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Missing real estate lawyer to surrender to authorities next month

Mitchell Kossoff is expected to turn himself in and plead guilty Dec. 3, according to the New York District Attorney's Office To view the full story, click the title link......»»

Category: blogSource: crainsnewyorkNov 24th, 2021

Futures Rise As Usual, Approaching All Time High

Futures Rise As Usual, Approaching All Time High US equity futures resumed their upward climb (after Goldman quadrupled down on its call for a massive, year-end meltup driven by $15BN in inflows every single day) as major technology stocks advanced, and as investors awaited a slew of retail earnings and economic data this week to gauge the health of consumer spending while keeping an eye on runaway inflation. Better-than-estimated profit growth has led to a rally in markets, helping ease recent concerns over the hottest U.S. inflation in 30 years. At 730 a.m. ET, Dow e-minis were up 94 points, or 0.26%. S&P 500 e-minis were up 9 points, or 0.20% and about 20 points from their all time high around 4,711; while Nasdaq 100 e-minis were up 30.5 points, or 0.19%. The three major Wall Street indexes had fallen between 0.3% and 0.7% last week when the S&P 500 also snapped its longest winning streak since August 2020, amid concerns over high inflation and weakening consumer sentiment. Investors had begun pivoting into economically resilient sectors, mainly technology, towards the end of the week. Market-heavy GAMMA (fka FAAMG) stocks rose between 0.1% and 0.8% in premarket trade, with Meta Platforms Inc leading gains. On the other end, Tesla shares fell as much as 2.6% in U.S. premarket session after Elon Musk suggested over the weekend that he would sell even more stock after offloading almost $7 billion worth of shares over the past week. Tesla's declines follow a steep 15.4% drop last week after Musk offloaded a combined $6.9 billion worth of shares in the electric-car maker. Meanwhile, blank-check company Gores Guggenheim rose as much as 25% as the stock was touted among retail traders. Rivian shares were down about 2.7% in U.S. premarket trading after the electric-truck maker surged following its IPO last week. Dollar Tree Inc added 5.4% after activist investor Mantle Ridge LP revealed a 5.7% stake in the discount retailer. Strong corporate earnings are helping drive investors into stocks and overshadowing fears about the hottest U.S. inflation print in three decades. The sentiment found its way into calmer bond markets, where these fears had played out in the highest volatility since the onset of pandemic.   “Central banks may be becoming less accommodative, but they will be anxious not to derail the recovery or financial markets,” according to Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management and head of asset alloaction Christophe Donay. “Q3 results have offered further proof of corporate strength.” Focus this week will be on earnings reports from several major retailers including Walmart Inc, Target Corp, Home Depot and Macy's. Their results will round off an upbeat third-quarter earnings season, which pushed Wall Street to new highs. Retail sales data for October is also due on Tuesday, and is expected to show the impact of inflation on consumer spending. Looking ahead not everyone is euphoria: in its 2022 forecast, Morgan Stanley strategists warn that inflationary headwinds may become a bigger force against U.S. stocks next year; they prefer peers in Europe and Japan. They forecast the S&P 500 will end 2022 at 4,400 -- some 6% below current levels. For bonds, they expect 10-year yields to rise to 2.10% by the end of next year on improving growth and higher real rates, up from 1.54% on Monday. “One reason we like equities in Europe and Japan is that we think inflationary challenges there are much less daunting than elsewhere,” strategists led by Andrew Sheets wrote Sunday. They also cited “more reasonable valuations, limited central bank tightening and less risk from higher taxes” vis-a-vis the U.S. In Europe, Stoxx 600 Index was little changed near a record high as rising earnings estimates supported the region’s stocks. Travel and leisure and retailers led the gains, while miners slumped. Here’s the latest on what analysts are saying about European equities: EasyJet cut to reduce from hold at Kepler Cheuvreux due to deteriorating traffic trends and a risk that it has to incentivize demand with fare discounts. Alfen Beheer loses its only buy rating as Berenberg downgrades to hold on limited near- term upside, even after last week’s sell-off in the shares. Direct Line cut to hold and Admiral raised to buy at Berenberg with the broker switching preferences in its U.K. non- life insurer coverage. B&M European is cut to underperform from sector perform at RBC with growth set to become harder to deliver for the discount retailer and better value seen elsewhere in the sector. Wood’s strategic review of its built environment business could unlock “meaningful value,” Citi writes in note upgrading the energy-services firm to buy. Earlier in the session, shares fluctuated in Hong Kong and dipped in China, where traders weighed stronger-than-expected retail sales and industrial output, central bank liquidity support and a drop in home prices. Beijing’s crackdown on real-estate leverage is among the headwinds for the world’s second-largest economy. That said, Asian equities rose for a third day as the strength in U.S. technology heavyweights Friday helped ease market worry over global inflation, reigniting appetite for growth stocks.  The MSCI Asia Pacific Index advanced as much as 0.6%, with TSMC, Tencent Holdings and Samsung Electronics among the largest contributors to the gauge’s rise. South Korea’s Kospi was the top performer among the region’s benchmarks, adding 1%.  Futures on the Nasdaq 100 climbed in Asia after the underlying measure added 1% on Friday. U.S. equities rose led by technology and communication services, with share prices remaining near all-time highs after a strong corporate earnings season.  Overall, the positive mood from last week is extending to today’s trading, said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “Chip-related stocks are doing pretty well following the earnings season, which is also backing gains for the market.” The regional benchmark capped its second straight week of gains on Friday, helped by positive earnings readings. Price data from the U.S. and China remain in focus as traders fear elevated inflation could lead to tighter monetary policy. U.S. consumer sentiment unexpectedly collapsed in early November as Americans grew increasingly concerned about inflation. Japanese stocks rose after the Nikkei newspaper reported on Friday that the government plans to compile an economic stimulus package of more than 40 trillion yen ($351 billion) in fiscal measures. “Economic stimulus had been expected to be about 30 trillion yen, but a new figure of 40 trillion yen is likely to be cheered by investors,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Institute Co.  The Topix index rose 0.4% to close at 2,048.52 in Tokyo, while the Nikkei 225 advanced 0.6% to 29,776.80. Toyota Motor contributed the most to the Topix’s gain, increasing 1.1%. Out of 2,180 shares in the index, 1,051 rose and 1,029 fell, while 100 were unchanged. India’s benchmark index ended flat after wholesale prices surged higher-than-expected in October, weighing on metal and financial stocks. The S&P BSE Sensex was little changed at 60,718.71 in Mumbai, while the NSE Nifty 50 Index was flat at 18,109.45. Both gauges gained as much as 0.6% earlier on the back of an earnings season in which a majority of Nifty 50 companies reported results that beat expectations.  Both indexes, however, failed to hold onto their initial advance after wholesale prices rose 12.5% in October, more than economists’ consensus of a 11.1% advance, led by a rise in manufactured products as well as fuel and power prices. Nine of the 19 sector sub-indexes compiled by BSE Ltd. declined, led by gauges of metal and basic materials companies.  India will release monthly trade figures after market hours. The corporate earnings season for the three months ended September finished last week with 29 of the Nifty 50 companies beating analyst estimates. Three companies made their trading debut on Monday, with chemical maker Sigachi Industries rising 267% over its IPO price. One97 Communications Ltd., the operator of digital payments app Paytm which raised $2.5b in India’s biggest IPO, is slated for Thursday. In FX, the Bloomberg Dollar Spot Index slipped with the greenback weaker against all of its Group-of-10 peers. Commodity currencies, led by Norway’s krone, were the best performers. The Treasury curve bull flattened, with yields falling by up to 2bps. The euro hovered around $1.1450; the French presidential election next year is the scheduled event carrying the highest risk for the common currency, according to options gauges. The pound steadied as traders await clues on monetary policy from BOE Governor Andrew Bailey during parliamentary testimony later Monday. U.K. economists expect a rate increase to 0.25% next month, according to a Bloomberg survey. U.K. economists have become more hawkish over the past month and now expect the Bank of England to increase interest rates in December as concerns about inflation intensify. Sweden’s krona inched up after inflation accelerated more than forecast in October. Meanwhile, the Australian dollar rose on data that China’s economy performed better than expected in October. The nation’s sovereign bonds also extended opening gains after China home prices fell again, sapping real-estate shares. Japan’s super-long government bonds underperformed amid concerns that supply may increase to finance government spending. The yen consolidated In rates, Treasury yields broadly within a basis point of Friday’s close, the curve fractionally steeper. The front-end and belly outperform, following bigger gains for Aussie front-end, which attracted buyers during Asia session. Stocks supported, with S&P 500 futures above Friday’s high.  Treasury yields were richer from front-end out to 10-year sector, which trades around 1.55%, outperforming gilts and bunds by ~1bp; long-end cheapens slightly on the day, steepening 5s30s by ~1bp.  Euro- area bonds gained, led by the periphery, following comments on inflation by ECB Chief Economist Philip Lane over the weekend. ECB’s Lane said recent price inflation is “really part of the pandemic” and people should not panic, in an interview with RTE on Saturday. The Fed begins tapered purchase schedule released Friday; schedule departed slightly from Nov. 3 plan by leaving target size of operations in 10- to 22.5-year sector unchanged while trimming 22.5- to 30-year more, which spurred outperfomance by 20-year sector In commodities, crude futures drifted lower with focus on U.S. energy policy and commentary from OPEC speakers. WTI is down 0.6%, trading either side of $80; Brent drops through Asia’s worst levels before running into support near $81. Spot gold fades Asia’s weakness to trade flat near $1,863/oz. Most base metals are in the red with LME nickel underperforming; copper trades flat.  Looking at today's calendar, it's quiet on the news front with just the US November Empire State manufacturing survey on deck. Biden will meet virtually with Chinese President Xi Jinping on Monday. Tensions between the two countries have been building over issues including Taiwan and restrictions on sales of U.S. technology to China. Market Snapshot S&P 500 futures up 0.1% to 4,685.00 STOXX Europe 600 little changed at 487.13 MXAP up 0.4% to 200.95 MXAPJ up 0.4% to 656.76 Nikkei up 0.6% to 29,776.80 Topix up 0.4% to 2,048.52 Hang Seng Index up 0.2% to 25,390.91 Shanghai Composite down 0.2% to 3,533.30 Sensex up 0.1% to 60,771.98 Australia S&P/ASX 200 up 0.4% to 7,470.11 Kospi up 1.0% to 2,999.52 Brent Futures down 0.9% to $81.46/bbl Gold spot down 0.2% to $1,860.89 U.S. Dollar Index little changed at 95.09 German 10Y yield little changed at -0.27% Euro little changed at $1.1447 Top Overnight News from Bloomberg  Federal Reserve Bank of Minneapolis President Neel Kashkari said the U.S. central bank shouldn’t overreact to elevated inflation even as it causes pain for Americans, because it is likely to prove temporary A reduction in China’s reserve requirement ratio looks increasingly unlikely after the authorities rolled over all policy loans coming due and data surprised on the upside, suggesting that bonds will have little room to gain China’s industrial output rose 3.5% in October from a year earlier, while retail sales growth accelerated to 4.9%, beating economists’ forecasts Japan’s gross domestic product contracted at an annualized pace of 3% in the three months through September from the previous quarter, the Cabinet Office reported Monday. Economists had forecast a 0.7% decline Bank of Japan Governor Haruhiko Kuroda said financial stress from the pandemic is limited to certain sectors of the economy, potentially signaling the BOJ is planning to scale back its Covid-era funding program European Central Bank President Christine Lagarde doubled down on her assessment that euro-area inflation will ease as economies rebound, falling back below the 2% target in the medium term. Yet analysts see itfaster than previously thought this year and next A short-lived reprieve for emerging- market carry trades funded in dollars looks to be over, with an upsurge in U.S. inflation making the outlook increasingly treacherous The U.K. is expanding its Covid-19 booster program to younger people as the country seeks to head off another wave of infections this winter. A third vaccine dose will be available to people aged 40 to 49 starting six months after their second shot, the government said Monday Oman said there was no need for OPEC+ to accelerate oil-production increases, signaling at least some members of the group will continue to resist U.S. pressure for more crude   A more detailed look at global markets courtesy of Newsquawk Asian equity markets began the week with a lack of firm direction as the region digested varied tier-1 economic releases including better than expected Chinese activity data and miss on Japanese GDP, with attention also on a slew of earnings results and corporate updates. ASX 200 (+0.4%) and Nikkei 225 (+0.6%) both opened higher and took impetus from last Friday’s gains on Wall Street but with upside in Australia capped as financials and energy lagged, while Japanese participants weathered the weak GDP data which showed a wider than expected quarterly contraction during Q3, when the economy was still mired by widespread state of emergency declarations in key areas including Tokyo and its surrounding prefectures. Nonetheless, Japanese stocks have taken the disappointing economic growth within their strides as it justifies the incoming stimulus package which was said to have been increased to over JPY 40tln in fiscal spending and with Japan reportedly to resume its Go To Travel campaign in mid-January. Conversely, Hang Seng (+0.2%) and Shanghai Comp. (-0.2%) were initially moderately pressured despite stronger than forecast Industrial Production and Retail Sales data from China, as well as the PBoC’s CNY 1tln MLF announcement which matched this month’s expiring MLF loans and further dampened prospects of PBoC easing. Today also saw the launch of the Beijing Stock Exchange which aims to help SMEs raise capital and included 81 companies in the first batch of listings, while participants await the Biden-Xi virtual meeting which is set to take place Monday evening at 19:45EST or Tuesday morning in Asia and with US Treasury Secretary Yellen and Secretary of State Blinken set to join in on the call. Finally, 10yr JGBs are higher as they tracked a marginal rebound in T-notes and following the disappointing Japanese GDP release, but with gains capped as stocks in Tokyo remained afloat and amid the absence of BoJ purchases in the market today. Top Asian News Cathay Crew Who Flew From Frankfurt Doing 21-Day Quarantine Duterte Runs for Philippine Senate, Avoids Clash With Daughter Greenland Jumps in Bond Market After Classification Change Chinese Startup Meicai Is Said to Pick Banks for Hong Kong IPO European equities (+0.1%) trade with minor gains which have nudged the Stoxx 600 to a high of 487.21 in what has been a quiet start to the week. The desk will continue to monitor further lockdown restrictions across the region, however, updates from the Netherlands and Austria have done little to dent sentiment thus far. The handover from the APAC region was a mixed one as the soft GDP data from Japan was overshadowed by forthcoming stimulus efforts whilst Chinese equities were unable to garner much upside from stronger than forecast Industrial Production and Retail Sales data. Participants were also awaiting the Biden-Xi virtual meeting which is set to take place Monday evening at 19:45EST or Tuesday morning in Asia. Stateside, futures are trading with gains of a similar magnitude to their European counterparts (ES +0.1%) with not a great deal on the docket beyond the NY Fed Manufacturing print at 13:30GMT/08:30EST. Back to Europe, sectors are relatively mixed with Travel & Leisure top of the leaderboard amid gains in Deutsche Lufthansa (+1.7%) after the Co. was upgraded to neutral from sell at UBS. Oil & Gas names have been granted some reprieve following the selling pressure seen towards the latter half of last week. To the downside, Basic Resources is the standout laggard amid underlying price action in the metals space. In terms of individual movers, Ahold Delhaize (+2.4%) is one of the best performers in the Stoxx 600 after announcing a EUR 1bln buyback as of 2022, accelerated its growth/investment plan and will explore an IPO of Bol.com. Shell (+1.8%) is seen higher on the session after announcing that it is looking to implement a simplified structure and move its tax residency to the UK from the Netherlands. To the downside, Philips (-12.1%) sits at the foot of the Stoxx 600 as concerns continue to mount over its ventilator recall issues in the US. Finally, BBVA (-3.7%) is seen lower on the session after launching a tender offer to acquire the remaining 50.2% of Turkiye Garanti Bankasi. Top European News U.K. Expands Covid-19 Booster Program to People in Their 40s Austria Locks Down Unvaccinated as Europe Tightens Covid Curbs Cathay Crew Who Flew From Frankfurt Doing 21-Day Quarantine Telefonica Launches Tender Offer for Hybrid Notes In FX, the Aussie and Kiwi are outperforming their major peers, or making the most of ongoing Greenback consolidation off last week’s new y-t-d highs, with the former also gleaning encouragement from Chinese data overnight as ip and retail sales beat consensus. Aud/Usd is back above 0.7350 and Nzd/Usd has reclaimed 0.7050+ status as the Aud/Nzd cross hovers in the low 1.0400 zone and eyes an unusually large 1 bn option expiry at the round number. Similarly, the Norwegian and Swedish Krona are both firmer vs a somewhat leggy/lethargic Euro, but with assistance from macro releases in the form of trade and inflation respectively. Eur/Nok is probing 9.9200 and Eur/Sek is testing bids and support around 10.0000 compared to peaks near 9.9600 and 10.0330. CAD/DXY - No lasting support from crude prices for the Loonie as WTI retreats through Usd 80/brl from Usd 81.20 at best, but Usd/Cad has reversed from 1.2550+ ahead of Canadian manufacturing sales and wholesale trade that are out alongside the more timely Empire state survey. Meanwhile, the index is meandering either side of 95.000 within a 95.152-94.963 band having ‘topped out’ at 95.266 in wake of US CPI and a far from well received new 30 year issue. GBP/EUR/CHF/JPY - All narrowly mixed against the Buck and seemingly awaiting clearer direction from their US counterpart or independently, as Cable continues to straddle a key Fib level (1.3412) in advance of testimony from the BoE on the latest MPR and top tier UK data from tomorrow. Eur/Gbp is sitting even tighter around 0.8530 before talks intensify to try and resolve differences on NI Protocol, while Eur/Usd is pivoting 1.1450, Usd/Chf is rotating around 0.9200 and Usd/Jpy is holding mostly below 114.00. Note, the Euro has ECB speakers to digest (see Headline Feed at 10.01GMT for remarks from President Lagarde) and look forward to, while the Franc has not really responded to small rises in weekly Swiss sight deposits and the Yen has largely brushed aside much weaker than expected Japanese GDP and a draft document saying that the government and BoJ share a strong sense of urgency about supply shortages, whilst maintaining an appropriate combination of monetary and fiscal policies. In commodities, WTI and Brent are softer this morning, with losses in excess of 1.0% on the session thus far. Such pressure stems from demand-side updates in the wake of further COVID-19 measures being announced/implemented, most recently that Austria is entering a lockdown for the un-vaccinated and the Netherlands is to reimpose social distancing from Saturday. Furthermore, given the surge in cases seen in Germany in recent weeks the three-parties in coalition discussions intend to put forward proposals to Parliament on Thursday for renewed measures, which will reportedly include contact restrictions. On the other hand, the supply-side of the equation is cognisant of the looming imposition of further restrictions on Belarus by the EU, particularly as Leader Lukashenko last week said they would respond to any sanctions and suggested closing gas/goods transit through Belarus. Additional sanctions are, currently, scheduled to be announced this afternoon. Separately, and perhaps adding pressure, is commentary from various oil ministers the most pertinent of which has seen the UAE representative announce they are to increase production to over 5mln BPD from the current 4mln by 2030, alongside expecting a Q1-2022 oil surplus. Currently, the benchmarks are in proximity to the sessions trough which resides around USD 0.10/bbl below Friday’s low of USD 79.78/bbl in WTI, for instance. Moving to metals, spot gold and silver have been grinding higher throughout the European morning but are yet to retrace the downside seen overnight in-spite of the stronger Chinese data though this failed to spur regional or base-metal performance either. In terms of bank views, the Head of Energy Research at Goldman Sachs predicting the precious metal is set for a boom to the USD 2k level. US Event Calendar 8:30am: Nov. Empire Manufacturing, est. 22.0, prior 19.8 DB's Jim Reid concludes the overnight wrap This morning I’ve just put out a short note which I hope will win the catchiest research title of the year award. It’s called “If you think real yields are low, look at these charts…”. See here for the link. Regular readers will know my view that inflation will be structurally higher going forward and that for the rest of my career developed market real yields will likely stay negative even if nominal yields climb. This is because with debt so high, history suggests that heavy financial repression will be necessary to manage this. However, nothing could have prepared me for 2021 so far with US CPI at 6.2% YoY in October and 10-year US yields stuck below 1.6%. On a spot basis real yields are c.-4.6% and at around 70-year lows. If you think real yields are low, however, take a look at the 200-year graphs in the note to see that whenever debt has spiked historically, real yields have moved a lot lower than even today’s levels, albeit through inflation around or above 20%. These are extreme times but history offers even more extreme examples. Staying with inflation DB’s Francis Yared and I did a webinar on inflation last week and the recording can be viewed here. You’ll need Francis’s slides at hand on Regime Shifts in Inflation (link here) and mine (link here) on what history can tell us about inflation and what it means for asset prices in the future. I thought it was a really good webinar but I am slightly biased. Maisie and mum came back from a week in hospital at the weekend. Mum slept for 18 hours on Saturday leaving me to work out how the wheelchair folds up and reopens and delivering what I hoped was the right dose of morphine. It’s going to be tough living with a wheelchair for the next year as Maisie’s hip bone tries to regrow but after hearing many stories from my wife about children in the ward with life threatening conditions you realise that you’re actually pretty lucky. Before you think I’ve gone all zen, I did nearly throw the wheelchair across the room when it wouldn’t unfold. I’d missed a small lever under the seat. After a tiring last week at home and in the markets it’s a quieter week ahead in terms of the calendar, though market attention will continue to focus on the question of who might be appointed as the next Fed Chair, as well as the latest inflation statistics from a number of countries, including the UK (Wednesday). There is a reasonable amount of Fedspeak so it’ll be especially interesting to hear those on the transitory side to see if last week’s shocking print has impacting their thinking. Otherwise, geopolitics will be in focus, with today’s virtual meeting between US President Biden and Chinese President Xi, alongside continued speculation about whether the UK might trigger Article 16 of the Northern Ireland Protocol even if tensions have eased a touch in the last few days. Starting with today’s virtual meeting between President Biden and President Xi, it is set to take place at 7:45 PM Washington time, which will be 8:45 AM on Tuesday in Beijing. While both the presidents spoke over the phone twice this year, this is the first time it is being dubbed as a summit. There is some thought that tariff reductions could be on the agenda, especially given current US inflation levels but it might be a bit early for that in any relationship rebuild. We’ll know more in time for tomorrow’s EMR. The monthly Chinese data dump came in better than expected overnight with industrial output +3.5% yoy (vs. 3% expected), retail sales 4.9% yoy (vs 3.7% expected) but fixed-asset investment slightly missing at 6.1% (vs 6.2% expected). There is some discussion that the retail sales beat may be led by higher prices and also higher food sales as consumers prepare for the possibility of winter virus restriction. Asian stocks are trading mixed with the KOSPI (+1.04%) and the Nikkei (+0.48%) trading in the green while the Hang Seng (-0.08%), Shanghai Composite (-0.29%) and CSI (-0.29%) trading lower. In Japan GDP shrank by -0.8% from the last quarter (-0.2% consensus and +0.5% previous) augmenting expectations of a stimulus package by Prime Minister Fumio Kishida, which is expected to be announced at the end of this week. The Nikkei reported last Friday that the stimulus could top 40 trillion yen ($350 bn). Futures are pointing to a muted start in US & Europe with S&P 500 futures (-0.01%) and DAX futures (-0.08%) both fairly flat. Moving onto the rest of the week, there are a few decisions from EM central banks over the week ahead, including Turkey, South Africa and Indonesia (all Thursday). However, the main focus for investors will be the speculation about who might be the next Fed Chair, particularly in light of the news out last week that both incumbent Fed Chair Powell and Governor Brainard had been interviewed for the position. Powell’s current four-year term comes to an end in February, and whoever’s nominated would require senate confirmation for another term. At this point 4, 8 and 12 years ago, the announcement of who’d be nominated had already been made, but we still don’t have a date for when we might get the news. However, it may not be too far away, with President Biden saying in Glasgow on November 2 that it would be “fairly quickly”. On the data side, there’ll be an increasing amount of hard data out of the US for October, including retail sales, industrial production (both Tuesday) and housing starts (Wednesday). Meanwhile, there’ll also be some important UK data as the Bank of England mulls over their monetary policy settings ahead of their meeting next month. On Tuesday, there’s the latest employment report, and then on Wednesday, we’ll get the latest CPI reading for October. Turning to politics, it’s worth keeping an eye out for any developments on Brexit, with speculation rising that the UK government could trigger Article 16 of the Northern Ireland Protocol. Over the last 3 or 4 days the mood music has moved a little towards compromise so we’ll see if this gathers some momentum. Lastly on the earnings front, it’s the tail end of the season now, but there are still a few major companies left to report. Tomorrow we’ll hear from Walmart and Home Depot, before Wednesday brings reports from Nvidia, Cisco, Lowe’s and Target. Then on Thursday, we’ll hear from Intuit, Applied Materials and TJX. Recapping last week now and inflation had a strong stranglehold on the market narrative, as much higher-than-expected US CPI data drove Treasury yields higher, led by the belly of the curve. Global sovereign yields increased in sympathy. Quickly recapping the highlights from the pivotal CPI data: year-over-year headline CPI of 6.2% and core CPI of 4.6% were each the highest readings since the early 1990s and we’re generally getting to levels last seen consistently at the start of the 40yr disinflationary trend in the early 1980s. Price gains were shared across a broad range of components, which prompted some rabble rousing out of Democratic politicians, including President Biden. Five-year Treasury yields increased +13.5 bps as investors brought forward the expected timing of increases to the fed funds rate. Markets are pricing the first Fed rate hike by the July FOMC and 2.5 hikes through 2022. This compares with a September FOMC lift-off and fewer than 2 hikes in 2022 a week before. All told, 2yr, 5yr, and 10yr Treasury yields increased +11.7bps (+0.5bps Friday), +17.1bps (+1.0bps Friday), and +11.9bps (+2.1bps Friday) on the week. 10yr inflation breakevens hit their highest levels on record, finishing the week at 2.72%. Real yields were the only rates declining on the week, with 10yr real Treasury yields retreating -6.6bps (+0.8bps Friday) to end the week at -1.17%, just above all-time lows. Other developed sovereign bond yields followed Treasuries higher, with ten-year yields in Germany, UK, France, and Italy increasing +2.1bps (-2.8bps Friday), +6.9bps (-0.6bps Friday), +3.5bps (-2.8bps Friday), +7.8bps (-0.8bps Friday) on the week. The spectre of higher inflation and concomitant monetary policy tightening put an end to the recent S&P 500 win streak. After posting eight straight days of record highs by Tuesday, the S&P 500 retreated -0.31% this week, including -0.82% on Wednesday alone following the inflation data, but made a heroic effort to reclaim lost ground Friday, gaining +0.72%. Mega cap stocks were notable laggards, due to the increase in discount rates, with FANG+ stocks down -0.49% (+1.00% Friday). The index was also hit by a -15.44% collapse in Tesla stocks following news that Elon Musk would liquidate some of his holdings, which he duly did. European stocks proved more resilient, with the STOXX 600 (+0.68% on the week, +0.30% Friday), DAX (+0.25%, +0.07%), and CAC 40 (+0.72%, +0.45%), again posting new all-time highs to finish the week. On the virus front, Pfizer requested regulatory approval for all US adults to be eligible to receive the company’s Covid-19 booster shot, while climbing cases in Europe have prompted renewed lockdown measures and enhanced vaccination efforts across the continent. Federal Vice Chair for Supervision Quarles announced he would resign at the end of the year, as was widely anticipated. There was a steady leak of news on the impending nomination for Fed Chair, but neither Chair Powell nor Governor Brainard, the two favorites for the position, saw their chances much changed following the news. The Fed also released its bi-annual Financial Stability Report and concluded that asset prices remain vulnerable to deteriorating investor risk sentiment, virus progress, or economic recovery. Geopolitical tensions bubbled in Europe. Threats from Belarussian President Lukashenko to cut the transit of natural gas from Russia to Europe, and reports of potential Russian plans for further military excursions into Ukraine, drove European natural gas prices higher in the second half of the week. President Putin apparently warned the US and its allies that Moscow would not tolerate expansion of Western military influence in Ukraine. Tyler Durden Mon, 11/15/2021 - 07:59.....»»

