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Queen Elizabeth II’s Death Slowed Action on a U.K. Economy Already in Turmoil

Queen Elizabeth II's death slowed action on a U.K. economy already in turmoil The death of Queen Elizabeth II and the period of national mourning that followed have been the latest blow to Britain’s already struggling economy, but economists and analysts say that there are glimmers of hope. Britain is at a watershed moment. The country has just completed a 10-day period of mourning, concluding with country-wide shutdowns during a public holiday to mark the late monarch’s funeral. Her death came just two days after a new prime minister, Liz Truss, took office, after the last leader was ousted by his own party for unbecoming behavior, while the U.K. faces a cost-of-living crisis unlike anything the nation has seen in decades. Inflation has soared to the highest levels since the 1980s, at around 10%, and the nation faces an energy crisis due to dwindling Russian energy exports to Europe. The British pound has been languishing around a nearly 37-year low against the dollar. And economic growth is another concern—the U.K. has now fallen behind India, a former British colony, becoming the world’s sixth largest economy. The U.K.’s central bank, the Bank of England, has warned that it risks falling into a recession that could last well into 2024. [time-brightcove not-tgx=”true”] The death of Queen Elizabeth II is the latest thing to touch Britain’s psyche. While the monarchy is often viewed as an anachronism, it is still an important part of U.K. life. It’s likely that will continue under the new monarch, King Charles III, who acceded when the Queen passed. “It really does feel like we’ve entered into a new era for the U.K. as a whole,” says Craig Erlam, a senior market analyst at multi-asset broker OANDA. “That makes for a very interesting time for the country and its place in the world.” In many ways, the monarch holds a symbolic role, not a political one. That means the change shouldn’t be too controversial, Erlam says. However, it’s a tough act to follow. “She was an incredibly loved figure,” he says. “I just wonder whether there is the same love and devotion for King Charles.” Britain’s mounting economic pressures When gross domestic product figures for the third quarter are released, it could show that the public holiday for Queen Elizabeth II’s funeral on Sept. 19 slightly depressed growth, pushing the economy into a technical recession of two back-to-back quarters of negative growth, says Steve Clayton, head of equity funds at U.K.-based Hargreaves Lansdown. That’s because of lower productivity and economic output. A similar thing happened in the second quarter, when an additional holiday was granted to celebrate the Queen’s platinum Jubilee, and the economy shrank by 0.1%, according to data provider Trading Economics. “Whatever impact there will be, it will be temporary,” he says. That’s because it won’t likely change any spending on autos, TVs, food, and other things, he says. On top of that, some food banks planned closures on the day of the funeral, meaning those in desperate need may not have been able to get basic necessities. That’s not to say spending habits haven’t changed. Clayton has noticed a retrenchment in consumer spending, likely prompted by the country’s energy crisis and recent increases in interest rates. U.K. grocery delivery retailer Ocado, which is popular with Britain’s middle class consumers, recently reported that its customers were spending less, sending the company’s shares diving. Clayton says that’s in part also the harsh reality of higher home loan costs. Many homebuyers use variable-rate mortgages to purchase properties. The Bank of England raised its benchmark lending rate to 1.5% from 0.35% last November. That’s going to have a direct impact on the many U.K. residents with adjustable mortgages. Worse still, the central bank raised the rates by 0.5% today—its seventh successive increase—cutting into many Britons’ household budgets. “That will be painful for those with large flexible-rate mortgages,” Clayton says. Then there’s the energy crisis, which threatens to plunge half of households into energy poverty. The cost of natural gas in Europe has more than tripled to €217 ($217) per Kilowatt-hour recently from around €70 a year ago, according to data from Trading Economics. The surge occurred because Russia cut its deliveries of natural gas to Europe following the invasion of Ukraine. That price jump directly feeds through to higher electricity prices and heating costs. Earlier this summer, Britons were warned that energy bills could exceed £6,000 yearly ($6,960) by April 2023, due to higher heating costs this winter. That’s close to 20% of the £31,500 average annual after-tax household income, according to government statistics. Some people will not have the money to pay their bills, experts say. Warnings have also been given that more than one-in-five U.K. companies with sales above £1 million ($1.16 million,) around 76,000, could face insolvency due to higher energy bills, according to a financial research firm Red Flag Alert. Those with high energy consumption, such as industrial companies, are more at risk. Liz Truss’s emergency economic relief plans Two days after becoming Prime Minister, Truss announced a cap on household energy bills at an annual rate of around £2,500 for the next two years, with the government paying the difference. The government has