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Ethiopian Airlines sees crash settlement with Boeing by end-June

Ethiopian Airlines expects a settlement with planemaker Boeing by end of June over the crash of an 737 MAX plane in March 2019, CEO Tewolde Gebremariam told Reuters on Friday......»»

Category: topSource: reutersMay 15th, 2020

Crashes behind the front lines hint at a looming problem for isolated Russia"s Air Force

"What's interesting is that even aircraft not involved in the Russian invasion are crashing," an expert wrote of recent incidents in Russia. Ukrainians look on a part of destroyed Russian Su-25 on display in Kyiv on May 8, 2022.STR/NurPhoto via Getty Images Russia lost several combat aircraft to crashes in the final months of 2022. Some of those losses reflect the toll the war in Ukraine has taken on Russia's air force. Others, which involved jets not being used in the war, may reflect the toll of Western sanctions. Militaries expect to lose aircraft in combat, and even in peacetime there will be accidents when operating fast, complex jets, but a series of crashes by Russian combat jets may indicate that Western sanctions are cutting into Moscow's ability to maintain its warplanes."Sanctions placed on Russia by the West could well be affecting Russia's ability to manufacture and maintain parts needed to keep aircraft safe," Michael Bohnert, an engineer and analyst at the Rand Corporation, a US think tank, wrote in a November essay.Bohnert pointed to at least six crashes between September and late November.Accidents involving older Su-25 ground-attack aircraft, a newer Su-34 ground-attack aircraft that crashed into an apartment building in Russia, and a MiG-31 fighter that crashed on takeoff are not that surprising. Those models have flown extensively in combat over Ukraine, so the incidents may reflect the wear and tear on them.Russian emergency personnel remove parts of a Su-34 jet that crashed in a residential area in the town of Yeysk on October 18.STRINGER/AFP via Getty ImagesHowever, two crashes involved planes that weren't being used in Ukraine. In mid-October, an Su-34 crashed into an apartment building in the city of Yeysk. A week later, an Su-30 fighter crashed into a residential building in Siberia.The initial investigation of the Su-34 crash "pointed to a technical malfunction of the aircraft," according to Russian authorities."What's interesting is that even aircraft not involved in the Russian invasion are crashing," Bohnert wrote of the October crashes. "These aircraft were being used as training platforms, and their combat counterparts have limited use in the current war."Crashes of multiple aircraft types, involving jets that have and have not seen combat, suggests a pattern. "While mechanical failures are expected in aircraft over time, a rapid increase in fleetwide mechanical failures may indicate that something fundamental has changed," Bohnert wrote.The question is what has changed in Russian aircraft reliability and maintenance? Specifically, are Western sanctions that have deprived Russian aviation of imported parts to blame? Russian airlines are already cannibalizing jetliners for spare parts that sanctions have made unavailable.At the same time, there are indications that Russia is suffering from a lack of qualified military pilots as well as sloppy ground crews.Russian troops work on Su-24 aircraft at the Hamaimim air base in Syria in May 2016.Friedemann Kohler/picture alliance via Getty ImagesBohnert sees three possible causes for the crashes: a lack of skilled mechanics, not enough third-party companies to manufacture or repair aviation parts, or a lack of tools and materials to make or fix these parts.However, Bohnert doesn't see any of these explanations as sufficient by themselves. For example, while Western experts cite sloppy maintenance practices such as ground crews failing to remove covers from sensors before takeoff, Bohnert thinks a lack of competent mechanics isn't likely."While Russian airbases have been attacked, damage has not been extensive and maintainers probably would not have been transferred to forward combat units," he wrote.Mobilization has affected small- and medium-sized companies that make aviation parts, but the crashes began before Putin ordered the mobilization on September 21. That leaves a shortage of manufacturing tools and raw materials because of Western sanctions.This still leaves the problem of precisely attributing the reasons for the crashes. "We have seen continued and possibly increasing mechanical failures with Russian military and civilian aircraft," Bohnert told Insider. "It has been difficult to ascertain why."The site where a Russian military aircraft crashed into a residential building in the city of Irkutsk on October 23.REUTERS/StringerFor example, measuring the impact of mobilization on Russian manufacturing is difficult, as is determining how many aircraft parts Russia is covertly importing. Details on transshipments into Russia may appear in trade flow reports or company annual reports, but this information may take months or even years to surface.In the end, Russian aircraft maintenance may face a mix of problems. "The likely causes of the failures remain some combination of personnel, tooling, and increased demand for domestic production limiting the supply and/or the quality of spare parts," Bohnert said.As the war in Ukraine continues, combat will wear out aircraft and trained pilots. Pre-war stocks of spare parts will be depleted, especially of imported components and materials.Substitutions may help a bit: Iran, for example, has been resourceful in either secretly acquiring or producing parts for its US-made 1970s-era F-14 and F-4 fighters or in cannibalizing parts from some planes to keep others flying. But that's not a reliable way to maintain an air force.Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds a master's in political science. Follow him on Twitter and LinkedIn.Read the original article on Business Insider.....»»

Category: dealsSource: nytJan 18th, 2023

Macleod: The Great Global Unwind Begins

Macleod: The Great Global Unwind Begins Authored by Alasdair Macleod via GoldMoney.com, There is a growing feeling in markets that a financial crisis of some sort is now on the cards. backslash Credit Suisse’s very public struggles to refinance itself is proving to be a wake-up call for markets, alerting investors to the parlous state of global banking. This article identifies the principal elements leading us into a global financial crisis. Behind it all is the threat from a new trend of rising interest rates, and the natural desire of commercial banks everywhere to reduce their exposure to falling financial asset values both on their balance sheets and held as loan collateral. And there are specific problems areas, which we can identify: It should be noted that the phenomenal growth of OTC derivatives and regulated futures has been against a background of generally declining interest rates since the mid-eighties. That trend is now reversing, so we must expect the $600 trillion of global OTC derivatives and a further $100 trillion of futures to contract as banks reduce their derivative exposure. In the last two weeks, we have seen the consequences for the gilt market in London, warning us of other problem areas to come. Commercial banks are over-leveraged, with notable weak spots in the Eurozone, Japan, and the UK. It will be something of a miracle if banks in these jurisdictions manage to survive contracting bank credit and derivative blow-ups. If they are not prevented, even the better capitalised American banks might not be safe. Central banks are mandated to rescue the financial system in troubled times. However, we find that the ECB and its entire euro system of national central banks, the Bank of Japan, and the US Fed are all deeply in negative equity and in no condition to underwrite the financial system in this rising interest rate environment.  The Credit Suisse wake-up call In the last fortnight, it has become obvious that Credit Suisse, one of Switzerland’s two major banking institutions, faces a radical restructuring. That’s probably a polite way of saying the bank needs rescuing. In the hierarchy of Swiss banking, Credit Suisse used to be regarded as very conservative. The tables have now turned. Banks make bad decisions, and these can afflict any bank. Credit Suisse has perhaps been a little unfortunate, with the blow-up of Archegos, and Greensill Capital being very public errors. But surely the most egregious sin from a reputational point of view was a spying scandal, where the bank spied on its own employees. All the regulatory fines, universally regarded as a cost of business by bank executives, were weathered. But it was the spying scandal which forced the bank’s highly regarded CEO, Tidjane Thiam, to resign. We must wish Credit Suisse’s hapless employees well in a period of high uncertainty for them. But this bank, one of thirty global systemically important banks (G-SIBs) is not alone in its difficulties. The only G-SIBs whose share capitalisation is greater than their balance sheet equity are North American: the two major Canadian banks, Morgan Stanley, and JPMorgan. The full list is shown in Table 1 below, ranked by price to book in the second to last column. [The French Bank, Groupe BPCE’s shares are unlisted so omitted from the table] Before a sharp rally in the share price last week, Credit Suisse’s price to book stood at 24%, and Deutsche Bank’s stood at an equally lowly 23.5%. And as can be seen from the table, seventeen out of twenty-nine G-SIBs have price-to-book ratios of under 50%. Normally, the opportunity to buy shares at book value or less is seen by value investors as a strategy for identifying undervalued investments. But when a whole sector is afflicted this way, the message is different. In the market valuations for these banks, their share prices signal a significant risk of failure, which is particularly acute in the European and UK majors, and to a similar but lesser extent in the three Japanese G-SIBs. As a whole, G-SIBs have been valued in markets for the likelihood of systemic failure for some time. Despite what the markets have been signalling, these banks have survived, though as we have seen in the case of Deutsche Bank it has been a bumpy road for some. Regulations to improve balance sheet liquidity, mainly in the form of Basel 3, have been introduced in phases since the Lehman failure, and still price-to-book discounts have not recovered materially. These depressed market valuations have made it impossible for the weaker G-SIBs to consider increasing their Tier 1 equity bases because of the dilutive effect on existing shareholders. Seeming to believe that their shares are undervalued, some banks have even been buying in discounted shares, reducing their capital and increasing balance sheet leverage even more. There is little doubt that in a very low interest rate environment some bankers reckoned this was the right thing to do. But that has now changed. With interest rates now rising rapidly, over-leveraged balance sheets need to be urgently wound down to protect shareholders. And even bankers who have been so captured by the regulators that they regard their shareholders as a secondary priority will realise that their confrères in other banks will be selling down financial assets, liquidating financial collateral where possible, and withdrawing loan and overdraft facilities from non-financial businesses when they can.  It is all very well to complacently think that complying with Basel 3 liquidity provisions is a job well done. But if you ignore balance sheet leverage for your shareholders at a time of rising prices and therefore interest rates, they will almost certainly be wiped out. There can be no doubt that the change from an environment where price-to-book discounts are an irritation to bank executives to really mattering is bound up in a new, rising interest rate environment. Rising interest rates are also a sea-change for derivatives, and particularly for the banks exposed to them. Interest rates swaps, of which the Bank for International Settlements reckoned there were $8.8 trillion equivalent in June 2021, have been deployed by pension funds, insurance companies, hedge funds and banks lending fixed-rate mortgages. They are turning out to be a financial instrument of mass destruction. An interest rate swap is an arrangement between two counterparties who agree to exchange payments on a defined notional amount for a fixed time period. The notional amount is not exchanged, but interest rates on it are, one being at a predefined fixed rate such as a spread over a government bond yield with a maturity matching the duration of the swap agreement, while the other floats based on LIBOR or a similar yardstick. Swaps can be agreed for fixed terms of up to fifteen years. When the yield curve is positive, a pension fund, for example, can obtain a decent income uplift by taking the fixed interest leg and paying the floating rate. And because the deal is based on notional capital, which is never put up, swaps can be leveraged significantly. The other party will be active in wholesale money markets, securing a small spread over floating rate payments received from the pension fund. Both counterparties expect to benefit from the deal, because their calculations of the net present values of the cash flows, which involves a degree of judgement, will not be too dissimilar when the deal is agreed. The risk to the pension fund comes from rising bond yields. Despite the rise in bond yields, it still takes the fixed rate agreed at the outset, yet it is committed to paying a higher floating rate. In the UK, 3-month sterling LIBOR rose from 0.107% on 1 December 2021, to 3.94% yesterday. In a five-year swap, the fixed rate taken by the pension fund would be based on the 5-year gilt yield, which on 1 December last was 0.65%. With a spread of perhaps 0.25% over that, the pension fund would be taking 0.9% and paying 0.107%, for a turn of 0.793%. Today, the pension fund would still be taking 0.9%, but paying out 3.94%. With rising interest rates, even without leverage it is a disaster for the pension fund. But this is not the only trap they have fallen into. In the UK, pension fund exposure to repurchase agreements (repos) led to margin calls and a sudden liquidation of gilt collateral less a fortnight ago. A number of specialist firms offered liability driven investment schemes (LDIs), targeted at final salary pension schemes. Using repos, LDI schemes were able to use low funding rates to finance long gilt positions, geared by up to seven times. When LDIs blew up due to falling collateral values, the gilt market collapsed as pension funds became forced sellers, and the Bank of England dramatically reversed its stillborn quantitative tightening policy. That saga has further to run, and the problem is not restricted to UK pension funds, as we shall see. A fuller description of how these repo schemes blew up is described later in this article. The LDI episode is a warning of the consequences of a change in interest rate trends for derivatives in the widest sense. We should not forget that the evolution of derivatives has been in large measure due to the post-1980 trend of declining interest rates. With commodity, producer, and consumer prices now all rising fuelled by currency debasement, that trend has now come to an end. And with collateral values falling instead of rising, it is not just a case of dealers adjusting their outlook. There are bound to be more detonations in the $600 trillion OTC global derivatives market. Central to these derivatives are banks and shadow banks. Credit Suisse has been a market maker in credit default swaps, leveraged loans, and other derivative-based activities. The bank deals in a wide range of swaps, interest rate and foreign exchange options, forex forwards and futures.[i] The replacement values of its OTC derivatives are shown in the 2021 accounts at CHF125.6 billion, which reduces with netting agreements to CHF25.6 billion. Small beer, it might seem. But the notional amounts, being the principal amounts upon which these derivative replacement values are based are far, far larger. The leverage between replacement values and notional amounts means that the bank’s exposure to rising interest rates could rapidly drive it into insolvency. At this juncture, we cannot know if this is at the root of the bank’s troubles. And this article is not intended to be a criticism of Credit Suisse relative to its peers. The problems the bank faces are reflected in the entire G-SIB system with other banks having far larger derivative exposures. The point is that as a whole, participants in the derivatives market are unprepared for the conditions which led to its phenomenal growth at $600 trillion equivalent, which is now being reversed by a change in the primary trend for interest rates. Central bank balance sheets and bailing commercial banks In the event of commercial banking failures, it is generally expected that central banks will ensure depositors are protected, and that the financial system’s survival is guaranteed. But given the sheer size of derivative markets and the likely consequences of counterparty failures, it will be an enormous task requiring global cooperation and the abandonment of the bail-in procedures agreed by G20 member nations in the wake of the Lehman crisis. There will be no question but that failing banks must continue to trade with their bond holders’ funds remaining intact. If not, then all bank bonds are likely to collapse in value because in a bail-in bond holders will prefer the sanctity of deposits guaranteed by the state. And any attempt to limit deposit protection to smaller depositors would be disastrous. Because the Great Unwind is so sudden, it promises to become a far larger crisis than anything seen before. Unfortunately, due to quantitative easing the central banks themselves also have bond losses to contend with, wiping out the values of their balance sheet equity many times over. That a currency-issuing central bank has net liabilities on its balance sheet would not normally matter, because it can always expand credit to finance itself. But we are now envisaging central banks with substantial and growing net liabilities being required to guarantee entire commercial banking networks.  The burden of bail outs will undoubtedly lead to new rounds of currency debasement directly and indirectly, as vain attempts are made to support financial asset values and prevent an economic catastrophe. Accelerating currency debasement by the issuing authorities will almost certainly undermine public faith in fiat currencies, leading to their entire collapse, unless a way can be found to stabilise them. The euro system has specific problems In theory, recapitalising a central bank is a simple matter. The bank makes a loan to its shareholder, typically the government, which instead of a balancing deposit it books as equity in its liabilities. But when a central bank is not answerable to any government, that route cannot be taken. This is a problem for the ECB, whose shareholders are the national central banks of the member states. Unfortunately, they are also in need of recapitalisation. Table 2 below summarises the likely losses suffered this year so far on their bond holdings under the assumptions in the notes. Other than the four national central banks for which bond prices are unavailable, we can see that all NCBs and the ECB itself have been entrapped by rising bond yields. Even the mighty Bundesbank appears to have losses on its bonds forty-four times its shareholders’ capital since 1 January. Bearing in mind that the Eurozone’s consumer price index is now rising at about 10% and considerably higher in some member states, 5-year maturity government bond yields between 2% (Germany) and 4% (Italy) can be expected to rise considerably from here. No amount of mollification, that central banks can never go bust, will cover up this problem. Imagine the legislative hurdles. The Bundesbank, let’s say, presents a case to the Bundestag to pass enabling legislation to permit it to recapitalise itself and to subscribe to more capital in the ECB on the basis of its share of the ECB’s equity to restore it to solvency. One can imagine finance ministers being persuaded that there is no alternative to the proposal, but then it will be noticed that the Bundesbank is owed over €1.2 trillion through the TARGET2 system. Surely, it will almost certainly be argued, if those liabilities were paid to the Bundesbank, there would be no need for it to recapitalise itself. If only it were so simple. But clearly, it is not in the Bundesbank’s interest to involve ignorant politicians in monetary affairs. The public debate would risk spiralling out of control, with possibly fatal consequences for the entire euro system. So, what is happening with TARGET2? TARGET2 imbalances are deteriorating again… Figure 1 shows that TARGET2 imbalances are increasing again, notably for Germany’s Bundesbank, which is now owed a record €1,266,470 million, and Italy’s Banca Italia which owes €714,932 million. These are the figures for September, while all the others are for August and are yet to be updated. In theory, these imbalances should not exist because that was an objective behind TARGET2’s construction. And before the Lehman crisis, they were minimal as the chart shows. Since then, they have increased to a total of €1,844,815 million, with Germany owed the most, followed by Luxembourg, which in August was owed €337,315 billion. Partly, this is due to Frankfurt and Luxembourg being financial centres for international transactions through which both foreign and Eurozone investing institutions have been selling euro-denominated obligations issued by entities in Portugal, Italy, Greece, and Spain (the PIGS). The bank credit resulting from these transactions works through the system as follows: An Italian bond is sold through a German bank in Frankfurt. On delivering the bond, the seller has recorded in his favour a credit (deposit) at the German bank. Delivery to Milan against payment occurs with the settlement going through TARGET2, the settlement system through which cross-border settlements are made via the NCBs. Accordingly, the German bank records a matching credit (asset) with the Bundesbank.  The Bundesbank has a liability to the German bank. On the Bundesbank’s balance sheet, it generates a matching asset, reflecting the settlement due from the Banca d’Italia. The Banca d’Italia has a liability to the Bundesbank, and a matching asset to the Italian bank acting for the buyer of the Italian bond. The Italian bank has a liability to the Banca d’Italia, matching the debit on the bond buyer’s account, which is extinguishedby the buyer’s payment in settlement. As far as the international seller and the buyer through the Italian market are concerned, settlement has occurred. But the offsetting transfers between the Bundesbank and the Banca d’Italia have not taken place. There have been no settlements between them, and imbalances are the result.  The situation has been worsened by capital flight within the Eurozone, using dodgy collateral originating in the PIGS posted to the relevant national central bank by commercial banks, against cash credits made to commercial banks in the form of repurchase agreements (repos).  There are two reasons for these repo transactions. The first is simple capital flight within the Eurozone, where cash balances gained through repos are deployed to buy bonds and other assets lodged in Germany and Luxembourg. The payments will be in euros but are very likely to be for bonds and other investments not denominated in euros. The second is that in overseeing TARGET2, the ECB has ignored collateral standards as a means of subsidising the PIGS’ financial systems. With the PIGS economies on continuing life support, local bank regulators would be put in an awkward position if they had to decide whether bank loans are performing or non-performing. Because increasing quantities of these loans are undoubtedly non-performing, the solution has been to bundle them up as assets which can be used as collateral for repos through the central banks, so that they get lost in the TARGET2 system. If, say, the Banca d’Italia accepts the collateral it is no longer a concern for the local regulator. The true fragility of the PIGS economies is concealed in this way, the precariousness of commercial bank finances is hidden, and the ECB has achieved a political objective of protecting the PIGS’ economies from collapse. The recent increase in the imbalances, particularly between the Bundesbank and the Banca d’Italia are a warning that the system is breaking down. It was not an obvious problem when the long-term trend for interest rates was declining. But now that they are rising, the situation is radically different. The spread between Germany’s bond yields and those of Italy along with those of the other PIGS is increasingly being deemed by investors to be insufficient to compensate for the enhanced risks in a rising interest rate environment. The consequences could lead to a new crisis for the PIGS as their precarious state finances become undermined. Furthermore, capital flight out of Eurozone investments generally is confirmed by the collapse in the euro’s exchange rate against the US dollar. The Eurozone’s repo market From our analysis of the underlying causes of TARGET2 imbalances, we can see that repos play an important role. For the avoidance of doubt a repo is defined as a transaction agreed between parties to be reversed on pre-agreed terms at a future date. In exchange for posting collateral, a bank receives cash. The other party, in our discussion being a central bank, sees the same transaction as a reverse repo. It is a means of injecting fiat liquidity into the commercial banking system. Repos and reverse repos are not exclusively used between commercial banks and central banks, but they are also undertaken between banks and other financial institutions, sometimes through third parties, including automated trading systems. They can be leveraged to produce enhanced returns, and this is one of the ways in which liability driven investment (LDI) has been used by UK pension funds geared up to seven times. Presumably UK LDIs are an activity mirrored by their Eurozone equivalents, likely to be revealed as interest rates continue to rise. According to the last annual survey by the International Capital Market Association conducted in December 2021, at that time the size of the European repo market (including sterling, dollar, and other currencies conducted in European financial centres) stood at a record of €9,198 billion equivalent.[ii] This was based on responses from a sample of 57 institutions, including banks, so the true size of the market is somewhat larger. Measured by cash currency analysis, the euro share was 56.9% (€5,234bn). Obtaining euro cash through repos is cheap finance, as Figure 2 illustrates, which is of rates earlier this week. It allows European pension and insurance funds to finance geared bond positions through liability driven investment schemes. Which is fine, until the values of the bonds held as collateral fall, and cash calls are then made. This is what blew up the UK gilt market recently and are doing do so again this week as gilt prices fall. This is not a problem restricted to the UK and sterling markets. We can be sure that this situation is ringing alarm bells in the ECB’s headquarters in Frankfurt, as well as in all the major commercial banks around Europe. It has not been a concern so long as interest rates were not rising. Now that they are, with price inflation out of control there’s likely to be an increased reluctance on the part of the banks to novate repo agreements. There are a number of moving parts to this emerging crisis. We can summarise the calamity beginning to overwhelm the Eurozone and the euro system, as follows: Rising interest rates and bond yields are set to implode European repo markets. The LDI crisis which hit London will also afflict euro-denominated bond and repo markets — possibly even before the ink in this article has long dried. Collapsing repos in turn will lead to a failure of the TARGET2 system, because repos are the primary mechanism drivingTARGET2 imbalances. The spreads between German and highly indebted PIGS government bonds are bound to widen dramatically, causing a new funding crisis for ever more highly indebted PIGS on a scale far larger than seen in the past. Commercial banks in the Eurozone will be forced to liquidate their assets and collateral held against loans, including repos, as rapidly as possible. This will collapse Eurozone bond markets, as we saw with the UK gilt market earlier this month. Paper held in other currencies by Eurozone banks will be liquidated as well, spreading the crisis to other markets. The ECB and the euro system, which is already insolvent, is duty bound to intervene heavily to support bond markets and ensure the survival of the whole system. Panglossians might argue that the ECB has successfully managed financial crises in the past, and that to assume they will fail this time is unnecessarily alarmist. But the difference is in the trends for price inflation and interest rates. If the ECB is to have the slightest chance of succeeding in keeping the whole euro system and its allied commercial banking system afloat, it will be at the expense of the currency as it doubles down on suppressing interest rates.  The Bank of Japan is struggling to keep bond yields suppressed Along with the ECB, the Bank of Japan forced negative interest rates upon its financial system in an effort to maintain a targeted 2% inflation rate. And while other jurisdictions see CPI rising at 10% or more, Japan’s CPI is rising at only 3%. There are a number of identifiable reasons why this is so. But the overriding reason is that the Japanese consumer continues to place unshakeable faith in the yen. This means that in the face of higher prices, the average consumer withholds spending, increasing preferences for holding the currency. Even though the yen has fallen by 26% against the dollar, and dollar prices are rising at 8.5%, the growing preference for holding cash yen relative to consumer purchases in domestic markets holds. But this cannot go on for ever. While domestic market conditions remain stable, the US Fed’s more aggressive interest rate policy relative to the BOJ’s tells a different story for the yen on the foreign exchanges. The Bank of Japan first started quantitative easing over twenty years ago and has accumulated a mixture of government bonds (JGBs), corporate bonds, equities through ETFs, and property trusts. On 30 September, their accumulated total had a book value — as distinct from a market value — of over ¥594 trillion ($4.1 trillion). But at ¥545.5 trillion, the JGB element is 92% 0f the total. Since 31 December 2021, the yield on the 10-year JGB (by far the largest component) has risen from 0.17% to 0.25% today. On this basis, the bond portfolio held at that time has lost nearly ¥10 trillion, which compares with the bank’s capital of only ¥100 million. Therefore, the losses on the bond element alone are about 100,000 times greater that the bank’s slender equity. One can see why the BOJ has drawn a line in the sand against market reality. It insists that the 10-year JGB yield must be prevented from rising above 0.25%. Its neo-Keynesian case is that consumer inflation is subdued so the case for reducing stimulation to the economy is a marginal one. But the consequence is that the currency is collapsing. And only yesterday, the rate to the US dollar began to slide again. This is shown in Figure 3 — note that a rising number represents a weakening yen. Despite the mess that Japan’s Keynesian policies has created, it is difficult to see the BOJ changing course willingly. But the crisis for it will surely come if one or more of its three G-SIBs needs supporting. And it should be noted (See Table 1) that all three of them have balance sheet gearing measured by assets to shareholders equity of over twenty times, with Mizuho as much as 26 times, and they all have price to book ratios less than 50%. The Fed’s position The position of America’s Federal Reserve Board is starkly different from those of the other major central banks. True, it has substantial losses on its bond portfolio. In its Combined Quarterly Financial Report for June 30, 2022, the Fed disclosed the change in unrealised cumulative gains and losses on its Treasury securities and mortgage-backed securities of $847,797 million loss (versus June 30 2021, $185,640m loss).[iii] The Fed reports these assets in its balance sheet at amortised cost, so the losses are not immediately apparent. But on 30 June, the five-year note was yielding 2.7% and the ten-year 2.97%. Currently, they yield 4.16% and 3.95% respectively. Even without recalculating today’s market values, it is clear that the current deficit is now considerably more than a trillion dollars. And the Fed’s capital and reserves stand at only $46.274 billion, with portfolio losses exceding 25 times that figure. Other than losses from rising bond yields, instead of pushing liquidity into markets it is withdrawing it through reverse repos. In this case, the Fed is swapping some of the bonds on its balance sheet for cash on pre-agreed, temporary terms. Officially, this is part of the Fed’s management of overnight interest rates. But with the reverse repo facility standing at over $2 trillion, this is far from a marginal rate setting activity. It probably has more to do with Basel 3 regulations which penalise large bank deposits relative to smaller deposits, and a lack of balance sheet capacity at the large US banks. Repos, as opposed to reverse repos, still take place between individual banks and their institutional customers, but it is not obvious that they pose a systemic risk, though some large pension funds may have been using them for LDI transactions, similarly to the UK pension industry. While highly geared compared with in the past, US G-SIBs are not nearly as much exposed to a general credit downturn as the Europeans, Japanese, and the British. Contracting bank credit will hurt them, but other G-SIBs are bound to fail first, transmitting systemic risk through counterparty relationships. Nevertheless, markets do recognise some risk, with price-to-book ratios of less than 0.9 for Goldman Sachs, Bank of America, Wells Fargo, State Street, and BONY-Mellon. JPMorgan Chase, which is the Fed’s principal policy conduit into the commercial banking system, is barely rated above book value. Bank of England — bad policies but some smart operators In the headlights of an oncoming gilt market crash, the Bank of England acted promptly to avert a crisis centred on pension fund liability driven investment involving interest rate swaps. The workings of interest rate swaps have already been described, but repos also played a role. It might be helpful to explain briefly how repos are used in the LDI context. A pension fund goes to a shadow bank specialising in LDI schemes, with access to the repo market. In return for a deposit of say, 20% cash, the LDI scheme provider buys the full amount of medium and long-dated gilts to be held in the LDI scheme, using them as collateral backing for a repo to secure the funding for the other 80%. The repo can be for any duration from overnight to a year.  One year ago, when the Bank of England suppressed its bank rate at zero percent, one-month sterling LIBOR was close to 0.4% percent to borrow, while the yield on the 20-year gilt was 1.07%. Ignoring costs, a five-times leverage gave an interest rate turn of 0.63% X 5 = 3.15%, nearly three times the rate obtained by simply buying a 20-year gilt. Today, the yield differential has improved, leading to even higher net returns. But the problem is that the rise in yield for the 20-year gilt to 4.9% means that the price has fallen from a notional 100 par to 49.95. Since this is the collateral for the cash obtained through the repo, the pension fund faces margin calls amounting to roughly 2.5 times the original investment in the LDI scheme. And all the pension funds using LDI schemes faced calls at the same time, which crashed the gilt market. This is why the BOE had to act quickly to stabilise prices. Very sensibly, it has given pension funds and the LDI providers until this Friday to sort themselves out. Until then, the BOE stands prepared to buy any long-dated gilts until tomorrow (Friday, 14 October). It should remove the selling pressure from LDI-related liquidation entirely and orderly market conditions can then resume. This experience serves as an example of how rising bond yields can wreak havoc in repo markets, and with interest rate swaps as well. That being the case, problems are bound to arise in other currency derivative markets as bond yields continue to rise. Like the other major central banks, the BOE has seen a substantial deficit arise on its portfolio of gilts. But at the outset of QE, it got the Treasury to agree that as well as receiving the dividends and profits from gilts so acquired, it would also take any losses. All gilts bought under the QE programmes are held in a special purpose vehicle on the Bank’s balance sheet, guaranteed by the Treasury and therefore valued at cost. Conclusions In this article I have put to one side all the economic concerns of a downturn in the quantities of bank credit in circulation and focused on the financial consequences of a new long-term trend of rising interest rates. It should be coming clear that they threaten to undermine the entire fiat currency financial system. Credit Suisse’s public problems should be considered in this context. That they have not arisen before was due to the successful suppression of interest rates and bond yields, while the quantities of currency and bank credit have expanded substantially without apparent ill effects. Those ill effects are now impacting financial markets by undermining the purchasing power of all fiat currencies at an accelerating rate. From being completely in control of interest rates and fixed interest markets, central banks are now struggling in a losing battle to retain that control from the consequences of their earlier credit expansion. That enemy of every state, the market, has central banks on the run, uncertain as to whether their currencies should be protected (this is the Fed’s current decision and probably a dithering BOE) or a precarious financial system must be the priority (this is the ECB and BOJ’s current position). But one thing is clear: with CPI measures rising at a 10% clip, interest rates and bond yields will continue to rise until something breaks. So far, commercial banks are dumping financial assets to deleverage their balance sheets. The effects on listed securities are in plain sight. What is less appreciated, at least before LDI schemes threatened to collapse the UK’s gilt market, is that the $600 trillion OTC derivative market which grew on the back of a long-term trend of declining interest rates is now set to shrink as contracts go sour and banks refuse to novate them. That means that up to $600 trillion of notional credit is set to vanish, in what we might call the Great Unwind. This downturn in the cycle of bank credit boom and bust will prove difficult enough for the central banks to manage. But they themselves have balance sheet issues, which can only be resolved, one way or another, by the rapid expansion of base money. And that risks undermining all public credibility in fiat currencies. Tyler Durden Fri, 10/14/2022 - 19:40.....»»

