sales Ex Auto MoM, est. 0.4%, prior 1.0% Aug. Retail Sales Advance MoM, est. 0.1%, prior 0.7% 10:00: July Business Inventories, est. 0.1%, prior 0% DB's Jim Reid concludes the overnight wrap After much anticipation, markets mostly took the US CPI release in their stride yesterday, with bonds and equities fairly steady after the release, before a bond rally eventually took hold. The main headlines were much as expected, and monthly CPI for August came in at +0.6% thanks to a sharp uptick in gasoline prices. But with core coming in a tenth stronger than consensus at +0.3%, investors are still pricing in a near-evens chance of another Fed rate hike this year, whilst the 2yr inflation breakeven hit another 4-month high. So there’s still a lingering concern that inflation could remain above target, and that debate over whether to deliver another hike is a topical one as we arrive at the ECB’s latest decision today. In terms of the details of that CPI release, the big story was that spike in gasoline prices (+10.6% on the month) which drove the majority of the overall headline gain (+0.6%). In fact, that +0.6% reading was the strongest monthly inflation print since June 2022, and was still higher than any month throughout the entire 2010s. In turn, that sent the year-on-year measure up to +3.7%, which was a bit higher than the +3.6% expected by the consensus. Whilst the headline figure was strong, inflation swaps had already been pricing in a +0.64% headline print, so it wasn’t a big surprise. Instead, the more concerning story came from the core print, which moved back up to +0.3% (vs. +0.2% expected), albeit a low +0.3% with the unrounded number at +0.27%. Furthermore, the “supercore” measure that also excludes shelter and used cars and trucks spiked up to a 6-month high of +0.4%. A big driver of that was a strong performance for the transportation services category, which includes things like vehicle insurance and airline fares. That was up by +2.0% on the month, and makes up almost 6% of the CPI basket. A slightly concerning underlying trend was also shown by Cleveland Fed’s estimates of median and trimmed mean inflation, both of which were at their highest in four months at +0.3% mom. The release did little to affect near-term market pricing for the Fed, as futures see a 46% chance of another hike by year-end. But markets moved to price more 2024 Fed cuts during the day, with end-24 futures falling -6.6bps from the high for the cycle on Tuesday. For now, however, the focus will be on the ECB, which is announcing its latest policy decision today at 13:15 London time. Unusually, however, there’s quite a bit of uncertainty about whether it’ll deliver another hike today, or whether it’ll pause the hiking cycle after a run of 9 consecutive moves. Market pricing is currently pointing to a 66% likelihood of a hike as we go to press this morning, which is up from 38% at the end of last week. In the meantime, the consensus of economists on Bloomberg is narrowly suggesting that the ECB will stay on hold, and that’s what our own European economists at DB expect as well. In their preview (link here), they write that recent data has shown increasing evidence that tighter monetary policy is being transmitted, which favours a pause. Today will also see the release of the ECB’s latest growth and inflation forecasts, so one to watch out for. With that meeting to look forward to, sovereign bonds sold off in Europe, and yields on 10yr bunds (+0.8bps), OATs (+1.2bps) and BTPs (+4.4bps) all ended the day higher. Meanwhile for Treasuries, we initially saw a big sell-off after the CPI report came out, and the 10yr yield moved as high as 4.34% intraday. But that swiftly reversed course, and by the end of the session the 10yr yield closed -3.2bps lower at 4.25%, with a further -2.2bps decline overnight to 4.23%. Otherwise, the biggest outperformer were UK gilts, where the 10yr yield fell -6.9bps. That followed the release of monthly GDP data for July, which contracted by -0.5% (vs. -0.2% expected), and in response, investors also lowered the likelihood of a hike from the BoE next week to 72%, its lowest since May. We got more downbeat data out of the UK overnight, with the RICS house price balance survey for August falling from -53% to -68% (vs. -55% expected), a new post-GFC low. For US equities, the main story yesterday was one of modest advances, with the S&P 500 up +0.12%. That was mostly driven by the more cyclical sectors, with consumer discretionary stocks (+0.90%) seeing the biggest advances. Tech stocks were a slight outperformer, and the NASDAQ (+0.29%) and the FANG+ index (+0.42%) both rose as well. On the other hand, small-cap stocks struggled, leaving the Russell 2000 (-0.78%) at its lowest level since late June. And over in Europe there were also more widespread losses, with the STOXX 600 (-0.32%) and the DAX (-0.39%) losing ground ahead of the ECB decision. Overnight in Asia, equity markets are trading higher for the most part, with strong gains for the Nikkei (+1.40%) and the KOSPI (+0.96%). US equity futures are also pointing higher, with those on the S&P 500 up +0.28%. However, not every index is seeing strong advances overnight, as the Hang Seng is down -0.22% this