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Power Supply Shock Looms: "Global Markets Will Feel The Pinch Very Soon" Of China"s Next Crisis

Power Supply Shock Looms: "Global Markets Will Feel The Pinch Very Soon" Of China's Next Crisis Distracted by the 'grandness' of the collapse of China's property development market, many have missed the fact that China faces a crisis that could directly hit Asia's economy just as hard as a financial collapse - a nationwide power supply shock. After ramping up its coal-based power production earlier in the year, it appears Beijing has suddenly grown a conscience over its emissions and the 'average joe' could be about to feel the pain of that decision. Climate change facts: Chinese CO2 emissions are more than double those of the US, and greater than US and EU combined. pic.twitter.com/ZpJCoPaUjB — zerohedge (@zerohedge) October 6, 2020 As Bloomberg reports, the crackdown on power consumption is being driven by rising demand for electricity and surging coal and gas prices as well as strict targets from Beijing to cut emissions. It’s coming first to the country’s mammoth manufacturing industries: from aluminum smelters to textiles producers and soybean processing plants, factories are being ordered to curb activity or - in some instances - shut altogether. "With market attention now laser-focused on Evergrande and Beijing’s unprecedented curbs on the property sector, another major supply-side shock may have been underestimated or even missed,” Nomura Holding Inc. analysts including Ting Lu warned in a note, predicting China’s economy will shrink this quarter. As a reminder, China pollutes more than the US and all developed countries combined... More problematic for Greta and her pals, between the years 2000 and 2020, the amount of electricity generated by burning coal increased more than four-fold in China, hitting around 4,600 terrawatt hours in the past year. You will find more infographics at Statista As the scene below suggests, this is not the first time China has faced winter power demand surges (which prompted many to turn to diesel generators to plug the shortages of power from the electricity grid). However, this year is different. The danger is that, as Zeng Hao, chief expert at consultancy Shanxi Jinzheng Energy, warns: government policies will significantly limit the energy industry’s potential to increase production to meet the demand increase. 2021's worsening power crunch in China reflects three specific factors: 1) Extremely tight energy supply globally (that's already seen chaos engulf markets in Europe); 2) The economic rebound from COVID lockdowns that has boosted demand from households and businesses (as lower investment by miners and drillers constrains production); and 3) President Xi Jinping tries to ensure blue skies at the Winter Olympics in Beijing next February (showing the international community for the first time that he's serious about de-carbonizing the economy). Simply put, it is the third factor - which is all of its own making - that has raised the risk of a severe shortage of coal and gas - used to heat homes and power factories - this winter; and more ominously, expectations of the need to ration power to those deemed worthy. “The power curbs will ripple through and impact global markets,” Nomura’s Ting said. “Very soon the global markets will feel the pinch of a shortage of supply from textiles, toys to machine parts.” As we noted earlier in the year, China needs to shutter 600 coal plants to meet its emissions goals of net zero greenhouse emissions by 2060. If Xi's recent actions in the interests of "common prosperity" are really about forestalling social unrest, we suspect his commitment to meeting self-imposed carbon emissions targets may quickly evaporate as the Chinese people are unlikely to stand sustained black-outs for long without upheaval. Tyler Durden Sun, 09/26/2021 - 20:30.....»»

Category: dealsSource: nytSep 26th, 2021

Power Crisis Deepens In Asia And Europe: What It Means To Shipping

Power Crisis Deepens In Asia And Europe: What It Means To Shipping By Greg Miller of American Shipper, There’s panic-buying of gasoline in the U.K. Natural gas prices in Europe and Asia are skyrocketing. Protests are breaking out across Europe due to spiking electricity bills. India and China are short of coal for utilities. Power is being rationed to factories in multiple Chinese provinces — and winter is coming. First came the COVID-induced global supply chain crisis for container shipping. Now comes a power crunch across Asia and Europe. Energy commodity stockpiles - just like U.S. retail inventories - did not build back up fast enough to contend with post-lockdown demand. How could the power crunch affect ocean shipping? For U.S. importers of Asian containerized goods, it’s a negative: another crimp in the supply chain. For commodity shipping - dry bulk, liquefied natural gas (LNG) and possibly oil tankers - it’s a recipe for higher rates. Container shipping According to Bloomberg, power use is now being curbed by tight supply and emissions restrictions in the Chinese provinces of Jiangsu, Zhejiang and Guangdong. Bloomberg quoted Nomura analyst Ting Lu as stating, “The power curbs will ripple through and impact global markets. Very soon the global markets will feel the pinch of a shortage of supply from textiles and toys to machine parts.” Nikkei reported that an affiliate of Foxconn, the world’s biggest iPhone assembler and a key supplier of Apple and Tesla, halted production at its facility in Kunshan in Jiangsu Province on Sunday due to lack of electricity supply. Another Apple supplier, Unimicron Technologies, also halted production in Kunshan on Sunday, said Nikkei, citing regulatory filings. The New York Times reported on power outages in the heart of China’s southern manufacturing belt, in Guandong. Factories in the city of Dongguan have not had electricity since last Wednesday. The Times interviewed a general manager of a Dongguan factory that produces leather shoes for the U.S. market who has kept his operation running with a diesel generator and who said that power outages began this summer. Stoppages of Chinese factories would further delay deliveries of U.S. imports, which have already been waylaid by extreme congestion at ports in Southern California and, more recently, ports in China. Dry bulk shipping “Whether it was coal or natural gas or oil, there was very low capital available for companies to continue to reinvest [in production] for several years heading into the pandemic,” explained Clarksons Platou Securities analyst Omar Nokta in an interview with American Shipper on Monday. “We built up a big stockpile in the first few months of the pandemic and we went right through it as soon as lockdowns abated, but capital hasn’t been redeployed. There has really been a true lack of investment.” In particular, thermal coal — coal used for power generation — faces steep restrictions in access to capital for environmental reasons.  Thermal coal supplies in China and India have dwindled as post-lockdown electricity consumption has eaten into inventories; India’s stockpiles are at a four-year low. China’s supplies are further limited by environmental restrictions on domestic mines and a ban on Australian imports. The Newcastle benchmark thermal coal price was up to $205 per ton on Monday. This is good news for dry bulk vessels in the Capesize and Panamax classes, said Nokta. (Capesizes have a capacity of around 180,000 deadweight tons, or DWT, and Panamaxes 65,000-90,000 DWT.) Capesizes spot rose to $69,000 per day on Tuesday, with Panamax spot rates rising to $36,200 per day, according to Clarksons. “People expected some bounce back in demand for thermal coal in 2021, but the surge in demand was not at all anticipated,” said Nokta. “That resurgence is keeping Panamaxes and Capes very busy when they can’t count on the cargoes they normally would — grain for Panamaxes and iron ore for Capes. Grain has been consistent throughout the year and now the Panamaxes have this added thermal coal element. Capes have faced a somewhat inconsistent Chinese steel market [production plunged in August], but it hasn’t mattered because of all of these thermal coal cargoes they’ve been able to carry.” Capesize rates have risen over the past week despite escalating concern over the fate of Chinese property developer Evergrande and the Chinese property market in general. “The real-estate story is still a question, and the regulators are tempering steel production to limit pollution,” said Nokta. “But we could have a situation where iron ore demand dips and there’s a handoff to thermal coal, and when thermal coal demand diminishes after the winter season, the iron-ore market comes back to life. So, you may not even feel it.” LNG shipping The shortfall of natural gas in Europe and Asia is clearly evident in historically high natural gas spot prices. The Asia benchmark, the Japan-Korea Marker (JKM), had risen to $27.50 per million British Thermal Units (MMBtu) on Friday, nearly double the August price. The two European benchmarks, TTF Netherlands and the National Balancing Point (NBP), have risen in lockstep with the JKM, to $26.51 and $26.23 per MMBtu, respectively. TTF and NBP are at all-time highs. The U.S. Henry Hub price has risen, but to far below these levels, at $5.51. Last winter, amid a huge spread between natural gas prices, LNG shipping spot prices spiked to $200,000 or more per day (one spot voyage reached $350,000 per day). But currently, rates for tri-fuel diesel engine LNG carriers are $51,000 per day, just below the five-year average for this time of year, according to Clarksons. Asked why LNG spot shipping rates are not surging given extremely high commodity prices in Asia and Europe and a large spread with U.S. pricing, Nokta cited two reasons. First, he said that the big spikes in spot shipping rates happen when there is a big spread between the European and Asian commodity prices, and there are aggressive re-exports from Europe to Asia by traders. “Right now, the JKM is at parity with Europe, so there isn’t as much cross-hemispheric trade.” Second, when spot rates spiked last winter, cargo interests took LNG ships on long-term charter to protect against future high spot rates. “Most of the charterers covered their requirements and spot activity has really dwindled in the past three months. So, when you look at spot rates, they may tell you things aren’t on fire, but there’s actually a lot of [cargo] movement.” Even so, spot LNG shipping rates could see a jump this winter if the spread between European prices and the JKM widens and more companies with chartered ships “relet” them into the spot market to profit from higher rates. Tanker shipping Product and crude tanker rates remain below breakeven, but some analysts and brokers believe power shortage in Asia and Europe could help jumpstart these beleaguered shipping markets as well. As with other commodities, oil stockpiles are low. Evercore ISI analyst Jon Chappell said Monday that “OECD refined product inventories are now lower than pre-COVID levels and are well below five-year averages, [however] at a certain point, inventories approach a level where there is no longer much slack in the system.” Nokta noted that in past commodity cycles “crude oil led the charge and this time it seems all the other commodities rose and crude is bringing up the rear. But all the same fundamental factors and drivers are there [for crude as with other commodities].” In light of extremely high natural gas prices, Goldman Sachs recently estimated that Asia and Europe could use up to 900,000 barrels per day more oil for power generation, as a substitute for natural gas. According to Gibson Brokers, “This would depend on a ‘cold winter’ and would also likely be focused east of Suez where oil-based fuels have greater potential to form part of the power-generation market.” Gibson said, “High-sulfur fuel oil [HSFO] is expected to be the primary beneficiary … and countries including Pakistan and Bangladesh, as well as some Middle Eastern players, have already been more active in the spot HSFO market as LNG prices began to rise. “Higher HSFO prices could potentially increase refining run rates, supporting crude demand,” added Gibson. Nokta pointed to this upside as well. “When we think about oil consumption, that’s been improving purely on mobility. Gasoline refining margins have strengthened as more people have gotten vaccinated,” he said. “But you could have this other element with fuel oil. Refiners could ratchet up production, which would mean you’re bringing higher amounts of crude into the refining system and producing more distillates and fuel oil. “It’s a nice setup for tankers,” affirmed Notka. “You’ve got improving oil consumption, shrinking inventories, OPEC promising to boost output — and now throw in an energy crisis as we go into winter.” Tyler Durden Wed, 09/29/2021 - 07:59.....»»

Category: blogSource: zerohedgeSep 29th, 2021

Inside the World of Black Bitcoin, Where Crypto Is About Making More Than Just Money

“We can operate on an even playing field in the digital world” At the Black Blockchain Summit, there is almost no conversation about making money that does not carry with it the possibility of liberation. This is not simply a gathering for those who would like to ride whatever bumps and shocks, gains and losses come with cryptocurrency. It is a space for discussing the relationship between money and man, the powers that be and what they have done with power. Online and in person, on the campus of Howard University in Washington, D.C., an estimated 1,500 mostly Black people have gathered to talk about crypto—decentralized digital money backed not by governments but by blockchain technology, a secure means of recording transactions—as a way to make money while disrupting centuries-long patterns of oppression. [time-brightcove not-tgx=”true”] “What we really need to be doing is to now utilize the technology behind blockchain to enhance the quality of life for our people,” says Christopher Mapondera, a Zimbabwean American and the first official speaker. As a white-haired engineer with the air of a lecturing statesman, Mapondera’s conviction feels very on-brand at a conference themed “Reparations and Revolutions.” Along with summit organizer Sinclair Skinner, Mapondera co-founded BillMari, a service that aims to make it easier to transmit cryptocurrency to wherever the sons and daughters of Africa have been scattered. So, not exactly your stereotypical “Bitcoin bro.” Contrary to the image associated with cryptocurrency since it entered mainstream awareness, almost no one at the summit is a fleece-vest-wearing finance guy or an Elon Musk type with a grudge against regulators. What they are is a cross section of the world of Black crypto traders, educators, marketers and market makers—a world that seemingly mushroomed during the pandemic, rallying around the idea that this is the boon that Black America needs. In fact, surveys indicate that people of color are investing in cryptocurrency in ways that outpace or equal other groups—something that can’t be said about most financial products. About 44% of those who own crypto are people of color, according to a June survey by the University of Chicago’s National Opinion Research Center. In April, a Harris Poll reported that while just 16% of U.S. adults overall own cryptocurrency, 18% of Black Americans have gotten in on it. (For Latino Americans, the figure is 20%.) The actor Hill Harper of The Good Doctor, a Harvard Law School friend of former President Barack Obama, is a pitchman for Black Wall Street, a digital wallet and crypto trading service developed with Najah Roberts, a Black crypto expert. And this summer, when the popular money-transfer service Cash App added the option to purchase Bitcoin, its choice to explain the move was the MC Megan Thee Stallion. “With my knowledge and your hustle, you’ll have your own empire in no time,” she says in an ad titled “Bitcoin for Hotties.” Read more: Americans Have Learned to Talk About Racial Inequality. But They’ve Done Little to Solve It But, as even Megan Thee Stallion acknowledges in that ad, pinning one’s economic hopes on crypto is inherently risky. Many economic experts have described crypto as little better than a bubble, mere fool’s gold. The rapid pace of innovation—it’s been little more than a decade since Bitcoin was created by the enigmatic, pseudonymous Satoshi Nakamoto—has left consumers with few protections. Whether the potential is worth those risks is the stuff of constant, and some would say, infernal debate. Jared Soares for TIMECleve Mesidor, who founded the National Policy Network of Women of Color in Blockchain What looms in the backdrop is clear. In the U.S., the median white family’s wealth—reflecting not just assets minus debt, but also the ability to weather a financial setback—sat around $188,200, per the Federal Reserve’s most recent measure in 2019. That’s about eight times the median wealth of Black families. (For Latino families, it’s five times greater; the wealth of Asian, Pacific Island and other families sits between that of white and Latino families, according to the report.) Other estimates paint an even grimmer picture. If trends continue, the median Black household will have zero wealth by 2053. The summit attendees seem certain that crypto represents keys to a car bound for somewhere better. “Our digital selves are more important in some ways than our real-world selves,” Tony Perkins, a Black MIT-trained computer scientist, says during a summit session on “Enabling Black Land and Asset Ownership Using Blockchain.” The possibilities he rattles off—including fractional ownership of space stations—will, to many, sound fantastical. To others, they sound like hope. “We can operate on an even playing field in the digital world,” he says. The next night, when in-person attendees gather at Barcode, a Black-owned downtown D.C. establishment, for drinks and conversation, there’s a small rush on black T-shirts with white lettering: SATOSHI, they proclaim, IS BLACK. That’s an intriguing idea when your ancestors’ bodies form much of the foundation of U.S. prosperity. At the nation’s beginnings, land theft from Native Americans seeded the agricultural operations where enslaved Africans would labor and die, making others rich. By 1860, the cotton-friendly ground of Mississippi was so productive that it was home to more millionaires than anywhere else in the country. Government-supported pathways to wealth, from homesteading to homeownership, have been reliably accessible to white Americans only. So Black Bitcoiners’ embrace of decentralized currencies—and a degree of doubt about government regulators, as well as those who have done well in the traditional system—makes sense. Skinner, the conference organizer, believes there’s racial subtext in the caution from the financial mainstream regarding Bitcoin—a pervasive idea that Black people just don’t understand finance. “I’m skeptical of all of those [warnings], based on the history,” Skinner, who is Black American, says. Even a drop in the value of Bitcoin this year, which later went back up, has not made him reticent. “They have petrol shortages in England right now. They’ll blame the weather or Brexit, but they’ll never have to say they’re dumb. Something don’t work in Detroit or some city with a Black mayor, we get a collective shame on us.” Read more: America’s Interstate Slave Trade Once Trafficked Nearly 30,000 People a Year—And Reshaped the Country’s Economy The first time I speak to Skinner, the summit is still two weeks away. I’d asked him to talk through some of the logistics, but our conversation ranges from what gives money value to the impact of ride-share services on cabbies refusing Black passengers. Tech often promises to solve social problems, he says. The Internet was supposed to democratize all sorts of things. In many cases, it defaulted to old patterns. (As Black crypto policy expert Cleve Mesidor put it to me, “The Internet was supposed to be decentralized, and today it’s owned by four white men.”) But with the right people involved from the start of the next wave of change—crypto—the possibilities are endless, Skinner says. Skinner, a Howard grad and engineer by training, first turned to crypto when he and Mapondera were trying to find ways to do ethanol business in Zimbabwe. Traditional international transactions were slow or came with exorbitant fees. In Africa, consumers pay some of the world’s highest remittance, cell phone and Internet data fees in the world, a damaging continuation of centuries-long wealth transfers off the continent to others, Skinner says. Hearing about cryptocurrency, he was intrigued—particularly having seen, during the recession, the same banking industry that had profited from slavery getting bailed out as hundreds of thousands of people of color lost their homes. So in 2013, he invested “probably less than $3,000,” mostly in Bitcoin. Encouraged by his friend Brian Armstrong, CEO of Coinbase, one of the largest platforms for trading crypto, he grew his stake. In 2014, when Skinner went to a crypto conference in Amsterdam, only about eight Black people were there, five of them caterers, but he felt he had come home ideologically. He saw he didn’t need a Rockefeller inheritance to change the world. “I don’t have to build a bank where they literally used my ancestors to build the capital,” says Skinner, who today runs a site called I Love Black People, which operates like a global anti-racist Yelp. “I can unseat that thing by not trying to be like them.” Eventually, he and Mapondera founded BillMari and became the first crypto company to partner with the Reserve Bank of Zimbabwe to lower fees on remittances, the flow of money from immigrants overseas back home to less-developed nations—an economy valued by the World Bank and its offshoot KNOMAD at $702 billion in 2020. (Some of the duo’s business plans later evaporated, after Zimbabwe’s central bank revoked approval for some cryptocurrency activities.) Skinner’s feelings about the economic overlords make it a bit surprising that he can attract people like Charlene Fadirepo, a banker by trade and former government regulator, to speak at the summit. On the first day, she offers attendees a report on why 2021 was a “breakout year for Bitcoin,” pointing out that major banks have begun helping high-net-worth clients invest in it, and that some corporations have bought crypto with their cash on hand, holding it as an asset. Fadirepo, who worked in the Fed’s inspector general’s office monitoring Federal Reserve banks and the Consumer Financial Protection Bureau, is not a person who hates central banks or regulation. A Black American, she believes strongly in both, and in their importance for protecting investors and improving the economic position of Black people. Today she operates Guidefi, a financial education and advising company geared toward helping Black women connect with traditional financial advisers. It just launched, for a fee, direct education in cryptocurrency. Crypto is a relatively new part of Fadirepo’s life. She and her Nigerian-American doctor husband earn good salaries and follow all the responsible middle-class financial advice. But the pandemic showed her they still didn’t have what some of his white colleagues did: the freedom to walk away from high-risk work. As the stock market shuddered and storefronts shuttered, she decided a sea change was coming. A family member had mentioned Bitcoin at a funeral in 2017, but it sounded risky. Now, her research kept bringing her back to it. Last year, she and her husband bought $6,000 worth. No investment has ever generated the kinds of returns for them that Bitcoin has. “It has transformed people’s relationship with money,” she says. “Folks are just more intentional … and honestly feeling like they had access to a world that was previously walled off.” Read more: El Salvador Is Betting on Bitcoin to Rebrand the Country — and Strengthen the President’s Grip She knows frauds exists. In May, a federal watchdog revealed that since October 2020, nearly 7,000 people have reported losses of more than $80 million on crypto scams—12 times more scam reports than the same period the previous year. The median individual loss: $1,900. For Fadirepo, it’s worrying. That’s part of why she helps moderate recurring free learning and discussion options like the Black Bitcoin Billionaires chat room on Clubhouse, which has grown from about 2,000 to 130,000 club members this year. Jared Soares for TIMECharlene Fadirepo, a banker and former government regulator, near the National Museum of African American History and Culture There’s a reason Black investors might prefer their own spaces for that kind of education. Fadirepo says it’s not unheard-of in general crypto spaces—theoretically open to all, but not so much in practice—to hear that relying on the U.S. dollar is slavery. “To me, a descendant of enslaved people in America, that was painful,” she says. “There’s a lot of talk about sovereignty, freedom from the U.S. dollar, freedom from inflation, inflation is slavery, blah blah blah. The historical context has been sucked out of these conversations about traditional financial systems. I don’t know how I can talk about banking without also talking about history.” Back in January, I found myself in a convenience store in a low-income and predominantly Black neighborhood in Dallas, an area still living the impact of segregation decades after its official end. I was there to report on efforts to register Black residents for COVID-19 shots after an Internet-only sign-up system—and wealthier people gaming the system—created an early racial disparity in vaccinations. I stepped away to buy a bottle of water. Inside the store, a Black man wondered aloud where the lottery machine had gone. He’d come to spend his usual $2 on tickets and had found a Bitcoin machine sitting in its place. A second Black man standing nearby, surveying chip options, explained that Bitcoin was a form of money, an investment right there for the same $2. After just a few questions, the first man put his money in the machine and walked away with a receipt describing the fraction of one bitcoin he now owned. Read more: When a Texas County Tried to Ensure Racial Equity in COVID-19 Vaccinations, It Didn’t Go as Planned I was both worried and intrigued. What kind of arrangement had prompted the store’s owner to replace the lottery machine? That month, a single bitcoin reached the $40,000 mark. “That’s very revealing, if someone chooses to put a cryptocurrency machine in the same place where a lottery [machine] was,” says Jeffrey Frankel, a Harvard economist, when I tell him that story. Frankel has described cryptocurrencies as similar to gambling, more often than not attracting those who can least afford to lose, whether they are in El Salvador or Texas. Frankel ranks among the economists who have been critical of El Salvador’s decision to begin recognizing Bitcoin last month as an official currency, in part because of the reality that few in the county have access to the internet, as well as the cryptocurrency’s price instability and its lack of backing by hard assets, he says. At the same time that critics have pointed to the shambolic Bitcoin rollout in El Salvador, Bitcoin has become a major economic force in Nigeria, one of the world’s larger players in cryptocurrency trading. In fact, some have argued that it has helped people in that country weather food inflation. But, to Frankel, crypto does not contain promise for lasting economic transformation. To him, disdain for experts drives interest in cryptocurrency in much the same way it can fuel vaccine hesitancy. Frankel can see the potential to reduce remittance costs, and he does not doubt that some people have made money. Still, he’s concerned that the low cost and click-here ease of buying crypto may draw people to far riskier crypto assets, he says. Then he tells me he’d put the word assets here in a hard set of air quotes. And Frankel, who is white, is not alone. Darrick Hamilton, an economist at the New School who is Black, says Bitcoin should be seen in the same framework as other low-cost, high-risk, big-payoff options. “In the end, it’s a casino,” he says. To people with less wealth, it can feel like one of the few moneymaking methods open to them, but it’s not a source of group uplift. “Like any speculation, those that can arbitrage the market will be fine,” he says. “There’s a whole lot of people that benefited right before the Great Recession, but if they didn’t get out soon enough, they lost their shirts too.” To buyers like Jiri Sampson, a Black cryptocurrency investor who works in real estate and lives outside Washington, D.C., that perspective doesn’t register as quite right. The U.S.-born son of Guyanese immigrants wasn’t thinking about exploitation when he invested his first $20 in cryptocurrency in 2017. But the groundwork was there. Sampson homeschools his kids, due in part to his lack of faith that public schools equip Black children with the skills to determine their own fates. He is drawn to the capacity of this technology to create greater agency for Black people worldwide. The blockchain, for example, could be a way to establish ownership for people who don’t hold standard documents—an important issue in Guyana and many other parts of the world, where individuals who have lived on the land for generations are vulnerable to having their property co-opted if they lack formal deeds. Sampson even pitched a project using the blockchain and GPS technology to establish digital ownership records to the Guyanese government, which did not bite. “I don’t want to downplay the volatility of Bitcoin,” Sampson says. But that’s only a significant concern, he believes, if one intends to sell quickly. To him, Bitcoin represents a “harder” asset than the dollar, which he compares to a ship with a hole in it. Bitcoin has a limited supply, while the Fed can decide to print more dollars anytime. That, to Sampson, makes some cryptocurrencies, namely Bitcoin, good to buy and hold, to pass along wealth from one generation to another. Economists and crypto buyers aren’t the only ones paying attention. Congress, the Securities and Exchange Commission, and the Federal Reserve have indicated that they will move toward official assessments or regulation soon. At least 10 federal agencies are interested in or already regulating crypto in some way, and there’s now a Congressional Blockchain Caucus. Representatives from the Federal Reserve and the SEC declined to comment, but SEC Chairman Gary Gensler assured a Senate subcommittee in September that his agency is working to develop regulation that will apply to cryptocurrency markets and trading activity. Enter Cleve Mesidor, of the quip about the Internet being owned by four white men. When we meet during the summit, she introduces herself: “Cleve Mesidor, I’m in crypto.” She’s the first person I’ve ever heard describe herself that way, but not that long ago, “influencer” wasn’t a career either. A former Obama appointee who worked inside the Commerce Department on issues related to entrepreneurship and economic development, Mesidor learned about cryptocurrency during that time. But she didn’t get involved in it personally until 2013, when she purchased $200 in Bitcoin. After leaving government, she founded the National Policy Network of Women of Color in Blockchain, and is now the public policy adviser for the industry group the Blockchain Association. There are more men than women in Black crypto spaces, she tells me, but the gender imbalance tends to be less pronounced than in white-dominated crypto communities. Mesidor, who immigrated to the U.S. from Haiti and uses her crypto investments to fund her professional “wanderlust,” has also lived crypto’s downsides. She’s been hacked and the victim of an attempted ransomware attack. But she still believes cryptocurrency and related technology can solve real-world problems, and she’s trying, she says, to make sure that necessary consumer protections are not structured in a way that chokes the life out of small businesses or investors. “D.C. is like Vegas; the house always wins,” says Mesidor, whose independently published book is called The Clevolution: My Quest for Justice in Politics & Crypto. “The crypto community doesn’t get that.” Passion, she says, is not enough. The community needs to be involved in the regulatory discussions that first intensified after the price of a bitcoin went to $20,000 in 2017. A few days after the summit, when Mesidor and I spoke by phone, Bitcoin had climbed to nearly $60,000. At Barcode, the Washington lounge, Isaiah Jackson is holding court. A man with a toothpaste-commercial smile, he’s the author of the independently published Bitcoin & Black America, has appeared on CNBC and is half of the streaming show The Gentleman of Crypto, which bills itself as the one of the longest-running cryptocurrency shows on the Internet. When he was building websites as a sideline, he convinced a large black church in Charlotte, N.C., to, for a time, accept Bitcoin donations. He helped establish Black Bitcoin Billionaires on Clubhouse and, like Fadirepo, helps moderate some of its rooms and events. He’s also a former teacher, descended from a line of teachers, and is using those skills to develop (for a fee) online education for those who want to become crypto investors. Now, there’s a small group standing near him, talking, but mostly listening. Jackson was living in North Carolina when one of his roommates, a white man who worked for a money-management firm, told him he had just heard a presentation about crypto and thought he might want to suggest it to his wealthy parents. The concept blew Jackson’s mind. He soon started his own research. “Being in the Black community and seeing the actions of banks, with redlining and other things, it just appealed to me,” Jackson tells me. “You free the money, you free everything else.” Read more: Beyond Tulsa: The Historic Legacies and Overlooked Stories of America’s ‘Black Wall Streets’ He took his $400 savings and bought two bitcoins in October 2013. That December, the price of a single bitcoin topped $1,100. He started thinking about what kind of new car he’d buy. And he stuck with it, even seeing prices fluctuate and scams proliferate. When the Gentlemen of Bitcoin started putting together seminars, one of the early venues was at a college fair connected to an annual HBCU basketball tournament attended by thousands of mostly Black people. Bitcoin eventually became more than an investment. He believed there was great value in spreading the word. But that was then. “I’m done convincing people. There’s no point battling going back and forth,” he says. “Even if they don’t realize it, what [investors] are doing if they are keeping their bitcoin long term, they are moving money out of the current system into another one. And that is basically the best form of peaceful protest.”   —With reporting by Leslie Dickstein and Simmone Shah.....»»