Category: smallbizSource: nytOct 14th, 2022

Slow-Motion Crash Drags Futures Below 3,900; Yields, Cryptos Tumble

Slow-Motion Crash Drags Futures Below 3,900; Yields, Cryptos Tumble The relentless slow-motion crash sparked by the Biden Fed (which is hoping that a market collapse will halt inflation) that has sent stocks lower for the past 6 weeks continued overnight, and Wall Street’s main equity indexes were set for more declines after losing $6.3 trillion in value since their late-March high as stubborn inflation in the world’s biggest economy bolstered the case for more aggressive monetary tightening by the Federal Reserve. Nasdaq 100 futures were down 0.7% at 730am in New York, a day after the underlying gauge sank to its lowest since November 2020 on concerns that higher-than-expected inflation in April would lead to an even more aggressive pace of policy tightening by the Fed. S&P 500 were last down -1% and dropping below 3,900, the level. And with eminis trading around 3,900 means that stocks are now at bearish Morgan Stanley's year-end base case price target of 3900, and 100 points away from Michael Hartnett's Fed put of 3,800. The dollar continues its relentless ascent, sending the euro to a five-year low while the yen also perked up, as investors took a cue from a rally in bonds and ploughed into “safe-haven” currencies on concerns about inflation risks to global economic growth. Meanwhile, bonds around the globe are surging as fears mount over an economic slowdown and traders start pricing in the next recession, sending the yield on 10-year German bunds and US Treasuries down more than 10 basis points to about 2.82%. Among notable premarket moves, Disney shares dropped after the media giant said growth in the second half of the year may not be as fast as previously expected, while Beyond Meat slumped 24% as Barclays downgraded the stock and analysts slashed their price targets following underwhelming results. Bank stocks slump in premarket trading Thursday, set for a sixth straight day of losses. In corporate news, Carlyle Group is set to buy Chinese packaging firm HCP for about $1 billion. Meanwhile, Brookfield Asset Management said it plans to list 25% of its asset-management business in a transaction that would value the new entity at $80 billion. Economic data due late today include initial jobless claims. Here are all the notable premarket movers: Disney (DIS US) shares drop 4.8% in premarket trading after the media giant said growth in the second half of the year may not be as fast as previously expected. Apple (AAPL US) shares fall as much as 1.4% in premarket trading Thursday, putting them on course to open more than 20% below their January peak. Beyond Meat (BYND US) shares slump 24% in US premarket trading as analysts slashed their targets on the plant-based food company following underwhelming results. Riot Blockchain (RIOT US) -6.1% in premarket trading, Marathon Digital (MARA US) -5.8%, MicroStrategy (MSTR US)-10% and Coinbase (COIN US) -7.3% Zoom (ZM US) shares decline as much as 4.5% in US premarket as Piper Sandler analyst James Fish cut the recommendation on the stock to neutral as he sees limited upside to paid video service. Dutch Bros (BROS US) slumps 42% in premarket trading after the drive-thru coffee chain’s guidance lagged analyst estimates, though some analysts see the dip in shares as a buying opportunity. Lordstown Motors (RIDE US) shares jump as much as 27% in U.S. premarket trading after the electric truck maker completed the sale of its factory to Foxconn. Rivian (RIVN US) gains 2.9% in premarket trading after the electric vehicle startup reaffirmed its annual production guidance, even as it navigates through supply chain snarls. Coupang (CPNG US) shares jump as much as 18% in US premarket trading after the Korean e- commerce firm reported a first-quarter loss per share that was narrower than analysts’ expectations. Bumble (BMBL US) shares rise 8.3% in premarket after the company reported first-quarter results that beat expectations, despite currency risks and those related to the war in Ukraine. Cryptocurrency-exposed stocks also fell as digital tokens resumed declines after the collapse of the TerraUSD stablecoin, overnight the largest stablecoin, Tether, broke the buck spooking markets further that the contagion is spreading. The hotter-than-expected inflation reading for April raised concern the Fed’s hikes aren’t bringing down prices fast enough and policy makers may have to resort to a 75bps move, rather than the half-point pace markets have come to grips with. Worries such a shift would crimp economic growth, combined with Russia’s war in Ukraine and China’s struggles with Covid, are battering risk assets. The data halted a minor rebound in US equities, which are set for their longest weekly streak of losses since 2011, as investors worried that hawkish moves by central banks at a time of surging commodity prices and slowing earnings growth would spark a recession. While some strategists have said the rout has now made stock valuations attractive, others including Michael Wilson at Morgan Stanley warned of a bigger selloff. “What these wild market moves are telling us is that investors have very little idea of whether we’re near a short-term base, or whether we’ve got further to fall,” said Michael Hewson, chief market analyst at CMC Markets UK. “The higher-than-expected CPI figure may further fuel fears that the Fed will take policy higher than expected for longer than expected, draining precious liquidity from markets, which have until late been awash with it,” said Russ Mould, investment director at AJ Bell.  “Until we get a meaningful move lower in inflation, not only one print, but a consistent two, three, four prints moving in the right direction, this market may remain range bound,” Mona Mahajan, senior investment strategist at Edward Jones & Co., said on Bloomberg Television. Citigroup Inc. strategists said growth stocks, including the battered tech sector, will likely remain under pressure as central banks tighten monetary policy, driving yields higher.  “Now that central banks are unwinding monetary support, growth stocks’ valuations have further to fall,” strategists including Robert Buckland wrote in a note. They are especially wary of growth stocks in the US, where the Nasdaq 100 is down 27% this year. In Europe, the Stoxx 600 was down 2.2% with mining and consumer-products stocks leading declines. The Euro Stoxx 50 drops as much as 2.8%, Haven currencies perform well. The Stoxx 600 Basic Resources sub-index erased all YTD gains as a slide in metal prices and concerns about inflation fueled a selloff in the sector. Miners are the biggest laggard in the broader European equity benchmark on Thursday as major miners and steelmakers slip along with copper and iron ore prices. The basic resources sector (the sector is still second-best performing in Europe this year so far) fell as much as 5.6%, briefly erasing all YTD losses, and down to the lowest since January 3. Morgan Stanley strategists had downgraded miners to neutral on Wednesday, saying it’s time to take profits in the sector amid concerns inflation will lead to demand destruction. Here are the biggest movers: Telefonica shares rise as much as 4.5% after the Spanish carrier reported what analysts said was a solid set of quarterly earnings. STMicroelectronics gains as much as 4.1% as the chipmaker projects annual revenue of more than $20 billion for 2025-2027 period. Compass Group climbs as much as 2.5%, adding to Wednesday’s 7.4% advance, with Morgan Stanley lifting its price target to a Street-high. JD Sports rises as much as 3% after the UK sportswear chain said like-for-like sales for the 14-week period to May 7 were more than 5% higher than a year earlier. AS Roma advances as much as 15% after US billionaire Dan Friedkin made a tender offer for the roughly 13% of the Italian football team he doesn’t already own. The Stoxx 600 Basic Resources sub- index erases all YTD gains as a slide in metal prices and concerns about inflation fuel a selloff. Rio Tinto declines as much as 6%, Glencore -7.3%, Anglo American -6.9%, ArcelorMittal -4.8%, Antofagasta -7.9% Luxury stocks resume their declines after high US inflation bolstered the case for aggressive monetary tightening, deepening fears of an economic slowdown. Kering slides as much as 5.6%, Hermes -5.5% and Swatch -3.7% SalMar falls as much as 8.2% after the Norwegian salmon farmer published its latest quarterly earnings, which included a miss on operating Ebit. Earlier in the session, Asian stocks resumed their slide after Wednesday’s modest gains, as US inflation topped estimates and new Covid-19 community cases in Shanghai damped prospects for a reopening.  The MSCI Asia Pacific Index fell as much as 2%, with tech giants Alibaba and TSMC weighing the most on the gauge. Chinese shares snapped a two-day advance after Shanghai found two infections outside of isolation centers, pushing back the timeline for a relaxation of growth-sapping lockdowns.  US inflation remained above 8% in April, keeping the Federal Reserve on the path of aggressive tightening. That prospect weighed on shares in Asia, as investors also factored in growth implications from continued lockdowns in the world’s second-largest economy. Markets appeared to be unimpressed by China’s Premier Li Keqiang’s comments urging officials to use fiscal and monetary policies to stabilize employment and the economy. Valuations for the MSCI Asia Pacific Index are hurtling toward pandemic lows as the index records a 29% decline from its 2021 peak, posting declines in all but one of the trading sessions so far this month. “We’ve seen nearly the same amount of foreign investor selling in Asia as we saw during the global financial crisis, even though operating conditions aren’t as bad,” Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs, told Bloomberg Television. “On our expected conditions over the next year, somewhere around 13 times should be a fair and appropriate valuation for Asian markets,” he added. Benchmarks in Indonesia and Taiwan were among the biggest decliners in the region, with the Jakarta Composite Index on the cusp of erasing gains for the year. Hong Kong shares also fell as the city intervened to defend its currency for the first time since 2019 In FX, the Bloomberg Dollar Spot Index rose to a fresh two-year high as the greenback climbed versus all of its Group-of-10 peers apart from the yen. The demand for havens sent the yield on 10-year German bunds and US Treasuries down more than 10 basis points. Stops were triggered in the euro below $1.0490 and 1.0450, weighed by EUR/CHF selling and yen buying across the board, according to traders. The yen rose by as much as 1.2% against the greenback as selling in stocks hurt risk sentiment. The BOJ indicated its lack of appetite for changing policy to help address a slide in the yen to a two-decade low during discussions at a meeting last month, according to a summary of opinions from the gathering. The Australian and New Zealand dollars fell on concern that lockdowns in China’s financial capital will extend, dragging economic growth in the world’s biggest buyer of commodities. In rates, Treasuries extended Wednesday’s rally with yields richer by 6bp to 9bp across the curve, supported by risk-aversion as stocks extend losses. US 10-year yields around 2.82%, down 10bps on the session, and trailing gilts and bunds by 2.2bp and 3bp in the sector; intermediates lead the US curve, richening the 2s5s30s fly by 4bp on the day to tightest levels since March 23. Eurodollars are bid as well with the strip flattening out to early 2024 as rate-hike premium continues to erode. European fixed income extends gains. German and US curves bull-steepen; bunds outperform, richening ~12bps across the belly. Gilts bull-flatten, focusing on soft March GDP data over hawkish comments from BOE’s Ramsden.  STIRs are similarly well bid with red pack euribor, eurodollar and sonia futures all up over 10 ticks. The US auction cycle concludes with $22b 30-year bond sale at 1pm ET; Wednesday’s 10-year is trading more than 10bp lower in yield after 1.4bp auction tail. WI 30-year around 2.965% is above auction stops since March 2019 and ~15bp cheaper than April stop-out. Super-long sectors led gains in Japanese bonds even as the 30-year sale was seen sluggish. In commodities, base metals were under pressure; LME tin slumps over 8%, zinc down over 3.5%. European natural gas surged as much as 13% on supply concerns. Crude futures drop, fading roughly half of Wednesday’s rally. WTI is down over 2% near $103.50. Spot gold trades a narrow range near $1,850/oz. European natural gas prices jumped as disruptions to a key transit route through Ukraine and a move by Moscow to retaliate against sanctions ramped up the risk of supply cuts. Shanghai found two Covid cases outside government-run isolation centers on Wednesday, according to state-run CCTV, dampening prospects for potential easing of lockdowns. Prices of iron ore, the biggest commodity export from Australia, also fell on the news. Looking at the day, data releases include the US PPI reading for April, the weekly initial jobless claims, and UK GDP for Q1. Central bank speakers include the ECB’s De Cos and Makhlouf. And in the political sphere, US President Biden will be hosting ASEAN leaders at the White House, whilst G7 foreign ministers are meeting in Germany. Market Snapshot S&P 500 futures down 0.6% to 3,907.50 STOXX Europe 600 down 1.9% to 419.41 MXAP down 1.7% to 157.21 MXAPJ down 2.5% to 512.05 Nikkei down 1.8% to 25,748.72 Topix down 1.2% to 1,829.18 Hang Seng Index down 2.2% to 19,380.34 Shanghai Composite down 0.1% to 3,054.99 Sensex down 2.1% to 52,935.64 Australia S&P/ASX 200 down 1.8% to 6,941.03 Kospi down 1.6% to 2,550.08 Gold spot down 0.1% to $1,849.85 U.S. Dollar Index up 0.48% to 104.34 German 10Y yield little changed at 0.89% Euro down 0.6% to $1.0449 Brent Futures down 2.0% to $105.32/bbl Top Overnight News from Bloomberg The EU is looking at creating bond futures and repurchase agreements to bolster its pandemic-era debt program The BOE will have to raise interest rates further to control surging prices, and there’s a risk that the UK’s worst inflation crisis in decades will take longer to ease fully, according to Deputy Governor Dave Ramsden The UK economy unexpectedly contracted in March. Gross domestic product fell 0.1% from February, when growth was flat. It meant the economy expanded just 0.8% in the first quarter, less than the 1% forecast by economists UK Prime Minister Boris Johnson will spend the next few days considering whether the UK will introduce legislation to override its post- Brexit settlement with the EU, a move that risks sparking a trade war A massive sell-off in cryptocurrencies wiped over $200 billion of wealth from the market in just 24 hours, according to estimates from price-tracking website CoinMarketCap Finland’s highest-ranking policy makers President Sauli Niinisto and Prime Minister Sanna Marin threw their weight behind an application and Sweden’s government is likely to do so in the coming days Sweden’s Riksbank’s target measure, CPIF, accelerated to 6.4% on an annual basis in April, the highest level since 1991, according to data released on Thursday. Economists surveyed by Bloomberg expected prices to rise by 6.2% A more detailed look at global markets courtesy of Newsquawk Asia-Pc stocks were pressured after the losses on Wall St where the major indices whipsawed in the aftermath of the firmer than expected CPI data and the DJIA posted a fifth consecutive losing streak. ASX 200 was lower amid heavy losses in tech and with financials subdued after flat earnings from Australia’s largest lender CBA. Nikkei 225 weakened with attention on earnings updates and with SoftBank amongst the worst performers ahead of its results later with the Co. anticipated to have suffered a record quarterly loss. Hang Seng and Shanghai Comp were subdued with early pressure from default concerns after developer Sunac China missed its grace period deadline and warned there was no assurance that the group will be able to meet financial obligations, although the mainland bourse recovered its earlier losses after further policy support pledges by Chinese authorities. SoftBank (9984 JT) - FY revenue JPY 6.2trln (prev. 5.6trln Y/Y). FY net profits -1.7trln (prev. +4.99trln). Foxconn (2317 TT) Q1 net profit TWD 29.45bln (exp. 29.76bln); sees Q2 revenue flat Y/Y, sees smart consumer electronics slightly declining Y/Y. Top Asian News Rupee Tumbles to a Record Low, Stocks Slump on Inflation Woes SoftBank Vision Fund Posts a Record Loss as Son’s Bets Fail Yen Rebound Tipped as Recession Fears Push Down Treasury Yields More Defaults Seen Following Sunac’s Failure: Evergrande Update European bourses are pressured as overnight risk sentiment reverberated into the region, in a continuation of the post-CPI Wall St. move; Euro Stoxx 50 -2.5%. US futures are lower across the board though the magnitude is less extreme, ES -0.6%; NQ fails to benefit from the yield pullback as participants focus on the normalisation's impact on tech. Walt Disney Co (DIS) - Q2 2022 (USD): Adj. EPS 1.08 (exp. 1.19), Revenue 19.25bln (exp. 20.03bln). Disney+ subscribers 137.7mln (exp. 134.4mln). ESPN+ subscribers 22.3mln (exp. 22.5mln) -5.0% in the pre-market. Top European News UK Retailers Sue Truckmakers Over Alleged Price Fixing Rokos Raising $1 Billion as He Joins Macro Hedge Fund Surge Siemens Abandons Russian Market After 170-Year Relationship Hargreaves Tumbles as Peel Notes Macro, Geopolitical Impacts FX DXY tops 104.500 to set new 2022 peak as risk aversion intensifies. Yen regains safe haven premium to buck broadly weak trend vs Dollar, USD/JPY sub-128.50 vs top just over 130.00. Aussie and Kiwi flounder as commodities tumble on demand dynamics'; AUD/USD under 0.6900 and NZD/USD below 0.6250. Euro and Sterling give up big figure levels with the Pound also undermined by worse than forecast UK data; EUR/USD down through 1.0500 then 1.0450, Cable beneath 1.2200 and eyeing 1.2150 next. Swedish Crown holds up in wake of stronger than expected CPI and CPIF metrics; EUR/SEK straddles 10.6000. Yuan crushed as PBoC and Chinese Government reaffirm commitment to provide economic support; USD/CNY 6.7900+, USD/CNH just shy of 6.8300. Forint falls as NBH Deputy Governor contends that aggressive tightening period is over and future hikes likely more incremental. HKMA picks up pace of intervention to defend HKD peg, CNB steps in to support CZK. Fixed Income Debt revival gathers pace amidst risk-off positioning elsewhere. Bunds probe 155.00, Gilts reach 120.71 and 10 year T-note nudges 120-00. BTP supply encounters few demand issues, unlike second US Quarterly Refunding leg ahead of USD 22bln long bond auction. Commodities WTI and Brent are pressured in what has been a grinding move lower during European hours; however, benchmarks were lifted amid Kremlin/N. Korea updates. Currently, the benchmarks are lower by around USD 1.50/bbl. IEA OMR: Revises down oil demand growth projections for 2022 by 70k BPD, amid China lockdowns and elevated prices. Overall decline of Russian supply by 1.6mln BPD in May and 2mln BPD in June; could expand to circa. 3mln BPD from July onwards. Click here for more detail. OPEC MOMR to be released at 13:00BST/08:00EDT. Indian refineries purchased 25-30mln barrels of Russian oil at a discount for delivery in May-June, according to Interfax. Spot gold/silver are pressured amid the USD's revival, but, the yellow metal remains in relatively contained parameters around USD 1850/oz. US Event Calendar 08:30: May Initial Jobless Claims, est. 192,000, prior 200,000 08:30: April Continuing Claims, est. 1.37m, prior 1.38m 08:30: April PPI Final Demand MoM, est. 0.5%, prior 1.4%; YoY, est. 10.7%, prior 11.2% 08:30: April PPI Ex Food and Energy MoM, est. 0.6%, prior 1.0%; YoY, est. 8.9%, prior 9.2% DB's Jim Reid concludes the overnight wrap It was all about the higher than expected US CPI report yesterday which added to Fed rate expectations, as well as hard landing expectations as revealed through the curve flattening that took place through the rest of the day. Longer dated Treasury yields fell (after initially spiking much higher) and equities fell sharply (S&P 500 -1.65%) after actually being higher for the first half of the US session. So a topsy-turvy day that kept the Vix above 30 for a fifth straight session. In terms of the details of that report, headline monthly CPI surprised to the upside with a +0.3% gain (vs. +0.2% expected), whilst monthly core CPI also surprised to the upside at +0.6% (vs. +0.4% expected). Thanks to base effects from last year, the year-on-year numbers managed to decline in spite of the upside monthly surprises, but they were also higher than expected with headline CPI at +8.3% (vs. +8.1% expected), and core CPI at +6.2% (vs. +6.0% expected). Looking at the components, what will concern the Fed is that there are plenty of signs that inflation pressures remain broad and can’t be pinned on transitory shocks like the spike in energy prices of late. For instance, owners’ equivalent rent (which makes up nearly a quarter of the inflation basket) was up +0.45%, which is its fastest monthly pace since June 2006. Rents also remained strong with a +0.56% increase, which is just shy of its February increase and still the second-highest since December 1987. Food prices (+0.9%) also continued to move higher in April, bringing their year-on-year gain to a 41-year high of +9.4%. One consolation might be that the Cleveland Fed’s trimmed mean (which removes the outliers in either direction) saw its smallest monthly increase since last August at +0.45%, even if it’s still increasing well above rates seen throughout the 2010s. The fact the release surprised on the upside saw an immediate reaction across asset classes, with 10yr Treasury yields bouncing by more than +14bps intraday during the half hour following the report to 3.07%, before reversing all of this to end the day down -7.0bps to 2.92%. Ultimately the decline in real rates (-14.7bps) offset expectations of higher inflation (+8.1bps), but it was a different story at the front-end of the curve, where 2yr yields rose +2.5bps since the report was seen to raise the likelihood of larger hikes at the coming meetings, with the futures-implied rate for the December meeting rising +4.5bps on the day. In Asia, US 10 year yields are another -3.3bps lower with 2yrs flats. This has left the 2s10s curve at 24.3bps after trading as high as 48.5bps on Monday. In terms of the reaction from Fed officials themselves, Atlanta Fed President Bostic said he would support +50bp hikes until policy reaches neutral, which suggests more +50bp hikes than just the next two meetings, which has been the common line from Fed speakers of late. Markets are placing a 58% chance on a +50bp hike at September, up from 49% the day before. Markets also increased the chance they place on the Fed being forced into a +75bp hike even at the June meeting, pricing a 14% chance versus 10% yesterday. We will also get the May CPI release ahead of the next FOMC meeting in June, but by that point they’ll be in their blackout period, so this is the last print they’ll be able to comment on ahead of their next decision, and will frame the chatter around whether 75bps might be back on the table at some point given inflation looks to be proving stickier than many had expected. For equities, the CPI print drove indices lower at the open, but they bounced around all day as volatility remained elevated, ultimately closing near the lows. The S&P 500 fell -1.65%, led by tech and mega cap shares, while the Vix ended above 30 for the fifth straight session for the first time since the post-invasion bout of volatility gripped equity markets. As mentioned, tech stocks were the main underperformer, with the NASDAQ down by -3.18% as investors priced in faster hikes from the Fed this year. Separately in Europe, equities outperformed their US counterparts for a 3rd consecutive day, with the STOXX 600 posting a +1.74% advance but closing well before the US slump. Whilst the main focus yesterday was on the US CPI report, there was significant central bank news in Europe as well after ECB President Lagarde put out a strong signal that July would be when the ECB starts hiking rates for the first time in over a decade. In her remarks, she said that the first hike “will take place some time after the end of net asset purchases”, and that “this could mean a period of only a few weeks”. A July hike would be in line with the call from our own European economists here at DB (link here), who see four consecutive quarter point hikes from July, taking the deposit rate up to +0.50% by year-end. That was then echoed by a separate Bloomberg report later in the session, which said that ECB officials were “increasingly embracing a scenario” where interest rates moved into positive territory by year-end. ECB policy pricing by the end of the year actually fell -1.3bps to 26.5bps, as a broader sovereign bond rally overpowered this. With other ECB speakers having already been signalling their openness to a July hike, European sovereign bonds reacted more to the US CPI report than Lagarde’s remarks. So we ended up with a similar pattern to Treasuries, whereby yields surged following the US release before falling back to end the day lower on growth fears. Ultimately, that meant yields on 10yr bunds were down -1.5bps at 0.98%, and there was a significant narrowing in peripheral spreads too, with the gap between 10yr Italian yields and bunds down -9.9bps. Asian equity markets are weaker overnight. The Hang Seng (-0.94%) is the largest underperformer across the region this morning after the Hong Kong Monetary Authority (HKMA) intervened into the currency markets for the first time since 2019 to defend the local dollar from capital outflows. The authority bought about HK$1.589 billion from the market to bolster the exchange rate in order to bring it back within the trading band i.e., between 7.75 and 7.85 versus the US dollar. Elsewhere, the Nikkei (-0.84%), Kospi (-0.56%) are also trading lower. Mainland Chinese stocks are showing a more mixed performance with the Shanghai Composite (+0.17%) higher while the CSI 300 (-0.07%) is a tad lower. Outside of Asia, US stock futures are flat but Euro Stoxx futures are catching down with the late US move last night and are around -2%. According to the BOJ’s summary of opinions from the April 27-28 meeting, the board brushed aside the idea of countering sharp yen falls with interest rate hikes with several board members arguing in favour of maintaining the central bank’s massive stimulus programme. Oil prices are lower in early Asian trade, taking a pause after Brent crude futures closed +4.93% higher last night. This morning, the contract is -1.15% down at $106.27/bbl as I type. Elsewhere in markets, a significant story over the last 24 hours has been the significant price declines in a number of major cryptocurrencies. Bitcoin is at $27,617 as I type, a level not seen since December 2020. Coinbase’s share price was down a further -26.40% yesterday, bringing its losses over the last week alone to almost -60%. A few other headlines worth highlighting. The Dallas Fed announced that Lorie Logan, the current manager of the Fed’s portfolio, would assume the role of President, which makes her a voter on the FOMC next year. Given her remit has been to manage the balance sheet, little is known about her views about monetary policy as of yet. Finally on the Brexit front, there was a further ratcheting up in the comments between the UK and the EU over the Northern Ireland Protocol yesterday. UK PM Johnson said that “we need to sort it out”, and Levelling Up Secretary Gove said that “no option is off the table”. From the EU side however, Irish Foreign Minister Coveney said that the EU would need to react if the UK breached international law, and Bloomberg reported that the EU would likely suspend their trade deal with the UK if the UK were to revoke its commitments. To the day ahead now, and data releases include the US PPI reading for April, the weekly initial jobless claims, and UK GDP for Q1. Central bank speakers include the ECB’s De Cos and Makhlouf. And in the political sphere, US President Biden will be hosting ASEAN leaders at the White House, whilst G7 foreign ministers are meeting in Germany. Tyler Durden Thu, 05/12/2022 - 07:57.....»»

Category: blogSource: zerohedgeMay 12th, 2022

The Boeing 777X won"t be delivered to airlines until 2025. Take a look at the enormous new flagship Boeing hopes will be its redemption.

The Boeing plane is the largest twin-engine jet to ever take to the skies and will carry more passengers than its predecessor while using less fuel. The first flight of the Boeing 777X.Stephen Brashear/Getty Boeing's newest aircraft, the Boeing 777X, flew for the first time in January 2020 after lengthy delays. It's the largest twin-engine jet in the world and Boeing's latest new aircraft to fly since the grounding of the 737 Max. Boeing said in April that certification delays have pushed its first delivery back to 2025. Visit Business Insider's homepage for more stories. Boeing's latest history-making plane continues to be delayed. The Boeing 777X will not be delivered until late 2023, its manufacturer announced on Wednesday, further delaying the aircraft's debut well-beyond the planned time frame of 2020. Boeing attributed the delay to numerous factors including the pandemic, reduced demand, and new certification requirements. The twin-engine jet first graced the skies in January 2020 when it lifted off from Paine Field in Everett, Washington following a day of weather delays. A total of four test aircraft now roam the skies, pushing the limits of the aircraft in advance of its certification to fly passengers.Boeing designed the 777X to be the first next-generation variant of Boeing's popular 777 product line, which first flew in the 1990s and currently sees service with the world's leading airlines. The plane is equipped with new engines developed by General Electric and a longer pair of wings, enabling it to carry more passengers while operating more efficiently than its predecessor aircraft, effectively replacing the Boeing 747 Jumbo Jet. When it first took flight, the 777X became the largest twin-engine jet aircraft to ever fly. Though a milestone aircraft for Boeing, its 2020 aerial debut was hampered by the crash of an Ethiopian Airlines Boeing 737 Max and the subsequent worldwide grounding of the narrow-body jet due to issues with the aircraft's software stemming from its development.Take a look at the plane Boeing hopes will be its redemption.  Boeing's 777 became popular in the mid-90s as the next step up from its 767. Large twin-engine aircraft were gaining popularity due to their efficiency and changing attitudes toward their safety.A Boeing 777-200 test aircraft.Reuters/StringerSource: BoeingFast-forward to more recent days: Boeing looked back to its famous 777 to see if it could be improved using technology from its latest widebody, the smaller 787 Dreamliner.View of one of two Rolls Royce Trent 1000 engines of Boeing 787 Dreamliner during a media tour of the aircraft ahead of the Singapore Airshow in SingaporeReutersRead More: Boeing's revolutionary 787 Dreamliner has changed air travel forever. Here's how the company left competitors in the dust with a risky $8 billion bet.Source: BoeingAnd so, the 777X was born.A Boeing 777X aircraft being built by Boeing.Stephen Brashear/GettyJust like the aircraft that came before it, Boeing would create two variants, the -8 and -9.A Boeing 777X aircraft in production.Stephen Brashear/GettyThe -9 aircraft would be the first to be manufactured, with production beginning in October 2017.A Boeing 777X without paint at Paine Field.JASON REDMOND/AFP/GettySource: BoeingAt 251 feet and 9 inches in the length, the aircraft would be the largest twin-engine aircraft to roam the skies.A Boeing 777x aircraft.LINDSEY WASSON/ReutersSource: BoeingIts wingspan is almost as wide as the aircraft is long — wingtip to wingtip it spans 212 feet and 8 inches.The wingspan of a Boeing 777X.TERRAY SYLVESTER/ReutersSource: BoeingThe aircraft has two different wingspan lengths thanks to a unique feature of the aircraft: the wingtips extend flat before takeoff to improve fuel efficiency.The retractable wingtips of a Boeing 777X.TERRAY SYLVESTER/ReutersPilots activate the function via a switch in the cockpit and retract them right after landing to avoid hitting anything on the ground.A Boeing 777X with its wingtips retracted.TERRAY SYLVESTER/ReutersThe wingspan with the extended wingtips is 235 feet, nearly enough to fit two Boeing 757 aircraft back to back.A Boeing 777X preparing to take flight.LINDSEY WASSON/ReutersSource: BoeingWhile the range of the new -9 and the last generation 777-300ER are comparable, the draw to the new aircraft is its efficiency and extra carrying capacity.A Boeing 777X taxing back to its hangar.LINDSEY WASSON/ReutersSource: BoeingThe aircraft's increased efficiency and similar range to its predecessors despite the additional load are made possible thanks to General Electric Aviation's GE9X engines.A General Electric GE9X engine used exclusively on the Boeing 777X.JASON REDMOND/AFP/GettySource: BoeingThe huge engines are large enough for a Boeing 737 fuselage to fit inside.The GE Aviation GE9X engine powers the Boeing 777X.TERRAY SYLVESTER/ReutersThe fuel-efficient measures of the aircraft lead Boeing to boast that it will offer 10 percent less fuel burn, emissions, and operating costs.A Boeing 777X aircraft taxing in Washington.Stephen Brashear/Getty ImagesSource: BoeingBoeing also estimates that the -9 can carry 426 passengers in a two-cabin configuration, 30 more than the -300ER.A Boeing 777X taxing to the hangar.TERRAY SYLVESTER/ReutersSource: BoeingPassengers can look forward to larger windows, more natural light, quieter engines, and a more spacious cabin.A Boeing 777X taxing at Paine Field.JASON REDMOND/AFP/GettySource: BoeingIts first flight was scheduled for January 24, 2020, three years after production began. That flight was scrapped, however, due to bad weather in the area.A Boeing 777X taxis following a failed first flight attempt.LINDSEY WASSON/ReutersThe next day, with the sun shining, the aircraft successfully departed from Paine Field north of Seattle and away from the grounded Max aircraft at Boeing Field.The first flight of the Boeing 777X.Stephen Brashear/GettyA monumental day for Boeing, the aircraft performed routine tests before heading back to Seattle.The flight path of the Boeing 777X's first flightFlightRadar24Source: FlightRadar24But not before stopping for a photo with Mt. Rainer, a Boeing staple.The first Boeing 777X flight landing at Boeing Field.JASON REDMOND/AFP/GettyThe second 777X built by Boeing took flight on April 30, 2020, flying for just under 3 hours on its first trip to the skies.The second Boeing 777X test aircraft taking flight for the first time.BoeingSource: BoeingThe second of four flight test aircraft, this plane tested the 777X's flight handling characteristics and performance capabilities. Boeing flew the plane from its birthplace at Everett, Washington's Paine Field to Seattle's Boeing Field.The second Boeing 777X test aircraft taking flight for the first time.BoeingSource: BoeingA third aircraft took flight on August 3, 2020, departing from its home at Paine Field and heading as far south as Salem, Oregon before heading home via Spokane, Washington and a few touch-and-go maneuvers at an airport in Moses Lake, Washington.Boeing's third 777X aircraft departing on a test flight.BoeingSource: Flighradar24This test aircraft will focus on the auxiliary power unit – known as the third engine as it provides additional energy for functions such as engine start – as well as the aircraft's avionics, flight loads, and propulsion performance.Boeing's third 777X aircraft departing on a test flight.BoeingInstead of the Boeing house livery that its predecessors wear, the third aircraft's fuselage is nearly all white with the Boeing logo and other small lettering and branding providing the only color.Boeing's third 777X aircraft departing on a test flight.BoeingThe tail, however, remained the same.Boeing's third 777X aircraft departing on a test flight.BoeingThe aircraft will continue test flights until it receives certification from the world's aviation regulatory agencies. So far, Boeing has logged around 100 hours of test flying with the new type.A Boeing 777X test flight.Stephen Brashear/GettyWhen it does receive the certification, expected to be rigorous following the issues exposed with the Boeing 737 Max certification, deliveries can begin to customers, with Emirates first on the list.Emirates Boeing 777-300ER aircraft in Dubai.ReutersSource: ForbesSeven other airlines have the aircraft on order including Lufthansa, Singapore Airlines, Qatar Airways, British Airways, All Nippon Airways, Etihad Airways, and Cathay Pacific.A Boeing 777X aircraft departing Paine Field.JASON REDMOND/AFP/GettySource: BoeingAs is Boeing's custom, painted on the side of the fuselage of the first test plane are the tails of each airline that has an order in for the plane.A Boeing 777X aircraft on its first test flight.Stephen Brashear/Getty ImagesThe cost per plane stands at $442.2 million, but some airlines receive discounts for buying in bulk.A Boeing 777X aircraft preparing for takeoff.JASON REDMOND/AFP/GettySource: BoeingFor the majority of the airlines on the list, an Airbus aircraft serves as the flagship, though the 777X will likely take that spot.A Boeing 777X preparing for its first test flight amid bad weather.Stephen Brashear/GettyThe first delivery – and likely the first passenger flight – of the aircraft was expected in late 2023 following pandemic-related delays.A taxing Boeing 777 in Seatle, Washington.JASON REDMOND/AFP/GettyRead More: Boeing's Washington facilities closed indefinitely due to COVID-19. Take a look at the greatest successes and failures which were built there."This schedule, and the associated financial impact, reflect a number of factors, including an updated assessment of global certification requirements, the company's latest assessment of COVID-19 impacts on market demand, and discussions with its customers with respect to aircraft delivery timing," Boeing said in a statement at the time.A Boeing 777X test flight.Stephen Brashear/GettyIn April 2022, the company announced plans to halt production of the 777x through 2023 amid certification delays, pushing the jet's entry into service to 2025.Boeing 777X.BoeingSource: BoeingThis delay will give Boeing time to address the 777X's certification process but will incur an additional $1.5 billion in costs until the jet resumes production.Boeing 777X.BoeingUntil then Boeing will have to be satisfied with its creation of the world's largest twin-engine passenger jet.The Boeing 777X at Dubai Airshow 2021.Thomas Pallini/InsiderRead the original article on Business Insider.....»»