morning, whilst the CSI 300 (-0.09%) and the Shanghai Comp (+0.04%) have seen little change. On the data side, we also heard that Australia’s unemployment rate had held steady in August at 3.7%, with employment up by a stronger-than-expected +64.9k (vs. +25.0k expected). Elsewhere this morning, oil prices are at their highest level since November, with Brent crude currently trading at $92.31/bbl. That’s also the case for WTI, which is at $88.95/bbl. The c.30% oil price rally since late June has been an unhelpful trend for central banks as they try to return inflation back to target. In Europe, we also saw natural gas futures rise +6.52% yesterday to a 2-week high of €36.82/MWh amid concerns about supply disruption. There wasn’t much other data of note yesterday, although in the US, the Mortgage Bankers Association reported that the rate on a 30yr fixed mortgage was back up to 7.27%. That’s just beneath the 7.31% reported in a couple of weeks in August, which is the highest rate seen since 2000. To the day ahead now, and the main highlight will be the ECB’s latest monetary policy decision, along with President Lagarde’s subsequent press conference. Otherwise, US data releases US include retail sales and PPI for August, along with the weekly initial jobless claims. Tyler Durden Thu, 09/14/2023 - 08:09.....»»

Category: worldSource: nytSep 14th, 2023

UAW Boss Says "Targeted Strikes" On Standby As Talks With Automakers "Far Apart"

UAW Boss Says 'Targeted Strikes' On Standby As Talks With Automakers 'Far Apart' Update (1930ET):  "For the first time in our history, we may strike all of the Big Three at once," United Auto Workers boss Shawn Fain told members in a Wednesday evening Facebook Live event.  Fain said General Motors, Ford, and Stellantis increased their wage offers but rejected some of the union's other demands.  "We do not yet have offers on the table that reflect the sacrifices and contributions our members have made to these companies. "To win we're likely going to have to take action. We are preparing to strike these companies in a way they've never seen before." He said if no deal is reached by 11:59 p.m. on Thursday, then "standup strikes" will be unleashed at different auto plants to keep the automakers guessing. "We will not strike all of our facilities at once" on Thursday," he added.  Targeted strikes will help the union sidestep 'strike pay,' which amounts to $500 a week per member.  Fain said the goal of the targeted strikes is to reach a fair labor deal for members, "but if the companies continue to bargain in bad faith or continue to stall or continue to give us insulting offers, then our strike is going to continue to grow."  With 24 hours left in labor talks, UAW and the automakers are still far apart.  *    *    *  Talks between United Auto Workers and Detroit's "Big Three" automakers - General Motors, Ford, and Stellantis, appear stalled on Wednesday morning as the deadline for a new four-year labor deal with automakers quickly approaches. UAW boss Shawn Fain is set to speak to the 146,000 members during a Facebook Live event at 1700 ET regarding the ongoing labor negotiations with Ford, General Motors, and Stellantis. According to Bloomberg, Fain is expected to discuss a potential strike strategy. AP News reports the Facebook Live event could have the union boss shed more light on "targeted strikes at a small number of factories run by each of Detroit's three automakers if they can't reach contract agreements by a Thursday night deadline."  Strikes at parts plants could spark production halts at multiple assembly factories. We detailed Tuesday a large enough strike could plunge Michigan's economy into a recession.  Last week, automakers submitted contract offers to UAW. Fain quickly threw those in the trash, calling General Motors "insulting."  Bank of America Securities warned clients a "strike is almost guaranteed" because UAW demands and automaker offers are so wide apart.   Nelson Lichtenstein, a history professor at the University of California Santa Barbara, told AP if UAW strikes later this week -- it would be the largest in decades.  Labor actions will likely occur at part factories for pickup trucks and big SUVs, according to Marick Masters, a business professor at Wayne State University in Detroit.  "They're trying to impose some hardship on the companies and apply an accelerating level of pressure to encourage them to make an offer which will be acceptable to the rank and file and goes further toward meeting the demands that they have on the table," Masters said.  He said it would make sense for UAW to target the weakest point of the supply chains:  "You would go after the components that would shut down as many of those product facilities as possible. "The tactic would force the companies to lay off workers at assembly plants, and they would get unemployment benefits rather than money from the union strike fund."  Meanwhile, pro-union President Biden and his administration appear unconcerned about imminent strike threats across America's manufacturing automobile hub.  It appears the president likes spending time more time at his liberal white-elitest Rehoboth Beach house than actually working.  Tyler Durden Wed, 09/13/2023 - 19:30.....»»