Category: topSource: time11 hr. 10 min. ago

Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000

Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000 One day after the S&P posted its biggest one-day surge since March, index futures extended this week’s gains, helped by a stellar bank earnings, while the latest labor market data and inflation eased stagflation fears for the time being. . The 10-year Treasury yield rose and the dollar was steady. Goldman Sachs reports on Friday. At 715 a.m. ET, Dow e-minis were up 147 points, or 0.42%, S&P 500 e-minis were up 16.5 points, or 0.37%, and Nasdaq 100 e-minis were up 42.75 points, or 0.28%. Oil futures topped $85/bbl, jumping to their highest in three years amid an energy crunch that’s stoking inflationary pressures and prices for raw materials. A gauge of six industrial metals hit a record high on the London Metal Exchange.  Energy firms including Chevron and Exxon gained about half a percent each, tracking Brent crude prices that scaled the 3 year high. Solid earnings in the reporting season are tempering fears that rising costs and supply-chain snarls will hit corporate balance sheets and growth. At the same time, the wider debate about whether a stagflation-like backdrop looms remains unresolved. “We don’t sign up to the stagflation narrative that is doing the rounds,” said Hugh Gimber, global strategist at the perpetually optimistic J.P. Morgan Asset Management. “The economy is being supported by robust consumer balance sheets, rebounding business investment and a healthy labor market.” “After a choppy start to the week, equity markets appear to be leaning towards a narrative that companies can continue to grow profits, despite the combined pressures of higher energy prices and supply chain disruptions,” said Michael Hewson, chief market analyst at CMC Markets in London. Bitcoin and the crypto sector jumped after Bloomberg reported late on Thursday that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading in a watershed moment for the cryptocurrency industry. Bitcoin traded off session highs having tested $60k during Asian hours, but will likely rise to new all time highs shortly. Also overnight, Joe Biden signed a bill providing a short-term increase in the debt limit, averting the imminent threat of a financial calamity. But it only allows the Treasury Department to meets its financial obligations until roughly Dec. 3, so the can has been kicked for less than two months - brace for more bitter partisan battles in the coming weeks. This week’s move into rate-sensitive FAAMG growth names looked set to continue, with their shares inching up. Moderna rose 3.0% after a U.S. FDA panel voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and high-risk people. Western Digital slipped 2.5% as Goldman Sachs downgraded the storage hardware maker’s stock to “neutral” from “buy”. Here are some of the key premarket movers on Friday morning: Virgin Galactic (SPCE US) shares slump as much as 23% in U.S. premarket trading as the firm is pushing the start of commercial flights further into next year after rescheduling a test flight, disappointing investors with the unexpected delay to its space tourism business plans Cryptocurrency-exposed stocks rise in U.S. premarket trading after a report that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading.  Bit Digital (BTBT US) +6.7%, Riot Blockchain (RIOT US) +4.6%, Marathon Digital (MARA US) +3.6% Alcoa (AA US) shares jump 5.6% in thin volumes after co. reported profits that beat the average analyst estimate and said it will be paying a dividend to its shareholders Moderna (MRNA US) extends Thursday’s gains; Piper Sandler recommendation on Moderna Inc. to overweight from neutral, a day after co.’s Covid-19 booster got FDA nod for use in older, high-risk people Duck Creek Technologies (DCT US) shares fell 12% in Thursday postmarket trading after the software company projected 2022 revenue that fell short of the average analyst estimate 23andMe Holdings (ME US) soared 14% in Thursday postmarket trading after EMJ Capital founder Eric Jackson called the genetics testing company “the next Roku” on CNBC Corsair Gaming (CRSR US) shares fell 3.7% in post-market trading after it cut its net revenue forecast for the full year Early on Friday, China's PBOC broke its silence on Evergrande, saying risks to the financial system are controllable and unlikely to spread. Authorities and local governments are resolving the situation, central bank official Zou Lan said. The bank has asked lenders to keep credit to the real estate sector stable and orderly. In Europe, gains for banks, travel companies and carmakers outweighed losses for utilities and telecommunications industries, pushing the Stoxx Europe 600 Index up 0.3%. Telefonica fell 3.3%, the most in more than four months, after Barclays cut the Spanish company to underweight. Temenos and Pearson both slumped more than 10% after their business updates disappointed investors. Here are some of the biggest European movers today: Devoteam shares rise as much as 25% after its controlling shareholder, Castillon, increased its stake in the IT consulting group to 85% and launched an offer for the remaining capital. QinetiQ rises as much as 5.4% following a plunge in the defense tech company’s stock on Thursday. Investec upgraded its recommendation to buy and Berenberg said the shares now look oversold. Hugo Boss climbs as much as 4.4% to the highest level since September 2019 after the German apparel maker reported 3Q results that exceeded expectations. Jefferies (hold) noted the FY guidance hike also was bigger than expected. Mediclinic rises as much as 7.7% to highest since May 26 after 1H results, which Morgan Stanley says showed strong underlying operating performance with “solid metrics.” Temenos sinks as much as 14% after the company delivered a “mixed bag” with its 3Q results, according to Baader (sell). Weakness in Europe raises questions about the firm’s outlook for a recovery in the region, the broker said. Pearson declines as much as 12%, with analysts flagging weaker trading in its U.S. higher education courseware business in its in-line results. Earlier in the session, Asian stocks headed for their best week in more than a month amid a list of positive factors including robust U.S. earnings, strong results at Taiwan Semiconductor Manufacturing Co. and easing home-loan restrictions in China.  The MSCI Asia Pacific Index gained as much as 1.3%, pushing its advance this week to more than 1.5%, the most since the period ended Sept. 3. Technology shares provided much of the boost after chip giant TSMC announced fourth-quarter guidance that beat analysts’ expectations and said it will build a fabrication facility for specialty chips in Japan. Shares in China rose as people familiar with the matter said the nation loosened restrictions on home loans at some of its largest banks.  Conditions are good for tech and growth shares now long-term U.S. yields have fallen following inflation data this week, Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “If data going forward are able to provide an impression that demand is strong too -- on top of a sense of relief from easing supply chain worries -- it’ll be a reason for share prices to take another leap higher.”  Asia’s benchmark equity gauge is still 10% below its record-high set in February, as analysts stay on the lookout for higher bond yields and the impact of supply-chain issues on profit margins.  Japanese stocks rose, with the Topix halting a three-week losing streak, after Wall Street rallied on robust corporate earnings. The Topix rose 1.9% to close at 2,023.93, while the Nikkei 225 advanced 1.8% to 29,068.63. Keyence Corp. contributed the most to the Topix’s gain, increasing 3.7%. Out of 2,180 shares in the index, 1,986 rose and 155 fell, while 39 were unchanged. For the week, the Topix climbed 3.2% and the Nikkei added 3.6%. Semiconductor equipment and material makers rose after TSMC said it will build a fabrication facility for specialty chips in Japan and plans to begin production there in late 2024.  U.S. index futures held gains during Asia trading hours. The contracts climbed overnight after a report showed applications for state unemployment benefits fell last week to the lowest since March 2020.  “U.S. initial jobless claims fell sharply, and have returned to levels seen before the spread of the coronavirus,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities in Tokyo. “The fact that more people are returning to their jobs will help ease supply chain problems caused by the lack of workers.” Australian stocks also advanced, posting a second week of gains. The S&P/ASX 200 index rose 0.7% to close at 7,362.00, with most sectors ending higher.  The benchmark added 0.6% since Monday, climbing for a second week. Miners capped their best week since July 16 with a 3% advance. Hub24 jumped on Friday after Evans & Partners upgraded the stock to positive from neutral. Pendal Group tumbled after it reported net outflows for the fourth quarter of A$2.3 billion. In New Zealand, the S&P/NZX 50 index fell 0.3% to 13,012.19 In rates, the U.S. 10-year Treasury yield rose over 3bps to 1.54%. Treasuries traded heavy across long-end of the curve into early U.S. session amid earning-driven gains for U.S. stock futures. Yields are higher by more than 3bp across long-end of the curve, 10- year by 2.8bp at about 1.54%, paring its first weekly decline since August; weekly move has been led by gilts and euro-zone bonds, also under pressure Friday, with U.K. 10-year yields higher by 3.3bp. Today's bear-steepening move pares the weekly bull-flattening trend. U.S. session features a packed economic data slate and speeches by Fed’s Bullard and Williams.   In FX, the Bloomberg Dollar Spot Index was little changed even as the greenback weakened against most of its Group-of-10 peers; the euro hovered around $1.16 while European and U.S. yields rose, led by the long end. Norway’s krone led G-10 gains as oil jumped to $85 a barrel for the first time since late 2018 amid the global energy crunch; the currency rallied by as much as 0.6% to 8.4015 per dollar, the strongest level since June. New Zealand’s dollar advanced to a three-week high as bets on RBNZ’s tightening momentum build ahead of Monday’s inflation data; the currency is outperforming all G-10 peers this week. The yen dropped to a three-year low as rising equities in Asia damped demand for low-yielding haven assets. China’s offshore yuan advanced to its highest in four months while short-term borrowing costs eased after the central bank added enough medium-term funds into the financial system to maintain liquidity at existing levels. In commodities, crude futures trade off best levels. WTI slips back below $82, Brent fades after testing $85. Spot gold slips back through Thursday’s lows near $1,786/oz. Base metals extend the week’s rally with LME nickel and zinc gaining over 2%. Today's retail sales report, due at 08:30 a.m. ET, is expected to show retail sales fell in September amid continued shortages of motor vehicles and other goods. The data will come against the backdrop of climbing oil prices, labor shortages and supply chain disruptions, factors that have rattled investors and have led to recent choppiness in the market. Looking at the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Market Snapshot S&P 500 futures up 0.3% to 4,443.75 STOXX Europe 600 up 0.4% to 467.66 German 10Y yield up 2.4 bps to -0.166% Euro little changed at $1.1608 MXAP up 1.3% to 198.33 MXAPJ up 1.2% to 650.02 Nikkei up 1.8% to 29,068.63 Topix up 1.9% to 2,023.93 Hang Seng Index up 1.5% to 25,330.96 Shanghai Composite up 0.4% to 3,572.37 Sensex up 0.9% to 61,305.95 Australia S&P/ASX 200 up 0.7% to 7,361.98 Kospi up 0.9% to 3,015.06 Brent Futures up 1.0% to $84.83/bbl Gold spot down 0.5% to $1,787.54 U.S. Dollar Index little changed at 93.92 Top Overnight News from Bloomberg China’s central bank broke its silence on the crisis at China Evergrande Group, saying risks to the financial system stemming from the developer’s struggles are “controllable” and unlikely to spread The ECB has a good track record when it comes to flexibly deploying its monetary instruments and will continue that approach even after the pandemic crisis, according to policy maker Pierre Wunsch Italian Ministry of Economy and Finance says fourth issuance of BTP Futura to start on Nov. 8 until Nov. 12, according to a statement The world’s largest digital currency rose about 3% to more than $59,000 on Friday -- taking this month’s rally to over 35% -- after Bloomberg News reported the U.S. Securities and Exchange Commission looks poised to allow the country’s first futures-based cryptocurrency ETF Copper inventories available on the London Metal Exchange hit the lowest level since 1974, in a dramatic escalation of a squeeze on global supplies that’s sent spreads spiking and helped drive prices back above $10,000 a ton A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers including the best day for the S&P 500 since March after strong US bank earnings, encouraging data and a decline in yields spurred risk appetite. The ASX 200 (+0.7%) was positive as the tech and mining sectors continued to spearhead the advances in the index in which the former took impetus from Wall St where the softer yield environment was conducive to the outperformance in tech, although mining giant Rio Tinto was among the laggards following weaker quarterly production results. The Nikkei 225 (+1.8%) was buoyed as exporters benefitted from the JPY-risk dynamic but with Fast Retailing failing to join in on the spoils despite an 88% jump in full-year net as its profit guidance underwhelmed with just 3% growth seen for the year ahead, while Taiwan's TAIEX (+2.2%) surged with the spotlight on TSMC earnings which reached a record high amid the chip crunch and with the Co. to also build a factory in Japan that could receive JPY 500bln of support from the Japanese government. The Hang Seng (+1.5%) and Shanghai Comp. (+0.4%) were initially indecisive amid the overhang from lingering developer default concerns although found some mild support from reports that China is to relax banks' mortgage limits through the rest of 2021. Focus was also on the PBoC which announced a CNY 500bln MLF operation, although this just matched the amount maturing this month and there are mixed views regarding prospects of a looming RRR cut with ANZ Bank's senior China strategist recently suggesting the potential for a 50bps cut in RRR or targeted MLF as early as today, although a recent poll showed analysts had pushed back their calls for a RRR cut from Q4 2021 to Q1 2022. Finally, 10yr JGBs marginally pulled back from this week’s advances after hitting resistance at the 151.50 level, with demand hampered amid the firm gains in Japanese stocks and the lack of BoJ purchases in the market today. Top Asian News Hong Kong Probes Going Concern Reporting of Evergrande U.S. Futures Hold Gains as Oil Hits 3-Year High: Markets Wrap Toyota Cuts November Outlook by 15% on Parts Shortage, Covid Yango Group Wires Repayment Fund for Onshore Bond Due Oct. 22 Bourses in Europe have held onto the modest gains seen at the cash open (Euro Stoxx 50 +0.4%; Stoxx 600 +0.3%), but the region is off its best levels with the upside momentum somewhat faded heading into the US open, and amidst a lack of fresh newsflow. US equity futures have remained in positive territory, although the latest leg lower in bonds has further capped the tech-laden NQ (+0.2%), which underperforms vs the ES (+0.3%), YM (+0.3%) and RTY (+0.7%), with traders on the lookout for another set of earnings, headlined by Goldman Sachs at 12:25BST/07:25EDT. Back to Europe, bourses see broad-based gains, whilst sectors are mostly in the green with clear underperformance experienced in defensives, with Telecoms, Utilities, Healthcare and Staples at the foot of the bunch. On the flipside, Banks reap rewards from the uptick in yields, closely followed by Travel & Leisure, Autos & Parts and Retail. Renault (+4%) drives the gains in Autos after unveiling a prototype version of the Renault Master van that will go on sale next year. Travel & Leisure is bolstered by the ongoing reopening trade with potential tailwinds heading into the Christmas period. Retail meanwhile is boosted by Hugo Boss (+1.8%) topping forecasts and upgrading its guidance. Top European News Autumn Heat May Curb European Gas Demand, Prices Next Week Bollore Looking for Buyers for Africa Logistics Ops: Le Monde U.K. Offers Foreign Butchers Visas After 6,000 Pigs Culled Europe’s Car-Sales Crash Points to Worse Year Than Poor 2020 In FX, the Greenback was already losing momentum after a relatively tame bounce on the back of Thursday’s upbeat US initial claims data, and the index failed to sustain its recovery to retest intraday highs or remain above 94.000 on a closing basis. However, the Buck did reclaim some significant and psychological levels against G10, EM currencies and Gold that was relishing the benign yield environment and the last DXY price was marginally better than the 21 DMA from an encouraging technical standpoint. Nevertheless, the Dollar remains weaker vs most majors and in need of further impetus that may come via retail sales, NY Fed manufacturing and/or preliminary Michigan Sentiment before the spotlight switches to today’s Fed speakers featuring arch hawk Bullard and the more neutral Williams. GBP/NZD/NOK - Sterling has refuelled and recharged regardless of the ongoing UK-EU rift over NI Protocol, though perhaps in part due to the fact that concessions from Brussels are believed to have been greeted with welcome surprise by some UK Ministers. Cable has reclaimed 1.3700+ status, breached the 50 DMA (at 1.3716 today) and yesterday’s best to set a marginal new w-t-d peak around 1.3739, while Eur/Gbp is edging closer to 0.8450 having clearly overcome resistance at 1.1800 in the reciprocal cross. Similarly, the Kiwi continues to derive impetus from the softer Greenback and Aud/Nzd flows as Nzd/Usd extends beyond 0.7050 and the Antipodean cross inches nearer 1.0500 from 1.0600+ highs. Elsewhere, the Norwegian Crown is aiming to add 9.7500 to its list of achievements relative to the Euro with a boost from Brent topping Usd 85/brl at one stage and a wider trade surplus. CAD - The Loonie is also profiting from oil as WTI crude rebounds through Usd 82 and pulling further away from 1.5 bn option expiry interest between 1.2415-00 in the process, with Usd/Cad towards the base of 1.2337-82 parameters. EUR/AUD/CHF/SEK - All narrowly mixed and rangy vs the Greenback, or Euro in the case of the latter, as Eur/Usd continues to straddle 1.1600, Aud/Usd churn on the 0.7400 handle, the Franc meander from 0.9219 to 0.9246 and Eur/Sek skirt 10.0000 having dipped below the round number briefly on Thursday. In commodities, WTI and Brent front month futures remain on a firmer footing, aided up the overall constructive risk appetite coupled with some bullish technical developments, as WTI Nov surpassed USD 82/bbl (vs 81.39/bbl low) and Brent Dec briefly topped USD 85/bbl (vs 84.16/bbl low). There has been little in terms of fresh fundamental catalysts to drive the price action, although Russia's Gazprom Neft CEO hit the wires earlier and suggested that reserve production capacity could meet the increase in oil demand, whilst a seasonal decline in oil consumption is possible and the oil market will stabilise in the nearest future. On the Iranian JCPOA front, Iran said it is finalising steps to completing its negotiating team but they are absolutely decided to go back to Vienna discussions and conclude the negotiations, WSJ's Norman. The crude complex seems to have (for now) overlooked reports that the White House is engaged in diplomacy" with OPEC+ members regarding output. UK nat gas prices were higher as European players entered the fray, but prices have since waned off best levels after Russian Deputy PM Novak suggested that gas production in Russia is running at maximum capacity. Elsewhere, spot gold has been trundling amid yield-play despite lower despite the Buck being on the softer side of today’s range. Spot gold failed to hold onto USD 1,800/oz status yesterday and has subsequently retreated below its 200 DMA (1,794/oz) and makes its way towards the 50 DMA (1,776/oz). LME copper prices are on a firmer footing with prices back above USD 10,000/t – supported by technicals and the overall risk tone, although participants are cognizant of potential Chinese state reserves releases. Conversely, Dalian iron ore futures fell for a third straight session, with Rio Tinto also cutting its 2021 iron ore shipment forecasts due to dampened Chinese demand. US Event Calendar 8:30am: Sept. Retail Sales Advance MoM, est. -0.2%, prior 0.7% 8:30am: Sept. Retail Sales Ex Auto MoM, est. 0.5%, prior 1.8% 8:30am: Sept. Retail Sales Control Group, est. 0.5%, prior 2.5% 8:30am: Sept. Retail Sales Ex Auto and Gas, est. 0.3%, prior 2.0% 8:30am: Oct. Empire Manufacturing, est. 25.0, prior 34.3 8:30am: Sept. Import Price Index MoM, est. 0.6%, prior -0.3%; YoY, est. 9.4%, prior 9.0% 8:30am: Sept. Export Price Index MoM, est. 0.7%, prior 0.4%; YoY, prior 16.8% 10am: Aug. Business Inventories, est. 0.6%, prior 0.5% 10am: Oct. U. of Mich. 1 Yr Inflation, est. 4.7%, prior 4.6%; 5-10 Yr Inflation, prior 3.0% 10am: Oct. U. of Mich. Sentiment, est. 73.1, prior 72.8 10am: Oct. U. of Mich. Current Conditions, est. 81.2, prior 80.1 10am: Oct. U. of Mich. Expectations, est. 69.1, prior 68.1 DB's Jim Ried concludes the overnight wrap A few people asked me what I thought of James Bond. I can’t say without spoilers so if anyone wants my two sentence review I will cut and paste it to all who care and reply! At my age I was just impressed I sat for over three hours (including trailers) without needing a comfort break. By the time you email I will have also listened to the new Adele single which dropped at midnight so happy to include that review as well for free. While we’re on the subject of music, risk assets feel a bit like the most famous Chumbawamba song at the moment. They get knocked down and they get up again. Come to think about it that’s like James Bond too. Yesterday was a strong day with the S&P 500 (+1.71%) moving back to within 2.2% of its all-time closing high from last month. If they can survive all that has been thrown at them of late then one wonders where they’d have been without any of it. The strong session came about thanks to decent corporate earnings releases, a mini-collapse in real yields, positive data on US jobless claims, as well as a further fall in global Covid-19 cases that leaves them on track for an 8th consecutive weekly decline. However, inflation remained very much on investors’ radars, with a range of key commodities taking another leg higher, even as US data on producer prices was weaker than expected. Starting with the good news, the equity strength was across the board with the S&P 500 experiencing its best daily performance since March, whilst Europe’s STOXX 600 (+1.20%) also put in solid gains. It was an incredibly broad-based move higher, with every sector group in both indices rising on the day, with a remarkable 479 gainers in the S&P 500, which is the second-highest number we’ve seen over the last 18 months. Every one of the 24 S&P 500 industry groups rose, led by cyclicals such as semiconductors (+3.12%), transportation (+2.51%) and materials (+2.43%). A positive start to the Q3 earnings season buoyed sentiment, as a number of US banks (+1.45%) reported yesterday, all of whom beat analyst estimates. In fact, of the nine S&P 500 firms to report yesterday, eight outperformed analyst expectations. Weighing in on recent macro themes, Bank of America Chief, Brian Moynihan, noted that the current bout of inflation is “clearly not temporary”, but also that he expects consumer demand to remain robust and that supply chains will have to adjust. I’m sure we’ll hear more from executives as earnings season continues today. Alongside those earnings releases, yesterday saw much better than expected data on the US labour market, which makes a change from last week’s underwhelming jobs report that showed the slowest growth in nonfarm payrolls so far this year. In terms of the details, the weekly initial jobless claims for the week through October 9, which is one of the most timely indicators we get, fell to a post-pandemic low of 293k (vs. 320k expected). That also saw the 4-week moving average hit a post-pandemic low of 334.25k, just as the continuing claims number for the week through October 2 hit a post-pandemic low of 2.593m (vs. 2.670m expected). We should get some more data on the state of the US recovery today, including September retail sales, alongside the University of Michigan’s consumer sentiment index for October. That optimism has fed through into Asian markets overnight, with the Nikkei (+1.43%), the Hang Seng (+0.86%), the Shanghai Comp (+0.29%) and the KOSPI (+0.93%) all moving higher. That came as Bloomberg reported that China would loosen restrictions on home loans amidst the concerns about Evergrande. And we also got formal confirmation that President Biden had signed the debt-limit increase that the House had passed on Tuesday, which extends the ceiling until around December 3. Equity futures are pointing to further advances in the US and Europe later on, with those on the S&P 500 (+0.30%) and the STOXX 50 (+0.35%) both moving higher. Even with the brighter news, inflation concerns are still very much with us however, and yesterday in fact saw Bloomberg’s Commodity Spot Index (+1.16%) advance to yet another record high, exceeding the previous peak from early last week. That was partly down to the continued rise in oil prices, with WTI (+1.08%) closing at $81.31/bbl, its highest level since 2014, just as Brent Crude (+0.99%) hit a post-2018 high of $84.00/bbl. Both have posted further gains this morning of +0.58% and +0.61% respectively. Those moves went alongside further rises in natural gas prices, which rose for a 3rd consecutive session, albeit they’re still beneath their peak from earlier in the month, as futures in Europe (+9.14%), the US (+1.74%) and the UK (+9.26%) all moved higher. And that rise in Chinese coal futures we’ve been mentioning also continued, with their rise today currently standing at +13.86%, which brings their gains over the week as a whole to +39.02% so far. As well as energy, industrial metals were another segment where the recent rally showed no sign of abating yesterday. On the London metal exchange, a number of multi-year milestones were achieved, with aluminum prices (+1.60%) up to their highest levels since 2008, just as zinc prices (+3.73%) closed at their highest level since 2018. Separately, copper prices (+2.56%) hit a 4-month high, and other winners yesterday included iron ore futures in Singapore (+1.16%), as well as nickel (+1.99%) and lead (+2.43%) prices in London. With all this momentum behind commodities, inflation expectations posted further advances yesterday. Indeed, the 10yr US Breakeven closed +1.0bps higher at 2.536%, which is just 3bps shy of its closing peak back in May that marked its highest level since 2013. And those moves came in spite of US producer price data that came in weaker than expected, with the monthly increase in September at +0.5% (vs. +0.6% expected). That was the smallest rise so far this year, though that still sent the year-on-year number up to +8.6% (vs. +8.7% expected). That rise in inflation expectations was echoed in Europe too, with the 10yr UK breakeven (+5.6bps) closing at its highest level since 2008, whilst its German counterpart also posted a modest +0.7bps rise. In spite of the rise in inflation expectations, sovereign bonds posted gains across the board as the moves were outweighed by the impact of lower real rates. By the end of yesterday’s session, yields on 10yr Treasuries were down -2.6bps to 1.527%, which came as the 10yr real yield moved back beneath -1% for the first time in almost a month. Likewise in Europe, yields pushed lower throughout the session, with those on 10yr bunds (-6.3bps), OATs (-6.2bps) and BTPs (-7.1bps) all moving aggressively lower. To the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs. Tyler Durden Fri, 10/15/2021 - 07:50.....»»

Category: personnelSource: nytOct 15th, 2021

Now A US Govt Official Is Telling Us That Supply Chain Nightmares Could Potentially Last For "Years"

Now A US Govt Official Is Telling Us That Supply Chain Nightmares Could Potentially Last For "Years" Authored by Michael Snyder via The Economic Collapse blog, The truth is starting to come out, and a lot of people aren’t going to like it.  When the supply chain problems and the shortages began, government officials repeatedly assured us that they would just be temporary, and most of us believed them.  But now it has become clear that they aren’t going to be temporary at all.  In fact, during a recent interview with Bloomberg, U.S. Transportation Secretary Pete Buttigieg admitted that some of the supply chain problems that we are currently facing could last for “years and years”.  I don’t know about you, but to me “years and years” sounds like a really long time. Of course that is not the only time that Buttigieg has made such a claim.  During another recent interview, he used the words “long term” to describe what we are facing… Buttigieg has said in recent interviews that “it’s an incredibly complicated situation,” but the government is holding virtual “roundtables” with port operators, labor unions and private companies. Nevertheless, he told MSNBC last Thursday, the “challenges” will continue, not only “going into the next year or two, but going into the long term.” Isn’t it remarkable how the outlook for our economic future has changed so dramatically in just a matter of a few months? Earlier this year, we were told that we would soon be entering a new golden era of prosperity. But now inflation and shortages are causing chaos everywhere we look. Earlier today, I came across a Daily Mail article that boldly declared that “stores across America have empty shelves” right now… Stores across America have empty shelves thanks to a series in supply chain problems that are prolonging inflation and could stretch into the new year, with some retailers like Costco and Walmart limiting the amount of toilet paper in some stores. More than 60 cargo ships are waiting to dock in California, carrying hundreds of thousands of containers, and may be stuck for months in a traffic jam after arriving from China and Asia. Millions of dollars of American goods are still sitting in warehouses in China, awaiting shipment. In addition to the unprecedented backlogs that we are witnessing at our major ports, it has also become far, far more expensive to send products across the Pacific Ocean. Just check out these numbers… The Washington Post reported the median cost of shipping a standard container from China to the U.S. West Coast hit a record $20,586. That’s nearly twice what it cost in July, which was twice what it cost in January, according to the Freightos index. “Consumers are confronting higher prices and shortages of cars, children’s shoes and exercise gear, as the holiday shopping season looms,” the Post said. That is crazy. And now the emerging global energy crisis is going to make it even more expensive to move stuff around the planet.  On Monday, the price of gasoline in the United States hit a new seven-year high… The national average price for gasoline hit a fresh seven-year high of $3.27 a gallon on Monday, up by 7 cents in the past week alone, according to AAA. Gas has nearly doubled since bottoming at $1.77 in April 2020. High gas prices will only exacerbate elevated inflation, squeeze the budgets of American families and hurt President Joe Biden’s political fortunes. In addition, we just learned that U.S. stockpiles of heating oil have hit a 20 year low… The U.S. may be heading into winter with the lowest stockpiles of heating oil to meet surging demand in more than two decades. Inventories of distillates — used as diesel for both transportation and heating oil — are enough to meet 31.2 days of demand, according to the Energy Information Administration. That’s the tightest it has been for this time of the year since 2000. Unfortunately, global energy supplies are going to get even tighter and prices are going to go even higher in the months ahead. Needless to say, the big corporations are going to feel forced to pass on rising costs to consumers.  In fact, the head of Kraft Heinz says that his company is already doing this… Miguel Patricio said the international food giant, which makes tomato sauce and baked beans, was putting up prices in several countries. Unlike in previous years, he said, inflation was “across the board”. The cost of ingredients such as cereals and oils has pushed global food prices to a 10-year high, according to the UN Food and Agriculture Organisation. If you are reading this article and you are thinking that this is perfectly setting the stage for many of the scenarios that I have described in my books, you would be 100 percent correct. We are entering a period of inflation that is going to absolutely shock most people. In fact, the UN says that the global price of food has already risen more than 32 percent over the past year… The United Nation’s Food and Agriculture Organization (FAO)’s September food price index – a measure of monthly changes in global food prices – reached 130 points, a level not seen since 2011. It represents a 32.8 percent increase from September 2020. I realize that I have thrown a lot of information at you very quickly in this article. Things are starting to move quite rapidly now, and we are being warned that conditions are going to continue to deteriorate in the months ahead. And as conditions deteriorate, the American people are going to becoming increasingly restless.  Already, polls are showing that Americans are quite dissatisfied with the current state of affairs.  Here is one example… Just 37% of Americans rate the economy as very or fairly good – the lowest percentage since March, and for the second straight month, more than half feel the economy is in bad shape. And most Americans are not convinced that the Biden administration’s domestic agenda would improve the economy. As I discussed yesterday, our economy is starting to break down on a very basic level. We have become so dependent on an efficient flow of goods and services, but these days there are breakdowns all over the system. I would like to tell you that things will get better soon, but I can’t do that. More supply chain problems are ahead, and some of them are going to be exceptionally painful. *  *  * It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon. Tyler Durden Wed, 10/13/2021 - 16:45.....»»

Category: blogSource: zerohedgeOct 13th, 2021

America"s Funding Challenges Ahead

America's Funding Challenges Ahead Authored by Alasdair Macleod via GoldMoney.com, This article looks at the Fed’s funding challenges in the US’s new fiscal year, which commenced on 1 October. There are three categories of buyer for US Federal debt: the financial and non-financial private sector, foreigners, and the Fed. The banks in the financial sector have limited capacity to expand bank credit, and American consumers are being encouraged to spend, not save. Except for a few governments, foreigners are already reducing their proportion of outstanding federal debt. That leaves the Fed. But the Fed recently committed to taper quantitative easing, and it cannot be seen to directly monetise government debt. That is one aspect of the problem. Another is the impending rise in interest rates, related to non-transient, runaway price inflation. Funding any term debt in a rising interest rate environment is going to be considerably more difficult than when the underlying trend is for falling yields. There is the additional risk that foreigners overloaded with dollars and dollar-denominated financial assets are more likely to become sellers.Not only are foreigners overloaded with dollars and financial assets, but with bond yields rising and stock prices falling, foreigners for whom over-exposure to dollars is a speculative position going wrong will undoubtedly liquidate dollar assets and dollars. If not buying their own national currencies, they will stockpile commodities and energy for production, and precious metals as currency hedges instead. The Fed will be faced with a bad choice: protect financial asset values and not the dollar or protect the dollar irrespective of the consequences for financial asset values. And the Federal Government’s deficit must be funded. The likely compromise of these conflicting objectives leads to the risk of failing to achieve any of them. Other major central banks face a similar quandary. Funding ballooning government deficits is about to get considerably more difficult everywhere. Introduction Our headline chart in Figure 1 shows the excess liquidity in the US economy that is being absorbed by the Fed through reverse repos (RRPs). With a reverse repo, the Fed lends collateral (in this case US Treasuries overnight from its balance sheet) to eligible counterparties in exchange for overnight funds, which are withdrawn from public circulation. As of last night (6 October), total RRPs stood at $1,451bn, being the excess liquidity in the financial system with interest rates set by the RRP rate of 0.05%. Simply put, if the Fed did not offer to take this liquidity out of public circulation, overnight dollar money market rates would probably become negative. The chart runs from 31 December 2019 to cover the period including the Fed’s reduction of its funds rate to the zero bound and the commencement of quantitative easing to the tune of $120bn every month —they were announced on 19th and 23rd March 2020 respectively. Other than the brief spike in RRPs at that time which was a wobble to be expected as the market adjusted to the zero bound, RRPs remained broadly at zero for a full year, only beginning a sustained increase last March. Much of the excess liquidity absorbed by RRPs arises from government spending not immediately offset by bond sales. Figure 2 shows how this is reflected in the government’s general account at the Fed. The US Treasury’s balance at the Fed represents money not in public circulation. It is therefore latent monetary inflation, which is released into the economy as it is spent. Since March 2021, the balance on this account fell by about $800bn, while reverse repos have risen by about $1,400bn, still leaving a significant balance of liquidity to be absorbed arising from other factors, the most significant of which is likely to be seepage into the wider economy from quantitative easing (over two trillion so far and still counting). The US Treasury has draw down on its general account because had it accumulated balances from bond funding in excess of its spending ahead of the initial covid lockdown. And its debt ceiling was getting closer, which is currently being renegotiated. But this is only part of the story, with the Federal deficit running at about $3 trillion in the fiscal year just ended. That is a huge amount of government “fiscal stimulus”, and clearly, the private sector is having difficulty absorbing it all. The scale of this deficit, debt ceilings aside, is set to increase under the Biden administration. If the US economy is already drowning in dollars, it is likely to worsen. Assuming the debt ceiling negotiations raise the Treasury borrowing limit, the baseline deficit for the new fiscal year must be another $3 trillion. Optimists in the government’s camp have looked for economic recovery to increase tax revenues to reduce this deficit enough together with selective tax increases to allow the government to invest additional capital funds in the crumbling national infrastructure. A more realistic assessment is that unexpected supply disruption of nearly all goods and rising production costs are eating into the recovery, which is now faltering. And it is raising costs for the government in its mandated spending even above the most recent assumptions. It is increasingly difficult to see how the budget deficit will not increase above that $3 trillion baseline. This article looks at the funding issues in the new fiscal year following the expected resolution of the debt ceiling issue. The principal problems are its scale, how it will be funded, and the impact of price inflation and its effect on interest rates. Assessing the scale of the funding problem There are three distinct sources for this funding: the Fed, foreign investors, and the private sector, which includes financial and non-financial businesses. Figure 3 shows how the ownership of Treasury stock in these categories has progressed over the last ten years and the sum of these funding sources up to the mid-point of the last US fiscal year (31 March 2021). Over that time total Treasury debt more than doubled to nearly $30 trillion. The funding of further debt expansion from these levels is likely to be a significant challenge. Initially, the Fed can release funds by reducing the level of overnight RRPs, some of which will become absorbed directly, or indirectly, in Treasury funding. But after that financing will become more problematic. Since 2011, the Fed’s holdings of US Treasury debt have increased from 11% to 19% of the growing total, reflecting QE particularly since March 2020. At the same time the proportion of total Treasury debt owned by foreign investors has fallen from 32% to 24% today, and now that they are highly exposed to dollars, they could be reluctant to increase their share again, despite continuing trade deficits. Private sector investors, whose share of the total at 57% is virtually unchanged from ten years ago, can only expand their ownership by increasing their savings and through the expansion of bank credit. But with bank balance sheets lacking room for further credit expansion and consumers inclined to spend rather than save, it is difficult to envisage this ratio increasing sufficiently as well. Clearly, the Fed has been instrumental in filling the funding gap. But the Fed has now said it intends to taper its bond purchases. Unless foreign investors step in, the Fed will be unable to taper. Excess liquidity currently reflected in outstanding RRPs can be expected to be mostly absorbed by expanding T-bill and short-maturity T-bond funding, which might buy three- or four-months’ funding time and not permit much longer-term bond issuance. But after that, the Fed may be unable to taper QE. Foreign funding problems While we cannot be privy to the bimonthly meetings of central bankers at the Bank for International Settlements and at other forums, we can be certain that there is a higher level of monetary policy cooperation between the major central banks than is generally admitted publicly. On matters such as interest rate policy it is important that there is a degree of cooperation, otherwise there could be instability on the foreign exchanges. And to support the dollar’s debasement, policy agreements between important foreign central banks may need to be considered. This is because the dollar’s role as the reserve currency gives the US Government and its banks not just an advantage of seigniorage over the American people, but over foreign holders of dollars as well. Dollar M1 money supply is currently $19.7 trillion, approximately 50% of global M1 money stock.[i] Therefore, its seigniorage and the world-wide Cantillon effect from increasing public circulation is of great advantage to the US Government, not only over its own people but in transferring wealth from foreign nations as well. This is particularly to the disadvantage of any other national government which, following sounder monetary policies, does not expand its own currency stock at a similar rate while being forced to use dollars for international transactions. Ensuring currency debasement globally is therefore a compelling reason behind monetary cooperation between governments. By agreeing on permanent currency swap lines with five major central banks (the ECB, the Bank of Japan, the Bank of England, the Bank of Canada, and the Swiss National Bank) they are drawn into supporting a global inflationary arrangement which ensures the stock of dollars can be expanded without consequences on the foreign exchanges. Ahead of its massive monetary expansion on 19 March 2020, to keep other central banks onside temporary swap arrangements were extended to nine other central banks, ensuring their compliance as well.[ii] But notable by their absence were the central banks whose governments are members and associates of the Shanghai Cooperation Organisation, which will have found that their dollar holdings and financial assets (mainly US Treasuries) have been devalued without consultation or recompense. It is therefore not surprising that foreign governments other than those with permanent swap lines are increasingly reluctant to add to their holdings of dollars and US Treasuries. By selectively excluding major nations such as China from swap line arrangements, by default the Fed is pursuing a political agenda with respect to its currency. International acceptability of the dollar is being undermined thereby when the US Treasury is becoming increasingly desperate for inward capital flows to fund its budget deficits. Even including allied governments, all foreigners are now reducing their exposure to US dollar bank deposits, by 12.9% between 1 January 2020 and end-July 2021, and to US T-Bills and certificates by 20.7% over the same period. The only reason for holding onto longer-term assets is in expectation of speculative gains. The situation for longer-term Treasury bonds is not encouraging. The US Treasury’s “major foreign holders” list of holders of longer-maturity Treasury securities, shows the list to be dominated by Japan and China, between them owning 31.5% of all foreign owned Treasuries. Japan’s cooperative relationship with the Fed was confirmed by Japan increasing her holdings of US Treasuries, but only by 1.3% in the year to July 2021, while China and Hong Kong, which between them hold a similar amount to Japan, reduced theirs by 3%.[iii] The ability of the US Treasury to find foreign buyers other than for relatively smaller amounts from offshore financial centres and oil producing nations therefore appears to be potentially limited. We should also note that total financial assets and dollar cash held by foreigners already amounts to $32.78 trillion, roughly one and a half times US GDP — dangerously high by any measure. This total and its breakdown is shown in Table 1. If foreign residents are to increase their holdings in US Treasuries, it is most easily achieved by foreign central banks on the permanent swap line list drawing them down and further subscribing to invest in T-Bills and similar short-term securities. As well as being obviously inflationary, that recourse has practical limitations without reciprocal action by the Fed. But a far greater danger to Federal government funding comes from dollar liquidation of existing debt and equity holdings, especially if interest rates begin to rise, bearing in mind that for any foreign holder of dollars without a strategic reason for holding a foreign currency, all such exposure, even holding dollars and dollar-denominated assets, is speculative in nature. The question then arises as to what foreigners will buy when they sell their dollars. Governments without a strategic imperative may prefer at the margin to adjust their foreign reserves in favour of the other major currencies and gold. But out of the total liabilities shown in Table 1 official institutions only hold $4.284 trillion long- and short-term Treasuries, which includes China and Hong Kong’s holdings, out of the $7.2 trillion total shown in Figure 2 earlier in this article. The $3 trillion balance is owned by private sector foreign investors. Excluding China and Hong Kong’s $1.3 trillion, US Treasury debt held by foreign governments is under 10% of all foreign holdings of dollar securities and cash. What is held by foreign private sector actors therefore matters considerably more, bearing in mind that it can all be classified as speculative, being a foreign currency imparting accounting risk to balance sheets and investment portfolios. If interest rates rise because of price inflation not proving to be transient, it will lead to significant investment losses and therefore selling of the dollar, triggering a widespread repatriation of global funds. A global increase in bond yields and falling equity values will also force sales of foreign securities by US investors. But with US investors being less exposed to foreign currencies in correspondent banks and with a significantly lower level of foreign investment exposure, the net capital flows would be to the disadvantage of the dollar. Some of the proceeds from dollar liquidation by foreigners are likely to lead to commodity stockpiling and at the margin some of it will hedge into precious metals, driving their prices higher. The long-term suppression of precious metal prices would to come to an end. Domestic problems for the Fed Clearly, the resumption of government deficit funding will no longer be supported by foreign purchases of US Treasuries at a time when trade deficits remain stubbornly high. This throws the funding emphasis onto the Fed and domestic purchasers of government debt. But as stated above, the private sector will need to reduce its consumption to increase its savings. Alternatively, banks which have limited capacity to do so will have to expand credit to purchase Treasury bonds, which is not only inflationary, but diverts credit expansion from the private sector. Consumers are charging in the opposite direction from increasing savings, drawing them down in favour of increased consumption. This is partly due to them returning to their pre-covid relationship between consumption and savings, and partly due to a shift against cash liquidity in favour of goods increasingly driven by expectations of higher prices. With their fingers firmly crossed, the latter is believed by central bankers and politicians to be a temporary phenomenon, the consequence of imbalances in the economy due to logistics failures. But the longer it persists, the more this view will turn out to be wishful thinking. Increasing prices for energy and essential goods, which are notoriously under-recorded in the broader CPI statistics, are emerging as the major concern. So far, few observers appear to accept that they are the inevitable consequence of earlier currency debasement. There is a growing risk that when consumers realise that rising prices are not just a short-term and temporary phenomenon, they will increasingly buy the goods they may need in the future instead of buying them when they are needed. This alters the relation between cash liquidity-to-hand and goods, increasing the prices of goods measured in the declining currency. And so long as consumers expect prices to continue to rise, it is a process that is bound to accelerate until it is widely understood by the currency’s users that in exchange for goods, they must dispose of it entirely. If that point is reached, the currency will have failed completely. It is this process that undermines the credibility of a fiat currency. Before it develops into a total rout, it can only be countered by an increase in interest rates sufficient to stop it, as well as by strictly limiting growth in the stock of currency. And even then, some form of convertibility into gold may be required to restore public trust. This, the only cure for fiat currency instability, is too radical for the establishment to contemplate, and is a crisis that increases until it is properly addressed. The rise in interest rates exposes all the malinvestments that have grown and persisted while interest rates were suppressed from the 1980s onwards, finally ending at the zero bound. The shock of widespread business failures due to rising interest rates will impact early in the currency’s decline when it becomes obvious that initial increases in interest rates will be followed by yet more. Importantly, the supply of essential goods is then further compromised by business failures instead of being alleviated by improving logistics. And consumer demand shifts even more in favour of the essentials in life and away from luxury and inessential spending. The poor are especially disadvantaged thereby and the middle classes begin to struggle. The private sector’s growing economic woes further undermine government finances. Unemployment increases and tax revenues collapse, adding to the budget deficit and therefore to the government’s funding requirements. Mandatory costs increase more than budgeted. Interest charges, currently about $400bn, add yet more to the deficit. Today, in all the major currencies control over interest rates by central banks is being challenged. Like the Fed, other major central banks are also insisting that rising prices are temporary, while markets are beginning to suspect the reality is otherwise. All empirical evidence and theories of money and credit scream at us that statist control over interest rates is being eroded and lost to market-driven outcomes. The consequences for markets and government funding costs There is growing evidence that accelerating monetary expansion in recent years is feeding into a purchasing power crisis for major currencies. Covid and logistics disruptions, coupled with lack of inventories due to the widespread practice of just-in-time manufacturing processes have undoubtedly made the situation considerably worse. But in the history of accelerating inflations, there have always been unexpected economic developments. Shifting consumer priorities expose hitherto unforeseen weaknesses, so it would be a mistake to disassociate these problems from currency debasements. It is leading to a situation which confuses statist economists, who tend to think one-dimensionally about the relationships between prices and economic prospects. For them, rising prices are only a symptom of increasing demand. And so long as expansion of demand remains under control and is consistent with full employment, it is their policy objective. They do not appear to understand rising prices in a failing economy. But classical economics and on the ground conditions militate otherwise. Inflation is monetary in origin, and it is the destruction of the currency’s purchasing power that is evidenced in rising prices. And when the public sees prices of needed goods rising at an increased pace, they begin to rid themselves of the currency. And far from stimulating production and consumption, high rates of monetary inflation act as an economic burden. Monetary policy now faces the dual challenge of rising prices and rising interest rates as the economy slumps. When central banks would expect to reduce interest rates, they will now be forced to increase them. When deficit spending is deployed to stimulate the economy, it must now be curtailed. Just when they matter most, bond yields will rise along their yield curves from the short end, and equity market values will be undermined by changing yield relationships. Falling financial asset values become a consequence of earlier monetary inflation undermining a currency’s purchasing power. The Fed, the Bank of England, the Bank of Japan, and the ECB have all acted together to accommodate government budget deficits, to be funded as cheaply as possible by suppressing interest rates. That they have acted together has so far concealed the consequences from bond markets, whose participants only compare one government bond market with another instead of valuing bond risks on their own merits. And through regulation, banks have been made to view investment in government bonds as being risk-free for counterparty purposes. All this is about to change with the turn in the interest rate trend. Monetary policy will have two basic options to weigh; between supporting the currency’s purchasing power by increasing interest rates, or to support financial markets by suppressing them. If the latter is deemed more important than the currency, it will most likely require more quantitative easing by the Fed, not less. Expressed another way, either central banks will pursue the current policy of maintaining domestic confidence and the wealth effect of elevated financial asset values and let the currency go hang. Alternatively, they can aim to support their currencies, and be prepared to preside over a collapse in financial asset values and accept the knock-on consequences. It is a dirty choice, with either policy option likely to fail in its objective. The end of the neo-Keynesian statist road, which started out lauding the merits of deficit spending is in sight. Mathematical economics and the state theory of money are about to be shown for what they are — intellectualised wishful thinking. As the most distributed currency, the dollar is likely to lead the way for all the others, slavishly followed by the Bank of England, the Bank of Japan, and the ECB. And all their high-spending governments, addicted to debt, will face unexpected funding difficulties. Tyler Durden Mon, 10/11/2021 - 17:40.....»»