Category: personnelSource: nytApr 27th, 2022

Tesla’s Free Cash Flow Is Still Resoundingly Negative

Stanphyl Capital’s commentary for the month ended March 31, 2022, discussing their short position in Tesla Inc (NASDAQ:TSLA). We remain short the biggest bubble in modern stock market history, Tesla Inc. (TSLA) which, despite a steadily sliding share of the world’s EV market and a share of the overall auto market that’s only around 1.5%, […] Stanphyl Capital’s commentary for the month ended March 31, 2022, discussing their short position in Tesla Inc (NASDAQ:TSLA). We remain short the biggest bubble in modern stock market history, Tesla Inc. (TSLA) which, despite a steadily sliding share of the world’s EV market and a share of the overall auto market that’s only around 1.5%, Trevor Scott points out has a market cap roughly equal to the next 20 largest automakers combined: if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2021 hedge fund letters, conferences and more So here’s why we remain short Tesla: Tesla has no “moat” of any kind; i.e., nothing meaningfully proprietary in terms of its electric car technology (which has now been surpassed by numerous competitors), while existing automakers—unlike Tesla­—have a decades-long “experience moat” of knowing how to mass-produce, distribute and service high-quality cars consistently and profitably. Excluding working capital benefits and sunsetting emission credit sales Tesla generates negative free cash flow. Growth in sequential unit demand for Tesla’s cars is at a crawl relative to expectations. Elon Musk is a pathological liar who under the terms of his SEC settlement cannot deny having committed securities fraud. Tesla’s Q1 Deliveries Tesla’s Q1 2022 delivery number (to be reported in early April) will likely only be slightly better than Q4 2022’s 308,000, perhaps a 20,000 (or fewer) unit gain that would be a rounding error for an auto company trading at even one-tenth of Tesla’s valuation. If in any quarter GM or VW or Toyota sold 2.02 million vehicles instead of 2 million or 1.98 million, no one would pay the slightest bit of attention to the difference. Seeing as Tesla is still being valued at over seventeen GMs, it’s time to start looking at its relatively tiny numerical sequential sales growth, rather than Wall Street’s sell-side hype of “percentage off a small base.” In other words, if you want to be valued at a giant multiple of “the big boys,” you should be treated as a big boy. And yes, Tesla is somewhat capacity constrained, but so are all its competitors. Let’s see how quickly “constraint” morphs into “excess capacity” when the German and Texas factories are fully online! Meanwhile in January Tesla reported results for Q4 2021 and once again proved that it’s a truly horrible business. Although the company claimed to have generated $2.8 billion in free cash flow for the quarter, that was almost entirely created by massively increased payables & accrued liabilities, and by stock-based compensation. After adjusting for those factors (and a tiny increase in receivables), Tesla’s free cash flow was just $119 million, and that undoubtedly included several hundred million dollars of previously earned & billed emission credit sales, a revenue stream which will almost entirely disappear next year as other automakers begin selling enough electric cars of their own. Thus, despite all the sell-side and media hype, on a sustainable basis Tesla’s free cash flow is still resoundingly negative. An Energy Company And for those of you who think that Tesla is “really an energy company,” in Q4 “Tesla Energy” had revenue of $688 million (down 8.5% year-over-year and 8% sequentially) and cost of revenue of $739 million, meaning it had a negative gross margin. So if Tesla is “really an energy company,” it’s even more screwed than if it’s just a car company! Meanwhile, perhaps the biggest reason Tesla has recently been able to post marginally increasing sequential quarterly deliveries is because competitors’ production is at the lowest level in decades due to the massive chip shortage, thereby eliminating a number of “Tesla alternatives.” Yet Tesla is enjoying record production because Musk (a notorious “corner-cutter”) is apparently willing to either substitute untested, non-auto-grade chips for the more durable chips he can’t get (please see my Twitter post about this) or simply eliminate entire crucial safety systems such as back-up steering and crash-avoidance radar. Meanwhile, many Tesla bulls sincerely believe that ten years from now the company will be twice the size of Volkswagen or Toyota, thereby selling around 20 million cars a year (up from the current run-rate of around 1.3 million); in fact in March Musk himself even raised this as a possibility. To illustrate how utterly absurd this is, going from 1.3 million cars a year today to 20 million in ten years means that in addition to one million cars a year of eventual production from the new German and Texas factories, Tesla would have to add 35 more brand new 500,000 car/year factories with sold out production; i.e., a new factory nearly every single quarter for ten years! And what then? Well, then you’d have a car company approximately twice the size of Toyota (current market cap: $249 billion) or Volkswagen (current market cap: $110 billion). If that would make Tesla worth, say, $500 billion in 10 years, discounting that back at 15%/year and allowing for enough share dilution to pay for all those factories, Tesla—in that absurdly optimistic scenario—would be worth just $100/share today, down almost 93% from its current price. Another favorite hype story from Tesla bulls has been “the China market.” But based on the Chinese domestic (non-export) sales numbers we have for January and February it appears that Q1 2022 sales there barely grew (or may have even contracted)  from Q4 2021’s. And in Q4 Tesla had only around 1.5% of the overall Chinese passenger vehicle market and just 11% of the BEV market. Meanwhile,  as Tesla continues to sell its fraudulent & dangerous so-called “Full Self Driving” the head of that program just took a four-month sabbatical; the last major Tesla executive who did that (Doug Field) never returned. In a sane regulatory environment Tesla, having sold this garbage software for over five years now… …would be prosecuted for “consumer fraud,” and indeed the regulatory tide may finally be turning, as two U.S. senators continue to question its safety and in October the NHTSA appointed a harsh critic of this deadly product to advise on its regulation. (For all known Tesla deaths see here.) Are major write-downs and refunds on the way, killing the company’s slight “claimed profitability”? Stay tuned! Meanwhile, Guidehouse Insights continues to rate Tesla dead last among autonomous competitors: Another favorite Tesla hype story has been built around so-called “proprietary battery technology.” In fact though, Tesla has nothing proprietary there—it doesn’t make them, it buys them from Panasonic, CATL and LG, and it’s the biggest liar in the industry regarding the real-world range of its cars. And if new-format 4680 cells enter the market some time in 2024 (as is now expected), even if Tesla makes some of its own,  other manufacturers will gladly sell them to anyone. Build Quality Meanwhile, Tesla build quality remains awful (it ranks second-to-last in the latest Consumer Reports reliability survey) while the latest survey from British consumer organization Which? found it to be one of the least reliable cars in existence. And Tesla’s worst-rated Model Y faces current (or imminent) competition from the much better built electric Audi Q4 e-tron, BMW iX3, Mercedes EQB, Volvo XC40 Recharge, Volkswagen ID.4, Ford Mustang Mach E, Nissan Ariya, Hyundai Ioniq 5 and Kia EV6. And Tesla’s Model 3 now has terrific direct “sedan competition” from Volvo’s beautiful Polestar 2, the great new BMW i4 and the premium version of Volkswagen’s ID.3 (in Europe), plus multiple local competitors in China. And in the high-end electric car segment worldwide the Audi e-tron (substantially improved for 2022!) and Porsche Taycan outsell the Models S & X (and the newly updated Tesla models with their dated exteriors and idiotic shifters & steering wheels won’t change this), while the spectacular new Mercedes EQS, Audi e-Tron GT and Lucid Air make the Tesla Model S look like a fast Yugo, while the extremely well reviewed new BMW iX does the same to the Model X. And oh, the joke of a “pickup truck” Tesla previewed in 2019 (and still hasn’t shown in production-ready form) won’t be much of “growth engine” either, as it will enter a dogfight of a market; in fact, Ford’s terrific 2022 all-electric F-150 Lightning now has over 200,000 retail reservations (plus many more fleet reservations), GM has introduced its fantastic 2023 electric Silverado with over 110,000 reservations and Rivian’s pick-up has gotten excellent early reviews. Regarding safety, as noted earlier in this letter, Tesla continues to deceptively sell its hugely dangerous so-called “Autopilot” system, which Consumer Reports has completely eviscerated; God only knows how many more people this monstrosity unleashed on public roads will kill despite the NTSB condemning it. Elsewhere in safety, the Chinese government forced the recall of tens of thousands of Teslas for a dangerous suspension defect the company spent years trying to cover up, and now Tesla has been hit by a class-action lawsuit in the U.S. for the same defect. Tesla also knowingly sold cars that it knew were a fire hazard and did the same with solar systems, and after initially refusing to do so voluntarily, it was forced to recall a dangerously defective touchscreen. In other words, when it comes to the safety of customers and innocent bystanders, Tesla is truly one of the most vile companies on Earth. Meanwhile the massive number of lawsuits of all types against the company continues to escalate. So here is Tesla’s competition in cars... (note: these links are regularly updated) Porsche Taycan Porsche Taycan Cross Turismo Porsche Macan Electric SUV Officially Coming in 2023 Volkswagen ID.3 Volkswagen ID.4 Electric SUV Volkswagen unveils ID.6 SUV EV in China Volkswagen ID.Buzz electric van Volkswagen ID Vizzion confirmed - answer to the Tesla Model 3 VW’s Cupra brand counts on performance for Born EV Cupra, VW brand to get entry-level battery-powered cars Volkswagen unveils $7.1B commitment to boost product line-up, R&D, mfg in N. America Audi e-tron Audi e-tron Sportback Audi E-tron GT Audi Q4 e-tron Audi Q6 e-tron confirmed for 2022 launch 2022 Audi A6 e-tron set to take on Tesla Audi will expand EV lineup with electric A6 wagon Audi TT to be axed in 2023 for 'emotional', electric replacement Hyundai Ioniq 5 Hyundai Ioniq 6 Will Be a Slick-Looking EV Sedan Hyundai Kona Electric Genesis reveals their first EV on the E-GMP platform, the electric GV60 crossover Genesis Electrified GV70 Revealed With 483 Horsepower And AWD Kia Niro Electric: 239-mile range & $39,000 before subsidies Kia EV6: Charging towards the future Kia EV4 on course to grow electric SUV range Jaguar’s All-Electric i-Pace Jaguar to become all-electric brand; Land Rover to Get 6 electric models Daimler will invest more than $47B in EVs and be all-electric ready by 2030 Mercedes EQS: the first electric vehicle in the luxury class 2023 Mercedes-Benz EQS SUV Interior Unveiled With Up To Seven Seats Mercedes-Benz unveils EQE electric sedan with impressive 400-mile range Mercedes EQE SUV to rival BMW iX and Tesla Model X Mercedes EQC electric SUV available now in Europe & China Mercedes-Benz Launches the EQV, its First Fully-Electric Passenger Van Mercedes-Benz EQB Makes Its European Debut, US Sales Confirmed Mercedes-Benz unveils EQA electric SUV with 265 miles of range and ~$46,000 price Ford Mustang Mach-E Available Now Ford F-150 Lightning electric pick-up available 2022 Ford set to launch ‘mini Mustang Mach-E’ electric SUV in 2023 Ford to launch 7 EVs in Europe in big electric push Ford’s Lincoln brand to launch full slate of electric SUVs by 2026 Volvo Polestar 2 Polestar 3 will hit U.S. market in Q1 2023 Volvo XC40 Recharge Volvo C40 electric sedan to challenge Tesla Model 3, VW ID3 Polestar 3 will be an electric SUV that shares its all-new platform with next Volvo XC90 Chevrolet Bolt sedan, 259-mile range starting at $31,000 Chevrolet Bolt EUV electric crossover Cadillac All-Electric Lyriq Available Spring 2022 GMC 2022 ALL-ELECTRIC SUPERTRUCK HUMMER EV GM’s 2023 electric Silverado pickup truck GMC to launch electric Hummer SUV in 2023 GM announces electric versions of the 2023 Chevy Equinox & Blazer SUVs starting @ $30,000 GM Launches BrightDrop to Electrify the Delivery of Goods and Services BMW leads off EV offensive with iX3 BMW expands EV offerings with iX tech flagship and i4 sedan BMW i7 EV, with 600 hp, will be most powerful variant of new 7 Series flagship 2022 BMW iX1 electric SUV spied Renault-Nissan alliance plows $26B into EV blitz- will jointly launch 35 new EVs Nissan vows to hop back on EV podium with Ariya Nissan LEAF e+ with 226-mile range is available now Nissan Unveils $18 Billion Electric-Vehicle Strategy Renault upgrades Zoe electric car as competition intensifies Renault Dacia Spring Electric SUV Renault to boost low-volume Alpine brand with 3 EVs Renault's electric Megane will debut new digital cockpit Stellantis promises 'heart-of-the-market SUV' from new, 8-vehicle EV platform Chrysler to go all-EV by 2028 Alfa Romeo's First Electric Car Will Arrive in 2024 Peugeot e-208 PEUGEOT E-2008: THE ELECTRIC AND VERSATILE SUV Peugeot 308 will get full-electric version Subaru shows off its first electric vehicle, the Solterra SUV Citroen compact EV challenges VW ID3 on price Rivian R1T Is the Most Remarkable Pickup We’ve Ever Driven Maserati going fully electric by 2030 -all vehicles will offer a BEV version by 2025 Mini Cooper SE Electric Toyota’s Electric bZ4X Goes On Sale in Spring 2022 Toyota will have lineup of 30 full EVs by 2030; Lexus will be all-electric brand Honda and Sony to build, sell EVs by 2025 Opel sees electric Corsa as key EV entry 2021 Vauxhall Mokka revealed as EV with sharp looks, massive changes Skoda Enyaq iV electric SUV offers range of power, battery sizes Electric Skoda Enyaq coupe to muscle-in on Tesla Model 3 Skoda plans small EV, cheaper variants to take on French, Korean rivals Nio to launch in five more European countries after Norway BYD will launch electric SUV in Europe The Lucid Air Achieves an Estimated EPA Range of 517 Miles on a Single Charge Bentley will start output of first full EV in 2025 All-electric Rolls-Royce Spectre to launch in 2023 – firm to be EV-only by 2030 Aston Martin will build electric vehicles in UK from 2025 Meet the Canoo, a Subscription-Only EV Pod Coming in 2021 Two new electric cars from Mahindra in India; Global Tesla rival e-car soon Former Saab factory gets new life building solar-powered Sono Sion electric cars Foxconn aims for 10% of electric car platform market by 2025 And in China… How VW Group plans to dominate China's EV market VW Goes Head-to-Head With Tesla in China With New ID.4 Crozz Electric SUV Volkswagen’s ID.3 EV to be produced by JVs with SAIC, FAW in 2021 2022 VW ID.6 Revealed With Room For Seven And Two Electric Motors China-built Audi e-tron rolls off production line in Changchun Audi Q2L e-tron debuts at Auto Shanghai Audi will build Q4 e-tron in China Audi Q5 e-tron Confirmed For China Audi in cooperation company for local electric car production with FAW FAW Hongqi starts selling electric SUV with 400km range for $32,000 FAW (Hongqi) to roll out 15 electric models by 2025 BYD goes after market left open by Tesla with four cheaper models for budget-conscious buyers BYD said to launch premium NEV brand ‘Dolphin’ in 2022 Top of Form Bottom of Form Daimler & BYD launch DENZA electric vehicle for the Chinese market Geely announces premium EV brand Zeekr Geely, Mercedes-Benz launch $780 million JV to make electric smart-branded cars Mercedes styled Denza X 7-seat electric SUV to hit market Mercedes ‘makes mark’ with China-built EQC BMW, Great Wall to build new China plant for electric cars BAIC Goes Electric, & Establishes Itself as a Force in China’s New Energy Vehicle Future BAIC BJEV, Magna ready to pour RMB2 bln in all-electric PV manufacturing JV Toyota partners with BYD to build affordable $30,000 electric car Ford MUSTANG MACH-E ROLLS OFF ASSEMBLY LINE IN CHINA FOR LOCAL CUSTOMERS Lexus to launch EV in China taking on VW and Tesla GAC Aion about to start volume production of 1,000-km range AION LX GAC Toyota to ramp up annual capacity by 400,000 NEVs GAC kicks off delivery of HYCAN 007 all-electric SUV Nio – Ready For Tomorrow Nio steps up plans for mass-market brand to compete with VW, Toyota Xpeng Motors sells multiple EV models SAIC-GM to build Ultium EV platform in Wuhan Chevrolet Menlo Electric Vehicle Launched in China Buick Introduces New VELITE 6 EV with Extended Range Buick Velite 7 EV And Velite 6 PHEV Launch In China Dongfeng launches the all-electric Voyah  PSA to accelerate rollout of electrified vehicles in China SAIC, Alibaba-backed EV brand IM begins presale of first model L7 Hyundai Motor Transforming Chongqing Factory into Electric Vehicle Plant Polestar said to plan China showroom expansion to compete with Tesla Jaguar Land Rover's Chinese arm invests £800m in EV production Renault reveals series urban e-SUV K-ZE for China Renault & Brilliance detail electric van lineup for China Renault forms China electric vehicle venture with JMCG Honda plans China EV plant to expand lineup GAC Honda launches pure electric car brand ‘e:NP’ Geely launches new electric car brand 'Geometry' – will launch 10 EVs by 2025 Geely, Foxconn form partnership to build cars for other automakers Fiat Chrysler, Foxconn Team Up for Electric Vehicles Baidu to create an intelligent EV company with automaker Geely Leapmotor starts presale of C11 electric SUV on Jan. 1 2021 Changan forms subsidiary Avatar Technology to develop smart EVs with Huawei, CATL WM Motors/Weltmeister Chery Seres Enovate China's cute Ora R1 electric hatch offers a huge range for less than US$9,000 Singulato JAC Motors releases new product planning, including many NEVs Seat to make purely electric cars with JAC VW in China Iconiq Motors Hozon Aiways Skyworth Auto Youxia CHJ Automotive begins to accept orders of Leading Ideal ONE Infiniti to launch Chinese-built EV in 2022 Human Horizons Chinese smartphone giant Xiaomi to launch electric car business with $10 billion investment Lifan Technology to roll out three EV models with swappable batteries in 2021 Here’s Tesla’s competition in autonomous driving… Waymo ranked top & Tesla last in Guidehouse leaderboard on automated driving systems Tesla has a self-driving strategy other companies abandoned years ago Fiat Chrysler, Waymo expand self-driving partnership for passenger, delivery vehicles Waymo and Lyft partner to scale self-driving robotaxi service in Phoenix Jaguar and Waymo announce an electric, fully autonomous car Renault, Nissan partner with Waymo for self-driving vehicles Geely’s Zeekr, Waymo partner on autonomous ride-hailing vehicle for the U.S. market Volvo, Waymo partner to build self-driving vehicles Volvo Cars’ unsupervised autonomous driving feature Ride Pilot to debut in California Cruise and GM Team Up with Microsoft to Commercialize Self-Driving Vehicles Cadillac Super Cruise Sets the Standard for Hands-Free Highway Driving Honda Joins with Cruise and General Motors to Build New Autonomous Vehicle Honda launching Level 3 autonomous cars Volkswagen moves ahead with Autonomous Driving R&D for Mobility as a Service VW, Bosch partner to develop autonomous driving systems Volkswagen teams up with Microsoft to accelerate the development of automated driving VW taps Baidu's Apollo platform to develop self-driving cars in China Ford “Blue Cruise” ARGO AI AND FORD TO LAUNCH SELF-DRIVING VEHICLES ON LYFT NETWORK Hyundai and Kia Invest in Aurora Toyota, Denso form robotaxi partnership with Aurora Aptiv and Hyundai Motor Group complete formation of autonomous driving joint venture Amazon’s Zoox unveils electric robotaxi that can travel up to 75 mph Nvidia and Mercedes Team Up to Make Next-Gen Vehicles Daimler's heavy trucks start self-driving some of the way SoftBank, Toyota's self-driving car venture adds Mazda, Suzuki, Subaru Corp, Isuzu Daihatsu  Continental & NVIDIA Partner to Enable Production of Artificial Intelligence Self-Driving Cars Mobileye and Geely to Offer Most Robust Driver Assistance Features Mobileye Starts Testing Self-Driving Vehicles in Germany Mobileye and NIO Partner to Bring Level 4 Autonomous Vehicles to Consumers Lucid Chooses Mobileye as Partner for Autonomous Vehicle Technology Alibaba-backed AutoX unveils first driverless RoboTaxi production line in China Nissan gives Japan version of Infiniti Q50 hands-free highway driving Hyundai to start autonomous ride-sharing service in Calif. Pony.ai Receives Approval for Paid Autonomous Robotaxi Services in Beijing Baidu Apollo’s autonomous driving service is now inclusive to all the megacities in China Toyota to join Baidu's open-source self-driving platform Baidu, WM Motor announce strategic partnership for L3, L4 autonomous driving solutions Volvo will provide cars for Didi's self-driving test fleet BMW and Tencent to develop self-driving car technology together BMW, NavInfo bolster partnership in HD map service for autonomous cars in China GM Invests $300 M in Momenta to deliver self-driving technologies in China FAW Hongqi readies electric SUV offering Level 4 autonomous driving Tencent, Changan Auto Announce Autonomous-Vehicle Joint Venture Huawei teams up with BAIC BJEV, Changan, GAC to co-launch self-driving car brands GAC Aion, DiDi Autonomous Driving to co-develop driverless NEV model BYD partners with Huawei for autonomous driving Lyft, Magna in Deal to Develop Hardware, Software for Self-Driving Cars Xpeng releases autonomous features for highway driving Nuro Becomes First Driverless Car Delivery Service in California Deutsche Post to Deploy Test Fleet Of Fully Autonomous Delivery Trucks ZF autonomous EV venture names first customer Magna’s new MAX4 self-driving platform offers autonomy up to Level 4 Groupe PSA’s safe and intuitive autonomous car tested by the general public Mitsubishi Electric to Exhibit Autonomous-driving Technologies in New xAUTO Test Vehicle Apple acquires self-driving startup Drive.ai Motional to begin robotaxi testing with Hyundai Ioniq 5 in Los Angeles JD.com Delivers on Self-Driving Electric Trucks NAVYA Unveils First Fully Autonomous Taxi Fujitsu and HERE to partner on advanced mobility services and autonomous driving Great Wall’s autonomous driving arm Haomo.ai receives investment from Meituan Plus.ai, Iveco to start L4 autonomous heavy-duty truck test in Europe, China T3 Mobility, IDRIVERPLUS to pilot Robotaxi operation in Suzhou with autonomous+manual model Here’s where Tesla’s competition will get its battery cells… Panasonic (making deals with multiple automakers) LG Samsung SK Innovation Toshiba CATL BYD Volkswagen to Build Six Electric-Vehicle Battery Factories in Europe How GM's Ultium Battery Will Help It Commit to an Electric Future GM to develop lithium-metal batteries with SolidEnergy Systems Ford, SK Innovation announce EV battery joint venture BMW & Ford Invest in Solid Power to Secure All Solid-State Batteries for Future Electric Vehicles Stellantis affirms commitment to build battery factory in Italy with Mercedes, TotalEnergies Stellantis and LG to Invest Over $5 Billion CAD in Joint Venture for Li-Ion Battery Plant in Canada Stellantis and Factorial Energy to Jointly Develop Solid-State Batteries for Electric Vehicles Mercedes-Benz to build 8 battery factories in push to become electric-only automaker Toyota to build plant in N.C. capable of making up to 1.2M batteries a year Toyota Outlines Solid-State Battery Tech, $13.6 Billion Investment Nissan Announces Proprietary Solid-State Batteries Daimler joins Stellantis as partner in European battery cell venture ACC Renault signs EV battery deals with Envision, Verkor for French plants Nissan to build $1.4bn EV battery plant in UK with Chinese partner UK companies AMTE Power and Britishvolt plan $4.9 billion investment in battery plants Freyr Verkor Farasis Microvast Akasol Cenat Wanxiang Eve Energy Svolt Romeo Power ProLogium Hyundai Motor developing solid-state EV batteries Morrow Here’s Tesla’s competition in charging networks… Infrastructure Bill: $7.5 billion Towards Nationwide Network of 500,000 EV Chargers Electrify America EVgo Chargepoint Ionity Europe Shell Plans To Deploy Around 500,000 Charging Points Globally By 2025 51 U.S. electric companies commit to build nationwide EV fast charging network by end of 2023 GM to distribute up to 10 chargers to each of its dealerships starting early 2022 Circle K Owner Plans Electric-Car Charging Push in U.S., Canada 191 U.S. Porsche dealers are installing 350kw chargers ChargePoint to equip Daimler dealers with electric car chargers Ford introduces 12,000 station charging network, teams with Amazon on home installation Petro-Canada Introduces Coast-to-Coast Canadian Charging Network Volta is rolling out a free charging network E.ON and Virta launch one of the largest intelligent EV charging networks in Europe Volkswagen plans 36,000 charging points for electric cars throughout Europe Smatric has over 400 charging points in Austria Allego has hundreds of chargers in Europe PodPoint UK charging stations BP Will Invest £1 Billion In UK Charging Infrastructure Instavolt is rolling out a UK charging network Fastned building 150kw-350kw chargers in Europe Aral To Install Over 100 Ultra-Fast Chargers In Germany Deutsche Telekom launches installation of charging network for e-cars Total to build 1,000 high-powered charging points at 300 European service-stations NIO teams up with China’s State Grid to build battery charging, swapping stations BYD, Shell to build joint venture for EV charging network development in China Volkswagen-based CAMS launches supercharging stations in China Volkswagen, FAW Group, JAC Motors, Star Charge formally announce new EV charging JV BMW to Build 360,000 Charging Points in China to Juice Electric Car Sales BP, Didi Jump on Electric-Vehicle Charging Bandwagon Evie rolls out ultrafast charging network in Australia Evie Networks To Install 42 Ultra-Fast Charging Sites In Australia And here’s Tesla’s competition in storage batteries… Panasonic Samsung LG Energy Solutions BYD AES + Siemens (Fluence) GE Hitachi ABB Toshiba Saft Johnson Contols EnerSys SOLARWATT Sonnen Kyocera Generac Kokam Eaton Tesvolt Kreisel Leclanche Lockheed Martin Honeywell EOS Energy Storage ESS UET electrIQ Power Stem ENGIE Redflow Primus Power Simpliphi Power Invinity Murata Bluestorage Adara Blue Planet Aggreko Orison Moixa Powin Energy Nidec Powervault Kore Power Shanghai Electric LithiumWerks Natron Energy Energy Vault Ambri Voltstorage Cadenza Innovation Morrow Gridtential Villara Elestor Flexgen SolarEdge Q-Cells Huawei ADS-TEC Form Energy Enphase Sumitomo Electric Stryten Energy Freyr Growatt Polarium C4V Thanks, Mark Spiegel Updated on Apr 1, 2022, 11:00 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkApr 1st, 2022

Futures Drift Lower After Kremlin Dashes Ukraine Peace Hopes; Curve Inversion Persists