Category: dealsSource: nytSep 13th, 2023

UAW Boss May Unleash "Targeted Strikes" On Automakers 

UAW Boss May Unleash 'Targeted Strikes' On Automakers  Talks between United Auto Workers and Detroit's "Big Three" automakers - General Motors, Ford, and Stellantis, appear stalled on Wednesday morning as the deadline for a new four-year labor deal with automakers quickly approaches. UAW boss Shawn Fain is set to speak to the 146,000 members during a Facebook Live event at 1700 ET regarding the ongoing labor negotiations with Ford, General Motors, and Stellantis. According to Bloomberg, Fain is expected to discuss a potential strike strategy. AP News reports the Facebook Live event could have the union boss shed more light on "targeted strikes at a small number of factories run by each of Detroit's three automakers if they can't reach contract agreements by a Thursday night deadline."  Strikes at parts plants could spark production halts at multiple assembly factories. We detailed Tuesday a large enough strike could plunge Michigan's economy into a recession.  Last week, automakers submitted contract offers to UAW. Fain quickly threw those in the trash, calling General Motors "insulting."  Bank of America Securities warned clients a "strike is almost guaranteed" because UAW demands and automaker offers are so wide apart.   Nelson Lichtenstein, a history professor at the University of California Santa Barbara, told AP if UAW strikes later this week -- it would be the largest in decades.  Labor actions will likely occur at part factories for pickup trucks and big SUVs, according to Marick Masters, a business professor at Wayne State University in Detroit.  "They're trying to impose some hardship on the companies and apply an accelerating level of pressure to encourage them to make an offer which will be acceptable to the rank and file and goes further toward meeting the demands that they have on the table," Masters said.  He said it would make sense for UAW to target the weakest point of the supply chains:  "You would go after the components that would shut down as many of those product facilities as possible. "The tactic would force the companies to lay off workers at assembly plants, and they would get unemployment benefits rather than money from the union strike fund."  Meanwhile, pro-union President Biden and his administration appear unconcerned about imminent strike threats across America's manufacturing automobile hub.  It appears the president likes spending time more time at his liberal white-elitest Rehoboth Beach house than actually working.  Tyler Durden Wed, 09/13/2023 - 14:25.....»»

Category: blogSource: zerohedgeSep 13th, 2023

Futures Drop On Oracle Weakness Ahead Of iPhone 15 Reveal As CPI Looms

Futures Drop On Oracle Weakness Ahead Of iPhone 15 Reveal As CPI Looms US futures are slightly lower, but holding on to much of yesterday's tech-driven gains, with European bourses and Asian markets mixed ahead of tomorrow's CPI print. At 7:30am ET, both emini S&P500 and Nasdaq 100 futures slipped 0.3%, reversing yesterday's rally. Tech stocks retreated as Oracle dropped 10% after posting slowing cloud sales, while the euro and pound weakened on concern the Europe faces a growing threat of stagflation. Tech will also be the center of attention on Tuesday, with Apple set to unveil a new product lineup including the new iPhone 15, and SoftBank-owned chip designer Arm gearing is set to price the biggest IPO of the year. US Treasuries edged lower, commodities are higher led by base metals with oil trading near its highest level this year before the OPEC monthly report. Gold fell while bitcoin redovered much of yesterday's losses. In premarket trading, Oracle tumbled 10% after it reported slowing cloud sales growth in the quarter. Analysts said the report failed to live up to high expectations, although they remain positive on the company’s long-term prospects; Morgan Stanley analysts said the results raise questions about the timing of generative AI demand turning into revenue across the broader business. Apple is up 0.20% ahead of the new iPhone 15 reveal. Here are some other notable premarket movers: Acelyrin shares sink 58% after the biopharmaceutical company’s lead product, izokibep, did not meet the primary endpoint of a clinical trial of patients with hidradenitis suppurativa, a chronic inflammatory skin condition. Analysts found the miss to be disappointing, with Piper Sandler highlighting the “puzzling” dropout rates. RTX shares dip 1.11% as Barclays and RBC Capital Markets downgraded their recommendations on the stock after the aerospace and defense company cut its full-year sales forecast. Meanwhile, Citi reduces its price target on the stock. Sight Sciences shares slumped 34% after the glaucoma surgery device maker reduced its revenue outlook as uncertainty about the future of Medicare coverage for its products hurts demand. After today's Apple event, all eyes will turn to the US CPI report due Wednesday at 830am ET, and the ECB decision on Thursday.  