Category: personnelSource: nytOct 11th, 2021

Well Done Greta: Energy Crisis To Send Carbon Emissions To All Time Highs

Well Done Greta: Energy Crisis To Send Carbon Emissions To All Time Highs “I’m not in the transitory-inflation crowd. The private sector is allocating all the money to the fast-growing software, eating-the-world companies. It’s not allocating money to companies that actually make things and provide other kinds of services that people find less exciting, meaning there are shortages of these things now.” These comments from Greenlight Capital’s founder David Einhorn in a recent RealVision interview, while addressing the broader "transitory vs permanent" inflation debate, are especially apt in describing the transformation taking place in the energy sector where the recent ESG mania has deprived legacy fossil-fuel companies of much needed capital (not just growth capex but also maintenance) which has instead flown to "virtue-signaling" green projects. We discussed this dynamic back in June when we rhetorically asked "Will ESG Trigger Energy Hyperinflation" and explained that  "ESG is a negative supply shock that internalizes the climate cost of the production of goods and services. This negative supply shock will be inflationary until technological progress absorbs these costs. That could take years." And, as Deutsche Bank's credit analyst Jim Reid added, "pricing climate-change externalities more generally could make things more expensive over time. Are we on the verge of another change in inflation expectations due to oil and energy, one that is in large part due to ESG." Well, for those living in Europe, the answer has been a resounding yes - with 10Y breakevens surging higher - and it took just a few months to get there as the chart below shows; and since we still have a potentially very cold winter ahead of us, absent a flood of Russian gas (via the NS2 of course) it's about to get much worse. But the biggest irony is that in seeking to deprive fossil fuels of much needed growth capital to shrink fossil fuel output, the virtue-signaling assault by the green lobby spearheaded by hapless puppet Greta Thunberg, has achieved just the opposite. As Bloomberg writes, the ongoing global energy crisis, the coming winter weather and the release of pent-up pandemic demand have sent nations scrambling to stockpile fossil fuels, a move that portends a surge in global carbon dioxide emissions this year which is set to make new all time highs! The trajectory poses a new threat to the feel-good Paris Agreement goal of limiting global temperature increases to 1.5° Celsius as China, India and other developing economies are driving the demand for coal, but even the U.S. is poised to increase its consumption of the dirtiest fossil fuel in almost a decade, according to a forecast from the International Energy Agency. Here is Bloomberg's Javier Blas with more: Across the world, fossil fuels are making a remarkable comeback as a super-charged recovery from the pandemic boosts demand. For all the green energy promises and plans, that transition is in its infancy, and the world still leans heavily on fossils. It’s an addiction built up over two and a half centuries, and it runs deep. In Europe, where electric vehicles are becoming ever more popular, gasoline sales are booming, reaching a 10-year high in some countries. In the developing world, from Brazil to China, natural gas consumption is stronger than ever. The global hunger for energy has collided with constrained supply, itself the result of a tangle of factors, sending power prices surging in many countries. Adding it all up, fossil fuel demand is already flirting with pre-pandemic levels, which means emissions are on the rise too. On current trends, the combined consumption of coal, natural gas and oil is likely to hit an all-time high by mid-2022. “This is the revenge of the fossil fuels,” said Thierry Bros, an energy expert and professor at Sciences Po in Paris. Some history: global CO2 emissions peaked just prior to the onset of the Covid-19 pandemic, but then in 2020 registered the biggest annual decrease since at least 1965, according to BP Plc. However, since every action leads to a much more expensive reaction, releases of the greenhouse gas this year through August are already just 1% less compared with the same period in 2019, according to Carbon Monitor, an emissions monitoring group. And they are about to soar. Needless to say, this is a huge embarrassment for the green lobby, which to this day is simply using ESG as a smokescreen to demand trillions in taxpayer-funded government spending, of which a substantial portion quietly goes into the bank accounts of a select handful of the most vocal virtue-signalers, never to be seen again. As Bloomberg notes, the forecast for record emissions is a poor backdrop to the COP26 climate talks that will take place in Glasgow, Scotland in November. Hilarious, the United Nations is urging countries to submit more ambitious emissions plans by the time the discussions get underway, and officials from almost 200 nations are expected to gather for the fortnight of negotiations. Instead, many countries will be fighting populist anger and protests about energy hyperinflation. Some, like China, are already seeing a sharp hit to their economy as a result of widespread blackouts which have crippled industrial production. And so, we have gotten to the point where not only are emissions not dropping but the question of just how big the spike will be, will depend on how cold it gets: "Whether emissions reach new highs will probably depend on the weather", said Steven J. Davis, a professor at University of California, Irvine, and co-lead at Carbon Monitor. “Fossil fuels used to heat buildings could make up that 1% quickly if it’s cold.” Now if only someone had predicted this all too obvious outcome ahead of the push to defund the legacy fossil fuel infrastructure decades before alternative energy sources were ready to become the new energy leaders. The energy crisis has been concentrated in the power generation sector. Shortages of natural gas and electricity have been especially acute in China and the U.K. Emissions from electricity producers were already up 2.2% globally between January and August versus the same period in 2019, driven by increases in China, India and Brazil, Carbon Monitor data shows. To be sure, not everyone is set for new CO2 output records: emissions in the European Union and the U.K. during the first eight months of this year are down 4.7% compared with the same period in 2019, according to the group, which bases their estimates off on power generation, industrial activity, ground transport, domestic and international aviation and residential demand. In the U.S., they’re down 3.5%. Of course, the reason for that is that both the EU and UK are currently facing unprecedented supply bottlenecks which are preventing them from burning more fossil fuels. And considering that the trade off is energy hyperinflation, we are confident the local residents would be delighted at the trade off of much higher emissions if it means prices drop to historical levels. Incidentally, that's exactly what will happen once Putin finally starts sending nat gas to Europe via Nord Stream 2. What is striking is how long it took for the experts to realize what was patently obvious to most long ago: “I’m concerned hydrocarbon demand is not falling fast enough to match the potential under investment in fossil fuels,” said Jason Bordoff, dean of the Columbia Climate School and a former senior energy official in the Obama administration. Coal is paradigmatic. For nearly a decade, it appeared in terminal decline as investors shunned miners and European countries shut down coal-fired power plants. And yet, the world’s dirtiest fossil fuel won’t go away. Global consumption peaked in 2014, but rather than fall rapidly, as many expected, it stabilized in a gentle plateau. And now, just as the fight against climate change intensifies, it’s growing again, with the resurgence largely driven by China. Oil is another case where hopes of an early peak in demand are quickly fading. In 2020, Bernard Looney, the head of British oil giant BP Plc, said it was possible that Covid marked the moment of peak oil. That view has since shifted, with BP predicting in August that demand will reach pre-Covid levels in the second half of 2022. All of this means carbon dioxide emissions are rising too. The IEA estimates that they’ll post their second largest annual increase ever this year, reversing most of the decline during the lockdowns of 2020. On current trends, emissions will hit a fresh record in 2022 despite all government pledges bring them down, and quickly. Hilariously, none other than the de facto leader of the ESG movement, Bloomberg whose billionaire founder has emerged as the patron saint of climate change propaganda as he criss-crosses the world in his private jet, concedes that maybe it had it all wrong and writes that "another factor that could spur emissions growth is new skepticism over renewables in the face of the energy crisis. Disruptions the past few weeks have sparked debate about the impact of the world’s transition to cleaner power. While some see evidence of the intermittency of wind and solar power, others see equivalent if not greater vulnerability from extreme price swings and volatility triggered by disruptions in fossil fuel supply chains and dependency on petrostates like Russia." "My worry is there is a growing incorrect perception that the current energy crisis is caused because of renewables, or policies favoring renewables," said BloombergNEF analyst Ali Izadi-Najafabadi. The problem is that that perception is not incorrect - it is precisely the rabid push for "green" that is behind the energy crisis and price explosion, as we warned back in June. Remarkably, and showing how out of touch with reality the Green crusaders truly are, Bloomberg's analyst then said that “the rational response to higher fossil fuel commodity prices as well as higher emissions would be to accelerate the shift to renewables.” Actually no, that ridiculous statement encapsulates precisely the wrong response and all that is wrong with "green thinking" where the solution to a crisis is to make the crisis even bigger. In fact, that argument only makes sense in a world of infinite government spending that can be used to plug household funding holes such as those that have emerged now that we have energy hyperinflation. What should happen is that fossil fuels should receive appropriate capital for the next 3-4 decades until such time as alternative energy is competitive enough and widespread enough to be able to replace fossil fuels in their entirety. That won't happen until the 2040s. As such any push to outsource all fossil fuels today with a green sector that is unable to pick up the baseload energy generation will lead to catastrophe. Incidentally, none other than iconic Enron energy trader John Arnold put it best: "In the US, a (growing) majority of voters support efforts to address climate change. A majority also express reluctance to pay for these policies. If voters believe climate policy is causing a spike in energy prices, support for those actions will fall." In the US, a (growing) majority of voters support efforts to address climate change. A majority also express reluctance to pay for these policies. If voters believe climate policy is causing a spike in energy prices, support for those actions will fall. 4/ — John Arnold (@JohnArnoldFndtn) September 24, 2021 And unlike the Bloomberg crusaders, Arnold's conclusion is spot on: Like it or not, oil and gas will be widely used by Americans, and the world, this decade. The transition to clean energy will be eased if it's smooth: oil and gas prices stay at reasonable levels. Attempts to kill the industry are counterproductive to the broader effort. As for what happens next, the covid divide that split the world in two for the past year yet which is now fading away along with the pandemic, may soon shift to climate change as the most polarizing topic in the world: As political leaders prepare for COP26, the energy price spike has polarized views about the green transition, already an enormous challenge that involves rewiring the whole global economy. Climate change deniers and fossil fuel industry lobbyist have seized on it to campaign against green energy. On the other side, some climate activists say it shows the need to go even faster. “Inevitably, it wasn’t going to be a transition without tension,” said Morgan Bazilian, an energy expert and professor of public policy at the Colorado School of Mines. “The balancing act politically is becoming a lot harder.” And so we wait for the inevitable political turmoil that will follow as years of "green dream" waves crash into the rocks of a brutally hard - and very expensive - reality. Meanwhile for all those virtue-signalers listening and complying with Greta's endless platitudes (which bizarrely continue to omit China as the primary source of emissions), we hope you enjoy your next energy bill. Tyler Durden Sun, 10/10/2021 - 18:00.....»»

Category: personnelSource: nytOct 10th, 2021

What Governments Got Wrong About The Global Energy Transition

What Governments Got Wrong About The Global Energy Transition By Tsvetana Paraskova of OilPrice.com The energy crisis in Europe exposed the complexity of a transition to green energy: it is not happening overnight, and it cannot be done successfully with the old tricks. Energy systems, markets, and grids globally need fundamental changes to legislation, regulation, and oversight in order to accommodate 100-percent zero-emission sources. And even in that case, power systems need flexibility and backups in order to avert similar crises down the road as many parts of the world commit to net-zero emissions by 2050 or 2060. The current crisis in the UK is a cautionary tale about how not to rush to green energy, Rochelle Toplensky of The Wall Street Journal notes. Net-zero electricity systems need an entirely new set of rules in all areas of the energy systems and power markets, as well as enough flexibility to offset environmental factors such as low wind speeds, which happened in the UK last month. The UK has cut its reliance on coal dramatically over the past decade. But its power systems are not yet as resilient to a major transition to low-carbon energy sources as to prevent concerns about its power supply, the Journal’s Toplensky argues. The current energy crisis in the UK, the rest of Europe, and in major energy importers in Asia is a warning to policymakers that the transition cannot be rushed before new rules are set in place and backup battery storage is built en masse to support soaring new solar and wind capacity. Boosting power grid resilience, building battery storage, and widespread use of the much-touted green hydrogen will require trillions of U.S. dollars of investment, government support, and much greater coordination and cooperation among industry and policymakers at the national and international level. Everyone knew that the energy transition would not be cheap. The ongoing energy crisis shows that no one can put the cart before the horse in the transition - backups and flexibility are vital for any successful energy system. UK Power Crisis Shows Challenges To Green Transition  Even the UK, which has pledged to phase out coal-fired power generation by October 2024, had to fire up an old coal plant last month in order to meet its electricity demand.  The country which kick-started the Industrial Revolution with coal saw the share of the fuel drop to a record-low in 2020 - coal generated just 1.8 percent of electricity, down from 28.2 percent in 2010, as per government data. Renewable generation, on the other hand, hit a record 43.1 percent in 2020, outpacing annual fossil fuel generation for the first time. During many days in recent years, wind power generated the largest share of Britain’s electricity, surpassing natural gas. This is a commendable move toward clean energy but does not change the fact that wind power generation depends on…the speed of the wind. On those unfortunate days when the wind doesn’t blow, as it happened on most days in September, natural gas is used more in power generation, driving up gas and power prices and also increasing coal generation because of the sky-high prices of natural gas. Although households face higher energy bills, they are protected to some extent because of the so-called Energy Price Cap in the UK. But it is this price cap - when power providers are unable to pass the full extent of surging costs onto consumers - that has already led to nine UK providers going out of business. Just last week, three suppliers said they were ceasing trade, and the Office of Gas and Electricity Markets, Ofgem, had to choose new suppliers to take over the failed businesses. The UK likely needs new regulations on how its domestic power market operates, which should take into account the net-zero commitment and increased green energy share in electricity generation, analysts say. The European Union is also looking at potential changes to the way wholesale electricity markets operate, European Energy Commissioner, Kadri Simson, said this week. Demonization Of Fossil Fuels Cuts Backup Options  The two oil price crashes in the past five years, as well as the increasingly louder calls for shunning investment in fossil fuels, have led to chronic underinvestment in new supplies of oil, gas, and coal, especially in developed economies aspiring to reach net-zero by 2050. These days, however, those developed economies are scrambling for fossil fuel supplies to ensure they will keep the lights on. The surging price of coal and natural gas is leaving many energy-intensive businesses in Europe vulnerable to the price shock because the energy transition hasn’t reached the point where anything other than gas can efficiently power fertilizer or steel production. However, investment from the fossil fuel industry has declined in recent years. Moreover, Wall Street investors have been shunning traditional energy because of poor returns, Jeff Currie, global head of commodities research at Goldman Sachs, told Bloomberg in an interview earlier this week.  “The new economy is over-invested and the old economy is starved,” he said. “Gas, coal, oil, metals, mining – you pick – the old economy, it is severely underinvested,” Currie noted. Major Challenges Ahead To Avoid “A Disorderly Mess” Since the world continues to need a lot of fossil fuels despite the green push, supply shortages and price spikes are in the cards in the future, too. “[I]t is important to recognise that the transition is, as its derivation suggests, a process of moving from one state to another, and if it is to be successful must involve the managed decline of the existing energy system as well as its transformation towards a future state,” James Henderson and Anupama Sen of the Oxford Institute for Energy Studies (OIES) wrote in a paper last month.  “Policymakers have set countries on this essential road, and technology is the key to accelerating the process, but many complex questions remain to be resolved if the world is to avoid the transition becoming a disorderly mess,” they say. Tyler Durden Fri, 10/08/2021 - 02:00.....»»

Category: smallbizSource: nytOct 8th, 2021

Futures Surge On Debt Ceiling Reprieve, Slide In Energy Prices

Futures Surge On Debt Ceiling Reprieve, Slide In Energy Prices The nausea-inducing rollercoaster in the stock market continued on Thursday, when US index futures continued their violent Wednesday reversal - the biggest since March - and surged with Nasdaq futures up more than 1%, hitting a session high, as Chinese technology stocks rebounded from a record low, investors embraced progress on the debt-ceiling impasse in Washington, a dip in oil prices eased worries of higher inflation and concerns eased about the European energy crisis fueled a risk-on mood. At 7:30am ET, S&P futures were up 44 points or 1.00% and Dow futures were up 267 points or 0.78%. Oil tumbled as much as $2, dragging breakevens and nominal yields lower, while the dollar dipped and bitcoin traded around $54,000. Wednesday's reversal started after Mitch McConnell on Wednesday floated a plan to support an extension of the federal debt ceiling into December, potentially heading off a historic default, a proposal which Democrats have reportedly agreed to after Senate Majority Leader Chuck Schumer suggested an agreement would be in place by this morning. While the deal is good news for markets worried about an imminent default, it only kicks the can to December when the drama and brinksmanship may run again. Markets have been rocked in the past month by worries about the global energy crisis, elevated inflation, reduced stimulus and slower growth. Meanwhile, the prospect of a deal to boost the U.S. debt limit into December is easing concern over political bickering, while Friday’s payrolls report may shed light on the the Federal Reserve’s timeline to cut bond purchases. “We have several things that we are watching right now -- certainly the debt ceiling is one of them and that’s been contributing to the recent volatility,” Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute, said on Bloomberg Television. “But we look for these 5% corrections to add money to the equity markets.” Tech and FAAMG stocks including Apple (AAPL US +1%), Nvidia (NVDA +2%), Microsoft (MSFT US +0.9%), Tesla (TSLA US 0.8%) led the charge in premarket trading amid a dip in 10-year Treasury yields on Thursday, helped by a slide in energy prices on the back of Putin's Wednesday announcement that Russia could ramp up nat gas deliveries to Europe, something it still has clearly not done. Perhaps sensing that not all is at Putin said, after plunging on Wednesday UK nat gas futures (NBP) from 407p/therm to a low of 209, prices have ominously started to rise again. As oil fell, energy stocks including Chevron, Exxon Mobil and APA led declines with falls between 0.6% and 2.1%. Here are some of the other big movers today: Twitter (TWTR US) shares rise 2% in U.S. premarket trading after it agreed to sell MoPub to AppLovin for $1.05 billion in cash Levi Strauss (LEVI US) rises 4% in U.S. premarket trading after it boosted its adjusted earnings per share forecast for the full year; the guidance beat the average analyst estimate NRX Pharmaceuticals (NRXP US) drops in U.S. premarket trading after Relief Therapeutics sued the company, alleging breach of a collaboration pact Osmotica Pharmaceuticals (OSMT US) declined 28% in premarket trading after launching an offering of shares Rocket Lab USA (RKLB US) shares rose in Wednesday postmarket trading after the company announced it has been selected to launch NASA’s Advanced Composite Solar Sail System, or ACS3, on the Electron launch vehicle U.S. Silica Holdings (SLCA US) rose 7% Wednesday postmarket after it started a review of strategic alternatives for its Industrial & Specialty Products segment, including a potential sale or separation Global Blood Therapeutics (GBT US) climbed 2.6% in Wednesday after hours trading while Sage Therapeutics (SAGE US) dropped 3.9% after Jefferies analyst Akash Tewari kicked off his biotech sector coverage On the geopolitical front, a senior U.S. official said President Joe Biden’s plans to meet virtually with his Chinese counterpart before the end of the year. Tensions are escalating between the two countries, with U.S. Secretary of State Antony Blinken criticizing China’s recent military maneuvers around Taiwan. European equities rebounded, with the Stoxx 600 index surging as much as 1.3% boosted by news that the European Central Bank was said to be studying a new bond-buying program as emergency programs are phased out. Also boosting sentiment on Thursday, ECB Governing Council member Yannis Stournaras said that investors shouldn’t expect premature interest-rate increases from the central bank. Here are some of the biggest European movers today: Iberdrola shares rise as much as 6.8% after an upgrade at BofA, and as Spanish utilities climbed following a report that the Ministry for Ecological Transition may suspend or modify the mechanism that reduces the income received by hydroelectric, nuclear and some renewables in relation to gas prices. Hermes shares climb as much as 3.8%, the most since February, after HSBC says “there isn’t much to worry about” from a possible slowdown in mainland China or questions over trend sustainability in the U.S. Edenred shares gain as much as 5.2%, their best day since Nov. 9, after HSBC upgrades the voucher company to buy from hold, saying that Edenred, along with Experian, offers faster recurring revenue growth than the rest of the business services sector. Valeo shares gain as much as 4.9% and is Thursday’s best performer in the Stoxx 600 Automobiles & Parts index; Citi raised to neutral from sell as broker updated its model ahead of 3Q results. Sika shares rise as much as 4.2% after company confirms 2021 guidance, which Baader said was helpful amid market concerns of sequentially declining margins due to rising raw material prices. Centrica shares rise as much as 3.6% as Morgan Stanley upgrades Centrica to overweight from equalweight, saying the utility provider will add market share as smaller U.K. companies fail due to the spike in wholesale energy prices. Earlier in the session, Asian stocks rallied, boosted by a rebound in Hong Kong-listed technology shares and optimism over the progress made toward a U.S. debt-ceiling accord. The MSCI Asia Pacific Index climbed as much as 1.3%, on track for its biggest jump since Aug. 24. Alibaba, Tencent and Meituan were among the biggest contributors to the benchmark’s advance. Equity gauges in Hong Kong and Taiwan led a broad regional gain, while Japan’s Nikkei 225 also rebounded from its longest losing run since 2009. Thursday’s rally in Asia came after U.S. stocks closed higher overnight on a possible deal to boost the debt ceiling into December. Focus now shifts to the reopening of mainland China markets on Friday following the Golden Week holiday, and also the U.S. nonfarm payrolls report due that day. READ: China Tech Gauge Posts Best Day Since August After Touching Lows “Risk off sentiment has persisted due to a number of negative factors, but worry over some of these issues has been alleviated for the near term,” said Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “One is that concern over stagflation has abated, with oil prices pulling back.” Sentiment toward risks assets was also supported as a senior U.S. official said President Joe Biden plans to meet virtually with Chinese President Xi Jinping before the end of the year. Of note, holders of Evergrande-guaranteed Jumbo Fortune bonds have yet to receive payment; the holders next step would be to request payment from Evergrande. The maturity of the bond in question was Sunday October 3rd, with a Monday October 4th effective due data, though the bond does have a five-day grace period only in the event that payment failure is due to an administrative/technical error. Australia's S&P/ASX 200 index rose 0.7% to close at 7,256.70. All subgauges finished the day higher, with the exception of energy stocks as Asian peers tumbled with a retreat in crude oil prices.  Collins Foods was among the top performers after the company signed an agreement to become KFC’s corporate franchisee in the Netherlands. Whitehaven tumbled, dropping the most for a session since June 17.  In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,104.61. Oil extended its decline from a seven-year high as U.S. stockpiles grew more than expected, and European natural gas prices tumbled on signals from Russia it may increase supplies to the continent. The yield on the U.S. 10-year Treasury was 1.526%, little changed on the day after erasing a 2.4bp increase; bunds outperformed by ~1.5bp, gilts by less than 1bp; long-end outperformance flattened 2s10s, 5s30s by ~0.5bp each. Treasuries pared losses during European morning as fuel prices ebbed and stocks gained. Bunds and gilts outperform while Treasuries curve flattens with long-end yields slightly richer on the day. WTI oil futures are lower after Russia’s offer to ease Europe’s energy crunch. Negotiations on a short-term increase to U.S. debt-ceiling continue.    In FX, the Bloomberg Dollar Spot Index was little changed and the greenback was weaker against most Group-of-10 peers, though moves were confined to relatively tight ranges. The U.S. jobs report Friday is the key risk for markets this week as a strong print could boost the dollar. Options traders see a strong chance that the euro manages to stay above a key technical support, at least on a closing basis. Risk sensitive currencies such as the Australian and New Zealand dollars as well as Sweden’s krona led G-10 gains, while Norway’s currency was the worst performer as European natural gas and power prices tumbled early Thursday after signals from Russia it may increase supplies to the continent. The pound gained against a broadly weaker dollar as concerns over the U.K. petrol crisis eased and focus turned to Bank of England policy. A warning shot buried deep in the BoE’s policy documents two weeks ago indicating that interest rates could rise as early as this year suddenly is becoming a more distinct possibility. Australia’s 10-year bonds rose for the first time in two weeks as sentiment was bolstered by a short-term deal involving the U.S. debt ceiling. The yen steadied amid a recovery in risk sentiment as stocks edged higher. Bond futures rose as a debt auction encouraged players to cautiously buy the dip. Looking ahead, investors will be looked forward to the release of weekly jobless claims data, likely showing 348,000 Americans filed claims for state unemployment benefits last week compared with 362,000 in the prior week. The ADP National Employment Report on Wednesday showed private payrolls increased by 568,000 jobs last month. Economists polled by Reuters had forecast a rise of 428,000 jobs. This comes ahead of the more comprehensive non-farm payrolls data due on Friday. It is expected to cement the case for the Fed’s slowing of asset purchases. We'll also get the latest August consumer credit print. From central banks, we’ll be getting the minutes from the ECB’s September meeting, and also hear from a range of speakers including the ECB’s President Lagarde, Lane, Elderson, Holzmann, Schnabel, Knot and Villeroy, along with the Fed’s Mester, BoC Governor Macklem and PBoC Governor Yi Gang. Market Snapshot S&P 500 futures up 1% to 4,395.5 STOXX Europe 600 up 1.03% to 455.96 MXAP up 1.2% to 193.71 MXAPJ up 1.8% to 633.78 Nikkei up 0.5% to 27,678.21 Topix down 0.1% to 1,939.62 Hang Seng Index up 3.1% to 24,701.73 Shanghai Composite up 0.9% to 3,568.17 Sensex up 1.2% to 59,872.01 Australia S&P/ASX 200 up 0.7% to 7,256.66 Kospi up 1.8% to 2,959.46 Brent Futures down 1.8% to $79.64/bbl Gold spot up 0.0% to $1,762.96 U.S. Dollar Index little changed at 94.19 German 10Y yield fell 0.6 bps to -0.188% Euro little changed at $1.1563 Top Overnight News from Bloomberg Democrats signaled they would take up Senate Republican leader Mitch McConnell’s offer to raise the U.S. debt ceiling into December, alleviating the immediate risk of a default but raising the prospect of another bruising political fight near the end of the year The European Central Bank is studying a new bond-buying program to prevent any market turmoil when emergency purchases get phased out next year, according to officials familiar with the matter Market expectations for interest-rate hikes “are not in accordance with our new forward guidance,” ECB Governing Council member Yannis Stournaras said in an interview with Bloomberg Television Creditors have yet to receive repayment of a dollar bond they say is guaranteed by China Evergrande Group and one of its units, in what could be the firm’s first major miss on maturing notes since regulators urged the developer to avoid a near-term default Boris Johnson’s plan to overhaul the U.K. economy is a 10-year project he wants to see out as prime minister, according to a senior official. The time frame, which has not been disclosed publicly, illustrates the scale of Johnson’s gamble that British voters will accept a long period of what he regards as shock therapy to redefine Britain The U.K.’s surge in inflation has boosted the cost of investment-grade borrowing in sterling to the most since June 2020. The average yield on the corporate notes climbed just past 2%, according to a Bloomberg index A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded positively as the region took impetus from the mostly positive close in the US where the major indices spent the prior session clawing back opening losses, with sentiment supported amid a potential Biden-Xi virtual meeting this year, and hopes of a compromise on the debt ceiling after Senate Republican Leader McConnell offered a short-term debt limit extension to December. The ASX 200 (+0.7%) was led higher by strength in the tech sector and with risk appetite also helped by the announcement to begin easing restrictions in New South Wales from next Monday. The Nikkei 225 (+0.5%) attempted to reclaim the 28k level with advances spearheaded by tech and amid reports Tokyo is to lower its virus warning from the current top level. The Hang Seng (+3.1%) was the biggest gainer owing to strength in tech and property stocks, with Evergrande shareholder Chinese Estates surging in Hong Kong after a proposal from Solar Bright to take it private. Reports also noted that the US and China reportedly reached an agreement in principle for a Biden-Xi virtual meeting before year-end and with yesterday’s talks in Zurich between senior officials said to be more meaningful and constructive than other recent exchanges. Finally, 10yr JGBs retraced some of the prior day’s after-hours rebound with haven demand hampered by the upside in stocks and after the recent choppy mood in T-notes, while the latest enhanced liquidity auction for longer-dated JGBs resulted in a weaker bid-to-cover. Top Asian News Vietnam Faces Worker Exodus From Factory Hub for Gap, Nike, Puma Japan’s New Finance Minister Stresses FX Stability Is Vital Korea Lures Haven Seekers With Bonds Sold at Lowest Spread Africa’s Free-Trade Area to Get $7 Billion in Support From AfDB Bourses in Europe hold onto the gains seen at the cash open (Euro Stoxx 50 +1.5%; Stoxx 600 +1.1%) following on from an upbeat APAC handover, albeit the upside momentum took a pause shortly after the cash open. US equity futures are also firmer across the board but to a slightly lesser extent, with the tech-laden NQ (+1.0%) getting a boost from a pullback in yields and outperforming its ES (+0.7%), RTY (+0.6%) and YM (+0.6%). The constructive tone comes amid some positive vibes out of the States, and on a geopolitical note, with US Senate Minority Leader McConnell offered a short-term debt ceiling extension to December whilst US and China reached an agreement in principle for a Biden-Xi virtual meeting before the end of the year. Euro-bourses portray broad-based gains whilst the UK's FTSE 100 (+1.0%) narrowly lags the Euro Stoxx benchmarks, weighed on by its heavyweight energy and healthcare sectors, which currently reside at the foot of the bunch. Further, BoE's Chief Economist Pill also hit the wires today and suggested that the balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long-lasting than originally anticipated. Broader sectors initially opened with an anti-defensive bias (ex-energy), although the configuration since then has turned into more of a mixed picture, although Basic Resource and Autos still reside towards the top. Individual movers are somewhat scarce in what is seemingly a macro-driven day thus far. Miners top the charts on the last day of the Chinese Golden Week Holiday, with base metal prices also on the front foot in anticipation of demand from the nation – with Antofagasta (+5.1%), Anglo American (+4.2%) among the top gainers, whist Teamviewer (-8.2%) is again at the foot of the Stoxx 600 in a continuation of the losses seen after its guidance cut yesterday. Ubisoft (-5.1%) are also softer, potentially on a bad reception for its latest Ghost Recon game announcement. Top European News ECB’s Stournaras Reckons Investor Rate-Hike Bets Are Unwarranted Shell Flags Financial Impact of Gas Market Swings, Hurricane Johnson’s Plans for Economy Signal Ambitions for Decade in Power U.K. Grid Bids to Calm Market Saying Winter Gas Supply Is Enough In FX, the latest upturn in broad risk sentiment as the pendulum continues to swing one way then the other on alternate days, has given the Aussie a fillip along with news that COVID-19 restrictions in NSW remain on track for being eased by October 11, according to the state’s new Premier. Aud/Usd is eyeing 0.7300 in response to the above and a softer Greenback, while the Aud/Nzd cross is securing a firmer footing above 1.0500 in wake of a slender rise in AIG’s services index and ahead of the latest RBA FSR. Conversely, the Pound is relatively contained vs the Buck having probed 1.3600 when the DXY backed off further from Wednesday’s w-t-d peak to a 94.102 low and has retreated through 0.8500 against the Euro amidst unsubstantiated reports about less hawkish leaning remarks from a member of the BoE’s MPC. In short, the word is that Broadbent has downplayed the prospects of any fireworks in November via a rate hike, but on the flip-side new chief economist Pill delivered a hawkish assessment of the inflation situation in the UK when responding to a TSC questionnaire (see 10.18BST post on the Headline Feed for bullets and a link to his answers in full). Back to the Dollar index, challenger lay-offs are due and will provide another NFP guide before claims and commentary from Fed’s Mester, while from a technical perspective there is near term support just below 94.000 and resistance a fraction shy of 94.500, at 93.983 (yesterday’s low) and the aforementioned midweek session best (94.448 vs the 94.283 intraday high, so far). NZD - Notwithstanding the negative cross flows noted above, the Kiwi is also taking advantage of more constructive external and general factors to secure a firmer grip of the 0.6900 handle vs its US counterpart, but remains rather deflated post-RBNZ on cautious guidance in terms of further tightening. EUR/CHF/CAD/JPY - All narrowly mixed against their US peer and mostly well within recent ranges as the Euro reclaims 1.1500+ status in the run up to ECB minutes, the Franc consolidates off sub-0.9300 lows following dips in Swiss jobless rates, the Loonie weighs up WTI crude’s further loss of momentum against the Greenback’s retreat between 1.2600-1.2563 parameters awaiting Canada’s Ivey PMIs and a speech from BoC Governor Macklem, and the Yen retains an underlying recovery bid within 111.53-23 confines before a raft of Japanese data. Note, little reaction to comments from Japanese Finance Minister, when asked about recent Jpy weakening, as he simply said that currency stability is important, so is closely watching FX developments, but did not comment on current levels. In commodities, WTI and Brent front month futures are on the backfoot, in part amid the post-Putin losses across the Nat Gas space, with the UK ICE future dropping some 20% in early trade. This has also provided further headwinds to the crude complex, which itself tackles its own bearish omens. WTI underperforms Brent amid reports that the US was mulling a Strategic Petroleum Reserve (SPR) release and did not rule out an export ban. Desks have offered their thoughts on the development. Goldman Sachs says a US SPR release would likely be of up to 60mln barrels, only representing a USD 3/bbl downside to the year-end USD 90/bbl Brent forecast and stated that relief would only be transitory given structural deficits the market will face from 2023 onwards. GS notes that any larger price impact that further hampers US shale activity would lead to elevated US nat gas prices in 2022, and an export ban would lead to significant disruption within the US oil market, likely bullish retail fuel price impact. RBC, meanwhile, believes that these comments were to incentivise OPEC+ to further open the taps after the producers opted to maintain a plan to hike output 400k BPD/m. On that note, sources noted that the OPEC+ decision against a larger supply hike at Monday's meeting was partly driven by concern that demand and prices could weaken – this would be in-fitting with sources back in July, which suggested that demand could weaken early 2022. The downside for crude prices was exacerbated as Brent Dec fell under USD 80/bbl to a low of near 79.00/bbl (vs 81.14/bbl), whilst WTI Nov briefly lost USD 75/bbl (vs high 77.23/bbl). Prices have trimmed some losses since. Metals in comparison have been less interesting; spot gold is flat and only modestly widened its overnight range to the current 1,756-66 range, whilst spot silver remains north of USD 22.50/bbl. Elsewhere, the risk tone has aided copper prices, with LME copper still north of USD 9,000/t, whilst some also cite supply concerns as a key mining road in Peru (second-largest copper producer) was blocked, with the indigenous community planning to continue the blockade indefinitely, according to a local leader. It is also worth noting that Chinese markets will return tomorrow from their Golden Week holiday. US Event Calendar 7:30am: Sept. Challenger Job Cuts YoY, prior -86.4% 8:30am: Oct. Initial Jobless Claims, est. 348,000, prior 362,000; Continuing Claims, est. 2.76m, prior 2.8m 9:45am: Oct. Langer Consumer Comfort, prior 54.7 11:45am: Fed’s Mester Takes Part in Panel on Inflation Dynamics 3pm: Aug. Consumer Credit, est. $17.5b, prior $17b DB's Jim Reid concludes the overnight wrap On the survey, given how fascinating markets are at the moment I think the results of this month’s edition will be especially interesting. However the irony is that when things are busy less people tend to fill it in as they are more pressed for time. So if you can try to spare 3-4 minutes your help would be much appreciated. Many thanks. It was a wild session for markets yesterday, with multiple asset classes swinging between gains and losses as investors sought to grapple with the extent of inflationary pressures and potential shock to growth. However US equities closed out in positive territory and at the highs as the news on the debt ceiling became more positive after Europe went home. Before this equities had lost ground throughout the London afternoon, with the S&P 500 down nearly -1.3% at one point with Europe’s STOXX 600 closing -1.03% lower. Cyclical sectors led the European underperformance, although it was a fairly broad-based decline. However after Europe went home – or closed their laptops in many cases – the positive debt ceiling developments saw risk sentiment improve throughout the rest of New York session. The S&P rallied to finish +0.41% and is now slightly up on the week, as defensive sectors such as utilities (+1.53%) and consumer staples (+1.00%) led the index while US cyclicals fell back like their European counterparts. Small cap stocks didn’t enjoy as much of a boost as the Russell 2000 ended the day -0.60% lower, while the megacap tech NYFANG+ index gained +0.82%. Risk sentiment improved following reports that Senate Minority Leader Mitch McConnell was willing to negotiate with Democrats to resolve the debt ceiling impasse and allow Democrats to raise the ceiling until December. This means President Biden and Congressional Democrats would be able to finish their fiscal spending package – now estimated at around $1.9-2.2 trillion – and include a further debt ceiling raise into one large reconciliation package near year-end. Senate Majority Leader Schumer has not publicly addressed the deal yet, but Democrats have signaled that they’ll accept the deal, although they’ve also indicated they’d still like to pass the longer-term debt ceiling bill under regular order in a bipartisan manner when the time came near year-end. Interestingly, if we did see the ceiling extended until December, this would put another deadline that month, since the government funding extension only went through to December 3, so we could have yet another round of multiple congressional negotiations in just a few weeks’ time. The news of a Republican offer coincided with President Biden’s virtual meeting with industry leaders, where the President implored them to join him in pressuring legislators to raise the debt limit. Treasury Secretary Yellen also attended the meeting, and re-emphasised her estimate for the so-called “drop dead date” to be October 18. Potentially at risk Treasury bills maturing shortly thereafter rallied a few basis points, signaling investors took yesterday afternoon’s debt ceiling developments as positive and credible. This was a far cry from where markets opened the London session as turmoil again gripped the gas market. UK and European natural gas futures both surged around +40% to reach an intraday high shortly after the open. However, energy markets went into reverse following comments from Russian President Putin that the country was set to supply more gas to Europe and help stabilise energy markets, with European futures erasing those earlier gains to actually end the day down -6.75%, with their UK counterpart similarly reversing course to close -6.96% too. The U.K. future traded in a stunning 255 to 408 price range on the day. We shouldn’t get ahead of ourselves here though, since even with the latest reversal, prices are still up by more than five-fold since the start of the year, and this astonishing increase over recent weeks has attracted attention from policymakers across the world as governments look to step in and protect consumers and industry. In the EU, the Energy Commissioner, Kadri Simson, said that the price shock was “hurting our citizens, in particular the most vulnerable households, weakening competitiveness and adding to inflationary pressure. … There is no question that we need to take policy measures”. However, the potential response appeared to differ across the continent. French President Macron said that more energy capacity was required, of which renewables and nuclear would be key elements, while Italian PM Draghi said that joint EU gas purchases had wide support. However, Hungarian PM Orban took the opportunity to blame the European Commission, saying that the Green Deal’s regulations were “indirect taxation”, which shows how these price spikes could create greater resistance to green measures moving forward. Elsewhere, blame was also cast on carbon speculators, with Spanish environment minister Rodriguez saying that “We don’t want to be hostages of external financial investors”, and outside the EU, Serbian President Vucic said that his country could ban power exports if there were further issues, which just shows how energy has the potential to become a big geopolitical issue this winter. Those declines in natural gas prices were echoed across the energy complex, with both Brent Crude (-1.79%) and WTI (-1.90%) oil prices subsiding from their multi-year highs the previous day, just as coal also fell -10.20%. In turn, that served to alleviate some of the concerns about building price pressures and helped measures of longer-term inflation expectations decline across the board. Indeed by the close, the 10yr breakeven in the US had come down -1.4bps, and the equivalent measures in Germany (-4.6bps), Italy (-6.1bps) and the UK (-4.2bps) had likewise seen declines of their own. In spite of those moves for inflation expectations, this proved little consolation for European sovereign bonds as higher real rates put them under continued pressure, even if yields had pared back some of their gains from the morning. Yields on 10yr bunds (+0.6bps), OATs (+0.9bps) and BTPs (+3.2bps) were all at their highest levels in 3 months, whilst those on Polish 10yr debt were up +13.7bps after the central bank there unexpectedly became the latest to raise rates, with the 40bps hike to 0.5% marking the first increase since 2012. However, for the US it was a different story, with yields on 10yr Treasuries down -0.5bps to 1.521%, having peaked at 1.57% earlier in the London morning. There was a late story in Europe that could bear watching in the coming weeks as Bloomberg reported that the ECB is studying a new bond-buying tool that could help ease market volatility if a “taper tantrum”-esque move were to happen when the PEPP purchases end in March. The plan would reportedly target purchases selectively if there were to be a larger selloff in more heavily indebted economies, which differs from the existing programs that buys debt in relation to the size of each member’s economy. Asian stocks overnight have performed strongly, with the Hang Seng (+2.28%), Nikkei (+1.68%) and KOSPI (+1.61%) all advancing after the positive news on the debt-ceiling, as well on news that US President Biden was set to meeting with Chinese President Xi by the end of the year. All the indices were lifted by the IT and consumer discretionary sectors, and the Hang Seng Tech index has rebounded by +3.29% this morning. Separately, Evergrande-related news has been subsiding in recent days, but China Estates, a company controlled by a backer of Evergrande, rose 30% after the company disclosed an offer to take it private for $245mn. Otherwise, US futures are pointing to a positive start later, with those on the S&P 500 (+0.50%) and DAX (+1.19%) both advancing. Turning to Germany, exploratory talks will be commencing today between the centre-left SPD, the Greens and the Liberal FDP, who together would make up a so-called “traffic-light” coalition. That marks a boost for the SPD, who beat the CDU/CSU bloc into first place in the September 26 election, although CDU leader Armin Laschet said that his party were “still ready to hold talks”. However, the CDU/CSU have faced internal tensions after they slumped to their worst-ever election result, whilst a Forsa poll out on Tuesday said that 53% of voters wanted a traffic-light coalition, versus just 22% who favoured the Jamaica option led by the CDU/CSU. So momentum seems clearly behind the traffic light option for now. Looking at yesterday’s data, in the US the ADP’s report at private payrolls came in at an unexpectedly strong +568k (vs. +430k expected), which is the highest in their series for 3 months and comes ahead of tomorrow’s US jobs report. However in Germany, factory orders in August fell by -7.7% (vs. -2.2% expected) amidst various supply issues. To the day ahead now, and data releases include German industrial production and Italian retail sales for August, whilst in the US we’ve got the weekly initial jobless claims and August’s consumer credit.From central banks, we’ll be getting the minutes from the ECB’s September meeting, and also hear from a range of speakers including the ECB’s President Lagarde, Lane, Elderson, Holzmann, Schnabel, Knot and Villeroy, along with the Fed’s Mester, BoC Governor Macklem and PBoC Governor Yi Gang. Tyler Durden Thu, 10/07/2021 - 07:57.....»»