Futures Drift Lower After Kremlin Dashes Ukraine Peace Hopes; Curve Inversion Persists After yesterday's explosive session, which saw stocks trade in violent kneejerk response to conflicting headlines out of Ukraine at first, only to post the biggest ever post FOMC reversal, as markets realized that the Fed's overly hawkish ambitions are too great and doom the rapidly slowing economy to an accelerated recession, overnight trading has been positively subdued with emini S&P futs trading in a tight 20 point range between 4,340 and 4,360 until 6 am ET, when European stocks turned negative and US equity futures suddenly dropped as much as 0.5%, after the Kremlin said reports of major progress in Ukraine talks are "wrong" and Kremlin spokesman Dmitry Peskov dismissed reports that the warring parties are moving toward a settlement, blaming Kyiv for slowing the negotiations, crippling any hope for a quick ceasefire deal and adding to worries about the outlook for economic growth as the Federal Reserve’s campaign against inflation gets underway. Futures were already wavering as the bond market flagged a growing risk that the Fed’s efforts to rein in prices could trigger an economic downturn with the 5s10s curve inverting. Ominously, Brent jumped more than $5/bbl after tumbling below $100 yesterday. Contracts on the Nasdaq 100 dipped 0.4% by 7:30 a.m. in New York, while S&P 500 futures were 0.34% lower. The benchmark S&P 500 on Wednesday posted its best two-day rally since April 2020 as the Fed hiked interest rates by a quarter point and Chair Jerome Powell signaled the economy could weather tighter monetary policy. Gold and 10Y yields dropped to session lows, and bitcoin was modestly lower on the session. Europe was slightly green while Asia stocks closed higher, led by the Hang Seng which rose 7% On Wednesday, the Fed raised borrowing costs by a quarter percentage point and signaled hikes at all six remaining meetings in 2022, while projecting an "above-normal" policy rate at 2.8% by the end of 2023. Chair Jerome Powell said the U.S. economy is “very strong” and can handle monetary tightening. Treasuries advanced, while a portion of the bond curve - the gap between 5- and 10-year yields - inverted for the first time since March 2020, a sign investors expect recession. The Fed also said it would begin shrinking its $8.9 trillion balance sheet at a “coming meeting,” without elaborating as Biden breathes down Powell's neck to get inflation under control. Meanwhile, the commodity shock from Russia’s war in Ukraine is continuing to aggravate price pressures and economic risks, portending more market volatility. “It won’t be easy -- rarely has the Fed safely landed the U.S. economy from such inflation heights without triggering an economic crash,” Seema Shah, chief strategist at Principal Global Investors, said in emailed comments. “Furthermore, the Russia-Ukraine conflict, of course, has the potential to disrupt the Fed’s path. But for now, the Fed’s priority has to be price stability.” “This type of normalization policy does not always end well,” said Nicolas Forest, global head of fixed income at Candriam Belgium SA. “While the Fed began its tightening cycle later than usual, at a time when inflation has never been so high, financial conditions could also harden, making the 2.80% target ambitious in our view. In this context, it is easy to understand why the U.S. curve has flattened.” In the latest Ukraine war developments, Russia continued to “hammer” cities like Kharkiv and Cherniyiv with bombardments and rocket systems and isn’t acting like it wants to settle, Pentagon spokesman John Kirby said in an interview with Bloomberg TV. Meanwhile, Russia’s Finance Ministry said a $117 million interest payment due on two dollar bonds had been made to Citibank in London amid mounting speculation that the country is heading for a default. Russia had until the end of business Wednesday to honor the coupons on the two notes. The ruble gained for a sixth day in Moscow trading, while the country’s stock market remains shut. Here are some more headlines courtesy of Newsquawk: Ukrainian President Zelensky said talks with Russia are challenging but are still ongoing. He added that Russia has the advantage in the air and already crossed all red lines, while he hopes for assistance from allies. Russian Foreign Minister says that discussions with Ukraine are continuing via video link with the sides discussing humanitarian and political issues. Ukrainian Defense Minister says so far there is nothing to satisfy us in negotiations with Russia; a peaceful solution can be reached with Russia, but "on our terms". Russian Kremlin says their delegation is putting colossal energy into Ukraine peace talks, conditions are absolutely clear. Agreement with Ukraine with clear parameters could very fast stop what is going on; on the recent FT report re. peace talk progress said this is not right, elements are correct but the entire peace is not true. A rebound in China stocks listed on U.S. exchanges also cooled a day after they soared the most since at least 2001 on a pledge from Beijing to keep its stock market stable. American depository receipts of Alibaba were down 2% in premarket trading following their biggest gain since their trading debut in September 2014, while Baidu dropped 5.7%. Here are some other notable premarket movers: Shares in Marrone Bio (MBII US) jumped 20% premarket after announcing a merger pact with Bioceres Crop Solutions (BIOX US), which falls 5.9%. Williams-Sonoma (WSM US) gained 6.2% in extended trading Wednesday after the home-goods retailer reported adjusted fourth-quarter earnings that beat the average analyst estimate. The company also raised its dividend and announced a share buyback authorization. In Europe, the Stoxx 600 index gained, nearly erasing losses that were sparked by Russia’s invasion of Ukraine. The index then dipped on the abovementioned news out of the Kremlin which said reports of major progress in Ukraine talks are “wrong”, only to bounce back into the green. DAX and FTSE MIB lag, slipping ~1%. Banks, autos and personal care are the worst performing sectors. Energy, real estate and tech outperform.  Here are some of the biggest European movers today: Deliveroo shares rise as much as 9.8% after reporting full-year results, with Barclays (equal-weight) saying the food-delivery company’s mid-term margin commentary was “helpful.” Grenke shares jump 16%, the most since May, after the company reported dividend per share that beat the average analyst estimate. EQT shares rise as much as 9.5%, extending Wednesday’s 12% gain following the acquisition of Baring Private Equity Asia for $7.5 billion in what is the biggest takeover of a private equity firm by another in the sector. Atos shares jump as much as 7.4% after BFM Business reported that Airbus has been mulling a possible takeover of the French IT firm’s cybersecurity unit. Atos reiterated that its BDS cybersecurity business is not for sale. DiaSorin shares soar as much as 9.7%, their best day in nearly one year as analysts upgraded the Italian diagnostics company following results, with the firm reporting net income for the full year that beat the average analyst estimate. Verbund shares rise as much as 7.7% after 2021 profit beats estimates and Austria’s biggest utility forecasts higher profit next year. Thyssenkrupp shares fall as much as 11% after the company suspended its full-year forecast for free cash flow. The move is a disappointment, given the FCF focus in the steel company’s equity story after years of cash burn, Deutsche Bank says. Asian stocks extended their rebound through a second day after Chinese shares rallied again on a vow of state support and the Federal Reserve expressed confidence in the U.S. economy.  The MSCI Asia Pacific Index rallied as much as 3.6%, lifted by technology and consumer-discretionary shares. Japan and Hong Kong benchmarks led the way, with the Hang Seng Index surging 17% over two days, its biggest back-to-back advance since the Asian financial crisis in 1998, and the Topix jumping 2.5%.  A combination of China’s pledge to stabilize markets, Fed comments on the U.S. economy’s strength after the expected quarter-point interest rate hike by the central bank, and hopes for progress on Russia-Ukraine talks have put Asian stocks on track to end four consecutive weekly losses. “Following recent corrections, markets have reached a point that prices in, or presumes, a fair amount of rate hikes and economic stress,” said Ellen Gaske, lead economist for G-10 economies at PGIM Fixed Income. “It would not be surprising to see investors begin to inch back into the market in search of yield.” Japanese equities rose for a fourth day, as investors were cheered by comments from the Federal Reserve on U.S. economic growth and China’s moves to support its market. Electronics and machinery makers were the biggest boosts to the Topix, which rose 2.5%, to the highest level since Feb. 21. All 33 industry groups advanced. Fast Retailing and Tokyo Electron were the biggest contributors to a 3.5% rise in the Nikkei 225. The yen extended its losses against the dollar after weakening 3.4% over the previous eight sessions. The Fed raised interest rates by a quarter percentage point and signaled hikes at all six remaining meetings this year, while saying “the American economy is very strong” and able to handle tighter policy. Global stocks got a lift Wednesday after Beijing vowed to keep its stock market stable. “The FOMC dot plot clearly shows that the number of interest rate hikes will be reasonable, and the stock market is pleased that the risk of accelerating long-term interest rates rising due to monetary policy following has decreased,” said Kazuharu Konishi, head of equities at Mitsubishi UFJ Kokusai Asset Management. In domestic news, a magnitude-7.3 earthquake struck near Fukushima prefecture late Wednesday, killing four and injuring dozens of people, as well as derailing a bullet train and disrupting power India’s benchmark stocks index rose, tracking regional peers, as lenders drove gains. The S&P BSE Sensex climbed 1.8% to 57,863.93, in Mumbai. The measure added 4.2% this week, and with local markets closed for a holiday Friday, it is the biggest weekly advance for the index since February 2021. With today’s gains, it completely recovered all losses that followed Russia’s invasion of Ukraine.   Mortgage lender Housing Development Finance Corp. rose 5.4%, its biggest jump in over a year and was the best performer on the Sensex, which saw all but two of 30 shares advance. Seventeen of 19 sectoral sub-indexes compiled by BSE Ltd. gained, led by a gauge of realty companies. The NSE Nifty 50 Index added 1.8% to 17,287.05 on Thursday. China’s pledge to support its markets, the prospect of progress on Russia-Ukraine cease-fire talks and the U.S. Federal Reserve’s comments on America’s economic strength boosted sentiment. Brent crude, a major import for India, down to $100 a barrel from $127.98 last week, also eased concerns. The Fed announcement was on expected lines for the market and they rallied in relief, Nishit Master, portfolio manager at Axis Securities wrote in a note.  “Despite the recent rally, the markets will continue to remain volatile in the near future on the back of tightening of liquidity conditions globally. One should use this volatility to increase equity allocation for the long term.” In rates, the post-Fed flattening move has extended as investors continue to digest expectations on latest policy path, with some strategists calling for a top in yields. 10-year yields around 2.12%, richer by ~6bp on the day and outperforming bunds and gilts by  4.5bp and 3bp; 2s10s spread is flatter by ~4bp on the day.  US TSY yields are richer by as much as 7bp across long-end of the curve, flattening 5s30s by a further 2.4bp with the spread dropping as low as 24.2bp;  the 5s10s was again inverted, trading fractionally in the red after first inverting yesterday during Powell's FOMC presser. In FX, the Bloomberg Dollar Spot Index pared a loss and the greenback traded mixed after earlier sliding against all of its Group- of-10 peers apart from the Swedish krona, as risk aversion gave rise to a haven bid. The euro snapped a three- day advance after the news out of Kremlin dampened sentiment; short-dated European benchmark bond yields were little changed while they contracted longer out on the curve. The pound advanced and gilts rose, led by the long end before the Bank of England looks all but certain to take interest rates back to their pre- Covid level. The Australian dollar still outperformed G-10 peers after the nation’s February unemployment rate falls to the lowest since 2008, boosting bets of earlier interest-rate hikes. The yen inched up amid risk aversion, but still held near its lowest level in six years as Bank of Japan Governor Haruhiko Kuroda vowed to continue with monetary stimulus even after the Federal Reserve kicked of its rate hike cycle Wednesday. In commodities, WTI crude futures climb near $99.50 while Brent rallies through $102; spot gold adds ~$16 to trade around $1,944. Base metals are mixed; LME nickel falls 8% to maximum limit while LME aluminum gains 1.8%. Bitcoin is modestly softer but remains well within yesterday's parameters and retains a USD 40k handle. Looking at the day ahead now and housing starts, building permits, initial jobless claims and industrial production are due. We will also hear from ECB's Lagarde, Lane, Knot, Schnabel and Visco. Earnings releases include Accenture, Enel, FedEx, Dollar General and Verbund. Market Snapshot S&P 500 futures down 0.3% at 4,337.00 STOXX Europe 600 up 0.4% to 450.44 MXAP up 3.5% to 178.08 MXAPJ up 4.0% to 582.21 Nikkei up 3.5% to 26,652.89 Topix up 2.5% to 1,899.01 Hang Seng Index up 7.0% to 21,501.23 Shanghai Composite up 1.4% to 3,215.04 Sensex up 2.1% to 58,014.18 Australia S&P/ASX 200 up 1.1% to 7,250.80 Kospi up 1.3% to 2,694.51 German 10Y yield little changed at 0.38% Euro up 0.2% to $1.1057 Brent Futures up 3.0% to $100.97/bbl Gold spot up 0.7% to $1,940.77 U.S. Dollar Index down 0.42% to 98.21 Top Overnight News Russia’s Finance Ministry said a $117 million interest payment due on two dollar bonds had been made to Citibank in London amid mounting speculation that the country is heading for a default Rates and currency markets are skeptical of the Bank of England’s ability to tame inflation without triggering an economic slowdown. Policymakers may undo tightening as soon as next year, swaps contracts suggest After the Federal Reserve raised interest rates and signaled hikes at all six remaining meetings this year, a section of the Treasury curve -- the gap between five- and 10-year yields -- inverted for the first time since March 2020. Meanwhile the flattening trend between two- and 10-year yields continued Hungary’s central bank kept the effective interest rate unchanged after a rally in the forint eased pressure on policy makers to further hike the European Union’s highest key rate Commodities trader Pierre Andurand sees a path for crude oil to get to $200 by the end of the year as historically tight markets struggle to ramp up production and replace lost supply from Russia A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks gained post-FOMC while Chinese tech remained euphoric on support pledges. ASX 200 was led higher again by outperformance in tech and following strong jobs data. Nikkei 225 rallied after recent currency weakness and despite the deadly earthquake in Fukushima. Hang Seng and Shanghai Comp. continued to benefit from China’s recent policy support pledges which  lifted the NASDAQ Golden Dragon China Index by 33% and with the PBoC boosting its liquidity efforts. Significant gains were also seen amongst developers after reports that China is not planning to expand its pilot property tax reform this year. Top Asian News China Affirms Friendship With Ukraine, Promise to ‘Never Attack’ Indonesia Holds Rates While Monitoring Inflation, War Risks War in Ukraine Triggers Slew of Shelved IPOs in Japan: ECM Watch Strong Quake Hits Japan, Killing Two and Halting Factories European bourses are predominantly negative, Euro Stoxx 50 -0.4%, after a relatively constructive open post Wall St./APAC handover. Initial upside faded as updates on Russia/Ukraine are downbeat overall and push back further on some of Wednesday's more constructive updates. US futures are lower across the board, ES -0.4%, after yesterday's upbeat close post a hawkish-FOMC. Top European News Raiffeisen CEO Says Bank is Considering Exit From Russia UBS, Mitsubishi Sell Japan Realty Unit to KKR for $2 Billion Russia’s Ruined Gameplan for Ukraine Is Visible in the South Diageo Rises; JPMorgan Lifts to Overweight on U.S. Position In FX, the dollar flips after hawkish Fed hike and more aggressive dot plot before unwinding all and more upside in buy rumor, sell fact reaction; DXY almost 100 ticks down from pre-FOMC peak and just off 98.000. Aussie outperforms following upbeat labour data and Kiwi lags on the back of sub-forecast GDP, AUD/USD eyeing Fib ahead of 0.7350, AUD/NZD back up over 1.0700 and NZD/USD capped into 0.6850. Sterling firm awaiting confirmation of 25 bp hike from the BoE and vote split plus MPC minutes for further guidance; Cable close to 1.3200 at best and EUR/GBP sub-0.8400. Euro clears 1.1000 again, while Yen extends decline to cross 119.00 line. Lira looks ahead to CBRT with high bar for any direct support in contrast to Real that got a full point hike from BCB and signal of more to come. Brazilian Central Bank raised the Selic rate by 100bps to 11.75%, as expected, while the decision was unanimous and it considered it appropriate to advance monetary tightening significantly into even more restrictive territory. In commodities, crude futures continue to nurse recent wounds, with Brent May back around USD 102.50/bbl while WTI April inches toward USD 100/bbl. Upside occurred, picking up from initial choppy action, amid the most recent geopolitical developments from the Kremlin and Ukrainian Defence Ministry. India may purchase up to 15mln bbls of oil from Russia with state-run oil firms preparing to  purchase heavy volumes of Russian crude that's going at a deep discount to help ease the margin pressure oil refiners. China is to increase gasoline prices by CNY 750/ton and diesel by CNY 7220/ton as of March 18th, according to the NDRC via CCTV. Italy is considering blocking the export of raw materials, according to the Deputy Industry Minister. Spot gold/silver are firmer given geopolitical-premia., while LME Nickle hit the new adj. limit down of 8% after the reopen. In fixed income, debt derives impetus from downturn in risk sentiment as Russia and Ukraine deny major strides towards ceasefire deal. Bond curves remain flatter following Fed's hawkish dot plots. Bonos and OATs soak up Spanish and French supply. US Event Calendar 8:30am: March Initial Jobless Claims, est. 220,000, prior 227,000; March Continuing Claims, est. 1.48m, prior 1.49m 8:30am: Feb. Building Permits, est. 1.85m, prior 1.9m; Building Permits MoM, est. -2.4%, prior 0.7%, revised 0.5% 8:30am: Feb. Housing Starts, est. 1.7m, prior 1.64m; Housing Starts MoM, est. 3.8%, prior -4.1% 8:30am: March Philadelphia Fed Business Outl, est. 14.8, prior 16.0 9:15am: Feb. Industrial Production MoM, est. 0.5%, prior 1.4% Capacity Utilization, est. 77.9%, prior 77.6% Manufacturing (SIC) Production, est. 1.0%, prior 0.2% DB's Jim Reid concludes the overnight wrap After I press send today I’ll be venturing back on a plane for the first time in two years this morning. I'm off to give a speech at a conference in Cannes just at the time when all the tabloid papers here say that London is going to be hotter than Greece and the Costa Brava in a rare March warm spell here in the UK. Rarer than a warm spell in the UK in March, we now have the start of only the fourth Fed hiking cycle in 27 years. We saw a wild ride in markets after the decision as initially the hawkish dot plot led to a big sell off in rates, and an S&P 500 that fell nearly -1.5% from pre announcement levels and into negative territory for the session. However markets completely turned on Powell’s comments in the press conference that the probability of recession was "not particularly elevated" and that the "economy is very strong" and can handle tighter policy. The S&P closed +2.24%, completing its biggest 2-day move in 23 months, while the Nasdaq climbed +3.77%. The big winners were mega cap tech stocks, with the FANG+ index putting in its best day on record, climbing +10.19%. The latter were almost certainly helped by earlier news that China would “actively introduce policies that benefit markets” and take steps to ease the most spartan lockdown measures. The FANG index includes Baidu and Alibaba that were up nearly +40% yesterday. To be fair the Fed meeting and the surrounding price action makes sense. Although I think the risks of a US recession by late 2023 / early 2024 are increasingly elevated I'm not convinced that the risks are particularly high in 2022. The start of the hiking cycle isn't historically the problem point for the economy or for that matter equities. Further to this, in my CoTD yesterday (link here) I showed that on average it takes around three years from the first Fed hike to recession. However the bad news is that all but one of the recessions inside 37 months (essentially three years) occurred when the 2s10s curve inverted before the hiking cycle ended. With all the recessions that started later than that, none of them had an inverted curve when the hiking cycle ended. In fact, hiking cycles that ended with the curve still in positive territory saw the next recession hit 53 months on average after the first rate hike, whereas the next recession for hiking cycles that ended with an inverted curve started on average in 23 months, so just under two years. As a reminder, none of the US recessions in the last 70 years have occurred until the 2s10s has inverted. On average it takes 12-18 months from inversion to recession. The problem is that all but one of the hiking cycles in the last 70 years have seen a flatter 2s10s curve in the first year of hikes. The exception saw a very small steepening. So these are the risks. Indeed the yield curve flattened after the Fed with 2s10s moving from just under +31bps to +21bps an hour later. It closed at +23bps. 10yr yields rose 6bps after the announcement but reversed most of this into the close and ended +4.1bps on the day at 2.18%. We are at 2.137% this morning. The rise in 2 years was more durable at +8.9bps on the day with a -2.4bps reversal this morning to 1.912%. At one point yesterday this was +15bps on the day and at a hair's breadth below 2%. The tighter policy path meant that breakevens declined and real rates increased; 10yr Treasury breakevens fell -5.5bps to 2.80%. Digging into the meeting itself. Two years to the day after cutting rates to the zero lower bound, the Fed raised rates by 25 basis points yesterday, and communicated a much tighter path of policy to come (our US econ team’s full recap here). Yesterday’s meeting came with an updated Summary of Economic Projections, and the dots were much more hawkish. The median dot showed expectations for 7 hikes in 2022, including yesterday and in line with what our US economics team is expecting, and which would represent a hike at every meeting for the rest of the year. The median dot reaches 2.75% next year, above the Fed’s long-run estimate for the fed funds rate, signaling policy will need to get to a restrictive stance. Indeed, the dots actually showed the long-run neutral fed funds rate fell, so a restrictive stance will come even sooner. These were just the medians. There was considerable variance in the dots, and Chair Powell noted the risks to inflation were to the upside, suggesting rates could be even higher than what the hawkish medians are suggesting. On the balance sheet, the Fed noted that QT would start at a coming meeting. Chair Powell signaled it could start as early as May, noting the Committee made excellent progress on the parameters of balance sheet runoff, even if they did not provide more details yesterday. Chair Powell noted the minutes from this meeting would have more details around runoff parameters. Elsewhere in the press conference, the Chair noted that every meeting was live, and that the Fed would move more quickly if appropriate, which ostensibly means +50bp hikes are on the table, but also said the Fed’s expected QT program will equate to approximately one more hike, which is in line with our team’s expectations for QT this year. Indeed, each of the next few meetings is pricing a meaningful chance of a +50bp hike. He noted the Fed would be evaluating month-over-month inflation readings when determining the pace of policy tightening and that financial conditions needed to be tighter. In all, a hawkish meeting, which was expected, with little for doves to cling to. After yesterday’s Fed hike, it is the Bank of England turn to raise rates with the decision scheduled for 12pm London time. A preview from our UK economist is available here. Our team expects a +25bps hike to bring the key rate to its pre-pandemic level of 0.75%. They also added a +25bps June hike to their projections for the path of the monetary policy in 2022, which would bring the benchmark rate to 1.5% by the end of this year. Beyond 2022, they see another hike in February 2023 that would bring the key rate to 1.75%, their projected terminal rate. More on their economic outlook for the UK can be found in the UK Macro Handbook here. As of this morning, the market is pricing in slightly less than 70bps of hikes by the end of 2022. Turning to geopolitics, net net, more positive news flow came out of Russia-Ukraine talks, as a neutrality model that would allow Ukraine to preserve its army seems to be among options on the negotiations table. While comments were otherwise scarce, the head of Russian delegation Vladimir Medinsky said that the talks were going slowly and strenuously. Meanwhile, Russia was officially excluded from Council of Europe yesterday. Putin’s address on Russian TV was pretty hawkish but he was talking to a domestic audience. An FT report that suggested significant progress in the talks contributed to the optimism that fuelled European shares higher as the STOXX 600 gained +3.06%, although an earlier catalyst for the rally was China’s announcement of economic support. Country-level stock markets like Germany’s DAX (+3.76%) and France’s CAC 40 (+3.68%) have notched even stronger gains. The former is now just 1.30% below its pre-invasion close on February 23rd. On that China story, the news was that Shanghai would not implement a strict lockdown in response to the recent outbreak but would instead encourage working from home helped support risk sentiment. Arguably more impactful for markets, top economic ministers noted that the government would introduce policies to benefit markets after the recent volatility, which was a boon to equities. Following on from this, Asian stock markets have surged higher for a second day. The regional sentiment remains buoyant as a rally led by the Hang Seng (+5.79%), CSI (+3.19%) and Shanghai Composite (+2.59%) came after a blistering surge in tech stocks over the last 24 hours as a top Chinese official in his comments yesterday stated that the administration will introduce market friendly policies. Elsewhere, the Nikkei (+3.14%) is sharply higher this morning, extending the gains in the previous two sessions while the Kospi (+1.77%) is also surging. US stock futures are fairly flat. Prior to the Fed’s decision, European yields rallied after Sweden’s Riksbank governor did not rule out a possibility of a hike as early as this year – a significant shift from its previous 2024 projections. Swedish yields marched higher across the curve in response, with 10y rising by +7.2bps and hitting the highest level since January 2019 and the 2s10s curve steepening (+1.3bps), while the krona rose by +1.73% against the dollar in what was an overall down day for the greenback as the Bloomberg USD index declined by -0.35%. The British pound (+0.48%) rose as well ahead of the BoE decision and the yield on gilts (+5.3bps) reached the highest level since November 2018. Together with aforementioned geopolitical developments, these news fuelled risk appetite and bond yields rose across most of the Eurozone before we even got to the Fed. Moves in bunds (+6.0bps), OATs (+4.2bps) and BTPs (-0.3bps) were accompanied by sizeable declines in underlying breakevens, with those on bunds (-5.1bps) and BTPs (-5.1bps) edging lower. Inflation expectations were partially muted by a rather calm day for major commodities. Both Brent (-1.89%) and WTI (-1.45%) dipped although this has been reversed so far this morning. There were more fun and games in nickel after a week of no trading due to last week’s massive spike. This time trading was suspended as prices dropped below the new daily threshold and a technical glitch occurred. Despite relative calm in oil markets, other Russia-related commodities continued to slide, especially so in Europe. The Dutch TTF futures for April delivery fell by -10.73% yesterday and around -70% since their intra-day peak on March 7th. Meanwhile, E.ON, German energy supplier, announced it will stop new purchases of gas from Russian companies, although the firm has no long-term contracts. Soft commodities like corn (-3.69%) and wheat (-7.36%), export of which was recently sanctioned by Russia, also declined. In yesterday’s data releases, US retail sales came in at +0.3%, below +0.4% expected, with gasoline spending (+5.3%) driving the advance. The NAHB index also disappointed (79 vs 81 expected), dropping to a six month low. To the day ahead now and housing starts, building permits, initial jobless claims and industrial production are due from the US. We will also hear from ECB's Lagarde, Lane, Knot, Schnabel and Visco. Earnings releases include Accenture, Enel, FedEx, Dollar General and Verbund. Tyler Durden Thu, 03/17/2022 - 07:58.....»»

Category: blogSource: zerohedgeMar 17th, 2022

There’s a Problem With How We Train Truckers

New training guidelines years in the making lack a major safety component: minimum behind-the-wheel training time for truckers, despite an increase in fatal crashes involving big-rigs In most states, aspiring barbers have to spend 1,000 hours or more in training before they get a license. To drive a 40,000-pound truck, though, there’s no minimum behind-the-wheel driving time required, no proof of ability to navigate through mountains, snow, or rain. There’s just a medical exam, a multiple-choice written exam, and a brief driving test—which in some states can be administered by the school that drivers paid to train them. As trucking companies hustle to hire more drivers in response to supply chain issues, though, the roads could be getting more dangerous—and there were 4,895 people killed in crashes involving large trucks in 2020, 33% more than in the 3,686 fatalities in 2010. In the coming months, the minimum age to be licensed to drive commercial trucks interstate will drop from 21 to 18 for thousands of drivers as part of a pilot program announced by the Biden administration. And on Feb. 7, standards for driver training that have been in the works for three decades were set to finally go into effect, but they don’t include a critical component: a minimum number of hours of behind-the-wheel training. [time-brightcove not-tgx=”true”] Read more: There’s Not a Trucker Shortage; There’s a Trucker Retention Problem “We don’t want to do the hard things in this industry, which is spending extra money, taking extra time to train people to safely operate trucks,” says Lewie Pugh, who owned and operated a truck for 22 years and is now executive vice president of the Owner-Operator Independent Drivers Assn. His association has long pushed for higher training standards, which they say would help the high-turnover industry retain workers. The ramifications of sending inexperienced drivers on the road are evident in the fiery crashes along the nation’s highways that kill people in smaller vehicles and tie up traffic for hours. In April 2019, four people were killed in Colorado when Rogel Aguilera-Mederos, who had little experience driving on mountainous terrain, lost control of his truck. Aguilera-Mederos, who was 23 at the time, had earned his commercial driver’s license in Texas and was heading to Wyoming when his brakes failed coming down a mountain on I-70. Aguilera-Mederos was sentenced to 110 years in prison for vehicular manslaughter, later reduced to 10 years by the Colorado governor. But the responsibility shouldn’t only lie on the driver’s shoulders, argues his lawyer, James Colgan. “My client never received any formal training in mountain passes and how to deal with them,” Colgan told me. The trucking company “let this inexperienced driver take a mountain pass—they actually encouraged it.” “My client never received any formal training in mountain passes and how to deal with them.”  David Zalubowski—APWorkers clear debris from Interstate 70 on April 26, 2019, in Lakewood, Colo., following a deadly pileup involving a semi-truck hauling lumber. The truck driver who was convicted of causing the fiery pileup that killed four people said he had no experience navigating mountain roads; his 110-year sentence was later reduced to 10 years. The trucking company that hired Aguilera-Mederos, Castellano 03 Trucking LLC, has since gone out of business and was not held accountable in the case. Aguilera-Mederos had only earned his commercial driver’s license 11 months before the crash, and his regular driver’s license two years before that, according to court transcripts. He had been working for Castellano 03 Trucking for three weeks when he found himself barreling down a mountain at 80 m.p.h. with a 75,000-pound load and no brakes. “I held the steering wheel tight and that’s when I thought I was going to die,” he told investigators. Why There Aren’t Training Rules Now Concerned with a high level of truck driver crashes, Congress in 1991 ordered the Federal Highway Administration to create training requirements for new drivers of commercial vehicles. Highway safety advocates sued after no requirements had been created by 2002, but after a number of court cases, there were still no driving training requirements by 2012, when MAP-21, a law passed by Congress, mandated new standards.. In 2014, the Federal Motor Carrier Safety Administration—the FHA’s successor agency— brought together a committee to negotiate guidance for minimum training requirements. The panel came up with a long list of recommendations, including at least 30 hours training behind the wheel and some amount of time driving on a public road. The behind-the-wheel rules were a stipulation that only two members of the 25-member committee opposed. Both represented lobbying groups for the trucking industry, which argued that there was no scientific evidence showing that behind-the-wheel training led to safer drivers, says Peter Kurdock, general counsel for the Advocates for Highway and Auto Safety, who was on the committee. One major carrier, Schneider, which supported minimum behind-the-wheel training , said it “often” encountered newly-licensed drivers who had never operated a commercial motor vehicle on a highway or interstate. But when the final rules were released in 2016, a minimum number of behind-the-wheel hours had been dropped. The agency said it was not able to find data that proved the value of such training and that it was important to avoid imposing extra training costs on proficient drivers. (In the same document, the agency acknowledged that 38% of commercial motor vehicle drivers said they did not receive adequate entry-level training to safely drive a truck under all road and weather conditions, according to a 2015 survey from the National Institute for Occupational Safety and Health.) Read more: How American Shoppers Broke the Supply Chain “That is some of the most invaluable experience that a new truck driver learns—sitting behind the wheel with someone who is an experienced driver saying, ‘This is about to happen. This is how you avoid this critical safety situation,’” Kurdock says. “We feel it’s a significant failing of the rule.” People seeing a commercial pilot’s license, by contrast, have to have at least 250 hours of flight time; if they want to work for passenger airlines, they have to have 1,500 hours of flight time. The advisory committee’s recommendations, originally scheduled to take effect in 2020, were delayed and now are due to begin Feb. 7, 2022. They create a training-provider registry and require would-be drivers to sign up with a school that is on the registry. But to be listed on the registry, schools are allowed to self-certify that they qualify. “What’s actually changing?” the American Trucking Association asks, on a section of its website devoted to the new regulations. “For organizations that have a structured program in place today, the truth is – not much.” Colgan, the lawyer, says more stringent training would skewer the economics of trucking, which ensures that the company that can charge the cheapest rates often gets the business. “It comes down to the almighty dollar—if you required truckers to be trained like that, it would slow everything down,” he says. The American Trucking Assn. did not return calls requesting comment for this story. “We don’t want to do the hard things in this industry, which is spending extra money, taking extra time to train people to safely operate trucks.”If anything, there’s a push to speed things up in the trucking industry as supply chain issues create demand for more drivers to haul more stuff. On Feb. 2, the FMCSA said it would allow trucking schools in all states to administer the written portion of CDL tests for drivers, in addition to the driving test, a reversal of previous guidance, which could get new drivers on the roads faster. In November 2021, 11 Republican Senators asked the FMCSA to let 18-year-olds obtain commercial driver licenses for interstate trucking. “Inaction to grow America’s pool of truck drivers threatens to drive up shipping expenses, prolong delays, and burden already-strained consumers with additional costs,” they said in a letter. Andrew Hetherington for TIMETrucks outside Atlanta GA on February 5th 2022. Partly in response to that letter, the Infrastructure Investment and Jobs Act signed by President Biden in November 2021 ordered the Secretary of Transportation to create a pilot apprenticeship program for 18-to-20 year-olds within 60 days. “Segments of the trucking industry have been pushing for teenage truckers to drive interstate for years, but the most recent supply chain challenges are being used as a way to push forward that proposal,” Cathy Chase, the president of the Advocates for Highway and Auto Safety, told me. How A Trucker Learns The problems with training aren’t just about a lack of standards. The first year that people spend driving a truck usually consists of long weeks on the road making low wages, a far cry from the six-figure salary and independent lifestyle pitched to new students. Many drivers who get their commercial driver’s license (CDL) drop out once they get a taste of that life. Over the course of four years, only 20% of the 25,796 drivers who started with CRST, a carrier that promised free training and a job afterward, actually finished the training and started driving independently, according to a class-action lawsuit filed in Massachusetts over the company’s debt collection practices. (CRST agreed to pay $12.5 million to settle the lawsuit, but a former CRST driver has objected to the settlement and is still pursuing claims against the company.) “What our current system of training does is it throws people into the deep end with no support into the absolute worst and toughest and most dangerous jobs and just burns them out,” says Steve Viscelli, a sociologist and the author of The Big Rig: Trucking and the Decline of the American Dream. “Segments of the trucking industry have been pushing for teenage truckers to drive interstate for years, but the most recent supply chain challenges are being used as a way to push forward that proposal.”Because new drivers are so expensive to insure, most get trained at big, long-haul trucking companies that are self-insured. These companies recruit would-be drivers by offering to pay for them to get their CDLs in exchange for a promise to work for the company once they’re licensed. Obtaining a CDL takes a few weeks. Only after that do most newly licensed drivers spend significant time on the road, when they’re paired with more experienced drivers who are supposed to show them the ropes. This saves the companies money, because federal regulations stipulate that truck drivers can only drive 11 hours straight after 10 hours off. Putting two drivers together lets one take the wheel while the other sleeps in the truck and enables companies to move freight in half the time it would take a solo driver. In addition, newly licensed drivers are paid cents per mile to haul the loads, providing a major source of cheap labor. But the system means that new drivers are spending weeks sharing a truck with a stranger who has the upper hand in their relationship and the power to hurt their job prospects, because the trainer tells the company if the trainee is ready to drive on their own. Often, one person sleeps while the other drives, dimming prospects for the student to actually learn from the trainer, even though the trainer gets a few extra cents per mile to accompany a trainee. Some trainers barely have any more experience than the students. This is done in tens of thousands of trucks across the country, and horror stories abound. Read more: How to Reduce Your Family’s Emissions and Live Greener Kay Crawford, a 25-year-old who signed up to become a truck driver during the pandemic after getting sick of the low pay and danger of being a sheriff’s deputy, says she was sexually harassed numerous times by her trainers. One kept telling her he needed a woman and propositioned her; another refused to meet her anywhere but her hotel room. The company did nothing once she reported the incidents. The training coordinator said, ‘I got you work, you’re not accepting it, and I have 14 other students I need to get in a truck,’” she told me. After three separate bad experiences with trainers, Crawford decided to give up on trucking. She’s still hounded by the school, which says she owes it $6,000, despite her sexual harassment claims. “At that point, trucking pretty much disgusted me,” she said. Despite having her CDL, she can’t get a new job because she’s not insurable without long-haul trucking experience, she said. Her experience isn’t uncommon. One CRST student alleged that her trainer raped her in the cab of her truck and the company then billed her $9,000 for student driver training; company employees testified that CRST only considered sexual assault claims to be valid if they were corroborated by a third party or recorded. The case, Jane Doe v. CRST, was settled last year and though CRST agreed to pay $5 million, it did not admit wrongdoing. Despite dozens of legal battles like that one, training has changed little in decades. (There is now a second Jane Doe v. CRST complaint making its way through the courts, filed by another woman who said she was sexually assaulted by her trainer.) Brita Nowak, a longtime truck driver, said that her trainer hit and slapped her when she was learning on the road with a big carrier two decades ago; when she reported him, “they called me a pill,” and asked for proof of her assault, she said. She didn’t have any proof and had to put up with the abuse until her trainer hit an overpass and damaged the truck; then, she says, the company switched her to another trainer. Andrew Hetherington for TIMEOwner-operator Brita Nowak outside Atlanta, GA, on February 5th 2022. Even some people who have good trainers say that they earn less than the minimum wage in their first year of trucking, which makes the sacrifices of being so far from family for long periods of time hard to bear. Crawford said she never made more than $500 a week; even in training, she spent long unpaid hours waiting to load or unload. The Massachusetts lawsuit against CRST alleged that new drivers made between $0 an hour and $7.19 per hour between 2014 and 2015 because CRST deducted money from their paychecks for housing, physical exams, drug tests, and training reimbursement. “These are bad companies, I wouldn’t send my worst enemy to them,” says Desiree Wood, the founder and president of REAL Women in Trucking, which advocates for better standards for drivers. CRST did not respond to a request for comment. Hardly a week goes by on her group’s Facebook page without women complaining about trainers who aren’t helping them learn how to drive, or who are creating dangerous conditions for them on the road. One woman, Memory Collins, told me that she was so exhausted from a lack of sleep two days into training that she felt unsafe driving. She pulled off the highway only to find there was no place to safely stop. She woke her sleeping trainer, who helped her get back on the highway, but a week later, the company told her she’d hit a car while trying to turn around and fired her. When she called other companies to try to get hired, she was told she was too much of a liability. “You have some people who come out of training and know how to drive, others come out of training not prepared, and know they’re not prepared, and just hope they’ll be ok,” says Elaina Stanford, a truck driver who came up training through a big company. Truck driver training has been turned into a “profit center” for some big companies, says Viscelli, the sociologist. Some people training to become truck drivers get federal workforce development money to pay for their tuition, which saves companies having to cover training costs. Then, the companies pay the newly licensed drivers beginner rates, and when they quit because of the miserable conditions, the cycle is repeated. “They have figured out how to make that inexperienced, unsafe labor profitable,” Viscelli says, of the trucking companies. In 2020, local workforce boards in California invested $11.7 million of federal money on truck driver training schools, five times what they spent the year before. An effort to improve training The Biden administration says it is trying to improve training. Its Trucking Action Plan, announced in mid-December, launched a 90-day program that aims to work with carriers to create more registered apprenticeships in trucking. It’s also specifically focusing on recruiting veterans into trucking. Registered apprenticeships are the gold standard for workforce training and could improve trucker training, says Brent Parton, a senior advisor at the Labor Department overseeing the program. With a registered apprenticeship, would-be truckers get a guarantee that a trucking company will pay for their CDL and for on-the-road training, and that they will commit to certain wage increases over time. These type programs do exist in trucking, mostly set up by unions like the Teamsters who still can guarantee good jobs in trucking. The Teamsters have a program that holds truck driver training on military installations, taking six weeks to help drivers get a CDL and learn to drive on the road. They get union jobs with ABF Freight after they’ve completed the program, making more money than most entry-level drivers. Andrew Hetherington for TIMEOwner-operator Brita Nowak outside Atlanta, GA, on February 5th 2022. But most trucking companies don’t have the time or money to invest in extensive training. The concern among advocates is that the new apprenticeships, including the program to license 18-to-21-year olds to drive interstate commerce, will be akin to slapping a new label on the subpar training that exists. “We’re hoping this isn’t a title for what we’re already doing,” Pugh, of OOIDA said. The White House says its new program will be different, and that this is the first step in creating trucking jobs that people will want to keep for life. But advocates already have doubts. One of the first companies that signed up to work with the White House on its registered apprenticeships was CRST. In the last two years, it’s agreed to pay out at least $17 million in settlements over lawsuits filed against it for wage theft and incidents that occurred while training people who wanted to become truckers......»»