The consumer-price index report Wednesday will provide the latest insight into how much further the Fed may need to go to pull inflation back toward its target. Monthly inflation is expected to surge accelerate to 0.6% in August from 0.2% in July, even as core CPI is seen stable at 0.2%, according to economists’ estimates. “Markets are gearing up to this week’s main events,” wrote ING Group NV strategists including Benjamin Schroeder. “It is not just about this Thursday’s ECB meeting, but also about crucial data in the US and UK ahead of next week’s respective central bank meetings.” US consumers’ inflation expectations were mostly stable in August, but households grew more concerned about their finances and more pessimistic about the job market, according to a Fed Bank of New York survey which showed the highest 5-year inflation expectations since the start of 2022. “If we do see potentially a more sticky inflation number than the 0.6% expected by economists or 0.2% on core, I would expect to see the bond market start to potentially price in another rate hike before the end of the year, potentially as early as November,” Anthony Doyle, head of investment strategy at Firetrail Investments Pty Ltd, said on Bloomberg Television. In Europe, the Stoxx 50 fell 0.4% with the FTSE 100 outperforming peers, adding 0.4%, DAX lags, dropping 0.5%. Packaging company Smurfit Kappa Group plunged 13% after it announced a deal to combine with WestRock. Here are the most notable European movers: AB Foods gain as much as 5.4% after the Primark owner reported fourth-quarter comparable sales growth of 8% for the clothing-retail business. Morgan Stanley analysts said the results show top-line resilience for Primark, while Shore Capital plans to increase its estimates. HelloFresh shares climb as much as 8.3% after JPMorgan placed the meal-kit maker on positive catalyst watch following meetings with company management, saying it is “ready to beat.” Jet2 shares rise as much as 4.9% after Morgan Stanley adds to the clean sweep of positive ratings on the company, starting coverage at overweight based on a continued supportive package holiday market outlook. Smurfit Kappa shares fall as much as 13% after the packaging firm agreed on the terms of a merger with WestRock, just a week after disclosing talks to combine. Analysts note the premium paid for WestRock is higher than investors anticipated. Campari shares fall as much as 6.1% in Milan after the company said Bob Kunze-Concewitz has decided to retire as CEO, effective as of April 2024, according to a statement. PolyPeptide slumps as much as 8.3% after the Swiss biotechnology company gets downgraded to sell from neutral at Citigroup, which cited operational issues as a drag on profitability. Dowlais shares fall as much as 6.3%, the most since July 11, after the co. reported 1H23 earnings that revealed uncertainty around possible US strikes affecting its 2H23 demand and kept its FY outlook unchanged. Fevertree shares decline as much as 7.1% after the high-end tonic maker reported first-half sales and earnings that missed estimates and lowered Ebitda guidance for the year. Analysts were encouraged by the 2024 margin outlook, though the miss to profit expectations weighed. Pepco shares drop as much as 5.2% after discount retailer reported sudden departure of CEO Trevor Masters and cut its Ebitda guidance due to weaker sales, even after previously signaling consumer recovery in its key markets in East Europe. Keywords Studios shares fall as much as 6.4%, dropping to the lowest intraday level since April 2020, after the video-game industry services firm reported first-half adjusted pretax profit that missed estimates. Jefferies and Shore Capital noted that writer and actor strikes in the US were a headwind. Stocks in Asia fluctuated and Chinese shares were back in the red. The MSCI Asia Pacific Index rose as much as 0.3%, with Toyota and TSMC the biggest boosts. Hong Kong shares erased losses following a report that distressed developer Country Garden got approval to extend repayment on its yuan bonds. Chinese gains triggered by news on Country Garden Holdings, which secured payment extension approval from its bondholders, were not enough to keep the positive sentiment going for long.  