also unveiled a £40 billion ($45 billion) plan to help companies, imposing a cap on wholesale energy prices for businesses for six months. Some have criticized such measures as filling the coffers of energy companies that are expected to make bumper profits as a result of rising energy costs. The U.K.’s new Chancellor of the Exchequer, Kwasi Kwarteng, will announce the government’s urgently needed plan to address the cost of living crisis on Sept. 23. The emergency fiscal event was expected sooner, but was put on hold while Parliament was suspended over the mourning period. The so-called “mini budget” is expected to include tax relief for corporations and individuals and reductions in unnecessary regulations. “One of the most compelling stories is the U.K.’s economic policy mix,” says Marc Chandler, managing director at Bannockburn Global Forex. Specifically, that means loose fiscal policy (more spending, lower taxes) and tight monetary policy, with higher interest rates. That was the U.S. policy used in the early 1980s, which led to a period of stellar growth. Chandler also thinks the policy mix will partly help with the country’s other problem: the pound’s falling value. Sterling recently reached its lowest level against the dollar since the mid-1980s. He says the drop in the pound is largely due to the outrageous strength of the dollar. Other rich-country currencies have fallen by similar amounts, notably Europe’s single currency, the euro, and the Japanese yen. Sterling has rarely been as undervalued as it is now, Chandler says, and he expects it could start to rebound once the dollar peaks, which he predicts will be in early 2023. Truss also wants to ensure a future of stable energy supplies, says Ivo Pezzuto, professor of global economics and digital transformation at the International School of Management in Paris. Higher prices lead to lower demand, but that doesn’t fix the fact that the Kremlin cutting off natural gas deliveries is a supply problem in Europe. “They need more supply,” he says. Gone are the days of building an economy around cheap Russian oil and gas. Unlike the rest of Europe, Truss’s plan doesn’t mean levying windfall profit taxes on energy companies. She wants to encourage more drilling and has lifted the ban on hydraulic fracturing oil drilling—or fracking. There are also discussions about establishing a robust energy policy that embraces new technology, including nuclear power and renewables. “Some of this will take time before the benefits arrive,” Pezzuto says. There are other signs of hope for the economy. The unemployment rate, at 3.6%, is the lowest since the 1970s. There are now 1.3 million vacancies versus 1.5 million unemployed people. Put simply, the labor market is tight, which gives employees the power to demand higher wages, which in turn will help offset the rising cost of living. “Employers will be unlikely to hold down wages for long,” says Clayton. But there’s a caveat to the rising salaries. If the wage demands inflate too much, then the Bank of England may worry about sustained inflation. The result could be aggressively higher interest rates, says Konstantinos Venetis, director of global macro at London-based financial firm TS Lombard. If that happens, the economy could take a hit......»»

Category: topSource: timeSep 22nd, 2022

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears U.S. index futures regained some ground alongside Asian markets while European stocks slumped to session lows in a delayed response to yesterday's late Omicron-driven US selloff, as markets remained volatile following the biggest two-day plunge in more than a year, spurred by concern about the omicron coronavirus variant and Federal Reserve tightening. Investors await data for unemployment claims, as well as earnings from companies including Dollar General and Kroger. Tech is the weakest sector, dropping in sympathy after Apple warned its suppliers of slowing iPhone demand. Nasdaq futures pared earlier gains of up to 0.8% to trade down 0.1% while S&P futures are only 0.2% higher after rising as much as 0.9%. While the knee-jerk reaction of stock investors may “continue to be to take profits before the end of the year,” there is “plenty of liquidity available to drive stock prices higher as dip-buyers enter the market,” Ed Yardeni wrote in a note. The U.S. economy grew at a modest to moderate pace through mid-November, while price hikes were widespread amid supply-chain disruptions and labor shortages, the Federal Reserve said in its Beige Book survey Tuesday. Cruise-ship operator Carnival jumped 3.8% in premarket trading, while Pfizer and Moderna fell as the World Health Organization said that existing vaccines will likely protect against severe cases of the variant. Boeing contracts gained 3.4% after a report that the flagship 737 Max aircraft has regained airworthiness approval in China. With lots of uncertainty surrounding the pandemic and Fed policy, the size of potential market swings is still considerable.  