Category: blogSource: zerohedgeOct 7th, 2021

Luongo: Energy Subsidies, Bitcoin, & The Socialist Takeover That Isn"t

Luongo: Energy Subsidies, Bitcoin, & The Socialist Takeover That Isn't Authored by Tom Luongo via Gold, Goats, 'n Guns blog, “When you subsidize something, you get more of it." - RON PAUL I have a friend who once described Bitcoin to me as an organism which feeds on electricity subsidies. Bitcoin searches out the lowest cost of electricity available and consumes as much of it as it can to produce profit for the miners, since electricity costs are their biggest costs. This is partly why China, for years, attracted the lion’s share of Bitcoin mining. Miners could co-locate next to hydroelectric power plants in China and suck up every extra available cheap and subsidized kilowatt-hour. This is the essence of the free market. It finds inefficiencies and exploits them as capital flows to where it is treated best. It may be ‘predatory’ from the central planners’ point of view, but they opened themselves up to this effect the moment they intervened by subsidizing the market in the first place. Bitcoin exposed a structural weakness in China’s electricity grid this summer which was under massive stress thanks to drought conditions there dimming the output of its hydroelectric generators. This is partly why Chairman Xi Jinping took the aggressive steps to kick the Bitcoin miners out of China this summer. He could see the real costs of electricity rising as coal, oil and natural gas prices skyrocketed but, because of rate subsidies to end-users, revenue to power generating companies was flat. It served him in other strategic ways, like kicking out the flow of Bitcoin within the Chinese economy, cutting down would-be mining company financial oligarchs and ultimately lessening competition for the Digital Yuan. The response from the Socialist is always the same, however. Today Russia is getting blamed for gas prices in Europe. Price gouging in a crisis a moral failure, not the original wealth transfer (itself a theft) from one group of people to another, which is what an electrical subsidy is. They see this as a market failure because to them the greater good is served by subsidizing certain aspects of the economy to achieve political and/or social goals. And, in some ways, they may be correct, but you’ll never know it because there can be no rational calculation of the costs versus the benefits, c.f. Mises’ critique of Socialism from 1921. You see, the market is neutral. It doesn’t have a perspective other than expressing the very human response of seeing an arbitrage opportunity and exploiting it. Rather than being a failure of the free market, Bitcoin miners seeking out and exposing the unsustainability of electricity subsidies is a massive success of market principles. It is firmly rooted in actual human behavior rather than some fantastical one created by a central committee and the force of the gun. China kicking out the Bitcoin miners only forestalled the day of reckoning for its energy industry because their presence was a symptom of a deeper problem not the source of the problem itself. Today, four months later China is now rationing electricity to force demand down. Rather than let market forces raise the prices, divert capital away from energy intensive (and possibly uneconomic) activity and give accurate signals to producers and consumers, China will do the authoritarian thing to blame the people and take away a basic function of a first world society. This is a simple, yet dramatic, example of what’s fundamentally wrong with the world we live in today. China isn’t the only one guilty of this. Subsidies like these are everywhere and they do nothing except create pricing dislocations which attract massive amounts of capital creating economic bubbles in price. If you’re wondering where this headline could come from: Zerohedge answers it with the pullquote. In fact, it is the Austrian School critique of these subsidies which is its core competency; to explain in real terms why government intervention in a market ultimately subsidizes overinvestment in one activity at the expense of another. Capital at any given moment is finite. That means there is competition for it ceteris paribus. That competition means that if better profits can be made mining Bitcoin in China rather than building a new road or gas pipeline, then that’s what will happen. We can create more capital but that requires time, ingenuity and labor. Capital compounds at a pretty linear rate and all we do with things like deficit spending is pull forward capital from the future to subsidize production in the present. Today we produce far more electricity than we use. It’s estimated that as much as 30% of global electricity goes to ground. Bitcoin uses up less than 0.5% of that wasted electricity. It’s actually performing a major market function to blow apart these layers of bureaucratic insanity by preying on a fraction of this over-production. Since prices are set at the margin, small demand or supply shocks can create massive spikes or drops in price if the market is operating at peak capacity. If you really stop to think about it, it’s quite astounding that the world’s economic system is this vulnerable to this basic application of free market principles. Today Bitcoin mining is co-locating next to the cheapest electricity produced on the planet, next to volcanos and nuclear power plants. It’s coming to America in a big, big way where it will further expose rural electrical subsidies here in the U.S. just like it did in China. But, for now, this organism is healthy, strong and in no danger of dying from the heavy hand of inept socialists. French Fried Grid Lines What prompted this article was my reading with a certain perverse glee that France is dealing with the same problem China has but in a different way. They are now suspending a planned tax hike in electricity tariffs because prices to the French consumer are spiking thanks to rising gas, oil and coal prices that its nuclear power infrastructure can’t overcome. Even if France fully passed on the input cost rises to the consumer, the tariffs the government charges for using electricity are another form of subsidy, not to the electricity generator, but to government itself. Why was France considering raising taxes on electricity during a global energy price spike? Because its government spends too much money, doing what…? …regulating its economy, which it has done an objectively miserable job of. So, to subsidize its bloated and now openly tyrannical government France wanted to squeeze its citizens for more money to keep that arrangement in place: to fund The Davos Crowd’s mandates about COVID-9/11 vaccines, restrictions on travel, blasting protestors with water cannons… you know, protecting and serving the public. But with massive protests around the country and the people’s falling confidence and patience with its government, France had to back off lest this latest tax hike enflame passions there even more six months out from a Presidential election. In typical central planner Newspeak they called the simple act of not raising taxes, the ultimate form of government aggression, ‘price protection.’ It’s patently absurd for them to frame it this way when the last thing the French government actually does is protect its people, except those that work for it, from, well, anything. He {French Prime Minister Jean Castex} said any new natgas tariffs following Friday’s scheduled 12.6% hike would be postponed until prices decrease in late March/April, adding that it will shield 5 million households who are on floating-rate contracts. Castex said the French government would lower taxes on power prices, capping the scheduled increase in residential electricity tariffs at 4% in February. In the midst of an energy price crisis the French government, in a blatant pander to voters for the 2022 election, not only scrapped raising taxes but also further subsidized lower income households, encouraging them to use even more electricity and worsening the government’s fiscal position. Someone has to pay to move those electrons around just not those that might vote to re-elect Emmanuel Macron. These are decisions not made with any long-term economic benefits in mind, but rather the most crass short-term political consequences trying to put a band-aid on a government-inflicted wound on the people themselves. “The government is good at one thing. It knows how to break your legs, and then hand you a crutch and say, ‘See if it weren’t for the government, you wouldn’t be able to walk.” - HARRY BROWNE Capital Gone Walkabout Meanwhile, Germany is now running out of coal, as a major coal power plant there had to shut down because it ran out. German utility Steag halted its coal-fired power plant Bergkamen-A after it ran out of hard coal supplies amid an energy crunch globally and logistics challenges domestically, the company told Bloomberg on Friday. “We are short of hard coal,” Steag spokesman Daniel Muhlenfeld told Bloomberg via email. Germany has been the poster child for Europe’s Quixotic quest for carbon-neutrality. What it’s wound up with is windmills not spinning (and the birds chirped in excitement), solar panels covered in snow when the cloud cover clears and gas prices never before seen in history, at over $1200 per thousand cubic meters. Oil prices keep trying to fall and new conflicts and controls keep trying to push the price higher, be it from OPEC+ members trying to subsidize their national governments, or the U.S. actively pushing supply off the market to subsidize its LNG exports. But, none of the price rise is because we’re running out but because supply is being artificially restricted by central planners wanting to create a false reality. How does anyone expect the mighty German industrial economy to absorb these costs without some kind of output slowdown? The answer is no one. In fact, if you think through the situation, it’s clear Davos is happy about this because this puts downward pressure on growth, starving out Germany’s powerful industrial and middle class, who stand confused as to the cause, if the results of the election there are any indication. Because those people produce wealth. Growing wealth to those of limited understanding is problematic. If the world is finite, they argue, growth must be finite. That’s only true, however, at any single point on the timeline of our understanding of the universe. Tomorrow we’ll figure out some new thing, some new efficiency, material or overcome some obstacle we didn’t have time for yesterday. We’ll take our surplus time we earned as profit today and deploy it to fix some other problem tomorrow, opening up new pathways for growth. But this type of growth, where it isn’t directed by oligarchs and governments who stand in front of them, is somehow evil or unsustainable. Yeah, for them. For the past fifty years they’ve been telling us peak oil would end modern civilization and yet, absent their manipulations of energy markets through lockdowns, wars, currency manipulation and regulation, the real price of oil has risen just 12% over the past fifty years, when indexed for inflation, which they manipulate to the downside to sustain their power. One could easily argue that today’s price shocks aren’t any more sustainable than any other commodity whose supply and demand fundamentals are driven by politics more than they are the markets themselves. Remove those obstacles and I bet we’ll see oil production subsidies driven out of the market the same way that bitcoin drove China and France to ‘protect consumers’ from electricity subsidies. We had to invent a new word to describe the fight over energy, geopolitics, because of our adherence to the socialists’ maleducation on basic human behavior. We also had to invent a new definition of inflation in the age of money unmoored from the stored energy of gold and other hard assets, based on prices not the supply of money. Instead of basing our money on our past work, tokenized by gold, they gave us a money based on what we will produce for them, debt. What I didn’t show in the above graph is the stability of oil in real terms before we entered this era. All Malthusian arguments about the end of cheap energy are themselves indefensible and unsustainable and yet that is all we are ever told is coming. They deny the Marginal Revolution (1871-74) in economics, which negated all of Marx’s complaints about capitalism before his death (1883), and yet his idiotic ideas fuel the unquenchable thirst for power of midwit oligarchs and the envy of their socialist useful idiots. When someone is lying to you, you really owe it to yourself to ask why. Davos has broken the world supply chain for energy for the sole purpose of proving a point that history itself has already debunked, Facebook be damned. They do this, nominally, in the name of sustainability, arguing the wastefulness of capitalism is the end state of it. But, as I’ve already shown with bitcoin and electricity, oil and money printing, it is the over-production of something through subsidization that creates unsustainable waste and malinvestment which eventually has to be liquidated in a rational system. But instead of bowing to the rational, ending that system of privilege for them, they make the monetary system ever more irrational to the point of absurdity. Last year, Paul Krugman was calling the $1 trillion coin “an accounting gimmick” that “wouldn’t even fool anyone”, now he’s all in on the illegal power grab with a New York Times column headlined, “Biden Should Ignore the Debt Limit and Mint a $1 Trillion Coin”. That only took a little over a year.   The End of Socialism This brings me to the final point of this essay. They are losing. They are losing not because they aren’t powerful or aren’t making our lives miserable but because their system of subsidy, which produces unearned wealth (or rent) for them is failing rapidly. They embarked on this Great Reset solely for the purpose of defaulting on their socialist promises made by buying off present generations with the labor of future generations. We call this in modern parlance debt. Now that the debt is unpayable and the future liabilities of their governments overwhelming everything they have unleashed a torrent of policies around the world to starve, freeze and kill off entire generations of taxpayers who they can’t afford to bribe anymore. COVID-9/11, no matter how you look at it, as a political operation has shortened lifespans in the U.S. by 18 months in 2020, according to the CDC. What will those numbers look like in 2021? This is a radical contraction which lifted trillions of unfunded liabilities in Social Security and Medicare payments from future U.S. governments. And they call libertarians heartless? Draw your own conclusions from this but I think you know what it means. Davos is purposefully shrinking the division of labor in order to prove the Marxist critique of capitalism correct when it has done nothing but lift billions out of poverty which the Malthusian central planners told us a century ago then was unsustainable. Central planners aren’t rational. They are simply tyrants who prey on the fear and weakness of people grown soft through abundance. Because in their mind sustainability is only measured by the continuity of their power over society not the actual economics of that society. The instability, chaos and conflict come from their inability to accept that someone else may have a better solution to society’s problems than they do. And what truly keeps them up at night is the gnawing feeling that the best system is the one where no one person or group of people could ever manage a system as complex and dynamic as seven-plus billion people acting in their own self-interest creating a spontaneous and self-correcting order which doesn’t need their help. When I look out today and see bills in the U.S. Congress to deny unvaccinated people from flying or children from getting an education all I see is a failing system of energy distribution and subsidy trying to protect itself from the ravages of its own stupidity. I’ve said it before and I’ll say it again here, power doesn’t prove you’re smart, it simply makes you stupid. Bitcoin, among other technologies, is slowly eating away at these unsustainable markets while the socialists in China, France and yes, Washington D.C. scramble to keep the central planners’ dream alive of a world where they control access to everything you need to live your most productive life. They are scared to death of a private banking system that doesn’t need them or a division of labor that coordinates production where their toll booths can’t collect. To them we are just livestock to be farmed, batteries to be discharged and liabilities on their balance sheets to be written down. Energy isn’t scarce, it is abundant. Human energy, that is. Oil is finite. So is gas. So is coal. But until we properly price its costs, we’ll never figure out what’s the best replacement for them and at what point in time that change should occur. Between now and then it will be a long, cold winter. “I know you’re out there. I can feel you now. I know that you’re afraid. You’re afraid of us. You’re afraid of change. I don’t know the future. I didn’t come here to tell you how this is going to end. I came here to tell you how it’s going to begin. I’m going to hang up this phone, and then I’m going to show these people what you don’t want them to see. I’m going to show them a world without you, a world without rules and controls, without borders or boundaries, a world where anything is possible. Where we go from there, is a choice I leave to you.”. - NEO, THE MATRIX *  *  * Join my Patreon if you want to subsidize the truth BTC: 3GSkAe8PhENyMWQb7orjtnJK9VX8mMf7ZfBCH: qq9pvwq26d8fjfk0f6k5mmnn09vzkmeh3sffxd6rytDCR: DsV2x4kJ4gWCPSpHmS4czbLz2fJNqms78oELTC: MWWdCHbMmn1yuyMSZX55ENJnQo8DXCFg5kDASH: XjWQKXJuxYzaNV6WMC4zhuQ43uBw8mN4VaWAVES: 3PF58yzAghxPJad5rM44ZpH5fUZJug4kBSaETH: 0x1dd2e6cddb02e3839700b33e9dd45859344c9edcDGB: SXygreEdaAWESbgW6mG15dgfH6qVUE5FSE Tyler Durden Sun, 10/03/2021 - 13:32.....»»

Category: blogSource: zerohedgeOct 3rd, 2021

5 ways the debt ceiling brinksmanship in Congress could end, from markets teetering to Biden"s agenda and who gets blamed

The standoff could have huge knock-on effects, jeopardizing the infrastructure bill, not to mention the prospect of defaulting on the debt. Sen. Majority Leader Chuck Schumer (D-NY) and Sen. Minority Leader Mitch McConnell (R-KY). Drew Angerer/Getty Images Even if Congress avoids a shutdown and a default on the nation's debt, things could still get ugly. The brinksmanship fueled by negative polarization entails several knock-on effects. Markets could teeter, and it comes at a crucial time for President Biden's agenda. See more stories on Insider's business page. As with most things in Congress, seemingly arcane and petty disputes may end up having wide-reaching effects across the American public and global economy.When it comes to this particularly chaotic week in late September - with lawmakers in a standoff over lifting the debt ceiling, narrowly avoiding a government shutdown, and making any progress on President Joe Biden's infrastructure package - the stakes couldn't be higher and the pettiness is off the charts.It might seem irrational given the gravity of the situation, but these inter-connected spats are all part of a broader trend in American politics known as negative polarization and asymmetric polarization: As long as the other side is losing, your side is winning. That mentality is now especially strong among Republicans with Democrats holding the White House and both chambers of Congress.Even if some or all of the following potential catastrophes are averted, the uncertainty and confusion surrounding the negotiations could send global markets teetering in a ripple effect that may already be under way.Here are five ways this Congressional brinksmanship could play out:1. Armageddon: Congress fails to raise the debt ceiling and the US defaults on its debts. Traders work on the floor of the New York Stock Exchange August 9, 2007. REUTERS/Lucas Jackson The debt limit or debt ceiling is often a misunderstood term, since it pertains to money the US government has already spent, not future payments.The Senate and House have passed a continuing resolution to fund the government and stave off shutdown, averting a double whammy worst-case scenario - but the debt ceiling issue has yet to be resolved.-CBS News (@CBSNews) September 30, 2021 If Congress doesn't lift it, the government could run out of funding by mid-October, according to Treasury Secretary Janet Yellen. Democrats in the House passed a bill suspending the debt ceiling, but it was dead on arrival as soon as it reached Senate Republicans. A default - or a near-default - stands to negatively impact markets, and services that millions of Americans reply upon. Democrats are sick of dealing with the debt ceiling and the need to regularly stave off economic catastrophe, finding themselves the target of GOP efforts to make them pay a political price via a mechanism that isn't even used by most developed democracies, as Insider's Ben Winck, Joseph Zeballos-Roig, and Andy Kiersz reported last week.Even if there is no default, prolonging the process could still cause a financial drag: The nonpartisan Committee for a Responsible Federal Budget finds that even the threat of default can have "serious negative economic implications."In 2011, a similar showdown resulted in a last-minute increase to the debt ceiling - but not before roiling financial markets as the country's credit rating was downgraded. For instance, a Government Accountability Office (GAO) report estimated that the prolonged debt ceiling process in 2011 made Treasury's borrowing costs go up by $1.3 billion.There could be a huge hit to employment and stocks if the debt limit doesn't get lifted by mid-October, Moody's Analytics predicts. Economists led by Mark Zandi found that 6 million jobs could be shed, with unemployment soaring up to 9%. Stocks crashing could wipe out $15 trillion in household wealth.Yellen said in a statement to the Committee on Banking, Housing, and Banking that "the full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession" if the country goes into default. If the debt ceiling isn't lifted, Americans receiving support from government programs may feel the impact acutely. Treasury Secretary Janet Yellen warned in a Wall Street Journal opinion piece that families could see their monthly child tax credits delayed.Also potentially impacted: Military troops, senior citizens, children receiving free or subsidized school lunches, and Americans relying on Medicaid. Yellen wrote that almost 50 million senior citizens may not receive their Social Security checks, and that troops may not receive their paychecks. In a memo sent out to the state and local governments, the White House warned that federally subsidized Medicaid and free school lunches could face reductions in the case of a default.2. Both crises are avoided and the HIP and BIF live happily ever after. Rep. Ilhan Omar (D-MN) (L) and Speaker of the House Nancy Pelosi (D-CA). Chip Somodevilla/Getty Images Because Democrats hold the narrowest majority possible in the Senate, with just 50 members plus Vice President Kamala Harris as the deciding vote, passing Biden's infrastructure plan has been a high wire act from the start.It's an especially precarious position because it's so far from the 60 votes needed for most legislation to clear a filibuster from Republicans.Given the inevitability of a filibuster on several key Democratic priorities, the bill was split in two: the Bipartisan Infrastructure Framework, or "BIF," and the more wide-reaching Human Infrastructure Plan, or "HIP." The ostensible goal was to have enough Republicans vote for the BIF, since it includes more traditional infrastructure components such as roads, bridges, and ports, while the HIP would pass with just the 50 Senate Democrats and VP Harris before going over to the House.Right now, Democrats are essentially playing a game of infrastructure chicken as Republicans stand by and watch. From the start, progressives have said that the BIF needs to move in tandem with the larger social spending plan, and have warned they'll shut down any standalone bipartisan bill. It's a position that both Biden and Pelosi originally echoed.But moderates like Sen. Joe Manchin have indicated that they're not on board with the size or timeline of that $3.5 trillion reconciliation package. Now, Pelosi is pushing for a vote on just BIF, a risky gamble to get one part of the agenda across the finish line. As promised, House progressives like Rep. Alexandria Ocasio-Cortez have said they'll vote against the bipartisan bill, with prominent Senate progressive Bernie Sanders backing them. However, there is a chance both the moderate and progressive wings were bluffing after the deal fell apart, and both will escape the prisoner's dilemma of Game Theory to arrive at a compromise.3. Most of the public blames Republicans for the debt ceiling brinksmanship - just like before House Minority Leader Kevin McCarthy (R-CA). Chip Somodevilla/Getty Images Over the past 25 years, standoffs like this one have become increasingly routine in Congress.When it comes to the threat of a government shutdown - particularly the nation's longest, under former President Donald Trump, and both shutdowns during the Clinton administration in the mid-1990s - most Americans blame the GOP, without fail.Yet despite Republicans always being blamed more for shutdowns and bringing the nation closer to defaulting on its debts, they keep doing it. A Washington Post/ABC poll following the Clinton-era shutdowns, the first of which lasted five days and the second clocked in at 21, found 50% of Americans blaming Republicans to just 27% blaming Clinton. The clashes ultimately ended former House Speaker Newt Gingrich's reign in Congress, and emboldened Clinton going into his second term.Whether a similar dynamic plays out with Biden depends on how bad things get and how much more polarized the public is now compared to the '90s, but the polling history is not on the GOP's side.4. Both a shutdown and default are avoided, but Biden's infrastructure bill continues to suffer. President Joe Biden. Brendan Smialowski/AFP via Getty Images With Biden's infrastructure plan already on the ropes as intra-Democratic divisions have boiled over regarding how the bill was split in two, a protracted fight over the debt ceiling does nothing to help move the roughly $3.5 trillion package along.Similar to the way narrowly avoiding a default would still have negative impacts on the economy, a languishing infrastructure bill would factor into how Wall Street analysts assess the state of the economy and which sectors are worth investing in.With the midterms just over a year away, Biden and Democrats would like to campaign on the infrastructure bill as a major legislative accomplishment beyond the administration's pandemic response and the March stimulus bill known as the American Rescue Plan.5. All of this bogs down Biden's agenda through the fall, and Democrats get blamed by voters who associate government spending directly with inflation. President Joe Biden. Pete Marovich-Pool/Getty Images The notion of "overheating the economy" has already become a theme in the Biden presidency, and has been explicitly mentioned by notable holdouts such as Democratic Sen. Joe Manchin of West Virginia as a reason to be wary of the infrastructure bill's $3.5 trillion price tag.On top of the $5 trillion in stimulus spending during the pandemic between the Trump and Biden administrations, those ranging from partisan critics to apolitical observers tend to tie government spending directly with inflation. Although it's much more complicated than that, and pandemic-related supply chain issues have led to many of the most dramatic price hikes, Democrats risk losing the messaging battle on what could become one of the key issues in the 2022 midterms. Swing voters - or at least anyone showing up to a midterm election who isn't planning on backing their party all the way down the ticket - are far more likely to have the rising price of goods sitting top of mind than squabbles over the debt ceiling that took place over a year ago.Former President Jimmy Carter faced a similar issue, and despite breaking with the historical trend of an incumbent president's party losing seats in Congress in the first election since taking office, Carter ended up failing in his reelection bid as Ronald Reagan ran on reigning in government spending and tamping down on inflation.While this outcome is less empirical and more closely related to campaign messaging, it may be the one with the longest staying power.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 30th, 2021