Category: topSource: timeFeb 7th, 2022

The Problem With How We Train Truckers

New training guidelines years in the making lack a major safety component: minimum behind-the-wheel training time for truckers, despite an increase in fatal crashes involving big-rigs In most states, aspiring barbers have to spend 1,000 hours or more in training before they get a license. To drive a 40,000-pound truck, though, there’s no minimum behind-the-wheel driving time required, no proof of ability to navigate through mountains, snow, or rain. There’s just a medical exam, a multiple-choice written exam, and a brief driving test—which in some states can be administered by the school that drivers paid to train them. As trucking companies hustle to hire more drivers in response to supply chain issues, though, the roads could be getting more dangerous—and there were 4,895 people killed in crashes involving large trucks in 2020, 33% more than in the 3,686 fatalities in 2010. In the coming months, the minimum age to be licensed to drive commercial trucks interstate will drop from 21 to 18 for thousands of drivers as part of a pilot program announced by the Biden administration. And on Feb. 7, standards for driver training that have been in the works for three decades were set to finally go into effect, but they don’t include a critical component: a minimum number of hours of behind-the-wheel training. [time-brightcove not-tgx=”true”] “We don’t want to do the hard things in this industry, which is spending extra money, taking extra time to train people to safely operate trucks,” says Lewie Pugh, who owned and operated a truck for 22 years and is now executive vice president of the Owner-Operator Independent Drivers Assn. His association has long pushed for higher training standards, which they say would help the high-turnover industry retain workers. The ramifications of sending inexperienced drivers on the road are evident in the fiery crashes along the nation’s highways that kill people in smaller vehicles and tie up traffic for hours. In April 2019, four people were killed in Colorado when Rogel Aguilera-Mederos, who had little experience driving on mountainous terrain, lost control of his truck. Aguilera-Mederos, who was 23 at the time, had earned his commercial driver’s license in Texas and was heading to Wyoming when his brakes failed coming down a mountain on I-70. Aguilera-Mederos was sentenced to 110 years in prison for vehicular manslaughter, later reduced to 10 years by the Colorado governor. But the responsibility shouldn’t only lie on the driver’s shoulders, argues his lawyer, James Colgan. “My client never received any formal training in mountain passes and how to deal with them,” Colgan told me. The trucking company “let this inexperienced driver take a mountain pass—they actually encouraged it.”   David Zalubowski—APWorkers clear debris from Interstate 70 on April 26, 2019, in Lakewood, Colo., following a deadly pileup involving a semi-truck hauling lumber. The truck driver who was convicted of causing the fiery pileup that killed four people said he had no experience navigating mountain roads; his 110-year sentence was later reduced to 10 years. The trucking company that hired Aguilera-Mederos, Castellano 03 Trucking LLC, has since gone out of business and was not held accountable in the case. Aguilera-Mederos had only earned his commercial driver’s license 11 months before the crash, and his regular driver’s license two years before that, according to court transcripts. He had been working for Castellano 03 Trucking for three weeks when he found himself barreling down a mountain at 80 m.p.h. with a 75,000-pound load and no brakes. “I held the steering wheel tight and that’s when I thought I was going to die,” he told investigators. Why There Aren’t Training Rules Now Concerned with a high level of truck driver crashes, Congress in 1991 ordered the Federal Highway Administration to create training requirements for new drivers of commercial vehicles. Highway safety advocates sued after no requirements had been created by 2002, but after a number of court cases, there were still no driving training requirements by 2012, when MAP-21, a law passed by Congress, mandated new standards.. In 2014, the Federal Motor Carrier Safety Administration—the FHA’s successor agency— brought together a committee to negotiate guidance for minimum training requirements. The panel came up with a long list of recommendations, including at least 30 hours training behind the wheel and some amount of time driving on a public road. The behind-the-wheel rules were a stipulation that only two members of the 25-member committee opposed. Both represented lobbying groups for the trucking industry, which argued that there was no scientific evidence showing that behind-the-wheel training led to safer drivers, says Peter Kurdock, general counsel for the Advocates for Highway and Auto Safety, who was on the committee. One major carrier, Schneider, which supported minimum behind-the-wheel training , said it “often” encountered newly-licensed drivers who had never operated a commercial motor vehicle on a highway or interstate. But when the final rules were released in 2016, a minimum number of behind-the-wheel hours had been dropped. The agency said it was not able to find data that proved the value of such training and that it was important to avoid imposing extra training costs on proficient drivers. (In the same document, the agency acknowledged that 38% of commercial motor vehicle drivers said they did not receive adequate entry-level training to safely drive a truck under all road and weather conditions, according to a 2015 survey from the National Institute for Occupational Safety and Health.) “That is some of the most invaluable experience that a new truck driver learns—sitting behind the wheel with someone who is an experienced driver saying, ‘This is about to happen. This is how you avoid this critical safety situation,’” Kurdock says. “We feel it’s a significant failing of the rule.” People seeing a commercial pilot’s license, by contrast, have to have at least 250 hours of flight time; if they want to work for passenger airlines, they have to have 1,500 hours of flight time. The advisory committee’s recommendations, originally scheduled to take effect in 2020, were delayed and now are due to begin Feb. 7, 2022. They create a training-provider registry and require would-be drivers to sign up with a school that is on the registry. But to be listed on the registry, schools are allowed to self-certify that they qualify. “What’s actually changing?” the American Trucking Association asks, on a section of its website devoted to the new regulations. “For organizations that have a structured program in place today, the truth is – not much.” Colgan, the lawyer, says more stringent training would skewer the economics of trucking, which ensures that the company that can charge the cheapest rates often gets the business. “It comes down to the almighty dollar—if you required truckers to be trained like that, it would slow everything down,” he says. The American Trucking Assn. did not return calls requesting comment for this story. If anything, there’s a push to speed things up in the trucking industry as supply chain issues create demand for more drivers to haul more stuff. On Feb. 2, the FMCSA said it would allow trucking schools in all states to administer the written portion of CDL tests for drivers, in addition to the driving test, a reversal of previous guidance, which could get new drivers on the roads faster. In November 2021, 11 Republican Senators asked the FMCSA to let 18-year-olds obtain commercial driver licenses for interstate trucking. “Inaction to grow America’s pool of truck drivers threatens to drive up shipping expenses, prolong delays, and burden already-strained consumers with additional costs,” they said in a letter. Andrew Hetherington for TIMETrucks outside Atlanta GA on February 5th 2022. Partly in response to that letter, the Infrastructure Investment and Jobs Act signed by President Biden in November 2021 ordered the Secretary of Transportation to create a pilot apprenticeship program for 18-to-20 year-olds within 60 days. “Segments of the trucking industry have been pushing for teenage truckers to drive interstate for years, but the most recent supply chain challenges are being used as a way to push forward that proposal,” Cathy Chase, the president of the Advocates for Highway and Auto Safety, told me. How A Trucker Learns The problems with training aren’t just about a lack of standards. The first year that people spend driving a truck usually consists of long weeks on the road making low wages, a far cry from the six-figure salary and independent lifestyle pitched to new students. Many drivers who get their commercial driver’s license (CDL) drop out once they get a taste of that life. Over the course of four years, only 20% of the 25,796 drivers who started with CRST, a carrier that promised free training and a job afterward, actually finished the training and started driving independently, according to a class-action lawsuit filed in Massachusetts over the company’s debt collection practices. (CRST agreed to pay $12.5 million to settle the lawsuit, but a former CRST driver has objected to the settlement and is still pursuing claims against the company.) “What our current system of training does is it throws people into the deep end with no support into the absolute worst and toughest and most dangerous jobs and just burns them out,” says Steve Viscelli, a sociologist and the author of The Big Rig: Trucking and the Decline of the American Dream. Because new drivers are so expensive to insure, most get trained at big, long-haul trucking companies that are self-insured. These companies recruit would-be drivers by offering to pay for them to get their CDLs in exchange for a promise to work for the company once they’re licensed. Obtaining a CDL takes a few weeks. Only after that do most newly licensed drivers spend significant time on the road, when they’re paired with more experienced drivers who are supposed to show them the ropes. This saves the companies money, because federal regulations stipulate that truck drivers can only drive 11 hours straight after 10 hours off. Putting two drivers together lets one take the wheel while the other sleeps in the truck and enables companies to move freight in half the time it would take a solo driver. In addition, newly licensed drivers are paid cents per mile to haul the loads, providing a major source of cheap labor. But the system means that new drivers are spending weeks sharing a truck with a stranger who has the upper hand in their relationship and the power to hurt their job prospects, because the trainer tells the company if the trainee is ready to drive on their own. Often, one person sleeps while the other drives, dimming prospects for the student to actually learn from the trainer, even though the trainer gets a few extra cents per mile to accompany a trainee. Some trainers barely have any more experience than the students. This is done in tens of thousands of trucks across the country, and horror stories abound. Kay Crawford, a 25-year-old who signed up to become a truck driver during the pandemic after getting sick of the low pay and danger of being a sheriff’s deputy, says she was sexually harassed numerous times by her trainers. One kept telling her he needed a woman and propositioned her; another refused to meet her anywhere but her hotel room. The company did nothing once she reported the incidents. The training coordinator said, ‘I got you work, you’re not accepting it, and I have 14 other students I need to get in a truck,’” she told me. After three separate bad experiences with trainers, Crawford decided to give up on trucking. She’s still hounded by the school, which says she owes it $6,000, despite her sexual harassment claims. “At that point, trucking pretty much disgusted me,” she said. Despite having her CDL, she can’t get a new job because she’s not insurable without long-haul trucking experience, she said. Her experience isn’t uncommon. One CRST student alleged that her trainer raped her in the cab of her truck and the company then billed her $9,000 for student driver training; company employees testified that CRST only considered sexual assault claims to be valid if they were corroborated by a third party or recorded. The case, Jane Doe v. CRST, was settled last year and though CRST agreed to pay $5 million, it did not admit wrongdoing. Despite dozens of legal battles like that one, training has changed little in decades. (There is now a second Jane Doe v. CRST complaint making its way through the courts, filed by another woman who said she was sexually assaulted by her trainer.) Brita Nowak, a longtime truck driver, said that her trainer hit and slapped her when she was learning on the road with a big carrier two decades ago; when she reported him, “they called me a pill,” and asked for proof of her assault, she said. She didn’t have any proof and had to put up with the abuse until her trainer hit an overpass and damaged the truck; then, she says, the company switched her to another trainer. Andrew Hetherington for TIMEOwner-operator Brita Nowak outside Atlanta, GA, on February 5th 2022. Even some people who have good trainers say that they earn less than the minimum wage in their first year of trucking, which makes the sacrifices of being so far from family for long periods of time hard to bear. Crawford said she never made more than $500 a week; even in training, she spent long unpaid hours waiting to load or unload. The Massachusetts lawsuit against CRST alleged that new drivers made between $0 an hour and $7.19 per hour between 2014 and 2015 because CRST deducted money from their paychecks for housing, physical exams, drug tests, and training reimbursement. “These are bad companies, I wouldn’t send my worst enemy to them,” says Desiree Wood, the founder and president of REAL Women in Trucking, which advocates for better standards for drivers. CRST did not respond to a request for comment. Hardly a week goes by on her group’s Facebook page without women complaining about trainers who aren’t helping them learn how to drive, or who are creating dangerous conditions for them on the road. One woman, Memory Collins, told me that she was so exhausted from a lack of sleep two days into training that she felt unsafe driving. She pulled off the highway only to find there was no place to safely stop. She woke her sleeping trainer, who helped her get back on the highway, but a week later, the company told her she’d hit a car while trying to turn around and fired her. When she called other companies to try to get hired, she was told she was too much of a liability. “You have some people who come out of training and know how to drive, others come out of training not prepared, and know they’re not prepared, and just hope they’ll be ok,” says Elaina Stanford, a truck driver who came up training through a big company. Truck driver training has been turned into a “profit center” for some big companies, says Viscelli, the sociologist. Some people training to become truck drivers get federal workforce development money to pay for their tuition, which saves companies having to cover training costs. Then, the companies pay the newly licensed drivers beginner rates, and when they quit because of the miserable conditions, the cycle is repeated. “They have figured out how to make that inexperienced, unsafe labor profitable,” Viscelli says, of the trucking companies. In 2020, local workforce boards in California invested $11.7 million of federal money on truck driver training schools, five times what they spent the year before. An effort to improve training The Biden administration says it is trying to improve training. Its Trucking Action Plan, announced in mid-December, launched a 90-day program that aims to work with carriers to create more registered apprenticeships in trucking. It’s also specifically focusing on recruiting veterans into trucking. Registered apprenticeships are the gold standard for workforce training and could improve trucker training, says Brent Parton, a senior advisor at the Labor Department overseeing the program. With a registered apprenticeship, would-be truckers get a guarantee that a trucking company will pay for their CDL and for on-the-road training, and that they will commit to certain wage increases over time. These type programs do exist in trucking, mostly set up by unions like the Teamsters who still can guarantee good jobs in trucking. The Teamsters have a program that holds truck driver training on military installations, taking six weeks to help drivers get a CDL and learn to drive on the road. They get union jobs with ABF Freight after they’ve completed the program, making more money than most entry-level drivers. Andrew Hetherington for TIMEOwner-operator Brita Nowak outside Atlanta, GA, on February 5th 2022. But most trucking companies don’t have the time or money to invest in extensive training. The concern among advocates is that the new apprenticeships, including the program to license 18-to-21-year olds to drive interstate commerce, will be akin to slapping a new label on the subpar training that exists. “We’re hoping this isn’t a title for what we’re already doing,” Pugh, of OOIDA said. The White House says its new program will be different, and that this is the first step in creating trucking jobs that people will want to keep for life. But advocates already have doubts. One of the first companies that signed up to work with the White House on its registered apprenticeships was CRST. In the last two years, it’s agreed to pay out at least $17 million in settlements over lawsuits filed against it for wage theft and incidents that occurred while training people who wanted to become truckers......»»

Category: topSource: timeFeb 7th, 2022

Top 10 Themes For 2022: Part 2

Top 10 Themes For 2022: Part 2 Picking up where we left off with the first five of Deutsche Bank's Top 10 Themes For 2022, here is Part 2 of what the bank thinks will be the biggest themes of the coming year. Themes covered include i) Antitrust (or competition) renaissance; ii) The end of free money in stock markets; iii) Space: a worrying geopolitical frontier; iv) Central Bank Digital Currencies: Growing into reality and v) ESG bonds go mainstream. (click here for Part 1 which covers the following themes 1) An overheating economy; 2) Covid optimism; 3) A hypersonic labor market and inflation; 4) Corporate focus on asset efficiency; 5). Inventory glut. ) * * * 6. Antitrust (or competition) renaissance, by Luke Templeman Like it or not, US companies will likely face tougher competition in 2022. The rest of the western world is likely to follow suit. An executive order issued by President Biden in July argued that over the last several decades, “competition has weakened in too many markets”. It blamed this for widening racial, income, and wealth inequalities, as well as suppressing worker power. A “whole-of-government” effort was promised on 72 initiatives. That followed just months after the chair of the Federal Trade Commission was given to Lina Khan who is known for her work on anti-trust and competition issues. If Biden’s initiatives have teeth, companies may be about to witness a sharp reversal of the trend towards less competition seen over the past few decades. The following charts show just two indicators that life has become more difficult for new companies in the US. The result of diluted competition is that corporate profit margins have grown. Last quarter’s results showed that profit margins in S&P 500 companies have hit multi-decade highs (despite covid) and have almost doubled to 11.2 per cent (on a four-quarter rolling basis). That has helped corporate earnings comfortably outpace GDP over the last two decades. Of course, falling costs of labor and capital over the last few decades have helped boost profits. But in a textbook competitive market, these advantages should be competed out and/or passed onto customers. The tighter competition has been, in part, due to consolidation after rule changes in the 1980s gave corporates the confidence to ramp-up mergers and acquisitions. Hence a lower number of large firms in many markets. For instance, only a handful of mobile carriers and airlines compared with their numbers 20 years ago. Meanwhile, there is an open-ended question of whether some large technology groups stifle or promote competition. Some argue that scale delivers cheap goods to customers; other say it reduces innovation and the incentive to spend on capex and workers. Regardless of the reason for less competition, Biden appears to have the political will to boost it. And this desire will be undergirded by the will of workers. Post-covid, many workers, particularly low paid staff, have significantly greater bargaining power. As a result, long-standing discontent with wages lagging profits are morphing into action. Large firms, including Amazon, Disney, and McDonald's, have all given pay rises since covid. So, with political will at the top supported by worker power at the bottom, the companies stuck in the middle should expect that 2022 will usher in an era of greater competition, an easier time for new entrants, and more hurdles to mega-acquisitions. It could mean that companies come to see high profit margins as an anomaly rather than the norm. * * * 7. The end of free money in stock markets, Luke Templeman “Will the stock market crash in 2022 as the Fed tapers and likely raises rates?” While many investors fret over this question, the forgotten theme that may accompany the end of free money is not whether stock markets will crash. Rather, it is how investors may be forced, for the first time in a decade, to consider how the end of free money may reorder equity markets on the inside. The end of stimulus is certain to slow the money flow into equity markets. And if rising interest rates push bond yields higher, investors will have options elsewhere in bond markets and other rate-sensitive investments that have been ignored in recent years. As investments aside from equities become more appealing, frustrated active asset managers may finally witness the return of fundamental investing. Equity markets will be shocked by the return of fundamentals. After all, in the era of free money, many frustrated ‘value’ managers have given up. The following charts show that as markets recovered from the financial crisis, traditional ‘value’ investing became very difficult. The reason for the underperformance of ‘value’ is not simply explained by the outperformance of technology ‘growth’ stocks. It is also because the financial crisis catalyzed the era of super-cheap money. A significant proportion of this poured into equity markets, much through passive funds which bought the index. As a result, all stocks began to move in similar ways regardless of the profitability of the underlying companies. The following chart shows that between the 2008 financial crisis and covid, the dispersion (or spread) of stock returns disconnected from the dispersion of returns on equity. In other words, even though corporate profits were more different, their stock prices remained similar. Since covid, stock markets have flirted with the idea of once again discriminating between companies with strong and weak profitability. But the stimulus-fuelled rally has largely ended that. Investors are, once again, simply throwing their money at the entire stock market, particularly in passive funds. In 2022, as equity markets lose the flood of money that has propped up all stocks over the last decade, investors may be forced to become more discerning. There are signs this is beginning to happen. Postcovid, the dispersion of returns is higher than it has been in almost a decade. Accelerating the return of fundamentalism could be a tightening in business conditions. Wage pressure, exposure to ESG issues, and the Biden administration’s desire to increase competition, will likely have a disproportionate effect on poor quality companies that investors have hitherto propped up. That will further highlight the gap to market values and widen the differences between companies. None of this means overall equity markets will crash. Rather, it may lead to a reordering within equity markets as we witness the return of fundamental value investing. Finally, active managers may be back in vogue. * * * 8. Space: a worrying geopolitical frontier, Galina Pozdnyakova Against the backdrop of rising geo-political tensions between several countries, 2022 is shaping up to be the year when tensions over the potential for the militarization of space become a top geo-political negotiation topic. The problem is that most parties have an incentive to avoid agreeing on new rules. Many would rather keep space as a ‘wild west’. Of course, several countries have national space laws, and international treaties such as the Outer Space Treaty of 1967 are in place. Yet they do not adequately govern modern weaponisation of space technologies. And with no consensus over boundaries and control over space objects, and blurred lines between defence and weapons systems, the risk of conflict is rising. The reality of the military threat in space will be amplified in 2022 as politicians digest recent high-profile events. The Russian ASAT test in November showed that the country can take down satellites – an ability also demonstrated by the US (2008), China (2007) and India (2019). Meanwhile, France recently became the fourth country to launch electromagnetic-monitoring military satellites, following the US,  China, and Russia. The importance of space has surged in the past few years as falling launch costs have led to an increased number of satellites in orbit and, thus, and increased dependence upon them. Aside from military uses, future conflicts will certainly target communications, GPS, and finance applications that all rely on satellites. Countries have quickly taken the military risks of space more seriously. Over autumn, QUAD leaders agreed to finalize “Space Situational Awareness Memorandum of Understanding” this year. Separately, the UK pushed a resolution on “threatening and irresponsible space behaviours” which passed the first stage at the UN and will be reviewed in December. Responding to the threats, new military space divisions have popped up over the last two years. Japan’s Space Operations Squadron and the UK’s Space Command were both created since 2020. They follow the creation of China’s Strategic Support Force in 2015, and the US Space Force in 2019. The latter will receive a 13 per cent budget increase in 2022. The 2022 completion of the Chinese space station, Tiangong, will also mark a shift in soft space power. It will increase China’s scientific research capabilities and its collaboration with other countries. The station’s advanced technologies and equipment, as well as modular design, will allow for multiple use cases. Meanwhile, the International Space Station is only approved to operate until 2024. So 2022 will likely be the year where space becomes the next frontier of an arms race between key global powers. Layering these issues on top of existing geopolitical tensions will create an unusual situation for world leaders. Everyone wants everyone else to play by the rules. Yet the rules of space are antiquated and there is a heavy incentive for most powers to avoid cementing new ones. The tensions above the Earth appear set to amplify tensions on it. Space threats are already becoming a topic of geo-political negotiation and, in 2022, they will likely become front-and-center. * * * 9. Central Bank Digital Currencies: Growing into reality, Marion Laboure There is a clear move towards a cashless society (as a mean of payment) and CBDCs is set to progressively replace cash. The question is no longer « if » but « when » and « how ». Today, 86 per cent of central banks are developing a CBDC; 60 per cent are experimenting at the proof-of-concept stage. Central banks representing about a fifth of the world’s population are likely to issue a general purpose CBDC in the next two years. We believe that a large majority of countries will have a CBDC live in the next five to six years. Emerging economies will lead the race. They will move quicker and with higher adoption than advanced economies. The Bahamas and the Eastern Caribbean are live; China will be live in February 2022. In five years, many emerging economies will have moved; including many Asian countries. The ECB/Fed will soon start piloting projects and, if successful, are expected to be live around 2025-26. The main barriers for advanced economies are: cultural/privacy; low interest rates; older demography, heavily reliance on cards. A CBDC itself is not going to rebalance the international order between the US and China. But this is the Chinese global, 360 strategy with very advanced payments technologies which is creating an advantage to pay in their currencies and will continue to gain market share. China benefits from advanced payments systems (especially settlement technologies) that could change the deal and attract merchants and vendors to use this new, more efficient currency. The Chinese government has made tremendous efforts to internationalize the renminbi, like the US intervention in the early twentieth century. China aims to become a world leader in science and innovation by 2050. China is also massively investing in advanced technologies and is currently the second largest investor in artificial intelligence enterprises after the US. Indeed, China appears on track to have an “AI ecosystem” built by 2030. * * * 10. ESG bonds go mainstream, Luke Templeman Amongst the many themes turbocharged by the covid catalyst, ESG bond issuance is one of the most prominent. In 2022, ESG bond issuance is set to go mainstream. Investors have taken notice. In fact, the holdings of ESG bond exchange-traded funds have tripled to over $45bn since the covid outbreak. As the chart below shows, that surge of interest follows years of very little growth. The growth of ESG bonds appears to have breached a tipping point. Not just because investors are keen to hold ESG debt, but also because corporates see that ESG issues now affect their business and investment risk. Indeed, in our recent survey, 19 per cent of corporate debt issuers say that over the last 12 months, environmental factors have impacted their rating. A smaller, but still material proportion, report that social and governance factors have had an impact. Now that there is a firm nexus between ESG issues and business risk, ESG instruments (primarily bonds) have become a gateway through which corporates begin to address their impact on problems like climate change. Since early last year, over half of corporates have either offered their first ESG instrument or are currently preparing to do so. Some of the strongest issuance in 2022 will likely be of sustainability-linked bonds. These bonds, which have quickly become very popular, generally offer corporates an interest rate discount if they hit certain ESG targets. From a base of close to zero two years ago, sustainability-linked bonds have comprised up to half the ESG bond issuance in the second half of 2021. Investors have quickly fallen in love with sustainability-linked bonds. Just over half of investors say these types of bonds are the most promising instrument out of a pool of ESG assets. That is over double the next highest response, which is European green bonds, with 21 per cent. Driving sustainability-linked bonds is the sudden growth in the number of businesses that publish quantifiable ESG performance targets. Indeed, a third of corporate debt issuers have already started to do so since 2020. A further 21 per cent will begin publishing in the next 12 months and that will leave only 6 per cent without any plans to do so. Aside from investor demand and published corporate targets that have laid the platform for the growth of sustainability-linked bonds in 2022, corporates have discovered the ‘signalling’ benefits. Just over 60 per cent of companies in our survey said the main benefit of their company’s ESG instrument was that it “enables us to convey our sustainability strategy”. A further 22 per cent say these instruments expand their investor base. Meanwhile, half say there are pricing benefits. Definitions on how to do ESG investing ‘well’ differ given the breath-taking pace at which it is evolving. Regardless, corporates and investors have now created the market for ESG bonds. With companies starting to publish specific ESG targets, it seems inevitable that in 2022 there will be a surge in issuance from corporates and strong appetite from investors. Tyler Durden Thu, 12/23/2021 - 16:50.....»»