Category: blogSource: zerohedgeNov 15th, 2021

Evergrande Makes Another Last Minute Interest Payment After Selling Private Jets, Pledging Chairman"s Mansions

Evergrande Makes Another Last Minute Interest Payment After Selling Private Jets, Pledging Chairman's Mansions Heading into today, the fate of China's insolvent property giant, Evergrande, was once again uncertain, with Reuters reporting earlier today that some bondholders of the cash-strapped company had still not received coupon payments by the end of 30-day grace periods at close of Asia business on Wednesday, pushing the developer again to the edge of default. This despite the company recently selling two of its Gulfstream private jets, and despite a report from Hong kong's HK01 media that Evergrande Chairman Hui Ka Yan had pledged a second house on the peak in Hong Kong as collateral to Orix Asia Capital for a loan. Evergrande has been stumbling from deadline to deadline in recent weeks as it grapples with more than $300 billion in liabilities, $19 billion of which are international market bonds. While the company had not defaulted on any of its offshore debt obligations, a 30-day grace period on coupon payments of more than $148 million on its April 2022, 2023 and 2024 bonds ended on Wednesday. A failure to pay would result in a formal default by the company and trigger cross-default provisions for other Evergrande dollar bonds, exacerbating a debt crisis looming over the world's second-largest economy. And then, just as speculation swirled that today would finally be the day Evergrande collapsed, the insolvent debtor looked once again set to avert a default in its biggest test since the property developer’s debt crisis began. According to Bloomberg, customers of international clearing firm Clearstream received overdue interest payments on the three U.S. dollar bonds issued by Evergrande, a spokesperson for Clearstream said. Two investors that hold two of the bonds confirmed that they received the payments, asking not to be identified because they weren’t authorized to speak publicly. The latest payment means that the embattled developer once again made overdue coupon payments totaling $148.1 million to offshore creditors literally minutes before the end of 30-day grace periods on Wednesday, after missing the initial interest deadlines last month. The property giant pulled back from the brink of default in October by paying other coupons before the end of its grace period. However, with billions in coupons and maturities due in coming months, the crisis at Asia’s largest junk bond issuer is hardly over, as it grapples with more than $300 billion in liabilities. Countless other developers have also fallen into distress amid a crackdown on speculation and leverage following years of debt-fueled expansion.  A string of defaults and downgrades in the property industry in recent weeks pushed yields on junk dollar bonds from Chinese issuers to the highest in at least a decade over 24%. The contagion has even spread to other areas of the credit market, including investment grade companies that were previously seen as untouchable by panicked sellers. On Monday, two holders of other dollar notes sold by a unit of China Evergrande said they hadn’t received payment for coupons that were officially due Saturday. Both of those coupons also have a 30-day grace period before any missed payment would be considered a default Authorities have sought to limit the fallout from the wider property market distress, with the central bank injecting liquidity into the financial system. Separately, Chinese developers’ bonds and stocks rallied sharply Wednesday after the Securities Times said authorities are likely to loosen controls for the nation’s real estate companies to issue local-currency notes, part of efforts to prevent a further deterioration in their financing. Later in the day, the New York Times reported that the Chinese central bank is considering easing rules to let struggling developers sell assets to avoid defaults, the New York Times reports, citing unidentified people with knowledge of the discussions. The People’s Bank of China is considering allowing the buyers of assets from financial strained property firms to take over the assets without having the projects’ associated debt affect their own debt ratios; the buyers would likely be state-owned firms. Current rules, put in place last year, are so strict that they have hindered the ability of developers such as China Evergrande to sell assets to pay debts. As for Evergrande, this time the company may have made a payment but creditors shouldn't expect that these piecemeal payments will continue: as the WSJ reported, the Chinese state is quietly dismantling the giant developer slowly and behind the scenes: The plan, according to people familiar with the matter and official government statements, is to manage a controlled implosion by selling off some Evergrande assets to Chinese companies while limiting damage to home buyers and businesses involved in its projects. Chinese authorities must do this without bringing down the country’s epic property boom. Evergrande is struggling to manage roughly $300 billion in liabilities, including close to $20 billion in outstanding U.S. dollar bonds. Looking out for foreign investors isn’t a priority, WSJ sources citing people familiar with the matter perhaps because replacing one set of broke creditors with another set of soon to be broke creditors would be too much irony even for China. Still, Beijing is closely monitoring the situation, because authorities need credit markets to be healthy to prevent other property developers from failing and because they worry about China’s image, one of those people said. The bottom line: this will be one drawn out default-cum-nationalization as it could take years to take the company apart, and many details are still being worked out, people familiar with the matter say. It’s possible some version of Evergrande could survive, though it would likely be much smaller. Much of the work so far has focused on Evergrande’s hundreds of stalled projects, a process that will likely involve bringing in other developers to take over. Tyler Durden Wed, 11/10/2021 - 16:30.....»»

Category: blogSource: zerohedgeNov 10th, 2021

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

Futures Slip From All Time High Amid Fresh China, Growth, Valuation Concerns One day after US equity futures hit an all time high, rising to a record 4,590, risk sentiment has reversed and overnight index futures fluctuated and stocks in Europe retreated from a near-record on Wednesday after a flare up in U.S.-China tensions, signs of further regulatory crackdowns from Beijing, a decline in commodity prices, renewed concerns about economic growth and a rise in short-dated U.S. Treasury yields doused the equity market rally on Wednesday. At 7:45 a.m. ET, Dow e-minis were up 27 points, or 0.07%, S&P 500 e-minis were down 2.50 points, or -0.06%, and Nasdaq 100 e-minis were down 15.5 points, or 0.09%. Bonds and the dollar gained and bitcoin stumbled. The overnight losses started earlier in Asia, where tech stocks suffered hefty falls after China’s internet watchdog said it planned stricter registration rules for younger net users, while Chinese tech shares slid on concerns about more scrutiny from Washington after the U.S. banned China Telecom’s American business. U.S. futures also turned negative as the bullish mood over Tuesday’s forecast-beating results from Google owner Alphabet and Microsoft started to wane. Shares of energy firms including Exxon and Chevron tracked lower oil prices, while major lenders such as Bank of America slipped on a flattening U.S. yield curve. Microsoft Corp rose 2.1% in premarket trading after it forecast a strong end to the calendar year, thanks to its booming cloud business. Twitter gained 1.4% after the social networking site’s quarterly revenue grew 37% and avoided the brunt of Apple Inc’s privacy changes on advertising that hobbled its rivals. Google owner Alphabet also reported record quarterly profit for the third straight quarter on a surge in ad sales. However, its shares were down 0.6% after rising nearly 59% so far this year. Here are some of the biggest movers today: Microsoft (MSFT US) shares gain 2.2% in premarket after first- quarter results that analysts said were very strong across the board, showing scale and justifying the valuation of the software giant. Alphabet (GOOGL US) rises 1.3% after 3Q earnings earned a mostly positive reception from analysts, with at least three raising their price targets on the Google parent. Twitter (TWTR US) adds 2% amid resilient third-quarter sales at the social media company as it weathers Apple’s new limits on consumer data collection. Enphase Energy (ENPH US) gains 13% after its 3Q results and 4Q forecasts beat estimates. Analysts await more clarity on supply chain constraints. Robinhood (HOOD US) slumps 12% as some analysts cut price targets after the retail brokerage reported 3Q revenue that missed estimates and flagged further weakness in 4Q. Visa (V US) falls 2.4% as analysts flag a disappointing outlook from the payments company. Texas Instruments (TXN US) declined 4% after a forecast that may disappoint some investors who are concerned about a potential slowdown in demand for electronic components. Watch peers for a readacross. Angion (ANGN US) plunges 55% after company said a kidney transplant drug failed to meet primary end points in a phase three trial. European partner Vifor (VIFN SW) slips 6%. “While some prominent earnings misses have clouded the picture, the reality is that on aggregate, the reporting season so far has been very solid,” said Max Kettner, a multi-assets strategist at HCBC Holdings Plc. “Everyone, literally everyone, in the market right now is worried about supply-chain constraints, higher input costs and the like, so headwinds from this side are now very well reflected in near-term earnings expectations.” Concern over more tension between Beijing and Washington also weighed on markets after the U.S. Federal Communications Commission voted to revoke the authorization for China Telecom’s U.S. subsidiary to operate in the United States after nearly two decades, citing national security. “We have good U.S. data in earnings which is very reassuring but valuation is very stretched in both the value as well as the growth sector,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “And people are also getting a bit hesitant and are a bit worried because the amount of money that is going through will slow down with the Fed slowly starting to taper - but that is not necessarily a bad thing.” MSCI’s global equity benchmark hovered close to Monday’s seven-week high and is on track for the best month in almost a year. However, European stocks softened, led by a 1.6% drop in mining and resource firms in the Stoxx Europe 600 index as prices of raw materials including aluminum and iron ore fell along with crude oil. Germany’s DAX underperformed after Europe’s biggest economy cut its 2021 growth forecast, citing the lingering effects of the pandemic and a supply squeeze. Bund yields dropped along with those on other European bonds. Bank shares also slipped, with Deutsche Bank down more than 5% despite forecast-beating earnings. Europe's Stoxx 600 dropped about 0.3%, weighed down the most by miners and energy firms. FTSE 100 and DAX both down similar amounts. Here are some of Wednesday’s major earnings and corporate news from Europe Deutsche Bank AG dropped more than 6% after disappointing earnings, while Banco Santander SA declined despite a bullish outlook. Heineken NV fell after reporting a drop in demand for beer. BASF SE slipped after flagging dwindling returns on its core suite of chemical products as sputtering global supply catches up with demand. GlaxoSmithKline Plc rose after improving its profit outlook. Dutch semiconductor equipment maker ASM International NV advanced after revenue forecasts beat analyst estimates. Puma SE gained after raising full-year profit forecasts. Temenos AG surged as much as 16% after Bloomberg reported EQT AB is exploring an acquisition of the Swiss banking software specialist. Earlier in the session, the MSCI Asia Pacific Index was down 0.4% in late afternoon trading, paring an earlier drop of 0.7%, with Tencent, Alibaba and Meituan the biggest drags. Asian equities fell as risk-off sentiment fueled by renewed concerns over Evergrande’s debt woes and an escalation in China-U.S. tensions drove losses in Chinese tech giants. Benchmarks in Hong China and China led declines around the region. The Hang Seng Tech Index plunged as much as 3.9%, the most in over five weeks after Washington moved to ban U.S. business by China Telecom, following previous similar measures against Chinese tech firms including Huawei. Meanwhile, Secretary of State Antony Blinken called for a greater role by Taiwan in the United Nations, raising objections from Beijing. Chinese tech stocks have been rattled this year by a crackdown amid President Xi Jinping’s “common prosperity” campaign. There had been signs of a rebound recently, however, as the government signaled it would limit its restrictions. Investor confidence in beaten-down Chinese tech stocks hasn’t been fully restored “so they rush to dump those stocks at any negative news and signs of flow reversal,” said Castor Pang, head of research at Core Pacific-Yamaichi International Hong Kong. “This round of tech rebound has peaked,” he added. Key equity gauges also fell more than 0.5% in Indonesia and South Korea, while Vietnam’s benchmark climbed more than 2%. Japanese equities fell, though they closed off intraday lows, as electronics makers and telecommunications providers drove losses. Auto and chemical makers provided support for the Topix which closed down 0.2%, paring an earlier drop of as much as 0.7%. The Nikkei 225 closed little changed, with a gain in Fast Retailing offsetting a drop in SoftBank Group. Asian stocks were broadly lower, as the U.S. moved to ban China Telecom and amid renewed concern over Evergrande’s debt woes. Meanwhile, Japan Exchange Group said Tokyo Stock Exchange will extend the trading day by 30 minutes in the second half of the fiscal year ending March 2025.  In rates, the 10Y yield is down 1.2bp at 1.595%, trailing steeper declines for U.K. and German counterparts, which outperform by ~3bp as money markets trim expectations for BOE and ECB rate hikes. Long-end Treasuries continued to outperform vs front-end ahead of 5- and 7-year auctions Wednesday and Thursday, as well as month-end rebalancing expected to favor bonds over equities. Long-end yields are lower on the day by ~2bp, front-end yields higher by similar amounts, following selloff in Australia front-end bonds after strong 3Q CPI numbers. 5s30s curve breached 82bp for first time in a year. Gilts flatten further ahead of a revised gilt remit that is expected to report a GBP33b reduction. U.K. 10-year yield falls 5bps to 1.06%, the lowest since Oct. 14, outperforming bunds by ~1bp. In FX, the Japanese yen strengthened ~0.5% against the U.S. dollar, leading G-10 majors and followed by the Swiss franc. All other G-10 peers are red against the dollar, which is up about 0.06%. The fading risk sentiment meanwhile pushed up the safe-haven Japanese yen which rose 0.4% against the U.S. dollar though the greenback in turn held just off a one-week high versus a currency basket. The euro kept gravitating toward the $1.16 handle as overnight plays in the common currency as well as the loonie took the spotlight before the monetary policy meetings by the Bank of Canada and the ECB. The three-month Euro benchmark funding rate fell to -0.556%, matching the record low set on Jan. 6, as excess liquidity hovers near an all-time high seen earlier this month. The pound slipped and the Gilt curve bull-flattened ahead of the U.K. government’s budget announcement. The U.K. is expected to trim gilt sales to GBP33b, according to a Bloomberg survey of analysts at primary dealers. Commodity currencies, led by the krone, fell and the Australian dollar erased an Asia-session gain in European hours. The Aussie earlier rallied while Australian 3-year yield surged as much as 24bps to briefly top 1% after core inflation accelerated back inside RBA’s target, and taking its game of chicken with the bond market to new heights. Kiwi trailed most G-10 peers following a record trade deficit. The Offshore Chinese renminbi fell against the U.S. dollar amid heightened U.S.-China tensions. Currency and bond traders were looking to a slew of central bank meetings over the coming week for guidance. Canada is first up at 1400 GMT on Wednesday while the European Central Bank meets on Thursday, when the Bank of Japan also concludes its two-day meeting. The Fed has all but confirmed it will soon start to whittle back its asset purchases, though has said that shouldn’t signal that rate hikes are imminent. Nevertheless, Fed funds futures are priced for a lift-off in the second half of next year. “We updated our Fed call to show a hike in Q4 2022 and four hikes in 2023,” analysts at NatWest said in a note. “The inflation overshoot has been persistent,” they said. “There is (only) so much the Fed can tolerate before reacting ... it feels inevitable that that conversation will be brought up more and more as we go into next year.” Commodities are in the red. Brent crude down about 1.3% back to $85 a barrel, while WTI slips 1.7% to $83. Base metals drop. LME aluminium, copper, and nickel decline the most. Spot gold down $5 to trade around $1,787/oz.  The crypto space tumbled sharply shortly after the European close, pushing Bitcoin below $59,000 and wiping out much of the ETF launch gains. No changes are expected from Tokyo, but traders are expecting the ECB to push back on market inflation forecasts and are looking for hawkish clues from the Bank of Canada as prices put pressure on rates. Policymakers are facing a steady drip of evidence that there is no let-up from pressure on consumer prices. The latest came from Australia, where data showed core inflation hit a six-year high last quarter, raising the possibility of sooner-than-planned rate increases. The Australian dollar jumped after the data but soon pared the gains. Looking at today's busy calendar, we will get preliminary September wholesale inventories, durable goods orders and core capital goods orders from the US. In Europe, Germany November GfK consumer confidence, France October consumer confidence and Euro Area September M3 money supply are due. In central banks, monetary policy decisions from the Bank of Canada and Central Bank of Brazil will be released. On the corporate earnings front, companies reporting include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Elsewhere, the UK government announces Autumn Budget and Spending Review. Market Snapshot S&P 500 futures little changed at 4,569.75 STOXX Europe 600 down 0.3% to 474.38 MXAP down 0.4% to 199.65 MXAPJ down 0.8% to 656.34 Nikkei little changed at 29,098.24 Topix down 0.2% to 2,013.81 Hang Seng Index down 1.6% to 25,628.74 Shanghai Composite down 1.0% to 3,562.31 Sensex up 0.2% to 61,468.43 Australia S&P/ASX 200 little changed at 7,448.71 Kospi down 0.8% to 3,025.49 German 10Y yield fell 4 bps to -0.157% Euro little changed at $1.1593 Brent Futures down 1.1% to $85.46/bbl Gold spot down 0.5% to $1,784.14 U.S. Dollar Index little changed at 93.98 Top Overnight News from Bloomberg Chinese authorities told billionaire Hui Ka Yan to use his personal wealth to alleviate China Evergrande Group’s deepening debt crisis, according to people familiar with the matter Germany cut its 2021 growth outlook to 2.6% -- compared with a prediction of 3.5% published at the end of April -- reflecting a scarcity in some raw materials and rising energy prices, particularly for gas, Economy Minister Peter Altmaier said Wednesday in an interview with ARD television China plans to limit the price miners sell thermal coal for as it seeks to ease a power crunch that’s prompted electricity rationing and even caused a blackout in a major city last month The SNB stressed that in light of the highly valued currency and the degree of economic slack, expansive monetary policy needs to be maintained, according to an account of President Thomas Jordan’s meeting with Swiss govt Sweden’s National Debt Office is reducing its bond borrowing in both kronor and foreign currency because central government finances are recovering faster than expected from the pandemic, according to a statement A more detailed look at global markets courtesy of Newsquawk Asian markets adopted a downside bias as sentiment waned following the mild gains on Wall Street, in which the S&P 500 and DJIA eked out record closes after easing off best levels. The US close also saw earnings from behemoths Microsoft, Alphabet and AMD - the former rose 2% after blockbuster metrics, whilst the latter two dipped after-market. Meanwhile, Twitter shares rose almost 4% after hours as the Co. highlighted the lower-than-expected Q3 impact from Apple’s privacy-related iOS changes. On the flipside, Robinhood slumped over 8% after reporting a steep decline in crypto activity. It’s also worth noting that Berkshire Hathaway Class A shares - the world’s most expensive shares - are quoted +51% after-market (+USD 223,614.00/shr); reasoning currently unclear. Overnight, US equity futures resumed trade flat before a mild divergence became evident between the NQ and RTY, whilst European equity futures' losses were slightly more pronounced. Back to APAC, the ASX 200 (+0.1%) was buoyed by its tech sector amid the post-Microsoft tailwinds from the US, but the sector configuration then turned defensive, whilst Woolworths slumped some 4% after earnings and dragged the Consumer Staples sector with it. The Nikkei 225 (-0.1%) saw losses across most sectors, with Retail, Insurance and Banks towards the bottom. The KOSPI (-0.8%) conformed to the downbeat mood, whilst Hyundai shares were also pressured amid its chip-related commentary. The Hang Seng (-1.6%) and Shanghai Comp (-1.0%) declined despite another substantial CNY 200bln PBoC liquidity injection for a net CNY 100bln. The Hang Seng accelerated losses in the first half-hour of trade with Alibaba, Tencent and Xiaomi among the laggards. Meanwhile. PAX Technology slumped 45% after the FBI raided the Co's Florida officers amid suspicion PAX’s systems may have been involved in cyberattacks on US and EU organizations. Finally, 10yr JGBs were lower amid spillover selling from T-notes and Bund futures, whilst the Aussie 3yr yield topped 1.00% for the first time since 2019 as the trimmed and weighted Australian CPI metrics moved into the RBA's target zone. Top Asian News China Agrees Plan to Cap Key Coal Price to Ease Energy Crisis China Tech Stocks Slump as Tensions With U.S. Spook Investors Top Court Orders Probe Of India’s Alleged Pegasus Use Tokyo Stock Exchange to Extend Trading Day by 30 Minutes European equities (Stoxx 600 -0.3%) are trading moderately lower in a session which has been heavy on earnings and light on macro developments. The APAC session saw more pronounced losses in Chinese bourses (Shanghai Comp -1%, Hang Seng -1.8%) compared to peers despite ongoing liquidity efforts by the PBoC with Hong Kong stocks hampered by losses in Alibaba, Tencent and Xiaomi. Stateside, performance across US index futures were initially firmer before following European peers lower with more recent downside coinciding with the US Senate Finance Committee Chairman unveiling a tax proposal focused on unrealised gains of assets held by billionaires and impose a 23.8% capital gains rate on tradable assets such as stocks; ES -0.1%. The US close saw earnings from behemoths Microsoft, Alphabet and AMD - the former rose 2% after blockbuster metrics, whilst the latter two dipped after-market. Meanwhile, Twitter shares rose almost 4% after hours as the Co. highlighted the lower-than-expected Q3 impact from Apple’s privacy-related iOS changes. On the flipside, Robinhood slumped over 8% after reporting a steep decline in crypto activity. In the pre-market, upcoming earnings highlights include McDonalds, Boeing, GM, Bristol Myers and FTSE 100-listed GSK. Back to Europe, sectors are mostly lower with Basic Resources and Oil & Gas names at the foot of the leaderboard amid performance in underlying commodity prices. Banking names are also trading on a softer footing following earnings from Deutsche Bank (-5.4%) which saw the Co. report a decline in trading revenues whilst managing to make a profit for the 5th consecutive quarter. Spanish heavyweight Santander (-2.5%) is also acting as a drag on the sector despite reporting a net profit above expectations for Q3 with some desks highlighting softer performance for its US operations. Elsewhere, Sodexo (+5.6%) is the best performer in the Stoxx 600 after strong FY results, whilst Puma (+3.2%) trades on a firmer footing after reporting a beat on Q3 earnings and raising guidance. To the downside, BASF (-1.0%) shares are seen lower despite exceeding expectations for earnings with the Co. cautioning that the impact from higher Nat Gas prices in the first nine months of the year amounted to EUR 600mln costs and a significant increase in costs is expected following the October price hike. Top European News Deutsche Bank Falls; Results Fail to Provide Fresh Catalyst BASF Points to Chemical Price Surge Easing as Supply Increases SNB’s Jordan Stressed Need for Loose Policy in Govt Meeting U.K.’s Sunak Set to Cut Tax on Domestic Flights: The Independent In FX, nearly, but not quite for the index in terms of turning full circle on Tuesday and matching the prior week high as it fell just shy at 94.024 vs 94.174 on October 18, while also narrowly missing 94.000 on a ‘closing’ basis with a last price of 93.956. Moreover, month end rebalancing factors are moderately bearish for the Greenback against G10 rivals, and especially vs the Yen that has a relatively large 1.6 standard deviation and appears to be playing out in the headline pair and Jpy crosses on spot October 29. Indeed, Usd/Jpy has recoiled further from yesterday’s peak circa 114.31 to sub-113.60 before taking cues from the BoJ tomorrow and Japanese retail sales in the run up, but decent option expiry interest between 113.55-50 (1.8 bn) may underpin and support the DXY by default within a narrow 94.008-819 band. More immediately for the Buck in particular and peers indirectly, US durable goods, advance trade, wholesale and retail inventories. CHF/AUD - Also firmer vs their US counterpart, as the Franc clambers back above 0.9200 irrespective of a deterioration in Swiss investor sentiment and the growing chance that the SNB could be prompted to respond to a retreat in Eur/Chf from 1.0700+ to 1.0637 or so. Elsewhere, the Aussie has pared some of its post-core inflation inspired gains, but is holding close to 0.7500 and still outpacing its Antipodean neighbour as Aud/Nzd hovers around 1.0500. NZD/CAD/GBP - A downturn in overall risk sentiment and the aforementioned cross headwinds are weighing on the Kiwi that has slipped under 0.7150 vs its US namesake, and it’s a similar tale for Sterling that failed to retain 1.3800+ status or breach 0.8400 against the Euro before the latest reports about France preparing retaliatory measures against the UK over the fishing rights dispute. On top of that, Eur/Gbp tides are turning into month end and the usual RHS flows seen into and around fixings, while the Pound may also be acknowledging a pull-back in Brent prices in advance of the Budget, like the Loonie in respect of WTI ahead of the BoC, with Usd/Cad back above 1.2400 compared to 1.2350 at one stage on Tuesday and a tad lower in the prior session. Note, the break-even via implied volatility indicates a 58 pip move on the policy meeting that comes with a new MPR and press conference from Governor Macklem. EUR - Notwithstanding several gyrations and deviations of late, the Euro seems largely anchored to the 1.1600 mark vs the Dollar and yet more option expiries at the strike (1.5 bn today) may well be a contributing factor as the clock continues to tick down Thursday’s ECB convene that is seen as a dead rubber event in passing ahead of the big one in December - check out the Research Suite for a preview and other global Central Bank confabs scheduled this week. SCANDI/EM - Hardly a surprise to see the Nok recoil alongside crude prices, but the Sek is holding up relatively well in wake of an uptick in Swedish household lending and a big swing in trade balance from deficit to surplus. Conversely, the Try’s stoic revival mission has been derailed to an extent by dip in Turkish economic confidence offsetting a narrower trade shortfall, the Rub and Mxn are also feeling the adverse effects of oil’s retracement, the Zar is tracking Gold’s reversal through 200 and 100 DMAs, and the Cny/Cnh have been ruffled by the latest US-China angst, this time on the telecoms front. Last, but not least, the Brl anticipates a minimum 100 bp SELIC rate hike from the BCB, if not 125 bp as some hawkish forecasts suggest. In commodities, a softer start to the session for WTI and Brent seemingly stemming from the cautiously downbeat tone portrayed by broader risk and continuing to take impetus from last night’s Private Inventory report. For reference, the benchmarks are currently lower in excess of USD 1/bbl and WTI Dec’21 has been within touching distance of the USD 83.00/bbl figure, though is yet to test the level. Returning to yesterday’s crude report which printed an above consensus build of 2.318M for the headline print while the gasoline and distillate components were unexpectedly bearish, posting modest builds against expected sizeable draws. Looking ahead, the EIA release is expected to post a headline build. Aside from this, crude specific newsflow has been limited ahead of next week’s OPEC+ gathering though Iran remains on the radar given the latest release of constructive commentary on nuclear discussions. Albeit, we are still awaiting details on a return to full Vienna discussions. Moving to metals, spot gold and silver are softer on the session in a continuation of action seen around this time during yesterday’s session; metals pressured in wake of a choppy, but ultimately firmer, dollar. Elsewhere, China has reportedly agreed to set a price cap for thermal coal sales and comes as part of the ongoing crackdown by China on the commodity which spurred Zhengzhou thermal coal futures to hit limit-down overnight. US Event Calendar 8:30am: Sept. Durable Goods Orders, est. -1.1%, prior 1.8%; 8:30am: Durables Less Transportation, est. 0.4%, prior 0.3% Sept. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.6% Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.8% 8:30am: Sept. Retail Inventories MoM, est. 0.2%, prior 0.1%; Wholesale Inventories MoM, est. 1.0%, prior 1.2% 8:30am: Sept. Advance Goods Trade Balance, est. -$88.3b, prior -$87.6b, revised -$88.2b DB's Jim Reid concludes the overnight wrap It’s day 42 out of 42 on crutches without any weight bearing on my left leg. Over that period I’ve been hopping, crawling, sliding, and using the crutches as a pole vault amongst other various forms of self transportation. So sadly today is the last day I get waited on. When I wake up tomorrow I’ll try to walk again and fend for myself. Equities threw away their crutches a couple of weeks ago and haven’t looked back. US Earnings have helped and while they aren’t as good as the headline beats suggest, due to big unwinding of reserves for loan loss provisions at the banks, they are notably better than some of the stagflationary gloom stories that dominated in the weeks ahead of this season. A reminder that our equity guys did their state of play on earnings a couple of days back here. Big tech was always going to be the swing factor between a slightly better than normal level of beats and a more aggressive one. Last night Alphabet, Microsoft, and Twitter all reported after hour. Alphabet and Microsoft beat on both sales and earnings, while Twitter’s revenue just missed expectations but traded higher after hours. Of the 41 S&P 500 companies that reported yesterday, 33 beat estimates. For the earnings season to date, 166 S&P companies have reported, with 139 beating earnings estimates. Prior to this, markets continued to stay in their “new normal” of record or cyclical high equity prices and multi-year breakeven highs. Positive surprises for earnings on both sides of the Atlantic helped yesterday as did strong US consumer confidence numbers. Starting with the US, along with strong earnings, a number of positive surprises in an array of economic data yesterday did just enough to push the S&P 500 (+0.18%) and the DJIA (+0.04%) to new record highs, while the Nasdaq (+0.06%) fell short of beating its record set on September 30th. The FAANG Index lagged on the day, dropping -0.33%, but managed new all-time highs intraday. On the other side of the Atlantic, European equities notched solid gains as well, with most major European markets finishing well in the green territory, lifting the STOXX 600 by +0.75% - a fraction below its record high. All index sectors but energy (-0.29%) finished higher on the back of strong earnings early in the session, particularly from UBS and Novartis. Taking a closer look at the aforementioned economic data, October US consumer confidence came in at 113.8 versus 108.0 expected, while the Richmond Fed Manufacturing index rose to 12, beating expectations of 5. In housing, new home sales for September (800k) surpassed estimates (756k) by a decent margin, whereas the August FHFA House Price Index came in at +1.0% versus +1.5% expected. There were further signs of a tight US jobs market as the labour market differential in the Conference Board index improved to 45.0, the best reading since 2000. Similar to Monday, breakevens climbed as real yields fell in the US and Germany. Nominal 10-year Treasuries were -2.3bps lower, while breakevens increased +2.6bps to 2.69%, still just a hair beneath all-time highs for the series. 10-year bunds declined -0.3bps while the breakeven widened +3.0bps. Breakevens took a breather in the UK, narrowing -8.6bps, whilst 10-year gilts were -3.0 bps lower. In Asia, most major indices are down this morning. The Nikkei 225 (-0.61%), KOSPI (-0.92%), Hang Seng (-1.58%) and Shanghai Composite (-0.92%) are all trading lower. Sentiment soured after the real estate saga continued with Chinese authorities asking companies to get ready to repay offshore bonds, while also urging Evergrande’s founder to employ his own wealth to aid the struggling developer. Additionally, in geopolitics, the US Federal Communications Commission banned China Telecom (Americas) Corp. from operating in the US on the back of national security concerns. Data releases from Asia continued to support the inflationary narrative amid rising commodity prices as we saw a +16.3% YoY growth in China’s industrial profits in September, up from +10.1% a month earlier. Meanwhile, Australia’s trimmed mean CPI (+2.1%) came in above expectations (+1.8%), sending the 3y yield higher by +14.5bps. The S&P 500 mini futures (0.00%) is broadly unchanged with the 10y Treasury at 1.622 (+1.4bps). In commodities, oil futures were mostly mixed yesterday, but both WTI (+1.06%) and Brent (+0.48%) managed to rise by the European close, as Saudi Aramco said earlier in the session that oil output capacity is declining rapidly across the world. On the other hand, European weather forecasts that pointed at lower temperatures starting next week did little to propel natural gas prices, which declined both in the region (-0.33%) and in the US (-0.27%). Briefly taking a look at the virus news, The FDA’s vaccines advisory committee voted 17-0 to back jabs for kids ages 5-11. The dose for the younger cohort amounts to one third of the current one given to those over the age of 12, which means that it could be more quickly distributed if the demand is there. The agency will give its final ruling soon, which is expected to follow the panel’s recommendation, and then the shots could be distributed within weeks to schools, pediatricians, and pharmacies. Elsewhere, Singapore will allow fully vaccinated travelers from Australia and Switzerland to enter without quarantine from November 8. In terms of upcoming data releases today, we will get preliminary September wholesale inventories, durable goods orders and core capital goods orders from the US. In Europe, Germany November GfK consumer confidence, France October consumer confidence and Euro Area September M3 money supply are due. In central banks, monetary policy decisions from the Bank of Canada and Central Bank of Brazil will be released. On the corporate earnings front, companies reporting include Thermo Fisher Scientific, Coca-Cola, McDonald’s, Boeing, General Motors, Santander and Ford. Elsewhere, the UK government announces Autumn Budget and Spending Review. Tyler Durden Wed, 10/27/2021 - 07:53.....»»