Futures Fade Rally With Congress Set To Avert Government Shutdown

Futures Fade Rally With Congress Set To Avert Government Shutdown US equity futures faded an overnight rally on the last day of September as lingering global-growth risks underscored by China's official manufacturing PMI contracted for the first time since Feb 2020 as widely expected offset a debt-ceiling deal in Washington and central-bank assurances about transitory inflation. The deal to extend government funding removes one uncertainty from the minds of investors, amid China risks and concerns over Federal Reserve tapering. Comments from Fed Chair Powell and ECB head Christine Lagarde about inflation being transitory rather than permanent also helped sentiment, even if nobody actually believes them any more.In China, authorities told bankers to help local governments support the property market and homebuyers, signaling concern at the economic fallout from the debt crisis at China Evergrande As of 7:15am ET, S&P futures were up 18 points ot 0.44%, trimming an earlier gain of 0.9%. Dow eminis were up 135 or 0.4% and Nasdaq futs rose 0.43%. 10Y TSY yields were higher, rising as high as 1.54% and last seen at 1.5289%; the US Dollar erased earlier losses and was unchanged. All the three major indexes are set for a monthly drop, with the benchmark S&P 500 on track to break its seven-month winning streak as worries about persistent inflation, the fallout from China Evergrande’s potential default and political wrangling over the debt ceiling rattled sentiment. The index was, however, on course to mark its sixth straight quarterly gain, albeit its smallest, since March 2020’s drop. The rate-sensitive FAANG stocks have lost about $415 billion in value this month after the Federal Reserve’s hawkish shift on monetary policy sparked a rally in Treasury yields and prompted investors to move into energy, banks and small-cap sectors that stand to benefit the most from an economic revival. Among individual stocks, oil-and-gas companies APA Corp. and Devon Energy Corp. led premarket gains among S&P 500 members. Virgin Galactic shares surged 9.7% in premarket trading after the U.S. aviation regulator gave the company a green-light to resume flights to the brink of space. Perrigo climbed 14% after reporting a settlement in a tax dispute with Ireland.  U.S.-listed Macau casino operators may get a boost Thursday after Macau Chief Executive Ho Iat Seng said the region will strive to resume quarantine-free travel to Zhuhai by Oct. 1, the start of the Golden Week holiday, if the Covid-19 situation in Macau is stable. Here are some of the other biggest U.S. movers today: Retail investor favorites Farmmi (FAMI US) and Camber Energy (CEI US) both rise in U.S. premarket trading, continuing their strong recent runs on high volumes Virgin Galactic (SPCE US) shares rise 8.9% in U.S. premarket trading after the U.S. aviation regulator gave co. a green-light to resume flights to the brink of space Perrigo (PRGO US) rises 15% in U.S. premarket trading after reporting a settlement in a tax dispute with Ireland. The stock was raised to buy from hold at Jefferies over the “very favorable” resolution Landec (LNDC US) shares fell 17% in Wednesday postmarket trading after fiscal 1Q revenue and adjusted loss per share miss consensus estimates Affimed (AFMD US) rises 4.3% in Wednesday postmarket trading after Stifel analyst Bradley Canino initiates at a buy with a $12 price target, implying the stock may more than double over the next year Herman Miller (MLHR US) up ~2.8% in Wednesday postmarket trading after the office furnishings maker posts fiscal 1Q net sales that beat the consensus estimate Orion Group Holdings (ORN US) shares surged as much as 43% in Wednesday extended trading after the company disclosed two contract awards for its Marine segment totaling nearly $200m Kaival Brands (KAVL US) fell 18% Wednesday postmarket after offering shares, warrants via Maxim An agreement among U.S. lawmakers to extend government funding removes one uncertainty from a litany of risks investors are contenting with, ranging from China’s growth slowdown to Federal Reserve tapering. “Republicans and Democrats showed some compromise by averting a government shutdown,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “By removing what felt like a significant risk for a retail audience, it helps sentiment in the equity market.” Still, president Joe Biden’s agenda remains at risk of being derailed by divisions among his own Democrats, as moderates voiced anger on Wednesday at the idea of delaying a $1 trillion infrastructure bill ahead of a critical vote to avert a government shutdown. The big overnight economic news came from China whose September NBS manufacturing PMI fell to 49.6 from 50.1 in August, the first contraction since Feb 2020, likely due to the production cuts caused by energy constraints. Both the output sub-index and the new orders sub-index in the NBS manufacturing PMI survey decreased in September. The NBS non-manufacturing PMI rebounded to 53.2 in September from 47.5 in August on a recovery of services activities as COVID restrictions eased. However, the numbers may not capture full impact of energy restrictions as the NBS survey was taken around 22nd-25th of the month: expect far worse number in the months ahead unless China manages to contain its energy crisis. Europe’s Stoxx 600 Index advanced 0.3%, trimming a monthly loss but fading an earlier gain of 0.9%, led by gains in basic resources companies as iron ore climbed, with the CAC and FTSE 100 outperforming at the margin. Technology stocks, battered earlier this week, also extended their rebound.  Miners, oil & gas and media are the strongest sectors; utility and industrial names lag. European natural gas and power markets hit fresh record highs as supply constraints persist. Perrigo jumped 13.8% after the drugmaker agreed to settle with Irish tax authorities over a 2018 issue by paying $1.90 billion in taxes Asian stocks were poised to cap their first quarterly loss since March 2020 as Chinese technology names fell and as investors remained wary over a recent rise in U.S. Treasury yields.  The MSCI Asia Pacific Index is set to end the September quarter with a loss of more than 5%, snapping a winning streak of five straight quarters. A combination of higher yields, Beijing’s corporate crackdown and worry over slowing economic growth in Asia’s biggest economy have hurt sentiment, bringing the market down following a brief rally in late August.  The Asian benchmark rose less than 0.1% after posting its worst single-day drop in six weeks on Wednesday. Consumer discretionary and communication services groups fell, while financials advanced. The Hang Seng Tech Index ended 1.3% lower as Beijing announced new curbs on the sector, while higher yields hurt sentiment toward growth stocks.  “Because there’s growing worry over U.S. inflation, we need to keep an eye on the potential risks, globally,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “Also, there’s the Evergrande issue. The market is in a wait-and-see mode now, with a focus on whether the group will be able to make future interest rate payments.”  Benchmarks in Thailand and Malaysia were the biggest losers, while Indonesia and Australia outperformed. Japan’s Topix and the Nikkei 225 Stock Average slipped for a fourth day as investors weighed Fumio Kishida’s election victory as the new ruling party leader. Global stocks are poised to end the quarter with a small loss, after a five-quarter rally, as investors braced for the Fed to wind down its stimulus. They also remain concerned about slowing growth and elevated inflation, supply-chain bottlenecks, an energy crunch and regulatory risks emanating from China. A majority of participants in a Citigroup survey said a 20% pullback in stocks is more likely than a 20% rally. In rates, Treasuries were slightly cheaper across the curve, off session lows as stock futures pare gains. 10-year TSY yields were around 1.53%, cheaper by 1.2bp on the day vs 2.3bp for U.K. 10-year; MPC-dated OIS rates price in ~65bps of BOE hikes by December 2022. Gilts lead the selloff, with U.K. curve bear-steepening as BOE rate-hike expectations continue to ramp up. Host of Fed speakers are in focus during U.S. session, while month-end extension may serve to underpin long-end of the curve.   A gauge of the dollar’s strength headed for its first drop in five days as Treasury yields steadied after a recent rise, and amid quarter-end flows. The Bloomberg Dollar Spot Index fell as the dollar steady or weaker against most of its Group-of-10 peers. The euro hovered around $1.16 and the pound was steady while Gilts inched lower, underperforming Bunds and Treasuries. Money markets now see around 65 basis points of tightening by the BOE’s December 2022 meeting, according to sterling overnight index swaps. That means they’re betting the key rate will rise to 0.75% next year from 0.1% currently. The Australian dollar led gains after it rose off its lowest level since August 23 amid exporter month-end demand and as iron ore buyers locked in purchases ahead of a week-long holiday in China. Norway’s krone was the worst G-10 performer and slipped a fifth day versus the dollar, its longest loosing streak in a year. In commodities, oil surrendered gains, still heading for a monthly gain amid tighter supplies. West Texas Intermediate futures briefly recaptured the level above $75 per barrel, before trading at $74.71. APA and Devon rose at least 1.8% in early New York trading. European gas prices meanwhile hit a new all time high. Looking at the day ahead, one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Market Snapshot S&P 500 futures up 0.7% to 4,379.00 STOXX Europe 600 up 0.6% to 457.59 MXAP little changed at 196.85 MXAPJ up 0.3% to 635.71 Nikkei down 0.3% to 29,452.66 Topix down 0.4% to 2,030.16 Hang Seng Index down 0.4% to 24,575.64 Shanghai Composite up 0.9% to 3,568.17 Sensex down 0.3% to 59,239.76 Australia S&P/ASX 200 up 1.9% to 7,332.16 Kospi up 0.3% to 3,068.82 Brent Futures up 0.4% to $78.98/bbl Gold spot up 0.4% to $1,732.86 U.S. Dollar Index little changed at 94.27 German 10Y yield fell 0.5 bps to -0.212% Euro little changed at $1.1607 Top Overnight News from Bloomberg U.K. gross domestic product rose 5.5% in the second quarter instead of the 4.8% earlier estimated, official figures published Thursday show. The data, which reflected the reopening of stores and the hospitality industry, mean the economy was still 3.3% smaller than it was before the pandemic struck. China has urged financial institutions to help local governments stabilize the rapidly cooling housing market and ease mortgages for some home buyers, another signal that authorities are worried about fallout from the debt crisis at China Evergrande Group. The U.S. currency’s surge is helping the Chinese yuan record its largest gain in eight months on a trade-weighted basis in September. It adds to headwinds for the world’s second- largest economy already slowing due to a resurgence in Covid cases, a power crisis and regulatory curbs. The Swiss National Bank bought foreign exchange worth 5.44 billion francs ($5.8 billion) in the second quarter, part of its long-running policy to alleviate appreciation pressure on the franc   A few members of the Riksbank’s executive board discussed a rate path that could indicate a rate rise at the end of the forecast period, Sweden’s central bank says in minutes from its Sept. 20 meeting French inflation accelerated in September as households in the euro area’s second-largest economy faced a jump in the costs of energy and services. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded somewhat varied with the region indecisive at quarter-end and as participants digested a slew of data releases including mixed Chinese PMI figures. ASX 200 (+1.7%) was underpinned by broad strength across its industries including the top-weighted financials sector and with the large cap miners lifted as iron ore futures surge by double-digit percentages, while the surprise expansion in Building Approvals also helped markets overlook the 51% spike in daily new infections for Victoria state. Nikkei 225 (+0.1%) was subdued for most of the session after disappointing Industrial Production and Retail Sales data which prompted the government to cut its assessment of industrial output which it stated was stalling. The government also warned that factory output could decline for a third consecutive month in September and that October has large downside risk due to uncertainty from auto manufacturing cuts. However, Nikkei 225 then recovered with the index marginally supported by currency flows. Hang Seng (-1.0%) and Shanghai Comp. (+0.4%) diverged heading into the National Day holidays and week-long closure for the mainland with tech names in Hong Kong pressured by ongoing regulatory concerns as China is to tighten regulation of algorithms related to internet information services. Nonetheless, mainland bourses were kept afloat after a further liquidity injection by the PBoC ahead of the Golden Week celebrations and as markets took the latest PMI figures in their strides whereby the official headline Manufacturing PMI disappointed to print its first contraction since February 2020, although Non-Manufacturing PMI and Composite PMI returned to expansionary territory and Caixin Manufacturing PMI topped estimates to print at the 50-benchmark level. Top Asian News S&P Points to Progress as Bondholders Wait: Evergrande Update Bank Linked to Kazakh Leader Buys Kcell Stake After Share Slump Goldman Sachs Names Andy Tai Head of IBD Southeast Asia: Memo What Japan’s Middle-of-the-Road New Leader Means for Markets The upside momentum seen across US and European equity futures overnight stalled, with European cash also drifting from the best seen at the open (Euro Stoxx 50 +0.1%; Stoxx 600 +0.4%). This follows somewhat mixed APAC handover, and as newsflow remains light on month and quarter-end. US equity futures are firmer across the board, but again off best levels, although the RTY (+0.8%) outperforms the ES (+0.4%), YM (+0.4%) and NQ (+0.5%). Back to Europe, the periphery lags vs core markets, whilst the DAX 40 (-0.3%) underperforms within the core market. Sectors in Europe are mostly in the green but do not portray a particular risk bias. Basic Resources top the chart with aid from overnight action in some base metals, particularly iron, in turn aiding the large iron miners BHP (+2.2%), Rio Tinto (+3.4%) and Anglo American (+2.9%). The bottom of the sectors meanwhile consists of Travel & Leisure, Autos & Parts and Industrial Goods & Services, with the former potentially feeling some headwinds from China’s travel restrictions during its upcoming National Day holiday. In terms of M&A, French press reported that CAC-listed Carrefour (-1.3%) is reportedly looking at options for sector consolidation, and talks are said to have taken place with the chain stores Auchan, with peer Casino (Unch) also initially seeing a leg higher in sympathy amid the prospect of sector consolidation. That being said, Carrefour has now reversed its earlier upside with no particular catalyst for the reversal. It is, however, worth keeping in mind that regulatory/competition hurdles cannot be ruled out – as a reminder, earlier this year, France blocked the takeover of Carrefour by Canada’s Alimentation Couche-Tard. In the case of a successful deal, Carrefour will likely be the acquirer as the largest supermarket in France. Sticking with M&A, Eutelsat (+14%) was bolstered at the open amid source reports that French billionaire Patrick Drahi is said to have made an unsolicited takeover offer of EUR 12.10/shr for Eutelsat (vs EUR 10.35 close on Wednesday), whilst the FT reported that this offer was rejected. Top European News European Banks Dangle $26 Billion in Payouts as ECB Cap Ends U.K. Economy Emerged From Lockdown Stronger Than Expected In a First, Uber Joins Drivers in Strike Against Brussels Rules EU, U.S. Seek to Avert Chip-Subsidy Race, Float Supply Links In FX, The non-US Dollars are taking advantage of the Greenback’s loss of momentum, and the Aussie in particular given an unexpected boost from building approvals completely confounding expectations for a fall, while a spike in iron ore prices overnight provided additional incentive amidst somewhat mixed external impulses via Chinese PMIs. Hence, Aud/Usd is leading the chasing pack and back up around 0.7200, Usd/Cad is retreating through 1.2750 and away from decent option expiry interest at 1.2755 and between 1.2750-40 (in 1.3 bn and 1 bn respectively) with some assistance from the latest bounce in crude benchmarks and Nzd/Usd is still trying to tag along, but capped into 0.6900 as the Aud/Nzd cross continues to grind higher and hamper the Kiwi. DXY/GBP/JPY/EUR/CHF - It’s far too early to call time on the Buck’s impressive rally and revival from recent lows, but it has stalled following a midweek extension that propelled the index to the brink of 94.500, at 94.435. The DXY subsequently slipped back to 94.233 and is now meandering around 94.300 having topped out at 94.401 awaiting residual rebalancing flows for the final day of September, Q3 and the half fy that Citi is still classifying as Dollar positive, albeit with tweaks to sd hedges for certain Usd/major pairings. Also ahead, the last US data and survey releases for the month including final Q2 GDP, IJC and Chicago PMI before another raft of Fed speakers. Meanwhile, Sterling has gleaned some much needed support from upward revisions to Q2 UK GDP, a much narrower than forecast current account deficit and upbeat Lloyds business barometer rather than sub-consensus Nationwide house prices to bounce from the low 1.3600 area vs the Greenback and unwind more of its underperformance against the Euro within a 0.8643-12 range. However, the latter is keeping tabs on 1.1600 vs its US peer in wake of firmer German state CPI prints and with the aforementioned Citi model flagging a sub-1 standard deviation for Eur/Usd in contrast to Usd/Jpy that has been elevated to 1.85 from a prelim 1.12. Nevertheless, the Yen is deriving some traction from the calmer yield backdrop rather than disappointing Japanese data in the form of ip and retail sales to contain losses under 112.00, and the Franc is trying to do the same around 0.9350. SCANDI/EM - The tables have been turning and fortunes changing for the Nok and Sek, but the former has now given up all and more its post-Norges Bank hike gains and more as Brent consolidates beneath Usd 80/brl and the foreign currency purchases have been set at the same level for October as the current month. Conversely, the latter has taken heed of a hawkish hue to the latest set of Riksbank minutes and the fact that a few Board members discussed a rate path that could indicate a rise at the end of the forecast period. Elsewhere, the Zar looks underpinned by marginally firmer than anticipated SA ppi and private sector credit, while the Mxn is treading cautiously ahead of Banxico and a widely touted 25 bp hike. In commodities, WTI and Brent futures are choppy but trade with modest gains heading into the US open and in the run-up to Monday’s OPEC+ meeting. The European session thus far has been quiet from a news flow standpoint, but the contracts saw some fleeting upside after breaking above overnight ranges, albeit the momentum did not last long. Eyes turn to OPEC+ commentary heading into the meeting, which is expected to be another smooth affair, according to Argus sources. As a reminder, the group is expected to stick to its plan to raise output by 400k BPD despite outside pressure to further open the taps in a bid to control prices. Elsewhere, as a mild proxy for Chinese demand, China’s Sinopec noted that all LNG receiving terminals are to be operated at full capacity. WTI trades on either side of USD 75/bbl (vs low USD 74.54/bbl), while its Brent counterpart remains north of USD 78/bbl (vs low USD 77.66/bbl). Turning to metals, spot gold and silver continue to consolidate after yesterday’s Dollar induced losses, with the former finding some support around the USD 1,725/oz mark and the latter establishing a floor around USD 21.50/oz. Over to base metals, Dalian iron ore futures rose to three-week highs amid pre-holiday Chinese demand and after Fortescue Metals Group halted mining operations at a Pilbara project. Conversely, LME copper is on a softer footing as the Buck holds onto recent gains. US Event Calendar 8:30am: 2Q PCE Core QoQ, est. 6.1%, prior 6.1% 8:30am: 2Q GDP Price Index, est. 6.1%, prior 6.1% 8:30am: 2Q Personal Consumption, est. 11.9%, prior 11.9% 8:30am: Sept. Continuing Claims, est. 2.79m, prior 2.85m 8:30am: 2Q GDP Annualized QoQ, est. 6.6%, prior 6.6% 8:30am: Sept. Initial Jobless Claims, est. 330,000, prior 351,000 9:45am: Sept. MNI Chicago PMI, est. 65.0, prior 66.8 Central Bank speakers 10am: Fed’s Williams Discusses the Fed’s Pandemic Response 10am: Powell and Yellen Appear Before House Finance Panel 11am: Fed’s Bostic Discusses Economic Mobility 11:30am: Fed’s Harker Discusses Sustainable Assets and Financial... 12:30pm: Fed’s Evans Discusses Economic Outlook 1:05pm: Fed’s Bullard Makes Opening Remarks at Book Launch 2:30pm: Fed’s Daly Speaks at Women and Leadership Event Government Calendar 10am ET: Treasury Secretary Yellen, Fed Chair Powell appear at a House Financial Services Committee hearing on the Treasury, Fed’s pandemic response 10:30am ET: Senate begins voting process for continuing resolution that extends U.S. government funding to December 3 10:30am ET: Senate Commerce subcommittee holds hearing on Facebook, Instagram’s influence on kids with Antigone Davis, Director, Global Head of Safety, Facebook 10:45am ET: House Speaker Nancy Pelosi holds weekly press briefing DB's Jim Reid concludes the overnight wrap I’ll be getting my stitches out of my knee today and will have a chance to grill the surgeon who I think told me I’ll probably soon need a knee replacement. I say think as it was all a bit of a medicated blur post the operation 2 weeks ago. These have been a painfully slow 2 weeks of no weight bearing with another 4 to go and perhaps all to no avail. As you can imagine I’ve done no housework, can’t fend much for myself, or been able to control the kids much over this period. I’m not sure if having bad knees are grounds for divorce but I’m going to further put it to the test over the next month. In sickness and in health I plea. Like me, markets are hobbling into the end of Q3 today even if they’ve seen some signs of stabilising over the last 24 hours following their latest selloff, with equities bouncing back a bit and sovereign bond yields taking a breather from their recent relentless climb. It did feel that we hit yield levels on Tuesday that started to hurt risk enough that some flight to quality money recycled back into bonds. So the next leg higher in yields (which I think will happen) might be met with more risk off resistance, and counter rallies. The latest moves came amidst relatively dovish and supportive comments from central bank governors at the ECB’s forum yesterday, but sentiment was dampened somewhat as uncertainty abounds over a potential US government shutdown and breaching of the debt ceiling, after both houses of Congress could not agree on a plan to extend government funding. Overnight, there have been signs of progress on the shutdown question, with Majority Leader Schumer saying that senators had reached agreement on a stopgap funding measure that will fund the government through December 3, with the Senate set to vote on the measure this morning.However, we’re still no closer to resolving the debt ceiling issue (where the latest estimates from the Treasury Department point to October 18 as the deadline), and tensions within the Democratic party between moderates and progressives are threatening to sink both the $550bn bipartisan infrastructure bill and the $3.5tn reconciliation package, which together contain much of President Biden’s economic agenda. We could see some developments on that soon however, as Speaker Pelosi said yesterday that the House was set to vote on the infrastructure bill today. Assuming the vote goes ahead later, this will be very interesting since a number of progressive Democrats have said that they don’t want to pass the infrastructure bill without the reconciliation bill (which contains the administration’s other priorities on social programs). This is because they fear that with the infrastructure bill passed (which moderates are keen on), the moderates could then scale back the spending in the reconciliation bill, and by holding out on passing the infrastructure bill, this gives them leverage on reconciliation. House Speaker Pelosi and Majority Leader Schumer were in the Oval Office with President Biden yesterday, and a White House statement said that Biden spoke on the phone with lawmakers and engagement would continue into today. So an important day for Biden’s agenda. Against this backdrop, risk assets made a tentative recovery yesterday, with the S&P 500 up +0.16% and Europe’s STOXX 600 up +0.59%. However, unless we get a big surge in either index today, both indices remain on track for their worst monthly performances so far this year, even if they’re still in positive territory for Q3 as a whole. Looking elsewhere, tech stocks had appeared set to pare back some of the previous day’s losses, but a late fade left the NASDAQ down -0.24% and the FANG+ index down a greater -0.72%. Much of the tech weakness was driven by falling semiconductor shares (-1.53%), as producers have offered investors poor revenue guidance on the heels of the ongoing supply chain issues that are driving chip shortages globally. Outside of tech, US equities broadly did better yesterday with 17 of 24 industry groups gaining, led by utilities (+1.30%), biotech (+1.05%) and food & beverages (+1.00%). Similarly, while they initially staged a recovery, small caps in the Russell 2000 (-0.20%) continued to struggle. One asset that remained on trend was the US dollar. The greenback continued its climb yesterday, with the dollar index increasing +0.61% to close at its highest level in over a year, exceeding its closing high from last November. Over in sovereign bond markets, the partial rebound saw yields on 10yr Treasuries down -2.1bps at 1.517%, marking their first move lower in a week. And there was much the same pattern in Europe as well, where yields on 10yr bunds (-1.4bps), OATs (-1.3bps) and BTPs (-3.1bps) all moved lower as well. One continued underperformer were UK gilts (+0.3bps), and yesterday we saw the spread between 10yr gilt and bund yields widen to its biggest gap in over 2 years, at 120bps. Staying on the UK, the pound (-0.81%) continued to slump yesterday, hitting its lowest level against the dollar since last December, which comes as the country has continued to face major issues over its energy supply. Yesterday actually saw natural gas prices take another leg higher in both the UK (+10.09%) and Europe (+10.24%), and the UK regulator said that three smaller suppliers (who supply fewer than 1% of domestic customers between them) had gone out of business. This energy/inflation/BoE conundrum is confusing the life out of Sterling 10 year breakevens. They rose +18bps from Monday morning to Tuesday lunchtime but then entirely reversed the move into last night’s close. This is an exaggerated version of how the world’s financial markets are puzzling over whether breakevens should go up because of energy or go down because of the demand destruction and central bank response. Central bankers were in no mood to panic yesterday though as we saw Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda all appear on a policy panel at the ECB’s forum on central banking. There was much to discuss but the central bank heads all maintained that this current inflation spike will relent with Powell saying that it was “really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy -- which is a process that will have a beginning, a middle and an end.” ECB President Lagarde shared that sentiment, adding that “we certainly have no reason to believe that these price increases that we are seeing now will not be largely transitory going forward.” Overnight in Asia, equities have seen a mixed performance, with the Nikkei (-0.40%), and the Hang Seng (-1.08%) both losing ground, whereas the Kospi (+0.41%) and the Shanghai Composite (+0.30%) have posted gains. The moves came amidst weak September PMI data from China, which showed the manufacturing PMI fall to 49.6 (vs. 50.0 expected), marking its lowest level since the height of the Covid crisis in February 2020. The non-manufacturing PMI held up better however, at a stronger 53.2 (vs. 49.8 expected), although new orders were beneath 50 for a 4th consecutive month. Elsewhere, futures on the S&P 500 (+0.50%) and those on European indices are pointing to a higher start later on, as markets continue to stabilise after their slump earlier in the week. Staying on Asia, shortly after we went to press yesterday, former Japanese foreign minister Fumio Kishida was elected as leader of the governing Liberal Democratic Party, and is set to become the country’s next Prime Minister. The Japanese Diet will hold a vote on Monday to elect Kishida as the new PM, after which he’ll announce a new cabinet, and attention will very soon turn to the upcoming general election, which is due to take place by the end of November. Our Chief Japan economist has written more on Kishida’s victory and his economic policy (link here), but he notes that on fiscal policy, Kishida’s plans to redistribute income echo the shift towards a greater role for government in the US and elsewhere. There wasn’t a massive amount of data yesterday, though Spain’s CPI reading for September rose to an above-expected +4.0% (vs. 3.5% expected), so it will be interesting to see if something similar happens with today’s releases from Germany, France and Italy, ahead of the Euro Area release tomorrow. Otherwise, UK mortgage approvals came in at 74.5k in August (vs. 73.0k expected), and the European Commission’s economic sentiment indicator for the Euro Area rose to 117.8 in September (vs. 117.0 expected). To the day ahead now, and one of the highlights will be Fed Chair Powell’s appearance at the House Financial Services Committee, alongside Treasury Secretary Yellen. Other central bank speakers include the Fed’s Williams, Bostic, Harker, Evans, Bullard and Daly, as well as the ECB’s Centeno, Visco and Hernandez de Cos. On the data side, today’s highlights include German, French and Italian CPI for September, while in the US there’s the weekly initial jobless claims, the third estimate of Q2 GDP and the MNI Chicago PMI for September. Tyler Durden Thu, 09/30/2021 - 07:49.....»»

Category: blogSource: zerohedgeSep 30th, 2021

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80

Futures Slide, Nasdaq Plunges As Yields Surge And Oil Tops $80 For much of 2021, a vocal contingent of market bulls had claimed that there is no way the broader market could sell off as long as the gigacap tech "general" refused to drop. Well, it looks like that day is finally upon us because this morning US equity futures are sliding again, continuing their Monday drop as yields from the US to Germany again, the 10Y TSY rising as high as 1.55%, driven to an extent by Fed tapering fears but mostly by the surge in oil which has pushed Brent above $80, the highest price since late 2018. The dollar gained amid the deteriorating global supply crunch from oil to semiconductors. The surge in oil sparked a new round of stagflation fears, sending Nasdaq futures down 240 points or 1.3% as the yield on the benchmark 10-year U.S. Treasury climbed sharply. S&P 500 and Dow Jones futures also retreated, with spoos sliding below 4,400 as to a session low of 4,390. Rising bond yields prompted a shift from growth to cyclical stocks in the United States, in a move that analysts expect could become more permanent after a prolonged period of supressed bond yields. The premarket selloff was led by semiconductor stocks which tracked similar falls for European peers, as a rising 10-year Treasury yield puts pressure on the tech sector. Applied Materials Inc. led a slump in chip stocks in New York premarket trading while Nvidia was down 2.6%, AMD -2.1%, Applied Materials -2.9%, Micron -1.6%. Meanwhile retail trader favorite meme stock Naked Brand Group, an underwear and swimwear retailer, rises again after having surged 40% in the past two trading sessions after Chairman Justin Davis-Rice said in a letter to shareholders that he believes the company has found a “disruptive” potential acquisition in the clean technology sector. Frequency Electronics also soared after being awarded a contract by the Office of Naval Research to develop an atomic clock. Chinese stocks listed in the U.S. were mixed and semiconductor stocks declined. Here are some of the other notable U.S. movers today: iPower (IPW US) shares rise as much as 61% in U.S. premarket trading after the online hydroponics equipment retailer posted 4Q and FY21 earnings Alibaba (BABA US) rises 2.5% in U.S. premarket trading after the company’s shares listed in Hong Kong rose, adding to the Hang Seng Tech Index’s gains Frequency Electronics (FEIM US) soars 20% in U.S. premarket trading after being awarded a contract by the Office of Naval Research to develop an atomic clock Concentrix (CNXC) jumped 5.9% in Monday after hours trading after setting its first dividend payment and buyback program since being spun off from from Synnex in December Brookdale Senior Living (BKD US) shares fell in extended trading on Monday after announcing a $200 million convertible bond offering Altimmune (ALT US) rose as much as 4.2% in Monday postmarket trading on plans to announce results for an early stage study of ALT-801 in overweight people on Tuesday Ziopharm Oncology (ZIOP US) fell in extended trading after company said it cut about 60 positions, or a more than 50% reduction in personnel, to extend its cash runway into 1H 2023 Montrose Environmental Group (MEG US) was down 2.8% Monday postmarket after offering shares via JPMorgan, BofA Securities, William Blair The main catalyst for the stock selloff was the continued drop in Treasurys which sent the 10-year Treasury rising as high as 1.55% while shorter-dated rates surged toward pre-pandemic levels. This in turn was driven by the relentless meltup in commodities: overnight Brent roared above $80 a barrel - on its way to Goldman's revised $90 price target - on louder signs that demand is running ahead of supply and depleting inventories as the world finds itself in an unprecedented energy crisis. The international crude benchmark extended a recent run of gains to hit the highest since October 2018, while West Texas Intermediate also climbed. Oil’s latest upswing has come with a flurry of bullish price predictions from banks and traders, forecasts for surging demand this winter, and speculation the industry isn’t investing enough to maintain supplies. The jump to $80 also is adding inflationary pressure to the global economy at a time when prices of energy commodities are soaring. European natural gas, carbon permits and power rose to fresh records Tuesday, with little sign of the rally slowing. As Bloomberg notes, traders have begun reassessing valuations amid multiplying global risks, while Fed officials have communicated increasingly hawkish signals in recent days as supply-chain bottlenecks threaten to keep inflation elevated. China’s growth slowdown which saw Goldman lower its q/q Q3 GDP forecast to a flat 0.0%, and a debt crisis in the nation’s property market.have also fueled the risk-off shift. "Central bankers have set out how they want to normalize monetary policy for some time,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “That process could start soon. The realization of this has the potential to provoke some volatility in rates and equities." Elsewhere, European stocks also declined with the Stoxx Europe 600 dragged down most by technology shares. Europe’s Stoxx Tech Index drops as much as 2.8% to a five-week low after falling 1.5% on Monday having previously touched its highest level since 2000 earlier in the month. Single-stock downgrades also weighed. Stocks which performed particularly well this year are among the biggest fallers, with chip equipment makers BE Semi -4.6% and ASML -4.4%, and chipmaker Nordic Semi down 4.2%. Among other laggards, Logitech drops as much as 8.5% after being downgraded to underweight at Morgan Stanley. Earlier in the session, Asian stocks fell for the first time in four days as declines in technology names overshadowed a rally in energy shares.  The MSCI Asia Pacific Index dropped as much as 0.7%, with a jump in U.S. Treasury yields weighing on richly-valued tech stocks. That’s even as the region’s oil and gas shares climbed amid signs of a global energy crunch. Chipmakers Taiwan Semiconductor Manufacturing and Samsung Electronics were the biggest drags on the Asian benchmark. “The climb in yields led to the selling of growth stocks that have been strong, with investors rotating into names that are sensitive to business cycles - not unlike what happened in U.S. equities,” said Shutaro Yasuda, an analyst at Tokai Tokyo Research Center.  Asian equities have been recovering after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. As worries over the distressed property developer abate, the pace of rise in Treasury yields and global inflation data are being closely watched for clues on the U.S. Federal Reserve’s policy stance. Australia’s equity benchmark was among the biggest losers in Asia Tuesday, dragged down by losses in mining and healthcare stocks. Still, broad-based gains in oil explorers and refiners helped mitigate the Asian market’s retreat. In South Korea, importers and distributors of liquefied petroleum gas and liquefied natural gas rallied as the price of natural gas jumped. The future of Evergrande is being forensically scrutinized by investors after the company last Friday did not meet a deadline to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default and Shenzen authorities are now investigating the company's wealth management unit. Without making reference to Evergrande, the People's Bank of China (PBOC) said Monday in a statement posted to its website that it would "safeguard the legitimate rights of housing consumers". Widening power shortages in China, meanwhile, halted production at a number of factories including suppliers to Apple Inc and Tesla Inc and are expected to hit the country's manufacturing sector and associated supply chains. Analysts cautioned the ongoing blackouts could affect the country's listed industrial stocks. "What we see in China with the developers and the blackouts is going to be a negative weight on the Asian markets," Tai Hui, JPMorgan Asset Management's Asian chief market strategist told Reuters. "Most people are trying to work out the potential contagion effect with Evergrande and how far and wide it could go. We keep monitoring the policy response and we have started to see some shift towards supporting homebuyers which is what we have been expecting." In rates, as noted above, the selloff in Treasuries gathered pace in Asia, early Europe session leaving yields cheaper by 3.5bp to 5.5bp across the curve with 20s and 30s extending above 2% and 10-year through 1.50%. Treasury 10-year yields traded around 1.53%, cheaper by 4.5bp on the day after topping at 1.55%, highest since mid-June; in front- and belly, 2- and 5-year yields remain near cheapest levels in at least 18 months; in 10-year sector, gilts lag by 3bp vs. Treasuries while German yields are narrowly richer. Gilts underperformed further, where long-end yields are cheaper by up to 7.5bp on the day. Treasury futures volumes over Asia, early European session were at more than twice usual levels, with most activity seen in 10-year note contract; eurodollar futures volumes were also well above recent average. With recent aggressive move higher in yields, threat of convexity hedging has exacerbated moves as rate hike premium continues to filter into the curve after last week’s FOMC. Auctions conclude Tuesday with 7-year note sale, while busy Fed speaker slate includes Fed Chair Powell. In FX, the Bloomberg dollar index reached the highest level in more than a month as rising energy costs drove up Treasury yields for a fourth session. The dollar gained against all its peers; Japan’s currency slid for a fifth day against the greenback before a speech Tuesday from Fed Chair Jerome Powell who will say inflation is elevated and is likely to remain so in coming months, according to prepared remarks. Treasury two-year yields rose to the highest since March 2020. “Dollar-yen saw the clearest expression of Treasury yield increases and we attributed this divergence to the surge in energy prices,” says Christopher Wong, senior foreign-exchange strategist at Malayan Banking in Singapore. U.S. natural gas futures soared to their highest since February 2014 on concern over tight inventories. Brent oil topped $80 a barrel amid signs demand is outrunning supply. The euro slipped to hit its lowest level since Aug. 20, nearing the year-to-date low of $1.1664. The Treasury yield curve bear steepened; euro curves followed suit, with the yield on U.K. 10-year notes soaring past 1% for the first time since March 2020 on the prospects for Bank of England policy tightening. In commodities, Crude futures extend Asia’s gains. WTI rises as much as 1.6% to highs of $76.67 before stalling. Brent holds above $80. Spot gold trades around last week’s lows near $1,740/oz. Base metals are mixed: LME aluminum outperforming, rising as much as 1.1%; nickel and copper are in the red. Looking at the day ahead, one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Market Snapshot S&P 500 futures down 0.7% to 4,403.50 STOXX Europe 600 down 1.2% to 456.83 MXAP down 0.4% to 200.06 MXAPJ down 0.4% to 641.05 Nikkei down 0.2% to 30,183.96 Topix down 0.3% to 2,081.77 Hang Seng Index up 1.2% to 24,500.39 Shanghai Composite up 0.5% to 3,602.22 Sensex down 1.4% to 59,209.94 Australia S&P/ASX 200 down 1.5% to 7,275.55 Kospi down 1.1% to 3,097.92 Brent Futures up 0.8% to $80.15/bbl Gold spot down 0.4% to $1,742.61 U.S. Dollar Index up 0.20% to 93.57 German 10Y yield rose 2.7 bps to -0.196% Euro down 0.1% to $1.1681 Top Overnight News from Bloomberg Chinese authorities are striving to signal to traders that whatever happens to China Evergrande Group, its debt crisis won’t spiral out of control or derail the economy Brent oil roared above $80 a barrel, the latest milestone in a global energy crisis, on signs that demand is running ahead of supply and depleting inventories As the dust settles on Germany’s election, control over the finances of Europe’s largest economy could fall to a 42-year-old former tech entrepreneur who wants to lower taxes and tighten spending Wells Fargo agreed to pay $37 million in penalties and forfeiture to settle U.S. claims that it overcharged almost 800 commercial customers that used its foreign exchange services, the latest in a series of scandals at the bank A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mixed following on from a Wall Street lead where value outperformed growth and tech suffered as yields rose. ASX 200 (-1.5%) was the laggard with losses in healthcare, gold miners and tech frontrunning the declines which dragged the index beneath 7300. Nikkei 225 (-0.2%) was lacklustre and briefly approached 30k to the downside but then bounced off worse levels amid a softer currency, while the KOSPI (-1.1%) also declined following a suspected North Korean ballistic missile launch and with a recent South Korean court order to sell seized Mitsubishi Heavy assets as compensation for wartime forced labour, threatening a flare up of tensions between Japan and South Korea. Hang Seng (+1.2%) and Shanghai Comp. (+0.5%) were underpinned after the PBoC continued to inject liquidity ahead of the approaching National Day holidays and with Hong Kong led higher by strength in property names after the PBoC stated it will safeguard legitimate rights and interests of housing consumers which also provided Evergrande-related stocks further reprieve from their recent sell-off. Finally, 10yr JGBs retreated on spillover selling from T-notes after yields rose on the back of further Fed taper rhetoric and with prices not helped by the uninspiring 2yr and 5yr auctions stateside, while weaker results at the 40yr JGB auction also provided a headwind for prices. Top Asian News Top-Performing Global Luxury Stock Seen Cooling After 680% Gain China Power Price Hike Sought Amid Supply Crunch: Energy Update Macau Evacuates Airport Quarantine Hotel After Outbreak Iron Ore Dips Again as China Power Crisis Adds to Steel Curbs Bourses in Europe extended on the losses seen at the cash open and trade lower across the board (Euro Stoxx 50 -1.7%; Stoxx 600 -1.7%) as sentiment retreated from a mixed APAC handover as month-end looms alongside tier 1 data and a slew of central bank speakers. US equity futures have also succumbed to the mood in Europe alongside the surge in global yields – which takes its toll on the NQ (-1.5%) vs the ES (-0.8%), YM (-0.4%) and RTY (-0.3%). From a more technical standpoint, ESZ1 fell under its 50 DMA (4,431) and tested the 4,400 level to the downside, whilst NQZ1 briefly fell under 15k and the YMZ1 inches towards its 100 DMA (34,489). Back to Europe, the FTSE 100 (-0.4%) sees losses to a lesser extent vs its European peers as energy prices and yields keep the index oil giants and banks supported – with some of the top gainers including Shell (+2.8%), BP (+2.1%). Sectors in Europe are predominantly in the red, but Oil & Gas buck the trend. Sectors also portray more of a defensive bias, whilst the downside sees Tech, Real Estate, and Travel & Leisure at the foot of the bunch, with the former hit by the rise in yields, which sees the US 10yr further above 1.50%, the 20yr above 2.00% and the UK 10yr hitting 1.00% for the first time since March 2020. In terms of individual movers, Smiths Group (+3.8%) is at the top of the Stoxx 600 following encouraging earnings. ING (+0.3%) holds onto gains after sources noted SocGen's (-0.6%) interest in ING's retail banking arm. Finally, chip-maker ASM International (-3.5%) has succumbed to the broader tech weakness despite upping its guidance and announcing capacity expansion by early 2023. Top European News U.K. 10-Year Yield Rises Past 1% for First Time Since March 2020 Goldman’s Petershill Unit Valued at $5.5 Billion in U.K. IPO Go-Ahead Sinks as U.K. Takes Over Southeastern Rail Franchise Hedge Funds and Private Equity Are Targeting European Soccer In FX, It took a while for the index to breach resistance ahead of 93.500, but when US Treasuries resumed their bear-steepening run and the intensity of the moves in futures and cash picked up pace the break beyond the half round number was relatively quick and decisive. Indeed, the DXY duly surpassed its post-FOMC peak (93.526) and a prior recent high from August 19 (93.587) on the way to reaching 93.619 amidst almost all round Dollar gains, as 5, 10, 20 and 30 year yields all rallied through or further above psychological levels (such as 1%, 1.5% and 2% in the case of the latter two maturities). However, petro and a few other commodity currencies are displaying varying degrees of resilience in the face of general Greenback strength that is compounded by buy signals for September 30 rebalancing on spot month, quarter and half fy end. Ahead, trade data, consumer confidence, more regional Fed surveys, speakers and the 7 year auction. NZD/CHF/JPY/AUD - The Kiwi was already losing altitude above 0.7000 vs its US counterpart and 1.0400 against the Aussie on Monday, so the deeper retreat is hardly surprising to circa 0.6975 and 1.0415 awaiting some independent impetus that may come via NZ building consents tomorrow. Meanwhile, the Franc has recoiled towards 0.9300 in advance of comments from SNB’s Maechler and the Yen continues to suffer on the aforementioned rampant yield and steeper curve trajectory on top of a more pronounced 1+ sd portfolio hedge selling requirement vs the Buck, with Usd/Jpy meandering midway between 110.94-111.42 parameters irrespective of renewed risk aversion due to same bond rout dynamic. Back down under, Aud/Usd has faded from around 0.7311 to the low 0.7260 area, though holding up a bit better in wake of not quite as weak as forecast final retail sales overnight. CAD/EUR/GBP - All softer against their US rival, but the Loonie putting up a decent fight with ongoing help from WTI crude that has now topped Usd 76.50/brl, and Usd/Cad also has decent option expiry interest to keep an eye on given 1.2 bn rolling off at 1.2615 and an even heftier 3 bn at 1.2675 compared to current extremes spanning 1.2693-1.2652. Elsewhere, the Euro has lost its battle to stay afloat of multiple sub-1.1700 lows even though EGBs are tumbling alongside USTs and the same goes for Sterling in relation to the 1.3700 handle irrespective of the 10 year Gilt touching 1% for the first time since March 2020. SCANDI/EM - Brent’s advances on Usd 80 brl have been offset to an extent by soft Norwegian retail sales data, as the Nok pares more of its post-Norges Bank gains, while the Sek looks somewhat caught between stalls following a recovery in Swedish consumption, but big swing in trade balance from surplus to larger deficit. However, the Try is taking no delight from the costlier price of oil or remarks from Turkey’s Deputy Finance Minister contending that interest rates can move lower by reducing the current account and budget deficits, or conceding that Dollarisation is a problem and steps need to be taken to enhance confidence in the Lira. Conversely, the Cnh and Cny are still holding a firm line following another net injection of 2 week funds from the PBoC and the Governor saying that China will lengthen the period for the implementation of normal monetary policy, adding that it has conditions to keep a normal and upward yield curve, as it sees no need to purchase assets at present. In commodities, WTI and Brent futures have extended on the gains seen during APAC hours, which saw the Brent November contract topping USD 80/bbl, albeit the volume and open interest has migrated to the December contract – which topped out just before the USD 80/bbl mark. WTI November meanwhile advanced past the USD 76/bbl mark to a current peak at USD 76.67/bbl (vs low USD 75.21/bbl). Desks have been attributing the leg higher to tight supply – with the UK fuel situation further deteriorating amid a shortage of drivers coupled with panic buying. It's worth bearing in mind that the demand side of the equation has also seen supportive, with the US announcing the lifting of international travel curbs recently alongside the economic resilience to the Delta variant heading into the winter period. Traders would also be keeping an eye on the electricity situation in China, which in theory would provide tailwinds for diesel demand via generators, although this could be offset by a slowdown in economic activity due to power outages. There has also been growing noise for OPEC+ to hike output beyond the monthly plan of 400k BPD, with some African nations also struggling to ramp up production due to maintenance issues and lack of investments. Ministers recently noted that the plan would be maintained at next week's confab. As a reminder, the OPEC World Oil Outlook is set to be released at 13:30BST/08:30EDT, although the findings may be stale given the recent developments in crude dynamics. Major banks have also provided commentary on Brent following Goldman Sachs' bullish call recently, with Barclays upping its forecast for both benchmarks due to supply deficits, whilst Morgan Stanley maintained its forecast but suggested that the USD 85/bbl Brent scenario clearly exists. MS also noted that oil inventories continue to draw at high rates and suggest that the market is more undersupplied than generally perceived; the analysts see the market undersupplied into 2022 amid its expectation for further OPEC discipline. Nat gas also remains in focus, with prices +11% at one point, whilst Russia's Kremlin said Russia remains the safeguard of natural gas to Europe and Gazprom is ready to discuss new gas supply contracts with increased volumes to meet rising European demand. It's also worth being aware of the increasing likelihood of state intervention at these levels as nations attempt to save or at least cushion consumers and company margins. Elsewhere, precious metals are under pressure as the Buck remains buoyant, with spot gold still under USD 1,750/oz as it inches closer to the 11th August low of USD 1,722/oz. Spot silver remains within recent ranges above USD 22/oz. Overnight Chinese nickel and tin prices extended losses with traders citing subdued demand, whilst coking coal and coke futures leapt on tight supply. US Event Calendar 8:30am: Aug. Advance Goods Trade Balance, est. -$87.3b, prior -$86.4b, revised -$86.8b 8:30am: Aug. Retail Inventories MoM, est. 0.5%, prior 0.4%; Wholesale Inventories MoM, est. 0.8%, prior 0.6% 9am: July S&P CS Composite-20 YoY, est. 20.00%, prior 19.08% 9am: July S&P/CS 20 City MoM SA, est. 1.70%, prior 1.77% 9am: July FHFA House Price Index MoM, est. 1.5%, prior 1.6% 10am: Sept. Conf. Board Consumer Confidence, est. 115.0, prior 113.8 Expectations, prior 91.4 Present Situation, prior 147.3 10am: Sept. Richmond Fed Index, est. 10, prior 9 Central Bank Speakers 9am: Fed’s Evans Makes Welcome Remarks at Payments Conference 10am: Powell and Yellen Appear Before Senate Banking Panel 1:40pm: Fed’s Bowman Speaks at Community Bank Event 3pm: Fed’s Bostic Discusses the Economic Outlook 7pm: Fed’s Bullard Discusses U.S. Economy and Monetary Policy DB's Jim Reid concludes the overnight wrap What a difference a week makes. You hardly hear the word Evergrande now. We asked in a flash poll last week whether we would still be talking about it in a month or whether it would be a distant memory by then. Maybe we should have narrowed the time frame to a week! We’ve quickly moved on to rate hikes and rising bond yields as the topic de jour. A further rise in the Bloomberg Commodity Spot Index (+1.87%) to a fresh high for the decade helped reinforce the move. Indeed, sovereign bond yields moved higher once again yesterday amidst a sharp rise in inflation expectations, with those on 10yr Treasury yields rising +3.6bps to 1.487%, their highest level in over 3 months. Meanwhile the 2yr yield rose +0.8bps to 0.278%, its highest level since the pandemic began, which comes on the back of last week’s Fed meeting that prompted investors to price in an initial rate hike from the Fed by the end of 2022. The moves in Treasury yields were almost entirely driven by higher inflation breakevens, with 10yr breakevens up +3.7bps. That echoed similar moves in Europe, where the German 10yr breakeven (+4.7bps) hit a post-2013 high of 1.653%, and their Italian counterparts (+3.9bps) hit a post-2011 high. The biggest move was in the UK however, where the 10yr breakeven (+13.2bps) reached its highest level since 2008, which comes amidst a continued fuel shortage in the country, alongside another rise in UK natural gas futures, which were up +8.20% yesterday to £190/therm, exceeding the previous closing peak set a week earlier. We were waiting for the wind to blow in this country to get alternatives back on stream and boy did it blow yesterday but with no impact yet on gas prices. Lower real rates dampened the rise in yields across the continent, though yields on 10yr bunds (+0.5bps), OATs (+0.9bps), BTPs (+1.3bps) and gilts (+2.7bps) had all moved higher by the close of trade. Those spikes in commodity prices were evident more broadly yesterday, with energy prices in particular seeing a major increase. Brent crude oil prices were up +1.84% to $79.53/bbl, marking their highest closing level since late-2018, and this morning in trading they have now exceeded the $80/bbl mark with a further +0.94% increase. It was much the same story for WTI (+1.99%), which closed at $75.45/bbl, which was its own highest closing level since 2018 too. And those pressures in UK natural gas prices we mentioned above were seen across Europe more broadly, where futures were up +8.92%. With yields moving higher and inflationary pressures growing stronger, tech stocks struggled significantly yesterday, with the NASDAQ down -0.52%. The megacap tech FANG+ index fell -0.15% on the day, but was initially down as much as -1.7% in early trading. The NASDAQ underperformed the S&P 500, which was only down -0.28%, but that masked significant sectoral divergences, with interest-sensitive growth stocks struggling, just as cyclicals more broadly posted fresh gains. More specifically, energy (+3.43%), bank (+2.29%) and autos (+2.19%) led the S&P, while biotech (-1.65%) and software (-1.39%) shares were among the largest laggards. European equities were also pretty subdued, with the STOXX 600 down -0.19%, though the DAX was up +0.27% following the results of the German election, which removed the tail risk outcome of a more left-wing coalition featuring the SPD, the Greens and Die Linke. Staying on the political scene, we are now less than 72 hours away from a potential US government shutdown as it stands. As was expected, Republicans in the Senate blocked the House-passed measure to fund the government for another 2 months and raise the debt ceiling for 2 years. While Democrats have not put forward their alternative strategy if Republicans refuse to vote to lift the debt ceiling, their only option would be to attach it to the budget reconciliation plan that currently makes up much of the Biden economic agenda. In an effort to keep all party members on board, Speaker Pelosi moved the vote on the $550bn bipartisan infrastructure bill to Thursday in order to give all sides more time to finish the larger budget bill and pass both together. It is a going to be a very busy Thursday, since Congress will have to also pass the funding bill that day. Republicans and Democrats already agree on a funding bill to keep the government open that does not include the debt ceiling increase so it is just a matter of how exactly the debt ceiling provision goes through without a Republican Senate vote. Overnight in Asia, equity indices are seeing a mixed performance. On the one hand, most of the region including the Nikkei (-0.24%) and KOSPI (-0.80%) are trading lower as investors begin to price in tighter monetary policy from the Fed. However, the Hang Seng (+1.50%), Shanghai Composite (+0.53%) and CSI (0.38%) have all advanced after the People’s Bank of China said that they would ensure a “healthy property market”. Looking forward, US equity futures are pointing to little change, with those on the S&P 500 down just -0.05%, and 10yr Treasury yields have risen +1.9bps this morning to trade above 1.50% again. Back to the German election, where the aftermath yesterday saw various party leaders assess the results and stake their claims to participate in a new coalition. As a reminder, the SPD came in first place with 25.7%, but the CDU/CSU weren’t far behind on 24.1%, making it mathematically possible for either to form a government in a coalition with the Greens and the FDP. The SPD’s chancellor candidate, Finance Minister Olaf Scholz, appealed for the Greens and FDP to join him in forming a government, and told the media that he wanted to form a coalition before Christmas. Meanwhile Green co-leader Robert Habeck said that “Of course there is a certain priority for talks with the SPD and the FDP”, but said that this didn’t mean they wouldn’t speak with the CDU/CSU either. As the SPD were calling for an alliance, the tone sounded more negative from the CDU’s leadership, even though Armin Laschet said that he had not given up on the idea of forming a government. Notably, Laschet said that no party was able to draw a clear mandate from the result, including the SPD, and this echoed remarks from the CSU leader Markus Söder, who said that the conservatives had no mandate to form a government, though they could “make an offer out of a sense of responsibility for the country.” Meanwhile, attention will turn to the FDP and the Greens to see which way they’re leaning when it comes to forming a government. FDP leader Lindner said that he would hold preliminary talks with the Greens, after which they would be open to invitations from either the SPD or the CDU/CSU for further discussions. Back on the UK, there was an interesting speech from BoE Governor Bailey yesterday, where he echoed the line from the MPC minutes last week, saying that “all of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainable over the medium-term”. However, he also said that their view was that “the price pressures will be transient”, and that “monetary policy will not increase the supply of semi-conductor chips … nor will it produce more HGV drivers.” He then further added that tighter policy “could make things worse in this situation by putting more downward pressure on a weakening recovery of the economy”. So a bit of a mixed message of backing rate hike expectations but warning about its impact on growth. Over in the US we heard from a host of Fed speakers with Governor Brainard saying that while “employment is still a bit short of the mark” of “substantial further progress”, she expects that the labour market will recover enough to start tapering asset purchases soon. Separately on the inflation debate, Minneapolis Fed President Kashkari argued that this year’s pickup in US inflation has been a byproduct of the supply disruptions associated with Covid and that policy makers should not react to it just yet. He cited the need to get US employment back up as the Fed’s “highest priority”. New York Fed President Williams agreed with his colleague, saying that “this process of adjustment may take another year or so to complete as the pandemic-related swings in supply and demand gradually recede.” And Chicago Fed President Evans is even worried about downside inflation risks, as he is " more uneasy about us not generating enough inflation in 2023 and 2024 than the possibility that we will be living with too much.” Lastly, news came out yesterday that Boston Fed President Rosengren will retire this week due to health concerns. He was due to step down in June regardless as there is a mandatory retirement age of 65. Dallas Fed President Kaplan also announced his retirement yesterday, which will take effect October 8th. Both officials have drawn scrutiny in recent days stemming from their recent disclosure of trading activity over the last year, though the activity did not violate the Fed’s ethics code even as Fed Chair Powell announced an official review of those rules. The Boston Fed President will be a voting member on the FOMC next year, and the Dallas Fed President in 2023. Running through yesterday’s data, the preliminary reading for US durable goods orders in August showed growth of +1.8% (vs. +0.7% expected), and the previous month was also revised up to show growth of +0.5% (vs. -0.1% previously). Meanwhile core capital goods orders grew by +0.5% (vs. +0.4% expected), and the previous month’s growth was revised up two-tenths. Finally, the Dallas Fed’s manufacturing activity index for September came in at 4.6 (vs. 11.0 expected) – its lowest reading since July 2020. To the day ahead now, and one of the main highlights will be the appearance of Fed Chair Powell, and Treasury Secretary Yellen at the Senate Banking Committee. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Schnabel, Panetta and Kazimir, along with the BoE’s Mann and the Fed’s Evans, Bowman and Bostic. US data highlights include the US Conference Board’s consumer confidence indicator for September and the FHFA house price index for July. Tyler Durden Tue, 09/28/2021 - 07:52.....»»