Here are some other notable premarket movers today: Apple (AAPL US) shares fell 1.8% in premarket trading after the iPhone maker was said to tell suppliers that demand for its flagship product has slowed. Wall Street analysts, however, remained bullish. U.S. stocks tied to former President Donald Trump rise in premarket trading following a report his media group is in talks to raise new financing. Digital World Acquisition (DWAC US) +24%, Phunware (PHUN US) +38%. Katapult (KPLT US) shares sink 14% in premarket after the financial technology firm said its gross originations over a two-month period were lower than 2020 levels. Vir (VIR US) shares jump 8.1% in premarket trading after its Covid-19 antibody treatment, co-developed with Glaxo, looked to be effective against the new omicron variant in early testing. Snowflake (SNOW US) is up 17% premarket following quarterly results that impressed analysts, though some raise questions over the data software company’s valuation. CrowdStrike (CRWD US) shares jumped 5.1% in premarket after it boosted its revenue forecast for the full year. Square’s (SQ US) shares are 0.4% higher premarket. Corporate name change to Block Inc. indicates “a symbolic rebirth,” according to Barclays as it shows a broader set of possibilities than those of a pure payments company. Okta’s (OKTA US) shares advanced in postmarket trading. 3Q results show the cybersecurity company is well- positioned to deliver growth, even if some analysts say its guidance looks conservative and that its growth was not as strong as in prior quarters. The Omicron variant also hurt risk appetite, making the safe-haven bonds more attractive to investors, pushing yields down - although yields picked up again in early European trading. Volatility in equity markets as measured by the Vix hit its highest since February on Wednesday, before easing on Thursday, but remained well above this year’s average and almost twice as high as a month ago. Investors are braced for volatility to continue through December, stirred by tightening central-bank policies to fight inflation just as the omicron variant complicates the outlook for the pandemic recovery. The recent market turmoil may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. "Investors will need to maintain their calm during a period of uncertainty until the scientific data give a clearer picture of which scenario we face," said Mark Haefele, chief investment officer at UBS Global Wealth Management in Zurich. “This, in turn, will help shape the reaction of central bankers." Also weighing on stock markets, and flattening the U.S. yield curve, were remarks by Federal Reserve Chair Jerome Powell, who said that he would consider a faster end to the Fed's bond-buying programme, which could open the door to earlier interest rate hikes. In his second day of testimony in Congress on Wednesday, Powell reiterated that the U.S. central bank needs to be ready to respond to the possibility that inflation does not recede in the second half of next year. read more "In this past what we’ve seen is central banks using COVID as an excuse to remain dovish, and what we're seeing is central banks turn hawkish despite rising concerns around COVID, so it is a bit of a shift in communication," said Mohammed Kazmi, portfolio manager at UBP.  That said, the market is now so oversold, this is where we usually see aggressive dip-buying. In Europe, tech companies were the worst performers after Apple warned its component suppliers of slowing demand for its iPhone 13, the news dragged index heavyweight ASML Holding NV more than 4%. Meanwhile, travel shares were among the worst performers as the omicron variant continued to pop upin countries around the world, including the U.S., Norway, Ireland and South Korea. The Euro Stoxx 50 dropped as much as 1.7% while the Stoxx 600 Index fell 1.5%, extending declines to trade at a session low, with all sectors in the red and led lower by technology and travel stocks. The Stoxx 600 Technology Index slumped as much as 3.9%, the most in two months. Vifor Pharma surged by a record 18% following a report that Australia’s CSL is in advanced talks to acquire Swiss drugmaker. Here are some of the biggest European movers today: Vifor Pharma shares rise as much as 18% on a report that Australia’s CSL is in advanced talks to acquire the Swiss-based drug maker and developer while working with BofA on a A$4 billion funding package. Argenx jumps as much as 9.5% after Kepler Cheuvreux upgrades the stock to buy, saying the biotech company is on the brink of launching its first commercial product. Duerr gains as much as 7.2%, most since Aug. 10, after Deutsche Bank upgrades to buy and sets aa Street-high PT of EU60 for the German engineering company, citing the digitalization of the industry. Daily Mail & General Trust rises as much as 3.9% after Rothermere Continuation raised its bid for all DMGT’s Class A shares by 5.9% to 270p a share in cash. Klarabo surges as much as 54% as shares start trading on Nasdaq Stockholm after the Swedish property company raised SEK750m in an IPO. Eurofins Scientific declines for a fourth session, falling as much as 3.2%, as Goldman Sachs downgrades the company to neutral from buy “following strong outperformance YTD.” Deliveroo drops as much as 6.4% after an offering of 17.6m shares by CEO Will Shu and CFO Adam Miller at a price of 278p a share, representing a 4.2% discount to the last close. M&S falls as much as 3.4% after UBS cut its rating to neutral from buy, citing limited upside to its new price target as well as “little room for meaningful upgrades.” Earlier in the session, Asian stocks erased an earlier loss to trade slightly up, as traders continued to assess the potential impact of the omicron virus strain and the Federal Reserve’s efforts to keep inflation in check.  