With Chinese equities still struggling even after a slew of recent market-support measures, regional investors await retail sales and factory data due Friday for signs of recovery in the economy. China’s underperformance has held the MSCI Asia gauge to a gain of 4% this year while the S&P 500 Index has climbed 17%. “In the near term, we need to see more policy actions and data turning more positive” in order to see more reallocations to Chinese equities, Nupur Gupta, a portfolio manager at Eastspring Investments, said in an interview with Bloomberg TV. Australia's ASX 200 was lacklustre amid weakness in energy, tech and financials, with trade also contained after a somewhat mixed business survey and weaker consumer sentiment data. Japan's Nikkei 225 gained amid strength in automakers and with SoftBank among the early leaders after its Arm unit IPO was oversubscribed by 10 times although price action was choppy and the index nearly pared all of its gains before revisiting session highs. Indian stocks opened higher, while South Korean shares fell amid losses in chip and EV battery names. In FX, the Bloomberg Dollar Spot Index edged up 0.2%, recovering from a 0.7% slide - the biggest in two months - while the yen resumed its fall. The yuan was little changed after China’s central bank set its daily fixing rate at below 7.20 versus the dollar, another sign that it won’t tolerate excessive yuan weakness. The euro and the pound both traded around 0.3% lower against the dollar. UK wage growth held at a record high in the three months through July, a sign of persistent inflation that will keep pressure on the Bank of England to raise interest rates again. Investor confidence in Germany’s economy improved for a second month, while lingering at a level that will do little to dispel intensifying concerns over the country’s status as Europe’s growth laggard. In rates, US Treasury yields remained within 1bp of Monday’s closing levels, with 10-year yields at 4.285% ahead of $35 billion reopening auction at 1pm New York time, as the front-end underperforms, slightly flattening 2s10s. . Demand was soft for Monday’s 3-year sale. Gilts outperformed after UK labor market data showed signs of cooling, while bunds trade marginally cheaper vs Treasuries. Dollar IG issuance slate contains a handful of names, including Slovenia 10Y benchmark, and another busy day is expected ahead of CPI and PPI due Wednesday and Thursday; eleven names priced almost $11b Monday, with at least one borrower electing to stand down. Today's 10-year note auction is poised to draw the highest yield since 2007, as did the 3-year, which tailed by around 1bp; cycle concludes with $20b 30-year reopening Wednesday In commodities, WTI trades within Monday’s range, adding 0.9% to trade near $88. Most base metals trade in the red; LME nickel falls 2.2%, underperforming peers. Spot gold falls roughly $3 to trade near $1,920/oz. Bitcoin has rebounded from Monday's weakness, rising back over $26L after tumbling to a $24.9k low rumors of forced FTX liquidations. Looking to the quiet day ahead, data releases include UK employment data for July, the German ZEW survey for September, and in the US we also get the NFIB small business optimism index for August, which came in at 91.3, just below the 91.5 expected and down from 91.9. The SEC's Gensler testifies at Senate Banking Committee at 10.00 a.m. New York time. Apple is expected to launch an India-assembled iPhone 15 with a USB-C port at 1.00 p.m. Arm bankers plan to stop taking orders for the IPO by Tuesday afternoon. The Google antitrust trial begins in Washington D.C. On Wednesday, US inflation data for August is out at 1.30 p.m. time along with mortgage applications data at noon. Market Snapshot S&P 500 futures down 0.3% to 4,478.25 MXAP up 0.1% to 162.00 MXAPJ down 0.1% to 503.65 Nikkei up 1.0% to 32,776.37 Topix up 0.8% to 2,379.91 Hang Seng Index down 0.4% to 18,025.89 Shanghai Composite down 0.2% to 3,137.06 Sensex little changed at 67,162.91 Australia S&P/ASX 200 up 0.2% to 7,206.85 Kospi down 0.8% to 2,536.58 STOXX Europe 600 little changed at 456.50 German 10Y yield little changed at 2.62% Euro down 0.3% to $1.0721 Brent Futures up 0.5% to $91.06/bbl Gold spot down 0.1% to $1,921.00 U.S. Dollar Index up 0.17% to 104.75 Top Overnight News Tech stocks were in retreat as Oracle Corp. posted slowing cloud sales, while the euro and pound weakened on concern the Europe faces a growing threat of stagflation. The European Central Bank’s decision is a cliffhanger for investors, but even participants in the meeting have no inkling of the likely outcome, according to people familiar with the matter. The new Cold War is a business opportunity, and Mexico looks better placed than almost any other country to seize it. The global economy is shifting toward a higher-for-longer period for interest rates, making the coming flurry of monetary decisions across the developed world pivotal in mapping out that plateau. Apple Inc.’s biggest day of the year has arrived, and the company is set to unveil updated versions of its iPhone, smartwatch and AirPods. Arm Holdings Ltd.’s initial public offering is already oversubscribed by 10 times and bankers plan to stop taking orders by Tuesday afternoon, according to people familiar with the matter. The luxury armored train carrying North Korean leader Kim Jong Un crossed into Russia ahead of a summit with President Vladimir Putin that the US said would focus on supplying weapons for Moscow’s war on Ukraine. A more detailed look at global markets courtesy of Newsquawk APAC stocks were