Category: blogSource: zerohedgeDec 23rd, 2021

Futures Drift Lower In Illiquid Session As Virus Fears Resurface

Futures Drift Lower In Illiquid Session As Virus Fears Resurface After three days of torrid gains, US futures and European markets fell as concerns about economic risks from restrictions to control the new variant outweighed optimism about the efficacy of vaccines after a study from Japan found that the omicron variant is 4.2 times more transmissible (as largely expected) in its early stage than delta. Both S&P 500 and Nasdaq futures dropped around -0.4% as traders awaited earnings from Broadcom, Oracle and Costco after the market close and tomorrow's key CPI print, while European equities drifted lower in quiet trade with little fresh news flow to drive price action. Uncertainty about monetary policy could keep stocks “significantly volatile,” according to Pierre Veyret, a technical analyst at ActivTrades in London. “Investors are likely to remain cautious and keep on monitoring the macro outlook, especially today’s U.S. initial jobless claims, in order to gather more clues on what and when could be the Fed’s next move,” said Veyret. In Asia, China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt, while the People’s Bank of China raised its foreign currency reserve requirement ratio for a second time this year after the yuan climbed to the highest since 2018. Among individual moves, CVS Health Corp. jumped in pre-market trading after saying it would buy back shares and raise dividends. Drugmakers including Pfizer rose, while travel companies and airlines declined. European stocks erased gains of as much as 0.3% with the Stoxx 600 trading -0.1% in the red as investors weigh new economic restrictions prompted by the omicron variant against earlier optimism. The real estate subgroup was best performer, up 0.7%; energy company shares lead declines with a drop of 1.2%. The Euro Stoxx 50 is down 0.25%, reversing a modest push into the green at the open. Other cash indexes trade either side of flat. Oil & gas and retail names are the weakest sectors. UniCredit SpA rose after saying it will return at least 16 billion euros ($18.1 billion) to shareholders by 2024. Meanwhile, Electricite de France SA fell with the government considering a cap on regulated power tariffs to help curb soaring electricity prices. Here are some of the biggest European movers today: LPP shares rose as much as 12% after its 3Q earnings beat expectations. The figures confirm a rebound of sales in traditional stores and stronger margins, according to analysts. UniCredit shares gain as much as 8.4%, the most since November 2020, after the Italian lender unveiled its new strategic plan that includes the distribution of at least EU16b to shareholders by 2024. Société Marseillaise du Tunnel Prado Carénage (SMTPC) shares rise as much as 5.5% after Vinci Concessions and Eiffage said they reached a pact to act in concert for a tender offer at EU27/share. Zur Rose drops as much as 7.3% in Zurich after an offering of 650,000 shares priced at CHF290 apiece, representing a 12% discount to the last close. Neste Oyj shares slid as much as 5.7% as investors digested the unexpected resignation of Chief Executive Officer Peter Vanacker from the helm of the world’s biggest maker of renewable diesel. FirstGroup shares fall as much as 5.9% after 1H results, with Chairman David Martin saying the U.K.’s work-from- home edict will “clearly have an impact” on commuter trips. There are potential downside risks to estimates in the short term, if Covid restrictions tighten, according to Liberum (buy). Dr. Martens released solid 1H results, but there’s “nothing material to flag” and unlikely to be upgrades to FY Ebitda estimates, Morgan Stanley says in a note. Shares drop as much as 5.2% after initially gaining 8.9%. Electricite de France shares fall as much as 5.1% after Le Figaro said the French government is considering taking additional steps to keep electricity prices from rising too much amid a spike in energy costs. The global equity rally will be tested as traders expect volatility until there’s more clarity on omicron’s threat to the economy, and ahead of U.S. consumer inflation numbers this week and a Federal Reserve meeting next week that may provide clues on the pace of tapering and interest rate increases. “We are looking to potentially have a rise in volatility even if the market continues higher around those events next week,” said Frances Stacy, Optimal Capital portfolio strategist, on Bloomberg Television. “Many of the catalysts that gave us this boom out of Covid are slowing. And then you have the Fed potentially tapering into a decelerating economy.” Geopolitical tensions are also adding to investor concerns. Germany’s new foreign minister Annalena Baerbock doubled down on warnings from western politicians to Russia over Ukraine, saying that Moscow would pay a high price if it went ahead with an invasion of its neighbor. Separately, the U.S. said it will place SenseTime Group Inc. on an investment blacklist Friday, accusing the artificial intelligence startup of enabling human rights abuses. That’s after the U.S. House of Representatives on Wednesday passed legislation designed to punish China for its treatment of Uyghur Muslims in the country’s Xinjiang province. Asian stocks rose for a third day as investors reassessed concerns over the new virus strain and factored in the possibility that the Federal Reserve will accelerate the end of its quantitative easing.  The MSCI Asia Pacific Index added as much as 0.5%, extending its advance since Tuesday to almost 3%. Information technology and communication services were the sectors providing the biggest support to the climb, with benchmarks in China and Hong Kong among the region’s best performers. The CSI 300 Index gained 1.7% as consumer stocks rallied.   “The market had been initially wary of the Fed’s hawkish tilt in their stance, and a change in how they view inflation, but investors don’t seem too worried about it anymore,” said Tetsuo Seshimo, a fund manager at Saison Asset Management Co. “But this isn’t a theme that’s going away in the short term.”  Asia’s benchmark headed for its highest since Nov. 25, set to erase losses since the omicron variant was detected during the U.S. Thanksgiving holidays, but still in negative territory for 2021. The S&P 500 Index is up 25% this year, after gaining Wednesday on announcements by Pfizer Inc. and BioNTech SE that early lab studies showed a third dose of their Covid-19 vaccine neutralizes the omicron variant. “Funds are flowing into growth stocks with high estimated profit growth and ROE levels, a continuation of moves seen from yesterday,” said Takashi Ito, an equity market strategist at Nomura Securities in Tokyo. “But there could be some profit taking after the market rose for a few consecutive sessions.” Japanese stocks fell, cooling off after a two-day rally as investors weighed the potential impact of the omicron variant on the global economy. Electronics and auto makers were the biggest drags on the Topix, which fell 0.6%. Fanuc and Tokyo Electron were the largest contributors to a 0.5% loss in the Nikkei 225 Indian stocks ended higher, after swinging between gains and losses several times through the session, as traders shifted their focus to key economic data globally and at home in the days ahead.  The S&P BSE Sensex rose 0.3% to close at 58,807.13 in Mumbai, after falling as much as 0.5% earlier in the day. The gauge has gained 3.6% in the last three sessions, its biggest three-day advance in over a seven-month period, on optimism the economic recovery will be resilient despite the spread of the new Covid variant, with the RBI continuing its policy support intact.  The NSE Nifty 50 Index also advanced by similar magnitude on Thursday. Reliance Industries Ltd. contributed the most to the Sensex gain, rising 1.6%. Out of 30 shares in the Sensex index, equal number of stocks rose and fell. Fifteen of 19 sectoral indexes compiled by BSE Ltd. gained, led by a gauge of capital goods companies. The Reserve Bank of India kept borrowing costs at a record-low on Wednesday and voted 5-1 to retain its accommodative policy stance for as long as is necessary, reflecting its bias to support economic growth. The RBI expects the economy to expand 9.5% expansion in the year ending March, one of the fastest paces among the major growing world economies.  Markets’ focus will now shift to U.S. inflation data this week and a Federal Reserve meeting next week, which may provide clues on the pace of tapering and policy tightening. India will release its factory output data on Friday and consumer-price inflation on Monday.  “All eyes will be on crucial macro data (CPI & IIP) outcome which may further provide some direction to the markets,” Ajit Mishra, vice-president research at Religare Broking Ltd., wrote in a note. “The focus will remain on the global cues and updates regarding the new variant. We reiterate our cautious yet positive stance on the markets and suggest traders to focus on managing risk.” Australian stocks edged lower as miners, consumer shares retreated. The S&P/ASX 200 Index fell 0.3% to close at 7,384.50, snapping a four-day winning streak. Miners and consumer discretionary shares contributed the most to the benchmark’s decline. Redbubble was the worst performer, dropping the most since Oct. 14. Sydney Airport was among the top performers after regulators cleared a proposed takeover of the company. The stock also joined a global rally in travel shares after Pfizer and BioNTech said initial lab studies show a third dose of their Covid-19 vaccine may be effective at neutralizing the omicron variant. In New Zealand, the S&P/NZX 50 index fell 0.8% to 12,771.83 In rates, Treasury yields were mostly lower, led by the long end of the curve, while underperforming German bunds. 10Y TSY yields are lower by ~2bp at 1.4973%, trailing declines of 3bp-5bp for most European 10-year yields but remaining above 200-DMA, which it closed above Wednesday for first time since Nov. 29. Treasury futures trade near session highs, with cash yields lower by 3bp-4bp from the 5-year sector to the long end, inside Wednesday’s bear-steepening ranges. European bond markets lead the move, led by Ireland which cut 2022 issuance plans, as virus concerns weighed on most equity markets. U.S. auction cycle concludes with $22b 30-year reopening at 1pm ET, following two Fed purchase operations. Wednesday’s 10Y reopening auction drew 1.518%, tailing by about 0.4bp; Tuesday’s 3Y, which drew 1.000%, also trades at a profit, yielding 0.989% The WI 30Y yield 1.865% is below auction stops since January as sector has benefited from expectations that Fed rate increases beginning next year may strain the economy, as well as from strong equity-market performance driving increased allocation to bonds In FX, the Bloomberg Dollar Spot Index resumed its ascent, climbing 0.2% as the dollar advanced versus all Group-of-10 peers apart from the yen. TRY and ZAR are the weakest in EMFX.  The euro retreated, nearing the $1.13 handle and after touching a one-week high yesterday. One-week volatility for euro and sterling has risen to multi-month highs, with meetings by the Federal Reserve, the European Central Bank and the Bank of England in focus. The British pound fell as Goldman Sachs Group Inc. pushed back its forecast for a U.K. rate hike and business groups called for government support after Prime Minister Boris Johnson announced restrictions to curb the spread of the variant, which Bloomberg Economics estimates could cost the economy as much as 2 billion pounds ($2.6 billion) a month. A study found omicron is 4.2 times more transmissible than the delta variant in its early stages.   The pound hovered near its lowest level in more than a year against the dollar as fresh coronavirus restrictions weighed on the U.K.’s economic outlook. Expectations that the Bank of England will raise interest rates next Thursday continue to wane, with markets pricing less than six basis points of hikes. Goldman pushed back its forecast for a U.K. rate hike and business groups called for government support after Prime Minister Boris Johnson announced restrictions to curb the spread of the variant, which Bloomberg Economics estimates could cost the economy as much as 2 billion pounds ($2.6 billion) a month. A study found omicron is 4.2 times more transmissible than the delta variant in its early stages. Norway’s krone led losses among G-10 currencies as it snapped a three-day rally that had taken it to an almost three-week high against the greenback. In commodities, Crude futures drift lower. WTI slips back near $72 having stalled near $73 during Asian trade. Brent dips 0.5%, finding support just above $75. Spot gold trades flat near $1,782/oz Looking at the day ahead now, and it’s a quiet one on the calendar, with data releases including the US weekly initial jobless claims, as well as the German trade balance for October. Market Snapshot S&P 500 futures down 0.2% to 4,691.00 STOXX Europe 600 up 0.2% to 478.52 MXAP up 0.4% to 195.63 MXAPJ up 0.7% to 638.47 Nikkei down 0.5% to 28,725.47 Topix down 0.6% to 1,990.79 Hang Seng Index up 1.1% to 24,254.86 Shanghai Composite up 1.0% to 3,673.04 Sensex up 0.3% to 58,839.03 Australia S&P/ASX 200 down 0.3% to 7,384.46 Kospi up 0.9% to 3,029.57 Brent Futures down 0.3% to $75.58/bbl Gold spot up 0.0% to $1,783.15 U.S. Dollar Index up 0.20% to 96.09 German 10Y yield little changed at -0.34% Euro down 0.2% to $1.1318 Top Overnight News from Bloomberg European Central Bank governors are to discuss a temporary increase in the Asset Purchase Program with limits on the size and time of the commitment at a Dec. 16 meeting, Reuters reports, citing six people familiar with the matter Hungary raised interest rates for a fifth time in less than a month as policy makers try to rein in the fastest inflation in 14 years. The central bank hiked the one-week deposit rate by 20 basis points on Thursday to 3.3%, broadly matching the median estimate in a Bloomberg survey China’s central bank has signaled a limit to its tolerance for the yuan’s recent advance by setting its reference rate at a weaker-than-expected level China Evergrande Group and Kaisa Group Holdings were downgraded to restricted default by Fitch Ratings, which cited missed dollar bond interest payments in Evergrande’s case and failure to repay a $400 million dollar bond in Kaisa’s. Evergrande Group’s inability to meet its obligations will be dealt with in a market-oriented way, the head of the nation’s central bank said PBOC is exploring interlinking the e-CNY, as the digital yuan is known, system into the Faster Payment System in Hong Kong, says Mu Changchun, head of the Chinese central bank’s Digital Currency Institute Money managers have shown some tentative signs that they may be willing to start buying more Chinese dollar bonds again, after demand for the securities plunged to a 27-month low in November Greece plans to early repay the total amount of IMF’s bailout loan to the country in the first quarter of 2022, Finance Minister Christos Staikouras says in a Parapolitika radio interview The omicron variant of Covid-19 is 4.2 times more transmissible in its early stage than delta, according to a study by a Japanese scientist who advises the country’s health ministry, a finding likely to confirm fears about the new strain’s contagiousness Pfizer will have data telling how well its vaccine prevents infections with the omicron variant before the end of the year A detailed look at global markets courtesy of newsquawk Asian equity markets eventually traded mixed as the early tailwinds from the US gradually waned despite the recent encouragement on the vaccine front. All major US indices were underpinned in which the S&P 500 reclaimed the 4,700 level and approached closer to its ATHs, while Apple extended on record levels and moved closer to USD 3tln valuation. The ASX 200 (-0.3%) was initially kept afloat by resilience in defensives, although upside was restricted amid weakness in tech alongside concerns of a further deterioration in ties with China after Australia’s decision to boycott the Beijing Winter Olympics. The Nikkei 225 (-0.5%) was rangebound with the Japanese benchmark stalled by resistance ahead of the 29k level, although the downside was cushioned by recent currency weakness and a modest improvement in the Business Survey Index. The Hang Seng (+1.1%) and Shanghai Comp. (+1.0%) outperformed after China’s NDRC pledged support measures to boost consumption in rural areas and with some chatter regarding the possibility of another RRR cut in Q1 next year according SGH Macro citing a senior Chinese official. Furthermore, participants digested mixed inflation data from China including firmer than expected factory gate prices. CPI Y/Y was softer than forecast but it still registered the fastest pace of increase since August last year. Finally, 10yr JGBs briefly declined below the 152.00 level following the bear steepening stateside in which T-notes tested 130.00 to the downside and following a somewhat tepid US 10yr offering in which the b/c increased from prior but remained short of the six-auction average, while the results of the 5yr JGB auction were mixed and failed to spur prices with higher accepted prices offset by a weaker b/c. Top Asian News Evergrande Declared in Default as Massive Restructuring Looms China Dollar Junk Bonds Up After Fitch Move on Kaisa, Evergrande Gold Steady as Traders Assess Virus Risk Before Inflation Data China’s Credit Growth Rebounds After Slowing for Almost a Year Stocks in Europe trade have drifted lower in recent trade, giving up the modest gains seen at the open (Euro Stoxx 50 -0.5%, Stoxx 600 -0.2%), and following the mixed lead from APAC and amidst a lack of fresh fundamental catalysts. US equity futures are also subdued, with a relatively broad-based performance seen across the ES (-0.3%), NQ (-0.4%), YM (-0.3%) alongside some mild underperformance in the RTY (-0.6%). Markets are awaiting tomorrow’s US CPI metrics, but more importantly, are gearing up for next week’s blockbuster FOMC confab. Desks have attributed this week’s rebound to several factors working in unison, including a milder Omicron variant (thus far), Chinese policy easing, FOMO, buybacks/upbeat corporate commentary alongside the widely telegraphed hawkish Fed pivot. On the last note, it’s also worth keeping in mind that the rotating voters next year on the FOMC will be more hawkish with the addition of George, Mester and Bullard as voters, albeit some empty spots remain – namely Brainard’s spot as she takes over the Vice-Chair position. Back to Europe, sectors are mostly in the green but portray a defensive bias – with Healthcare, Telecoms, Food & Beverages and Personal & Household Goods at the top of the bunch, whilst Oil & Gas, Retail and Travel & Leisure resides on the other end of the spectrum. In terms of individual moves, UniCredit (+7.8%) shot up to the top of the Stoxx 600 after unveiling its 2024 targets – with the Co. looking to return at least EUR 16bln via dividend and buybacks between 2021-24. Sticking with banks, Deutsche Bank (-2.1%) is pressured after the US DoJ reportedly told Deutsche Bank it may have violated a criminal settlement, due to failures in alerting authorities about internal complaints at its asset management unit, according to sources. Elsewhere, AstraZeneca (+1.0%) is supported as its long-acting antibody combination received emergency use authorisation in the US for COVID-19 prevention in some individuals. Finally, Rolls-Royce (-3.7%) slipped despite an overall positive trading update. Top European News Rolls-Royce Sinks as Omicron Clouds Outlook for 2022 Comeback Harbour Energy Plans Dividend But Pushes Back Tolmount Again Toxic U.K. Tory Press Is Flashing Warning Sign for Boris Johnson Credit Suisse Chairman Horta-Osorio Broke Quarantine Rules In FX, the Greenback remains rangy amidst undulating US Treasury yields and a fluid flow of Omicron related headlines that are filling the void until this week’s main macro release arrives tomorrow in the form of CPI data. However, the index is drifting down in almost ever decreasing circles having retreated a bit further from peaks to a marginally deeper sub-96.000 trough on Wednesday, at 95.848, and forming a fractionally firmer base currently to stay within contact of the psychological level within a narrow 96.154-95.941 band, thus far. Ahead, latest jobless claims updates and the last refunding leg comprising Usd 22 bn long bonds after a reasonable 10 year outing, overall. CHF/EUR/CAD - No obvious reaction to Swiss SECO forecasts even though supply bottlenecks and stricter COVID-19 measures are putting a strain on the economy internationally in winter 2021/22, according to the Government affiliated body. Similarly, ECB sources reporting that views on the GC are converging on a limited, temporary increase of the APP at December’s policy meeting, via an envelope or time specified increase with more frequent reviews, hardly impacted the Euro, as Eur/Usd remained towards the bottom of a 1.1346-16 range and Usd/Chf continued to straddle 0.9200, albeit mostly on the weaker side. Meanwhile, the Loonie has also slipped to the back of the major ranks following yesterday’s largely non BoC event against the backdrop of softer crude prices and an indifferent risk tone, with Usd/Cad hovering mainly above 1.2650 between 1.2645-80 parameters. JPY/GBP/NZD/AUD - All sticking to tight confines against their US peer, as the Yen rotates around 113.50 again and Pound pivots 1.3200 in limbo awaiting top tier UK data on Friday that might shed more light on what is gearing up to be another tight BoE rate call next week. Moreover, Usd/Jpy looks pretty well and heavily flanked by option expiry interest either side and in between its 113.81-35 extremes given large amounts running off at the NY cut - see 6.59GMT post on the Headline Feed for full details. Elsewhere, the pendulum has swung down under in favour of the hitherto underperforming Kiwi, as Nzd/Usd popped over 0.6800 and Aud/Nzd stalled ahead of 1.0550 alongside a pull back in Aud/Usd from 0.7185+ at best to test support into 0.7150 in wake of comments by RBA’s Harker and the RBNZ rebalancing its TWI. In short, the former said Australia’s economy can run hot while dodging the runaway inflation that’s plaguing much of the world, signaling monetary policy will stay ultra-loose for some time yet, while the latter culminated in a bigger Cny contribution at 27% from 23.5%. SCANDI/EM - Another day and more appreciation for the Cnh and Cny, at least in early hours, with validation via the PBoC setting a sub-6.3500 midpoint fix for the onshore Yuan vs Buck. However, the offshore then re-weakened past 6.3500 per Dollar after the Chinese central bank opted to raise the FX RRR by 2ppts - effective 15th Dec. Meanwhile, the Nok gives back after midweek gains as Brent slips with WTI to the detriment of the Rub and Mxn as well. Conversely, the Huf has a further 20 bp 1 week repo hike from the NBH to lean on and the Brl got a boost from 150 bp tightening on top of the BCB signalling the same again when COPOM delivers its next SELIC rate call. In commodities, WTI and Brent front month futures have drifted lower from their best levels printed overnight, which saw WTI Jan briefly mount USD 73.00/bbl and Brent Feb eclipse 76.50/bbl. The complex was unfazed by WSJ source reports suggesting the Biden administration is said to be moving to tighten enforcement of sanctions against Iran, whilst US officials say if there is no progress in the nuclear talks. This comes ahead of the resumption of nuclear talks today, albeit the US delegation will only travel to Vienne over the weekend. With the likelihood of an imminent deal somewhat slim, participants will be eyeing any further deterioration in relations alongside additional demand/sanctions. Aside from that, price action will likely be dictated by the overall market tone in the absence of macro catalysts. Elsewhere, reports suggested the Marathon pipeline has been shut due to a crude oil leak estimated to be around 10 barrels from the 20-inch diameter Illinois pipeline, but again the headlines failed to spur the oil complex. Over to metals, spot gold trades sideways and remains under that cluster of DMAs which today sees the 100 at 1,790/oz, 200 and 1,792.50/oz and 50 and 1,795/oz. LME copper meanwhile has been drifting lower since the end of APAC trade, but the contract remains north of USD 9,500/t. US Event Calendar 8:30am: Dec. Initial Jobless Claims, est. 220,000, prior 222,000; Continuing Claims, est. 1.91m, prior 1.96m 9:45am: Dec. Langer Consumer Comfort, prior 51.0 10am: Oct. Wholesale Inventories MoM, est. 2.2%, prior 2.2%; Wholesale Trade Sales MoM, est. 1.0%, prior 1.1% 12pm: 3Q US Household Change in Net Wor, prior $5.85t DB's Jim Reid concludes the overnight wrap On the theme of advertising, here’s a final reminder about our special monthly survey for 2022, which will be closing today at 1pm London time. We ask about rates, equities, and the path of Covid-19 in 2022, amongst other things, and also return to a festive question we asked in 2019, namely your favourite ever Christmas songs. The link is here and it’s your last chance to complete. All help filling in very much appreciated. Following the strongest 2-day equity performance so far this year, yesterday saw the rally begin to peter out amidst growing concern that another round of restrictions over the coming weeks could set back the economic recovery. Ultimately the issue from a health perspective is that even if Omicron does prove to be less severe, which the initial indications so far have pointed to, a rise in transmissibility could offset that, and ultimately mean that more people are in hospital as a much bigger number of people would actually get Covid-19, even if a lower proportion of them are severely affected. We’ll start with the good news, and one new piece of information yesterday was that Pfizer and BioNTech announced the results from an initial study showing that three doses of their vaccine neutralised the Omicron variant of Covid-19. President Biden tweeted that the new data was “encouraging” and said it reinforced the point that boosters offer the highest protection, whilst Pfizer’s chief executive said that the final verdict would be the real-world efficacy data, which they expect to see toward the end of this year. We also had an update from the EU’s ECDC, who said that of the 337 Omicron cases reported in the EU/EEA so far, all of them were either asymptomatic or mild where severity was available, and that no deaths had yet been reported. Obviously, these sample sizes aren’t big enough to come to concrete conclusions yet, but if things continue this way that’s clearly a promising sign. On the other hand, the spread of infections has continued in South Africa, and the country reported 19,482 cases, which is the highest number since Omicron was first reported. That comes as a study from a Japanese scientist advising the health ministry in Japan said that Omicron was 4.2 times more transmissible than delta in its early stage. That hasn’t been peer-reviewed yet but would certainly back up all the other indications that this is a much more transmissible variant than seen before. These growing warning signs have led governments to keep toughening up restrictions, and here in the UK, the government announced they’d be moving to “Plan B” in England, which will see the reintroduction of guidance to work from home from Monday, and an extension of face masks to most public indoor venues. They will also be making Covid-19 passes mandatory for nightclubs and venues with large crowds, though a negative test will also be sufficient. That comes as cases have continued to rise, with the 7-day average now above 48,000 and at its highest level since January. Separately in Denmark, the government said that schools would close early for the Christmas break, amongst other restrictions. Equities struggled against this backdrop, with Europe’s STOXX 600 down -0.59%, although the S&P 500 managed to pare back its earlier losses to eke out a +0.31% gain. Cyclicals underperformed, but we did see volatility continue to subside, with the VIX down to its lowest closing level since Omicron emerged, at 19.9pts. In addition, there was an outperformance from tech stocks, with the NASDAQ (+0.64%) and the FANG+ index (+0.62%) seeing solid gains. The increasing risk-off tone didn’t bother oil prices either, with Brent crude (+0.50%) and WTI (+0.43%) continuing their run of gains this week, including further gains overnight, whilst European natural gas futures (+5.86%) closed above €100 per megawatt-hour for the first time in nearly 2 months. Over in sovereign bond markets, yields moved higher on both sides of the Atlantic for the most part, with those on 10yr Treasuries up +4.8bps to 1.52%, though this morning they’re down by -1.2bps. That’s the first time they’ve closed back above 1.5% since the session just before Thanksgiving, ahead of the news emerging about the Omicron variant. In Europe, there was an even bigger sell-off, with yields on 10yr bunds (+6.3bps), OATs (+6.9bps) and BTPs (+10.4bps) all moving higher, alongside a further widening in peripheral spreads. This more mixed performance has continued overnight in Asia, with a number of indices trading higher including the CSI (+1.76%), the Shanghai Composite (+1.03%), Hang Seng (+0.89%), and the KOSPI (+0.37%). However, both the Nikkei (-0.27%) and Australia’s ASX 200 (-0.28%) lost ground. On the data front, China’s inflation numbers this morning showed that CPI rose to +2.3% year-on-year in November, slightly lower than forecast +2.5%, albeit still the highest since last August. The PPI readings remained much stronger, but did fall back from a 26-year high last month to +12.9% year-on-year (vs. +12.1% forecast). Looking ahead, futures are indicating a mixed start in the US & Europe with S&P 500 (-0.13%) and DAX (+0.12%) seeing modest moves in either direction. Overnight we also heard from President Biden on Russia, who said that he hoped to announce high-level talks by tomorrow where they would discuss Russian concerns about NATO, and that this would include at least four major NATO allies. President Biden said the meeting was an explicit attempt to “bring down the temperature along the eastern front” that’s ramped up over recent days and weeks. Nevertheless, President Biden reinforced that the US was ready to implement severe economic sanctions should Russia invade Ukraine, telling reporters that he said to Putin there would be “economic consequences like none he’s ever seen”. Back to yesterday, and the Bank of Canada kept policy on hold at their meeting, as was expected. The bank reinforced their expectation for the 2 percent inflation target to be sustainably achieved in the “middle quarters of 2022”. Like other DM central banks, they are focused on persistently elevated inflation, which they tied to supply constraints that will take some time to alleviate. We had some rate hikes elsewhere, however, yesterday with Brazil’s central bank taking rates up by 150bps to 9.25%, whilst Poland’s hiked rates by +50bps to 1.75%. The main data of note yesterday were the US job openings for October, which rose to 11.033m (vs. 10.469m expected) after 2 successive monthly declines. Notably the quits rate, which is a good indicator of labour market tightness, saw its first monthly decline since May as it came down to 2.8%, from an all-time record of 3.0%. To the day ahead now, and it’s a quiet one on the calendar, with data releases including the US weekly initial jobless claims, as well as the German trade balance for October. Tyler Durden Thu, 12/09/2021 - 07:55.....»»

Category: dealsSource: nytDec 9th, 2021

NASDAQ Jumps 2% as Tech Makes a Comeback

NASDAQ Jumps 2% as Tech Makes a Comeback SPECIAL ALERT: The November episode of the Zacks Ultimate Strategy Session is now available for viewing! Tune in to this "must-see" event when Kevin Matras, Dr. John Blank, David Bartosiak and Sheraz Mian discuss the investment landscape from several angles. Don't miss your chance to hear: ▪ Sheraz and David Agree to Disagree on the sectors best positioned to perform in 2021 and beyond ▪ Kevin discusses what investors should do now that the election is over in Zacks Mailbag ▪ Sheraz and John choose one portfolio to give feedback for improvement ▪ And much more Simply log on to Zacks.com and view the November episode here. And please let us know what you think of this format. Email all feedback to mailbag@zacks.com. The NASDAQ recouped most of its recent losses on Wednesday, as the two-day rotation out of tech paused and the Dow finally took a break. The market has been a different place since news of a vaccine that’s reportedly more than 90% effective at preventing covid. Money surged into recovery names on Monday and Tuesday. But you can’t keep tech down for long! The NASDAQ jumped 2.01% (or about 232 points) on Wednesday to 11,786.43. The index had lost nearly 3% in the previous two sessions, so it got about two-thirds of the way back. The FAANGs were all higher, led by more than 3% advances for Apple (AAPL) and Amazon (AMZN) each. Netflix (NFLX) increased more than 2% and Facebook (FB) rose 1.5%. The S&P was up 0.77% to 3572.66, but the Dow declined 0.08% (or around 23 points) to 29,397.63.   The loss ended a two-day winning run for the Dow, which may not seem too impressive until you realize that it soared just under 1100 points in those two days. The market was so impressed with the vaccine news that it focused on names set to take off once we get back to normal, such as airlines, cruise companies, hotels, etc. However, we’re not back to normal just yet. In fact, we’re still dealing with rising coronavirus cases and the threat of lockdowns. Meanwhile, you know what’s taken a backseat amid all the vaccine hopes and election results? Earnings season! And that’s too bad, because its been a pretty good ride. More than 90% of S&P companies have reported Q3 results. Over 84% of them beat earnings expectations, while more than 75% topped revenue estimates. “The earnings outlook has been steadily improving since early July, as the U.S. economy started coming out of the pandemic-driven slump,” said Sheraz Mian in his Earnings Trends article posted today.   “While pockets of entrenched weakness remain, the pace and magnitude of the recovery has largely been better than expected.” Make sure to read his complete article titled: “Handicapping the Improving Earnings Picture”.  Today's Portfolio Highlights: Options Trader: In addition to beating earnings by 20% in its most recent report. Arthur J. Gallagher (AJG) has also broken out of a bullish consolidation pattern. Kevin expects more upside to come from this Zacks Rank #1 (Strong Buy) provider of insurance brokerage, consulting services, and third-party claims settlement and administration services. On Wednesday, the editor bought to open two April 120.00 Calls. Get more specifics in the full write-up.  Home Run Investor: Stocks in the building products space continue to move higher, so that’s where Brian went for today’s addition. The editor picked up Construction Partners (ROAD), an infrastructure & road construction company that beat the Zacks Consensus Estimate by 25% in its most recent report. Rising earnings estimates have made the stock a Zacks Rank #2 (Buy). If ROAD can keep the earnings momentum going, Brian thinks the stock could move a lot higher. Meanwhile, the portfolio also sold Brown & Brown (BRO, +3.8%) and Meridian Bioscience (VIVO) on Wednesday. Read the full write-up for more on all of today’s moves. Surprise Trader: Earnings estimates for Teekay LNG Partners (TGP) are on the rise, but the stock has been giving up ground. Dave doesn’t mind such a divergence, since it gives the share price plenty of running room moving forward. The company has a positive Earnings ESP of 10.71% for the quarter coming before the bell tomorrow, which makes this one of the editor’s “quick turnaround” ideas. He also appreciates that the company is a big dividend payer with a yield over 8%. The portfolio added TGP on Wednesday with a 12.5% allocation, while also getting out of Wolverine World Wide (WWW). The complete commentary has more on today’s action.   Commodity Innovators: With the market rallying sharply so far in November, Jeremy sees the potential for pullbacks in certain areas. Therefore, he took profits in three names on Wednesday. The biggest winner was premier specialty chemicals provider Albemarle Corporation (ALB), which ran beyond the portfolio’s targets. It was sold today for a 26.7% return in a little over two months. The editor would be willing to re-enter on any pullbacks. The other sells on Wednesday were Teucrium Soybean ETF (SOYB) for a 10% return in about six weeks and iShares Silver Trust (SLV) for a 5.8% profit in approximately the same amount of time. Read more in the full write-up. Until Tomorrow, Jim Giaquinto Recommendations from Zacks' Private Portfolios: Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>  Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2021

Ethiopian Airlines sees crash settlement with Boeing by end-June

Ethiopian Airlines expects a settlement with planemaker Boeing by end of June over the crash of an 737 MAX plane in March 2019, CEO Tewolde Gebremariam told Reuters on Friday......»»

Category: topSource: reutersMay 15th, 2020

Here"s a complete rundown of Wall Street"s 2024 stock market predictions

From a potential economic recession to continuation of the ongoing bull market, here's what Wall Street expects to happen next year. A stock trader at work at the New York Stock Exchange on February 24, 2020.Johannes Eiselle/Getty ImagesAfter a strong 2023, investors biggest question is whether the stock market rally can continue next year.Business Insider has compiled a comprehensive list of Wall Street's 2024 stock market outlooks.From recessions to bull markets, here's what the top analysts expect for the S&P 500 next year. After a dismal 2022, stocks soared in 2023, with the S&P 500 and Nasdaq 100 jumping more than 20% and 50%, respectively.A resilient economy, moderating inflation, and the potential peak in interest rates helped investors overcome fears of a potential recession and jump back into stocks. Now the biggest question investors have is whether the strong market rally can continue into 2024, and is an economic slowdown and subsequent stock market crash imminent.Business Insider has put together a complete rundown of the top Wall Street forecasts for the stock market in 2024.From economic recessions to the continuation of the bull market, here's what Wall Street expects to happen next year.BCA Research: bearish, S&P 500 price target of 3,300The S&P 500 could experience its worst crash since 2008 next year as a recession kicks off, according to the 2024 outlook of BCA Research."A recession in the US and euro area was delayed this year but not avoided. Developed markets (DM) remain on a recessionary path unless monetary policy eases very significantly. As such, the risk/reward balance is quite unfavorable for stocks," BCA Research said.The stock market could avoid such a steep drawdown next year if the Federal Reserve swiftly cuts interest rates, but BCA Research isn't holding its breath as they don't expect inflation to fall quickly."We remain in the disinflationary camp, but expect that inflation will not slow quickly enough for the Fed and the ECB to cut rates in time to prevent a significant rise in unemployment. Unless a recession occurs imminently or inflation completely collapses, the Fed is unlikely to cut rates before next summer," BCA Research said.BCA Research said a recession next year would put the S&P 500 in a range of between 3,300 and 3,700 before an eventual rebound materializes.JPMorgan: bearish, S&P 500 price target of 4,200Michael Nagle/Xinhua via Getty ImagesJPMorgan said high equity valuations, high interest rates, a weakening consumer, rising geopolitical risks, and a potential recession give it little confidence that stocks will move higher in 2024."We expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed," JPMorgan's Marko Kolanovic and Dubravko Lakos-Bujas said in their 2024 outlook note."Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated. We expect lackluster global earnings growth with downside for equities from current levels," JPMorgan said. Morgan Stanley: neutral, S&P 500 price target of 4,500Morgan Stanley expects a flat stock market in 2024, but sees some pockets of the stock market performing better than others. The extremely narrow leadership of the mega-cap tech stocks is likely to continue early next year, but eventually breakdown, according to the firm."The question for investors at this stage is whether the leaders can drag the laggards up to their level of performance or if the laggards will eventually overwhelm the leaders' ability to keep delivering in this challenging macro environment," Morgan Stanley said."We think these dynamics are likely to persist into early 2024 before a sustainable earnings recovery takes hold (we ultimately see +7% earnings growth next year)," Morgan Stanley said.Morgan Stanley recommended investors avoid the high-priced tech stocks and instead focus on defensive growth stocks, typically found in the healthcare, utilities, and consumer staples sectors, as well as late-cycle cyclical stocks typically found in the industrials and energy sectors.Goldman Sachs: neutral, S&P 500 price target of 4,700Photo by Michael M. Santiago/Getty ImagesGoldman Sachs expects the S&P 500 to finish 2024 slightly higher from current levels as stocks are stuck in a "fat and flat" range since 2022. "As higher-for-longer interest rates make valuation expansion from here difficult to justify, our market forecasts are broadly in line with earnings growth. On a weighted basis, we expect 8% price returns and 10% total returns for Global equities over the next year, taking them towards the upper end of the Fat & Flat range that they have been in since 2022," Goldman Sachs said.Corporate earnings should also remain solid next year, providing a buoy to stock prices, as long as a recession is averted."In the absence of recession, corporate earnings rarely fall. Nevertheless, the lack of strong profit growth and a high starting valuation (particularly in the US equity market), and low equity risk premia leaves an unexciting outlook overall on a risk-adjusted basis, relative to cash returns," Goldman Sachs said.Bank of America: bullish, S&P 500 price target of 5,000Bank of America is bullish on the stock market in 2024 because of how much progress the Federal Reserve has made towards tightening its monetary policy following more than a year of aggressive interest rate hikes and the ongoing reduction of its balance sheet.We're bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted to higher rates and inflation," Bank of America's Savita Subramanian said in her 2024 outlook note.It also helps that investors remain laser focused on a potential economic recession and is focusing more on the bad news than the good news."We are past maximum macro uncertainty. The market has absorbed significant geopolitical shocks already and the good news is we're talking about the bad news," Bank of America said.RBC: bullish, S&P 500 price target of 5,000ST CLAIR AVE WEST, TORONTO, ONTARIO, CANADA - 2015/07/05: Royal Bank of Canada signage on a glass facade building. The signage has the outline of a lion holding a globe in yellow against a blue background. RBC Financial Group is the largest financial institution in Canada. (Photo by Roberto Machado Noa/LightRocket via Getty Images)Roberto Machado Noa/LightRocket via Getty ImagesThe stock market's strong 9% rally in November may have pulled forward some of 2024's potential gains, but there's still further upside ahead, according to RBC's 2024 outlook.The main driver behind the expected gains next year could be a continued decline in the inflation rate."Implicit in [our valuation] model is the idea that continued moderation in inflation can do most of the heavy lifting to prop up the P/E multiple, something our analysis suggests happened back in the 1970's," RBC said. "This model has been the most constructive one in our arsenal on the 2023 forecast, and may very well end up being the most accurate if Santa shows up in December instead of the Grinch."The Canadian bank added that while the 2024 Presidential election could add uncertainty to the market, the S&P 500 saw an average gain of around 7.5% in presidential election years."What this stat tells us is that any given Presidential election year is a source of uncertainty for the US equity market. Given all of the unusual aspects of the 2024 contest, that seems like an appropriate way to think about the political backdrop for stocks in 2024," RBC said. Federated Hermes: bullish, S&P 500 price target of 5,000Strong underlying trends in the stock market are likely to extend well into 2024, according to Federated Hermes' chief equity strategist Phil Orlando."We think that stocks are going to grind higher. They've gone from 4100 to 4500. And we think that's a trend that's got legs," Orlando said last month.Orlando chalked up his bullishness to his belief that the Federal Reserve is done hiking interest rates, given that inflation has cooled considerably from its peak."The bond market's done the heavy lifting for [the Fed] since the last Fed rate hike in July. That gives the Fed the luxury, in my view, to step back and say, 'you know what, we don't have to hike any more. We can just sit here on the sidelines for the next year and allow the gradual slowing of inflation to occur," Orlando said.Deutsche Bank: bullish, S&P 500 price target of 5,100Deutsche Bank logos in Tokyo, Japan.REUTERS/Toru HanaiThe US economy is approaching a soft landing as inflation cools and GDP growth remains solid, and that's a great scenario for the stock market, according to Deutsche Bank's 2024 stock market outlook.And even if an economic recession does materialize in 2024, it shouldn't impact stock prices dramatically because most investors are anticipating it, the bank said.The bank expects the S&P 500 to rise about 10% in 2024 to 5,100, and if the economy dodges a recession, the gains could nearly double to about 19% in its bull-case scenario.BMO: bullish, S&P 500 price target of 5,100The stock market will deliver another year of solid gains in 2024 as the second year of the bull market gets underway, even if an economic recession materializes, according to BMO's 2024 outlook.Falling inflation, falling interest rates, a strong job market and rising corporate earnings are tailwinds that will drive further upside in the stock market next year, according to BMO."US stock market performance and fundamentals in 2023 followed the script in our view to lay the foundation for what we continue to believe will be a path of normalcy for earnings growth, valuation trends, and price performance that is likely to unfold over the next three to five years," BMO said.Read the original article on Business Insider.....»»