The MSCI Asia Pacific Index rose 0.2% after falling 0.4% in the morning. South Korea led regional gains, helped by large-cap chipmakers, while Japan was among the worst performers after the government dropped a plan for a blanket halt to all new incoming flight reservations. Asia’s equity benchmark is still down about 4% so far this year after rebounding in the past two sessions from a one-year low reached earlier this week. Despite the region’s underperformance against the U.S. and Europe, cheap valuations and foreign-investor positioning have prompted brokerages including Credit Suisse Group AG and Nomura Securities Co. Ltd. to turn bullish on Asia’s prospects next year. “Equity markets continue to play omicron tennis and traders looking for short-term direction should just wait for the next virus headline and then act accordingly,” said Jeffrey Halley, a senior market analyst at Oanda Corp. “Volatility, and not market direction, will be the winner this week.” Chinese technology shares including Alibaba Group Holding slid after Beijing was said to be planning to close a loophole used by the sector to go public abroad, fueling concern over existing overseas listings. Japanese equities declined, following U.S. peers lower after the first American case of the omicron coronavirus variant was confirmed. Electronics makers and telecoms were the biggest drags on the Topix, which fell 0.5%. SoftBank Group and TDK were the largest contributors to a 0.7% loss in the Nikkei 225.  The S&P 500 posted its worst two-day selloff since October 2020 after the first U.S. case of the new strain was reported. Federal Reserve Chair Jerome Powell reiterated that officials should consider a quicker reduction of monetary stimulus amid elevated inflation. “Truth is, there’s probably a lot of people who are wanting to buy stocks at some point,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “But, with omicron still an unknown, people are responding sensitively to news development, and that’s keeping them from buying.” India’s benchmark equity index climbed for a second day, led by software exporters, on an improving economic outlook and as investors grabbed some beaten-down stocks after recent declines. The S&P BSE Sensex Index rose 1.4% to close at 58,461.29 in Mumbai, the biggest advance since Nov. 1. Its two-day gains increased to 2.5%, the most since Aug. 31. The NSE Nifty 50 Index also surged by a similar magnitude. All of the 19 sector sub-indexes compiled by BSE Ltd. were up, led by a gauge of utilities companies. “India underperformed the global markets in recent weeks. Investors are now going for value buying in stocks at lower levels,” said A. K. Prabhakar, head of research at IDBI Capital Market Services. The Sensex gained in three of the past four sessions after plunging 2.9% on Friday, the biggest drop since April. The rally, however, is in contrast to most global peers which are witnessing volatility on worries over the spread of the omicron variant. High frequency indicators in India, such as tax collection and manufacturing activities, have shown robust growth in recent months, while the country’s economy expanded 8.4% in the quarter ended in September, according to an official data release on Tuesday. Mortgage lender HDFC contributed the most to the Sensex’s gain, increasing 3.9%. Out of 30 shares in the index, 27 rose and three fell. In rates, trading has been relatively quiet as bunds and gilts bull steepen a touch with risk offered, while cash TSYs bear flatten, cheapening ~5bps across the curve.Treasuries retraced part of yesterday’s rally that sent the benchmark 30-year rate to the lowest since early January. A large buyer of 5-year U.S. Treasury options targets the yield dropping around 17bps. 5s10s, 5s30s spreads flattened by ~1bp and ~2bp to multimonth lows; 10-year yields around 1.43%, cheaper by more than 3bp on the day while bunds and gilt yields are richer by ~1bp. Front-end and belly of the curve underperform vs long-end, while bunds and gilts outperform Treasuries. With little economic data slated, speeches by several Fed officials are main focal points. Peripheral spreads tighten with 10y Spain outperforming after well received auctions, albeit with a small size on offer. U.S. economic data slate includes November Challenger job cuts (7:30am) and initial jobless claims (8:30am) In FX, the Bloomberg Dollar Spot Index fell to a day low in the European session and the greenback traded mixed versus its Group-of-10 peers as most crosses consolidated in recent ranges. Two-week implied volatility in the major currencies trades in the green Thursday as it now captures the next policy decisions by the world’s major central banks. Euro- dollar on the tenor rises by as much as 138 basis points to touch 8.22%, highest in a year; the relative premium, however, remains below parity as realized has risen to levels unseen since August 2020. The pound rose along with some other risk- sensitive currencies following the British currency’s three-day slump against the dollar. Long-end gilts underperformed, leading to some steepening of the curve. The yen fell for the first day in three while the Swiss franc fell a second day. The Hungarian forint rose to almost a three-week high after the central bank in Budapest raised the one-week deposit rate by 20 basis points to 3.10%. Economists in a Bloomberg survey were evenly split in predicting a 10 or 20 basis point increase. The Turkish lira resumed its slump after President Recep Tayyip Erdogan abruptly replaced his finance minister amid deepening rifts in the administration over aggressive interest-rate cuts that have undermined