mixed with the region tentative in the absence of any fresh macro catalysts and with participants bracing for the US CPI data due midweek. ASX 200 was lacklustre amid weakness in energy, tech and financials, with trade also contained after a somewhat mixed business survey and weaker consumer sentiment data. Nikkei 225 gained amid strength in automakers and with SoftBank among the early leaders after its Arm unit IPO was oversubscribed by 10 times although price action was choppy and the index nearly pared all of its gains before revisiti ng session highs. Hang Seng and Shanghai Comp traded ultimately flat with early downside cushioned following the PBoC's liquidity effort and after Country Garden Holdings received approval to extend 6 onshore bond repayments by 3 years. Top Asian News Country Garden Holdings (2007 HK) received approval to extend 6 onshore bond repayments by 3 years and it delayed the voting deadline on two bond payment extensions to Tuesday evening. New Zealand pre-election economic and fiscal update sees 2023/24 operating balance before gains and losses at NZD -11.4B (Budget forecast NZD -7.6bln), while it sees net at 43.6% of GDP (Budget forecast 43.1%) and expects to return to an OBEGAL surplus in 2026/2027 (Budget forecast of 2025/26). Several Chinese banks have reportedly said that regulators as of this year no longer require them to report the proportion of property loans/mortgages in total loans, via Xinhua; indicating a relaxation of restrictions on property financing. European bourses are diverging slightly and generally struggling for direction with newsflow light ahead of the week's risk events, Euro Stoxx 50 -0.3%. The breakdown has the DAX 40 lagging following after-market earnings from ORCL -9.1% in pre-market trade which in turn is weighing on heavyweight SAP -2.7%. As such, Tech is the laggard among European sectors while Telecom and Retail names see some relative outperformance. Stateside, futures are incrementally lower across the board with tech in focus given Oracle and as we await the AAPL, +0.2% pre-market, event; ES -0.2%, NQ -0.3% Top European News BoE's Breeden agrees with the MPC that the risks to inflation around the August forecasts are to the upside; expects inflation to be around the 2% target in two years. Sees balances risks to growth an unemployment in both directions. UK economic activity is weak. Breeden replaces Cunliffe on the MPC from November 1st. German Ifo residential construction survey (Aug): Crisis intensified in August, number of Co's reporting cancelled projects at a new high. Click here for more detail. Germany's ZEW says experts are even more pessimistic about the current economic situation in Germany vs August. More positive economic expectations for Germany are accompanied by significantly optimistic outlook for development on the international stock market, in part due to stable interest rates in EZ and US. Experts expect a further easing of interest rate policy in China. FX Buck finds its feet after a rocky start to the week, DXY towards the top of 104.820-430 range. Sterling stumbles on weak UK labour market metrics alongside strong headline average earnings, Cable retreats from 1.2530 towards 1.2460 Euro shrugs off mixed German ZEW survey as VDMA and Ifo deliver bleak outlook updates, EUR/USD closer to base of 1.0713-68 parameters Kiwi undermined by downgrades to NZ fiscal projections, NZD/USD heavy on 0.5900 handle Yen keeps afloat of 147.00 vs Greenback as a Fib supplements psychological support PBoC set USD/CNY mid-point at 7.1986 vs exp. 7.2859 (prev. 7.2148) Fixed Income Bonds bid, but off peaks after solid bounces from Monday lows. Bunds topped out at 130.99 within a range down to 130.60. Gilts reached 94.97 from 94.27 and outperformed on the back of weak components in the UK jobs report. T-note straddled parity between 109-28/23 confines awaiting US CPI tomorrow DMO's 2051 linker and Germany's Schatz tap both well received ahead of USD 35bln 10 year US refunding leg Commodities WTI and Brent futures are somewhat choppy within tight ranges amid quiet newsflow this European morning and ahead of key risk events including US CPI on Wednesday, the ECB decision on Thursday, and Chinese activity data on Friday. Dutch TTF remains supported with modest intraday gains as the Australian LNG strike and the extended maintenance at Norwegian fields keep prices underpinned. Spot gold is softer intraday amid the firmer Dollar, but the yellow metal remains within yesterday’s ranges and trades on either side of its 200 DMA (USD 1,920.03/oz today) after finding support at the 21 DMA (USD 1,916.41/oz today) yesterday. Base metals see modest softness amid the broader Dollar strength and cautious trade across stocks, although Singapore iron ore futures hit over five-month highs with analysts citing better-than-expected Chinese loans data and pre-holiday stocking ahead of the Chinese mid-Autumn festival at the end of the month. The Australia