Category: blogSource: zerohedgeSep 28th, 2021

Rabobank: "When Are The Locusts Due To Arrive?"

Rabobank: "When Are The Locusts Due To Arrive?" By Michael Every of Rabobank This is the end of the Jewish festival of Sukkot, one of the less well-known holidays. (Also known as ‘The Feast of the Tabernacles’, it involves eating dinner in an outdoor booth, and waving palm, myrtle, and willow branches, with an etrog, a lemon-like citrus fruit. Really.) However, the Governor of the BOE seems to think it is another Jewish holiday, Passover, where the ceremony involves dipping one’s finger into a glass of red wine, naming the 10 plagues that afflicted ancient Egypt, and saying “dom” as a drop of wine is splashed onto one’s plate for each of: Blood; Frogs; Lice; Flies; Livestock sickness; Boils; Hail; Darkness; and the Killing of the First Born. (There is also usually matza-ball soup, so it gets better.) Governor Bailey’s speech last night argued so many economic plagues are hitting the UK economy, that either Covid was responsible for amplifying them, “...or the gods really are against us,” before asking “When are the locusts due to arrive?” He noted the switch from spending on goods back to services “has not taken place to date on the scale expected”; “the number of high profile supply bottlenecks appears to be increasing”; energy prices are soaring; the labour market is a puzzle; and while inflation is “transitory”, it is still seen at 4% this year (as taxes are also rising); and, “It follows that the monetary policy response, if we need to make one,...should involve Bank Rate not QE. There is no reason to beat about the bush on this point.” In conclusion, “the yards will be hard I’m afraid, and we must stick to the task.” And *I* get accused of being a pessimist! Of course, we have already have the locusts – just not in the UK, but in economies that can afford to see them least, and as food prices already soar. We are hurtling towards Hail, because it’s the UK and winter is coming. Moreover, Darkness looms – because there is no sign of the global energy crisis abating. Indeed, dom, dom, dom! Logically, if supply vs. demand is now the underlying energy issue, this crunch cannot be resolved until natural gas production increases, taking us further away from 2030 targets, or green energy is brought on-line far more rapidly (where it can be), or we cut demand via a recession. Hard yards indeed – and not just for the UK, but for all of us. Indeed, the PBOC says the recovery is “shaky and unbalanced” and will push real rates to fall further (via rate cuts or higher CPI?); the Evergrande-related slump in property is hitting a sector worth 1/3 of GDP; factories are forced to shut down for days each week because coal prices have soared, and electricity prices are fixed, so power plants are losing money; and expectations for China’s Q3 GDP growth are now slashed to zero. That’s exactly the kind of production backdrop which will exacerbate global bottlenecks and supply-chain problems, as now is peak demand for retailers trying to stock up for Black Friday and Xmas against a backdrop of ludicrous shipping rates, crazy energy bills, crippling labour shortages, and consumers facing higher taxes and prices. Someone is going to be eating a lot of unleavened bread ahead, so to speak. (If not for Xmas.) It won’t be the “arrant nonsense” economists at the Fed, who *yet again* did not see any of this coming, but get to shrug and say “whocouldanooed?” Yet their bosses are going, as Rosengren, from the Boston Fed, and Kaplan, from the Dallas Fed, both resigned over stock-trading ethics violations. Fed Chair Powell has not resigned for doing the same with muni bonds, but the decision on who gets the top FOMC job still looms: do the other two resignations suggest a clean sweep, or two sacrificial lambs? US Treasury Secretary Yellen (whose own trading activity when Fed Chair, if any, has not been made public) is also refusing to take the calls of IMF Chief Georgieva, who is herself embroiled in a different ethics scandal. Does the White House really want to see new blood at the IMF and the Fed? To what purpose if so? While waiting for ‘the call’, Powell is to deliver a speech to the Senate Banking Committee today that while far less colourful than the BOE version, will also stress that supply bottlenecks have been larger and longer lasting than anticipated, and that inflation pressures will remain high in coming months - before they ‘naturally’ “abate”. So, not as colourful as the BOE: and not as realistic? ‘This too shall pass’ is the eternal message from the gang who never see what is about to come to pass (except when it helps them trade their own portfolios). Williams from the New York Fed also warned of an “extreme” market backlash if the US debt ceiling is not raised (hitting even FOMC members’ wealth!) - as Republican Senators blocked a Democratic Bill to raise it. This is of course all political posturing tied to the $1.2trn infrastructure bill and the $3.5trn Build Back Better bill, the Byzantine twists and turns of which do not look auspicious at the time of writing given one of the Democrat’s progressive members just stated: “We obviously didn’t envision having Republicans as part of our party,” when referring to Senators Manchin and Sinema, suggesting those two key votes are not there for at least the $3.5trn package – which the progressives insists is a prerequisite for the passage of the $1.2trn bill. Manchin’s reply: “I’m not really good on threats.” We shall find out more over coming days as we build towards what was promised as a Thursday vote. In Europe, the German election looks like, perhaps, we will end up with a coalition of the SDP, FDP, and Greens. As Stefan Koopman notes, if the FDP’s Lindner becomes Finance minister, implications for the EU’s fiscal policy are large (and not expansionary); and he expects Germany to adapt to the harsh geopolitical environment slowly and reluctantly. The same could be said in a different sense of the French. Reportedly, ahead of the key first EU-US Trade and Technology Council tomorrow --and days after the Quad announced a tech/resources tie-up that makes a huge new block with all the green supply-chain inputs required, which Europe does not have secured from anywhere-- Paris is demanding a watering down of the conclusions to develop joint standards in favour of EU “Strategic autonomy”. Quelle mouche t’a piqué? So what are markets making of this all? Well, benchmark US 10-year yields are up 8bp since Friday morning, while 2-year yields are up 4bp. That move and steepening bias says “Morning in America” more than “Darkness” – but is it a bet on US fiscal stimulus and then rate hikes, or just a reflection of entrenched global stagflation? The S&P isn’t at a record high for once – but then again, it’s well off its recent low; and in a world where so much appears to be capable of going wrong so fast, do you want to put your money as an inflation hedge in EM, or the US? Likewise, the USD is hardly stumbling, with EUR now below 1.17, for example, and USD/JPY over 111, although AUD is off its recent low due to commodities, and CNY is still doing its tired “none shall pass” shtick as if nothing serious is happening in its economy. When you hear a buzzing sound it can be a busy, happy market. Or the beating of billions of tiny wings heading your way. Or unhappy consumers in long lines for fuel. Or, most terrifying of all, millions of Western children without the exact Xmas presents they wanted. Tyler Durden Tue, 09/28/2021 - 09:14.....»»