the currency and fueled inflation. Poland’s central bank Governor Adam Glapinski sent the zloty to a three-week high against the euro on Thursday with his changed rhetoric on inflation, which he no longer sees as transitory after prices surged at the fastest pace in more than two decades. Currency market volatility also rose, with euro-dollar one-month volatility gauges below Monday's one-year peak but still at elevate levels . "Liquidity in some areas of the market is still quite poor as people grapple with this news and as we head towards year-end, a lot of it is really liquidity driven, which is leading to some volatility," said UBP's Kazmi. "Even in the most liquid market of the U.S. treasury market we've seen some fairly large moves on very little newsflow at times." In commodities, crude futures extend Asia’s gains. WTI adds 2.2% near $67, Brent near $70.50 ahead of today’s OPEC+ meeting. Spot gold finds support near Tuesday’s, recovering somewhat to trade near $1,774/oz. Base metals are mixed: LME aluminum drops as much as 1.1%, nickel, zinc and tin hold in the green Looking at the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Market Snapshot S&P 500 futures up 0.7% to 4,540.25 STOXX Europe 600 down 1.0% to 466.37 MXAP up 0.2% to 192.07 MXAPJ up 0.7% to 629.36 Nikkei down 0.7% to 27,753.37 Topix down 0.5% to 1,926.37 Hang Seng Index up 0.5% to 23,788.93 Shanghai Composite little changed at 3,573.84 Sensex up 1.3% to 58,436.52 Australia S&P/ASX 200 down 0.1% to 7,225.18 Kospi up 1.6% to 2,945.27 Brent Futures up 2.4% to $70.53/bbl Gold spot down 0.6% to $1,771.73 U.S. Dollar Index little changed at 96.03 German 10Y yield little changed at -0.35% Euro little changed at $1.1320 Top Overnight News from Bloomberg Federal Reserve Bank of Cleveland President Loretta Mester said she’s “very open” to scaling back the Fed’s asset purchases at a faster pace so it can raise interest rates a couple of times next year if needed A United Nations gauge of global food prices rose 1.2% last month, threatening to make it more expensive for households to put a meal on the table. It’s more evidence of inflation soaring in the world’s largest economies and may make it even harder for the poorest nations to import food, worsening a hunger crisis Germany is poised to clamp down on people who aren’t vaccinated against Covid-19 and drastically curtail social contacts to ease pressure on increasingly stretched hospitals Some investors buffeted by concerns about tighter monetary policy are turning their sights to China’s battered junk bonds, given they offer some of the biggest yield buffers anywhere in global credit markets Pfizer Inc. says data on how well its Covid-19 vaccine protects against the omicron variant should be available within two to three weeks, an executive said GlaxoSmithKline Plc said its Covid-19 antibody treatment looks to be effective against the new omicron variant in early testing A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded tentatively following the declines on Wall St where all major indices extended on losses and selling was exacerbated on confirmation of the first Omicron case in the US, while the Asia-Pac region also contended with its own pandemic concerns. ASX 200 (-0.2%) was subdued amid heavy losses in the tech sector and with a surge of infections in Victoria state, although downside in the index was cushioned amid inline Retail Sales and Trade Balance, as well as M&A optimism after Woolworths made a non-binding indicative proposal for Australian Pharmaceutical Industries. Nikkei 225 (-0.7%) weakened after the government instructed airlines to halt inbound flight bookings for a month due to fears of the new variant and with auto names also pressured by declines in monthly sales amid the chip supply crunch. KOSPI (+1.6%) showed resilience amid expectations for lawmakers to pass a record budget today and recouped opening losses despite the record increase in daily infections and confirmation of its first Omicron cases, while the index also shrugged off the highest CPI reading in a decade which effectively supports the case for further rate increases by the BoK. Hang Seng (+0.6%) and Shanghai Comp. (-0.1%) were choppy following another liquidity drain by the PBoC and with tech pressured in Hong Kong as Alibaba shares extended on declines after recently slipping to a 4-year low in its US listing. Beijing regulatory tightening also provided a headwind as initial reports suggested China is to crack down on loopholes used by tech firms for foreign IPOs, although this was later refuted by China, and the CBIRC is planning stricter regulations on major shareholders of banks and insurance companies, as well as confirmed it will better regulate connected transactions of banks. Finally, 10yr JGBs were higher as prices tracked gains in global counterparts and amid the risk aversion in Japan, although prices are off intraday highs after hitting resistance during a brief incursion to the 152.00 level and despite the marginally improved metrics from 10yr JGB auction. Top Asian News Asia Stocks Swing as Investors Weigh Omicron Impact, Fed Views Apple Tells Suppliers IPhone Demand Slowing as Holidays Near Moody’s Cuts China Property Sales View on Financing Difficulties Faith in Singapore Leaders Hit by Record Covid Wave, Poll Shows Bourses across Europe have held onto losses seen at the cash open (Euro Stoxx 50 -1.4%; Stoxx -1.2%), as the region plays catchup to the downside seen on Wall Street – seemingly