Category: blogSource: zerohedgeOct 27th, 2021

Taibbi: Konstantin Kilimnik, Russiagate"s Last Fall Guy, Speaks Out

Taibbi: Konstantin Kilimnik, Russiagate's Last Fall Guy, Speaks Out Authored by Matt Taibbi via TK News, On Real Time With Bill Maher two Fridays ago, I fumbled and deflected politely over a Russiagate question, instead of going full cage match. The segment went off the rails beginning with this exchange: MAHER: You compared it to WMDs. You said, the Russia connection with Trump is this generation’s WMD. I don’t think that’s an accurate analogy, because there were no WMDs. But there was collusion with Russia. TAIBBI: Really? Where? MAHER: Where? The Senate Intelligence Committee, run by Republicans, who are if anything slavish to Trump, their report said, “The Trump campaign’s interactions with Russian intelligence services during the 2016 presidential election posed a ‘grave’ counterintelligence threat.” First of all, that quote isn’t from the Senate Select Committee on Intelligence (SSCI) report from last August. It’s actually a paraphrase of the report from an Associated Press article, “Trump campaign’s Russia contacts ‘grave’ threat, Senate says,” which reads: WASHINGTON (AP) — The Trump campaign’s interactions with Russian intelligence services during the 2016 presidential election posed a “grave” counterintelligence threat, a Senate panel concluded Tuesday… The real SSCI quote is a little different: Taken as a whole, Manafort's high-level access and willingness to share information with individuals closely affiliated with the Russian intelligence services, particularly Kilimnik and associates of Oleg Deripaska, represented a grave counterintelligence threat. By all rights, Russiagate should be dead as a serious news story. But as the Real Time episode showed, “collusion” is still alive for some, and the bulk of the case essentially rests now upon the characterization of one person from the above passage as a Russian agent: a former aide to Paul Manafort named Konstantin Kilimnik. Kilimnik is a Ukrainian-American who’d served in the army and was hired to work as a translator at the American-funded International Republican Institute in Moscow beginning in the mid-nineties. In 2005, he left the IRI to go work for Paul Manafort, who was advising future president Viktor Yanukovich and the “Party of Regions” in Ukraine. As it happens, Kilimnik worked at the IRI in Moscow during the same time I lived in that city in the nineties and early 2000s. In fact, he was well-known enough in that small expatriate community that in the space of a day last week I was able to reach, through mutual acquaintances, five of Kilimnik’s former colleagues, including three from the IRI and one from the U.S. State Department, to whom he was a regular and valuable contact (the Senate investigators left that fact out). I also called Kilimnik and had two lengthy interviews with him. Why bring this up? Because in that little flurry of calls, I did more actual work on Konstantin Kilimnik than either the Special Counsel or SSCI researchers, who ostensibly spent thousands of man-hours investigating him. Kilimnik being a spy wouldn’t just mean that the Trump campaign had been penetrated. It would mean the same thing for the IRI, which was chaired by late Senator and leading proponent of the Russiagate theory John McCain at the time. More to the point, it would also be disastrous for the State Department, and particularly for the U.S. embassy in Ukraine, whose staffers placed great trust in “KK” as a regular source. The FBI’s own declassified reports show Kilimnik met with the head of the Kiev embassy’s political section “at least biweekly” during his time working with Manafort and Yanukovitch, adding that he “displayed good knowledge and seemed to know what was going on,” and came across as “less slanted” than other sources, among many other things. This fits with what I was told by multiple former colleagues of Kilimnik’s, that staffers in the Kiev embassy valued his analyses above those of some Americans in Yanukovitch’s orbit. (A third former co-worker was a little more blunt about what he heard, saying the Kiev embassy was “sucking his dick”). They also show the embassy was so intent on protecting Kilimnik’s identity as a State Department source that they pulled his name out of diplomatic cables sent home: Kilimnik says he “played a certain role in communication with the Western embassies in Kiev” both before and after the “Euromaidan” Revolution in 2014. “I tried to draw attention to facts about thugs attacking TV channels and opposition politicians, and things like [an arson attack against “InterTV” in 2016],” he says, adding that he “naively thought the West would stand for media freedom and protecting rules for fair play in politics, like it has for many years.” The only reason nobody’s asked the Senate Committee why Kilimnik’s alleged spy status doesn’t also represent a “grave” embarrassment to, say, the U.S. State Department is because our press corps is the most dogshit on earth (more on that in a moment). Special Counsel Robert Mueller claimed the FBI spoke to an IRI employee who said Kilimnik was “fired from his post because his links to Russian intelligence were too strong.” Though not all the IRI staffers I reached liked Kilimnik, each found the idea that he might be a spy alternately ridiculous and baffling. Multiple ex-colleagues said they believed he was fired for “moonlighting,” i.e. because he’d already started working for Manafort. “I was actually moonlighting. It was a funny story,” Kilimnik says (for a more complete explanation, see the Q&A below). As to the idea that it was known around the IRI office that Kilimnik had intelligence ties, one former senior IRI official said, “I think whoever said that, that’s someone trying to feel more important in retrospect,” adding that the idea that he was “some GRU plant from years gone by” was questionable because the Russians “didn’t know their right from their left back then, and the IRI could not described as a high-value target.” The official concluded: “I find the notion that Kilimnik is now this big figure remarkable.” None of former employees of the Moscow IRI office I spoke with had been contacted by any American investigator, including Mueller. Then there’s the matter of the suspect himself. Question to Kilimnik: how many times was he questioned by American authorities, with whom he was so familiar — remember he met with American officials “at least biweekly” at one point pre-Trump — during the entire Russiagate period? “Not a single person from the U.S. Government ever reached out to me,” Kilimnik says. Nobody from the Office of the Special Counsel, the FBI, or the Senate Intelligence Committee ever contacted him? “Not once,” Kilimnik says. “Nobody from Mueller’s team reached out to me, literally nobody.” In reaching Kilimnik last week I also became just the second American reporter, after Aaron Maté of RealClear Investigations and Grayzone, to call Kilimnik for comment on the Senate report. Virtually every American news organization or TV commentary program has in the last year repeated accusations against Kilimnik made by either the Senate Intelligence Committee or the U.S. Treasury Department, which earlier this year called him a “Russian Intelligence Services agent” in an announcement of sanctions against Russia. It was once normal practice in American media to give people a chance to respond to serious allegations, but no longer, apparently. “Zero. Zero,” says Kilimnik, when asked how many American media outlets called him after the release of the Senate report. Incidentally, Kilimnik isn’t hiding under a snow-covered trap door at a secret FSB installation outside Izhievsk. He’s in an apartment in Northwest Moscow, where anyone could find him. “Everybody knows my phone number. It was in Mueller’s reports,” he says. “But I got no questions. I mean, a lot of people know how to find me. I guess they just didn’t care.” Kilimnik was even on the list of 16 entities and 16 individuals the Treasury just this year said “attempted to influence the 2020 U.S. presidential election at the direction of the leadership of the Russian Government.” That’s the 2020 election, not the 2016 election, meaning the one that came after the Senate report. “The US actually sanctioned me for interference in 2020 elections,” Kilimnik says. “I would not be able to say why. I’d love to know. I’ve been sitting in fucking Moscow, in my backyard, and feeding squirrels. Must have been some sort of interference.” The aforementioned Maté published photos of Kilimnik’s passport that appear to show he entered the U.S. on a visa stamped in a regular Russian passport on October 28, 1997. This is the same date the Senate committee said he was entering the United States on a diplomatic passport. The Senate also said Kilimnik met with Manafort in Spain in 2017, which he denies. “I’ve never been to Spain,” Kilimnik laughs. “I haven’t been there. Let them prove I’ve been there.” Another thing that came up on Real Time was the idea that we shouldn’t dismiss the monetarily tiny Russian Facebook campaign — featuring classics that ironically read like Real Time bits, with images of Jesus pleading with American voters, “Struggling with addiction to masturbation? Reach out to me and we’ll beat it together” — because “9/11 didn’t cost much either”: I oversold things on the air, talking about how the Internet Research Agency only spent $100,000, as only $44,000 of that was before the campaign. More importantly, only a tiny percentage of ads qualified as coherent propaganda. I’d wager few Americans have actually read through all these ads, which have messages like, “Tell me once again that there’s no such thing as white privilege,” “Stop Trump and his bigoted agenda!”, and “Share the experience and the challenges of the black hair industry.” Overall, for 2016, they read like a creepy, overambitious parody of woke culture, with a tinge of Charlie Manson’s “Helter Skelter” plan thrown in. Whatever it is/was, it’s pretty far from 9/11: Kilimnik stands accused of helping Evil Von Putin aim this high-tech weapon. How? Senate investigators said, “Manafort briefed Kilimnik on sensitive Campaign polling data and the Campaign’s strategy for beating Hillary Clinton.” What was sensitive about it? “That’s bullshit. There was nothing that resembled ‘sensitive’ polling data,” Kilimnik says. “I would get two figures maybe once a month, not every day, not every week.” Two figures — meaning two pages? “Two digits,” he says. “Like, ‘Trump 40, Hillary 45.’ That’s all I would get, nothing more. So I don’t understand how this is sensitive data.” Kilimnik was getting his information from former Trump deputy campaign chief Rick Gates, who was directed to send the data to Kilimnik by Manafort. None other than Rachel Maddow once called Gates “Mueller’s star cooperating witness.” I called Gates last week and asked: what was he passing to Kilimnik? “Top-line data, and I want people to understand what that means,” he says. “It was like, ‘Ohio, Clinton 48, Trump 50,’ Or, ‘Wisconsin, Trump 50, Clinton 42.’ The sources were a combination of things like RealClear Politics and occasionally some numbers from [Republican pollster] Tony Fabrizio. But it was all just top-line stuff.” Gates’s story is that Manafort was passing this data back to people like his longtime sponsors, the Ukrainian barons Rinat Akhmetov and Sergei Lyvochkin, because “Paul was just trying to show that Trump was doing well,” as “Paul was just trying to do what he’s always done,” i.e. trying to show how valuable he could be. For those disinclined to believing the Gates or Kilimnik version of events, remember that neither Mueller nor the Senate Intelligence Committee could come up with a different one. Apart from adding “sensitive” to their description (Mueller just called it “internal polling data”), the Senate never offered evidence that Kilimnik was getting more than those few numbers. As to why Kilimnik was sent this information, this is what the Senate had to say: The Committee was unable to reliably determine why Manafort shared sensitive internal polling data or Campaign strategy with Kilimnik. Manafort and Gates both claimed that it was part of an effort to resolve past business disputes and obtain new work with their past Russian and Ukrainian clients by showcasing Manafort's success. Why “sensitive?” The Committee was “unable to reliably determine” why, having no idea what Kilimnik did with those numbers. But they were sure enough it was bad to conclude it represented a “grave counterintelligence threat.” Kilimnik is roughly the twentieth suspect in a long list of alleged secret conduits that across five years have already been tried out and discarded by pundits and investigators alike as “smoking gun” links between Trump and Putin. An abbreviated list: There was a Maltese professor named Josef Mifsud and a young Trump aide named George Papadopoulos, former Trump adviser Carter Page, an alleged “secret server” supposedly pinging between Trump and Alfa Bank, former Trump campaign foreign policy adviser J.D. Gordon, former Attorney General Jeff Sessions, former Trump lawyer Michael Cohen, the Russian lawyer Natalia Veselnitskaya, real estate developer Felix Sater, another Russian who approached Trump people claiming to have dirt on Hillary Clinton named Henry Oknyansky, a Russian firm called Concord Consulting, plus Michael Flynn, Roger Stone, and many others. The pattern with all of these “smoking gun” cases was the same. At first, there would be a great press hullaballoo, complete with front-page media profiles and heated straight-to-camera monologues at the tops of cable commentary shows over “Breaking News” chyrons: Freakouts would be long, but months or years later, narratives would collapse. Ambassador Sergei Kislyak was everyone’s favorite suspect in the summer of 2016 for having done everything from rig the Republican convention platform to turning Sessions into a spy, but then Mueller quietly said Kisylak’s interactions with Trump officials in those months were “brief, public, and non-substantive.” Reporters howled that Christopher Steele was right about Cohen meeting Russian hackers in Prague to help rig the 2016 race, and even claimed (see above) that Mueller was about to release evidence of it any minute, until Mueller said flatly, “Cohen… never traveled to Prague.” The saddest case involved Carter Page. Steele’s Dossier identified Page — not Vladimir Putin, Julian Assange, or even Donald Trump — as the mastermind of the Wikileaks leak: The aim of leaking the DNC e-mails to WikiLeaks during the Democratic Convention had been to swing supporters of Bernie SANDERS away from Hillary CLINTON and across to TRUMP… This objective had been conceived and promoted, inter alia, by TRUMP’s foreign policy adviser Carter PAGE… Steele also had Page negotiating a massive bribe via the oil company Rosneft in exchange for the dropping of sanctions, and acting as the personal intermediary between Paul Manafort and the Kremlin. Page, not knowing he was being spied upon, told an FBI informant that August that he had “literally never met” or “said one word to” Paul Manafort, even going so far as to complain that Manafort never answered his emails. The FBI sat on this information, and wrote up a secret surveillance warrant application that read: Sub-Source reported that the conspiracy was being managed by Candidate’s then campaign manager, who was using, among others, foreign policy advisor Carter Page as an intermediary… It wasn’t until the report by Inspector General Michael Horowitz came out in December of 2019 that the world found out that the FBI not only “did not have information corroborating the specific allegations against Carter Page,” but had covered up Page’s history as an informant for the CIA, very much like the Senate and the Treasury are now covering up Kilimnik’s status as a U.S. State Department source. Kilimnik is just the last person on the list, and he’s conveniently in Moscow, unlikely to ever come back here to defend himself. As such, he’s the perfect fall guy for the marooned-Japanese-soldier-type holdouts on Russiagate who think the collusion narrative is still viable. More from Kilimnik: TK: You were described by the Senate Intelligence Committee as a “Russian Intelligence Officer.” Are you one? Konstantin Kilimnik: I have not had any relationship with any intelligence agency. Not with U.S. intelligence, not the Ukrainian, Russian, Zimbabwean, whatever. I’m a consultant who has worked for many years running elections in Ukraine. I just haven’t had any relationship with any intelligence, and haven’t seen any facts proving otherwise. I think the investigation was so politically charged from the beginning, that they just needed to find a Russian body that they could just put as much dirt as possible on. Ultimately, nobody is going to care, because all the Russians are considered to be bad anyhow, they’re all spies. TK: The intelligence community in the U.S. seems unanimous in their conclusion that Russians interfered in the 2016 and 2020 elections. Did they not? Konstantin Kilimnik: I don’t think Russians interfered… I know that runs counter to all the conclusions of the intelligence community and all that country to all the intelligence and press and all that. And maybe there were other efforts, as well. But, I was not involved in any of that. There was a lot of misinformation, just because the public wanted someone, and I just happened to be that person thrown into the mix. If I had Hungarian citizenship or any other citizenship, of course, people would not have given my name. They just needed the Russian connection, and I happened to be that unfortunate Russian connection. TK: The Mueller report claims an IRI employee believed you were “fired from his post because his links to Russian intelligence were too strong.” Others say you were “moonlighting.” Why did you leave the IRI? Konstantin Kilimnik: I was actually moonlighting. It was a funny story. I was looking for ways to move on, because by 2005 I had been at IRI for 10 years. Some time in mid-2004 an old IRI pal, Phil Griffin, reemerged and proposed a well-paying job of going to Ukraine and writing analyses of what was going on during the Orange Revolution, for Manafort. So, I went there after not having been to Ukraine for over 10 years. I was ecstatic about Kiev and got seriously interested in what was going on politically… Manafort, Griffin and I (as a translator) went to Donetsk in, I think, November 2004 to meet some guy I had no previous knowledge of (who turned out to be Rinat Akhmetov’s closest confidant, Borys Kolesnikov). Manafort and he spoke for several days and got convinced that the “Donetsk guys” were not even close to being thugs they had been portrayed by the Western media to be. I went back a couple of times to translate for these meetings, which I thought were not in any conflict with my work at IRI Moscow. Then, the government in Ukraine changed. [Viktor] Yuschenko became the President, Manafort was in negotiations about the contract, and I almost forgot about my short translation jobs. In April 2005, we were at an IRI retreat, and my boss, director of Europe and Eurasia programs Steve Nix got a tip from the new President’s office that “Donetsk thugs” were looking to hire an American consultant, and that a guy who seemed to work at IRI was helping in the process. Steve, who was very pro-Yuschenko, completely freaked out, and accused me of working for criminals. I said that a) I was doing this in my free time, 2) this did not conflict in any way with my job at IRI Russia, and 3) maybe things are not so straightforward in Ukrainian politics, and there are no guys in black and white hats, but mostly gray hats. He disagreed and demanded I resign, which I did. TK: The Senate claims you met Manafort in Spain in 2017. Did you? Konstantin Kilimnik: I have never been to Spain. (laughter)...I have not been there. They can’t prove that. And yet they’ve inserted that. And yet, that’s central to what they’re saying. Europe is specific place in terms of passports and immigration. To cross the border, you have to give your fingerprints, and upon any re-entry too. If I went to Spain, I can guarantee that, first of all, Europe keeps a record of that. They would say that I have crossed the border at a certain time in a certain place. And that would be okay because, again, it’s all tied to the fingerprints. You cannot get into the EU without this. You can’t fake it. So let them prove it. TK: You’ve been accused of obtaining that “sensitive polling data” for Oleg Deripaska. Was that right? Konstantin Kilimnik: No, Deripaska was a Russian businessman. I actually didn’t have any contact with him. There were Ukrainian businessmen and Ukrainian politicians in 2016 who were in opposition, and who were actually under pressure from Petro Poroshenko’s government. Naturally, for them, any change, opening a channel into the U.S. Government, that for them would have been a great thing. So that’s why they were interested in the outcome of the elections. There was no Russian connection whatsoever. If there were, they would have a record of me talking to Deripaska or visiting him.TK: You never had any contact with Deripaska? Konstantin Kilimnik: No, I haven’t met him since, I’m afraid to be exact, but like 2006, I think was the last time I saw him. I was translating for Manafort. But after that, Manafort spoke to him himself, because Deripaska spoke the language by then. And there was no need for me. Part 2 of my interview with Konstantin Kilimnik is coming later this week. Tyler Durden Wed, 10/13/2021 - 21:25.....»»