Category: blogSource: zerohedgeSep 28th, 2021

Futures Slide On Growing Stagflation Fears As Treasury Yields Surge

Futures Slide On Growing Stagflation Fears As Treasury Yields Surge US index futures, European markets and Asian stocks all turned negative during the overnight session, surrendering earlier gains as investors turned increasingly concerned about China's looming slowdown - and outright contraction - amid a global stagflationary energy crunch, which sent 10Y TSY yields just shy of 1.50% this morning following a Goldman upgrade in its Brent price target to $90 late on Sunday. At 745 a.m. ET, S&P 500 e-minis were down 4.75 points, or 0.1% after rising as much as 0.6%, Nasdaq 100 e-minis were down 83 points, or 0.54% and Dow e-minis were up 80 points, or 0.23%. The euro slipped as Germany looked set for months of complex coalition talks. While the market appears to have moved beyond the Evergrande default, the debt crisis at China's largest developer festers (with Goldman saying it has no idea how it will end), and data due this week will show a manufacturing recovery in the world’s second-largest economy is faltering faster. A developing energy crisis threatens to crimp global growth further at a time markets are preparing for a tapering of Fed stimulus. The week could see volatile moves as traders scrutinize central bankers’ speeches, including Chair Jerome Powell’s meetings with Congressional panels. “Most bad news comes from China these days,” Ipek Ozkardeskaya, a senior analyst at Swissquote Group Holdings, wrote in a note. “The Evergrande debt crisis, the Chinese energy crackdown on missed targets and the ban on cryptocurrencies have been shaking the markets, along with the Fed’s more hawkish policy stance last week.” Oil majors Exxon Mobil and Chevron Corp rose 1.5% and 1.2% in premarket trade, respectively, tracking crude prices, while big lenders including JPMorgan, Citigroup, Morgan Stanley and Bank of America Corp gained about 0.8%.Giga-cap FAAMG growth names such as Alphabet, Microsoft, Amazon.com, Facebook and Apple all fell between 0.3% and 0.4%, as 10Y yield surged, continuing their selloff from last week, which saw the 10Y rise as high as 1.4958% and just shy of breaching the psychological 1.50% level. While growth names were hit, value names rebounded as another market rotation appears to be in place: industrials 3M Co and Caterpillar Inc, which tend to benefit the most from an economic rebound, also inched higher (although one should obviously be shorting CAT here for its China exposure). Market participants have moved into value and cyclical stocks from tech-heavy growth names after the Federal Reserve last week indicated it could begin unwinding its bond-buying program by as soon as November, and may raise interest rates in 2022. Here are some other notable premarket movers: Gores Guggenheim (GGPI US) shares rise 7.2% in U.S. premarket trading as Polestar agreed to go public with the special purpose acquisition company, in a deal valued at about $20 billion. Naked Brand (NAKD US), one of the stocks caught up in the first retail trading frenzy earlier this year, rises 11% in U.S. premarket trading, extending Friday’s gains. Among other so-called meme stocks in premarket trading: ReWalk Robotics (RWLK) +6.5%, Vinco Ventures (BBIG) +18%, Camber Energy (CEI) +2.9% Pfizer (PFE US) and Opko Health (OPK US) in focus after they said on Friday that the FDA extended the review period for the biologics license application for somatrogon. Opko fell 3.5% in post-market trading. Aspen Group (ASPU) climbed 10% in Friday postmarket trading after board member Douglas Kass buys $172,415 of shares, according to a filing with the U.S. Securities & Exchange Commission. Seaspine (SPNE US) said spine surgery procedure volumes were curtailed in many areas of the U.S. in 3Q and particularly in August. Tesla (TSLA US) and other electric- vehicle related stocks globally may be active on Monday after Germany’s election, in which the Greens had their best-ever showing and are likely to be part of any governing coalition. Europe likewise drifted lower, with the Stoxx Europe 600 Index erasing earlier gains and turning negative as investors weighed the risk to global growth from the China slowdown and the energy crunch. The benchmark was down 0.1% at last check. Subindexes for technology (-0.9%) and consumer (-0.8%) provide the main drags while value outperformed, with energy +2.4%, banks +2% and insurance +1.3%.  The DAX outperformed up 0.5%, after German election results avoided the worst-case left-wing favorable outcome.  U.S. futures. Rolls-Royce jumped 12% to the highest since March 2020 after the company was selected to provide the powerplant for the B-52 Stratofortress under the Commercial Engine Replacement Program. Here are some of the other biggest European movers today IWG rises as much as 7.5% after a report CEO Mark Dixon is exploring a multibillion-pound breakup of the flexible office-space provider AUTO1 gains as much as 6.1% after JPMorgan analyst Marcus Diebel raised the recommendation to overweight from neutral Cellnex falls as much as 4.3% to a two-month low after the tower firm is cut to sell from neutral at Citi, which says the stock is “priced for perfection in an imperfect industry” European uranium stocks fall with Yellow Cake shares losing as much as 6% and Nac Kazatomprom shares declining as much as 4.7%. Both follow their U.S. peers down following weeks of strong gains as the price of uranium ballooned For those who missed it, Sunday's closely-watched German elections concluded with the race much closer than initially expected: SPD at 25.7%, CDU/CSU at 24.1%, Greens at 14.8%, FDP at 11.5%, AfD at 10.3% Left at 4.9%, the German Federal Returning Officer announced the seat distribution from the preliminary results which were SPD at 206 seats, CDU/CSU at 196. Greens at 118, FDP at 92, AfD at 83, Left at 39 and SSW at 1. As it stands, three potential coalitions are an option, 1) SPD, Greens and FDP (traffic light), 2) CDU/CSU, Greens and FDP (Jamaica), 3) SPD and CDU/CSU (Grand Coalition but led by the SPD). Note, option 3 is seen as the least likely outcome given that the CDU/CSU would be unlikely willing to play the role of a junior partner to the SPD. Therefore, given the importance of the FDP and Greens in forming a coalition for either the SPD or CDU/CSU, leaders of the FDP and Greens have suggested that they might hold their own discussions with each other first before holding talks with either of the two larger parties. Given the political calculus involved in trying to form a coalition, the process is expected to play out over several months. From a markets perspective, the tail risk of the Left party being involved in government has now been removed due to their poor performance and as such, Bunds trade on a firmer footing. Elsewhere, EUR is relatively unfazed due to the inconclusive nature of the result. We will have more on this in a subsequent blog post. Asian stocks fell, reversing an earlier gain, as a drop in the Shanghai Composite spooked investors in the region by stoking concerns about the pace of growth in China’s economy.  The MSCI Asia Pacific Index wiped out an advance of as much as 0.7%, on pace to halt a two-day climb. Consumer discretionary names and materials firms were the biggest contributors to the late afternoon drag. Financials outperformed, helping mitigate drops in other sectors.  “Seeing Shanghai shares extending declines, investors’ sentiment has turned weak, leading to profit-taking on individual stocks or sectors that have been gaining recently,” said Shoichi Arisawa, an analyst at Iwai Cosmo Securities. “The drop in Chinese equities is reminding investors about a potential slowdown in their economy.”  The Shanghai Composite was among the region’s worst performers along with Vietnam’s VN Index. Shares of China’s electricity-intensive businesses tumbled after Beijing curbed power supplies in the country’s manufacturing hubs to cut emissions. The CSI 300 still rose, thanks to gains in heavily weighted Kweichow Moutai and other liquor makers. Asian equities started the day on a positive note as financials jumped, tracking gains in U.S. peers and following a rise in Treasury yields. Resona Holdings was among the top performers after Morgan Stanley raised its view on the stock and Japanese banks. The regional market has been calmer over the past few trading sessions after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. While anxiety lingers, many investors expect China will resolve the distressed property developer’s problems rather than let them spill over into an echo of 2008’s Lehman crisis. Japanese equities closed lower, erasing an earlier gain, as concerns grew over valuations following recent strength in the local market and turmoil in China. Machinery and electronics makers were the biggest drags on the Topix, which fell 0.1%. Daikin and Bandai Namco were the largest contributors to a dip of less than 0.1% in the Nikkei 225. Both gauges had climbed more 0.5% in morning trading. Meanwhile, the Shanghai Composite Index fell as much as 1.5% as industrials tumbled amid a power crunch. “Seeing Shanghai shares extending declines, investors’ sentiment has turned weak, leading to profit-taking on individual stocks or sectors that have been gaining recently,” said Shoichi Arisawa, an analyst at Iwai Cosmo Securities Co. “The drop in Chinese equities is reminding investors about a potential slowdown in their economy. That’s why marine transportation stocks, which are representative of cyclical sectors, fell sharply.” Shares of shippers, which have outperformed this year, fell as investors turned their attention to reopening plays. Travel and retail stocks gained after reports that the government is making final arrangements to lift all the coronavirus state of emergency order in the nation as scheduled at the end of this month. Australia's commodity-heavy stocks advanced as energy, banking shares climb. The S&P/ASX 200 index rose 0.6% to close at 7,384.20, led by energy stocks. Banks also posted their biggest one-day gain since Aug. 2. Travel stocks were among the top performers after the prime minister said state premiers must not keep borders closed once agreed Covid-19 vaccination targets are reached. NextDC was the worst performer after the company’s CEO sold 1.6 million shares. In New Zealand, the S&P/NZX 50 index. In FX, the U.S. dollar was up 0.1%, while the British pound, Australian dollar, and Canadian dollar lead G-10 majors, with the Swedish krona and Swiss franc lagging. •    The Bloomberg Dollar Spot Index was little changed and the greenback traded mixed versus its Group-of-10 peers o    Volatility curves in the major currencies were inverted last week due to a plethora of central bank meetings and risk-off concerns. They have since normalized as stocks stabilize and traders assess the latest forward guidance on monetary policy •    The yield on two-year U.S. Treasuries touched the highest level since April 2020, as tightening expectations continued to put pressure on front-end rates and ahead of debt sales later Monday •    The pound advanced, with analyst focus on supply chain problems as Prime Minister Boris Johnson considers bringing in army drivers to help. Bank of England Governor Andrew Bailey’s speech later will be watched after last week’s hawkish meeting •    Antipodean currencies, as well as the Norwegian krone and the Canadian dollar were among the best Group-of-10 performers amid a rise in commodity prices •    The yen pared losses after falling to its lowest level in six weeks and Japanese stocks paused their rally and amid rising Treasury yields   In rates, treasuries extended their recent drop, led by belly of the curve ahead of this week’s front-loaded auctions, which kick off Monday with 2- and 5-year note sales.  Yields were higher by up to 4bp across belly of the curve, cheapening 2s5s30s spread by 3.2bp on the day; 10-year yields sit around 1.49%, cheaper by 3.5bp and underperforming bunds, gilts by 1.5bp and 0.5bp while the front-end of the curve continues to sell off as rate-hike premium builds -- 2-year yields subsequently hit 0.284%, the highest level since April 2020. 5-year yields top at 0.988%, highest since Feb. 2020 while 2-year yields reach as high as 0.288%; in long- end, 30-year yields breach 2% for the first time since Aug. 13. Auctions conclude Tuesday with 7-year supply. Host of Fed speakers due this week, including three scheduled for Monday. In commodities, Brent futures climbed 1.4% to $79 a barrel, while WTI futures hit $75 a barrel for the first time since July, amid an escalating energy crunch across Europe and now China. Base metals are mixed: LME copper rises 0.4%, LME tin and nickel drop over 2%. Spot gold gives back Asia’s gains to trade flat near $1,750/oz In equities, Stoxx 600 is up 0.6%, led by energy and banks, and FTSE 100 rises 0.4%. Germany’s DAX climbs 1% after German elections showed a narrow victory for social democrats, with the Christian Democrats coming in a close second, according to provisional results. S&P 500 futures climb 0.3%, Dow and Nasdaq contracts hold in the green. In FX, the U.S. dollar is up 0.1%, while the British pound, Australian dollar, and Canadian dollar lead G-10 majors, with the Swedish krona and Swiss franc lagging. Base metals are mixed: LME copper rises 0.4%, LME tin and nickel drop over 2%. Spot gold gives back Asia’s gains to trade flat near $1,750/oz Investors will now watch for a raft of economic indicators, including durable goods orders and the ISM manufacturing index this week to gauge the pace of the recovery, as well as bipartisan talks over raising the $28.4 trillion debt ceiling. The U.S. Congress faces a Sept. 30 deadline to prevent the second partial government shutdown in three years, while a vote on the $1 trillion bipartisan infrastructure bill is scheduled for Thursday. On today's calendar we get the latest Euro Area M3 money supply, US preliminary August durable goods orders, core capital goods orders, September Dallas Fed manufacturing activity. We also have a bunch of Fed speakers including Williams, Brainard and Evans. Market Snapshot S&P 500 futures down 0.1% to 4,442.50 STOXX Europe 600 up 0.3% to 464.54 MXAP little changed at 200.75 MXAPJ little changed at 642.52 Nikkei little changed at 30,240.06 Topix down 0.1% to 2,087.74 Hang Seng Index little changed at 24,208.78 Shanghai Composite down 0.8% to 3,582.83 Sensex up 0.2% to 60,164.70 Australia S&P/ASX 200 up 0.6% to 7,384.17 Kospi up 0.3% to 3,133.64 German 10Y yield fell 3.1 bps to -0.221% Euro down 0.3% to $1.1689 Brent Futures up 1.2% to $79.04/bbl Gold spot little changed at $1,750.88 U.S. Dollar Index up 0.15% to 93.47 Top Overnight News from Bloomberg House Speaker Nancy Pelosi put the infrastructure bill on the schedule for Monday under pressure from moderates eager to get the bipartisan bill, which has already passed the Senate, enacted. But progressives -- whose votes are likely vital -- are insisting on progress first on the bigger social-spending bill Olaf Scholz of the center-left Social Democrats defeated Chancellor Angela Merkel’s conservatives in an extremely tight German election, setting in motion what could be months of complex coalition talks to decide who will lead Europe’s biggest economy China’s central bank pumped liquidity into the financial system after borrowing costs rose, as lingering risks posed by China Evergrande Group’s debt crisis hurt market sentiment toward its peers as well Global banks are about to get a comprehensive blueprint for how derivatives worth several hundred trillion dollars may be finally disentangled from the London Interbank Offered Rate Economists warned of lower economic growth in China as electricity shortages worsen in the country, forcing businesses to cut back on production Governor Haruhiko Kuroda says it’s necessary for the Bank of Japan to continue with large-scale monetary easing to achieve the bank’s 2% inflation target The quant revolution in fixed income is here at long last, if the latest Invesco Ltd. poll is anything to go by. With the work-from-home era fueling a boom in electronic trading, the majority of investors in a $31 trillion community say they now deploy factor strategies in bond portfolios A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded somewhat mixed with the region finding encouragement from reopening headlines but with gains capped heading towards month-end, while German election results remained tight and Evergrande uncertainty continued to linger. ASX 200 (+0.6%) was led higher by outperformance in the mining related sectors including energy as oil prices continued to rally amid supply disruptions and views for a stronger recovery in demand with Goldman Sachs lifting its year-end Brent crude forecast from USD 80/bbl to USD 90/bbl. Furthermore, respectable gains in the largest weighted financial sector and details of the reopening roadmap for New South Wales, which state Premier Berijiklian sees beginning on October 11th, further added to the encouragement. Nikkei 225 (Unch) was kept afloat for most of the session after last week’s beneficial currency flows and amid reports that Japan is planning to lift emergency measures in all areas at month-end, although upside was limited ahead of the upcoming LDP leadership race which reports noted are likely to go to a run-off as neither of the two main candidates are likely to achieve a majority although a recent Kyodo poll has Kono nearly there at 47.4% of support vs. nearest contender Kishida at 22.4%. Hang Seng (+0.1%) and Shanghai Comp. (-0.8%) were varied with the mainland choppy amid several moving parts including back-to-back daily liquidity efforts by the PBoC since Sunday and with the recent release of Huawei’s CFO following a deal with US prosecutors. Conversely, Evergrande concerns persisted as Chinese cities reportedly seized its presales to block the potential misuse of funds and its EV unit suffered another double-digit percentage loss after scrapping plans for its STAR Market listing. There were also notable losses to casino names after Macau tightened COVID-19 restrictions ahead of the Golden Week holidays and crypto stocks were hit after China declared crypto activities illegal which resulted in losses to cryptoexchange Huobi which dropped more than 40% in early trade before nursing some of the losses, while there are also concerns of the impact from an ongoing energy crisis in China which prompted the Guangdong to ask people to turn off lights they don't require and use air conditioning less. Finally, 10yr JGBs were flat but have clawed back some of the after-hour losses on Friday with demand sapped overnight amid the mild gains in stocks and lack of BoJ purchases in the market. Elsewhere, T-note futures mildly rebounded off support at 132.00, while Bund futures outperformed the Treasury space amid mild reprieve from this month’s losses and with uncertainty of the composition for the next German coalition. Top Asian News Moody’s Says China to Safeguard Stability Amid Evergrande Issues China’s Tech Tycoons Pledge Allegiance to Xi’s Vision China Power Crunch Hits iPhone, Tesla Production, Nikkei Reports Top Netflix Hit ‘Squid Game’ Sparks Korean Media Stock Surge Bourses in Europe have trimmed the gains seen at the open, albeit the region remains mostly in positive territory (Euro Stoxx 50 +0.4%; Stoxx 600 +0.2%) in the aftermath of the German election and amid the looming month-end. The week also sees several risk events, including the ECB's Sintra Forum, EZ CPI, US PCE and US ISM Manufacturing – not to mention the vote on the bipartisan US infrastructure bill. The mood in Europe contrasts the mixed handover from APAC, whilst US equity futures have also seen more divergence during European trade – with the yield-sensitive NQ (-0.3%) underperforming the cyclically-influenced RTY (+0.4%). There has been no clear catalyst behind the pullback since the Cash open. Delving deeper into Europe, the DAX 40 (+0.6%) outperforms after the tail risk of the Left party being involved in government has now been removed. The SMI (-0.6%) has dipped into the red as defensive sectors remain weak, with the Healthcare sector towards to bottom of the bunch alongside Personal & Household Goods. On the flip side, the strength in the price-driven Oil & Gas and yield-induced Banks have kept the FTSE 100 (+0.2%) in green, although the upside is capped by losses in AstraZeneca (-0.4%) and heavy-weight miners, with the latter a function of declining base metal prices. The continued retreat in global bonds has also hit the Tech sector – which resides as the laggard at the time of writing. In terms of individual movers, Rolls-Royce (+8.5%) trades at the top of the FTSE 100 after winning a USD 1.9bln deal from the US Air Force. IWG (+6.5%) also extended on earlier gains following reports that founder and CEO Dixon is said to be mulling a multibillion-pound break-up of the Co. that would involve splitting it into several distinct companies. Elsewhere, it is worth being cognizant of the current power situation in China as the energy crisis spreads, with Global Times also noting that multiple semiconductor suppliers for Tesla (Unch), Apple (-0.4% pre-market) and Intel (Unch), which have manufacturing plants in the Chinese mainland, recently announced they would suspend their factories' operations to follow local electricity use policies. Top European News U.K. Relaxes Antitrust Rules, May Bring in Army as Pumps Run Dry Magnitude 5.8 Earthquake Hits Greek Island of Crete German Stocks Rally as Chances Wane for Left-Wing Coalition German Landlords Rise as Left’s Weakness Trumps Berlin Poll In FX, the Aussie is holding up relatively well on a couple of supportive factors, including a recovery in commodity prices overnight and the Premier of NSW setting out a timetable to start lifting COVID lockdown and restrictions from October 11 with an end date to completely re-open on December 1. However, Aud/Usd is off best levels against a generally firm Greenback on weakness and underperformance elsewhere having stalled around 0.7290, while the Loonie has also run out of momentum 10 pips or so from 1.2600 alongside WTI above Usd 75/brl. DXY/EUR/CHF - Although the risk backdrop is broadly buoyant and not especially supportive, the Buck is gleaning traction and making gains at the expense of others, like the Euro that is gradually weakening in wake of Sunday’s German election that culminated in narrow victory for the SPD Party over the CDU/CSU alliance, but reliant on the Greens and FDP to form a Government. Eur/Usd has lost 1.1700+ status and is holding a fraction above recent lows in the form of a double bottom at 1.1684, but the Eur/Gbp cross is looking even weaker having breached several technical levels like the 100, 21 and 50 DMAs on the way down through 0.8530. Conversely, Eur/Chf remains firm around 1.0850, and largely due to extended declines in the Franc following last week’s dovish SNB policy review rather than clear signs of intervention via the latest weekly Swiss sight deposit balances. Indeed, Usd/Chf is now approaching 0.9300 again and helping to lift the Dollar index back up towards post-FOMC peaks within a 93.494-206 range in advance of US durable goods data, several Fed speakers, the Dallas Fed manufacturing business index and a double dose of T-note supply (Usd 60 bn 2 year and Usd 61 bn 5 year offerings). GBP/NZD/JPY - As noted above, the Pound is benefiting from Eur/Gbp tailwinds, but also strength in Brent to offset potential upset due to the UK’s energy supply issues, so Cable is also bucking the broad trend and probing 1.3700. However, the Kiwi is clinging to 0.7000 in the face of Aud/Nzd headwinds that are building on a break of 1.0350, while the Yen is striving keep its head afloat of another round number at 111.00 as bond yields rebound and curves resteepen. SCANDI/EM - The Nok is also knocking on a new big figure, but to the upside vs the Eur at 10.0000 following the hawkish Norges Bank hike, while the Cnh and Cny are holding up well compared to fellow EM currencies with loads of liquidity from the PBoC and some underlying support amidst the ongoing mission to crackdown on speculators in the crypto and commodity space. In commodities, WTI and Brent front-month futures kicked the week off on a firmer footing, which saw Brent Nov eclipse the USD 79.50/bbl level (vs low 78.21/bbl) whilst its WTI counterpart hovers north of USD 75/bbl (vs low 74.16/bbl). The complex could be feeling some tailwinds from the supply crunch in Britain – which has lead petrol stations to run dry as demand outpaces the supply. Aside from that, the landscape is little changed in the run-up to the OPEC+ meeting next Monday, whereby ministers are expected to continue the planned output hikes of 400k BPD/m. On that note, there have been reports that some African nations are struggling to pump more oil amid delayed maintenance and low investments, with Angola and Nigeria said to average almost 300k BPD below their quota. On the Iranian front, IAEA said Iran permitted it to service monitoring equipment during September 20th-22nd with the exception of the centrifuge component manufacturing workshop at the Tesa Karaj facility, with no real updates present regarding the nuclear deal talks. In terms of bank commentary, Goldman Sachs raised its year-end Brent crude forecast by USD 10 to USD 90/bbl and stated that Hurricane Ida has more than offset the ramp-up in OPEC+ output since July with non-OPEC+, non-shale output continuing to disappoint, while it added that global oil demand-deficit is greater than expected with a faster than anticipated demand recovery from the Delta variant. Conversely, Citi said in the immediate aftermath of skyrocketing prices, it is logical to be bearish on crude oil and nat gas today and forward curves for later in 2022, while it added that near-term global oil inventories are low and expected to continue declining maybe through Q1 next year. Over to metals, spot gold and silver have fallen victim to the firmer Dollar, with spot gold giving up its overnight gains and meandering around USD 1,750/oz (vs high 1760/oz) while spot silver briefly dipped under USD 22.50/oz (vs high 22.73/oz). Turning to base metals, China announced another round of copper, zinc and aluminium sales from state reserves – with amounts matching the prior sales. LME copper remains within a tight range, but LME tin is the outlier as it gave up the USD 35k mark earlier in the session. Finally, the electricity crunch in China has seen thermal coal prices gain impetus amid tight domestic supply, reduced imports and increased demand. US Event Calendar 8:30am: Aug. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.9% 8:30am: Aug. Cap Goods Orders Nondef Ex Air, est. 0.4%, prior 0.1% 8:30am: Aug. -Less Transportation, est. 0.5%, prior 0.8% 8:30am: Aug. Durable Goods Orders, est. 0.6%, prior -0.1% 10:30am: Sept. Dallas Fed Manf. Activity, est. 11.0, prior 9.0 Central Banks 8am: Fed’s Evans Speaks at Annual NABE Conference 9am: Fed’s Williams Makes Opening Remarks at Conference on... 12pm: Fed’s Williams Discusses the Economic Outlook 12:50pm: Fed’s Brainard Discusses Economic Outlook at NABE Conference DB's Jim Reid concludes the overnight wrap Straight to the German elections this morning where unlike the Ryder Cup the race was tight. The centre-left SPD have secured a narrow lead according to provisional results, which give them 25.7% of the vote, ahead of Chancellor Merkel’s CDU/CSU bloc, which are on 24.1%. That’s a bit narrower than the final polls had suggested (Politico’s average put the SPD ahead by 25-22%), but fits with the slight narrowing we’d seen over the final week of the campaign. Behind them, the Greens are in third place, with a record score of 14.8%, which puts them in a key position when it comes to forming a majority in the new Bundestag, and the FDP are in fourth place currently on 11.5%. Although the SPD appear to be in first place the different parties will now enter coalition negotiations to try to form a governing majority. Both Olaf Scholz and the CDU’s Armin Laschet have said that they will seek to form a government, and to do that they’ll be looking to the Greens and the FDP as potential coalition partners, since those are the most realistic options given mutual policy aims. So the critical question will be whether it’s the SPD or the CDU/CSU that can convince these two to join them in coalition. On the one hand, the Greens have a stronger policy overlap with the SPD, and governed with them under Chancellor Schröder from 1998-2005, but the FDP seems more in line with the Conservatives, and were Chancellor Merkel’s junior coalition partner from 2009-13.  So it’s likely that the FDP and the Greens will talk to each other before talking to either of the two biggest parties. For those wanting more information, our research colleagues in Frankfurt have released a post-election update (link here) on the results and what they mean. An important implication of last night’s result is that (at time of writing) it looks as though a more left-wing coalition featuring the SPD, the Greens and Die Linke would not be able for form a majority in the next Bundestag. So the main options left are for the FDP and the Greens to either join the SPD in a “traffic light” coalition or instead join the CDU/CSU in a “Jamaica” coalition. The existing grand coalition of the SPD and the CDU/CSU would actually have a majority as well, but both parties have signalled that they don't intend to continue this. That said, last time in 2017, a grand coalition wasn’t expected after that result, and there were initially attempts to form a Jamaica coalition. But once those talks proved unsuccessful, discussions on another grand coalition began once again. In terms of interesting snippets, this election marks the first time the SPD have won the popular vote since 2002, which is a big turnaround given that the party were consistently polling in third place over the first half of this year. However, it’s also the worst ever result for the CDU/CSU, and also marks the lowest combined share of the vote for the two big parties in post-war Germany, which mirrors the erosion of the traditional big parties we’ve seen elsewhere in continental Europe. Interestingly, the more radical Die Linke and AfD parties on the left and the right respectively actually did worse than in 2017, so German voters have remained anchored in the centre, and there’s been no sign of a populist resurgence. This also marks a record result for the Greens, who’ve gained almost 6 percentage points relative to four years ago, but that’s still some way down on where they were polling earlier in the spring (in the mid-20s), having lost ground in the polls throughout the final weeks of the campaign. Markets in Asia have mostly started the week on a positive note, with the Hang Seng (+0.28%), Nikkei (+0.04%), and the Kospi (+0.25%) all moving higher. That said, the Shanghai Comp is down -1.30%, as materials (-5.91%) and industrials (-4.24%) in the index have significantly underperformed, which comes amidst power curbs in the country. In the US and Europe however, futures are pointing higher, with those on the S&P 500 up +0.37%, and those on the DAX up +0.51%. Moving onto another big current theme, all the talk at the moment is about supply shocks and it’s not inconceivable that things could get very messy on this front over the weeks and months ahead. However, I think the discussion on supply in isolation misses an important component and that is demand. In short we had a pandemic that effectively closed the global economy and interrupted numerous complicated supply chains. The global authorities massively stimulated demand relative to where it would have been in this environment and in some areas have created more demand than there would have been at this stage without Covid. However the supply side has not come back as rapidly. As such you’re left with demand outstripping supply. So I think it’s wrong to talk about a global supply shock in isolation. It’s not as catchy but this is a “demand is much higher than it should be in a pandemic with lockdowns, but supply hasn't been able to fully respond” world. If the authorities hadn’t responded as aggressively we would have plenty of supply for the demand and a lot of deflation. Remember negative oil prices in the early stages of the pandemic. So for me every time you hear the phrase “supply shock” remember the phenomenal demand there is relative to what the steady state might have been. This current “demand > supply” at lower levels of activity than we would have had without covid is going to cause central banks a huge headache over the coming months. Should they tighten due to what is likely to be a prolonged period of higher prices than people thought even a couple of months ago or should they look to the potential demand destruction of higher prices? The risk of a policy error is high and the problem with forward guidance is that markets demand to know now what they might do over the next few months and quarters so it leaves them exposed a little in uncertain times. This problem has crept up fast on markets with an epic shift in sentiment in the rates market after the BoE meeting Thursday lunchtime. I would say they were no more hawkish than the Fed the night before but the difference is that the Fed are still seemingly at least a year from raising rates and a lot can happen in that period whereas the BoE could now raise this year (more likely February). That has focused the minds of global investors, especially as Norway became the first central bank among the G-10 currencies to raise rates on the same day. Towards the end of this note we’ll recap the moves in markets last week including a +15bps climb in US 10yr yields in the last 48 hours of last week. One factor that will greatly influence yields over the week ahead is the ongoing US debt ceiling / government shutdown / infrastructure bill saga that is coming to a head as we hit October on Friday - the day that there could be a partial government shutdown without action by the close on Thursday. It’s a fluid situation. So far the the House of Representatives has passed a measure that would keep the government funded through December 3, but it also includes a debt ceiling suspension, so Republicans are expected to block this in the Senate if it still includes that. The coming week could also see the House of Representatives vote on the bipartisan infrastructure bill (c.$550bn) that’s already gone through the Senate, since Speaker Pelosi had previously committed to moderate House Democrats that there’d be a vote on the measure by today. She reaffirmed that yesterday although the timing may slip. However, there remain divisions among House Democrats, with some progressives not willing to support it unless the reconciliation bill also passes. In short we’ve no idea how this get resolved but most think some compromise will be reached before Friday. Pelosi yesterday said it “seems self-evident” that the reconciliation bill won’t reach the $3.5 trillion hoped for by the administration which hints at some compromise. Overall the sentiment has seemingly shifted a little more positively on there being some progress over the weekend. From politics to central banks and following a busy week of policy meetings, there are an array of speakers over the week ahead. One of the biggest highlights will be the ECB’s Forum on Central Banking, which is taking place as an online event on Tuesday and Wednesday, and the final policy panel on Wednesday will include Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey and BoJ Governor Kuroda. Otherwise, Fed Chair Powell will also be testifying before the Senate Banking Committee on Tuesday, alongside Treasury Secretary Yellen, and on Monday, ECB President Lagarde will be appearing before the European Parliament’s Committee on Economic and Monetary Affairs as part of the regular Monetary Dialogue. There are lots of other Fed speakers this week and they can add nuances to the taper and dot plot debates. Finally on the data front, there’ll be further clues about the state of inflation across the key economies, as the Euro Area flash CPI estimate for September is coming out on Friday. Last month's reading showed that Euro Area inflation rose to +3.0% in August, which was its highest level in nearly a decade. Otherwise, there’s also the manufacturing PMIs from around the world on Friday given it’s the start of the month, along with the ISM reading from the US, and Tuesday will see the release of the Conference Board’s consumer confidence reading for the US as well. For the rest of the week ahead see the day-by-day calendar of events at the end. Back to last week now and the highlight was the big rise in global yields which quickly overshadowed the ongoing Evergrande story. Bonds more than reversed an early week rally as yields rose for a fifth consecutive week. US 10yr Treasury yields ended the week up +8.9bps to finish at 1.451% - its highest level since the start of July and +15bps off the Asian morning lows on Thursday. The move saw the 2y10y yield curve steepen +4.5bps, with the spread reaching its widest point since July as well. However, at the longer end of the curve the 5y30y spread ended the week largely unchanged after a volatile week. It was much flatter shortly following the FOMC and steeper following the BoE. Bond yields in Europe moved higher as well with the central bank moves again being the major impetus especially in the UK. 10yr gilt yields rose +7.9bps to +0.93% and the short end moved even more with the 2yr yield rising +9.4bps to 0.38% as the BoE’s inflation forecast and rhetoric caused investors to pull forward rate hike expectations. Yields on 10yr bunds rose +5.2bps, whilst those on the OATs (+6.3bps) and BTPs (+5.7bps) increased substantially as well, but not to the same extent as their US and UK counterparts. While sovereign debt sold off, global equity markets recovered following two consecutive weeks of declines. Although markets entered the week on the back foot following the Evergrande headlines from last weekend, risk sentiment improved at the end of the week, especially toward cyclical industries. The S&P 500 gained +0.51% last week (+0.15% Friday), nearly recouping the prior week’s loss. The equity move was primarily led by cyclicals as higher bond yields helped US banks (+3.43%) outperform, while higher commodity prices saw the energy (+4.46%) sector gain sharply. Those higher bond yields led to a slight rerating of growth stocks as the tech megacap NYFANG index fell back -0.46% on the week and the NASDAQ underperformed, finishing just better than unchanged (+0.02). Nonetheless, with four trading days left in September the S&P 500 is on track for its third losing month this year, following January and June. European equities rose moderately last week, as the STOXX 600 ended the week +0.31% higher despite Friday’s -0.90% loss. Bourses across the continent outperformed led by particularly strong performances by the IBEX (+1.28%) and CAC 40 (+1.04%). There was limited data from Friday. The Ifo's business climate indicator in Germany fell slightly from the previous month to 98.8 (99.0 expected) from 99.4 on the back a lower current assessment even though business expectations was higher than expected. In Italy, consumer confidence rose to 119.6 (115.8 expected), up just over 3pts from August and at its highest level on record (since 1995). Tyler Durden Mon, 09/27/2021 - 08:09.....»»

Category: personnelSource: nytSep 27th, 2021

Rickards: Systemic Risk Is Greater Than Ever

Rickards: Systemic Risk Is Greater Than Ever Authored by James Rickards via DailyReckoning.com, Contagion! There has been a litany of bad news recently, including the U.S. August humiliation in Afghanistan, China’s aggressive actions against Taiwan and increased tensions with Iran, North Korea and Russia. It will take the U.S. years, possibly decades, to recover from the debacle of August 2021 and the collapse of American prestige. All of these geopolitical events combine to undermine confidence in U.S. power. When that happens, a loss of confidence in the U.S. dollar is not far behind. And, perhaps most importantly of all recent bad news, is a market meltdown and slowing growth in China. Greatest Ponzi Ever I’ve long advised my readers that the Chinese wealth management product (WMP) system is the greatest Ponzi in the history of the world. Retail investors are led to believe that WMPs are like bank deposits and are backed by the bank that sells them. They’re not. They’re actually unsecured units in blind pools that can be invested in anything the pool manager wants. Most WMP funds have been invested in the real estate sector. This has led to asset bubbles in real estate (at best) and wasted developments that cannot cover their costs (at worst). When investors wanted their money back, the sponsor would simply sell more WMPs and use the money to pay back the redeeming investors. That’s what gave the product its Ponzi characteristic. The total amount invested in WMPs is now in the trillions of dollars used to finance thousands of projects sponsored by hundreds of major developers. Chinese investors are all-in with WMPs. Now the entire edifice is collapsing as I predicted it would. The largest property developer in China, Evergrande, is quickly headed for bankruptcy. That’s a multibillion-dollar fiasco on its own. Evergrande losses will arise in WMPs, corporate debt, unpaid contractor bills, equity markets and unfinished housing projects. China’s entire property and financial system is on the verge of a world-historic crack-up. And it won’t remain limited to China. It comes back to contagion. Financial Contagions Are Like Biological Contagions Unfortunately, since early last year, the world has learned a painful lesson in biological contagions. A similar dynamic applies in financial panics. It can begin with one bank or broker going bankrupt as the result of a market collapse (a “financial patient zero”). But the financial distress quickly spreads to banks that did business with the failed entity and then to stockholders and depositors of those other banks and so on until the entire world is in the grip of a financial panic as happened in 2008. Disease contagion and financial contagion both work the same way. The nonlinear mathematics and system dynamics are identical in the two cases even though the “virus” is financial distress rather than a biological virus. And unfortunately, each crisis is bigger than the one before and requires more intervention by the central banks. The reason has to do with the system scale. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses. Today, systemic risk is more dangerous than ever because the entire system is larger than before. This means that the larger size of the system implies a future global liquidity crisis and market panic far larger than the Panic of 2008. Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books. Contagion and The Old Man and the Sea To understand the risk of contagion, you can think of the marlin in Hemingway’s The Old Man and the Sea. The marlin started out as a prize catch lashed to the side of the fisherman Santiago’s boat. But once there was blood in the water, every shark within miles descended on the marlin and devoured it. By the time Santiago got to shore, there was nothing left of the marlin but the bill, the tail and some bones. An even greater danger for markets is when these two kinds of contagion converge. This happens when market losses spill over into broader markets, and then those losses give rise to systematic trading against a particular instrument or hedge fund. When the targeted instrument or fund is driven under, credit losses spread to a wider group of fund counterparts that then fall under suspicion themselves. Soon a marketwide liquidity panic emerges in which “everybody wants his money back.” This is exactly what happened during the Russia/Long Term Capital Management (LTCM) crisis in 1998. To the Brink of Collapse It was an international monetary crisis that started in Thailand in June 1997, spread to Indonesia and Korea and then finally to Russia by August 1998. It was exactly like dominoes falling. LTCM wasn’t a country, although it was a hedge fund as big as a country in terms of its financial footings. I was right in the middle of that crash. I was the general counsel of that firm. I negotiated that bailout. The importance of that role is that I had a front-row seat. I was in the conference room, in the deal room, at a big New York law firm. There were hundreds of lawyers. There were 14 banks in the LTCM bailout fund. There were 19 other banks in a $1 billion unsecured credit facility. Included were Treasury officials, Federal Reserve officials, other government officials, Long Term Capital and our partners. I was on point for one side of the deal and had to coordinate all that. Wall Street Bailed out Itself It was a $4 billion all-cash deal, which we put together in 72 hours with no due diligence. Anyone who’s raised money for his or her company or done deals can think about that and imagine how difficult it would be to get a group of banks to write you a check for $4 billion in three days. Systematic pressure on LTCM persisted until the fund was almost broke. As Wall Street attacked the fund, they missed the fact that they were also the creditors of the fund. By breaking LTCM, they were breaking themselves. That’s when the Fed intervened and forced Wall Street to bail out the fund. Those involved can say they bailed out Long Term Capital. But if Long Term Capital had failed, and it was on the way to failure, $1.3 trillion of derivatives would’ve been flipped back to Wall Street. In reality, Wall Street bailed out itself. The panic of 2008 was an even more extreme version of 1998. We were days, if not hours, from the sequential collapse of every major bank in the world. The 2008 panic had its roots in subprime mortgages but quickly spread to debt obligations of all kinds, especially money market funds and European bank commercial paper. Think of the dominoes again. What had happened there? You had a banking crisis. Except in 2008, Wall Street did not bail out a hedge fund; instead, the central banks bailed out Wall Street. Systemic Risk Is Greater Than Ever The point, again, is that today systemic risk is more dangerous than ever, and each crisis is bigger than the one before. Remember, too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books. The ability of central banks to deal with a new crisis is highly constrained by low interest rates and bloated balance sheets, which have exploded even higher in response to the pandemic. The Fed’s balance sheet is currently about $8.5 trillion. Last March it was $4.2 trillion. In September 2008, it was under $1 trillion, so that just shows you how bloated the Fed’s balance sheet has become since the Great Financial Crisis. The threat of contagion is a scary reminder of the hidden linkages in modern capital markets. The conditions are in place. But you can’t wait for the shock to occur because by then it will be too late. You won’t be able to get your money out of the market in time because it’ll be a mad rush to the exits. The solution for investors is to have some assets outside the traditional markets and outside the banking system. Tyler Durden Thu, 10/14/2021 - 08:22.....»»

Category: blogSource: zerohedgeOct 14th, 2021

Futures Surge As Banks Report Stellar Earnings; PPI On Deck

Futures Surge As Banks Report Stellar Earnings; PPI On Deck US equity futures, already sharply higher overnight, jumped this morning as a risk-on mood inspired by stellar bank earnings, overshadowed concern that supply snarls. a China property crunch, a tapering Fed and stagflation will weigh on the global recovery. Nasdaq futures jumped 1%, just ahead of the S&P 500 which was up 0.9%. 10-year Treasury yields ticked lower to about 1.5%, and with the dollar lower as well, oil jumped. Bitcoin and the broader crypto space continued to rise. Shares in Morgan Stanley, Citi and Bank of America jumped as their deal-making units rode a record wave of M&A. On the other end, Boeing shares fell more than 1% after a Dow Jones report said the plane maker is dealing with a new defect on its 787 Dreamliner. Here are some of the biggest other U.S. movers today: Occidental (OXY US) rises 1.6% in U.S. premarket trading after it agreed to sell its interests in two Ghana offshore fields for $750m to Kosmos Energy and Ghana National Petroleum Plug Power (PLUG US) rises 3.3% premarket, extending gains from Wednesday, when it announced partnership with Airbus SE and Phillips 66 to find ways to harness hydrogen to power airplanes, vehicles and industry Esports Entertainment (GMBL US) shares rise 16% in U.S. premarket trading after the online gambling company reported its FY21 results and reaffirmed its FY22 guidance Perrigo  (PRGO US) gains 2.8% in premarket trading after Raymond James upgrades to outperform following acquisition of HRA Pharma and recent settlement of Irish tax dispute AT&T (T US) ticks higher in premarket trading after KeyBanc writes upgrades to sector weight from underweight, saying it seems harder to justify further downside from here Avis Budget (CAR US) may be active after getting its only negative rating among analysts as Morgan Stanley cuts to underweight with risk/reward seen pointing toward downside OrthoPediatrics (KIDS US) dipped 2% Wednesday postmarket after it said 3Q revenue was hurt by the surge in cases of Covid-19 delta variant and RSV within children’s hospitals combined with staff shortage Investors continue to evaluate the resilience of economic reopening to supply chain disruptions, a jump in energy prices and the prospect of reduced central bank support. In the earnings season so far, executives at S&P 500 companies mentioned the phrase “supply chain” about 3,000 times on investor calls as of Tuesday -- far higher than last year’s then-record figure. “Our constructive outlook for growth means that our asset allocation remains broadly pro-risk and we continue to be modestly overweight global equities,” according to Michael Grady, head of investment strategy and chief economist at Aviva Investors. “However, we have scaled back that position marginally because of growing pains which could impact sales and margins.” Europe's Stoxx 600 index reached its highest level in almost three weeks, boosted by gains in tech shares and miners. The Euro Stoxx 50 rose over 1% to best levels for the week. FTSE 100 rises 0.75%, underperforming at the margin. Miners and tech names are the strongest sectors with only healthcare stocks in small negative territory. Here are some of the biggest European movers today: THG shares advance as much as 10%, snapping a four-day losing streak, after a non-executive director bought stock while analysts at Goldman Sachs and Liberum defended their buy recommendations. Steico gains as much as 9.9%, the most since Jan., after the insulation manufacturer reported record quarterly revenue, which Warburg says “leaves no doubt” about underlying market momentum. Banco BPM climbs as much as 3.6% and is the day’s best performer on the FTSE MIB benchmark index; bank initiated at buy at Jefferies as broker says opportunity to internalize insurance business offers 9%-16% possible upside to 2023 consensus EPS and is not priced in by the market. Hays rises as much as 4.3% after the recruiter posted a jump in comparable net fees for the first quarter. Publicis jumps as much as 3.7%, the stock’s best day since July, with JPMorgan saying the advertising company’s results show a “strong” third quarter, though there are risks ahead. Kesko shares rise as much as 6.1%. The timing of this year’s third guidance upgrade was a surprise, Inderes says. Ubisoft shares fall as much as 5.5% after JPMorgan Cazenove (overweight) opened a negative catalyst watch, citing short-term downside risk to earnings ahead of results. Earlier in the session, Asian stocks advanced, boosted by a rebound in technology shares as traders focused on the ongoing earnings season and assessed economic-reopening prospects in the region. The MSCI Asia Pacific Index gained as much as 0.7%, as a sub-gauge of tech stocks rose, halting a three-day slide. Tokyo Electron contributed the most to the measure’s climb, while Taiwan Semiconductor Manufacturing Co. closed up 0.4% ahead of its earnings release. India’s tech stocks rose following better-than-expected earnings for three leading firms in the sector. Philippine stocks were among Asia’s best performers as Manila began easing virus restrictions, which will allow more businesses in the capital to reopen this weekend. Indonesia’s stock benchmark rallied for a third-straight day, as the government prepared to reopen Bali to tourists. READ: Commodities Boom, Tourism Hopes Fuel Southeast Asia Stock Rally Ilya Spivak, head of Greater Asia at DailyFX, said FOMC minutes released overnight provided Asian markets with little direction, which may offer some opportunity for recouping recent losses. The report showed officials broadly agreed last month they should start reducing pandemic-era stimulus in mid-November or mid-December. U.S. 10-year Treasury yields stayed below 1.6%, providing support for tech stocks.  “Markets seemed to conclude the near-term narrative is on pause until further evidence,” Spivak said. Shares in mainland China fell as the country reported factory-gate prices grew at the fastest pace in almost 26 years in September. Singapore’s stock benchmark pared initial losses as the country’s central bank unexpectedly tightened policy. Hong Kong’s equity market was closed for a holiday In rates, Treasuries were steady to a tad higher, underperforming Bunds which advanced, led by the long end.  Fixed income is mixed: gilts bull steepen with short dates richening ~2.5bps, offering only a muted reaction to dovish commentary from BOE’s Tenreyro. Bunds rise with 10y futures breaching 169. USTs are relatively quiet with 5s30s unable to crack 100bps to the upside. Peripheral spreads widen slightly. In FX, the Turkish lira was again the overnight standout as it weakened to a record low after President Recep Tayyip Erdogan fired three central bankers. The Bloomberg Dollar Spot Index fell and the greenback slipped against all of its Group-of-10 peers apart from the yen, with risk-sensitive and resource-based currencies leading gains; the euro rose to trade above $1.16 for the first time in a week.  The pound rose to more than a two-week high amid dollar weakness as traders wait for a raft of Bank of England policy makers to speak. Sweden’s krona temporarily came off an almost eight-month high against the euro after inflation fell short of estimates. The euro dropped to the lowest since November against the Swiss franc as banks targeted large option barriers and leveraged sell-stops under 1.0700, traders said; Currency traders are responding to stagflation risks by turning to the Swiss franc. The Aussie advanced to a five-week high versus the greenback even as a monthly jobs report showed employment fell in September; the jobless rate rose less than economists forecast. The kiwi was a among the top performers; RBNZ Deputy Governor Geoff Bascand said inflation pressures were becoming more persistent China’s yuan declined from a four-month high after the central bank signaled discomfort with recent gains by setting a weaker-than-expected reference rate. In commodities, crude futures extend Asia’s gains with WTI up ~$1 before stalling near $81.50. Brent regains a $84-handle. Spot gold drifts through Wednesday’s highs, adding $4 to print just shy of the $1,800/oz mark. Base metals are well bid with LME copper and aluminum gaining as much as 3%.  Looking at the day ahead, we’ve got central bank speakers including the Fed’s Bullard, Bostic, Barkin, Daly and Harker, the ECB’s Elderson and Knot, along with the BoE’s Deputy Governor Cunliffe, Tenreyro and Mann. Data releases from the US include the September PPI reading along with the weekly initial jobless claims. Lastly, earnings releases will include UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp and Walgreens Boots Alliance. Market Snapshot S&P 500 futures up 0.6% to 4,382.50 STOXX Europe 600 up 0.9% to 464.38 MXAP up 0.7% to 196.12 MXAPJ up 0.6% to 642.66 Nikkei up 1.5% to 28,550.93 Topix up 0.7% to 1,986.97 Hang Seng Index down 1.4% to 24,962.59 Shanghai Composite little changed at 3,558.28 Sensex up 0.7% to 61,190.63 Australia S&P/ASX 200 up 0.5% to 7,311.73 Kospi up 1.5% to 2,988.64 Brent Futures up 1.0% to $83.98/bbl Gold spot up 0.2% to $1,796.13 U.S. Dollar Index down 0.25% to 93.84 German 10Y yield fell 1.5 bps to -0.143% Euro little changed at $1.1615 Brent Futures up 1.0% to $84.13/bbl Top Overnight News from Bloomberg A flattening Treasury yield curve signals increasing concern Federal Reserve efforts to keep inflation in check will derail the recovery in the world’s largest economy China’s factory-gate prices grew at the fastest pace in almost 26 years in September, potentially adding to global inflation pressure if local businesses start passing on higher costs to consumers. Turkish President Recep Tayyip Erdogan fired monetary policy makers wary of cutting interest rates further, driving the lira to record lows against the dollar with his midnight decree Singapore’s central bank unexpectedly tightened its monetary policy settings, strengthening the local dollar, as the city-state joins policymakers globally concerned about risks of persistent inflation Shortages of natural gas in Europe and Asia are boosting demand for oil, deepening what was already a sizable supply deficit in crude markets, the International Energy Agency said A tropical storm that’s lashing southern China mixed with Covid-related supply chain snarls is causing a ship backlog from Shenzhen to Singapore, intensifying fears retail shelves may look rather empty come Christmas A more detailed look at global markets courtesy of Newsquawk A constructive mood was seen across Asia-Pac stocks with the region building on the mild positive bias stateside where the Nasdaq outperformed as tech and growth stocks benefitted from the curve flattening, with global risk appetite unfazed by the firmer US CPI data and FOMC Minutes that suggested the start of tapering in either mid-November of mid-December. The ASX 200 (+0.5%) traded higher as tech stocks found inspiration from the outperformance of US counterparts and with the mining sector buoyed by gains in underlying commodity prices. The Nikkei 225 (+1.5%) was the biggest gainer amid currency-related tailwinds and with the latest securities flow data showing a substantial shift by foreign investors to net purchases of Japanese stocks during the prior week. The KOSPI (+1.5%) conformed to the brightening picture amid signs of a slowdown in weekly infections, while the Singapore’s Straits Times Index (+0.3%) lagged for most of the session following weaker than expected Q3 GDP data, and after the MAS surprisingly tightened its FX-based policy by slightly raising the slope of the SGD nominal effective exchange rate (NEER). The Shanghai Comp. (U/C) was initially kept afloat but with gains capped after slightly softer than expected loans and financing data from China and with participants digesting mixed inflation numbers in which CPI printed below estimates but PPI topped forecasts for a record increase in factory gate prices, while there was also an absence of Stock Connect flows with participants in Hong Kong away for holiday. Finally, 10yr JGBs were higher after the recent curve flattening stateside and rebound in T-notes with the US longer-end also helped by a solid 30yr auction, although gains for JGBs were capped amid the outperformance in Tokyo stocks and mostly weaker metrics at the 5yr JGB auction. Top Asian News Chinese Developer Shares Fall on Debt Crisis: Evergrande Update Japan’s Yamagiwa Says Abenomics Fell Short at Spreading Wealth China Seen Rolling Over Policy Loans to Keep Liquidity Abundant Malaysia’s 2020 Fertility Rate Falls to Lowest in Four Decades Bourses in Europe have modestly extended on the upside seen at the European cash open (Euro Stoxx 50 +1.1%; Stoxx 600 +0.9%) in a continuation of the firm sentiment experienced overnight. US equity futures have also conformed to the broader upbeat tone, with gains seen across the ES (+0.7%), NQ (+0.8%), RTY (+0.8%) and YM (+0.7%). The upside comes despite a lack of overly pertinent newsflow, with participants looking ahead to a plethora of central bank speakers. The major indices in Europe also see a broad-based performance, but the periphery narrowly outperforms, whilst the SMI (Unch) lags amid the sectorial underperformance seen in Healthcare. Overall, the sectors portray somewhat of a cyclical tilt. The Basic Resources sector is the clear winner and is closely followed by Tech and Financial Services. Individual moves are scarce as price action is largely dictated by the macro picture, but the tech sector is led higher by gains in chip names after the world's largest contract chipmaker TSMC (+3.1% pre-market) reported strong earnings and upgraded its revenue guidance. Top European News German 2021 Economic Growth Forecast Slashed on Supply Crunch U.K. Gas Shipper Stops Supplies in Another Blow to Power Firms Christmas Toy Shortages Loom as Cargo Clogs a Major U.K. Port Putin Is Back to Building Financial Fortress as Reserves Grow In FX, the Dollar and index by default have retreated further from Tuesday’s 2021 peak for the latter as US Treasury yields continue to soften and the curve realign in wake of yesterday’s broadly in line CPI data and FOMC minutes that set the schedule for tapering, but maintained a clear differential between scaling down the pace of asset purchases and the timing of rate normalisation. Hence, the Buck is losing bullish momentum with the DXY now eying bids and downside technical support under 94.000 having slipped beneath an early October low (93.804 from the 5th of the month vs 93.675 a day earlier) and the 21 DMA that comes in at 93.770 today between 94.090-93.754 parameters before the next IJC update, PPI data and a heavy slate of Fed speakers. NZD/AUD - No real surprise that the Kiwi has been given a new lease of life given that the RBNZ has already taken its first tightening step and put physical distance between the OCR and the US FFR, not to mention that the move sparked a major ‘sell fact’ after ‘buy rumour’ reaction. However, Nzd/Usd is back on the 0.7000 handle with additional impetus via favourable tailwinds down under as the Aud/Nzd cross is now nearer 1.0550 than 1.0600 even though the Aussie is also taking advantage of the Greenback’s fall from grace to reclaim 0.7400+ status. Note, Aud/Usd may be lagging somewhat on the back of a somewhat labour report overnight as the employment tally fell slightly short of expectations and participation dipped, but the jobless rate fell and full time jobs rose. Moreover, RBA Deputy Governor Debelle repeated that circumstances are different for Australia compared to countries where policy is tightening, adding that employment is positive overall, but there is not much improvement on the wage front. CAD/GBP/CHF - The next best majors in terms of reclaiming losses vs their US counterpart, with the Loonie also encouraged by a firm bounce in oil prices and other commodities in keeping with a general recovery in risk appetite. Usd/Cad is under 1.2400, while Cable is now over 1.3700 having clearly breached Fib resistance around 1.3663 and the Franc is probing 0.9200 for a big figure-plus turnaround from recent lows irrespective of mixed Swiss import and producer prices. EUR/JPY - Relative laggards, but the Euro has finally hurdled chart obstacles standing in the way of 1.1600 and gradually gathering impetus to pull away from decent option expiry interest at the round number and just above (1.5 bn and 1 bn 1.1610-20), and the Yen regrouping around the 113.50 axis regardless of dovish BoJ rhetoric. In short, board member Noguchi conceded that the Bank may have little choice but to extend pandemic relief support unless it becomes clear that the economy has returned to a pre-pandemic state, adding that more easing may be necessary if the jobs market does not improve from pent-up demand, though he doesn't see and immediate need to top up stimulus or big stagflation risk. In commodities, WTI and Brent front month futures are continuing the grind higher seen since the European close yesterday as the risk tone remains supportive and in the aftermath of an overall bullish IEA oil market report. The IEA upgraded its 2021 and 2022 oil demand forecasts by 170k and 210k BPD respectively, which contrasts the EIA STEO and the OPEC MOMR – with the former upping its 2021 but cutting 2022 forecast, whilst the OPEC MOMR saw the 2021 demand forecast cut and 2022 was maintained. The IEA report however noted that the ongoing energy crisis could boost oil demand by 500k BPD, and oil demand could exceed pre-pandemic levels in 2022. On this, China has asked Russia to double electricity supply between November-December. The morning saw commentary from various energy ministers, but perhaps the most telling from the Russian Deputy PM Novak who suggested Russia will produce 9.9mln BPD of oil in October (in-line with the quota), but that Russia has no problem in increasing oil output which can go to 11.3mln BPD (Russia’s capacity) and even more than that, but output will depend on market situation. Long story short, Russia can ramp up output but is currently caged by the OPEC+ pact. WTI Nov extended on gain about USD 81/bbl to a current high of USD 81.41/bbl (vs 80.41/bbl low) while its Brent counter topped USD 84.00/bbl to a USD 84.24/bbl high (vs 83.18/bbl low). As a reminder, the weekly DoEs will be released at 16:00BST/11:00EDT on account of the Columbus Day holiday. Gas prices have also moved higher in intraday, with the UK Nat Gas future +5.5% at the time of writing. Returning to the Russian Deputy PM Novak who noted that Nord Stream 2 will be ready for work in the next few days, still expects certification to occur and commercial supplies of gas via Nord Stream 2 could start following certification. Elsewhere, spot gold and silver have been drifting higher as the Buck wanes, with spot gold topping its 200 DMA (1,7995/oz) and in striking distance of its 100 DMA (1,799/oz) ahead of the USD 1,800/oz mark. Over to base metals, LME copper is again on a firmer footing, owing to the overall constructive tone across the market. Dalian iron ore meanwhile fell for a second straight day in a continuation of the downside seen as Beijing imposed tougher steel output controls for winter. World Steel Association also cut its global steel demand forecast to +4.5% in 2021 (prev. forecast +5.8%); +2.2% in 2022 (prev. forecast 2.7%). US Event Calendar 8:30am: Sept. PPI Final Demand MoM, est. 0.6%, prior 0.7%; YoY, est. 8.6%, prior 8.3% 8:30am: Sept. PPI Ex Food and Energy MoM, est. 0.5%, prior 0.6%; YoY, est. 7.1%, prior 6.7% 8:30am: Sept. PPI Ex Food, Energy, Trade MoM, est. 0.4%, prior 0.3%; YoY, est. 6.5%, prior 6.3% 8:30am: Oct. Initial Jobless Claims, est. 320,000, prior 326,000; Continuing Claims, est. 2.67m, prior 2.71m 9:45am: Oct. Langer Consumer Comfort, prior 53.4 Central Banks 8:35am: Fed’s Bullard Takes Part in Virtual Discussion 9:45am: Fed’s Bostic Takes Part in Panel on Inclusive Growth 12pm: New York Fed’s Logan Gives Speech on Policy Implementation 1pm: Fed’s Barkin Gives Speech 1pm: Fed’s Daly Speaks at Conference on Small Business Credit 6pm: Fed’s Harker Discusses the Economic Outlook DB's Jim Reid concludes the overnight wrap Inflation dominated the conversation yet again for markets yesterday, after another upside surprise from the US CPI data led to the increasing realisation that we’ll still be talking about the topic for some time yet. Equities were pretty subdued as they looked forward to the upcoming earnings season, but investor jitters were evident as the classic inflation hedge of gold (+1.87%) posted its strongest daily performance since March, whilst the US dollar (-0.46%) ended the session as the worst performer among the G10 currencies. Running through the details of that release, headline US consumer prices were up by +0.4% on a monthly basis in September (vs. +0.3% expected), marking the 5th time in the last 7 months that the figure has come in above the median estimate on Bloomberg, though core prices were in line with consensus at +0.2% month-over-month. There were a number of drivers behind the faster pace, but food inflation (+0.93%) saw its biggest monthly increase since April 2020. Whilst some pandemic-sensitive sectors registered soft readings, housing-related prices were much firmer. Rent of primary residence grew +0.45%, its fastest pace since May 2001 and owners’ equivalent rent increased +0.43%, its strongest since June 2006. These housing gauges are something that Fed officials have signposted as having the potential to provide more durable upward pressure on inflation. The CPI release only added to speculation that the Fed would be forced to hike rates earlier than previously anticipated, and investors are now pricing in almost 4 hikes by the end of 2023, which is over a full hike more than they were pricing in just a month earlier. In response, the Treasury yield curve continued the previous day’s flattening, with the prospect of tighter monetary policy seeing the 2yr yield up +2.0bps to a post-pandemic high of 0.358%, whilst the 10yr decreased -4.0bps to 1.537%. That move lower in the 10yr yield was entirely down to lower real rates, however, which were down -7.4bps, suggesting investors were increasingly concerned about long-term growth prospects, whereas the 10yr inflation breakeven was up +3.3bps to 2.525%, its highest level since May. Meanwhile in Europe, 10yr sovereign bond yields took a turn lower alongside Treasuries, with those on bunds (-4.2bps), OATs (-4.0bps) and BTPs (-2.3bps) all falling. Recent inflation dynamics and issues on the supply-side are something that politicians have become increasingly attuned to, and President Biden gave remarks last night where he outlined efforts to address the supply-chain bottlenecks. This followed headlines earlier in the session that major ports in southern California would move to a 24/7 schedule to unclog delivery backlogs, and Mr. Biden also used the opportunity to push for the passage of the infrastructure plan. That comes as it’s also been reported by Reuters that the White House has been speaking with US oil and gas producers to see how prices can be brought lower. We should hear from Mr. Biden again today, who’s due to give an update on the Covid-19 response. On the topic of institutions that care about inflation, the September FOMC minutes suggested staff still remained optimistic that inflationary pressures would prove transitory, although Committee members themselves were predictably more split on the matter. Several participants pointed out that pandemic-sensitive prices were driving most of the gains, while some expressed concerns that high rates of inflation would feed into longer-term inflation expectations. Otherwise, the minutes all but confirmed DB’s US economists’ call for a November taper announcement, with monthly reductions in the pace of asset purchases of $10 billion for Treasuries and $5 billion for MBS. Markets took the news in their stride immediately following the release, reflecting how the build-up to this move has been gradually telegraphed through the year. Turning to equities, the S&P 500 managed to end its 3-day losing streak, gaining +0.30% by the close. Megacap technology stocks led the way, with the FANG+ index up +1.13% as the NASDAQ added +0.73%. On the other hand, cyclicals such as financials (-0.64%) lagged behind the broader index following flatter yield curve, and JPMorgan Chase (-2.64%) sold off as the company’s Q3 earnings release showed muted loan growth. Separately, Delta Air Lines (-5.76%) also sold off along with the broader S&P 500 airlines index (-3.51%), as they warned that rising fuel costs would threaten earnings over the current quarter. European indices posted a more solid performance than the US, with the STOXX 600 up +0.71%, though the sectoral balance was similar with tech stocks outperforming whilst the STOXX Banks index (-2.05%) fell back from its 2-year high the previous session. Overnight in Asia equities have put in a mixed performance, with the KOSPI (+1.17%) and the Nikkei (+1.01%) moving higher whilst the Shanghai Composite (-0.25%) and the CSI (-0.62%) have lost ground. Those moves follow the release of Chinese inflation data for September, which showed producer price inflation hit its highest in nearly 26 years, at +10.7% (vs. +10.5% expected), driven mostly by higher coal prices and energy-sensitive categories. On the other hand, the CPI measure for September came in slightly below consensus at +0.7% (vs. +0.8% expected), indicating that higher factory gate prices have not yet translated into consumer prices. Meanwhile, equity markets in the US are pointing to a positive start later on with S&P 500 futures up +0.32%. Of course, one of the drivers behind the renewal of inflation jitters has been the recent surge in commodity prices across the board, and we’ve seen further gains yesterday and this morning that will only add to the concerns about inflation readings yet to come. Oil prices have advanced yet again, with Brent Crude up +0.69% this morning to be on track to close at a 3-year high as it stands. That comes in spite of OPEC’s monthly oil market report revising down their forecast for world oil demand this year to 5.8mb/d, having been at 5.96mb/d last month. Elsewhere, European natural gas prices were up +9.24% as they continued to pare back some of the declines from last week, and a further two energy suppliers in the UK collapsed, Pure Planet and Colorado Energy, who supply quarter of a million customers between them. Otherwise, copper (+4.4x%) hit a 2-month high yesterday, and it up a further +1.01% this morning, Turning to Brexit, yesterday saw the European Commission put forward a set of adjustments to the Northern Ireland Protocol, which is a part of the Brexit deal that’s caused a significant dispute between the UK and the EU. The proposals from Commission Vice President Šefčovič would see an 80% reduction in checks on animal and plant-based products, as well as a 50% reduction in paperwork by reducing the documentation needed for goods moving between Great Britain and Northern Ireland. It follows a speech by the UK’s David Frost on Tuesday, in which he said that Article 16 of the Protocol, which allows either side to take unilateral safeguard measures, could be used “if necessary”. Mr. Frost is due to meet with Šefčovič in Brussels tomorrow. Running through yesterday’s other data, UK GDP grew by +0.4% in August (vs. +0.5% expected), and the July number was revised down to show a -0.1% contraction (vs. +0.1% growth previously). The release means that GDP in August was still -0.8% beneath its pre-pandemic level back in February 2020. To the day ahead now, and on the calendar we’ve got central bank speakers including the Fed’s Bullard, Bostic, Barkin, Daly and Harker, the ECB’s Elderson and Knot, along with the BoE’s Deputy Governor Cunliffe, Tenreyro and Mann. Data releases from the US include the September PPI reading along with the weekly initial jobless claims. Lastly, earnings releases will include UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp and Walgreens Boots Alliance. Tyler Durden Thu, 10/14/2021 - 08:29.....»»