sparked by a concoction of hawkish Fed rhetoric and the discovery of the Omicron variant in the US. Nonetheless, US equity futures are firmer across the board but to varying degrees – with the cyclical RTY (+1.1%) and the NQ (+0.3%) the current laggard. European futures ahead of the cash open saw some mild fleeting impetus on reports GlaxoSmithKline's (-0.3%) COVID treatment Sotrovimab retains its activity against Omicron variant, and the UK MHRA simultaneously approved the use of Sotrovimab – but caveated that it is too early to know whether Omicron has any impact on effectiveness. Conversely, brief risk-off crept into the market following commentary from a South African Scientist who warned the country is seeing an exponential rise in new COVID cases with a predominance of Omicron variant across the country – with the variant causing the fastest ever community transmission - but expects fewer active cases and hospitalisations this wave. Back to Europe, Euro indices see broad-based losses whilst the downside in the FTSE 100 (-0.7%) is less severe amid support from its heavyweight Oil & Gas sector – the outperforming sector in the region. Delving deeper, sectors see no overarching theme nor bias – Food & Beverages, Autos and Banks are towards the top of the bunch, whilst Tech, Telecoms, and Travel &Leisure. Tech is predominantly weighed on by reports that Apple (-2% pre-market) reportedly told iPhone component suppliers that demand slowed down. As such ASML (-5.0%), STMicroelectronics (-4.4%) and Infineon (-3.6%) reside among the biggest losers in the Stoxx 600. Deliveroo (-5.3%) is softer following an offering of almost 18mln at a discount to yesterday's close. In terms of market commentary, Morgan Stanley believes that inflation will remain high over the next few months, in turn supporting commodities, financials and some cyclical sectors. The bank identifies beneficiaries including EDF (-1.5%), Engie (-1.2%), SSE (-0.2%), Legrand (-1.3%), Tesco (-0.5%), BT (-0.8%), Michelin (-1.6%) and Sika (-0.9%). Top European News Shell Kicks Off First Wave of Buybacks From Permian Sale Omicron Threatens to Prolong Pain in Bid to Vaccinate the World Apple, Suppliers Drop Premarket After Report Demand Slowed Valeo, Gestamp Gain After Barclays Raises to Overweight In FX, currency markets are still in a state of flux, or limbo bar a few exceptions, and the Greenback is gyrating against major peers awaiting the next major event that could provide clearer direction and a more decisive range break. Thursday’s agenda offers some scope on that front via US initial jobless claims and a host of Fed speakers, but in truth NFP tomorrow is probably more likely to be influential even though chair Powell has effectively given the green light to fast-track tapering from December. In the interim, the index continues to keep a relatively short leash around 96.000, and is holding within 96.138-95.895 confines so far today. JPY/CHF - Although risk considerations look supportive for the Yen, on paper, UST-JGB/Fed-BoJ differentials coupled with technical impulses are keeping Usd/Jpy buoyant on the 113.00 handle, with additional demand said to have come from Japanese exporters overnight. However, the headline pair may run into offers/resistance circa 113.50 and any breach could be capped by decent option expiry interest spanning 113.60-75 (1.5 bn). Similarly, the Franc has slipped back below 0.9200 on yield and Swiss/US Central Bank policy stances plus near term outlooks, and hardly helped by a slowdown in retail sales. GBP/CAD/NZD - All firmer vs their US counterpart, though again well within recent admittedly wide ranges, and the Pound perhaps more attuned to Eur/Gbp fluctuations as the cross retreats to retest 0.8500 and Cable rebounds to have another look at 1.3300 where a fairly big option expiry resides (850 mn). Indeed, Sterling has largely shrugged off the latest BoE Monthly Decision Maker Panel release that in truth did not deliver any clues on what is set to be another knife-edge MPC gathering in December. Elsewhere, the Loonie is straddling 1.2800 with eyes on WTI crude ahead of Canadian jobs data on Friday and the Kiwi is hovering above 0.6800 after weaker NZ Q3 terms of trade were offset to some extent by favourable Aud/Nzd headwinds. AUD/EUR - Both narrowly mixed against US Dollar, with the Aussie pivoting 0.7100 in wake of roughly in line trade and retail sales data overnight, but wary about the latest virus outbreak in the state of Victoria, while the Euro is sitting somewhat uncomfortably on the 1.1300 handle amidst softer EGB yields and heightened uncertainty about what the ECB might or might not do in December on the QE guidance front. In commodities, WTI and Brent front-month futures are firmer intraday as traders gear up for the JMMC and OPEC+ confabs at 12:00GMT and 13:00GMT, respectively. The jury is still split on what the final decision could be, but the case for OPEC+ to pause the planned monthly relaxation of output curbs by 400k BPD has been strengthening against the backdrop of Omicron coupled with the coordinated SPR releases (an updating Rolling Headline is available on the Newsquawk headline feed). As expected, OPEC sources have been testing the waters in the run-up, whilst yesterday's JTC/OPEC meetings largely surrounded the successor to the Secretary-General position. Oil market price action will likely be centred around OPEC+ today in the absence of any macro shocks. WTI Jan resides around USD 66.50/bbl (vs low USD 