Category: blogSource: zerohedgeOct 13th, 2021

Futures Rebound From Overnight Slide As Oil Keeps Rising

Futures Rebound From Overnight Slide As Oil Keeps Rising US equity-index futures erased earlier declines, rebounding from a loss of as much as 0.8% helped by the start of the European session and easing mounting concerns about stagflation from rising energy prices, signs of widening regulatory scrutiny by China, and the upcoming third-quarter earnings which is expected to post a sharply slower pace of growth and beats than recent record quarters. At 730am ET, Dow e-minis were up 5 points, or 0.1%, S&P 500 e-minis were up 7.25 points, or 0.16%, and Nasdaq 100 e-minis were up 46.75points, or 0.31%. Oiil rose 0.3% to $83.86/bbl while the dollar dipped and 10Y yield drifted back under 1.60%. Gains in tech stocks kept Nasdaq futures afloat on Tuesday, while energy names rose as Brent resumed gains, trading around $84/bbl on expectations that a power crisis from Asia to Europe will lift demand and tighten global balances. Higher oil prices and supply chain disruptions have set off alarm bells for businesses and consumers ahead of the third-quarter reporting season that kicks off on Wednesday with JPMorgan results.  "We believe that market participants could stay concerned over high energy prices translating into further acceleration in inflation, and thereby faster tightening by major central banks," said Charalambos Pissouros, head of research at JFD Group. In the pre-market, Tesla rose 0.7% after data showed the electric vehicle maker sold 56,006 China-made vehicles in September, the highest since it started production in Shanghai about two years ago. Oil firms including Exxon Mobil and Chevron Corp gained 0.1% and 0.3%, respectively, as Brent crude hit a near-three year high on energy crunch fears. Here are the notable movers: China’s Internet sector is one of the “most undervalued” in Morningstar’s coverage, says Ivan Su, an analyst, adding that Tencent (TCEHY US) and Netease (NTES US) are top picks MGM Resorts (MGM US) rises 2% in U.S. premarket trading after stock was upgraded to outperform from neutral and price target more than doubled to a Street-high $68 at Credit Suisse Quanterix (QTRX US) jumped 20% in Monday postmarket trading after the digital-health company announced that its Simoa phospho-Tau 181 blood test has been granted breakthrough device designation by the U.S. FDA as an aid in diagnostic evaluation of Alzheimer’s disease Relay Therapeutics (RLAY US) fell 7% in Monday postmarket trading after launching a $350 million share sale via Goldman Sachs, JPMorgan, Cowen, Guggenheim Securities Westwater Resources (WWR US) rose as much as 26% in Monday postmarket trading after its board of directors approved construction of the first phase of a production facility in Alabama for battery ready graphite products TechnipFMC (FTI US) in focus after co. was awarded a substantial long-term charter and services contract by Petrobras for the pipelay support vessel Coral do Atlântico Fastenal, which was one of the first companies to report Q3 earnings, saw its shares fall 2.4% in premarket trading on Tuesday, after the industrial distributor said the Covid-related boost was fading. The company said growth in the quarter was slightly limited by either slower expansion or contraction in sales of certain products related to the pandemic, when compared to the previous year quarter. While there was an uptick in sales of certain Covid-related supplies, the unit price of many products was down significantly, the company said in a statement.  Third-quarter sales and profit were in line with the average analyst estimate "While investors want to believe the narrative that stock markets can continue to move higher, this belief is bumping up against the reality of how the continued rise in energy prices, as well as supply-chain pressures, are likely to impact company profit margins,” said Michael Hewson, chief market analyst at CMC Markets in London. In Europe, losses led by basic resources companies and carmakers outweighed gains for utilities and tech stocks, pulling the Stoxx Europe 600 Index down 0.1%. Metals miner Rio Tinto was among the worst performers, dropping 2.7%. European equities climbed off the lows having lost over 1% in early trade. Euro Stoxx 600 was down -0.35% after dropping as much as 1.3% initially, led by basic resources companies and carmakers outweighed gains for utilities and tech stocks. The DAX is off 0.3%, FTSE 100 underperforms in a quiet morning for news flow. Miners, banks and autos are the weakest sectors after China reported a sharp drop in auto sales; utilities, tech and real estate post modest gains. European tech stocks slide, with the Stoxx Tech Index dropping as much as 1.4% in third straight decline, as another broker downgrades TeamViewer, while Prosus and chip stocks come under pressure. TeamViewer shares fall as much as 5.1% after Deutsche Bank downgrades the remote software maker to hold from buy following recent guidance cut. Asian stocks fell, halting a three-day rally as uncertainty over earnings deepened amid elevated inflation, higher bond yields and the risk of a widening Chinese crackdown on private industry. The MSCI Asia Pacific Index slid as much as 1.2%, led by technology and communication shares. Alibaba plunged 3.9% following a rally over the past week, while Samsung Electronics tumbled to a 10-month low after at least five brokers slashed their price targets, as China’s power crisis is seen worsening supply-chain disruptions. “Given the run-up in tech so far, it’s not difficult for investors to harvest profits first before figuring out if techs can maintain their growth when yields rise,” said Justin Tang, head of Asian research at United First Partners. Shares in Hong Kong and the mainland were among the worst performers after Chinese authorities kicked off an inspection of the nation’s financial regulators and biggest state-run banks in an effort to root out corruption. The MSCI Asia Pacific Index is down 12% from a February peak, with a global energy crunch lifting input prices and the debt crisis at China Evergrande Group weighing on the financial sector. Investors are waiting to see how this impacts earnings, according to Jun Rong Yeap, a market strategist at IG Asia.  “Increasing concerns on inflation potentially being more persistent have started to show up,” he said. “This comes along with the global risk-off mood overnight, as investors look for greater clarity from the earnings season on how margins are holding up, along with the corporate economic outlook.” Japan’s Topix index also fell, halting a two-day rally, amid concerns about a global energy crunch and the possibility of a widening Chinese crackdown on private industry. The Topix fell 0.7% to 1,982.68 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.9% to 28,230.61. SoftBank Group Corp. contributed the most to the Topix’s drop, decreasing 2.4%. Out of 2,181 shares in the index, 373 rose and 1,743 fell, while 65 were unchanged. “Market conditions were improving yesterday, but pushing for higher prices got tough when the Nikkei 225 approached its key moving averages,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.  The Nikkei’s 75-day moving average is about 28,500 and the 200-day moving average is about 28,700, so some investors were taking profits, he said. Japan’s spot power price increased to the highest level in nine months, as the global energy crisis intensifies competition for generation fuel before the winter heating season. In FX, the Bloomberg Dollar Spot Index reversed an overnight gain as the greenback slipped against all of its Group-of-10 peers. Risk sensitive Scandinavian currencies led gains, followed by the New Zealand and Australian dollars. The pound was little changed while speculators ramped up wagers on sterling’s decline at the fastest rate in more than two years, Commodity Futures Trading Commission data show, further breaking the link between anticipated rate increases and currency gains. The yen steadied after three days of declines. The Turkish lira extended its slide to a record low after President Recep Tayyip Erdogan hinted at a possible military offensive into neighboring Syria. Fixed-income was quiet by recent standards: Treasury futures were off lows of the day, improving as S&P 500 futures pare losses during European morning, and as cash trading resumed after Monday’s holiday. The 10Y yield dipped from 1.61% to 1.59% after hitting 1.65% based on futures pricing on Monday, but the big mover was on the front end, where 2-year yields climbed as much as 4bps to 0.35% the highest level since March 2020 reflecting increased expectations for Fed rate hikes, as Treasury cash trading resumed globally. Two coupon auctions during U.S. session -- of 3-and 10-year notes -- may weigh on Treasuries however.  Treasury and gilt curves bull-flatten with gilts outperforming at the back end. Bunds have a bull-steepening bias but ranges are narrow. Peripheral spreads tighten a touch with long-end Italy outperforming peers. In commodities, Crude futures drift higher in muted trade. WTI is up 0.25% near $80.70, Brent trades just shy of a $84-handle. Spot gold remains range-bound near $1,760/oz. Base metals are mixed with LME lead and nickel holding small gains, copper and aluminum in the red. Looking at the day ahead, central bank speakers include the Fed’s Vice Chair Clarida,Bostic and Barkin, as well as theECB’s President Lagarde, Makhlouf, Knot, Villeroy, Lane and Elderson. Data highlights from the US include the JOLTS job openings for August, and the NFIB’s small business optimism index for September which came in at 99.1, below last month's 100.1. The IMF will be releasing their latest World Economic Outlook. Market Snapshot S&P 500 futures little changed at 4,351.50 STOXX Europe 600 down 0.6% to 454.90 MXAP down 0.9% to 194.41 MXAPJ down 1.0% to 635.42 Nikkei down 0.9% to 28,230.61 Topix down 0.7% to 1,982.68 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite down 1.2% to 3,546.94 Sensex little changed at 60,149.85 Australia S&P/ASX 200 down 0.3% to 7,280.73 Kospi down 1.4% to 2,916.38 German 10Y yield fell 6 bps to -0.113% Euro up 0.1% to $1.1565 Brent Futures up 0.4% to $84.01/bbl Gold spot up 0.2% to $1,757.84 U.S. Dollar Index little changed at 94.29 Top Overnight Headlines from Bloomberg The EU drew record demand for its debut green bond, in the sector’s biggest-ever offering. The bloc registered more than 135 billion euros ($156 billion) in orders Tuesday for a sale of 12 billion euros of securities maturing in 2037 Investors are dumping negative-yielding debt at the fastest pace since February as concerns about inflation and reduced central bank stimulus propel global interest rates higher French President Emmanuel Macron unveiled a 30-billion-euro ($35 billion) plan to create the high-tech champions of the future and reverse years of industrial decline in the euro area’s second-largest economy British companies pushed the number of workers on payrolls above pre-coronavirus levels last month, an indication of strength in the labor market that may embolden the Bank of England to raise interest rates. As the Biden administration and governments around the world celebrate another advance toward an historic global tax accord, an obscure legal question in the U.S. threatens to tear it apart Chinese property developers are suffering credit rating downgrades at the fastest pace in five years, as a recent slump in new-home sales adds to concerns about the sector’s debt woes German investor confidence declined for a fifth month in October, adding to evidence that global supply bottlenecks and a surge in inflation are weighing on the recovery in Europe’s largest economy Social Democrat Olaf Scholz’s bid to succeed Angela Merkel as German chancellor is running into its first test as tensions emerge in talks to bridge policy differences with the Greens and pro-business Free Democrats A more detailed breakdown of global markets from Newsquawk Asian equity markets traded mostly lower following the indecisive mood stateside where the major indices gave back initial gains to finish negative amid lingering inflation and global slowdown concerns, with sentiment overnight also hampered by tighter Beijing scrutiny and with US equity futures extending on losses in which the Emini S&P retreated beneath its 100DMA. ASX 200 (-0.3%) was subdued as weakness in energy, tech and financials led the declines in Australia and with participants also digesting mixed NAB business survey data. Nikkei 225 (-0.9%) was on the backfoot after the Japan Center for Economic Research noted that GDP contracted 0.9% M/M in August and with retailers pressured after soft September sales updates from Lawson and Seven & I Holdings, while the KOSPI (-1.4%) was the laggard on return from holiday with chipmakers Samsung Electronics and SK Hynix subdued as they face new international taxation rules following the recent global minimum tax deal. Hang Seng (-1.4%) and Shanghai Comp. (-1.3%) adhered to the downbeat picture following a continued liquidity drain by the PBoC and with Beijing scrutinising Chinese financial institutions’ ties with private firms, while default concerns lingered after Evergrande missed yesterday’s payments and with Modern Land China seeking a debt extension on a USD 250mln bond to avoid any potential default. Finally, 10yr JGBs eked minimal gains amid the weakness in stocks but with demand for bonds limited after the recent subdued trade in T-note futures owing to yesterday’s cash bond market closure and following softer results across all metrics in the 30yr JGB auction. Top Asian News Alibaba Stock Revival Halted on Concerns of Rising Bond Yields Iron Ore Rally Pauses as China Steel Curbs Cloud Demand Outlook China’s Star Board Sees Rough Start to Fourth Quarter: ECM Watch Citi Lists Top Global Stock Picks for ‘Disruptive Innovations’ European bourses kicked the day off choppy but have since drifted higher (Euro Stoxx 50 -0.4%; Stoxx 600 Unch) as the region remains on standby for the next catalyst, and as US earnings season officially kicks off tomorrow – not to mention the US and Chinese inflation metrics and FOMC minutes. US equity futures have also nursed earlier losses and reside in relatively flat territory at the time of writing, with broad-based performance seen in the ES (Unch), NQ (+0.2%), RTY (-0.2%), YM (Unch). From a technical standpoint, some of the Dec contracts are now hovering around their respective 100 DMAs at 4,346 for the ES, 14,744 for the NQ, whilst the RTY sees its 200 DMA at 2,215, and the YM topped its 21 DMA at 34,321. Back to Europe, cash markets see broad-based downside with the SMI (-0.1%) slightly more cushioned amid gains in heavyweight Nestle (+0.6%). Sectors kicked off the day with a defensive bias but have since seen a slight reconfiguration, with Real Estate now the top performer alongside Food & Beverages, Tech and Healthcare. On the flip side, Basic Resources holds its position as the laggard following yesterday's marked outperformance and despite base metals (ex-iron) holding onto yesterday's gains. Autos also reside at the bottom of the bunch despite constructive commentary from China's Auto Industry Body CAAM, who suggested the chip supply shortage eased in China in September and expected Q4 to improve, whilst sources suggested Toyota aims to make up some lost production as supplies rebound. In terms of individual movers, GSK (+2.3%) shares spiked higher amid reports that its USD 54bln consumer unit has reportedly attracted buyout interest, according to sources, in turn lifting the FTSE 100 Dec future by 14 points in the immediacy. Elsewhere, easyJet (-1.9%) gave up its earlier gains after refraining on guidance, and despite an overall constructive trading update whereby the Co. sees positive momentum carried into FY22, with H1 bookings double those in the same period last year. Co. expects to fly up to 70% of FY19 planned capacity in FY22. In terms of commentary, the session saw the Germany ZEW release, which saw sentiment among experts deteriorate, citing the persisting supply bottlenecks for raw materials and intermediate products. The release also noted that 49.1% of expects still expect inflation to rise further in the next six months. Heading into earnings season, experts also expect profits to go down, particularly in export-tilted sectors such a car making, chemicals and pharmaceuticals. State-side, sources suggested that EU antitrust regulators are reportedly likely to open an investigation into Nvidia's (+0.6% Pre-Mkt) USD 54bln bid from Arm as concessions were not deemed sufficient. Top European News Soybeans Near 10-Month Low as Supply Outlook Expected to Improve EasyJet Boosts Capacity as Travel Rebound Gathers Pace Currency Traders Are Betting the BOE Is About to Make a Mistake Citi Lists Top Global Stock Picks for ‘Disruptive Innovations’ In FX, the Buck has reclaimed a bit more lost ground in consolidatory trade rather than any real sign of a change in fundamentals following Monday’s semi US market holiday for Columbus Day and ahead of another fairly light data slate comprising NFIB business optimism and JOLTS. However, supply awaits the return of cash Treasuries in the form of Usd 58 bn 3 year and Usd 38 bn 10 year notes and Fed commentary picks up pace on the eve of FOMC minutes with no less than five officials scheduled to speak. Meanwhile, broad risk sentiment has taken a knock in wake of a late swoon on Wall Street to give the Greenback and underlying bid and nudge the index up to fresh post-NFP highs within a 94.226-433 band. NZD/AUD - A slight change in fortunes down under as the Kiwi derives some comfort from the fact that the Aud/Nzd has not breached 1.0600 to the upside and Nzd/Usd maintaining 0.6950+ status irrespective of mixed NZ electric card sales data, while the Aussie takes on board contrasting NAB business conditions and confidence readings in advance of consumer sentiment, with Aud/Usd rotating either side of 0.7350. EUR/CAD/GBP/CHF/JPY - All rangy and marginally mixed against their US counterpart, as the Euro straddles 1.1560, the Loonie meanders between 1.2499-62 with less fuel from flat-lining crude and the Pound tries to keep sight of 1.3600 amidst corrective moves in Eur/Gbp following a rebound through 0.8500 after somewhat inconclusive UK labour and earnings data, but hardly a wince from the single currency even though Germany’s ZEW survey missed consensus and the institute delivered a downbeat assessment of the outlook for the coming 6 months. Elsewhere, the Franc continues to hold within rough 0.9250-90 extremes and the Yen is striving to nurse outsize losses between 113.00-50 parameters, with some attention to 1 bn option expiries from 113.20-25 for the NY cut. Note also, decent expiry interest in Eur/Usd and Usd/Cad today, but not as close to current spot levels (at the 1.1615 strike in 1.4 bn and between 1.2490-1.2505 in 1.1 bn respectively). SCANDI/EM - The Nok and Sek have bounced from lows vs the Eur, and the latter perhaps taking heed of a decline in Sweden’s registered jobless rate, but the Cnh and Cny remain off recent highs against the backdrop of more Chinese regulatory rigour, this time targeting state banks and financial institutions with connections to big private sector entities and the Try has thrown in the towel in terms of its fight to fend off approaches towards 9.0000 vs the Usd. The final straw for the Lira appeared to be geopolitical, as Turkish President Erdogan said they will take the necessary steps in Syria and are determined to eliminate threats, adding that Turkey has lost its patience on the attacks coming from Syrian Kurdish YPG controlled areas. Furthermore, he stated there is a Tal Rifaat pocket controlled by YPG below Afrin and that an operation could target that area which is under Russian protection. However, Usd/Try is off a new ATH circa 9.0370 as oil comes off the boil and ip came in above forecast. In commodities, WTI and Brent front-month futures are choppy and trade on either side of the flat mark in what is seemingly some consolidation and amid a distinct lack of catalysts to firmly dictate price action. The complex saw downticks heading into the European cash open in tandem with the overall market sentiment at the time, albeit the crude complex has since recovered off worst levels. News flow for the complex has also remained minimal as eyes now turn to any potential intervention by major economies in a bid to stem the pass-through of energy prices to consumers heading into winter. On that note, UK nat gas futures have been stable on the day but still north of GBP 2/Thm. Looking ahead, the weekly Private Inventory data has been pushed back to tomorrow on account of yesterday's Columbus Day holiday. Tomorrow will also see the release of the OPEC MOMR and EIA STEO. Focus on the former will be on any updates to its demand forecast, whilst commentary surrounding US shale could be interesting as it'll give an insight into OPEC's thinking on the threat of Shale under President Biden's "build back better" plan. Brent Dec trades on either side of USD 84/bbl (vs prev. 83.13-84.14 range) whilst WTI trades just under USD 81/bbl after earlier testing USD 80/bbl to the downside (USD 80-80.91/bbl range). Over to metals, spot gold and silver hold onto modest gains with not much to in the way of interesting price action, with the former within its overnight range above USD 1,750/oz and the latter still north of USD 22.50/oz after failing to breach the level to the downside in European hours thus far. In terms of base metals, LME copper is holding onto most of yesterday's gains, but the USD 9,500/t mark seems to be formidable resistance. Finally, Dalian and Singapore iron ore futures retreated after a four-day rally, with traders citing China's steel production regaining focus. US Event Calendar 6am: Sept. SMALL BUSINESS OPTIMISM 99.1,  est. 99.5, prior 100.1 10am: Aug. JOLTs Job Openings, est. 11m, prior 10.9m 11:15am: Fed’s Clarida Speaks at IIF Annual Meeting 12:30pm: Fed’s Bostic Speaks on Inflation at Peterson Institute 6pm: Fed’s Barkin Interviewed for an NPR Podcast DB's Jim Reid concludes the overnight wrap It’s my wife’s birthday today and the big treat is James Bond tomorrow night. However, I was really struggling to work out what to buy her. After 11.5 years together, I ran out of original ideas at about year three and have then scrambled round every year in an attempt to be innovative. Previous innovations have seen mixed success with the best example being the nearly-to-scale oil portrait I got commissioned of both of us from our wedding day. She had no idea and hated it at the closed eyes big reveal. It now hangs proudly in our entrance hall though. Today I’ve bought her a lower key gamble. Some of you might know that there is a US website called Cameo that you can pay famous people to record a video message for someone for a hefty fee. Well, all her childhood heroes on it were seemingly too expensive or not there. Then I saw that the most famous gymnast of all time, Nadia Comăneci, was available for a reasonable price. My wife idolised her as a kid (I think). So after this goes to press, I’m going to wake my wife up with a personalised video message from Nadia wishing her a happy birthday, saying she’s my perfect ten, and praising her for encouraging our three children to do gymnastics and telling her to keep strong while I try to get them to play golf instead. I’m not sure if this is a totally naff gift or inspired. When I purchased it I thought the latter but now I’m worried it’s the former! My guess is she says it’s naff, appreciates the gesture, but calls me out for the lack of chocolates. Maybe in this day and age a barrel of oil or a tank of petrol would have been the most valuable birthday present. With investor anticipation continuing to build ahead of tomorrow’s CPI release from the US, yesterday saw yet another round of commodity price rises that’s making it increasingly difficult for central banks to argue that inflation is in fact proving transitory. You don’t have to be too old to remember that back in the summer, those making the transitory argument cited goods like lumber as an example of how prices would begin to fall back again as the economy reopened. But not only have commodity aggregates continued to hit fresh highs since then, but lumber (+5.49%) itself followed up last week’s gains to hit its highest level in 3 months. Looking at those moves yesterday, it was a pretty broad-based advance across the commodity sphere, with big rises among energy and metals prices in particular. Oil saw fresh advances, with WTI (+1.47%) closing above $80/bbl for the first time since 2014, whilst Brent Crude (+1.53%) closed above $83/bbl for the first time since 2018. Meanwhile, Chinese coal futures (+8.00%) hit a record after the flooding in Shanxi province that we mentioned in yesterday’s edition, which has closed 60 of the 682 mines there, and this morning they’re already up another +6.41%. So far this year, the region has produced 30% of China’s coal supply, which gives you an idea as to its importance. And when it came to metals, aluminium prices (+3.30%) on the London Metal Exchange rose to their highest level since the global financial crisis, whilst Iron Ore futures in Singapore jumped +7.01% on Monday, and copper was also up +2.13%. The one respite on the inflation front was a further decline in natural gas prices, however, with the benchmark European future down -2.73%; thus bringing its declines to over -47% since the intraday high that was hit only last Wednesday. With commodity prices seeing another spike and inflation concerns resurfacing, this proved bad news for sovereign bonds as investors moved to price in a more hawkish central bank reaction. Yields in Europe rose across the continent, with those on 10yr bunds up +3.0bps to 0.12%, their highest level since May. The rise was driven by both higher inflation breakevens and real rates, and leaves bund yields just shy of their recent post-pandemic closing peak of -0.10% from mid-May. If they manage to surpass that point, that’ll leave them closer to positive territory than at any point since Q2 2019 when they last turned negative again. It was a similar story elsewhere, with 10yr yields on OATs (+2.6bps), BTPs (+3.9bps) and gilts (+3.1bps) likewise reaching their highest level in months. The sell-off occurred as money markets moved to price in further rate hikes from central banks, with investors now expecting a full 25 basis point hike from the Fed by the end of Q3 2022. It seems like another era, but at the start of this year before the Georgia Senate race, investors weren’t even pricing in a full hike by the end of 2023, whereas they’re now pricing in almost 4. So we’ve come a long way over 2021, though pre-Georgia the consensus CPI forecast on Bloomberg was just 2.0%, whereas it now stands at 4.3%, so it does fit with the story of much stronger-than-expected inflation inducing a hawkish response. Yesterday’s repricing came alongside a pretty minimal -0.15% move in the Euro versus the dollar, but that was because Europe was also seeing a similar rates repricing. Meanwhile, the UK saw its own ramping up of rate hike expectations, with investors pricing in at least an initial 15bps hike to 0.25% happening by the December meeting in just two months’ time. Overnight in Asia, stocks are trading in the red with the KOSPI (-1.46%), Shanghai Composite (-1.21%), Hang Seng (-1.20%), the Nikkei (-0.93%) and CSI (-0.82%) all trading lower on inflation concerns due to high energy costs and aggravated by a Wall Street Journal story that Chinese President Xi Jinping is increasing scrutiny of state-run banks and big financial institutions with inspections. Furthermore, there were signs of a worsening in the Evergrande debt situation, with the firm missing coupon payments on a 9.5% note due in 2022 and a 10% bond due in 2023. And there were fresh indications of a worsening situation more broadly, with Sinic Holdings Group Co. saying it doesn’t expect to pay the principal or interest on a $250m bond due on October 18. Separately in Japan, Prime Minister Fumio Kishida said on Monday that he will raise pay for public workers and boost tax breaks to firms that boost wages to try and improve the country’s wealth distribution. Back to yesterday, and the commodity rally similarly weighed on thin-volume equity markets, though it took some time as the S&P 500 had initially climbed around +0.5% before paring back those gains to close down -0.69%. Before the late US sell-off, European indices were subdued, but the STOXX 600 still rose +0.05%, thanks to an outperformance from the energy sector (+1.49%), and the STOXX Banks Index (+0.13%) hit a fresh two-year high as the sector was supported by a further rise in yields. On the central bank theme, we heard from the ECB’s chief economist, Philip Lane, at a conference yesterday, where he said that “a one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation.” So clearly making a distinction between a more persistent pattern of wage inflation, which comes as the ECB’s recent forward guidance commits them to not hiking rates “until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon”, as well as having confidence that “realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term”. Turning to the political scene, Brexit is likely to be in the headlines again today as the UK’s Brexit negotiator David Frost gives a speech in Lisbon where he’s expected to warn that the EU’s proposals on the Northern Ireland Protocol are insufficient. That comes ahead of a new set of proposals that are set to come from the EU tomorrow, with the two sides disagreeing on the extent of border controls required on trade from Northern Ireland with the rest of the UK. Those controls were put in place as part of the Brexit deal to prevent a hard border being put up between Northern Ireland and the Republic of Ireland, whilst also preserving the integrity of the EU’s single market. But the UK’s demands for adjustments have been met with opposition by the EU, and speculation has risen that the UK could trigger Article 16, which allows either side to take unilateral safeguard measures, if the protocol’s application “leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade”. On the data front, there wasn’t much data to speak of with the US holiday, but Italy’s industrial production contracted by -0.2% in August, in line with expectations. To the day ahead now, andcentral bank speakers include the Fed’s Vice Chair Clarida,Bostic and Barkin, as well as theECB’s President Lagarde, Makhlouf, Knot, Villeroy, Lane and Elderson. Data highlights from the US include the JOLTS job openings for August, and the NFIB’s small business optimism index for September. In Europe, there’s also UK unemployment for August and the German ZEW Survey for October. Lastly, the IMF will be releasing their latest World Economic Outlook.     Tyler Durden Tue, 10/12/2021 - 07:56.....»»

Category: personnelSource: nytOct 12th, 2021

ADUs Are Blowing Up, But Does It Matter?

What are ADUs? Some call them “granny flats.” Others call them “she-sheds” or “in-law suites.” Recently, “tiny house” became a trendy topic among certain builders. Nearly all of these—regardless of terminology or function—will fall under the category of “accessory dwelling unit,” or ADU. Amid a nationwide housing crunch, this alternate model of living, investment and […] The post ADUs Are Blowing Up, But Does It Matter? appeared first on RISMedia. What are ADUs? Some call them “granny flats.” Others call them “she-sheds” or “in-law suites.” Recently, “tiny house” became a trendy topic among certain builders. Nearly all of these—regardless of terminology or function—will fall under the category of “accessory dwelling unit,” or ADU. Amid a nationwide housing crunch, this alternate model of living, investment and space-sharing has seen massive growth as developers and homeowners seek ways to integrate post-pandemic lifestyles and policymakers scramble to address an acute shortage of living spaces. But what is the value of an ADU, from a real estate perspective? Are consumers seeing them as worth the significant time and monetary investment? Will the trend of local authorities relaxing restrictions change the current market, and if so, how? Can ADUs outlast the current unprecedented housing crisis? Not all of these questions have answers. But according to the people who are building, regulating and studying ADUs, if you are not asking about them right now, you might be missing out. Amy Allgeyer is the founder of Architect Inc., a building company in Boise, Idaho, that has come to specialize in ADUs. She said that in her market, interest in these specialized structures has been creeping up over the past five years, but exploded after the onset of the pandemic as people sought more living space or more value in their fast-appreciating properties. Recently, she said she gets multiple calls a week from people interested in the possibilities of an ADU. “Sort of a perfect storm—it’s a lot of different things that are coming together to help people get ADUs that they want, and encourage people to want ADUs,” she says. The ABCs of ADUs The first question most people have about ADUs is quite simply, what are they? That, like a lot other things in the ADU world, depends on where you are. At the basic level, ADUs are separate living spaces on the same lot as another primary structure—sometimes physically separated from it, sometimes not. Most states allow cities and counties significant latitude in defining and permitting the structures. Building codes in some cities restrict free-standing cottage-style ADUs more than attached structures. Often there is a requirement they offer separate amenities—bathrooms or kitchens—but not always. Maximum sizes can range from a couple hundred square feet to over a thousand. Permitting ADUs can be as simple as a quick visit to a county office or as complex as a multi-month public hearing process. Local officials also seek to conform ADUs to local conditions or preferences. According to Sarah Berke, program officer at the Family Housing Fund in Minnesota, ADUs in that area must have frost-proof foundations so they can endure the harsh northern winters. Voters in the historic Boston suburb of Salem recently voted on a new ADU ordinance that, among other things, requires property owners to replace any trees they chop down when building an ADU. There are literally hundreds of other potential requirements, from street setback to paint scheme. Across the country, though, policymakers are trending toward loosening these restrictions, making ADUs easier and cheaper to build and massively expanding the number of properties and neighborhoods where they are allowed, which potentially creates a new market and vast new opportunities for both homeowners and renters. Why It Matters  There is one thing that nearly everyone agrees on in regards to ADUs: they have a tremendous value right now in a tight housing market. “We do have more people who are interested in having their property help pay their mortgage in the wake of COVID,” Allgeyer says. “Definitely in the past two years, I’m seeing a lot of home offices going into ADUs.” It is not clear yet whether a new interest in ADUs will have a lasting impact on the market—the kind of impact that could address supply scarcity or significantly alter regional trends or consumer behavior. But the “perfect storm” Allgeyer referred to is a combination of policy, market conditions and consumer attitudes that right now are making ADUs a red-hot opportunity in the real estate market. In Salem, Amanda Chiancola serves as the city’s Deputy Director of Planning. She is also a long-time advocate of inclusionary housing who recently helped spearhead an ordinance that serves as a major overhaul in how the town regulates ADUs. In the three months since that ordinance was approved, the city has already surpassed the number of ADU permits it received over the previous three years, she says. “We get calls all the time from people…who say, ‘I can’t afford to live here, I’m driving two hours to work everyday,'” Chiancola says. “We hear these calls and emails all the time.” With a large proportion of their housing tied to single-family zoning, a lack of living spaces—and affordable units in particular—Salem needed to find a way to expand and diversify its housing stock in a meaningful way. Enter the ADU. The focus for Salem is affordability, according to Chiancola, and so the ordinance actually set a maximum rent for ADUs—$1,635 for a two-bedroom and $1,214 for a studio. Even with this limitation, Chiancola says that estimates by her office projected that a property owner financing an ADU through a home equity loan or second mortgage will pay less than half of that cost a month—$500-700 on average. That will hopefully make building an ADU an attractive investment for existing homeowners, she says. In Boise, Allgeyer says that many families use the rental income from an ADU to allow them to move into an otherwise unattainable neighborhood, seeking better schools or shorter commutes. “Younger families who wouldn’t be able to afford that property in the really good school district, but they want to raise their kids there and so they buy a house with an ADU they can rent out,” Allgeyer says “It helps a first-time homebuyer be able to afford a mortgage,” Chiancola adds. An ADU also adds “fantastic” resale value to a home, according to Allgeyer, because even if the buyer is not interested in renting the unit, ADUs are incredibly flexible no matter the demographic or needs of the homeowner, serving as everything from a caregiver’s apartment for an older resident to office space for young professionals. “Anywhere between [age] 30 and 90—it’s pretty evenly split,” Allgeyer says. How ADUs can be used is something in flux across the country, driven mostly by policy at the local level. Many places—Salem being one of them—have banned short-term rentals like Airbnb from utilizing ADUs. Town officials actually scan those company’s websites to make sure homeowners aren’t surreptitiously listing them, according to Chiancola. Boise and other places allow Airbnb rentals, which Allgeyer has seen become very lucrative for homeowners especially in hot housing markets. “I see ADUs really being enticing in an urban area,” she says. Berke says that as the price of construction falls, more and more people will be ready and willing to build ADUs. A handful of developers are actually adding ADUs into their single-family constructions in the Twin Cities area, according to Berke, offering that kind of flexibility from the start. “You can build a single-family home with a basement space that is suitable for conversion ADUs, and that creates a value addition opportunity in the future,” she says. Minneapolis was ahead of Salem and many other cities, expanding their policies for ADUs in 2014—partly in response to an acute housing shortage that a recent study by the Minnesota Population Center rated as the worst in the country. Just changing the policy created a huge influx of ADUs as many homeowners found that rooms they had rented off the books or garage conversion projects now qualified as ADUs—with the potential benefits of being able to advertise the structures more traditionally when selling or renting. Many only cost a few thousand dollars to permit or finish up, according to Berke. All of this is coming together to allow more mobility, more flexibility, and potentially a shift in attitudes as people find new rental opportunities and a new way to look at work-from-home and age-in-place scenarios. Despite all this, Allgeyer says that she does not personally see the run on ADUs outlasting the current housing crunch. Once urban areas get their fill of new ADU construction, she says the trend will peter out in suburbs and rural areas where space is less of an issue. But for the cities and neighborhoods that are seeing an ADU boom right now, the potential for a transformational change is there, Berke suggests. Though Minneapolis has seen a relatively small increase in ADUs since they changed their policies, adding those structures to just 1.5% of eligible properties would make a huge difference in the local market. “That could be 11,000 new housing units. So the impact on any one block…won’t change anything on how your neighborhood feels. But if you add a little here and there, it really does add up to a lot of housing,” she concludes. Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com. The post ADUs Are Blowing Up, But Does It Matter? appeared first on RISMedia......»»

Category: realestateSource: rismediaSep 27th, 2021

“The Housing Market Is Almost Frozen" - An Even Bigger Problem Emerges For China

“The Housing Market Is Almost Frozen" - An Even Bigger Problem Emerges For China With Wall Street's fascination with risk associated with Evergrande's default fading fast, and the sellside pumping out charts such as this one showing that the contagion in China junk bond market is unlikely to spillover globally... ... the smartest men in the room are once again missing the forest for the trees because as we explained in detail over the weekend, and again reminded earlier this week... Remember: for China this is not about Evergrande, it's about preserving confidence in the property sector — zerohedge (@zerohedge) September 22, 2021 ... for Beijing the real risk is not whether foreign creditors are impacted - in fact Evergrande's willingness to default on offshore bondholders while preserving operational cash flow and continuing to build homes shows just how much China "cares" about Blackrock's P&L - but how an Evergrande crisis could impact China's massive, $60 trillion, property sector, something which CCB International, the Chinese investment bank, touched on in a recent research note in which it said that Evergrande "contagion risk has spread from financing to land sales, property sales, project deliveries and home prices." And indeed, as the FT reports this morning, some very ominous cracks in China's property market - which according to Goldman is the largest asset class globally - are starting to emerge. In a letter to the Shaoxing municipal government in eastern Zhejiang province, the local office of developer Sunac China appealed for “policy assistance” as it was struggling through what it called a "turning point in China’s real estate industry." "We have never experienced such a radical change in the external environment," Sunac’s Shaoxing office said, pointing to a 60% year-on-year fall in home sales over the summer. "The market is almost frozen," it added in the letter, which was first reported by the Financial Times. “The radical change in policy and environment has seriously disrupted our business and made it very difficult to maintain normal operations.” The sudden, sharp collapse in China's property market is shown in the charts below which reveal that the amount of actual land transactions was not only well below the land supply in recent weeks, an unprecedented divergence, but that volumes were 65% below year-ago levels as potential buyers are suddenly terrified of investing in real estate as the Evergrande fate remains in limbo, with some worried that some of the 65 million empty apartments could hit the market and lead to a crash in property values. While the plunge in transactions is demand-induced, there are also concerns that an Evergrande insolvency and eventual collapse could lead to a supply crunch. As reported earlier, in July a Chinese city halted sales at two Evergrande projects alleging the troubled developer misappropriated funds by only depositing a portion of the proceeds from housing sales into the escrow accounts, according to a local government statement.  To ensure Evergrande doesn’t divert these funds, the housing bureau in Nansha district created an escrow account under its own name this month to take in proceeds from Evergrande homebuyers, cutting off the developer’s direct access to the money. A lack of funds has already led to a construction halt on some unfinished housing properties, sparking social unrest among buyers. In Guangzhou, buyers surrounded a local housing bureau earlier this month to demand Evergrande restart construction. As we discussed over the weekend, one of the most troubling downstream consequences from chaos in the property sector would be social unrest, and as we noted, maintaining social order has always been a key priority for the Communist Party, which has no tolerance for protests of any kind. In Guangzhou, homebuyers surrounded a local housing bureau last week to demand Evergrande restart stalled construction. Disgruntled retail investors have gathered at the companys Shenzhen headquarters for at least three straight days this week, and videos of protests against the developer in other parts of China have been shared widely online. Without a social safety net and with limited places to put their money, Chinese savers have for years been encouraged to buy homes whose prices were only ever supposed to go up (similar to the US before 2007 when even idiots like Ben Bernanke said that the US housing market never goes down). Today, buying a house (or two) is a cultural touchstone. And while housing affordability has become a hot topic in the West, many Chinese are more likely to protest falling home prices than spiking ones. Which brings us to a must read report from Goldman's Kinger Lau published overnight and focusing entirely on China's property sector - instead of just Evergrande - where it addresses a glaring dilemma: Beijing's desire to regulate and deleverage the housing sector even as it keeps property prices rising, a dynamic we summarized concisely earlier this week inside a tweet: Markets used to focus on China's "impossible trinity" but it's time to shift to China's "impossible dilemma": you can't have deleveraging/tightening/"3 red lines" AND rising home prices at the same time. China wants both, will have to pick one — zerohedge (@zerohedge) September 22, 2021 In his must read report (available for professional subscribers in the usual place) Goldman's Lau explains that what is going on with Evergrande, and in fact the turmoil gripping China's broader property sector is largely self-inflicted as "regulatory actions in China Internet have resulted in more than US$1tn market cap loss on the tech sector since mid-Feb, but in the past two weeks, investor focus has shifted to the US$60tn China property market which is linked to ~20% of Chinese GDP and represents 62% of household wealth." Specifically, Goldman notes that more than 400 new property regulations (shown in the appendix) that are largely tightening in nature have been announced ytd to restrain housing market activity, spanning supply, demand, funding, leverage, to price control measures. It is these measures that have contributed to a 14% year-on-year fall in property sales and $90 billion of market-cap losses among developer stocks in 3Q alone. In his attempt to summarize the critical linkages between China's all-important property sector and the broader economy (something we first tried to do back in 2017 in "Why The Fate Of The World Economy Is In The Hands Of China's Housing Bubble"), Goldman first focuses on the immediate catalyst behind the current crisis, which according to the bank has to do with the unprecedented regulatory tightening "in the largest asset class globally." Or, as Goldman puts it succinctly, "Property is everywhere in China" Some explanatory notes on the chart above: The regulatory cycle keeps evolving: The ongoing regulatory tightening cycle, which is unprecedented in terms of its duration, intensity, scope, and velocity (of new regulation announcement) as suggested by our POE regulation proxy, has so far provoked significant concerns among investors in and have resulted in more than US$1tn market cap loss on China Tech. From Tech to Social Sector, and then to Property: According to Centaline, more than 400 new property regulations have been unveiled ytd across the central and local governments to address the issues of rising property prices and imbalanced supply/demand in certain areas, over-reliance on property for economic growth and fiscal revenues, and potential speculation in the real estate market where 22% of property could be vacant and ~60% of recent-year purchases were driven by investment demand. Property market tightening isn’t a new feature in the Chinese policy cycle over the past decade, but the severity of the measures, the scope of tightening, and the determination of policy implementation (e.g. the 3 Red Lines) are arguably unprecedented. China property is big: Almost two years ago, Goldman took a deep dive into the US$40tn Chinese residential housing market and analyzed its impacts on macro and asset markets. Since then, the market has grown to US$60tn in notional value including inventory, likely the largest asset class in the world on current prices. It has also registered Rmb26tn (US$4tn) of home sales with more than 3bn sqm of GFA being sold, almost 3x the size of HK SAR. Additionally, it is well-documented that Chinese households have a strong investment and allocation bias towards real assets for different economic and cultural reasons—as of Aug 2021, property accounted for around 62% of household assets in both the total and net terms, vs. 23% in the US and 36% in Japan, where stocks are the dominant household assets. Property is ubiquitous in China, fundamentally and financially: Goldman economists estimate that the housing sector contributes to around 20% of GDP via direct and indirect channels such as property FAI, property construction supply chain, consumption, and wealth effect. In the financial markets, 15% of aggregate market earnings (i.e. ~US$150bn out of US$1tn in 2020) could be exposed to ‘property demand’ in the extended housing construction-to-sale cycle which typically spans over three years, and that property-related loans (developer loans, mortgages, shadow banking)/ developer bonds represent 35%/23% of banks’ loan books/the outstanding balance of the offshore USD credit (IG + HY) market,respectively. And visually: While a full-blown property crisis would impact virtually every aspect of the Chinese economy, starting with capital markets, shadow banks, and social stability, the most immediate one for global investors is of course, the equity market. Here are Goldman's key observations on this topic: The regulation headwinds have resulted in a noticeable slowdown in property activities in recent months: nationwide property sales have fallen 14% yoy in3Q21 alongside stable prices in the primary market but large declines of transactions in the secondary market; property FAI and new starts have fallend rastically, although completion growth momentum has remained strong largely on favorable base effects. At the macro level, Goldman economists have laid out 3 scenarios to model the contagion impacts from reduced property impulse on macro growth. Overall, they see 2022 GDP growth hit ranging from 1.4% to 4.1% depending on the magnitude/severity of the property market slowdown and the tightening of financial conditions domestically, although their scenario analysis does not take into consideration potential monetary and fiscal policy easing in response to the property market declines. While listed developers only account for 4% of earnings in the aggregate listed universe, the housing market could be linked, directly and indirectly, to ~15% of corporate earnings, and every 10pp growth deceleration in housing activity could reduce profit growth of the housing market by ~2pp, all else equal. Broadly, Goldman lists five key transmission mechanisms along the extended property market food chain: Property developers and management companies (4% of equity market earnings): Developers’ earnings are highly sensitive to the property market fundamentals. However, given the time lag between transaction (pre-sales) and revenue recognition (accrual-based accounting), reported earnings usually lag sales by around 2 years, meaning that their current- and next-year earnings may not fully reflect the latest situation in the physical market. For property management companies, their near-term earnings profile is more sensitive to completions than sales but slowing property sales could dampen their future growth prospect. Financial institutions (54% of equity market earnings): Developer loans and mortgage loans account for 35% of commercial banks’ aggregate loan book. Goldman's banks analysts see the potential for mortgage NPLs to rise (at 0.3% now, 1% increase in mortgage NPL ratio translates into 18.7% drop in net profits per their bear case) although their risk exposures to property-related WMPs have fallen substantially since 2016. For insurers, Goldman's team believes the listed insurers’ exposure to the property sector is low, but the potential indirect wealth effect could pose a bigger fundamental challenge. While not directly linked to the housing market, equity brokers’ earnings cycles have been negatively correlated with property sales, likely reflecting the asset allocation decisions/flows from Chinese households between the two asset classes. Construction (2% of equity market earnings): From new property FAI start to completion, the construction cycle for commodity housing typically lasts 20-30 months in China. It drives demand for construction materials (China is the largest consumer of copper, iron ore and steel), although the focus of materials and their consumption intensity varies in different parts of the cycle. The process also directly impacts construction-related equipment, with excavators, heavy-duty trucks, bulldozers, cranes, and loaders all exhibiting reasonably high demand correlation with land sales. Consumption: (3% of equity market earnings): Whether property purchase is considered consumption (at least for first time buyer) remains an open-ended debate, but the housing market is undoubtedly a key demand driver for a wide range of consumption items, including white goods,consumer durables like furniture equipment, and certain electronic products(e.g. Audio devices and air conditioners). Goldman's study shows that housing completion usually leads the sales and earnings in these sectors by 6-9months. Wealth effect (1% of equity market earnings): At the micro level, capital appreciation (or depreciation) in the housing market could have short-term material impact on discretionary spending given the potential wealth creation from the US$60tn asset market, especially considering the relatively high investment ratios there. Industries that are sensitive to this channel encompass the Autos (luxury), Macau gaming, HK retailers and travel-related companies (before the pandemic), which tend to lag property sales by around two quarters, although these relationships may be also reflective of the broader macro dynamics including liquidity easing. A snapshot of the various top-down impact of the Chinese property cycle on corporate earnings is shown below: In sum, mapping Goldman' base case assumptions on GDP growth and property activities for 2022 onto corporate earnings via these channels,the bank lowers its 2022E EPS growth for MSCI China from 13% to 7%, but as the bank warns "the earnings downside (delta) could be much more significant (-28pp) if their bear cases prevail." And should more companies warn that "the market is almost frozen" as a result of the Evergrande crisis, the bear case is virtually assured. We conclude with Goldman's observations on the contagion risks which according to the bank - and contrary to the market - "are building", even if systemic risks can still be avoided. While the restrictive policies have cooled the market, it has put highly-geared developers, notably Evergrande, in the spotlight as their deleveraging path becomes increasingly challenging. On one hand, Goldman agrees with us, and says that on a standalone basis, Evergrande should not be a serious systemic threat given that its total liability of Rmb1.9tn accounts for 0.6% of China’s outstanding TSF, its bank loans of Rmb572bn represent 0.3% of systemwide loan book, and its market share in nationwide commodity housing sales stood at 4% by 1H21. However, the real risks emerges in the context of the slowing property market: indeed, as in other systemic/crisis episodes, investors are concerned about specific weak links which could spread to the broader system via fundamental and financial channels in the case of disorderly default, and therefore the financial condition tightening risk could be much more significant than the Rmb1.9tn liability would suggest, according to Goldman. How much risk is priced in? This is a popular question from investors but also a difficult one to answer given the fluidity of the situation. However, the following analyses lead Goldman to believe that the market may have priced in some degrees of degradation in macro/corporate fundamentals and possibly policy response from the authorities (i.e. a “muddle-through” scenario), but not a harsh scenario that is systemic and global in nature Episodic analysis: Historical physical property market downturns were short-lived and shallow, but if we focus on episodes where developer equities traded at depressed valuations to proxy for property-related concerns (eg.2H11, early 2015, and late 2018), prevailing NAV discounts of listed developers(-60%) are roughly in-line with those difficult times. At the index level, MSCI China bottomed at around 10-11x fwd P/E and 10% ERP in those periods, vs. 13xand 9% at present respectively. Fair PE targets: The MSCI China index is currently trading on 13x fP/E, having already de-rated from 19.6x at the peak in mid-Feb. Applying Goldman's three scenarios to its top-down macro PE model, the bank estimates that the index fair PE could fall to 12.5x in the base case, and 11.0x in their most bearish case. Correlation analysis: Intra- and inter-sector, and cross-asset correlations with regard to Chinese stocks or developer equities have all risen in the past weeks, albeit from a low base. However, compared with previous cases where concerns related to China regulations or trade relations had spooked global markets (e.g. 2015 FX reform, 2018 US-China trade war), the absolute correlation levels are more benign at present, suggesting a global contagious impact is not fully priced in. In light of all this, the good news is that in Goldman's view systemic risks could still be avoided considering: broad liquidity and risk-appetite indicators such as 7d repo, the onshore funding stress index, as well as the A-share market performance/ turnover suggest that the imminent "minsky moment" remains a narrative but far from a reality; the effective leverage (LTV) for the housing market is low, around 40% to 50% per our Banks team’s estimate; the institutional setup in China where the government has strong control over its banking system makes a market-driven collapse less likely to happen than would otherwise be the case; Losses will be realized by stakeholders associated with highly-geared developers, but the liabilities are relatively transparent and are less widely socialized in the financial markets than in previous global financial crises; the potential economic, social, and financial impacts have been well publicized and discussed, and it appears that the authorities are assessing the situation and starting to take actions; and, economists believe there is potential for the authorities to ease policy to prevent a disorderly default of Evergrande from developing into a crisis leading up to the Sixth Plenum in November. Ultimately, timing will be key to a happy ending: Given the outsized market value of China property, and its intricate linkages to the real economy and the financial markets, deleveraging the property market and improving financial stability - two contradictory concepts - could raise systemic concern if policy actions are pursued too aggressively, or without clear coordination among regulators and communication with the market. Importantly, as market concerns over tail risk and spillovers start to build, there is increasing focus on the narrowing window for policymakers to provide the necessary circuit breakers to ring-fence the (collateral) damages and stop the downward spirals. A key risk from continued delayed action would be a bigger snowball effect and more damage on markets and investor (already strained) confidence in Chinese assets. As such, Goldman expects the market to focus on potential actions that could be pursued, such as a combination of debt restructuring (bank loans, WMP, credits), conditional government involvement in working capital bridges and unfinished property projects, and a coordinated plan to divest and cash in assets. Finally, as promised earlier, here is a summary of the key loosing (green) and tightening (red) policies in China's property market.   Tyler Durden Fri, 09/24/2021 - 13:00.....»»