Category: blogSource: zerohedgeOct 14th, 2021

The supply-chain crisis is wreaking havoc on advertisers" Q4 plans

In this week's Insider Advertising, we're covering the supply-chain crisis, new ad units at Lowe's and DoorDash, and a flurry of mobile ad activity. Hello and welcome back to Insider Advertising, your weekly look at the biggest stories and trends affecting Madison Avenue and beyond. I'm Lara O'Reilly, Insider's media and advertising editor. If this was forwarded to you, sign up here.Have you binged your way through "Squid Game" yet? If not, you're probably in the minority. Netflix said this week that the dystopian Korean-language horror series had become its biggest-ever series launch, with 111 million member households having watched it so far. You can already buy merch from Walmart (bafflingly, no green tracksuits yet), and no doubt we're in for a bunch of awkward memes from brand social-media accounts come Halloween. Red light!Green light! Let's quickly dive into this week's big advertising news before we get eliminated.The supply-chain crisis throws advertisers' Q4 plans into disarrayLowe's and DoorDash launch new ad offeringsMobile adtech consolidation continues apaceI'm in the middle of a chain reaction Ad agencies are scrambling to shift ad plans for clients struggling with supply chain issues like stock shortages. ArtMarie/Getty Images The supply-chain crisis is wreaking havoc on all sorts of industries, not least advertising.Lindsay Rittenhouse, an Insider senior reporter, found that some advertisers were slashing their fourth-quarter budgets by up to 50% - cuts that could carry over into 2022. Some marketers are also scrambling to change their messaging in light of stock shortages.Every agency staffer I've spoken with this week has told me that planning and forecasting have never been harder.The holiday ad season is likely to look very different from typical years, Mindshare UK CEO Jem Lloyd-Williams told me."Supply-chain issues may mean you have fewer people advertising - who haven't got stuff on the shelves, or don't think it's the right thing to do - it may be less cacophonous," he said.Still, he added, for many advertisers, such as automakers, there's an opportunity to double down on advertising designed to build brand awareness and preference, rather than promoting specific products."When everyone else is pulling out of the market, you get a higher share of voice," Lloyd-Williams said.Shawty got low, low, low, low, low, low, low, Lowe's Fred Prouser/Reuters Continuing the trend that every business becomes an ads business eventually, the home retailer Lowe's is the latest retailer to get in on the act, Insider's Tanya Dua reports.Its new advertising arm, Lowe's One Roof Media Network, offers ads across its website and app. Lowe's is also offering its first-party data for advertisers to target their digital ads outside its properties.Access to lucrative first-party shopping data in a destination where people are just about to make a purchase is key to all the latest retail-media plays.Take DoorDash, which this week formally launched an ad business, Insider's Lauren Johnson and Nancy Luna reported.DoorDash is pitching advertisers on data about its 20 million monthly users like what restaurants people order from and whether they are a first-time or repeat DoorDash user. One interesting aspect to the offer: A small-business owner can pay less to advertise to a consumer who prefers buying from such small businesses, while chains will pay more to reach the same person.Hanging on the telephone A woman using a smartphone. Vladimir Vladimorov "Mobile is eating the world," the former Andreessen Horowitz analyst Benedict Evans presciently said many moons ago.The sentiment continues into 2021. Mobile adtech companies have been among the most active advertising dealmakers this year amid the continued growth in mobile-ad spending as well as Apple's recent privacy changes that limit tracking.The latest such deal: InMobi on Wednesday said it was acquiring the European mobile-analytics company Appsumer, Insider's Ryan Joe reported. Terms of the deal weren't disclosed."Local advertising" - ads specifically targeting local and regional markets - is also going mobile. BIA Advisory Services forecasts that local mobile ad spending will surpass direct mail for the first time in 2022.Here's how BIA predicts the US local ad market will stack up next year:Mobile - $34 billion (+21%)Direct mail - $33.4 billion (+20.7%)PC or laptop - $27.5 billion (+17.1%)Local TV - $21 billion (+13%)Local radio - $12.7 billion (+7.9%)The 90-second slotIn this semiregular corner of the newsletter, we bring you a rapid-fire, 90-second interview with the industry's most influential executives in this week's advertising news.This week, I spoke with Christian Broughton, the managing director of The Independent. The digital-news title this week pledged to increase its climate coverage and set a 2030 net-zero emissions goal. The UK publisher also announced a new petitions website and is piloting an advertising tool that makes use of data clean rooms. The Independent How is The Independent seeking to differentiate itself internationally?We've just given a presentation to mark our 35th anniversary, the theme of which is "Making change happen."The Independent has always been a very purposeful, change-minded news brand, based on the independence of our journalists and crucially the independent-minded readers that we attract.When you look at the climate agenda and you look at the number of brands out there that are presenting themselves as people encouraging and looking for an inclusive way to bring everyone along on climate progress, there is something 100% of The Independent about that. I really do feel that The Independent's time has come.Back in the day, when great journalists like Michael McCarthy and Steve Connor were blazing a trail in climate journalism, other news brands were mocking us for it. But it turns out that they were absolutely right. It makes me very excited to see how many other mainstream brands, from furniture to food, are now looking for a climate purpose.If there was one key marketing objective that you want to achieve next year, what would be your biggest priority?To define ourselves as positive change makers.For example, in the next year we're going to be launching a petitions website called Yourpetitions.com. For years as editor it was the most thrilling moment when readers backed our campaigns, and now we're going to be giving readers the opportunity for us to back their campaigns by allowing them to start their petitions.Recommended readingThe ad giant WPP has suspended three staffers at its Finecast agency amid an investigation after a whistleblower complaint - InsiderFacebook has promoted its EMEA vice president, Nicola Mendelsohn, to lead the company's global business group. She replaces Carolyn Everson, who left the company in June to join Instacart. - CampaignTikTok music marketers are using satisfying hydraulic-press videos and DIY slime posts to amp up engagement with their artists' tracks - InsiderA look inside the "multibillion-dollar dogfight" in the pet-healthcare market - Wall Street JournalReuters says it reviewed thousands of pages of internal documents that show Amazon copied products and rigged its search results to promote its own brands. (In a statement, Amazon sought to cast doubt on the claims but said it had not been provided the documents to review their authenticity.) - ReutersPublicis Groupe posted an 11% increase in organic revenue growth for its third quarter and raised its full-year guidance. The company credited strong performances from its US Epsilon and Publicis Sapient divisions - Ad AgeHeading to Advertising Week New York next week? Make sure to check out all the sessions hosted by the Insider team.That's all for now. See you next week - LaraRead the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 14th, 2021

The supply-chain crisis is wreaking havoc with advertisers" Q4 plans

In this week's Insider Advertising, we're covering the supply-chain crisis, new ad units at Lowe's and DoorDash, and a flurry of mobile ad activity. Hello and welcome back to Insider Advertising, your weekly look at the biggest stories and trends affecting Madison Avenue and beyond. I'm Lara O'Reilly, Insider's media and advertising editor. If this was forwarded to you, sign up here.Have you binged your way through "Squid Game" yet? If not, you're probably in the minority. Netflix said this week that the dystopian Korean-language horror series had become its biggest-ever series launch, with 111 million member households having watched it so far. You can already buy merch from Walmart (bafflingly, no green tracksuits yet), and no doubt we're in for a bunch of awkward memes from brand social-media accounts come Halloween. Red light!Green light! Let's quickly dive into this week's big advertising news before we get eliminated.The supply-chain crisis throws advertisers' Q4 plans into disarrayLowe's and DoorDash launch new ad offeringsMobile adtech consolidation continues apaceI'm in the middle of a chain reaction Ad agencies are scrambling to shift ad plans for clients struggling with supply chain issues like stock shortages. ArtMarie/Getty Images The supply-chain crisis is wreaking havoc on all sorts of industries, not least advertising.Lindsay Rittenhouse, an Insider senior reporter, found that some advertisers were slashing their fourth-quarter budgets by up to 50% - cuts that could carry over into 2022. Some marketers are also scrambling to change their messaging in light of stock shortages.Every agency staffer I've spoken with this week has told me that planning and forecasting have never been harder.The holiday ad season is likely to look very different from typical years, Mindshare UK CEO Jem Lloyd-Williams told me."Supply-chain issues may mean you have fewer people advertising - who haven't got stuff on the shelves, or don't think it's the right thing to do - it may be less cacophonous," he said.Still, he added, for many advertisers, such as automakers, there's an opportunity to double down on advertising designed to build brand awareness and preference, rather than promoting specific products."When everyone else is pulling out of the market, you get a higher share of voice," Lloyd-Williams said.Shawty got low, low, low, low, low, low, low, Lowe's Fred Prouser/Reuters Continuing the trend that every business becomes an ads business eventually, the home retailer Lowe's is the latest retailer to get in on the act, Insider's Tanya Dua reports.Its new advertising arm, Lowe's One Roof Media Network, offers ads across its website and app. Lowe's is also offering its first-party data for advertisers to target their digital ads outside its properties.Access to lucrative first-party shopping data in a destination where people are just about to make a purchase is key to all the latest retail-media plays.Take DoorDash, which this week formally launched an ad business, Insider's Lauren Johnson and Nancy Luna reported.DoorDash is pitching advertisers on data about its 20 million monthly users like what restaurants people order from and whether they are a first-time or repeat DoorDash user. One interesting aspect to the offer: A small-business owner can pay less to advertise to a consumer who prefers buying from such small businesses, while chains will pay more to reach the same person.Hanging on the telephone A woman using a smartphone. Vladimir Vladimorov "Mobile is eating the world," the former Andreessen Horowitz analyst Benedict Evans presciently said many moons ago.The sentiment continues into 2021. Mobile adtech companies have been among the most active advertising dealmakers this year amid the continued growth in mobile-ad spending as well as Apple's recent privacy changes that limit tracking.The latest such deal: InMobi on Wednesday said it was acquiring the European mobile-analytics company Appsumer, Insider's Ryan Joe reported. Terms of the deal weren't disclosed."Local advertising" - ads specifically targeting local and regional markets - is also going mobile. BIA Advisory Services forecasts that local mobile ad spending will surpass direct mail for the first time in 2022.Here's how BIA predicts the US local ad market will stack up next year:Mobile - $34 billion (+21%)Direct mail - $33.4 billion (+20.7%)PC or laptop - $27.5 billion (+17.1%)Local TV - $21 billion (+13%)Local radio - $12.7 billion (+7.9%)The 90-second slotIn this semiregular corner of the newsletter, we bring you a rapid-fire, 90-second interview with the industry's most influential executives in this week's advertising news.This week, I spoke with Christian Broughton, the managing director of The Independent. The digital-news title this week pledged to increase its climate coverage and set a 2030 net-zero emissions goal. The UK publisher also announced a new petitions website and is piloting an advertising tool that makes use of data clean rooms. The Independent How is The Independent seeking to differentiate itself internationally?We've just given a presentation to mark our 35th anniversary, the theme of which is "Making change happen."The Independent has always been a very purposeful, change-minded news brand, based on the independence of our journalists and crucially the independent-minded readers that we attract.When you look at the climate agenda and you look at the number of brands out there that are presenting themselves as people encouraging and looking for an inclusive way to bring everyone along on climate progress, there is something 100% of The Independent about that. I really do feel that The Independent's time has come.Back in the day, when great journalists like Michael McCarthy and Steve Connor were blazing a trail in climate journalism, other news brands were mocking us for it. But it turns out that they were absolutely right. It makes me very excited to see how many other mainstream brands, from furniture to food, are now looking for a climate purpose.If there was one key marketing objective that you want to achieve next year, what would be your biggest priority?To define ourselves as positive change makers.For example, in the next year we're going to be launching a petitions website called Yourpetitions.com. For years as editor it was the most thrilling moment when readers backed our campaigns, and now we're going to be giving readers the opportunity for us to back their campaigns by allowing them to start their petitions.Recommended readingThe ad giant WPP has suspended three staffers at its Finecast agency amid an investigation after a whistleblower complaint - InsiderFacebook has promoted its EMEA vice president, Nicola Mendelsohn, to lead the company's global business group. She replaces Carolyn Everson, who left the company in June to join Instacart. - CampaignTikTok music marketers are using satisfying hydraulic-press videos and DIY slime posts to amp up engagement with their artists' tracks - InsiderA look inside the "multibillion-dollar dogfight" in the pet-healthcare market - Wall Street JournalReuters says it reviewed thousands of pages of internal documents that show Amazon copied products and rigged its search results to promote its own brands. (In a statement, Amazon sought to cast doubt on the claims but said it had not been provided the documents to review their authenticity.) - ReutersPublicis Groupe posted an 11% increase in organic revenue growth for its third quarter and raised its full-year guidance. The company credited strong performances from its US Epsilon and Publicis Sapient divisions - Ad AgeHeading to Advertising Week New York next week? Make sure to check out all the sessions hosted by the Insider team.That's all for now. See you next week - LaraRead the original article on Business Insider.....»»

Category: worldSource: nytOct 14th, 2021

US stock futures rally as investors look past rising inflation and focus on earnings season

Stock market investors' focus was on third-quarter earnings, with a slew of big banks due to report on Thursday. Stocks rose on Wednesday despite inflation hitting a 13-year high. EMMANUEL DUNAND/AFP via Getty Images US stock futures rallied Thursday despite inflation hitting a 13-year high and the Fed moving toward tapering. Investors' focus was on third-quarter earnings, with a slew of big banks due to report on Thursday. Elsewhere, oil prices continued to rise as the IEA said the energy crisis could add 500,000 barrels a day to demand. US stock futures rose Thursday as earnings season picked up pace, even after inflation climbed and the Federal Reserve edged closer to cutting back its support for the economy.S&P 500 futures were up 0.65%, Nasdaq 100 futures were 0.84% higher and Dow Jones futures rose 0.54%, after US stocks snapped a three-day losing streak on Wednesday.In Asia overnight, China's CSI 300 index slipped 0.54%, but Tokyo's Nikkei 225 climbed 1.46%. Europe's continent-wide Stoxx 600 rose 0.83% in early trading.US stocks ended in the green Wednesday despite falling early in the session as traders digested a key inflation report and minutes from the latest Fed meeting.Consumer price index inflation rose to 0.4% month-on-month and 5.4% year-on-year, a 13-year high. Persistent supply-chain disruption and an energy crunch have been pushing up prices around the world.The Fed minutes showed the central bank could begin "tapering" its bond purchases in November or December, as it reacts to strong inflation and a solid economic recovery.Despite the growing chances of a taper, US bond yields were little changed and major stock markets closed higher. Analysts said investors had already positioned for strong inflation and an imminent Fed move."There was barely a murmur from markets following the release of the latest [Fed] meeting minutes," said Mike Owens, global sales trader at Saxo Markets. "The Fed's signalling in the last few months has prepared markets for the reduction of emergency pandemic support they have been providing up to this point."The yield on the key 10-year US Treasury note was down slightly on Thursday to 1.539%, having started the week above 1.6%. Bond yields move inversely to prices.Read more: The head of investment strategy for iShares' $2.3 trillion US business explains 2 key market themes that will define the upcoming Q3 earnings season - and shares why 'stagflation' concerns are overblownInvestors turned their focus to third-quarter earnings season, which kicked off Wednesday with JPMorgan posting profits that topped estimates, driven by a surge in dealmaking. Leading lenders Bank of America, Wells Fargo, Morgan Stanley and Citigroup are due to report Thursday as earnings pick up pace.Many analysts are bullish about corporate earnings, expecting companies to beat expectations despite the Delta coronavirus wave and rising cost pressures."Earnings growth and the 'beat' rate will likely drop significantly compared with the second quarter," said Mark Haefele, chief investment officer at UBS Global Wealth Management."But we still expect roughly 30% earnings growth in the third quarter, representing a 5% beat. Pent-up demand should drive revenue growth, while pricing power and operating leverage should help offset inflationary pressures."Elsewhere in markets, oil prices continued to rise as a global energy crunch pushes users towards the fossil fuel. The IEA said Thursday the switch to oil could boost demand by 500,000 barrels a day until March, compared with normal conditions. Brent crude was up 1.32% to $84.26 a barrel, while WTI crude was 1.26% higher at $81.47 a barrel.In the crypto world, bitcoin was up 1.2% to $57,677. The world's biggest cryptocurrency fell sharply on Wednesday after a solid rise in recent weeks.Read the original article on Business Insider.....»»

Category: worldSource: nytOct 14th, 2021

Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change

Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change We now live in a world, where bizarro headlines such as the ones below, have become a daily if not hourly occurrence: *TREASURY TO STUDY IMPACT OF CLIMATE ON HOUSEHOLDS, COMMUNITIES *TREASURY LAUNCHES EFFORT ON CLIMATE-RELATED FINANCIAL RISKS *BRAINARD: CLIMATE-SCENARIO ANALYSIS WILL HELP IDENTIFY RISKS *BRAINARD: CLIMATE CHANGE COULD HAVE PROFOUND ECONOMIC EFFECTS *MESTER: FED LOOKS AT CLIMATE CHANGE FROM VIEW OF RISKS TO BANKS *FED IS TAKING THE RIGHT COURSE ON MONITORING CLIMATE CHANGE *FED SHOULD CONSIDER CLIMATE-CHANGE RISK TO FINANCIAL SYSTEM Now, in case someone is still confused, none of these institutions, and not a single of the erudite officials running them, give a rat's ass about the climate, about climate change risks, or about the fate of future generations of Americans (and certainly not about the rising water level sweeping away their massive waterfront mansions): if they did, total US debt and underfunded liabilities wouldn't be just shy of $160 trillion. So what is going on, and why is it that virtually every topic these days has to do with climate change, "net zero", green energy and ESG? The reason - as one would correctly suspect - is money. Some $150 trillion of it. Earlier today, Bank of America published one of its massive "Thematic Research" tomes, this time covering the "Transwarming" World, and serves as a massive primer to today's Net Zero reality. The report (which is available to all ZH pro subs) is actually a must read, interesting, chock-full of data and charts such as these... ... and handy cheat sheets... ... none of which happen to mention China's role in the "global climate change" crisis of course (after all, can't offend Beijing and lose the biggest revenue stream now can we) and comes at a very precarious time for the green cause, just when soaring energy prices around the globe as a result of the escalating global energy crisis, threatens to crush any grass roots support to fight "global warming." As report author Haim Israel writes: This is the decade of climate action and COP26 will be the tipping point of the race to reach net zero emissions – the balance of reducing and removing carbon emissions from the atmosphere. To achieve it, a transition to clean technologies in all sectors at an unprecedented pace would be required, with the steering of governments and willingness of society. This is the last decade to act. Absolute water scarcity is likely for 1.8bn people, 100mn face poverty, and 800mn are at risk from rising sea levels by 2025. Climate migration could reach 143mn from emerging markets, driven by extreme weather. None of that is new, of course - and while it is handy to have a centralized compendium of the data, a 5 minute google search can provide all the answers that are "accepted" dogma by the green lobby. But while we don't care about the charts, that cheat sheets, or the propaganda, what we were interested in was the bottom line - how much would this green utopia cost, because if the "net zero", "ESG", "green" narrative is pushed so hard 24/7, you know it will cost a lot. Turns out it does. A lot, lot. Responding rhetorically to the key question, "how much will it cost?", BofA cuts to the case and writes $150 trillion over 30 years - some $5 trillion in annual investments - amounting to twice current global GDP!  At this point the report gets good because since it has to be taken seriously, it has to also be at least superficially objective. And here, the details behind the numbers, do we finally learn why the net zero lobby is so intent on pushing this green utopia - simple answer: because it provides an endless stream of taxpayer and debt-funded "investments" which in turn need a just as constant degree of debt monetization by central banks. Consider this: the covid pandemic has so far led to roughly $30 trillion in fiscal and monetary stimulus across the developed world. And yet, not even two years later, the effect of this $30 trillion is wearing off, yet despite the Biden's admin to keep the Covid Crisis at bay, threatening to lock down society at a moment's notice with the help of the complicit press, the population has made it clear that it will no longer comply with what is clear tyranny of the minority. And so, the establishment needs a new perpetual source (and use) of funding, a crisis of sorts, but one wrapped in a virtuous, noble facade. This is where the crusade against climate change comes in. Much digital ink has been spilled on the philosophy and debate behind the green movement, and we won't bore you with the details, but we will instead focus on the very clear, and very tangible financial consequences of a world where the establishment agrees, whether with democratic support or not, to allocate $5 trillion in new capital toward some nebulous cause of "fighting global warming." Here are the highlights from Bank of America: Will it be inflationary? Yes, expect 1-3% pa shock. This is for the next 30 years... over and on top of any already present inflation! What are the bottlenecks? Geopolitics, climate wars and EM. Do we have the resources? Nickel and Lithium are just two that could be in deficit as soon as 2024. Is green technology really green? Not really (see below). Drilling down on the absolutely staggering costs, at an estimated $150 trillion over 30 years, boosting funding sources to $5tn a year is equivalent to the entire US tax base, or 3x the COVID-19 stimulus this decade. Here are the details: The energy transition to a net zero greenhouse gas (GHG) economy by 2050 will be a very expensive exercise, estimated by the IEA at $150tn of total investment, over a period of 30 year. At $5tn p.a, the IEA see it costing as much as the entire US tax base every year for 30 years. Not high enough for you? Hang on then because... BNEF has a higher estimate that the total investment needed for energy supply and infrastructure could be as high as $173tn through 2050, or up to $5.8tn annually, which is nearly three times the amount invested on an annual basis today. Next follows the obligatory pitch from BofA which is reminiscent of a stalinist kolhoz pep talk from the 1950s, to wit: ... But it can be done, with technology, economy, markets and ESG joining forces. Exponential cost reductions in wind, solar and batteries technologies have made renewables the cheapest form of energy in areas producing >90% of global electricity. Market appetite is chipping in too. Labelled bonds and loans jumped to > $3tn this year, with $3 in every $10 of flows into global equities going into ESG, which will support climate-friendly investments, as well as funding new ones needed to further decarbonize our planet like green mining, green hydrogen or carbon capture. We leave the best for last because at the end of the day, this was always about more debt, and more monetization, a process which by now even the shoeshine boy knows makes the rich richer and the poor poorer. Only this time the world's wealthiest plan on robbing what little is left of the middle class under the guise of a noble crusade to defeat global warming... a crusade which will require over $500 billion in annual debt monetization by central banks each and every year, leading to hyperinflation in either risk assets or the broader economy, or both. So if it sounds like "the crusade against climate change" is one giant con game meant to enrich a handful of kleptocrats here and now, while the nebulous benefits - and the all too certain debt and hyperinflation - of this revolutionary overhaul of the global economy are inherited by future generations, it's because that's precisely what it is. Here is BofA's startling admission of the above, as excerpted from the report's Q&A on the Climate Change Conference (COP 26): Q: What is the economic impact of net zero?   A: The inflation impact of elevated net zero funding will not be insignificant but the impact looks manageable at 1% to 3% per annum depending on central bank monetization rates, particularly if government spending is targeted and contributes to accelerate the rate of global GDP growth. The IEA also has a productive outlook for their net zero scenario, where the change in the annual growth rate of GDP accelerates by somewhere between 0.3% and 0.5% on a sustained basis over the next 10 years as a result of a shift to a green economy. So much more QE for the next 30 years, check. What about inflation? Oh, there will be plenty of that too. As BofA admits, "green bond purchases  could result in a 1% to 3% inflation p.a. shock" To answer this question, we look at three separate cases. In our first case, the Fed, ECB and other central banks would subsidize all of the required infrastructure spending to decarbonize (translation: print the money). In a second scenario, we assume that they would absorb only half of the new bond issuance. And in a third case, we assume central banks take up only a fifth of all decarbonization spending onto their balance sheet. What is our key finding? If central banks only have to foot 20% of the bill or less, the impact of decarbonization looks fairly manageable with respect to inflation (Exhibit 108). And just so readers know what to BofA looks "manageable" here it is: this is inflation on top of whatever inflation is already in the economy. Of course, if central banks have to "foot" 50%, 80%, or more, well... it gets much worse. And this is where we get to the punchline: as BofA admits, it's all about greenlighting the biggest QE episode in history! We just see a peak of.....»»

Category: blogSource: zerohedgeOct 13th, 2021