65.41/bbl) whilst Brent Feb briefly topped USD 70/bbl (vs low USD 68.73/bbl). Elsewhere, spot gold has eased further from the USD 1,800/oz after failing to sustain a break above the 50, 100 and 200 DMAs which have all converged to USD 1,791/oz today. LME copper is on the backfoot amid the cautious risk sentiment, with the red metal back under USD 9,500/t but off overnight lows. US Event Calendar 7:30am: Nov. Challenger Job Cuts -77.0% YoY, prior -71.7% 8:30am: Nov. Initial Jobless Claims, est. 240,000, prior 199,000; 8:30am: Nov. Continuing Claims, est. 2m, prior 2.05m 9:45am: Nov. Langer Consumer Comfort, prior 52.2 DB's Jim Reid concludes the overnight wrap With investors remaining on tenterhooks to find out some definitive information on the Omicron variant, yesterday saw markets continue to see-saw for a 4th day running. Following one of the biggest sell-offs of the year on Friday, we then had a partial bounceback on Monday, another bout of fears on Tuesday (not helped by the prospect of faster tapering), and yesterday saw another rally back before risk sentiment turned sharply later in the day as an initial case of the Omicron variant was discovered in the US. You can get some idea of this by the fact that Europe’s STOXX 600 (+1.71%) posted its best daily performance since May, whereas the S&P 500 moved from an intraday high where it had been up +1.88%, before shedding all those gains and more to close -1.18% lower. In fact, that decline means the S&P has now lost over -3% in the last two sessions, marking its worst 2-day performance in over a year, and this heightened volatility saw the VIX index close back above 30 for the first time since early February. In terms of developments about Omicron, we’re still in a waiting game for some concrete stats, but there was positive news early on from the World Health Organization’s chief scientist, who said that they think vaccines “will still protect against severe disease as they have against the other variants”. On the other hand, there was further negative news out of South Africa, as the country reported 8,561 infections over the previous day, with a positivity rate of 16.5%. That’s up from 4,373 cases the day before, and 2,273 the day before that, so all eyes will be on whether this trend continues, and also on what that means for hospitalisation and death rates over the days ahead. Against this backdrop, calls for fresh restrictions mounted across a range of countries, particularly on the travel side. In the US, it’s been reported already by the Washington Post that President Biden could today announce stricter testing requirements for arriving travellers. Meanwhile, France is moving to require non-EU arrivals to show a negative test before arrival, irrespective of their vaccination status. The EU Commission further said that member states should conduct daily reviews of essential travel restrictions, and Commission President von der Leyen also said that the EU should discuss the topic of mandatory vaccinations. There was also a Bloomberg report that German Chancellor Merkel would recommend mandatory vaccinations from February 2022, according to a Chancellery paper that they’d obtained. That came as Slovakia sought to incentivise vaccination uptake among older citizens, with the cabinet backing a €500 hospitality voucher for residents over 60 who’ve been vaccinated. As on Tuesday, the other main headlines yesterday were provided by Fed Chair Powell, who re-emphasised his more hawkish rhetoric around inflation before the House Financial Services Committee. Notably he said that “We’ve seen inflation be more persistent. We’ve seen the factors that are causing higher inflation to be more persistent”, though yields on 2yr Treasuries (-1.4bps) already had the shift in stance priced in. New York Fed President Williams echoed that view in an interview, noting it would be germane to discuss and decide whether it was appropriate to accelerate the pace of tapering at the December FOMC. 10yr yields (-4.1bps) continued their decline, predominantly driven by the turn in sentiment following the negative Omicron headlines. That latest round of curve flattening left the 2s10s slope at its flattest level since early January around the time of the Georgia Senate race that ushered in the prospect of much larger fiscal stimulus. In terms of markets elsewhere, strong data releases helped to support risk appetite earlier in yesterday’s session, with investors also looking forward to tomorrow’s US jobs report for November that will be an important one ahead of the Fed’s decision in less than a couple of weeks’ time. The ISM manufacturing release for November saw the headline number come in roughly as expected at 61.1 (vs. 61.2 expected), and also included a rise in both the new orders (61.5) and the employment (53.3) components relative to last month. Separately, the ADP’s report of private payrolls for November likewise came in around expectations, with a +534k gain (vs. +526k expected). Staying on the US, one thing to keep an eye out over the next 24 hours will be any news on a government shutdown, with funding currently set to run out by the weekend as it stands. The headlines yesterday weren’t promising for those hoping for an uneventful, tidy resolution, as Politico indicated that some Congressional Republicans would not agree to an expedited process to fund the government should certain vaccine mandates remain in place. An expedited process is necessary to avoid a government shutdown at