Category: blogSource: zerohedgeSep 24th, 2021

Futures Rise On Taper, Evergrande Optimism

Futures Rise On Taper, Evergrande Optimism US index futures jumped overnight even as the Fed confirmed that a November tapering was now guaranteed and would be completed by mid-2022 with one rate hike now on deck, while maintaining the possibility to extend stimulus if necessitated by the economy. Sentiment got an additional boost from a strong showing of Evergrande stock - which closed up 17% - during the Chinese session, which peaked just after Bloomberg reported that China told Evergrande to avoid a near-term dollar bond default and which suggested that the "government wants to avoid an imminent collapse of the developer" however that quickly reversed when the WSJ reported, just one hour later, that China was making preparations for Evergrande's demise, and although that hammered stocks, the report explicitly noted that a worst-case scenario for Evergrande would mean a partial or full nationalization as "local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion." In other words, both reports are bullish: either foreign creditors are made whole (no default) as per BBG or the situation deteriorates and Evergrande is nationalized ("SOEs step in") as per WSJ. According to Bloomberg, confidence is building that markets can ride out a pullback in Fed stimulus, unlike 2013 when the taper tantrum triggered large losses in bonds and equities. "Investors are betting that the economic and profit recovery will be strong enough to outweigh a reduction in asset purchases, while ultra-low rates will continue to support riskier assets even as concerns linger about contagion from China’s real-estate woes." That's one view: the other is that the Fed has so broken the market's discounting ability we won't know just how bad tapering will get until it actually begins. “The Fed has got to be pleased that their communication on the longer way to tapering has avoided the dreaded fear of the tantrum,” Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at BlackRock Inc., said on Bloomberg Television. “This is a very good outcome for the Fed in terms of signaling their intent to give the market information well ahead of the tapering decision.” Then there is the question of Evergrande: “With regards to Evergrande, all those people who are waiting for a Lehman moment in China will probably have to wait another turn,” said Ken Peng, an investment strategist at Citi Private Bank Asia Pacific. “So I wouldn’t treat this as completely bad, but there are definitely a lot of risks on the horizon.” In any case, today's action is a continuation of the best day in two months for both the Dow and the S&P which staged a strong recovery from two-month lows hit earlier in the week, and as of 745am ET, S&P 500 E-minis were up 25.25 points, or 0.6%, Dow E-minis were up 202 points, or 0.59%, while Nasdaq 100 E-minis were up 92.0 points, or 0.60%. In the premarket, electric vehicle startup Lucid Group rose 3.1% in U.S. premarket trading. PAVmed (PVM US) jumps 11% after its Lucid Diagnostics unit announced plans to list on the Global Market of the Nasdaq Stock Market.  Here are some of the biggest movers today: U.S.-listed Chinese stocks rise in premarket trading as fears of contagion from China Evergrande Group’s debt crisis ease. Blackberry (BB US) shares rise 8.7% in premarket after co.’s 2Q adjusted revenue beat the average of analysts’ estimates Eargo (EAR US) falls 57% in Thursday premarket after the hearing aid company revealed it was the target of a Justice Department criminal probe and withdrew its forecasts for the year Amplitude Healthcare Acquisition (AMHC US) doubled in U.S. premarket trading after the SPAC’s shareholders approved the previously announced business combination with Jasper Therapeutics Steelcase (SCS US) fell 4.8% Wednesday postmarket after the office products company reported revenue for the second quarter that missed the average analyst estimate Vertex Energy Inc. (VTNR US) gained 2.1% premarket after saying the planned acquisition of a refinery in Mobile, Alabama from Royal DutVTNR US Equitych Shell Plc is on schedule Synlogic (SYBX US) shares declined 9.7% premarket after it launched a stock offering launched without disclosing a size HB Fuller (FUL US) climbed 2.7% in postmarket trading after third quarter sales beat even the highest analyst estimate Europe's Stoxx 600 index rose 0.9%, lifted by carmakers, tech stocks and utilities, which helped it recover losses sparked earlier in the week by concerns about Evergrande and China’s crackdown on its property sector. The gauge held its gain after surveys of purchasing managers showed business activity in the euro area lost momentum and slowed broadly in September after demand peaked over the summer and supply-chain bottlenecks hurt services and manufacturers. Euro Area Composite PMI (September, Flash): 56.1, consensus 58.5, last 59.0. Euro Area Manufacturing PMI (September, Flash): 58.7, consensus 60.3, last 61.4. Euro Area Services PMI (September, Flash): 56.3, consensus 58.5, last 59.0. Germany Composite PMI (September, Flash): 55.3, consensus 59.2, last 60.0. France Composite PMI (September, Flash): 55.1, consensus 55.7, last 55.9. UK Composite PMI (September, Flash): 54.1, consensus 54.6, last 54.8. Commenting on Europe's PMIs, Goldman said that the Euro area composite PMI declined by 2.9pt to 56.1 in September, well below consensus expectations. The softening was broad-based across countries but primarily led by Germany. The peripheral composite flash PMI also weakened significantly in September but remain very high by historical standards (-2.4pt to 57.5). Across sectors, the September composite decline was also broad-based, with manufacturing output softening (-3.3pt to 55.6) to a similar extent as services (-2.7pt to 56.3). Supply-side issues and upward cost and price pressures continued to be widely reported. Expectations of future output growth declined by less than spot output on the back of delta variant worries and supply issues, remaining far above historically average levels. Earlier in the session, Asian stocks rose for the first time in four sessions, as Hong Kong helped lead a rally on hopes that troubled property firm China Evergrande Group will make progress on debt repayment. The MSCI Asia Pacific Index climbed as much as 0.5%, with Tencent and Meituan providing the biggest boosts. The Hang Seng jumped as much as 2.5%, led by real estate stocks as Evergrande surged more than 30%. Hong Kong shares later pared their gains. Asian markets were also cheered by gains in U.S. stocks overnight even as the Federal Reserve said it may begin scaling back stimulus this year. A $17 billion net liquidity injection from the People’s Bank of China also provided a lift, while the Fed and Bank of Japan downplayed Evergrande risks in comments accompanying policy decisions Wednesday. Evergrande’s stock closed 18% higher in Hong Kong, in a delayed reaction to news a unit of the developer had negotiated interest payments on yuan notes. A coupon payment on its 2022 dollar bond is due on Thursday “Investors are perhaps reassessing the tail risk of a disorderly fallout from Evergrande’s credit issues,” said Chetan Seth, a strategist at Nomura. “However, I am not sure if the fundamental issue around its sustainable deleveraging has been addressed. I suspect markets will likely remain quite volatile until we have some definite direction from authorities on the eventual resolution of Evergrande’s debt problems.” Stocks rose in most markets, with Australia, Taiwan, Singapore and India also among the day’s big winners. South Korea’s benchmark was the lone decliner, while Japan was closed for a holiday In rates, Treasuries were off session lows, with the 10Y trading a 1.34%, but remained under pressure in early U.S. session led by intermediate sectors, where 5Y yield touched highest since July 2. Wednesday’s dramatic yield-curve flattening move unleashed by Fed communications continued, compressing 5s30s spread to 93.8bp, lowest since May 2020. UK 10-year yield climbed 3.4bp to session high 0.833% following BOE rate decision (7-2 vote to keep bond-buying target unchanged); bunds outperformed slightly. Peripheral spreads tighten with long-end Italy outperforming. In FX, the Bloomberg Dollar Spot Index reversed an earlier gain and dropped 0.3% as the dollar weakened against all of its Group-of-10 peers apart from the yen amid a more positive sentiment. CAD, NOK and SEK are the strongest performers in G-10, JPY the laggard.  The euro and the pound briefly pared gains after weaker-than-forecast German and British PMIs. The pound rebounded from an eight-month low amid a return of global risk appetite as investors assessed whether the Bank of England will follow the Federal Reserve’s hawkish tone later Thursday. The yield differential between 10-year German and Italian debt narrowed to its tightest since April. Norway’s krone advanced after Norges Bank raised its policy rate in line with expectations and signaled a faster pace of tightening over the coming years. The franc whipsawed as the Swiss National Bank kept its policy rate and deposit rate at record lows, as expected, and reiterated its pledge to wage currency market interventions. The yen fell as a unit of China Evergrande said it had reached an agreement with bond holders over an interest payment, reducing demand for haven assets. Turkey’s lira slumped toa record low against the dollar after the central bank unexpectedly cut interest rates. In commodities, crude futures drifted lower after a rangebound Asia session. WTI was 0.25% lower, trading near $72; Brent dips into the red, so far holding above $76. Spot gold adds $3.5, gentle reversing Asia’s losses to trade near $1,771/oz. Base metals are well bid with LME aluminum leading gains. Bitcoin steadied just below $44,000. Looking at the day ahead, we get the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Market Snapshot S&P 500 futures up 0.7% to 4,413.75 STOXX Europe 600 up 1.1% to 468.32 MXAP up 0.5% to 200.57 MXAPJ up 0.9% to 645.76 Nikkei down 0.7% to 29,639.40 Topix down 1.0% to 2,043.55 Hang Seng Index up 1.2% to 24,510.98 Shanghai Composite up 0.4% to 3,642.22 Sensex up 1.4% to 59,728.37 Australia S&P/ASX 200 up 1.0% to 7,370.22 Kospi down 0.4% to 3,127.58 German 10Y yield fell 5.6 bps to -0.306% Euro up 0.4% to $1.1728 Brent Futures up 0.3% to $76.39/bbl Gold spot up 0.0% to $1,768.25 U.S. Dollar Index down 0.33% to 93.16 Top Overnight News from Bloomberg Financial regulators in Beijing issued a broad set of instructions to China Evergrande Group, telling the embattled developer to focus on completing unfinished properties and repaying individual investors while avoiding a near-term default on dollar bonds China’s central bank net-injected the most short- term liquidity in eight months into the financial system, with markets roiled by concerns over China Evergrande Group’s debt crisis Europe’s worst energy crisis in decades could drag deep into the cold months as Russia is unlikely to boost shipments until at least November Business activity in the euro area “markedly” lost momentum in September after demand peaked over the summer and supply chain bottlenecks hurt both services and manufacturers. Surveys of purchasing managers by IHS Markit showed growth in both sectors slowing more than expected, bringing overall activity to a five-month low. Input costs, meanwhile, surged to the highest in 21 years, according to the report The U.K. private sector had its weakest month since the height of the winter lockdown and inflation pressures escalated in September, adding to evidence that the recovery is running into significant headwinds, IHS Markit said The U.K.’s record- breaking debut green bond sale has given debt chief Robert Stheeman conviction on the benefits of an environmental borrowing program. The 10 billion-pound ($13.7 billion) deal this week was the biggest-ever ethical bond sale and the country is already planning another offering next month A more detailed look at global markets courtesy of Newsquaw Asian equity markets traded mostly positive as the region took its cue from the gains in US with the improved global sentiment spurred by some easing of Evergrande concerns and with stocks also unfazed by the marginally more hawkish than anticipated FOMC announcement (detailed above). ASX 200 (+1.0%) was underpinned by outperformance in the commodity-related sectors and strength in defensives, which have more than atoned for the losses in tech and financials, as well as helped markets overlook the record daily COVID-19 infections in Victoria state. Hang Seng (+0.7%) and Shanghai Comp. (+0.6%) were also positive after another respectable liquidity operation by the PBoC and with some relief in Evergrande shares which saw early gains of more than 30% after recent reports suggested a potential restructuring by China’s government and with the Co. Chairman noting that the top priority is to help wealth investors redeem their products, although the majority of the Evergrande gains were then pared and unit China Evergrande New Energy Vehicle fully retraced the initial double-digit advances. KOSPI (-0.5%) was the laggard as it played catch up to the recent losses on its first trading day of the week and amid concerns that COVID cases could surge following the holiday period, while Japanese markets were closed in observance of the Autumnal Equinox Day. China Pumps $17 Billion Into System Amid Evergrande Concerns China Stocks From Property to Tech Jump on Evergrande Respite Philippines Holds Key Rate to Spur Growth Amid Higher Prices Taiwan’s Trade Deal Application Sets Up Showdown With China Top Asian News European equities (Stoxx 600 +0.9%) trade on the front-foot and have extended gains since the cash open with the Stoxx 600 now higher on the week after Monday’s heavy losses. From a macro perspective, price action in Europe has been undeterred by a slowdown in Eurozone PMIs which saw the composite metric slip to 56.1 from 59.0 (exp. 58.5) with IHS Markit noting “an unwelcome combination of sharply slower economic growth and steeply rising prices.” Instead, stocks in the region have taken the cue from a firmer US and Asia-Pac handover with performance in Chinese markets aided by further liquidity injections by the PBoC. Some positivity has also been observed on the Evergrande front amid mounting expectations of a potential restructuring at the company. That said, at the time of writing, it remains unclear what the company’s intentions are for repaying its USD 83.5mln onshore coupon payment. Note, ING highlights that “missing that payment today would still leave a 30-day grace period before this is registered as a default”. The most recent reports via WSJ indicate that Chinese authorities are asking local governments to begin preparations for the potential downfall of Evergrande; however, the article highlights that this is a last resort and Beijing is reluctant to step in. Nonetheless, this article has taken the shine off the mornings risk appetite, though we do remain firmer on the session. Stateside, as the dust settles on yesterday’s FOMC announcement, futures are firmer with outperformance in the RTY (+0.8% vs. ES +0.7%). Sectors in Europe are higher across the board with outperformance in Tech and Autos with the latter aided by gains in Faurecia (+4.6%) who sit at the top of the Stoxx 600 after making an unsurprising cut to its guidance, which will at least provide some clarity on the Co.’s near-term future; in sympathy, Valeo (+6.6) is also a notable gainer in the region. To the downside, Entain (+2.6%) sit at the foot of the Stoxx 600 after recent strong gains with the latest newsflow surrounding the Co. noting that MGM Resorts is considering different methods to acquire control of the BetMGM online gambling business JV, following the DraftKings offer for Entain, according to sources. The agreement between Entain and MGM gives MGM the ability to block any deal with competing businesses; MGM officials believe this grants the leverage to take full control of BetMGM without spending much. Top European News BOE Confronts Rising Prices, Slower Growth: Decision Guide La Banque Postale Eyes Retail, Asset Management M&A in Europe Activist Bluebell Raises Pressure on Glaxo CEO Walmsley Norway Delivers Rate Lift-Off With Next Hike Set for December In FX, not much bang for the Buck even though the FOMC matched the most hawkish market expectations and Fed chair Powell arguably went further by concluding in the post-meeting press conference that substantial progress on the lagging labour front is all but done. Hence, assuming the economy remains on course, tapering could start as soon as November and be completed my the middle of 2022, though he continued to play down tightening prospects irrespective of the more hawkish trajectory implied by the latest SEP dot plots that are now skewed towards at least one hike next year and a cumulative seven over the forecast horizon. However, the Greenback only managed to grind out marginally higher highs overnight, with the index reaching 93.526 vs 93.517 at best yesterday before retreating quite sharply and quickly to 93.138 in advance of jobless claims and Markit’s flash PMIs. CAD/NZD/AUD - The Loonie is leading the comeback charge in major circles and only partially assisted by WTI keeping a firm bid mostly beyond Usd 72/brl, and Usd/Cad may remain contained within 1.2796-50 ahead of Canadian retail sales given decent option expiry interest nearby and protecting the downside (1 bn between 1.2650-65 and 2.7 bn from 1.2620-00). Meanwhile, the Kiwi has secured a firmer grip on the 0.7000 handle to test 0.7050 pre-NZ trade and the Aussie is looking much more comfortable beyond 0.7250 amidst signs of improvement in the flash PMIs, albeit with the services and composite headline indices still some way short of the 50.0 mark. NOK/GBP/EUR/CHF - All firmer, and the Norwegian Crown outperforming following confirmation of the start of rate normalisation by the Norges Bank that also underscored another 25 bp hike in December and further tightening via a loftier rate path. Eur/Nok encountered some support around 10.1000 for a while, but is now below, while the Pound has rebounded against the Dollar and Euro in the run up to the BoE at midday. Cable is back up around 1.3770 and Eur/Gbp circa 0.8580 as Eur/Usd hovers in the low 1.1700 area eyeing multiple and a couple of huge option expiries (at the 1.1700 strike in 4.1 bn, 1.1730 in 1 bn, 1.1745-55 totalling 2.7 bn and 1.8 bn from 1.1790-1.1800). Note, Eurozone and UK flash PMIs did not live up to their name, but hardly impacted. Elsewhere, the Franc is lagging either side of 0.9250 vs the Buck and 1.0835 against the Euro on the back of a dovish SNB Quarterly Review that retained a high Chf valuation and necessity to maintain NIRP, with only minor change in the ordering of the language surrounding intervention. JPY - The Yen is struggling to keep its head afloat of 110.00 vs the Greenback as Treasury yields rebound and risk sentiment remains bullish pre-Japanese CPI and in thinner trading conditions due to the Autumn Equinox holiday. In commodities, WTI and Brent have been choppy throughout the morning in-spite of the broadly constructive risk appetite. Benchmarks spent much of the morning in proximity to the unchanged mark but the most recent Evergrande developments, via WSJ, have dampened sentiment and sent WTI and Brent back into negative territory for the session and printing incremental fresh lows at the time of publication. Back to crude, newsflow has once again centred around energy ministry commentary with Iraq making clear that oil exports will continue to increase. Elsewhere, gas remains at the forefront of focus particularly in the UK/Europe but developments today have been somewhat incremental. On the subject, Citi writes that Asia and Europe Nat. Gas prices could reach USD 100/MMBtu of USD 580/BOE in the winter, under their tail-risk scenario. For metals, its very much a case of more of the same with base-metals supportive, albeit off-best given Evergrande, after a robust APAC session post-FOMC. Given the gas issues, desks highlight that some companies are being forced to suspend/reduce production of items such as steel in Asian/European markets, a narrative that could become pertinent for broader prices if the situation continues. Elsewhere, spot gold and silver are both modestly firmer but remain well within the range of yesterday’s session and are yet to recovery from the pressure seen in wake of the FOMC. US Event Calendar 8:30am: Sept. Initial Jobless Claims, est. 320,000, prior 332,000; Continuing Claims, est. 2.6m, prior 2.67m 8:30am: Aug. Chicago Fed Nat Activity Index, est. 0.50, prior 0.53 9:45am: Sept. Markit US Composite PMI, prior 55.4 9:45am: Sept. Markit US Services PMI, est. 54.9, prior 55.1 9:45am: Sept. Markit US Manufacturing PMI, est. 61.0, prior 61.1 11am: Sept. Kansas City Fed Manf. Activity, est. 25, prior 29 12pm: 2Q US Household Change in Net Wor, prior $5t DB's Jim Reid concludes the overnight wrap My wife was at a parents event at school last night so I had to read three lots of bedtime stories just as the Fed were announcing their policy decision. Peppa Pig, Biff and Kipper, and somebody called Wonder Kid were interspersed with Powell’s press conference live on my phone. It’s fair to say the kids weren’t that impressed by the dot plot and just wanted to join them up. The twins (just turned 4) got their first reading book homework this week and it was a bit sad that one of them was deemed ready to have one with words whereas the other one only pictures. The latter was very upset and cried that his brother had words and he didn’t. That should create even more competitive tension! Back to the dots and yesterday’s Fed meeting was on the hawkish side in terms of the dots and also in terms of Powell’s confidence that the taper could be complete by mid-2022. Powell said that the Fed could begin tapering bond purchases as soon as the November FOMC meeting, in line with our US economists’ forecasts. He left some room for uncertainty, saying they would taper only “If the economy continues to progress broadly in line with expectations, and also the overall situation is appropriate for this.” However he made clear that “the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff.” The quarterly “dot plot” showed that the 18 FOMC officials were split on whether to start raising rates next year or not. In June, the median dot indicated no rate increases until 2023, but now 6 members see a 25bps raise next year and 3 members see two such hikes. Their inflation forecasts were also revised up and DB’s Matt Luzzetti writes in his FOMC review (link here) that “If inflation is at or below the Fed's current forecast next year of 2.3% core PCE, liftoff is likely to come in 2023, consistent with our view. However, if inflation proves to be higher with inflation expectations continuing to rise, the first rate increase could well migrate into 2022.” Markets took the overall meeting very much in its stride with the biggest impact probably being a yield curve flattening even if US 10yr Treasury yields traded in just over a 4bp range yesterday and finishing -2.2bps lower at 1.301%. The 5y30y curve flattened -6.7bps to 95.6bps, its flattest level since August 2020, while the 2y10y curve was -4.2bps flatter. So the market seems to believe the more hawkish the Fed gets the more likely they’ll control inflation and/or choke the recovery. The puzzle is that even if the dots are correct, real Fed funds should still be negative and very accommodative historically for all of the forecasting period. As such the market has a very dim view of the ability of the economy to withstand rate hikes or alternatively that the QE technicals are overpowering everything at the moment. In equities, the S&P 500 was up nearly +1.0% 15 minutes prior to the Fed, and then rallied a further 0.5% in the immediate aftermath before a late dip look it back to +0.95%. The late dip meant that the S&P still has not seen a 1% up day since July 23. The index’s rise was driven by cyclicals in particular with energy (+3.17%), semiconductors (-2.20%), and banks (+2.13%) leading the way. Asian markets are mostly trading higher this morning with the Hang Seng (+0.69%), Shanghai Comp (+0.58%), ASX (+1.03%) and India’s Nifty (+0.81%) all up. The Kospi (-0.36%) is trading lower though and is still catching up from the early week holidays. Japan’s markets are closed for a holiday today. Futures on the S&P 500 are up +0.25% while those on the Stoxx 50 are up +0.49%. There is no new news on the Evergrande debt crisis however markets participants are likely to pay attention to whether the group is able to make interest rate payment on its 5 year dollar note today after the group had said yesterday that it resolved a domestic bond coupon by negotiations which was also due today. As we highlighted in our CoTD flash poll conducted earlier this week, market participants are not too worried about a wider fallout from the Evergrande crisis and even the Hang Seng Properties index is up +3.93% this morning and is largely back at the levels before the big Monday sell-off of -6.69%. Overnight we have received flash PMIs for Australia which improved as parts of the country have eased the coronavirus restrictions. The services reading came in at 44.9 (vs. 42.9 last month) and the manufacturing print was even stronger at 57.3 (vs. 52.0 last month). Japan’s flash PMIs will be out tomorrow due to today’s holiday. Ahead of the Fed, markets had continued to rebound from their declines earlier in the week, with Europe’s STOXX 600 gaining +0.99% to narrowly put the index in positive territory for the week. This continues the theme of a relative outperformance among European equities compared to the US, with the STOXX 600 having outpaced the S&P 500 for 5 consecutive sessions now, though obviously by a slim margin yesterday. Sovereign bonds in Europe also posted gains, with yields on 10yr bunds (-0.7bps), OATs (-1.0bps) and BTPs (-3.2bps) all moving lower. Furthermore, there was another tightening in peripheral spreads, with the gap in Italian 10yr yields over bunds falling to 98.8bps yesterday, less than half a basis point away from its tightest level since early April. Moving to fiscal and with Democrats seemingly unable to pass the $3.5 trillion Biden budget plan by Monday, when the House is set to vote on the bipartisan infrastructure bill, Republican leadership is calling on their members to vote against the bipartisan bill in hopes of delaying the process further. While the there is still a high likelihood the measure will eventually get passed, time is becoming a factor. Congress now has just over a week to get a government funding bill through both chambers of congress as well as raise the debt ceiling by next month. Republicans have told Democrats to do the latter in a partisan manner and include it in the reconciliation process which could mean that a significant portion of the Biden economic agenda – mostly encapsulated in the $3.5 trillion over 10 year budget – may have to be cut down to get the entire Democratic caucus on board. Looking ahead, an event to watch out for today will be the Bank of England’s policy decision at 12:00 London time, where our economists write (link here) that they expect no change in the policy settings. However, they do expect a reaffirmation of the BoE’s updated forward guidance that some tightening will be needed over the next few years to keep inflation in check, even if it’s too early to expect a further hawkish pivot at this stage. Staying on the UK, two further energy suppliers (Avro Energy and Green Supplier) ceased trading yesterday amidst the surge in gas prices, with the two supplying 2.9% of domestic customers between them. We have actually seen a modest fall in European natural gas prices over the last couple of days, with the benchmark future down -4.81% since its close on Monday, although it’s worth noting that still leaves them up +75.90% since the start of August alone. There wasn’t much data to speak of yesterday, though US existing home sales fell to an annualised rate of 5.88 in August (vs. 5.89m expected). Separately, the European Commission’s advance consumer confidence reading for the Euro Area unexpectedly rose to -4.0 in September (vs. -5.9 expected). To the day ahead now, the data highlights include the September flash PMIs from around the world, while in the US there’s the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Tyler Durden Thu, 09/23/2021 - 08:13.....»»