union said it is to oppose Chevron's (CVX) intractable bargaining application and it wants industrial action to continue until it secures a union-negotiated deal at Australian LNG facilities, according to Reuters. Western Australia State Government says they have no current plans to engage with the Fair Work Commission in the Chevron (CVX) dispute, at this stage there has been no disruption to Western Australia's domestic gas supply. Kazakhstan's Karachaganak gas condensate field is undergoing maintenance on September 11-15th, output will be reduced by 27k tonnes, according to the Energy Minister. China is looking to buy LNG again in latest risk to the global gas market's delicate balance, according to Bloomberg sources; Unipec released a tender to purchase more than a dozen shipments for this winter, in addition to deliveries through the end-2024. India imposed anti-dumping duty on some Chinese steel for five years. Geopolitics US President Biden's administration is close to approving long-range missiles including ATACMS or GMLRS both armed with cluster bombs for Ukraine, while these missiles would give Kyiv the ability to cause significant damage deeper within Russia-occupied territory, according to Reuters citing four US officials. US Secretary of State Blinken confirmed they exercised a waiver to allow the transfer of USD 6bln from South Korea to Qatar as part of a US-Iran prisoner swap, according to Reuters. North Korean leader Kim left Pyongyang on Sunday to visit Russia and his train arrived at Khasan Station in Russia's far east, while the White House urged North Korea not to provide weapons to Russia. Kremlin spokesman said Russian President Putin and North Korean leader Kim will discuss bilateral ties and seek to build good, mutually beneficial relations, while a spokesman also stated that Russia is not interested in Washington's warnings on Moscow's contact with North Korea. No separate meeting between Russian and North Korea defence ministers planned, via Ifax citing Russia's Peskov; Russian President Putin and North Korean Leader Kim to meet in the "coming days". Russian President Putin says FSB captured Ukrainian saboteurs who sought to damage our nuclear power station; Saboteurs were instructed by British services; that is worrying and consequences could be serious. Taiwan's Ministry of Defence 2023 National Defence Report stated that China's military intimidation and intrusions are a new normal and China is using grey-zone tactics to change the status quo. US Event Calendar 06:00: Aug. Small Business Optimism 91.3, est. 91.5, prior 91.9 10:00: Income, Poverty and Health Insurance report: 2022 DB's Jim Reid concludes the overnight wrap Welcome to my annual day of being seduced into buying a new iPhone that I don't really need but desperately want. Apple launch their new product suite today which actually is a potential macro mover. It goes alongside the annual "buy a new golf driver I don't really need" day usually in the Spring. However, I'm nearly 50 and I've only ever owned two cars, so allow me these extravagances. As I type this on a dull old iPhone 14, markets are mostly awaiting tomorrow’s all-important US CPI print. As we wait, the most interesting moves over the last 24 hours have been the dollar putting in one of its worst daily performances in the past two months and Tesla climbing over 10% to be up +122% YTD but actually almost -10% YoY. Timing is everything. There was also a fresh sell-off for bonds as speculation about rate hikes and inflation gathered pace. But, on the other hand, risk assets did quite well, with the S&P 500 (+0.67%) recovering from last week’s declines, helped by tech and Tesla. The bond sell-off carried on from the overnight moves before Monday's Western market open after BoJ Governor Ueda’s comments over the weekend (that we discussed yesterday along with our revised BoJ call - link here) that then spread globally. In Japan, yields on 10yr JGBs had already closed at a post-2014 high of 0.70% (0.713% this morning) but we then saw yields on 10yr Treasuries up +2.5bps to 4.29%, which was their highest closing level in nearly 3 weeks. It was a similar story in Europe too, with yields on 10yr bunds (+2.9bps), OATs (+3.2bps) and BTPs (+4.8bps) all rising. Interestingly, markets are continuing to price in a growing likelihood that the ECB will deliver a hike on Thursday, with overnight index swaps now giving it a 41% probability, up from a low of 23% on 1 September, the day after the August euro area inflation print. The last time there was as much doubt about an ECB decision was back in March after SVB’s collapse, although back then the question was more between 25bps vs 50bps rather than no hike at all. When it came to the bond sell-off, 10yr gilts (+4.9bps) saw the largest increase in yields, which followed comments from the BoE’s Mann, the most hawkish member of the MPC. She said that her preference was to tighten further, and that to “pause or