Category: personnelSource: nytDec 1st, 2023

US Futures Rise As November Surge Closes Strong, Oil Jump Ahead Of Fresh OPEC+ Output Cut

US Futures Rise As November Surge Closes Strong, Oil Jump Ahead Of Fresh OPEC+ Output Cut US equity futures, European bourses and Asian markets all advanced, and Treasuries steadied at the end of a blistering November run after more dovish comments from hawkish Fed officials this week, and as investors waited for a key US inflation metric for further evidence that price pressure are cooling.  As of 7:55am ET, S&P futures rose 0.3% while US 10-year yields climb 3bp to 4.29%. Treasuries paused their strongest monthly gain since 2008, with yields on 10-year paper up four basis points at 4.30%. The dollar bounced 0.4% at the end of its worst month in a year, sending all major developed- and emerging-market currencies lower. The euro traded down 0.5% versus the greenback as the pace of price growth in the region cooled. Today’s macro focus will be the PCE, Personal Income/Spending and Initial Jobless Claims. The PCE release today will provide us with more details on the disinflation trend in Q4: Consensus sees core PCE printing 3.5% YoY vs. 3.68% prior. Eyes will also be on OPEC+ today as the group may consider a production cut at today’s meeting: RTRS sources said OPEC+ ministers agreed for a preliminary cut for over 1mn bpd. In premarket trading, megacap tech are leading gains morning, with TSLA +65bp and GOOGL + 29bp. Salesforce jumped about 9% after the application software company’s third-quarter results and profit forecasts beat estimates. Here are some other notable premarket movers: HP Enterprise shares are up about 3% and are set to extend gains for a second session as Morgan Stanley raised its recommendation following results. ImmunoGen shares are halted after AbbVie (ABBV) agreed to buy the company. Stock is set to resume trading at 8 a.m. Nutanix gains about 9% as strong demand fueled a quarterly sales beat. Okta Inc. is down about 2% after a pair of analysts issued downgrades following the company’s breach disclosures. Pure Storage slumps 17% after the technology company’s outlook disappointed. Snowflake climbs about 7% after the US cloud-software company posted 3Q results that beat expectations and the firm gave an outlook that is seen as strong. Synopsys shares are up 2% after the maker of electronic design automation software reported fourth-quarter results that beat expectations. Easing inflation and signs of a milder-than-expected slowdown in the US economy have sent Treasuries, agency and mortgage debt to their best month since the 1980s, triggering a November surge that pulled along assets from stocks to credit to emerging markets. Oil gained following a Reuters reports that OPEC+ has reached a preliminary agreement on an additional output cut of more than 1mb/d. Details of how the cut will be distributed are yet to be finalised, but it is important that Saudi Arabia appears to have been able to maintain the unified stance from OPEC+ -- at least long enough to move through the seasonally low demand period of 1Q24. Front-month Brent crude is up is up 2% at $84.69 a barrel. Data due Thursday is forecast to show the Fed’s preferred inflation metric — the personal consumption expenditures price index — decelerated in October to the slowest annual rate since early 2021. “Momentum on the other side of the pond is likely to remain bullish rates,” wrote Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho International Plc in London. “The PCE inflation data for October is most likely going to echo what we already saw in the October CPI and PPI reports and add to the soft-landing narrative.” Now, traders are looking to a speech by Fed Chair Jerome Powell on Friday. “Upcoming Fed communication could continue to stress the need hold rates steady for some time,” said Hauke Siemssen, rates strategist at Commerzbank AG. “We expect the air to be getting thinner for further bond market performance ahead of the usual supply wave early next year.” European stocks are in the green with the Stoxx 600 rising 0.4%, set for their best month since January. Energy, financial and insurance shares are leading gains; oil stocks are the top performers on Europe’s Stoxx 600 index, as OPEC+ producers prepare to discuss additional output cuts of about one million barrels a day.  The euro sank after weak French economic data and a Euro-zone inflation print that came in lower than the estimates of all economists in a Bloomberg poll. Traders are now fully pricing in a rate cut from the ECB by April after data showed euro-area inflation slowed more than expected in November.  Here are some of the biggest movers on Thursday: VAT Group shares climb as much as 5.6%, to the highest level since January 2022 after the Swiss chipmaker announced it will end its short-time work scheme in the country’s production sites. Leonardo shares rise as much as 4.8%, the most intraday since Oct. 9, as JPMorgan reinstates full coverage of the aerospace and defense company with an overweight rating. A recovery in end markets and “self-help” can drive the shares higher in coming years, according to the analysts. ABB shares climb as much as 1.9%, touching the highest level since August, as the Swiss industrial conglomerate’s new revenue and margin targets came in ahead of estimates. The update will trigger low to mid-single digit percentage upgrades to 2025 consensus expectations, according to Citigroup. ASR Nederland and NN Group both soar by as much as 15% as ASR’s settlement of a long-standing miss-selling case removes a major overhang for the company and provides optimism of a resolution for its Dutch peer NN. Outokumpu shares surge as much as 14%, the most in almost 13 months, after the Finnish steelmaker announces an extension to its partnership with AM/NS within the Americas region, which Morgan Stanley says removes a key overhang. ASML shares drop as much as 1.8% after the Dutch chip-equipment maker said Christophe Fouquet will become CEO when Peter Wennink retires next year. Chief Technology Officer Martin van den Brink, who worked at the firm since its foundation in 1984, will also retire. Dr Martens shares plummet as much as 27%, dropping to the lowest intraday level on record, after the bootmaker’s first-half revenue missed estimates. The company also said that improvement in the US business will probably take longer than expected. Analysts viewed the results as weak overall, with Morgan Stanley attributing the miss mainly to industry-wide destocking across the Americas wholesale channel. OCI falls as much as 9.3% after being downgraded to hold from buy at Jefferies, which said that natural gas supply is becoming ample, potentially hurting profits from company’s planned investments. Future plc drops as much as 8.5% after Canaccord Genuity downgrades the media company to sell from hold, saying there is material risk of downgrades to consensus. It is the stock’s only negative analyst rating. Elekta shares fall as much as 7.1%, the most intraday in six months, after the Swedish medical equipment firm reported second-quarter results, with analysts noting some weakness in the company’s outlook comments and a strong share-price performance ahead of the release. Siltronic shares fall as much as 5.7% after the German silicon wafer manufacturer says chip inventories will remain high for at least the first half of 2024. The company also set mid-term sales growth targets that Jefferies said were slightly below consensus expectations. Earlier in the session, Asian stocks gained, with investors in Chinese shares shrugging off a weak set of economic data on expectations that Beijing will ramp up support for the flagging economy. The MSCI Asia Pacific Index rose as much as 0.2%, buoyed by Chinese tech giants such as Tencent, with the gauge headed toward its best month since January. Japanese shares fell for a fourth day as the yen strengthened, while Korean stocks advanced after the Bank of Korea held its key interest rate. Hong Kong’s Hang Seng Index rebounded from the lowest level in a year after activity in China’s manufacturing and services sectors shrank in November, adding to expectations of further government support for the economy. Chinese President Xi Jinping’s first visit to Shanghai in three years was also seen as a positive for the tech sector. The relief rally in Chinese stocks could extend into early 2024 on “easing US-China tensions, China’s easing deflation, revenue growth pickup and further cost and interest expense cuts by enterprises lending support to non-financial margins,” JPMorgan & Chase Co. strategists including Wendy Liu wrote in a note. Hang Seng and Shanghai Comp were indecisive with only brief pressure seen after the PMI data showed a steeper contraction in China’s factory activity which raises the prospects for further supportive measures. Japan's Nikkei 225 swung between gains and losses amid recent currency strength and with better-than-expected Industrial Production offset by softer Retail Sales. Korea's Kospi was just about kept afloat following the unsurprising decision by the BoK to keep rates unchanged and noted that it will maintain a restrictive policy stance for a sufficiently long period of time. Australia's ASX 200 was choppy after mixed data in which Building Approvals topped forecast and Private Capital Expenditure missed estimates. In FX, the Bloomberg Dollar Spot Index rose as much as 0.4%; but for the month it is poised to fall around 3%, its worst month in a year. The euro fell 0.5% as German yields slid as markets pulled forward expectations for ECB rate cuts, now fully pricing in the first rate cut by April 2024. Investors have become confident that the Fed has ended its monetary tightening campaign, and have turned their focus on rate cuts for next year, which has weighed on the dollar and boosted Treasuries. “A medium-term US dollar weakening trend is already underway,” Wells Fargo strategists including Aroop Chatterjee wrote in a research note. “The US dollar owes its recent strength to the high levels of US real rates — above 2% across much of the curve. We expect these to head toward more normal levels as the economy slows and disinflation continues” In rates, treasuries were slightly cheaper across the curve with losses led by long-end, extending Wednesday’s steepening move. US 10-year yields around 4.295%, cheaper by 4bp on the day with bunds outperforming by 3bp in the sector; continued long-end underperformance steepens 2s10s spread by 2.5bp while 5s30s is only slightly wider vs Wednesday close. 10-year touched 4.246% during Asia session, lowest level since September, extending retreat from October’s multiyear high near 5.02% that has fueled the market’s biggest monthly advance since 2008 (3.9% through Nov. 29). Core European rates outperform after French November inflation slowed more than expected. In commodities, crude futures advance as the OPEC meeting gets underway, with WTI rising 1% to trade near $78.70. Spot gold falls 0.3%. To the day ahead now, and the main data highlight will be the flash CPI release for the Euro Area in November, which printed below the lowest estimate as European inflation slides, along with the unemployment rate for October. In the US, we’ll get the weekly initial jobless claims, PCE inflation, and personal income and spending for October. Central bank speakers include ECB President Lagarde, the ECB’s Panetta and Nagel, the Fed’s Williams, and the BoE’s Greene. Otherwise, the COP28 summit begins today, and there’s also the OPEC+ meeting taking place. Market Snapshot S&P 500 futures up 0.1% to 4,565.75 STOXX Europe 600 up 0.2% to 459.86 MXAP up 0.4% to 162.25 MXAPJ up 0.3% to 505.27 Nikkei up 0.5% to 33,486.89 Topix up 0.4% to 2,374.93 Hang Seng Index up 0.3% to 17,042.88 Shanghai Composite up 0.3% to 3,029.67 Sensex little changed at 66,932.47 Australia S&P/ASX 200 up 0.7% to 7,087.33 Kospi up 0.6% to 2,535.29 German 10Y yield little changed at 2.41% Euro down 0.3% to $1.0936 Brent Futures up 0.8% to $83.80/bbl Gold spot down 0.1% to $2,041.77 U.S. Dollar Index up 0.34% to 103.11 Top Overnight News Occidental Petroleum is in talks to buy CrownRock, a major energy producer in the west Texas area of the Permian basin, continuing a frenzy of deal making in the oil patch. A deal for the closely held company, which could be valued well above $10 billion including debt, could come together soon assuming the talks don’t fall apart or another suitor doesn’t prevail, according to people familiar with the matter. WSJ Elon Musk told advertisers who have halted spending on X due to his endorsement of an antisemitic post to “go F” themselves, deepening a rift between the billionaire and the companies that generate most of the social media platform’s revenue. FT China’s NBS PMIs for Nov fall short of expectations, with manufacturing coming in at 49.4 (down from 49.5 in Oct and below the Street’s 49.8 forecast) and services sliding to 50.2 (down from 50.6 in Oct and below the Street’s 50.9 forecast). FT WMT shipped 25% of all its US imports from India between Jan and Aug of '23 vs. just 2% in '18 as the firm moves its supply chain away from China (imports from China went from 80% to 60% of the total). RTRS China Evergrande seeks to avoid liquidation with a last-minute debt restructuring plan, but creditors are unlikely to accept the new proposal. RTRS France’s CPI falls by more than expected in Nov, coming in at +3.8% (down from +4.5% in Oct and below the Street’s +4.1% forecast). RTRS Eurozone CPI sinks by more than anticipated in Nov, with headline coming in at +2.4% (down from +2.9% in Oct and below the Street’s +2.7% forecast) and core +3.6% (down from +4.2% in Oct and below the Street’s +3.9% forecast). BBG Israel and Hamas agreed to extend their truce for at least another day in an announcement just minutes before it was set to expire. Antony Blinken will discuss the path forward with the Israeli government today. BBG Henry Kissinger, the former US secretary of state, died at the age of 100. He defined American foreign policy in the 1970s with his strategies to end the Vietnam War, and remained China’s preferred go-between with Washington until his death. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks were mixed and indecisively capped off this month’s notable gains as the Israel-Hamas truce hung in the balance before the announcement of a last-minute one-day extension, while participants also digested a slew of key data releases including disappointing Chinese official PMI figures. ASX 200 was choppy after mixed data in which Building Approvals topped forecast and Private Capital Expenditure missed estimates. Nikkei 225 swung between gains and losses amid recent currency strength and with better-than-expected Industrial Production offset by softer Retail Sales. KOSPI was just about kept afloat following the unsurprising decision by the BoK to keep rates unchanged and noted that it will maintain a restrictive policy stance for a sufficiently long period of time. Hang Seng and Shanghai Comp were indecisive with only brief pressure seen after the PMI data showed a steeper contraction in China’s factory activity which raises the prospects for further supportive measures. Top Asian News Taiwan is closely monitoring China's respiratory illnesses outbreak and will adjust epidemic prevention measures when needed. BoK kept its base rate unchanged at 3.50%, as expected, with the decision unanimous and four out of the seven board members said the door to a rate hike should remain open. BoK said uncertainties to the growth path are high with the economy facing heightened geopolitical risks and restrictive monetary policies abroad, while it will maintain a restrictive policy stance for a "sufficiently long period" of time (prev. "considerable time") until the board is confident inflation will converge to the target level. Furthermore. Governor Rhee said the current policy rate is sufficiently restrictive and that restrictive monetary policy could stay for longer than six months. Hong Kong Exchange consultation paper on severe weather: severe conditions will no longer have automatic consequential impact on the continuity of trading European bourses currently post modest gains, Euro Stoxx 50 +0.2%, despite spending the majority of the morning in the red; with the FTSE 100 outperforming, +0.6%, boosted by broader Crude price action pre-OPEC+; DAX 40 is lifted by SAP, +1.1%, as a read-over from Salesforce earnings. European sectors are mixed, though with a positive tilt; Energy significantly outperforms whilst Autos lag. Stateside futures, NQ & ES +0.2%, tilt higher in-fitting with the European bias as markets await US PCE data. Top European News German Finance Minister Lindner said Germany faces a EUR 17bln gap in the 2024 budget. Dutch NSC party said it is not ready to negotiate on joining the Cabinet with far-right leader Wilders, according to ANP. ECB to, as usual, temporarily pause PEPP purchases (reinvestments) in anticipation of significantly lower market liquidity towards the end of this year. The last trading day before 19th December 2023, and purchases will resume on 2nd January 2024. BoE Monthly Decision Maker Panel (3rd-17th Nov): One-year ahead CPI inflation expectations decreased to 4.4% in November, down from 4.6% in October, expected year-ahead wage growth remained unchanged at 5.1%. The three-month moving average fell by 0.2 percentage points to 4.6% in the three months to November. Three-year ahead CPI inflation expectations increased 0.1 percentage point to 3.2% in November. ECB will discuss QT in December, via Econostream citing an ECB insider; some preference for coming to a QT decision next year as it means less once in 2024. Lagarde will not try to delay the discussion indefinitely. Will not take many meetings to come to a decision on PEPP, given broad agreement currently. PEPP change is expected, liquidity is high; unworried by how markets will take the change. ECB’s Panetta says ECB needs to avoid "useless damage" to the economy and financial stability that would end up also putting price stability at risk; ECB may be able to ease monetary conditions if persistently weak output accelerates decline in inflation; Monetary tightening has not yet had full impact, it will continue to dampen demand in the future FX Dollar resumes recovery rally with a firm fillip from the Euro post-EZ inflation data and pre-US PCE/IJC. DXY towards top of 103.35-102.71 range and EUR/USD hovering near bottom of 1.0910-84 band. Pound and Yen suffer contagion, with Cable sub-1.2650 and USD/JPY above 147.50 compared to 1.2700+ and 146.85 at one stage. Loonie underpinned between 1.3568-1.3616 parameters as oil rebounds in advance of Canadian GDP metrics. PBoC set USD/CNY mid-point at 7.1018 vs exp. 7.1273 (prev. 7.1031). Banxico Governor Rodriguez said they do not see a rate cut in the December decision but it is possible they could begin a discussion of rate cuts in meetings early next year. Fixed Income Debt futures wane after short squeeze fizzles out. Bunds hit brakes just ahead of 133.00 as cool EZ inflation data pre-empted. Gilts undermined by extra DMO issuance and probing 97.00 to downside. T-note near base of 110-05+/14 range awaiting US PCE and IJC. UK DMO Gilt Auction Calendar: December 2023-March 2024. Two Gilts (2053 & 2034) to be sold at the additional auctions on 13th & 19th December; The gilts to be issued at auctions on 5, 6 and 12 December 2023 were previously announced on 31 August 2023. The auctions on 13 and 19 December 2023 were added to the calendar at the remit revision published on 22 November 2023 Commodities WTI and Brent, +1.9%, extend gains following reports that OPEC+ has a preliminary agreement for additional oil output cuts in excess of 1mln BPD, according to Reuters; reminder the JMMC commences at 08:30EST and the OPEC+ gathering at 09:30EST. Spot Gold is marginally lower, owing to the firmer Dollar, though with overall trade rangebound ahead of US PCE, base metals are mixed/flat following on from weaker Chinese PMI data and the FX influence. OPEC "proposal is around Saudi Arabia extending the voluntary cuts of 1 million bpd and then on top of that other states may add additional cuts", via Energy Intel's Bakr OPEC+ has a preliminary agreement for additional oil output cuts in excess of 1mln BPD, via Reuters citing a delegate; Talks around an OPEC cut of more than 1mln BPD will depend on how much could be contributed by members states, Energy Intel reports; adds almost all member states appear to be aligned that a deeper cut is needed Updated OPEC Timings for today: OPEC meeting at 10:00GMT/05:00EST, JMMC meeting at 13:30GMT/08:30EST, OPEC+ meeting at 14:30GMT/09:30EST, according to EnergyIntel's Bakr OPEC/OPEC+ meetings expected to occur as scheduled on Thursday, via Reuters citing sources; OPEC+ continues to discuss additional oil output cut for early-2024 OPEC+ additional output cut discussions range from 1-2mln BPD, according to Reuters sources OPEC+ reportedly mulls new oil production cuts amid the Middle East conflict with Saudi Arabia favouring a curb of up to 1mln BPD, while other members oppose downgrading quotas with Nigeria and Angola resisting a downgrade of their individual quotas and the UAE is also reluctant to cut output. Furthermore, it was stated that a rollover of most existing output curbs is the most likely scenario but talks are continuing, according to WSJ citing delegates. Kazakhstan Energy Ministry said oil output was down 34% at Karachaganak oilfield on November 29th due to the Black Sea storm. Oil loadings from Novorossiysk and CPC terminals remained shut on Wednesday amid a storm with the November plan for Novorossiysk delayed by over 1mln tons, according to Reuters sources. First Quantum (FM CA) announced the suspension of 7,000 contract employees due to force majeure at its Panama mine. Geopolitics: Israel-Hamas Israeli military said the truce will continue in light of mediators' efforts to release more hostages and Hamas also confirmed that it agreed to extend the truce for a seventh day, according to Reuters. Sources in Israel's war council earlier noted that Hamas's list of the new batch of hostages to be released did not meet the agreed criteria and Israel officials warned fighting will resume if Hamas does not present a new list by 07:00 local time (05:00GMT/00:00EST), while Hamas confirmed Israel rejected its proposed hostage release and it told its fighters to be ready for renewed battles if the truce with Israel was not extended, according to Al Jazeera, Al Arabiya and Reuters. Israeli prison service announced it released 30 Palestinians in the sixth round of Gaza truce swaps on Wednesday. UK Defence Minister Shapps is sending a warship to the Gulf region amid fears of a ramp up in Iranian missile attacks. The warship will protect against drone threats and ensure safe flow of trade, according to the Telegraph. China issued a position paper on the Israeli-Palestinian conflict which stated that the UN Security Council should respond to the general call of the international community for a comprehensive ceasefire to be put in place to stop the fighting. Furthermore, China's Foreign Minister Wang Yi said a spillover of the Israeli-Palestinian conflict to the entire Middle East region should be avoided by urging countries that have an impact on the parties to play an active role, while he added that China is to send another batch of emergency humanitarian supplies to Gaza to alleviate the humanitarian situation. "Sirens in the Upper Galilee in northern Israel after a march crept in from southern Lebanon", according to Al Arabiya United Nations Interim Force In Lebanon says Israel retaliated to cross-border fire from Lebanon "Estimates in Israel indicate that tomorrow is the last day of the truce in Gaza", according to Al Arabiya citing Israeli Press Yedioth Ahronoth Geopolitics: North Korea North Korean leader Kim inspected satellite photos of a US naval base in San Diego and Kadena air base in Japan, while North Korea said it will never sit face-to-face with the US for negotiations, according to KCNA. US Event Calendar 08:30: Nov. Initial Jobless Claims, est. 218,000, prior 209,000 Nov. Continuing Claims, est. 1.87m, prior 1.84m 08:30: Oct. Personal Income, est. 0.2%, prior 0.3% Oct. Personal Spending, est. 0.2%, prior 0.7% Oct. Real Personal Spending, est. 0.1%, prior 0.4% 08:30: Oct. PCE Deflator MoM, est. 0.1%, prior 0.4% Oct. PCE Core Deflator YoY, est. 3.5%, prior 3.7% Oct. PCE Core Deflator MoM, est. 0.2%, prior 0.3% Oct. PCE Deflator YoY, est. 3.0%, prior 3.4% 09:45: Nov. MNI Chicago PMI, est. 46.0, prior 44.0 10:00: Oct. Pending Home Sales YoY, est. -8.8%, prior -13.1% Oct. Pending Home Sales (MoM), est. -2.0%, prior 1.1% Central Bank speakers 09:15: Fed’s Williams Speaks on Innovations in Central Banking DB's Jim Reid concludes the overnight wrap Morning from Zurich where it is currently snowing. I know that as the hotel gym is 200 meters away from the hotel and I've finished this off on an exercise bike here this morning. That was a long 200 meters dressed in just gym kits! For markets the sun has shined almost every day this month and as we arrive at the last day, bonds have continued their extraordinary performance over November, driven by growing hopes for a soft landing and a dovish central bank pivot. That excitement meant that we saw another strong rally yesterday, with the 2yr Treasury yield (-8.8bps) falling to its lowest level since July, at 4.65%, whilst other records were being set across the board. For instance, Bloomberg’s global bond aggregate is currently on course for its best month since December 2008, and the US bond aggregate is on course for its best month since May 1985. That said, equities struggled to gain much traction yesterday after an equally dizzying run, with the S&P 500 paring back its initial gains to close down -0.09%. The main catalyst for this rally was another round of downside surprises on inflation. In particular, the preliminary German CPI reading for November fell to just +2.3% on the EU-harmonised measure (vs. +2.5% expected), which is the lowest it’s been since June 2021. Earlier in the day, we also had a downside surprise from Spain, where CPI fell to +3.2% (vs. +3.7% expected). So all that has set us up nicely for the Euro Area-wide release this morning. That good news narrative was then supported by some robust data from the US, which saw the strong Q3 GDP performance revised up even higher. The latest estimate showed annualised growth at a +5.2% rate (vs. +4.9% before), and it also included downward revisions to PCE and core PCE inflation, which is the measure the Fed officially targets. Specifically, the Q3 PCE number was revised down a tenth to +2.8%, and core PCE was also revised down a tenth to +2.3%. So all other things being equal the revisions were in a soft landing direction. Today’s PCE and personal spending data for October will give us more colour on where in Q3 these revisions came and the read through for Q4. This data meant that investors grew even more excited about near-term rate cuts, with futures pricing in the most dovish path in months. For instance, a March rate cut by the Fed was seen as a 50% chance at the close, and a cut is now fully priced in by the May meeting. It’s a similar story at the ECB as well, with a cut now fully priced by April. So when it comes to market pricing, a Q1 rate cut has gone from being a complete out-of-consensus view only a month ago, to a serious proposition now. It will be fascinating to see what Mr Powell makes of all this tomorrow. This rally all started at the last FOMC meeting on 1 November with him repeatedly noting that financial conditions had tightened "significantly". This shifted the market’s attention from a slight chance of hikes to cuts. Since then this trade has taken a life of its own. With bonds and equities performing so strongly over the past month, it will be very interesting if Powell endorses or pushes back on it. With rate cuts seemingly coming closer, sovereign bonds rallied very strongly on both sides of the Atlantic, particularly at the front end. For instance, yields on 2yr Treasuries (-8.8bps) fell to their lowest level since July, at 4.65%, and those on 10yr Treasuries (-6.6bps) were at their lowest since September, at 4.26%. In Europe, there was a similar rally, with yields on 10yr bunds (-6.4bps), OATs (-6.4bps) and BTPs (-8.2bps) all seeing a considerable decline. In fact for 10yr bunds, that left them at 2.43%, which is the lowest they’ve been since July . Whilst hopes were growing about a soft landing, risk assets struggled to gain much traction despite a strong performance at the open. Some of that weakness followed comments from Richmond Fed President Barkin, who struck a more hawkish tone than recent Fed speakers. He pointed out that “if inflation is going to flare back up, I think you want to have the option of doing more on rates. That said, other Fed speakers avoided such hawkish signals. Atlanta Fed President Bostic expressed confidence that the “the downward trajectory of inflation will likely continue”, while Cleveland Fed President Mester said that “monetary policy is in a good place”. Back in Europe, we heard from Greek central bank Governor Stournaras that the first rate cut could come in mid-2024 but that pricing of an April ECB cut seemed a bit optimistic. So some pushback against increased market pricing of cuts coming from one of the more dovish ECB voices. Equities started the day on the front foot but then lost ground, with the S&P 500 falling back from a gain of +0.72% to close -0.09% lower. The Dow Jones (+0.04%) and the NASDAQ (-0.16%) were also near-flat on the day, with one outperformer being the small-cap Russell 2000, which rose +0.61%. Bank stocks were also a notable outperformer, with the S&P 500 banks index (+1.46%) rising to its highest level since mid-August . European risk assets outperformed their US counterparts yesterday, with the STOXX 600 advancing +0.45%, whilst the DAX was up +1.09% to its highest level since early August. That was echoed in the credit space too, where the iTraxx Crossover (-10.2bps) moved to its tightest since April 2022, at 367bps. The moves came as we also got some better-than-expected sentiment data, with the European Commission’s economic sentiment indicator ticking up for a second month running to 93.8 (vs. 93.6 expected), having previously been on a run of five consecutive declines. In the commodities space, oil prices gained ahead of today’s OPEC+ meeting, with Brent crude up +1.74% to $83.10/bbl and WTI up +1.90% to $77.86/bbl. Today’s OPEC+ meeting had previously been scheduled for last weekend but was delayed amid negotiation difficulties over potential new output cuts. The WSJ reported yesterday that the alliance was considering new production cuts of as much as 1mmb/day. In our 2024 World Outlook mentioned at the start, our oil analyst noted that, with subdued oil demand growth and rising non-OPEC production, the global oil market would move into an oversupplied position in early 2024 if there were no further OPEC+ output cuts . Moving on to Asia, equity markets are trading in a tight range this morning even with the downbeat China PMIs highlighting the sustained softness in the world’s second biggest economy. In terms of specific moves, the Hang Seng (+0.18%), the CSI (+0.24%) and the Shanghai Composite (+0.16%) are trading slightly higher on the hopes for more policy support. Elsewhere, the Nikkei (+0.03%) is reversing its opening losses while the KOSPI (+0.04%) is also fairly flat following the Bank of Korea’s decision to keep its interest rate unchanged at 3.5%. S&P 500 (+0.13%) and NASDAQ 100 (+0.20%) futures are looking to wrap up a stella month in style . Coming back to China, the official factory activity measure shrank for the second consecutive month in November, slipping to 49.4 (v/s 49.8 expected) from 49.5 in October, dragged down by insufficient demand. Additionally, the official non-manufacturing PMI dropped to 50.2 in November (v/s 50.9 expected) from 50.6 in October, recording its weakest level since December 2022. Elsewhere, retail sales in Japan rose at its slowest pace so far this year, increasing +4.2% y/y in October (v/s +6.0% expected) compared to a revised +6.2% gain in September. Meanwhile, industrial output rebounded +0.9% y/y in October, exceeding market forecasts for a +0.4% increase and after a -4.4% drop in the previous month. Staying with data, there was some more positive data from the UK yesterday, where mortgage approvals rose to 47.4k in October (vs. 45.3k expected), ending a run of three consecutive declines. That was above every economist’s estimate in Bloomberg’s survey, and it adds to the theme of better-than-expected UK data over the last week, including the flash PMIs and the GfK’s consumer confidence reading. To the day ahead now, and the main data highlight will be the flash CPI release for the Euro Area in November, along with the unemployment rate for October. In the US, we’ll get the weekly initial jobless claims, PCE inflation, and personal income and spending for October. Central bank speakers include ECB President Lagarde, the ECB’s Panetta and Nagel, the Fed’s Williams, and the BoE’s Greene. Otherwise, the COP28 summit begins today, and there’s also the OPEC+ meeting taking place. Tyler Durden Thu, 11/30/2023 - 08:14.....»»