Category: blogSource: zerohedgeSep 23rd, 2021

How Evergrande Became Too Big To Fail And Why Beijing Will Have To Bail It Out

How Evergrande Became Too Big To Fail And Why Beijing Will Have To Bail It Out While the world is obsessing with the fate of Evergrande, and more importantly when, or if, Beijing will bail it out, another just as interesting question is how did the company many call "China's Lehman" get to the point of no return and become a global systematic risk. For a fascinating look into how we got here, we turn our readers' attention to a recent article from Caixin titled "How Evergrande Could Turn Into ‘China’s Lehman Brothers'," and which provides one of the most comprehensive insights into why Beijing will have to, even if it is kicking and screaming, bail out Evergrande which, at its core, is just one giant shadow-banking black box whose time has finally run out. * * * For the past two months, hundreds of people have been gathering at the 43-floor Zhuoyue Houhai Center in Shenzhen, where China Evergrande Group’s headquarters occupy 20 floors. They held banners demanding repayment of overdue loans and financial products. Police with riot shields had to be on site to keep things under control. The demonstrators are construction workers at the property developer’s housing projects, suppliers providing construction materials and investors in the company’s wealth management products (WMPs). From paint suppliers to decoration and construction companies, Evergrande owes more than 800 billion yuan ($124 billion) due within one year, while it has only a 10th of that amount of cash on hand. As of the end of June, Evergrande had nearly 2 trillion yuan ($309 billion) of debts on its books, plus an unknown amount of off-books debt. The property giant is on the verge of a dramatic debt restructuring or even bankruptcy, many institutions believe. A bankruptcy would amount to a financial tsunami, or as some analysts put it, “China’s Lehman Brothers.” The venerable American investment bank’s 2008 collapse helped trigger a global financial crisis. Certainly Evergrande, one of China’s three biggest developers, has a giant footprint in China. Unfinished residential buildings at Evergrande Oasis, a housing complex developed by Evergrande Group, in Luoyang, China September 16, 2021 Its liabilities are equivalent to about 2% of China’s GDP. It has more than 200,000 employees, who themselves and many of their families have invested billions of yuan in the company’s WMPs. The company has more than 800 projects under construction, more than half of them halted due to its cash crunch. There are thousands of upstream and downstream companies that rely on Evergrande for business, creating more than 3.8 million jobs every year. Like many of China’s “too big to fail” conglomerates, Evergrande’s crisis has fueled speculation over whether the government will step in for a rescue. Several state-owned enterprises, including Shenzhen Talents Housing Group Co. Ltd. and Shenzhen Investment Ltd., both controlled by the Shenzhen State-owned Assets Supervision and Administration Commission (SASAC), are in talks with Evergrande on its Shenzhen projects, according to people close to the talks. But so far, no deals have been reached. In a statement last week, Evergrande denied rumors that it will go bankrupt. While the developer faces unprecedented difficulties, it is fulfilling its responsibilities and is doing everything possible to restore normal operations and protect the legitimate rights and interests of customers, according to a statement on its website. The company hired financial advisers to explore “all feasible solutions” to ease its cash crunch, warning that there’s no guarantee the company will meet its financial obligations. It has repeatedly signaled that it will sell equity and assets including but not limited to investment properties, hotels and other properties and attract investors to increase the equity of Evergrande and its affiliates. Growth on borrowed money Over the years, Evergrande has faced liquidity pressure several times, but every time it dodged the bullet. This time, the crisis of cash flow and trust is unprecedented. Evergrande shares in Hong Kong plummeted to a 10-year low. Its onshore bonds fell to what investors call defaulted bond level. All three global credit rating companies and one domestic rating company have downgraded Evergrande’s debt. For many years, Chinese developers were driven by the “three carriages” — high turnover, high gross profit and high leverage. Developers use borrowed money to acquire land, collect presale cash before projects even start, and then borrow more money to invest in new projects. In 2018, Evergrande reported record profit of 72 billion yuan, more than double the previous year’s net. But behind that, it spent more than 100 billion yuan a year on interest. Even in good years, the company usually had negative operating cash flow, with not enough cash on hand to cover short-term loans due within a year with and presale revenue not enough to pay suppliers. In addition to borrowing from banks, Evergrande also borrows from executives and employees. When developers seek funds from banks, lenders often require personal investments from the developers’ executives as a risk-control measure, a former employee at Evergrande’s asset management department told Caixin. “At times like this, Evergrande would have an internal fund-raising campaign,” the manager said. “Either the executives would pay out of their own pockets, or they would set a goal for each division.” One crowdfunding product issued to executives was called “Chaoshoubao,” which means “super return treasure.” In 2017, Evergrande tried to obtain project financing from state-owned China Citic Bank in Shenzhen, which required personal investment from Evergrande’s executives. The company then issued Chaoshoubao to employees, promising 25% annual interest and redemption of principal and interest within two years. The minimum investment was 3 million yuan. China Citic Bank eventually agreed to provide 40 billion yuan of acquisition funds to Evergrande. In 2020, Chen Xuying, former vice president of China Citic Bank and head of the bank’s Shenzhen branch from 2012 to 2018, was sentenced to 12 years in prison for accepting bribes after issuing loans. A senior executive at Evergrande said he personally invested 1.5 million yuan and mobilized his subordinates to invest 1.5 million yuan into Chaoshoubao. Some employees would even borrow money to invest in the product because the 25% return was much higher than loan rates. When the Chaoshoubao was due for redemption in 2019, the company asked employees who bought the product to agree to a one-year extension for repayment. Then in 2020, the company asked for another one-year extension. One investor said buyers received an annualized return of 4% to 5% in the last four years, far below the 25% promised return. When Evergrande’s cash flow crisis was exposed, the company chose to repay principal only to current executives. From late August to early September, the company repaid current executives and employees about 2 billion yuan but still owed 200 million yuan to former employees, including Ren Zeping, former chief economist of Evergrande who joined Soochow Securities Co. in March. Evergrande’s wealth division also sells WMPs to the public. Most of these WMPs offer a return of 5% to 10%, with a minimum investment of 100,000 yuan, the former employee at Evergrande’s asset management department said. As the return is higher than WMPs typically sold at banks, many of Evergrande’s employees bought them and persuaded their families and friends to invest, an employee said. Usually, a 20 million yuan WMP could be sold out within five days, the employee said. The company also sells WMPs to construction partners. Evergrande would require construction companies to buy WMPs whenever it needed to pay them, a former employee at Evergrande’s construction division told Caixin. “If the construction companies are owed 1 million or 2 million yuan, we would ask them to buy 100,000–200,000 yuan of WMPs, or about 10% of their receivables,” the former employee said. Although it was not mandatory for construction companies to buy WMPs, they often would do so for the sake of maintaining a good relationship with Evergrande, the former employee said. In addition, Evergrande property owners were also buyers of the company’s WMPs. About 40 billion yuan of the WMPs are now due. “It is difficult for Evergrande to make all of the repayments at once at this moment,” said Du Liang, general manager of Evergrande’s wealth division. Evergrande initially proposed to impose lengthy repayment delays, with investments of 100,000 yuan and above to be repaid in five years. After heated protests by investors, the company tweaked its plan last week, offering three options. Investors can accept cash installments, purchase Evergrande’s properties in any city at a discount, or waive investors’ payables on residential units they have purchased. Some investors opposed the “property for debt” option, as many projects of Evergrande have been halted and there is a risk of unfinished projects in the future. “The proposals are insincere,” a petition signed by some Guangdong investors said. “It’s like buying nonperforming assets with a premium.” The petition urged the government to freeze Evergrande’s accounts and assets and demanded cash repayment of all principal and interest. Some investors chose to accept the payment scheme proposed by Evergrande. They selected Evergrande projects located in hot cities in the hope of making up for losses by resale in the future. As Evergrande owed large amounts to construction companies, more than 500 of Evergrande’s 800-plus projects across the country are now halted. The company has at least several hundred thousand units that have been presold and not delivered. It needs at least 100 billion yuan to complete construction and deliver the units, Caixin learned. Whether and how to repay WMP investors or deliver housing is Evergrande’s dilemma. Debt to construction partners and suppliers In August, the construction company that was contracted to build Evergrande’s Taicang cultural tourism city in Nantong, Jiangsu province, announced the halt of the project due to bills unpaid by Evergrande. The company, Jiangsu Nantong Sanjian Construction Group Co. Ltd., said it put 500 million yuan of its own funds into the project and Evergrande paid it less than 290 million yuan. Sanjian has other construction contracts with Evergrande and its subsidiaries. As of September, Evergrande owes the Nantong company about 20 billion yuan. As of August 2020, Evergrande had 8,441 upstream and downstream companies it was working with. If the flow of Evergrande cash stops, the normal operation of these companies will be disrupted, and some would even face the risk of bankruptcy. In Ezhou, Hubei province, five of Evergrande’s projects have been halted for more than a month, and it owes contractors about 500 million yuan. “Housing delivery involves not only hundreds of thousands of families, but also local social stability,” a banker said. The housing authorities in Guangdong province are coordinating with Evergrande and its construction partners, trying to resume construction, the banker said. Evergrande relies heavily on commercial paper to pay construction partners and suppliers. Among payments it made to Sanjian, only 8% was in cash and the rest in commercial paper. Initially, the commercial paper borrowings were mostly six-month notes with annualized interest rates of 15%–16%. Now most carry interest rates of more than 20%. Holders of such commercial paper can sell the notes at a discount to raise cash. In 2017–18, the discount rate on Evergrande paper could reach 15%–20%. Since May 2021, the few Evergrande notes that could still be sold have been discounted as much as 55%, according to a person familiar with such transactions. For small and medium-sized suppliers, holding a large amount of overdue Evergrande notes is a burden too heavy to bear. In recent months, a number of suppliers sued Evergrande for breach of contract but often settled the cases. A lawyer who represented Evergrande in related cases told Caixin that many plaintiffs chose to negotiate with Evergrande while fighting in court. Evergrande also offered a “property for debt” option to its commercial paper holders. The company said it’s in talks with suppliers and construction contractors to delay payment or offset debt with properties. From July 1 to Aug. 27, Evergrande sold properties to suppliers and contractors to offset a total of 25 billion yuan of debt. Selling assets, but not land Meanwhile, Evergrande has been offloading its assets to raise cash. Its biggest assets are its land reserves. As of June 30, it had 778 land reserve projects with a total planned floor area of 214 million square meters and an original value of 456.8 billion yuan. Additionally, it has 146 urban redevelopment projects. In the past three months, Evergrande has been in talks with China Overseas Land and Investment Ltd., China Vanke Co. Ltd. and China Jinmao Holdings Group Ltd. for possible asset sales. Shenzhen and Guangzhou SASACs have arranged for several state-owned enterprises to conduct due diligence on Evergrande’s urban redevelopment projects, a person close to the matter said. Evergrande has approached every possible buyer in the market, the person said. However, no deals have been reached. Several real estate developers that have been in contact with Evergrande told Caixin that while some of Evergrande’s projects look good on the surface, there are complex creditors’ rights that make them difficult to dispose of. Some potential buyers have said they could consider a debt-assumption acquisition, but Evergrande was reluctant to sell at a loss, Caixin learned. At an emergency staff meeting Sept. 10, the wealth management general manager Du said in a speech that most of Evergrande’s land reserve is not for sale, reflecting the position of his boss, founder and Chairman Xu Jiayin. “In China, land reserves are the most valuable assets,” Du said. “This is Evergrande’s biggest asset and last resort. “For example, for a land parcel, Evergrande’s acquisition cost is 1 billion yuan, and the land itself is worth 2 billion yuan, but the buyer may only offer 300 million yuan,” Du said. “If we sold at a loss, we would have no capital to revive.” For his part, Xu maintained that Evergrande could repay all its debts and recover as long as it turns land into houses and sells them. But even if Evergrande can quickly sell its houses, the revenue would be far from enough to pay down debt. The chance that Evergrande won’t be able to pay interest due in the third quarter is 99.99%, estimated by a banker whose employer has billions of yuan of exposure to the company. As of the end of June, Evergrande had total assets of 2.38 trillion yuan and total liabilities of 1.97 trillion yuan. Of the nearly 2 trillion yuan of debt, interest-bearing debt was 571.7 billion yuan, down about 145 billion yuan from the end of 2020. The decrease in interest-bearing debt was mostly achieved by deferred payables to suppliers. In addition to the 571.7 billion yuan of interest-bearing debt on its books, it’s not a secret that developers like Evergrande have huge off-balance sheet debt. But the amount at Evergrande is not known. In the early stage of projects, developers need to invest a lot of money, which could significantly increase the debt on the balance sheet. Companies often place these debts off their balance sheet through a variety of means. After the pre-sale of the project, or even after the cash flow of the project turns positive, these debts would be consolidated into the balance sheet in the form of equity transfer, according to a property industry insider. For example, 40 billion yuan of acquisition funds Evergrande obtained from China Citic Bank were invested in multiple projects. Among them, 10.7 billion yuan was used by Shenzhen Liangyang Industrial Co. Ltd. to acquire Shenzhen Duoji Investment Co. Ltd. As Evergrande doesn’t have an equity relationship with the two companies, this item was not required to be consolidated into Evergrande’s financial statement. Evergrande used leveraged funds to acquire equities in 10 projects, and none of them were included in its financial statement, the prospectus of its Chaoshoubao shows. Evergrande has sold equity in subsidiaries to strategic investors and promised to buy back the stakes if certain milestones can’t be reached in the future. Such equity sales are actually a form of borrowing, too. In March, Evergrande sold a stake in its online home and car sales platform Fangchebao for HK$16.4 billion ($2.1 billion) in advance of a planned U.S. share sale by the unit. If the online sales unit doesn’t complete an initial public offering on Nasdaq or any other stock exchange within 12 months after the completion of the stake sale, the unit is required to repurchase the shares at a 15% premium. Evergrande’s hidden debts also include unpaid payments to acquire equities. Dozens of small property companies have sued Evergrande demanding cancellation of their equity sales agreements with the company because Evergrande failed to pay them. They are Evergrande’s partners in local development projects. Evergrande usually paid them 30% down for equities but declined to pay the rest even after the project was completed, according to the lawsuits. A plaintiff’s lawyer told Caixin that Evergrande’s project subsidiaries don’t want to go sour with local partners, but they have no money to pay as sales from the projects have been transferred to the parent company. A total of 49 of Evergrande’s wholly owned local subsidiaries have been sued since April, according to Tianyancha, a database of publicly available corporate information. Evergrande also owes land transfer fees to some local governments. Some 20 Evergrande affiliates have not yet made payments to the city government of Lanzhou, the capital of Northwest China’s Gansu province, according to a list of 41 such firms issued in July by the city’s natural resources department. A potential default by Evergrande could spread to markets outside China as it has huge, high-interest offshore bonds. Some of its offshore bonds carry interest rates as high as 15%, a person close to the Hong Kong capital market said. UBS estimates that $19 billion of Evergrande’s liabilities are made up of outstanding offshore bonds. Evergrande has been frantically selling properties at discounts this year. In late May, it offered certain homebuyers 30% to 40% off if they paid entirely in cash. In the first half, the company reported 356 billion yuan of contracted sales, slightly higher than 349 billion yuan for the same period last year. Average selling prices in the first six months declined 11.2%. Meanwhile, payables increased 14.7% to 951 billion yuan, and sales and marketing expenses increased 30% to 17.8 billion yuan. In response to the market environment, the company increased sales commissions and marketing expenses, the company said. Compared with its competitors, Evergrande has higher capital and human costs but lower selling prices, an industry participant said. “How can it make money?” the person said. The developer reported a 29% slide in profit for the first half. Its 10.5 billion yuan of profit mainly reflected an 18.5 billion yuan gain from the sale of some shares and marked-to-market holding in internet unit Henten Networks. It reported a loss in its core property business of 4 billion yuan. Evergrande’s extremely high debt ratio, high financing cost and repeated delays in payments to suppliers, partners and local government show that its liquidity has always been tight, but on the other hand, the fact that it has survived years under this model indicates that it has always been able to generate money, a veteran investor said. Now everyone is watching whether it can dodge the bullet once again. Tyler Durden Mon, 09/20/2021 - 22:00.....»»