to hold the policy rate lower for longer risks inflation becoming more deeply embedded”. And she added further that “holding rates constant at the current level risks enabling further inflation persistence”. For now, markets continue to price in a 79% likelihood of another BoE hike next week, which would take the policy rate up to 5.5%. As an aside, our rates strategist Francis Yared wrote a piece here suggesting that central banks should be erring on the side of doing too much rather than too little. It’s worth a read after the recent Table Mountain talk. Those movements in the bond market occurred alongside some interesting shifts in the FX space. In particular, the Japanese Yen surged +0.93% against the US Dollar, which came as investors priced in a growing likelihood of a policy shift from the BoJ. This morning the Yen (-0.03%) is slightly lower. And there was also a significant appreciation in the Chinese Yuan (+0.74%), which followed comments from the People’s Bank of China, which said in a statement that FX market participants should “resolutely avoid behaviors that disturb market orders such as conducting speculative trades.”. The dollar index had been on course for its worst performance in nearly two months yesterday, though it ended the day a smidgen shy of this mark, down -0.50% (which marked its first decline in eight sessions). It is fairly flat this morning. There wasn’t much data to speak of yesterday, but the New York Fed’s latest Survey of Consumer Expectations offered some interesting findings that added to signs of a weakening economy. For instance, the mean probability of losing one’s job over the next 12 months rose to 13.8% in August, which was the highest since April 2021. There were also signs of tightening credit availability, since the share saying that credit was “much harder” or “somewhat harder” to obtain credit than a year ago rose to 59.8%, which is the highest since the series began over a decade ago. In the meantime, the inflation expectations series were broadly steady, with 1yr inflation expectations ticking up a tenth to 3.6%. On the topic of risks to the US economy, our economists yesterday published a note updating their recession probability models. See here for more. Despite the broader moves in markets, equities managed to put in a resilient performance yesterday, with the S&P 500 advancing +0.67%. That was supported by a large gain for Tesla (+10.09%), which was the top performer in the entire S&P yesterday on the back of a big broker upgrade. This helped drive the outperformance from the NASDAQ (+1.14%) and the FANG+ Index (+2.07%). To narrow down the tech rally even further we are going to start quoting the “Magnificent Seven” performance regularly in the EMR. They rose +2.71% yesterday buoyed by Tesla with only Nvidia down (-0.86%). Talking of tech, last week, Bloomberg reported that Huawei and China’s top chipmaker, SMIC, have surprised the market by building an advanced 7nm (N+2) chip and installing it in the latest Huawei smartphone. This is the most recent development in what has become known as the US-China high tech decoupling. In their latest chartbook, my team members Marion Laboure and Cassidy Ainsworth-Grace explore how this tech decoupling began, the cost of a full global technological decoupling, and break down the ten technologies most at risk of decoupling. See here for more. Back in Europe, the STOXX 600 (+0.34%), the DAX (+0.36%) and the FTSE 100 (+0.25%) all rose. Unlike the US, European tech stocks underperformed on a broadly positive day that saw 69% of the STOXX 600 constituents post a gain. Asian equity markets are relatively quiet overnight. As I check my screens, the Nikkei (+0.61%) is outperforming the region with the CSI (+0.03%) and the Shanghai Composite (+0.04%) trading a tad higher while the KOSPI (-0.52%) is trading in negative territory. The Hang Seng (-0.01%) is flat but has come back from over -1% down near the open. Country Garden got creditor approval to extend the duration of 6 onshore bonds which has helped lift its shares by 10% and turn the property sector from around -2% to nearly +3%. S&P 500 (-0.12%) and NASDAQ 100 (-0.09%) futures are inching lower. There wasn’t much other data of note yesterday, but the European Commission downgraded its growth forecast for the Euro Area in 2023 and 2024 by three-tenths in both years. That now leaves its forecasts at +0.8% this year and +1.3% in 2024. For inflation, it sees a slightly lower figure this year at +5.6%, down two-tenths, but the 2024 projection has been raised a tenth to +2.9%. Elsewhere, Italian industrial production fell by a larger-than-expected -0.7% in July (vs. -0.3% expected). To the day ahead now, and data releases include UK employment data for July, the German ZEW survey for September, and in the US there’s the NFIB’s small business optimism index for August. Tyler Durden Tue, 09/12/2023 - 08:08.....»»

Category: blogSource: zerohedgeSep 12th, 2023