Category: dealsSource: nytNov 30th, 2023

Flight attendants "hot bed" to deal with sporadic shifts – but an insider says the practice is in a legal gray zone

A flight attendant says airline crew can elect to rent a bed at "crash pads," which are similar to a "sorority house" and not always the cleanest. Flight attendants often stay at "crash pads" to handle sporadic work schedules.Johner Images/Getty ImagesFlight attendants sometimes stay in temporary housing called "crash pads."An airline worker says crew can "hot bed" at a crash pad if they bring their own bedding with them.While common across the aviation industry, the practice is in a legal gray zone, the insider said.For those not in the aviation industry, it might be easy to assume the life of a flight attendant is glamorous with constant travel.But when it comes to housing, that isn't always the case, according to Lea, an American Airlines flight attendant who goes by @flightattendantbaelee on TikTok and Instagram. Lea, 28, would not disclose her last name for privacy reasons, but Business Insider has verified her employment.At the start of their careers, Lea said flight attendants are typically kept on "reserve," meaning they have little say over their schedule."You don't know what you're working, where you're going on the days that you work, you just know that you're on call that day," she said.In Lea's six years of working in the aviation industry, she said she's rarely come across early-career flight attendants who live close to the base they get assigned to after training. More often than not, they commute from other cities or even other states, she said."There are people that live in Puerto Rico or Hawaii, that come all the way to DC, New York, wherever," she said.When you are on reserve and get called in to work a flight, the airline typically gives flight attendants two to three hours to get to the airport.For that reason, flight attendants on reserve sometimes resort to staying in shared housing, commonly known as a "crash pad."Lea is a flight attendant at American Airlines.@flightattendantbaelee/TikTokDepending on the city, crash pads are houses or apartments that are usually owned by flight attendants, pilots, or former airline crew.Shared rooms and bunk beds are common, Lea — who has stayed in several crash pads before — added."It reminds me of like a sorority house," she said. People find crash pads through word of mouth or on social media pages, Lea added.What's more, flight attendants have two options to choose from within the crash pad: a "hot bed" or "cold bed."Hot bedding requires flight attendants to take whatever bed is available at that time, and there's not always a guarantee one will be free, she said."It's very temporary," Lea said. "You bring your own linens, you take them off when you leave."The other option is cold bedding where a flight attendant can rent a specific bed on a more permanent basis. They also don't take turns using it with anyone else.Renting a cold bed can cost between $260 to $700 while hot bedding is much cheaper — typically half the price, according to Lea.Crash pads aren't always clean — or legalAccording to Lea, the cleanliness of crash pads and the different bedding options they offer can vary wildly."I've had all kinds of experiences," she said. For example, the first crash pad she stayed in "smelled like dog" because there were also eight French Bulldogs living there.Besides a lot of dog hair, Lea said the home was otherwise decently clean.But Lea said there are no guarantees when it comes to how clean a crash pad is."What you get is always a mystery," she said. "It depends on the people that are occupying the space and the person that runs the crash pad."Besides cleanliness, Lea said that crash pads and hot- and cold-bed systems wade into murky legal territory.Crash pads can feature bunk beds.Amelia Hanron/Getty Images"That's a huge thing that people don't realize," she said, adding that the number of airline crew occupying crash pads could be considered dangerous."Even in your regular house that you live in, you can't legally have 15 people living in a three-bedroom home. It's a fire hazard," she said.It is possible for crash pads to be shut down, particularly in New York City, where most airlines have a base, she added."The issue is if that crash pad ever gets shut down and you're on a trip, your stuff will just be on the sidewalk," she said. In some cases, crash pad owners will take special measures to avoid being discovered, she added.At a crash pad in NYC Lea used to rent, she said the owner discouraged flight attendants lingering outside of the apartment while waiting for taxis or ordering packages to the apartment to avoid unwanted attention that could lead to it being shut down.That said, Lea's rarely heard of a crash pad being shut down from her experience, it mostly has happened when a flight attendant reports the crash pad to authorities themselves."It's like a petty revenge type of thing," Lea said. "You typically see that it's like the crash pad owner sucks or something, and someone feels the crash pad owner wronged them."Outside of crash pads run by current or former airline crewmembers, flight attendants also have the option to rent beds with officially registered companies like The Hotel Crash Pad Network, which offers shared living spaces in several states. The company has a variety of subscription options and advertises different accommodations, depending on location and membership type, in the range of $60 to $475.Cierra, a flight attendant who spoke to Business Insider's Monica Humphries about what it's like to stay at The Hotel Crash Pad Network in New York City back in 2021 said there were some downsides, including dealing with people snoring and noises from late-night partying.But she maintained she still enjoyed the experience overall, which cost her $350 a month at the time."I can come into this hotel and it feels like a family," Cierra said. "It really is like the 'Suite Life of Zach and Cody.' I love being here."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 27th, 2023

Saturday links: your fellow travelers

On Saturdays we catch up with the non-finance related items that we didn’t get to earlier in the week. You can check... EVsWhy Toyota ($TM) is sticking with its hybrid strategy. (wsj.com)History tells us the growth rate of EVs will slow. (klementoninvesting.substack.com)Lithium prices are in a bear market. (wsj.com)AutosGM's ($GM) bet on Cruise looks shaky. (theverge.com)Tall SUVs and trucks are more likely to kill pedestrians in a crash. (theverge.com)EnergyHow a “counter-rotating vertical-axis turbines” could change offshore wind. (thecooldown.com)Covering water canals with solar panels is a no-brainer. (newatlas.com)EnvironmentWe just experienced two days of 2 degrees Celsius warmer than pre-industrial levels. (theatlantic.com)Some areas in the American Midwest are historically dry. (wsj.com)Can Florida's coral be saved? (wsj.com)TravelFour airlines – Delta, United, American and Southwest – now control roughly 80% of the domestic market. (bbc.com)What happens when Airbnbs take over a small town. (nytimes.com)The oceanWe really don't know much many fish there are in the sea. (hakaimagazine.com)What do crabs, and other 'simpler' animals, know? (aeon.co)Ocean noise is on the rise. (thecooldown.com)CovidMore evidence, this time from Sweden, that Covid vaccines were effective in preventing PCC. (bmj.com)Covid isn't the only virus that can cause long term dysfunction. (nytimes.com)Covid caused a baby bump, contrary to expectations. (scientificamerican.com)Respiratory illnessThe new normal for winter respiratory illness season includes three viruses. (wsj.com)Respiratory viruses are returning to a more normal seasonal pattern. (statnews.com)ImmunityImmune health is all about balance. (theconversation.com)What makes for better immune resilience. (bigthink.com)HealthWe are in the golden age of vaccine development. (barrons.com)Movement on improving indoor air quality have been slow, at best. (nytimes.com)Allergy season is extending further into the Fall. (thecooldown.com)Disposable vapes are everywhere. (wired.com)FitnessHow much protein do you really need? (gq.com)Why men are prone to beer bellies. (insidehook.com)FoodHow supermarket mergers can help create food deserts. (modernfarmer.com)Does New Haven pizza have a future outside of New Haven? (newyorker.com)Why do chefs always cross their arms in photos? (eater.com)DrinkPeter Suderman, "Arguably the most important innovation in cocktail construction over the last few decades was the reintroduction of fresh juice." (worksinprogress.co)The whiskey business in Japan is booming. (reuters.com)SportsHow Swedish soccer revitalized itself. (nytimes.com)Why are kids quitting youth sports in droves? (fatherly.com)F1An honest review of the inaugural F1 race in Las Vegas. (huddleup.substack.com)Has Formula One expanded too far, too fast? (vox.com)Earlier on Abnormal ReturnsWhat you missed in our Friday linkfest. (abnormalreturns.com)Podcast links: tax fairness. (abnormalreturns.com)Longform links: seeking meaning. (abnormalreturns.com)Are you a financial adviser looking for some out-of-the-box thinking? Then check out our weekly e-mail newsletter. (newsletter.abnormalreturns.com)Mixed mediaTherapy speak has saturated social media, and not for the better. (vox.com)Incognito browsing mode doesn't do what you think it does. (wsj.com)TikTok was not built for news. (fastcompany.com).....»»

Category: blogSource: abnormalreturnsNov 25th, 2023

How Emirates will keep the world"s largest airliner flying for years to come —even though Airbus doesn"t make it anymore

While many global airlines are throwing in the towel on the fuel-hungry Airbus A380, Emirates is long from giving up on its flagship airplane. Emirates has signed deals worth over $1.5 billion in an effort to keep its Airbus A380s flying.Lutz Borck/AirbusEmirates announced investments of more than $1.5 billion to keep its 119-strong fleet of Airbus A380s flying.The quad-engine superjumbo has been the airline's flagship plane for over 15 years.While Airbus shut down production of the A380 in 2021, the move shows Emirates' continued commitment to the jet.Although global airlines continue to retire the mammoth Airbus A380 in favor of more fuel-efficient twin-engine aircraft, Emirates is long from giving up on its flagship airplane.At the Dubai Airshow in mid-November, the UAE-based carrier announced a series of investments that would keep its giant fleet of A380s flying for years to come.The company, which is the world's largest operator of the over $400 million A380, said in a statement that it signed deals worth over $1.5 billion that will contribute to the maintenance and repair of its superjumbo.Collins Aerospace, Honeywell, Pratt & Whitney, and Lufthansa Technik, among others, have all been tapped for the project to help Emirates "optimise its A380 fleet's lifespan and unlock additional operational efficiency gains, all at its exacting standards."The companies will provide services like engine maintenance and a landing gear overhaul."The A380 has been and will continue to be very much part of the Emirates story," company president Sir Tim Clark said in a press release.In total, the airline took 123 of the 251 double-deckers delivered — meaning it bought up nearly half of the world's A380s. Emirates still operates nearly 90 of its 119-strong superjumbo fleet, with plans to reinstate more "in the coming months.""Our continued commitment to and confidence in the A380 is why we're investing heavily to keep the fleet in optimal shape and pristine condition," Clark said. "The A380 will remain core to our network and customer proposition for the next decade, and we want to ensure our fleet is in tip-top shape." The billion-dollar investment comes despite Airbus shutting down production of the A380 in 2021 after sending off its last double-decker to Emirates.The planemaker ended the A380 program for myriad reasons.Not only was the jet's popularity dwindling as airlines sought out more fuel-efficient airliners like the Airbus A350 and the Boeing 787, but the company was losing money on production."In the end, you have to face facts, and we could see that we were building A380s faster than people were ordering them," Bob Lange, Airbus' head of business analysis and market forecast, said in 2019.But, despite the pandemic travel lull that proved to be the nail in the coffin for many A380 fleets, Emirates is doubling down. It sees the high-capacity, long-haul aircraft as a key to powering its hub-and-spoke business model — especially as the post-pandemic travel boom continues to rage on.A handful of other carriers, like British Airways, Qantas, and Korean Air, are following Emirates' strategy, using the A380 to maximize capacity on high-demand routes.In a 2021 interview with CNN, former Qantas CEO Alan Joyce described the A380 as the "perfect vehicle" to handle the pent-up COVID demand, specifically pointing to routes between its Australian hubs and places like London and Los Angeles.Emirates' recent announcement is the latest example of its commitment to the A380. In January, the first of 67 superjumbos completed its full cabin overhaul as part of Emirates' $2 billion retrofit program.The most significant change is the addition of premium economy, a first for Emirates.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 25th, 2023

See inside a test Boeing 737 MAX 10, the heavily modified variant that has been bought by carriers like United and hopes to enter service in 2024

Boeing's 737 MAX 10 is so heavily modified that it's almost a standalone jet, but Boeing has done everything to keep it under the MAX family umbrella. Pete Syme/Insider Boeing's upcoming 737 MAX 10 was recently given the green light to start certification test flights. The high-density plane will compete with the Airbus A321neo but has faced development problems. Insider toured the 737 MAX 10 testbed at the Paris Airshow to catch up on the certification process. Boeing's upcoming 737 MAX 10 is the largest of the single-aisle jet family and will compete with Airbus' A321neo.According to the manufacturer, the next-generation jet offers "the lowest cost per seat of any single-aisle airplane," making it attractive for airlines looking for high-density narrowbodies that can replace costly widebodies on long-haul routes — especially between low-demand city pairs.Carriers like United Airlines and Delta Air Lines have placed orders for the stretched jet, which can accommodate up to 230 people.However, the MAX 10 has had a tough road to certification.Boeing originally thought the plane would be certified by the end of 2022 after the MAX 8 and 9 were officially ungrounded in November 2020. However, the manufacturer has since pushed the timeline back to 2024.The delayed timeline results from components like the flight deck, the landing gear, and the angle of attack sensors requiring extra engineering to mitigate safety risks and meet federal requirements. Stricter documentation laws created after the MAX crashes have also delayed the process.Fortunately for Boeing, it received a waiver in December 2022 allowing it to certify the MAX 10 without making significant changes to its cockpit.And, more recently, the FAA granted a type inspection authorization for the variant, said Boeing's senior vice president for development programs, Mike Fleming, 737 program head, Ed Clark, and testing lead, Wayne Tygert, in a letter sent to employees on Wednesday and viewed by Business Insider."TIA allows the FAA's pilots to participate in flight tests," the three executives said. "We appreciate the FAA's work and their important validation of our airplane and its readiness to enter this next phase of testing."Insider toured one of Boeing's MAX 10 testbeds at the Paris Airshow in June to learn more about the program, production, and the heavy modifications made to the plane. Take a look.Powered by CFM International LEAP-1B engines, Boeing has several MAX 10 test aircraft, which have collectively flown nearly 850 flight hours across some 400 flights since June 2021.Pete Syme/InsiderSource: Flight GlobalThe planes are required for FAA certification to demonstrate the jet can safely operate in extreme events and weather conditions.Boeing 737 MAX 10.Taylor Rains/InsiderSource: CNNAnd they have been pushed to their limits thanks to specialized equipment and monitoring systems fitted on the testbeds.Pete Syme/InsiderThis means you won't find any galleys or passenger cabins onboard. Instead, there is a lot of open space with seats surrounded by computers and hundreds of feet of wiring.Pete Syme/InsiderWorking the flights are a team of pilots and engineers, the latter responsible for monitoring the tests and collecting data.Pete Syme/InsiderSeveral stations are set up with seatbelts, keyboards, and displays that feed information to the staff in real-time.Pete Syme/InsiderEngineers will conduct a series of tests in one single flight, like how the plane performs with different centers of gravity.Pete Syme/InsiderThis is done by moving water forward and aft via large black tanks onboard the jet.Pete Syme/InsiderMeanwhile, a large winch sits towards the back of the plane. According to a Boeing representative, it is equipped with a sensor on the end that extends out of the plane through the roof to measure air pressure.Pete Syme/InsiderEngineers are also testing new interior concepts, including Boeing's new Space Bins that will carry more luggage and hopefully minimize gate checks.Pete Syme/InsiderOther important tests involve the MAX 10's new cockpit systems — specifically an extra angle-of-attack (AoA) sensor and a way to turn off stall or overspeed alerts.Boeing 737 MAX 10 test aircraft at the Farnborough International Airshow.Taylor Rains/InsiderThe conditions for these two systems to be specifically on the MAX 10 goes back to the two MAX crashes in 2018 and 2019.Investigators look through debris from the 2019 Boeing 737 MAX crash. Boeing's attorneys claim the plane hit the ground too fast for passengers to feel any pain.Jemal Countess/Getty ImagesSource: AirInsight GroupBoth accidents were caused by flaws in something called the MCAS, which used erroneous data from faulty AoA sensors to trigger a stall alert and essentially forced the plane to nose dive.The angle of attack sensor is seen on a 737 Max aircraft at the Boeing factory in RentonReutersSource: The Seattle Times, InsiderUnfortunately, the indicator light that would alert the pilots to the faults didn't work due to a fleet wide software issue. Boeing knew about this issue in 2017 but didn't consider it a high-risk problem.Pete Syme/InsiderSource: The Seattle TimesHowever, after the disasters, the FAA acknowledged the oversight and mandated a new crew alert system be added to any aircraft certified after January 1, 2023.Boeing 737 MAX 10 test aircraft at the Farnborough International Airshow.Taylor Rains/InsiderSource: AirInsight GroupBecause the rules only apply to new jets, Boeing's MAX 8, 8200, and 9 were safe. But, its uncertified MAX 7 and 10 would need a redesigned flight deck if they weren't certified by the December 2022 deadline.Boeing 737 MAX 7 in Boeing livery. A Southwest 737 MAX 8, a Ryanair 737 MAX 8200, and an Alaska 737 MAX 9 sit behind.Taylor Rains/InsiderSource: AirInsight GroupWith expected certification pushed to 2024, Boeing sought a waiver because it needed its MAX planes to have common flight decks.An American Airlines Boeing 737 Max cockpit.Business Insider/David SlotnickSource: AirInsight GroupAn additional system would likely require extra pilot training, meaning current MAX pilots couldn't immediately jump into the new MAX variants.Boeing's biggest 737 customer Southwest Airlines could have been impacted by this.Southwest AirlinesThis is important because airlines don't want to pay for extra training, so Boeing could lose business without the waiver. Fortunately, the planemaker secured it in the 11th hour after heavy lobbying.Pete Syme/InsiderSource: AirInsight GroupBut, it came with conditions — retrofitting the two aforementioned systems (the extra AoA sensor and a stall alert disengage) onto every MAX variant starting three years after the MAX 10 is certified.Boeing 737 MAX 10 test aircraft at the Farnborough International Airshow.Taylor Rains/InsiderSource: AirInsight GroupComplying with the FAA's request will ensure the MAX 10 is federally approved under the current MAX family umbrella, maintaining commonality with the other models.Boeing 737 MAX jets, including Lion Air.ReutersSource: AirInsight GroupPlus, former NTSB chairman Robert Sumwalt pointed out that commonality between jets is important not only for costs but also safety because pilots are not confused from variant to variant.Associated PressSource: Simple FlyingBut, the cockpit system isn't the only modification Boeing had to make to maintain consistency across its MAX fleet.Pete Syme/InsiderDuring production, engineers found the 737 MAX 10's extra-long fuselage — which was extended to give airlines space for more passengers — was so long that it could experience a tail strike during takeoff.Pete Syme/InsiderTo combat this, Boeing created a compression system in the landing gear that adds nine inches of height to give the plane enough takeoff clearance.Taylor Rains/InsiderSource: Simple FlyingBut, to ensure the jet's gear maintained commonality with its MAX counterparts, Boeing had to create something called a "shrink link" to store the gear in flight.Taylor Rains/InsiderSource: Simple FlyingThis mechanism helps the extended gear retract properly so the entire system can still fit into the same wheel well that is on the rest of the MAX variants.Taylor Rains/InsiderSource: Simple FlyingFor Boeing, this — as well as getting the waiver for the cockpit — is extremely important from a business standpoint.Pete Syme/InsiderWithout the heavy modifications, the MAX 10 could teeter on becoming its own standalone plane, requiring Boeing to endure a longer and more complex certification process.Pete Syme/InsiderAnd, to re-emphasize, airlines favor commonality between aircraft types because it saves time, money, and resources. Boeing would be in hot water if it lost that advantage.Pete Syme/InsiderBut, history suggests that Boeing's fixes could create new problems. However, the planemaker has maintained confidence in MAX 10's safety and design as it enters the recently green-lit flight testing phase of certification.xPete Syme/Insider"With more than 400 flights and nearly 1,000 flight hours, the 737-10 has performed well in our own rigorous test program," Boeing wrote in the Wednesday letter. "Our entire team has remained focused on this goal, working with diligence and resilience in a dynamic environment."Pete Syme/InsiderRead the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 24th, 2023

Wall Street Says Buys These 10 Dividend Stocks Now

It’s been a great year if you’re looking for yield. 10-Year Treasuries hit almost a 5% yield in October! Yet, they’ve fallen since, down to 4.4% in about a month’s time. As the yields on treasuries drop, another asset class has seen a massive rally in the past month: stocks. If you’re an investor looking […] The post Wall Street Says These are the Best 10 Dividend Stocks You Can Buy Today appeared first on 24/7 Wall St.. It’s been a great year if you’re looking for yield. 10-Year Treasuries hit almost a 5% yield in October! Yet, they’ve fallen since, down to 4.4% in about a month’s time. As the yields on treasuries drop, another asset class has seen a massive rally in the past month: stocks. If you’re an investor looking for yields and the potential for rising asset prices, dividend stocks are very attractive right now. With that in mind, let’s look at the 10 dividend-paying stocks that Wall Street ranks as its 10 best. We’ve limited our scope to stocks in the S&P 500 and looked for stocks that have the highest buy rating from Wall Street and pay at least a 1% dividend yield. For each stock we’ll list its yield and potential upside from today’s price. 10. Las Vegas Sands Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.50 Dividend Yield: 1.62% Mean Target Price: $66.65 Las Vegas Sands (NYSE: LVS) starts out our list with buy recommendations from most of Wall Street. While you might be familiar with Sands from the name being in Las Vegas, the publicly traded las Vegas Sands operates 6 properties in Macao and Singapore. Wall Street’s mean target price is 31% above where its recently traded. One downside of owning Las Vegas Sands is that casinos are extremely dependent on broader economic conditions. So, if you’re a dividend investor looking for safety, you may want to steer clear of the space. 9. VICI Properties Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.50 Dividend Yield: 5.80% Mean Target Price: $35.45 We’ll stick with gambling for the next entry on our list. VICI Properties (NYSE: VICI) is a REIT that owns hospitality and entertainment destinations that include Caesars Palace, the MGM Grand, and Venetian Resort in Las Vegas. Beyond its casinos VICI also has partnerships with companies like Bowlero, Great Wolf Resort, and own four championship golf courses. In total, the company claims 54 gaming and 38 non-gaming entertainment properties across the U.S. that contain 60,300 hotel rooms and about 500 restaurants, bars, nightclubs, and sportsbooks. VICI Properties mean price target is $35.45, which is about 24% above Wednesday’s closing price. 8. UnitedHealth Group Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.48 Dividend Yield: 1.38% Mean Target Price: $585.09 UnitedHealth Group (NYSE: UNH) is one of the most rock-solid dividend stocks you can buy. While their yield might not be among the highest options, its also very secure with the company continuing to reliably grow net income. Looking ahead to 2027, Wall Street believes the company will grow profits 50% from 2023 estimates, which explains why Wall Street is so bullish on the company. One potential downside is that UnitedHealth Group is trading only about 8% from Wall Street’s mean price target. This could be an excellent stock to add to your portfolio if stocks see a sell-off during December. 7. Targa Resources Corp. Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.46 Dividend Yield: 2.29% Mean Target Price: $106.12 Targa Resources (NYSE: TRGP) develops a portfolio of domestic midstream infrastructure assets. That means the company transports and stores resources like natural gas and natural gas liquids as well as crude oil. In addition the company has a transportation division that includes 606 rail cars and even natural gas liquids barges. Like other resource companies, dividends can be lumpy. In 2019 they were $3.64 per share before being cut to $.40 per share the next year. In the last twleve months dividends have risen to $1.85 per share, which is a payout ratio of just 29%. 6. Lamb Weston Holdings Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.44 Dividend Yield: 1.13% Mean Target Price: $123.67 Who knew potatoes could be so profitable? Lamb Weston (NYSE: LW) sells frozen potato products across the world. The company maintains excellent margins and has plenty of room to continue growing its dividend in the years ahead. Its payout ratio is just 15%, meaning it could triple its dividend at today’s profit levels and still pay out less than half its profits as dividends. Lamb Weston shares trade about 25% below Wall Street’s median price target. 5. Alexandria Real Estate Equities Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.42 Dividend Yield: 4.74% Mean Target Price: $134 Alexandria Real Estate Equities (NYSE: ARE) is a REIT that owns and operates a portfolio of office space designed for innovative industries like life science, biotechnology, and agtech in markets like Boston, San Francsico, San Diego, and North Carolina’s Research Triangle. Shares have fallen throughout 2023 as the office space market faces challenges, but Wall Street still forecasts strong growth for the company in the years to come. If Alexandria Real Estate Equities can deliver on that growth, they should pay out significant dividends to investors. Wall Street currently has a price target that’s 28% above where Alexandria Real Estate’s stock trades today. 4. Elevance Health Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.35 Dividend Yield: 1.2% Mean Target Price: $565.26 Elevance Health (NYSE: ELV) is another massive healthcare company. Wall Street sees profits rising from $6.5 billion in 2023 all the way up to nearly $11 billion in 2027, which is a key reason the company has such a strong buy rating. Share trade fora. reasonable P/E of about 19X (below the average for S&P 500 stocks), there’s 18% upside from its current price and Wall Street’s target, and the company only has a 22% payout ratio on its dividend. In short, there’s a lot of reasons to consider adding Elevance to your portfolio. 3. Delta Air Lines Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.33 Dividend Yield: 1.11% Mean Target Price: $52.05 Delta Airlines‘ (NYSE: DAL) stock trades at $35.95, which means its Wall Street target price implies 45% upside. The company also trades for an anemic P/E of just 7X last year’s profits. The largest concern is that areas like increased labor costs could eat into profits. Revenues are now significantly above where they stood pre-Covid. While airlines are a notoriously difficult industry, opportunistic investors could look at Delta at today’s bargain bin prices and rising potential to issue larger dividends. 2. Assurant Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.33 Dividend Yield: 1.8% Mean Target Price: $189.20 Why is Wall Street so bullish on Assurant (NYSE: AIZ)? It’s an interesting question, since the company isn’t significantly below its target price ($189.20 versus its recent price of $163.94). The company’s shares have been on fire since March. After seeing normalized EPS at $9.36 in 2021, the company is expected to hit $14.59 this year. So, the best explanation is simply that the company is executing extremely well in a very competitive insurance market. 1. NiSource Average Buy Recommendation (1 – Buy – to 5 – Sell-): 1.33 Dividend Yield: 3.92% Mean Target Price: $28.90 We end our list with NiSource (NYSE: NI), which is rated a buy from the majority of Wall Street analysts that follow it. The company trades for $26.19, which isn’t much below its Wall Street target price of $28.90. A few factors in NiSource’s favor include its dividend yield, which is an above-average 3.8% and its industry – utilities – which is generally stable. Sponsored: Attention Savvy Investors: Speak to 3 Financial Experts – FREE Ever wanted an extra set of eyes on an investment you’re considering? Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help guide you through the financial decisions you’re making. And the best part? The first conversation with them is free. Click here to match with up to 3 financial pros who would be excited to help you make financial decisions. The post Wall Street Says These are the Best 10 Dividend Stocks You Can Buy Today appeared first on 24/7 Wall St.......»»

Category: blogSource: 247wallstNov 23rd, 2023

5 ETFs to Make the Most of Solid Thanksgiving Travel Trend

With travel demand remaining robust, a higher number of Americans are gearing up for Thanksgiving travel this year. Airline companies expect record travel demand this Thanksgiving. With travel demand remaining robust, a higher number of Americans are gearing up for Thanksgiving travel this year. Increased travel demand should boost revenues and profitability for the travel and tourism industry, thereby leading to higher share prices.Investors shouldn’t miss this opportunity and could tap this trend through ETFs that stand to profit big time from the upbeat Thanksgiving travel trend. As such, Defiance Hotel, Airline, and Cruise ETF CRUZ, ALPS Global Travel Beneficiaries ETF JRNY, AdvisorShares Hotel ETF BEDZ, Kelly Hotel & Lodging Sector ETF HOTL and U.S. Global Jets ETF JETS are intriguing picks.Solid Travel TrendsTravel service provider American Automobile Association (AAA) expects 2023 to be the third-busiest Thanksgiving travel season in the United States over the last two decades. About 55.4 million people will travel 50 miles or more from home this Thanksgiving. This increased 2.3% from last year. Of the travelers, 49.1 million (up 1.7% from the previous year) will go on road trips, 4.7 million (up 6.6%) will fly and the remaining 1.55 million (up 11%) will travel by train, bus or cruise (read: 5 ETFs to Binge on This Thanksgiving Week).However, travelers may face challenges due to weather conditions. A storm system is anticipated to potentially disrupt travel plans, especially for the 55 million people traveling for the holiday. This system, a low-pressure area, moved through the Western United States the weekend before Thanksgiving. Additionally, a pre-Thanksgiving storm system bringing heavy rain and wind could lead to significant travel disruptions along the East Coast.As Thanksgiving holiday travel approaches, gas prices are falling fast and could hit the lowest Thanksgiving day price since 2020. The national average for a gallon of regular gas was about $3.31 on Nov 20, 25 cents cheaper than a month ago and 36 cents lower than the same period in 2022, according to AAA. The average national price for a gallon of gas could hit $3.25 by Nov 23, which would be the lowest price on Thanksgiving day since 2020 when the Covid-19 pandemic crushed demand and gas fell to $2.11 per gallon, according to GasBuddy.Further, domestic trips are more affordable than last year, with the notable exception of slightly higher airfares. In contrast, international travel costs have increased, although international flight prices have slightly decreased. Similarly, domestic accommodation costs declined while international increased.The average price for a domestic hotel stay is $598, down 12% from 2022, while the average price for an international hotel stay is $772, up 5% from last year. Domestic rental car reservations average $590, marking a significant 20% decrease from 2022, while international rentals are at $696, up 9% from last year. Meanwhile, domestic cruises average $1,507, down 12% from 2022, and international cruises cost around $2,902, up 24% from last year.Airline companies expect record travel demand this Thanksgiving. The Transportation Security Administration expects to screen 30 million passengers from Nov 17 through Nov 28, the most ever. The Sunday after Thanksgiving is expected to be the busiest day during that period, with an estimated 2.9 million passengers taking to the skies (read: Airlines Ready for Record Thanksgiving Travel: ETF in Focus).Another report from the U.S. airlines group, Airlines for America (A4A), shows that nearly 30 million passengers will travel globally during the 11-day (Nov 17 -Nov 27) Thanksgiving travel period, which is an all-time high. A4A projects that 2.7 million passengers will fly per day over the holiday, up 9% from 2022. The Sunday after Thanksgiving, Nov 26, is predicted to be the busiest day of the holiday period, with a record-setting 3.2 million passengers. To fulfill the higher demand, air carriers are offering 253,000 additional seats per day, operating larger aircraft, adjusting routes to reduce strain on the system, and building the largest workforce in two decades.Let’s delve deeper into the above-mentioned ETFs:Defiance Hotel, Airline, and Cruise ETF (CRUZ)Defiance Hotel, Airline, and Cruise ETF tracks the BlueStar Global Hotels, Airlines, and Cruises Index, which measures the performance of globally listed companies primarily engaged in the passenger airline, hotel and cruise industries. Holding 57 stocks in its basket, American firms make up 48.5% of the portfolio, while the U.K., Panama, and Liberia round off the next three with single-digit exposure each.Defiance Hotel, Airline, and Cruise ETF has gathered $37.9 million in its asset base and charges 45 bps in annual fees. Volume is lower as it exchanges around 23,000 shares a day on average. CRUZ has a Zacks ETF Rank #3.ALPS Global Travel Beneficiaries ETF (JRNY)ALPS Global Travel Beneficiaries ETF provides diversified exposure to the global travel industry by tracking the S-Network Global Travel Index. The fund invests in 77 companies engaged in booking and rental agencies, airlines and airport services, hotels, casinos and cruise lines, along with travel-related companies identified through machine learning algorithms, such as luxury retail, entertainment, leisure, food and beverage and payment processing vendors.ALPS Global Travel Beneficiaries ETF has accumulated $6 million in its asset base and charges 65 bps in annual fees. JRNY trades in an average daily volume of 500 shares (read: Consumer Spending Boosts U.S. Q3 GDP: ETFs to Buy).AdvisorShares Hotel ETF (BEDZ)AdvisorShares Hotel ETF is the actively managed and only ETF investing exclusively in global hotel and travel-related services. AdvisorShares Hotel ETF holds 27 stocks in its basket that are pretty spread across components.AdvisorShares Hotel ETF charges 99 bps in annual fees and trades in an average daily volume of 500 shares. It has amassed $3.7 million in its asset base.Kelly Hotel & Lodging Sector ETF (HOTL)Kelly Hotel & Lodging Sector ETF tracks the Strategic Hotel & Lodging Sector Index, which measures the performance of companies that specialize in providing hotel, motel, lodging, residential and timeshare properties management services, operational services, including lodging platform services (e.g., global marketplaces for private accommodations) and companies that own or lease hotels, motels, lodges, resorts, timeshare properties. It holds 37 stocks in its basket, with a concentration on the top four firms.  Kelly Hotel & Lodging Sector ETF has accumulated $0.7 million in its asset base, while charging 78 bps in annual fees. It trades in an average daily volume of about 500 shares.U.S. Global Jets ETF (JETS)U.S. Global Jets ETF provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. The product holds 51 securities and charges 60 bps in annual fees.U.S. Global Jets ETF has gathered $1.5 billion in its asset base and sees a heavy trading volume of nearly 5 million shares a day. JETS has a Zacks ETF Rank #4 (Sell) with a High-risk outlook. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report U.S. Global Jets ETF (JETS): ETF Research Reports AdvisorShares Hotel ETF (BEDZ): ETF Research Reports Defiance Hotel, Airline, and Cruise ETF (CRUZ): ETF Research Reports ALPS Global Travel Beneficiaries ETF (JRNY): ETF Research Reports Kelly Hotel & Lodging Sector ETF (HOTL): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacksNov 21st, 2023