Category: blogSource: zerohedgeSep 21st, 2021

Futures Flat Ahead Of Taper Accelerating Payrolls

Futures Flat Ahead Of Taper Accelerating Payrolls U.S. equity futures are flat, rebounding from an overnight slide following news that 5 "mild" Omicron cases were found in New York, and European stocks wavered at the end of a volatile week as traders waited for the latest jobs data to assess the likely pace of Federal Reserve tightening and accelerated tapering. Emini S&P futures traded in a narrow range, and were up 2 points or 0.04%, Nasdaq futures were flat,while Dow Jones futures were up 8 points. The dollar edged higher, along with the euro after ECB President Christine Lagarde said inflation will decline in 2022. Crude advanced after OPEC+ left the door open to changing the plan to raise output at short notice. S&P 500 and Nasdaq 100 contracts fluctuated after dip-buyers Thursday fueled the S&P 500’s best climb since mid-October, a sign that some of the worst fears about the omicron virus strain are dissipating. That said, concerns about omicron are overshadowing economic news for now with “a lot of noise and very little meaningful information,” said Geir Lode, head of global equities at Federated Hermes in London. “The prospect of a faster monetary policy tightening could -- and should probably -- lead to a clear market reaction,” he said. “It is also another argument for why we assume value stocks outperform growth stocks. At the moment, however, investors’ attention is elsewhere.” In the latest U.S. data, jobless claims remained low, suggesting additional progress in the labor market. Traders are awaiting today's big event - the November payrolls numbers, which could shape expectations for the pace of Fed policy tightening (full preview here). Bloomberg Economics expects a strong report, while the median estimate in a Bloomberg survey of economists predicts an increase of 550,000. “Assuming the omicron news remains less end-of-the-world, a print above 550,000 jobs should see the faster Fed-taper trade reassert itself,” Jeffrey Halley, a senior market analyst at Oanda, wrote in a note. “That may nip the equity rally in the bud, while the dollar and U.S. yields could resume rising.” In premarket trading, Didi Global Inc. jumped more than 14% in U.S. premarket trading before reversing all gains, after the Chinese ride-hailing giant said it began preparations to withdraw from U.S. stock exchanges. U.S. antitrust officials sued to block chipmaker Nvidia’s proposed $40 billion takeover of Arm, saying the deal would hobble innovation and competition. Elon Musk’s offloading of Tesla Inc. shares surpassed the $10 billion mark as he sold stock in the electric-car maker for the fourth consecutive week. Here are some of the other biggest U.S. movers today: DocuSign (DOCU US) plunges 32% in premarket trading as the e-signature company’s quarterly revenue forecast missed analysts’ estimates. JPMorgan and Piper Sandler cut ratings. Marvell Technology (MRVL US) shares rise 18% in premarket after the semiconductor company’s fourth-quarter forecast beat analyst estimates; Morgan Stanley notes “an exceptional quarter” with surprising outperformance from enterprise networking, strength in 5G and in cloud. Asana (ASAN US) shares slump 14% in premarket trading after results, with KeyBanc cutting the software firm’s price target on a reset in the stock’s valuation. Piper Sandler said that slight deceleration in revenue and billings growth could disappoint some investors. Zillow Group (ZG US) shares rise 8.8% in premarket after the online real-estate company announced a $750 million share repurchase program and said it has made “significant progress” on Zillow Offers inventory wind- down. Stitch Fix (SFIX US) jumped in premarket after Morgan Stanley raised its rating to equal-weight from underweight. Smartsheet (SMAR US) rose in postmarket trading after the software company boosted its revenue forecast for the full year; the guidance beat the average analyst estimate. National Beverage Corp. (FIZZ US) gained in postmarket trading after the drinks company announced a special dividend of $3 a share. Ollie’s Bargain (OLLI US) plunged 21% in U.S. premarket trading on Friday, after the company’s quarterly results and forecast disappointed, hurt by supply-chain troubles. Smith & Wesson Brands (SWBI US) stock fell 15% in postmarket trading after adjusted earnings per share for the second quarter missed the average analyst estimate. In Europe, the Stoxx Europe 600 Index slipped as much as 0.2% before turning green with mining companies and carmakers underperforming and energy and utility stocks rising. Swedish Orphan Biovitrum AB fell as much as 26% after private-equity firm Advent International and Singapore wealth fund GIC abandoned their $7.6 billion bid to buy the drugmaker. Volatility across assets remains elevated, reflecting the Fed’s shift toward tighter monetary settings and uncertainty about how the omicron outbreak will affect global reopening. The hope is that vaccines will remain effective or can be adjusted to cope. New York state identified at least five cases of omicron, which is continuing its worldwide spread, while the latest research shows the risk of reinfection with the new variant is three times higher than for others. “The environment in markets is changing,” Steven Wieting, chief investment strategist at Citigroup Private Bank, said on Bloomberg Television. “Monetary policy, fiscal policy are all losing steam. It doesn’t mean a down market. But it’s not going to be like the rebound, the sharp recovery that we had for almost every asset in the past year.” Earlier in the session, Asian stocks held gains from the past two days as travel and consumer shares rallied after their U.S. peers rebounded and a report said Merck & Co. is seeking to obtain approval of its Covid-19 pill in Japan. The MSCI Asia Pacific Index was little changed after climbing as much as 0.3%, with Japan among the region’s best performers. South Korea’s benchmark had its biggest three-day advance since February, boosted by financial shares. Still, Asian stocks headed for a weekly loss as U.S. regulators moved a step closer to boot Chinese firms off American stock exchanges. The Hang Seng Tech Index slid as much as 2.7% to a new all time low, as Tencent Holdings and Alibaba Group Holding fell after Didi Global Inc. began preparations to withdraw its U.S. listing.  “While the risks of delisting have already been brought up previously, a step closer towards a final mandate seems to serve as a reminder for the regulatory risks in Chinese stocks,” said Jun Rong Yeap, a market strategist at IG Asia Pte. Asian stocks remain stuck near a one-year low, as the delisting issue damped sentiment already hurt by omicron and the Fed’s hawkish pivot. A U.S. payrolls report later today could give further clues on the pace of tightening Japanese equities rose, paring their weekly loss, helped by gains in economically sensitive names. Electronics makers reversed an early loss to become the biggest boost to the Topix, which gained 1.6%. Automakers and banks also gained, while reopening plays tracked a rebound in U.S. peers. Daikin and Recruit were the largest contributors to a 1% gain in the Nikkei 225, which erased a morning decline of as much as 0.6%. The Topix still dropped 1.4% on the week, extending the previous week’s 2.9% slide, amid concerns over the omicron coronavirus variant. Despite some profit-taking in tech stocks in the morning session, “the medium and long-term outlooks for these names continue to be really good,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “The spread of the omicron variant doesn’t mean an across-the-board selloff for Japanese stocks.” India’s benchmark equity index recorded a weekly advance, partly recovering from a sharp sell-off triggered by uncertainty around the new Covid variant, with investors focusing on the central bank’s monetary policy meeting from Monday.  The S&P BSE Sensex fell 1.3% to 57,696.46, but gained 1% for the week after declining for two weeks. The NSE Nifty 50 Index dropped 1.2%, the biggest one-day decline since Nov. 26. All but three of the 19 sector sub-indexes compiled by BSE Ltd. fell, led by a gauge of energy companies. “The focus seems to be shifting from premium Indian equities to relatively cheaper markets,” Shrikant Chouhan, head of retail equity search at Kotak Securities said in a note. The cautious mood in India was heightened by the “unenthusiastic” response to the IPO of Paytm, which was also the biggest public share sale in the country, and a resurgence of Covid concerns across Europe, he added.  Investors also focused on the country’s economic outlook, which is showing signs of improvement. Major data releases this week -- from economic expansion to tax collection -- showed robust growth. “Strong domestic indicators are playing a key role in driving the market amid negative global cues,” said Mohit Nigam, a fund manager with Hem Securities. But any further spread of the omicron strain in India may cap local equity gains, he said. Two cases of the new variant have been detected so far in the country. The market’s attention will shift to the Reserve Bank of India’s policy announcement on Dec. 8, after a three-day meeting from Monday. The panel is expected to leave record low interest rates unchanged as inflation remains within its target range. The economy faces new risks from the omicron variant after expanding 8.4% in the three months through September. Reliance Industries contributed the most to the Sensex’s decline, falling 3%. Out of 30 shares in the index, 26 fell and 4 gained. Australia stocks posted a fourth week of losses amid the Omicron threat even as the S&P/ASX 200 index rose 0.2% to close at 7,241.20, boosted by banks and miners. That trimmed the benchmark’s loss for the week to 0.5%, its fourth-straight weekly decline.  Corporate Travel was among the top performers, rising for a second session. TPG Telecom led the laggards, tumbling after media reports that founder David Teoh entered into an agreement to sell about 53.1 million shares in a block trade.  In New Zealand, the S&P/NZX 50 index was little changed at 12,676.50. In FX, the Bloomberg Dollar Spot Index advanced and the greenback was higher against all of its Group-of-10 peers, with risk-sensitive Scandinavian and Antipodean currencies the worst performers. Turkish lira swings back to gain against the USD after central bank intervention for the 2nd time in 3 days. The pound weakened and gilt yields fell after Bank of England policy maker Michael Saunders urged caution on monetary tightening due to the potential effects of the omicron variant on the economy. The euro fell below $1.13 and some traders are starting to use option plays to express the view that the currency may extend its drop in coming month, yet recover in the latter part of 2022. The Aussie dropped for a fourth day amid concern U.S. payroll data due Friday may add to divergence between RBA and Fed monetary policy. Australia’s sale of 2024 bonds saw yields drop below those in the secondary market by the most on record. The yen weakened for a second day as the prospects for a faster pace of Fed tapering fans speculation of portfolio outflows from Japan. In rates, Treasury yields ticked lower, erasing some of Tuesday jump after Fed officials laid out the case for a faster removal of policy support amid high inflation.  Treasurys followed gilts during European morning, when Bank of England’s Saunders said the omicron variant is a key consideration for the December MPC decision which in turn lowered odds of a December BOE rate hike. Treasury yields are richer by up to 1.5bp across 10-year sector which trades around 1.43%; gilts outperform by ~1bp as BOE rate- hike premium for the December meeting was pared following Saunders comments. Shorter-term Treasury yields inched up, and the 2-year yield touched the highest in a week Friday’s U.S. session features a raft of data headed by the November jobs report due 8:30am ET where the median estimate is 550k while Bloomberg whisper number is 564k; October NFP change was 531k Crude futures extend Asia’s modest gains advanced after OPEC+ proceeded with an output hike but left room for quick adjustments due to a cloudy outlook, making shorting difficult. WTI added on ~2.5% to trade near $68.20, roughly near the middle of the week’s range. Brent recovers near $71.50. Spot gold fades a small push higher to trade near $1,770/oz. Most base metals are well supported with LME aluminum and zinc outperforming.  Looking at the day ahead, and the aforementioned US jobs report for November will be the highlight. Other data releases include the services and composite PMIs for November from around the world, Euro Area retail sales for October, and in addition from the US, there’s October’s factory orders and the November ISM services index. From central banks, we’ll hear from ECB President Lagarde and chief economist Lane, the Fed’s Bullard and the BoE’s Saunders. Market Snapshot S&P 500 futures little changed at 4,574.25 STOXX Europe 600 up 0.2% to 466.43 MXAP little changed at 192.06 MXAPJ down 0.5% to 625.64 Nikkei up 1.0% to 28,029.57 Topix up 1.6% to 1,957.86 Hang Seng Index little changed at 23,766.69 Shanghai Composite up 0.9% to 3,607.43 Sensex down 1.3% to 57,692.90 Australia S&P/ASX 200 up 0.2% to 7,241.17 Kospi up 0.8% to 2,968.33 Brent Futures up 3.3% to $71.97/bbl Gold spot down 0.1% to $1,767.28 U.S. Dollar Index up 0.14% to 96.29 German 10Y yield little changed at -0.37% Euro down 0.1% to $1.1286 Top Overnight News from Bloomberg “I see an inflation profile which looks like a hump” and “we know how painful it is,” ECB President Christine Lagarde says at event Friday. She also said that “when the conditions of our forward guidance are satisfied, we won’t be hesitant to act” and that an interest rate increase in 2022 is very unlikely The betting window is open in the fixed-income market as hedge funds and other traders hunt for mispriced risk heading into 2022 -- whether it’s predictions for accelerating inflation or rising interest rates The U.K. Municipal Bonds Agency aims to sell the first ethical bonds on behalf of local governments early next year. The body, set up to help U.K. councils access capital markets, is looking to issue a couple of sustainable bonds in the first quarter of 2022, according to officials advising on the sales. It expects to follow that with a pooled ethical bond to raise money for a group of different local authorities Low- income countries indebted to Chinese commercial and policy banks could buy specially-created Chinese government bonds and then use these as collateral to support the sale of new yuan debt, Zhou Chengjun, head of the People’s Bank of China’s finance research institute, wrote in an article published in the ChinaBond Magazine Chinese tech shares briefly touched their record lows in Hong Kong, as Didi Global Inc.’s announcement to start U.S. delisting and rising scrutiny on mainland firms traded there dealt a further blow to already soured sentiment The yuan is set to weaken for the first time in three years in 2022, as capital inflows are expected to slow amid a shrinking yield gap between China and the U.S., a Bloomberg survey shows Turkish inflation accelerated for a sixth month in November to the highest level in three years, driven by a slump in the lira that continues to cloud consumer price outlook A more detailed look at global markets courtesy of Newsquawk Asian equities eventually traded mostly higher following the cyclical-led rebound in the US, but with the mood in the region tentative as Omicron uncertainty lingered after further cases of the new variant were reported stateside and with the latest NFP data drawing near. ASX 200 (+0.2%) lacked direction as resilience in cyclicals was offset by underperformance in defensives and amid ongoing COVID-19 concerns which prompted the Western Australian government to widen its state border closure to include South Australia. Nikkei 225 (+1.0%) was initially subdued amid recent currency inflows and with SoftBank among the worst performers amid several negative headlines including the FTC suing to block the Nvidia acquisition of Arm from SoftBank, while the Japanese conglomerate also suffered from its exposure in “super app” Grab which tumbled 20% in its New York debut and with Didi to start delisting from the NYSE in favour of a Hong Kong listing, although the index eventually recovered losses in latter half of trade. Hang Seng (-0.1%) and Shanghai Comp. (+0.9%) were varied with US-listed Chinese companies pressured as the US SEC moved closer to delisting Chinese ADRs for failing to comply with disclosure requirements, while the mood across developers was also glum with Kaisa shares at a record low after its bond exchange offer to avert a default was rejected by bondholders and China Aoyuan Property Group slumped by double-digit percentages following its warning of an inability to repay USD 651.2mln of debt due to a liquidity crunch. Furthermore, participants digested the latest Caixin Services and Composite PMI data which slowed from the prior month, but both remained in expansion territory and with reports that advisors are to recommend lowering China’s economic growth target to 5.0%-5.5% or above 5%, fanning hopes for looser policy. Finally, 10yr JGBs gained and made another incursion above 152.00 with prices supported amid the cautious mood in Japan and with the BoJ also present in the market today for a total of JPY 1.05tln of JGBs heavily concentrated in 1yr-5yr maturities. Top Asian News Astra Said to Sink Advent’s $7.6 Billion Buyout of Biotech Sobi BOJ Is Said to See Omicron as Potential Reason to Keep Covid Aid Kaisa Swap Rejected, Developer Bonds Slide: Evergrande Update Permira Is Said to Near Deal for U.K. Blood Plasma Lab BPL The positivity seen heading into the European open dissipated as the session went underway, with the region seeing more of a mixed configuration in cash markets (Euro Stoxx 50 -0.1%; Stoxx 600 Unch) – with no clear drivers in the run-up to the US jobs report. The release will be carefully watching measures of labour market slack to gauge the progress towards the Fed's 'three tests' for rate hikes, whilst the Fed appears almost certain to announce a quickening in the pace of asset purchase tapering at its December meeting (Full NFP preview available in the Newsquawk Research Suite). The recent downside in Europe also seeps into the US futures, with the RTY (-0.2%), NQ (-0.2%) and ES (-0.3%) posting broad-based losses as things stand. Sectors have shifted from the earlier firm cyclical layout to one of a more defensive nature, with Healthcare, Food & Beverages, and Personal & Household Goods making their way up the ranks. Travel & Leisure still sits in the green but largely owed to sector heavyweight Evolution (+6.3%) as the group is to acquire its own shares in Nasdaq Stockholm. Oil & Gas sits as the current winner as crude markets claw back a bulk of this week's losses. On the flip side, Basic Resources are hit as iron ore tumbled overnight. In terms of individual movers, Dassault Aviation (+8.0%) shares soared after France signed a deal with the UAE worth some EUR 17bln. Allianz (+1.0%) stays in the green after entering a reinsurance agreement with Resolution Life and affiliates of Sixth Street for its US fixed index annuity portfolio, with the transaction to unlock USD 4.1bln in value. Top European News U.K. Nov. Composite PMI 57.6 vs Flash Reading 57.7 The Chance of a BOE Rate Hike This Month Has Fallen: BofA’s Wood AP Moller Holding Agrees to Buy Diagnostics Company Unilabs Permira Is Said to Near Deal for U.K. Blood Plasma Lab BPL In FX, it’s debatable whether this month’s US jobs data will carry as much weight as normal given that Fed rhetoric in the run up to the pre-FOMC blackout period has effectively signalled a faster pace of tapering and the likelihood of more hawkishly aligned dot plots. However, the latest BLS report could be influential in terms of shaping the tightening path once QE has been withdrawn, as markets continue to monitor unfolding COVID-19 developments with the main focus on vaccine efficacy against the new Omicron variant. In the meantime, Buck bulls have resurfaced to lift the index more firmly back above 96.000 and towards loftier levels seen earlier this week within a 96.075-324 range, eyeing Monday’s 96.448 peak ahead of the semi-psychological 96.500 mark and then the w-t-d best at 96.647 set the day after. Back to Friday’s agenda, Fed’s Bullard is due to speak and the services ISM rounds off the week. AUD/NZD - The high betas are bearing the brunt of Greenback gains, but also bearish technical forces as the Aussie and Kiwi both lose sight of key chart and simple round number levels that were keeping them afloat or declines relatively contained at least. Aud/Usd is now probing 0.7050 and a Fib retracement just above, while Nzd/Usd is hovering around 0.6775 as the Aud/Nzd cross holds in the low 1.0400 zone. JPY/CAD/CHF/GBP/EUR - All softer vs their US counterpart, with the Yen looking towards 113.50 for support with added protection from option expiry interest up to 113.60 in 1.1 bn, while the Loonie is relying on WTI to maintain recovery momentum before Canada and the US go head-to-head in the employment stakes. Usd/Cad is meandering in the low 1.2800 area as the crude benchmark regains Usd 68+/brl status from a sub-Usd 66.50 base and even deeper trough below Usd 62.50 in knee-jerk response to OPEC+ sticking to its output plan yesterday. Elsewhere, the Franc continues to straddle 0.9200, Sterling has retreated from 1.3300+ terrain again post-fractionally softer than forecast final UK services and composite PMIs, whilst a less hawkish speech from BoE hawk Saunders took Cable to a session low of 1.3255 and a 15bps Dec hike pricing fell from 51% to 26%. The Euro has also reversed from recent highs beyond 1.1300 amidst rather mixed Eurozone readings and pretty routine ECB rhetoric from President Lagarde plus GC members Knot, de Cos and de Guindos. In commodities, WTI and Brent front month futures continue to nurse losses seen earlier this week, with the post-OPEC downside completely erased alongside some more. To recap, oil contracts were under pressure from compounding COVID headlines at the start of the week and in the run-up to OPEC+ whereby ministers opted to keep production plans despite the Omicron variant and the recent SPR releases. Delving deeper into these themes, desks suggest that a dominant Omicron variant could actually be positive if the strain turns out to be milder than some of its predecessors – with the jury still out but initial reports from India and South Africa suggesting so. Regarding OPEC+, some oil traders suggest the move to maintain plans was more of a political strategy as opposed to an attempt to balance markets, with journalists also suggesting that tensions with the US have simmered down and the prospect of further SPR releases have significantly declined. Further, it's also worth bearing in mind that due to maintenance and underinvestment, the real output hike from OPEC+ producers will likely be under the 400k BPD. In terms of Iranian developments, updates have been less constructive, with sources suggesting that Iran is holding a tougher stance than during the June talks. Negotiations will break today and resume next week. Crude contracts are modestly lower on the week and well-off worst levels, with Brent Feb now back around USD 71.50/bbl (65.72-77.02 weekly range), while WTI Jan resides around USD north of USD 68/bbl (62.43-72.93/bbl). Elsewhere, spot gold and silver vary, with the former finding some overnight support around USD 1,766/oz as risk sentiment erred lower, whilst the cluster of DMAs remain around the USD 1,790-91/oz region. In terms of base metals, LME copper is flat on either side of USD 9,500/t. Overnight, Dalian iron ore futures fell amid a decline in mill demand, whilst China's steel hub Tangshan city is to launch a second-level pollution alert from December 3-10th, the local government said – providing further headwinds for iron demand. US Event Calendar 8:30am: Nov. Change in Nonfarm Payrolls, est. 550,000, prior 531,000 Nov. Change in Private Payrolls, est. 525,000, prior 604,000 Nov. Change in Manufact. Payrolls, est. 45,000, prior 60,000 8:30am: Nov. Unemployment Rate, est. 4.5%, prior 4.6% Nov. Underemployment Rate, prior 8.3% Nov. Labor Force Participation Rate, est. 61.7%, prior 61.6% 8:30am: Nov. Average Hourly Earnings YoY, est. 5.0%, prior 4.9% Nov. Average Hourly Earnings MoM, est. 0.4%, prior 0.4% Nov. Average Weekly Hours All Emplo, est. 34.7, prior 34.7 9:45am: Nov. Markit US Composite PMI, prior 56.5 Nov. Markit US Services PMI, est. 57.0, prior 57.0 10am: Oct. Factory Orders, est. 0.5%, prior 0.2% Oct. Factory Orders Ex Trans, est. 0.6%, prior 0.7% Oct. Durable Goods Orders, est. -0.5%, prior -0.5% Oct. Cap Goods Ship Nondef Ex Air, prior 0.3% Oct. Cap Goods Orders Nondef Ex Air, prior 0.6% 10am: Nov. ISM Services Index, est. 65.0, prior 66.7 DB's Jim Reid concludes the overnight wrap I got great news yesterday. It was the school Xmas Fayre last weekend and at one stall we had to guess the weight of the school duck that lives in their pond. I spent a long time analysing it outside and was trying to mentally compare it to the weights of my various dumbbells at home. I learnt yesterday that I’d won. My prize? A rubber duck for the bath. In more trivial news I also learnt I was voted no.1 analyst in four categories of the Global Institutional Investor Fixed Income Analyst awards for 2021. So many thanks for all who voted. It is very much appreciated. However in terms of physical mementoes of my achievements yesterday, all I actually have to show for it is a brown rubber duck. Guessing the weight of a duck is a walk in the park at the moment compared to predicting markets. Indeed it’s been a wild week. If you’ve managed to time all the various swings you can surely only have done it via a time machine. If you have done so without one though I will happily hand over my prized rubber duck. By the close of trade, the S&P 500 (+1.42%) had begun to recover following its worst 2-day performance in over a year. The VIX index of volatility ticked back down beneath the 30 mark again, but finished above 25 for the fourth day in five for the first time since December of last year. Meanwhile Oil plunged and then soared on OPEC+ news and curves continued to flatten as 2yr yields got back close to their pre-Omicron levels after a near 20bps round journey over the last week. I’m glad I’m a research analyst not a day trader, and that’s before we get to today’s payrolls print. We’ll start with Omicron, where yesterday predictably saw a number of new countries report confirmed cases for the first time, as well as a second case in the United States during market hours, this one with roots in New York City, which reported more than 11,300 new cases yesterday, the highest daily count since January. After the market closed, an additional five cases were identified in New York, which sent futures over -0.5% lower at the time. They are back to flat as we type possibly helped by a late deal and vote in Congress to fund the US government through to February 18th and avert a shutdown at midnight tonight. Back to the virus and governments continued to ramp up their defence measures, with Germany yesterday announcing a range of fresh restrictions as they grapple with the latest wave, including a requirement that you must either be vaccinated or have recovered from Covid in order to get into restaurants or non-essential stores. There’s also set to be a parliamentary vote on mandatory vaccinations, and incoming Chancellor Scholz said that he expected it to pass. In the US, President Biden announced new measures to fight the impending winter wave and spreading Omicron variant, including tighter testing guidelines for international visitors, wider availability of at home tests, whilst accelerating efforts to get the rest of the world vaccinated. Over in South Africa, the daily case count rose further yesterday, with 11,535 reported, up from 8,561 the previous day and 4,373 the day before that. So definitely one to keep an eye on as we look for clues about what this could mean for the world more broadly. That said, we’re still yet to get the all-important information on how much less or more deadly this might be, as well as how effective vaccines still are and the extent to which it is more transmissible relative to other variants. Back to markets, and the revival in risk appetite led to a fresh selloff in US Treasuries, with the 2yr yield up +6.7bps, and the 10yr yield up +3.7bps. Nevertheless, as mentioned at the top, the latest round of curve flattening has sent the 2s10s slope to its flattest since before the Georgia Senate seat runoff gave Democrats control of Congress. It’s now at just +82.0bps, whilst the 5s30s slope is now at flattest since March 2020, at +55.0bps. So a warning sign for those who believe in the yield curve as a recessionary indicator, albeit with some way to go before that flashes red. In Europe there was also a modest curve flattening, but yields moved lower across the board, with those on 10yr bunds (-2.6bps), OATs (-3.2bps) and BTPs (-5.6bps) all down by the close. Over in equities, there was a decent rebound in the US following the recent selloff, with the S&P 500 (+1.42%) posting a solid gain. It was a very broad-based advance, with over 90% of the index’s members moving higher for the first time since mid-October. Every S&P sector increased, which was enough to compensate for the noticeable lag in mega-cap shares, with the FANG index gaining just +0.15%. The STOXX 600 decreased -1.15%, though that reflected the fact Europe closed ahead of the big reversal in sentiment the previous session. Aside from Omicron, one of the other biggest stories yesterday was the decision by the OPEC+ group to continue with their production hike, which will add a further +400k barrels/day to global supply in January. The news initially sent oil prices sharply lower, with Brent crude falling to an intraday low beneath $66/bbl, before recovering to end the day back at $69.67/bl in light of the group saying that they could adjust their plans “pending further developments of the pandemic”, with the ability to “make immediate adjustments if required”. Even with the bounceback yesterday however, oil has been one of the worst-performing assets over recent weeks, with Brent hitting an intraday high of $86.7/bbl in late-October, followed by a November that marked its worst monthly performance since the pandemic began. Overnight in Asia stocks are trading mostly higher with the KOSPI (+0.86%), Shanghai Composite (+0.58%), CSI (+0.35%) and the Nikkei (+0.29%) up but with the Hang Seng (-0.74%) under pressure amid the ongoing regulatory clampdown in technology from China as Didi prepares to delist on US markets. Looking forward now, the main highlight on today’s calendar is the US jobs report for November, which comes less than two weeks’ away from the Fed’s meeting where they’ll decide on the pace of tapering. In terms of what to expect, our US economists are looking for nonfarm payrolls to grow by +600k, which would be the fastest pace of job growth since July, and that in turn would take the unemployment rate down to a post-pandemic low of 4.4%. Ahead of that, we had another decent weekly claims report (albeit that took place after the jobs report survey period), with the number for the week through November 26 coming in at a stronger-than-expected 222k (vs. 240k expected). The previous week’s number was also revised down -5k, sending the 4-week moving average down to its own post-pandemic low of 238.75k. Looking at yesterday’s other data releases, the Euro Area unemployment rate fell to a post-pandemic low of 7.3% in October, in line with expectations. However producer price inflation shot up even faster than anticipated to +21.9% (vs. 19.0% expected). To the day ahead now, and the aforementioned US jobs report for November will be the highlight. Other data releases include the services and composite PMIs for November from around the world, Euro Area retail sales for October, and in addition from the US, there’s October’s factory orders and the November ISM services index. From central banks, we’ll hear from ECB President Lagarde and chief economist Lane, the Fed’s Bullard and the BoE’s Saunders. Tyler Durden Fri, 12/03/2021 - 07:55.....»»

Category: blogSource: zerohedgeDec 3rd, 2021

Retailers Open Pop-Up Container Yards To Bypass Savannah Port Jams

Retailers Open Pop-Up Container Yards To Bypass Savannah Port Jams By Eric Kulisch of American Shipper, Overflow lots set up by large retailers this month as temporary staging areas for imported containers have helped bring down congestion levels at the Port of Savannah, and Georgia officials expect further efficiency gains with this week’s opening of two more port-sponsored pop-up sites. The Georgia Ports Authority, in partnership with the Norfolk Southern, will start accepting loaded containers on Monday at the freight railroad’s nearby Dillon Yard and later this week will begin routing shipping units to a general aviation airport in Statesboro, located about 60 miles west of Savannah, Chief Operating Officer Ed McCarthy told FreightWaves. Moving containers to off-port properties is part of the recently announced South Atlantic Supply Chain Relief Program designed to reclaim space at the Garden City Terminal, where container crowding is making it difficult for vessels to unload and for stacking equipment and trucks to maneuver. In October, Savannah handled an all-time record of 504,350 twenty-foot equivalent units for a single month, an increase of 8.7% over October 2020. The volume surpassed the GPA’s previous record of 498,000 TEUs set in March. Port officials began testing the Dillon Yard and Statesboro locations last week after renting top loaders for stacking and truck transfers, installing computer lines in order to track containers entering the gate with radio frequency identification, and laying extra pavement at the rail facility, McCarthy said.  Four or five more pop-up container facilities are scheduled to open around Georgia by mid-December and the port authority is talking with freight railroad CSX about an auxiliary storage site in Rocky Mount, North Carolina, the COO said in an interview.  The sites are mini-versions of inland ports where containers are brought to strategically located sites by intermodal rail, shortening the distance trucks have to travel to collect imports or drop off exports and reducing traffic in and around busy seaports. The concept essentially brings the seaport closer to manufacturing, agriculture and population centers.  The GPA currently operates a large inland intermodal rail terminal in Murray County, Georgia, as well as an inland dry bulk facility. Construction on a second inland rail link for containerized cargo in northeast Georgia is scheduled to begin in April and be completed by mid- to late 2024, spokesman Robert Morris said. South Carolina also operates two inland ports, Virginia has one in the northwestern part of the state and the Port of Long Beach in California recently launched an effort to quickly flow cargo to Utah for distribution by converting truck traffic to rail. Several users of the Port of Savannah this month have opened pop-up yards of their own where they can directly flow import containers to avoid waiting for longshoremen to sort through shipping units for their cargo and then retrieve them when space opens at one of their distribution centers. Each of the private spillover yards can accommodate 2,000 to 3,000 containers.  “We’re starting to see some of our customer base do their own pop-ups. They’re contracting with some folks who have capabilities in the Savannah region and … taking their long-term destiny in their own hands,” McCarthy said in an interview. The Rocky Mount intermodal facility being discussed with CSX will probably be used as an alternative storage location for empty containers. It could be running by early December, the COO said. Whether containers are diverted from other locations or whether empties are loaded up in Savannah and sent there remains to be determined.  The Biden administration, which is focused on alleviating a nationwide supply chain crisis that is creating product shortages and contributing to inflation, helped fund the GPA’s emergency storage yards by reallocating $8 million in federal funds. Additional flexibility recently granted by the Department of Transportation allows port authorities to redirect cost savings from previous projects funded by port infrastructure grants toward mitigating truck, rail and terminal delays that are preventing the swift evacuation of containers from ports. White House port envoy John Porcari, the liaison between industry and the White House Supply Chain Disruptions Task Force, said the government is looking to create more inland ports.  “We’re encouraging other ports to do the same [thing as Savannah.] I think you’ll see a generation of projects in the short term around the country that will help maximize the existing on-dock capacity through interior pop-up sites,” Porcari said on Bloomberg’s “Odd Lots” podcast last week.  “The fundamental issue is that the docks themselves are such valuable pieces of real estate that you don’t want the containers dwelling there a second longer than you have to. You want to get them to the interior or back on ships to their target markets overseas,” he said. Better Fluidity Improvements in rail handling, a dip in import volumes in line with seasonal patterns and the customer pop-up yards have combined to improve cargo flow and reduce the number of ships waiting for a berth at the Port of Savannah, McCarthy said.  The port authority released an operations update last week showing the average dwell time for a container moving by rail after vessel unloading is two days, and that the average resting time within the terminal for import and export containers is about eight days, down from 11 and 10 days, respectively. The backlog of empty containers remains a problem, with boxes lingering an average of 17.8 days. The improved performance is helping personnel work vessels faster and reduce Savannah’s cargo backlog. The number of ships at anchor in the Atlantic Ocean declined to 15 as of Monday morning from 22 two weeks ago, Morris said. There were 24 container vessels at anchor in mid-October. Total containers on the terminal also declined 13% and are down 16% from the peak of 85,000, according to the update. McCarthy said there are about 225,000 TEUs currently on the water, a 10% to 12% reduction from early November that indicates “we are over the hump of the peak season.” Last week, ocean carrier CMA CGM said its Liberty Bridge service from northern Europe to the U.S. East Coast would temporarily skip Savannah due to the congestion. According to the revised schedule, seven stops between late December and early February will be omitted. Shippers can send Savannah cargo to the Port of Charleston, South Carolina, until then, it said. The GPA also noted that providers have increased the supply of chassis, the wheeled frames on which containers rest when pulled by truck, and are increasingly able to repair more chassis to help meet demand for cargo deliveries. Mason Rail Terminal expansion. (Source: Georgia Ports Authority) The Port of Savannah increased its near-dock rail capacity by 30% with the commissioning two weeks ago of a second set of nine tracks at the Mason Mega Rail Terminal. The port moved 550,000 containers by rail last year and now has more than 2 million TEUs of capacity with an eye toward future growth. The ability to discharge cargo from a vessel and ship it out by train in less than two days is best in class for the U.S., McCarthy noted. A huge new container yard will come online in phases starting in December and culminate with about 820,000 TEUs of additional capacity by March. The project includes rubber-tired gantry cranes for sorting, stacking and transferring containers. Construction of another berth is underway and scheduled to be complete in 2023. Meanwhile, the federal dredging project to deepen the Savannah River to 47 feet (54 feet at high tide) is expected to be completed in the first quarter of 2022. It has already allowed vessels with deeper drafts to enter the port, McCarthy said. The deepening translates to about 200 extra loaded containers per foot and a total of 1,000 per vessel when the project is finished. Tyler Durden Tue, 11/30/2021 - 19:45.....»»

Category: blogSource: zerohedgeNov 30th, 2021

Beijing Capitulates: Urges Local Govts To Unleash Debt Flood As Cities Begin Backstopping Property Developers

Beijing Capitulates: Urges Local Govts To Unleash Debt Flood As Cities Begin Backstopping Property Developers Despite the best efforts by South African doctors to temper the panic sparked by the emergence of the Omicron strain, it appears that western politicians and their media and "science" lackeys won't let go so fast, and one of the potential casualties is China, which will either be forced to engage in more lockdowns, depressing the economy, or find itself engaged in far less trade with a world that is about to undergo another wave of restrictions. All this, of course, is happening as the recent deep freeze of China's property market - the largest asses in the world according to Goldman Sachs... ... and sparked by the repeated near-death experiences of Evergrande - has unleashed a bone-crushing shockwave across China's economy, which takes place as Beijing continues to maintain its deleveraging stance amid Xi's "shared prosperity" drive, which has meant far less nearly created credit is available to mask the current weakness in the economy. And yet, cracks are finally starting to show in Beijing's deleveraging resolve and last week China’s State Council called on local governments to sell more special bonds this year in order to boost investment amid a slowdown in the economy. According to Bloomberg, Premier Li Keqiang chaired a meeting of the State Council (i.e., China’s cabinet) on Wednesday, urging local governments to have more ongoing construction of projects at the beginning of next year, the official Xinhua News Agency reported. And since they need money to fund these projects, the meeting also called on them to make better use of proceeds from special bonds to expand domestic demand. Said otherwise, China is once again quietly restarting the re-leveraging process, only this time instead of consumer loans, corporate bonds, or shadow debt (in the form of trusts), Beijing is targeting local government special debt issuance as the focal point of the next debt bubble. Xinhua confirmed as much, reporting that "regional governments should step up project preparation, facilitate the launch of projects that are mature, and make reasonable requests for special bond quotas next year." And to assist this upcoming debt burst, "the authorities will study the possibility of granting some bond quotas in advance of next year, according to the report, as they did in the recent two years." Meanwhile, echoing what he said at the start of the month, premier Li reiterated the economy is facing “new downward pressure” and cross-cyclical policy needs to be strengthened. This comes as economists have pared back their growth forecasts for the fourth quarter to a median of just 3.1%, while some say the economy’s pace next year could be slowest since 1990 (excluding last year’s pandemic impact), as low as 5% or even less according to some skeptics. Alas, there is an unexpected problem with Beijing's plan: lack of demand for the debt. As Bloomberg notes, sales of local government special bonds have been particularly slow in the first ten months of this year, partly due to a lack of quality projects. Previously, the Ministry of Finance urged local authorities to finish issuing all the bonds within this year’s quota by November. Alas, the collapse in Evergrande, and the broader property market has taken all the wind out of China's construction sails in 2021. Needless to say Beijing had to spin this unpleasant outcome, and instead the State Council meeting said that the Local governments have achieved positive results in managing debt and reducing so-called hidden debt in recent years, with the government’s overall debt-to-gross domestic product ratio trending lower. And while the meeting added that authorities need to step up auditing and monitoring of proceeds raised from the bond sales, China Securities Journal reported on Thursday that fiscal policy will play a bigger role in ensuring the economy has a stable start in 2022. And where will funding for said "fiscal policy" stimulus come from? Well, as Citic Securities economist Zhu Jianfeng said, while local governments’ income from land sales might fall, they should issue more special bonds to help fund investment projects. Then on Wednesday, the Securities Times reported that according to another Citi analyst, Cheng Qiang, regional government may issue more than 4 trillion yuan ($630 billion) worth of special bonds next year, up from the 3.65 trillion yuan budgeted for this year. Expect the final number to be much higher, especially if Omicron is indeed as dangerous as Fauci & Co. are trying to make it seem. Finally, a look at the latest Chinese property regulatory actions compiled by Goldman shows that over the past few weeks there have been incrementally more marginal loosening efforts at different city levels, especially in terms of mortgage rate easing and presales permit requirement/deposit withdrawal relaxation. Said otherwise, while China is not yet panicking it realizes that the deleveraging campaign is now effectively finished, and so expect much more debt creation in China next year. In short, China is about to restart its debt machine, and while all Chinese debt is of course fungible - since the state owns and controls all - this time around it will be the "local government" silo that will serve the the global growth dynamo for the coming year. Meanwhile, as China targets property stabilization at the macro level via local government bond sales, it is also expanding its "micro" focus and also last week, a Chinese city rolled out a series of easing measures to boost liquidity at property developers, becoming the first major local government to address a cash crunch engulfing the real estate industry. Chengdu, the capital of the southwestern province of Sichuan with a population of about 21 million, will accelerate approvals for home sales and property loans as well as ease restrictions on using proceeds from pre-sales, according to a statement posted by the local housing authority last week, Bloomberg reported. “Chengdu is the first city authority to call for faster property-related loans in a clear official statement,” said Yan Yuejin, research director at Shanghai-based E-house China Research and Development Institute. “We may see other initiatives to press banks on faster mortgages soon." The capitulation by Chengdu comes as new-home values in the city dropped 0.6% in October from a month earlier, the biggest slump in four and a half years. Here are some of Chengdu’s key measures allowing developers to boost cash: The housing authority vowed to shorten the time for compulsory pre-sales procedures by at least a third Developers will be able to use proceeds from pre-sales if they meet certain construction progress Chengdu will work with financial institutions to increase credit quotas for developers and accelerate loan approvals The city said it will coordinate with banks to extend property development loans for key developers The move to boost liquidity in the beleaguered building sector comes as China’s home slump deepens, adding pressure on authorities to stabilize an industry that’s estimated to account for almost a quarter of economic output. Separately, last week some cities relaxed rules for land sales - a key revenue source for municipalities - after cash-strapped developers became reluctant to bid, prompting the abovementioned appeal on local governments by China’s State Council to sell more special bonds to boost investment amid a slowdown in the economy. The bottom line is that as many had expected, regulators are finally fine-tuning their long-running crackdown on the property sector after the near implosion at Evergrande and other junk-rated developers began spreading to higher-rated peers. In late September, the central bank urged financial institutions to help local governments stabilize the rapidly cooling housing market and ease mortgages for some homebuyers. Official media reported in recent weeks that faster mortgages are already on the way. “It shows how the city government cares about developers’ liquidity risks,” said Pan Hao, a property analyst at KE Holdings, adding that Chengdu is looking at different measures to prevent developers’ cash risk from blowing up. And now that one city has adopted a proprety bailout strategy, expect every single other Chinese city to follow suit, the result of which will be another major can-kicking for China's property sector at the expense of trillions in new debt, this time at the local government level. Tyler Durden Sun, 11/28/2021 - 20:00.....»»

Category: dealsSource: nytNov 28th, 2021

Michael Cohen says Trump won"t pursue a 2024 White House bid, calls his "Big Lie" fundraising appeals "the greatest grift in US history"

"One of the things Trump has done is grift off of the 'Big Lie' that the election was stolen from him in 2020," Cohen said. "It was not stolen from him." Former Trump lawyer Michael Cohen.Michael M. Santiago/Getty Images Ex-Trump lawyer Michael Cohen said on NBC's "Meet the Press" that the former president won't run for president in 2024. "This should become a documentary, and it should be called the greatest grift in US history," Cohen said of Trump's efforts. "If he loses, which he will in 2024, what happens to the 'Big Lie?' The big lie disappears," Cohen said. Former President Donald Trump's ex-lawyer Michael Cohen on Sunday said that the former president would not run for the White House in 2024.During an appearance on NBC's "Meet the Press," Cohen, a former Trump confidant-turned-critic, told host Chuck Todd that the ex-president's efforts to secure political donations as he dangles another campaign in front of his supporters was being done "to keep the grift growing and to keep the grift going.""This should become a documentary, and it should be called the greatest grift in US history," he said. "Donald Trump has made it very clear, right, that he is grifting off of the American people, these supporters, these individuals that are just sending money to him at record levels.""It's really amazing that people don't see exactly what the guy is doing," he emphasized.Cohen goes on to describe what he perceives to be Trump's calling card."I talk about his sociopathy throughout 'Disloyal,'" he said, referencing his memoir that was released last year. "I talk about it on my podcast, Mea Culpa, ad nauseam."He continued: "Please understand ... and this is really important for all of the viewers as well. One of the things Donald Trump has done is grift off of the 'Big Lie' that the election was stolen from him in 2020. It was not stolen from him."Cohen said that Trump is using the specter of a campaign to continue airing his debunked election-related grievances, but contended that if the former president lost a 2024 bid, then his claims wouldn't stand up."If he loses, which he will in 2024, what happens to the 'Big Lie?' The big lie disappears. He can't now be like the boy who cried wolf. 'Oh, they stole it from me in 2020 — they now stole it from me in 2024.' Right? Now, that goes out the door and there goes his money," he said of the former president's claims."There goes the big grift. So like I said before, it's not going to happen. He's going to run it like he did in 2011, right to the very, very last second," he added.Trump has not yet indicated if he'll run for the presidency in 2024, but earlier this month, he said that he would "probably" reveal his decision after the 2022 midterm elections.The former president is playing an usually active role for an ex-president in 2022 Republican primary campaigns, seeking to prop up preferred candidates in Senate races while in some instances pushing other candidates to pursue other elected positions.In a September interview with Insider's Sonam Sheth, Cohen said that Trump would continue to soak up his time in the spotlight while continuing to rake in money from devotees of his presidency."His insatiable need for attention is one reason he continues to flaunt this disingenuous 2024 run," he said at the time. "The other is he's making more money doing that than anything he has ever done before."The New York Times reported in July that Trump had raised over $100 million in the first six months of the year, a total that surpassed every other Republican during that time frame.Cohen, who was once part of the former president's inner circle, was sentenced to three years in prison in December 2018 after pleading guilty to financial crimes and lying to Congress about a Moscow real estate project.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 28th, 2021

Is That House You’re Considering a Flip? Here’s What to Know

(TNS)—Not all houses are created equal. In any given price range, every property you’re going to look at will have its pros and cons. This applies even more so if you’re considering a home that was recently renovated by a flipper. You certainly don’t need to avoid properties that are being flipped, but there are […] The post Is That House You’re Considering a Flip? Here’s What to Know appeared first on RISMedia. (TNS)—Not all houses are created equal. In any given price range, every property you’re going to look at will have its pros and cons. This applies even more so if you’re considering a home that was recently renovated by a flipper. You certainly don’t need to avoid properties that are being flipped, but there are some things to watch out for if you’re looking at one. House flipping is hardly new—in fact, Bankrate wrote a whole guide on how to do it a few years ago. But as real estate prices skyrocketed over the last 12-18 months, many people saw an opportunity to earn a quick buck by buying property, fixing it up and reselling as the market pushed the value ever higher. Experts warn that flipped houses can sometimes be more trouble for the post-flip buyers, however, especially at lower price points. “There’s always been an issue with fix and flips with the quality of them,” said Stephanie Fix, a REALTOR® with RE/MAX Professionals in Denver. “The margins are so slim these days with these investors that they’re really cutting a lot of corners.” That reality came to the forefront recently as Zillow exited the home flip market. The online real estate giant made a big push to boost its iBuying platform in the last year, but ultimately decided it overpaid for too many properties and went into loss-cutting mode earlier this month. Flip Warning Signs to Watch Out For Fix said that a shoddy flip isn’t always obvious, but finishes that seem off can sometimes point to bigger construction quality problems. She said she recently toured a house that she could tell was flipped because a kitchen drawer was blocked by the refrigerator and the dishwasher wasn’t installed properly. “If those things are missing, cosmetic, on the surface that I mentioned, that tells me to be wary of what’s behind the walls,” Fix said. “Most of the things that are dangerous, you can’t always see with your eyes.” Alterations that seem rushed on the surface could indicate bigger problems, like electrical work that isn’t up to code or plumbing that wasn’t installed correctly. Addressing issues like that can become costly, especially if you haven’t factored them into your budget. What to Do If You’re Buying a Flipped House It’s crucial to work with a knowledgeable REALTOR® if you’re considering a house that’s being flipped, Fix said. “An experienced agent is probably going to have a better eye than the buyer,” she said When she tours a house that she suspects is being flipped, she’ll check the title’s chain of custody to see who owned the home previously, and will reach out to other agents in her network to see if anyone has experience buying from the flippers. You can easily tell if the home is a flip by looking at the property records. If the home is back on the market just a few months after being purchased by a new owner, odds are it’s a flip. At the height of the pandemic real estate boom, many buyers were waiving inspections and other contingencies in their contracts to make their offers more attractive. Fix said that’s an especially bad idea on flipped properties. “These guys typically don’t permit things,” she said, so getting an experienced inspector to go take a thorough look at the property is crucial. “It’s going to be really important to do your sewer and separate roof inspections.” Bottom Line Flipped houses may seem up-to-date on the surface, but shiny new finishes can sometimes mask shoddy work. If you’re looking at a property that is being flipped, you’ll want to be sure to get it thoroughly inspected before you close, and set aside money for any problems that may crop up as a result of renovations that were done on a tight budget ©2021 Bankrate.com Distributed by Tribune Content Agency, LLC The post Is That House You’re Considering a Flip? Here’s What to Know appeared first on RISMedia......»»

Category: realestateSource: rismediaNov 26th, 2021

The ABCs of Online Lead Management

For decades, real estate agents have been gathering leads from face-to-face events and referrals. With consumers going online in record numbers today, many agents aren’t all that excited about changing their strategy for securing online leads. But if you don’t do lead generation where most of the leads are, which is now proven to be […] The post The ABCs of Online Lead Management appeared first on RISMedia. For decades, real estate agents have been gathering leads from face-to-face events and referrals. With consumers going online in record numbers today, many agents aren’t all that excited about changing their strategy for securing online leads. But if you don’t do lead generation where most of the leads are, which is now proven to be online, you’re missing out on a huge amount of business. Most homebuyers begin their search online, and many need guidance when looking for an agent. It’s no longer an option to ignore your online lead generation strategy if you want to reach your highest potential. Luckily, you don’t have to change everything about your lead nurturing strategy. Online leads can still be managed by plugging them into your lead management system. One of the easiest and simplest management systems we recommend is the ABCs of Lead Management. This system helps you categorize, prioritize, incubate and stay connected with all your leads at no cost. There are three categories in the ABC Lead Management system: A leads, B leads and C leads. Every time you receive an online lead, place them into one of these three categories. A-leads are ready to buy or sell, and they already have an appointment set with you. Because the appointment is already set, there’s no need to follow up with them. However, it’s important to set a follow-up appointment while you’re meeting with them. This will keep them in the A lead category. If you don’t set a follow-up appointment, that lead falls into the B lead category. B-leads are individuals who are ready to buy or sell in the next 30 – 90 days, but they don’t have an appointment set with you. When this type of lead is ready, you want to set an appointment to be able to move them into the A category. To move these leads forward in the process, reach out twice a month to check their status. Remember to offer services and resources that are of value when reaching out. C-leads are the last category. This is a prospect who wants to buy or sell, but will not be ready for at least 90 days. Reach out to these leads once a month to check their status, and just like with the B leads, offer something of value when reaching out. Rotate the touches between phone, direct mail and video emails to keep the connection fresh and top of mind. When using this lead management tool with online leads, you’ll start converting in much higher numbers. Your online leads need your expertise, and the ABCs of Lead Management tool helps you provide relevant value to prospective buyers and sellers who begin their search online. Verl Workman is the founder and CEO of Workman Success Systems, a real estate consulting company that specializes in performance coaching and building highly effective teams. Contact wssm@workmansuccess.com for more information and free downloadable resources. The post The ABCs of Online Lead Management appeared first on RISMedia......»»

Category: realestateSource: rismediaNov 23rd, 2021

As Markets Brace For Beijing Easing, Chinese State Media Unveils 25bps RRR Cut Before Year-End

As Markets Brace For Beijing Easing, Chinese State Media Unveils 25bps RRR Cut Before Year-End While some in the market are still obsessing over i) when the Fed will end its taper and ii) when it will commence liftoff, or start the rate hiking process which according to the latest market-implied odds, will begin in June instead of July (spoiler alert - it won't)... ... the real question traders should be asking is how long after the Fed's attempt to tighten financial policy crashes and burns, because with record duration in the corporate bond market - the same bond market that the Fed already bailed out in March 2020 and so it will never let it crash again - it will take just a few rate hikes for everything to collapse. So in a preview of things to come to the US, over the weekend, China’s central bank signaled possible easing measures to aid the economy’s recovery after a sharp downturn in recent months fueled by a property slump. In its latest quarterly monetary policy report published Friday, the People’s Bank of China removed from its policy outlook a few key phrases cited in previous reports, including sticking with “normal monetary policy.” Additionally, as Goldman's Maggie Wei wrote in her PBOC monpol post-mortem, the bank noticed three changes in the Q3 report compared with Q2: PBOC added monetary policy should be based on domestic economic situation - "monetary policy would give prominence to domestic economic situation"; PBOC stated monetary policy should "give greater priority to serving the real economy and to enhance the stability of broad credit growth"; instead of "to guide lending rates lower" as mentioned in the Q2 report, Q3 report stated PBOC would work on "lowering financing cost for SMEs". The report also dropped previous phrases to “control the valve on money supply” and vowing not to “flood the economy with stimulus,” signaling more credit support in coming months. These statements and changes, according to banks such as Goldman, Citi and Nomura, suggests a shift in stance toward incrementally more supportive policies, "but mainly through increasing targeted supports to green development and SMEs while policy interest rates would remain unchanged." Meanwhile, the statement on "giving prominence to domestic economic situation" is an addition compared with the Q2 report, but not a new phrase itself as it was mentioned by PBOC officials recently. This statement is likely a response to market concerns on the divergence of monetary policy between China and major DMs (in particular the US) in the future and, according to Goldman, "leaves the door open for more monetary policy easing despite normalization of monetary policy (tapering and future rate hikes) in the US." Nomura's Ting Lu echoed Goldman's take, writing that he "expects Beijing to soon significantly step up its monetary easing and fiscal stimulus to counteract the increasing downward pressure." The PBOC’s more dovish outlook follows growing concerns about the economy flagged by several officials recently. After warning that China faces "downward pressure" at the start of the month, Premier Li Keqiang told a seminar on Friday that China still faces “many challenges” in keeping the economy stable, although this year’s goals will likely be achieved. He also emphasized policymakers would continue using reforms to increase productivity, streamlining administrative burdens for corporates and pushing for major project construction to maintain labor market stability and ensure economic growth within a reasonable range. Even more ominously, Liu Shijin, who sits on the central bank’s monetary policy committee, echoed a recent downbeat assessment by Citigroup, saying in an online forum Sunday that the economy could enter a period of “quasi-stagflation,” which needs close attention if it happens. “The concern for growth slowdown is clearly rising among technocrats at different government agencies,” said Macquarie Group Ltd.’s Larry Hu. “But the key is whether the top leaders share such a view.” The Politburo meeting in December and Communist Party’s Central Economic Work Conference due in the same month, will provide more clues, he said. China finds itself in an unfamiliar place with growth by some estimates set to drop below 5% next year, testing authorities’ resolve to cut the economy’s reliance on the highly-leveraged property sector. In the quarterly report, the PBOC said the economic recovery faces restrictions from “temporary, structural and cyclical factors,” and it’s become more difficult to maintain a stable economy. Meanwhile, also overnight, China stood pat on its version of Libor, or the benchmark lending rate known as the loan prime rate (LPR), for the 19th straight month at its November fixing, in line with market expectations. But, as the state-controlled Global Times writes today, confirming the rate cut speculation, "some analysts said that China will likely make another Reserve Requirement Ratio (RRR) cut before the end of this year to cope with an economic slowdown, though the benchmark lending rate is unlikely to change this year." The Global Times quoted Xi Junyang, a professor at the Shanghai University of Finance and Economics, who said that the central bank will likely cut the RRR, the amount of cash that banks and financial institutions must hold as reserves, by 25 basis points before the end of this year. "The RRR cut is necessary as the government needs to cope with the economic slowdown fueled by a mixture of factors, including the COVID-19 resurgence and real estate controls. Besides, China's capital supply growth is at a relatively low level, providing space for cutting the RRR," he told the Global Times on Monday. An RRR cut, while unlocking over $100BN in liquidity, however would not be followed by a cut in the benchmark lending rate this year, the Global Times reported. "The unchanged LPR in November shows that the PBC agrees with the current interest rate level in the credit market, as financial data show that these figures are within a reasonable range. Besides, banks are not motivated to lower the credit rate, while keeping the LPR unchanged will help stabilize market expectations for the property market," Zhou Maohua, a macroeconomics analyst under the financial market division of Everbright Bank, told the Global Times on Monday. One reason for China's continue caution: soaring wholesale inflation and painful consumer price inflation. Wu Chaoming, chief analyst of Chasing Securities, told the Global Times that "since inflation is still at a relatively high level, the timing of interest rate cuts will likely be delayed, and structural adjustment will remain the mainstream mode for the time being." Of course, even "only" an RRR cut would be very much welcome and the local market was delighted by the prospect, sending China’s CSI 300 Index higher as much as 0.5% Monday morning on expectations of potential loosening, while the 10-year government bond futures contracts gained as much as 0.3%. As for more cuts? Well, with the Chinese economy continuing to shrink, it is only a matter of time before Beijing - like the Fed - has no choice but to start from easing square one all over again. Tyler Durden Mon, 11/22/2021 - 15:33.....»»

Category: blogSource: zerohedgeNov 22nd, 2021

Why Is Texas Capital (TCBI) Up 0.8% Since Last Earnings Report?

Texas Capital (TCBI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues. It has been about a month since the last earnings report for Texas Capital (TCBI). Shares have added about 0.8% in that time frame, underperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Texas Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Texas Capital Q3 Earnings Miss Estimates, Revenues FallTexas Capital reported adjusted earnings per share of 76 cents per share in third-quarter 2021, missing the Zacks Consensus Estimate of $1.12. Results compare unfavorably with the prior-year quarter’s earnings of $1.08.Lower expenses were a positive. The firm’s credit quality witnessed an improvement. However, a fall in total revenues, along with margin pressure, were deterrents.Net income available to common stockholders was $39.1 million compared with the prior-year quarter’s $54.7 million.Revenues Decline, Costs FallTotal revenues (net of interest expense) fell 19.7% year over year to $215.3 million due to decline in both non-interest income and net interest income. Revenues lagged the Zacks Consensus Estimate of $222.3 million.NII came in at $194.1 million, down 6.5% year over year, as fall in total average loans and earning asset yields were partially offset by increases in average investment securities and loan fees and decline in cost of funds.NIM contracted 7 basis points (bps) year over year to 2.15%.Non-interest income plummeted 65% to $21.2 million. This decline primarily resulted from a drop in net gain/(loss) on the sale of loans held for sale as well as brokered loan fees and servicing income.Non-interest expenses decreased 8% to $153 million from the prior-year quarter. This mainly resulted from declines in the communication and technology expenses, and servicing-related expenses, partially offset by an increase in salaries and employee benefits.As of Sep 30, 2021, total loans increased marginally on a sequential basis to $23.8billion, while deposits increased 3.4% to $29.8 billion.Credit Quality StrengthensNon-performing assets totaled 0.37% of the loan portfolio plus other real estate-owned assets compared with the prior-year quarter’s figure of 0.64%. Total non-performing assets plunged 46% to $87.5 million compared with the prior-year quarter.Provision for credit losses aggregated $5 million compared to the year-ago quarter’s $30 million. The company’s net charge-offs (NCOs) were $3.1 million compared with $1.6 million as of Sep 30, 2020.Capital Ratios ImproveTangible common equity to total tangible assets came in at 7.8% compared with the year-earlier quarter’s 6.9%.Common equity Tier 1 (CET1) ratio was 10.7%, up from the prior-year quarter’s 9.1%. Leverage ratio was 9% compared with 7.6% as of Sep 30, 2020.Stockholders’ equity was up 12% year over year to $3.2 billion as of Sep 30, 2021.OutlookIn the fourth quarter of 2021, the company expects $1-$1.5 million of remaining CL expenses and basically no CL expenses, going into 2022.The bank expects low double-digit expense growth and low-to-mid-single digit revenue growth for 2022.Medium-Term Targets (2025)Treasury non-interest income is expected to account for 5% of the total revenues in 2025. The bank expects to achieve 10% of total revenues from the investment banking division by 2025.More than 1.10% return on assets, more than 12.5% return on total capital employed and a Common Equity Tier 1 ratio in the 9-10% range by 2025 is anticipated by the bank.With its strategic efforts to fortify its treasury, investment banking and private wealth divisions, the company aims to increase the contribution of non-interest income to total revenues from 11% in 2020 to 15-20% by 2025.The company expects the deposit mix to shift towards a more stable base (indexed deposits to decline 50% to 15% of deposits by 2025).The company expects to shift liquid assets (currently 39% of average total assets) into higher yielding assets over time with a goal of maintaining these liquid assets at over 20% of average total assets in the medium term.  NCO rate of 25-50 bps is expected.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -10.69% due to these changes.VGM ScoresCurrently, Texas Capital has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Texas Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months. More Stock News: This Is Bigger than the iPhone! It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market. Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.Click here for the 4 trades >>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 Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 19th, 2021

Time value of money: The guiding principle for virtually every financial and investing decision

The time value of money (TVM) is the idea that money today is worth more than the same amount in the future because of potential future earnings. Knowing how the value of money changes over time is fundamental to managing your finances.Brand X Pictures/Getty The time value of money (TVM) is the concept that a dollar today is worth more than a dollar tomorrow. Understanding TVM allows you to evaluate financial opportunities and risks. The principle underlies almost every financial and investing decision you make. Visit Insider's Investing Reference library for more stories. The time value of money (TVM) is the concept that the money you have in your pocket today is worth more than the same amount would be if you received it in the future because of the profit it can earn during the interim.For example, let's say you can either receive a $100,000 payout today or $10,000 per year for the next ten years totalling $100,000. Ignoring taxes, the $100,000 payout today is worth more, according to the TVM principle, because you can put your money to work. For example, you can invest in stocks, buy real estate, or put it in a certificate of deposit (CD).Understanding the time value of money can help you in making decisions ranging from which job has better salary terms, what's a good rate for a loan, or if the investment you're considering has good growth potential.How time value of money works The time value of money is an important concept to keep in mind because your money, once invested, can grow over time. Even if you were to just put it into a CD or savings account, the money can earn compound interest. On the flip side, money that is not invested will lose value over time. Just think about what you could buy for $1 when you were a child compared to what that same $1 would get you today. This is because inflation and loss of potential earnings erode the value of your dollars. If you keep your money under your mattress for 10 years, not only will it be worth less because of inflation, but you'll also miss out on the interest it can earn when invested. "So many young people are so busy juggling life, they are missing out on compounding returns of investing smaller amounts of money," says Jeff Rose, founder of GoodFinancialCents.com. "Say, for example, a 25-year-old were to invest $50 per month today, they would have to invest 3-4 times that to make up the difference if they procrastinated until they were 35."TMV is a fundamental concept that provides the foundation for virtually every financial and investing decision. From taking out a loan to negotiating a salary, or making a purchase decision, use the time value of money to evaluate the best financial course of action.Quick tip: "An understanding of the time value of money could help when deciding between a job that offers a decent salary and sign-on bonus, and one that pays more on a yearly basis but offers no sign-on incentives," says Brenton Harrison, a certified financial planner based in Nashville, Tennessee.How to calculate time value of money Now that you understand what the time value of money is, let's look at a concrete example. Let's say someone would like to buy your car and they can offer you $15,000 for it today or $15,500 if they can pay you two years from now. TVM teaches us that $15,000 today is worth more than $15,500 in two years. Here's the basic formula for calculating the future value of money:InsiderPV is the present value of money.i is the interest rate or other return that could be earned.t is the number of years to take into consideration.n is the number of compounding periods of interest per year.This will help you determine how much money you will have if you took the $15,000 and invested it today or if you waited two years for the $15,500. An example of using TVMUsing the example above, let's say you can invest the money from selling the car today for $15,000 in a CD that pays 2% every year, compounded monthly. To calculate the value of the money in two years, here's how it works:FV = $15,000 x (1+(0.2/12))(12x2)=$15,612This means the $15,000 you get for the car today will be worth $15,612 in two years. If you wait until two years from now to receive the $15,500 payment, you will lose out on $112 in interest you could have earned in that time. With investments that have higher returns, such as stocks or real estate, the missed opportunities will be even bigger.While you probably won't be using this formula regularly to calculate future value by hand, it gives you an idea of the opportunity cost of money today versus money tomorrow. This can help you make better financial decisions in the future. For example, when budgeting, keep in mind that your annual expenses will go up because of the time value of money. The return used is usually the inflation rate."We've seen the time value of money come into play in the past year as rent and grocery prices skyrocketed," says Jay Wu, CFA, founder of MoneyKnock.com. "Failure to include time value of money in expenses can cause you to under budget."Quick tip: The formula for figuring the future value of money shows us that money only grows through investment. Delaying an investment is a lost opportunity to grow your wealth.The financial takeawayThe time value of money is an important concept to understand for personal finance. It can help you decide how much to budget, evaluate a job offer, figure out if a loan is a good deal and help you save for the future. TVM showcases why your money loses value over time because of inflation. Apply the TVM formula to any loans you have to determine if it's better to pay them off or invest. You can also use it to see how increasing your retirement contributions can affect the future value of your dollars. It's a great tool that gives you information that can help you make smarter financial decisions.Net present value: One way to determine the viability of an investmentWhat are assets? The building blocks of wealth for individuals and profits for businessesWhat to know about the Consumer Price Index — a key economic indicator that measures inflationUnderstanding what financial advisors do and how they help clients better manage their moneyRead the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 19th, 2021

7 Chinese celebrities, business people, and activists who disappeared after speaking out about the Communist Party or powerful people

Peng Shuai, a Chinese tennis star who recently accused China's former vice president of sexual assault, is the latest to vanish. Shuai Peng seen at the 2020 Australian Open at Melbourne Park on January 23, 2020 in Melbourne, Australia.Clive Brunskill/Getty Images Peng Shuai seems to have disappeared after she said a Chinese politician sexually assaulted her. The Chinese tennis star is among an alarming number of Chinese celebrities who have disappeared. Some vanished after they made critical comments about the government or powerful people. Peng Shuai went missing after she said she was sexually assaulted by a top Chinese politician.Chinese tennis star Peng Shuai.Andy Brownbill/APPeng Shuai has not been heard from since she accused a top Chinese official of sexual assault. The 35-year-old tennis player is one of China's biggest sports stars.In a post on November 2 on Weibo, Peng alleged the former vice-premier Zhang Gaoli coerced her into sex and that they had an affair. Afterward, the post was taken down and references to Peng were blocked on China's internet, the Guardian reported.She hasn't been heard from or seen since.US tennis star Noami Osaka voiced her concerns over Peng's disappearance with a tweet on Tuesday using the hashtag #WhereisPengShuai."I was recently informed of a fellow tennis player that has gone missing shortly after revealing that she has been sexually abused," Osaka tweeted. "Censorship is never ok at any cost, I hope Peng Shuai and her family are safe and ok. I'm in shock of the current situation and I'm sending love and light her way."Zhao Wei was blacklisted from social media and her whereabouts were unknown after the government cracked down on pop culture influences.Chinese actress Zhao Wei.Vincent Yu/APThe whereabouts of Chinese actress Zhao Wei became a mystery in August after she was apparently blacklisted from social media by the Beijing authorities, according to the Hollywood Reporter. The actress was also removed from popular streaming sites.The Wall Street Journal reported that it was part of an effort by Beijing to target the pop-culture industry for what it sees as "unhealthy influences for young people."Rumors spread that Zhao fled to France with her husband, where the two own a vineyard outside Bordeaux. Zhao denied the rumors in a since-deleted Instagram post, claiming she was with family in Beijing, according to the Hollywood Reporter.Artist Ai Weiwei was disappeared and detained for months after he criticized the government.Dissident Chinese artist Ai Weiwei waves from the entrance of his studio after being released on bail in Beijing.David Gray/ReutersChinese artist Ai Weiwei has long been considered a dissident who has been critical of China's government. He published criticisms of the Chinese government on a blog that was eventually taken down and was later assaulted by Chinese police in 2009, according to Britannica.The artist was disappeared in April 2011 after he was accused of tax evasion and police detained him for almost 3 months, according to Human Rights Watch. He couldn't speak with his lawyer, and his wife was permitted to visit him once, HRW reported.After protests in his name, Ai was released in June 2011. The government said he was let go "because of his good attitude in confessing his crimes as well as a chronic disease he suffers from," Reuters reported.E-commerce billionaire Jack Ma disappeared from public view after he criticized the Chinese financial industry.Chinese entrepreneur Jack Ma.Firdia Lisnawati/APJack Ma, a high-profile Chinese entrepreneur and e-commerce billionaire, disappeared from public view after he criticized the Chinese financial industry in an October 2020 speech in Shanghai.Days later, the Chinese government ordered probes into Ma's companies, Alibaba and Ant Group, and tightened regulations. It was seen as an attempt by the government to regain control over tech giants that wield economic and political power.After vanishing for over two months, the entrepreneur reappeared in a January 2021 video that made no mention of his disappearance. Forbes contributor George Calhoun said Ma was "uncharacteristically flat and subdued" in the video. Subsequent sightings of Ma were scattered and unconfirmed, and the Financial Times later reported Ma was merely "lying low."In October 2021, Ma was seen in Spain, taking his first trip outside of China since the fallout with the government began.Billionaire businesswoman Whitney Duan vanished and wasn't heard from for 4 years until her ex-husband, tycoon Desmond Shum, was about to publish a book on corruption in China.Whitney Duan and her ex-husband Desmond Shum were closely tied to China's elites and involved in several large developments in Beijing, Time magazine reported. In 2017, Duan, who also goes by Duan Weihong, disappeared in Beijing without a trace.It came after she spoke with The New York Times during a 2012 investigation that found many of the relatives of then-Prime Minister Wen Jiabao became exceedingly wealthy during his political career, controlling at least $2.7 billion in assets. Duan herself was implicated in the scandal, although she denied having financial ties to the prime minister.After Duan's disappearance, Shum told Time he couldn't get in touch with her for four years. He left the country and hasn't returned since his ex-wife's disappearance.—Rob Hastings (@robhastings) September 9, 2021Then, in September 2021, Shum told Time he got messages from Duan urging him to call her. He did, and for the first time in four years, her line wasn't dead. Shum said Duan begged him not to publish his recent book "Red Roulette: An Insider's Story of Wealth, Power, Corruption, and Vengeance in Today's China", which details corruption in the Chinese Communist Party."She asked me to stop the book launch, saying: 'How would you feel if something happened to our son? And what would happen to our son if something happened to me?' I took that to be a threat," Shum told Time.Forbes reported a disturbing pattern that saw several billionaires and wealthy moguls had vanished from the public sphere for a period of time. Some reportedly were detained to assist with investigations.Real estate mogul Ren Zhiqiang vanished after he criticized the Chinese government for its handling of the pandemic.Ren Zhiqiang went missing after he criticized the government's handling of the pandemic.Getty ImagesReal estate mogul Ren Zhiqiang disappeared in March 2020 after he wrote an essay criticizing the Chinese government for how it was handling the COVID-19 pandemic, referring to President Xi Jinping as a "clown."Shortly afterward, his friends told The New York Times he went missing. He was later sentenced to 18 years in prison after a court found him guilty of a litany of financial crimes, but his peers said the sentence was a result of his essay."Very clearly this was punishment for his words, that's going to be obvious to everyone," sociologist Guo Yuhua told the Times. "Those economic problems — this one, that one — can be concocted whenever you want."Human rights lawyer Wang Quanzhang was detained amid a crackdown on Chinese activists in 2015.Human rights lawyer Wang Quanzhang was detained for several years.Thomas Peter/ReutersWang Quanzhang, a Chinese human rights lawyer, was detained with 200 others in 2015 amid a crackdown on activism in the country. He was found guilty of "subverting state power" in a closed-door court with no journalists or foreign diplomats present, according to BBC.For three years, his family did not know of his whereabouts or whether he was even alive."I don't know whether he's alive or dead," his wife Li Wenzu told BBC's John Sudworth in 2017. "I have had no information at all. He has simply disappeared from the face of the earth. It is so scary, so brutal."Li added that Wang wasn't "allowed to meet the lawyer that we have employed for him, and he has no right to communicate with the outside world."Wang was released in April 2020.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 18th, 2021

The founder of Evergrande is said to have used $1.1 billion of his own money to pay down company debt, pledging mansions and selling art to raise funds

Evergrande is the world's most indebted developer, with $300 billion in liabilities. It has managed to pay off several overdue coupons just in time. China Evergrande Group's chairman, Hui Ka Yan.Xiaomei Chen/South China Morning Post via Getty Images Evergrande's founder, Hui Ka Yan, has been selling personal assets or pledging them to raise funds. The money has gone toward bond interest and staff salaries and to keep building projects going. A report last month indicated Chinese authorities told Hui to use his money to pay company debt. China Evergrande's founder and chairman, Hui Ka Yan, has already used about 7 billion Chinese yuan, or $1.1 billion, of his own money raised from selling and pledging assets to keep the company going, according to China Business News.Currently, it's just Hui "personally raising money" for Evergrande, CBN reported, citing an unnamed source familiar with the matter.With $300 billion in liabilities, the real-estate giant is the world's most indebted developer. It has managed to pay off several overdue coupons just in time, averting a default that could send the rest of the sector — and possibly the rest of the world — into crisis.Unnamed sources told Bloomberg in a report last month that Chinese authorities had instructed Hui to use his own money to pay down the debt.According to CBN, Hui has raised $1.1 billion since July 1 from selling personal assets or pledging them. The money has been injected into Evergrande for basic operations. The company is not conducting any corporate fundraising now but still has to pay bond interest, staff salaries, and keep building projects going, CBN reported.The outlet did not specify which personal assets Hui sold, but reports of the billionaire pledging and disposing assets have been rife. According to Reuters, Hui has pledged two luxury properties in Hong Kong and sold art and calligraphy from his collection to raise funds.Evergrande meanwhile, is said to have sold two of the company's private jets for more than $50 million last month. It has been holding fire sales of its corporate assets, incurring huge losses to free up liquidity.Earlier Thursday, Evergrande said it was selling its entire stake in the film and streaming-television company HengTen Network for 2.13 billion Hong Kong dollars, or $273.5 million — at a loss of 8.5 billion Hong Kong dollars. And last week, Evergrande sold the Dutch electric-motor maker e-Traction for 2 million euros, or $2.27 million — a 97% discount on its purchase price.Creditors are also eyeing Hui's other assets, including a 60-meter yacht called Event that is estimated to be worth $60 million and a private Airbus jet, Reuters reported, citing Chinese media reports.Since Evergrande owes $300 billion, $1.1 billion from Hui's personal stash wouldn't make much of a dent in its debt pile, but the effort could still count for something."He needs to show that he is using at least some personal assets to pay off some debts," Zhiwu Chen, the director of the Asia Global Institute think tank, told Bloomberg. "He needs to show a lot of good will in order to avoid more serious consequences," Chen added.Evergrande did not immediately respond to a request for comment from Insider.Read the original article on Business Insider.....»»

Category: personnelSource: nytNov 18th, 2021