the end of the week, so one to watch. After the incredibly divergent equity performances in the US and Europe, we’ve seen a much more mixed performance in Asia overnight, with the KOSPI (+1.09%), Hang Seng (+0.23%), and CSI (+0.23%) all advancing, whereas the Shanghai Composite (-0.05%) and the Nikkei (-0.60%) are trading lower. In terms of the latest on Omicron, authorities in South Korea confirmed five cases, which came as the country also reported that CPI in November rose to its fastest since December 2011, at +3.7% (vs +3.1% expected). Separately in China, 53 local Covid-19 cases were reported in Inner Mongolia, whilst Harbin province reported 3 local cases. Looking forward, futures are indicating a positive start in the US with those on the S&P 500 (+0.64%) pointing higher. Back in Europe, sovereign bonds lost ground yesterday, and yields on 10yr bunds (+0.5bps), OATs (+1.1bps) and BTPs (+4.2bps) continued to move higher. Interestingly, there was a continued widening in peripheral spreads, with the gap between both Italian and Spanish 10yr yields over bunds reaching their biggest level in over a year, at 135bps and 77bps, respectively. Another factor to keep an eye on in Europe is another round of increases in natural gas prices, with futures up +3.42% to their highest level since mid-October yesterday. Lastly on the data front, the main other story was the release of the manufacturing PMIs from around the world. We’d already had the flash readings from a number of the key economies, so they weren’t too surprising, but the Euro Area came in at 58.4 (vs. flash 58.6), Germany came in at 57.4 (vs. flash 57.6), and the UK came in at 58.1 (vs. flash 58.2). One country that saw a decent upward revision was France, with the final number at 55.9 (vs. flash 54.6), which marks an end to 5 successive monthly declines in the French manufacturing PMI. One other release were German retail sales for October, which unexpectedly fell -0.3% (vs. +0.9% expected). To the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Tyler Durden Thu, 12/02/2021 - 07:57.....»»

Category: dealsSource: nytDec 2nd, 2021

Futures Flat In Muted End To Turbulent Week With All Eyes On Payrolls

Futures Flat In Muted End To Turbulent Week With All Eyes On Payrolls US futures dropped on Friday, ending a third straight week of declines, as investors eyed a key jobs report that will be pivotal for this month’s Fed rate hike decision. S&P futures fell 0.2% at 730 a.m. ET, with the underlying cash index down 2.2% this week. Nasdaq 100 futures fell 0.3%, with the tech-heavy index down 2.6% in the previous four days. The dollar index slipped from a record high and the euro strengthened. 10Y yield traded slightly lower, at 3.25%, following yesterday's spike. In pre-market trading, Lululemon jumped 10% after raising its full-year outlook. Meanwhile, Bed Bath & Beyond fell as much as 6%, putting the home-goods retailer on track for a weekly loss following its survival plan earlier in the week.  Analysts raise PTs on the stock, though some flag higher inventory levels as a note of bearishness. Here are other notable movers: Procept BioRobotics (PRCT US) initiated at overweight by Wells Fargo, highlighting the potential of the company’s AquaBeam Robotic System, a therapy for prostate gland enlargement JPMorgan cuts its ratings on Dow and LyondellBasell (LYB US) to neutral from overweight, saying the petrochemicals companies are “probably not the best places to put new money to work.” Shares in Addentax (ATXG US), a Chinese garment-maker, drop as much as 40% in US premarket trading, set to extend yesterday’s 95% plunge into a second day. US semiconductor- related stocks could be active on Friday after Broadcom gave a robust sales forecast for the current quarter, calming worries that spending on infrastructure is slowing The outlook for stocks has soured since mid-August after traders ramped up bets that the Fed will continue its aggressive monetary tightening, hurting the economy in the process. The S&P 500 has erased $2 trillion in market capitalization in the past five days, and has given up half of its gains made in the summer rally. Meanwhile, tech stocks have succumbed to rising rates, which are a headwind to the expensive growth sector. “We don’t have a lot of reasons to be bullish in this type of environment for the next couple of weeks and months,” Meera Pandit, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “Yet when we think about the longer term perspective and the longer term investor, these are the types of level that can be fruitful in the long run.” US stocks had outflows of $6.1 billion in the week to Aug. 31 - the biggest exodus in 10 weeks - according to a Bank of America's Michael Hartnett, adding that investors expect  “fast inflation shock, slow recession shock” as nominal growth continues to be boosted by surging consumer prices, fiscal stimulus, large household savings and the impact of the war in Ukraine. Next up on investor minds is the August jobs report in under an hour, which is expected to show healthy payrolls growth following a stronger-than-expected US manufacturing report. This is how Goldman traders framed what to expect (full preview here): "we are still in a bad is good and vice versa set up for US stocks as Fed has made it clear that they want to see some froth exit the labor market in tandem with cooling inflation: i) Strong print here will clearly make 75bps much more likely on 9/21; ii) Inline print of 300k(ish) will keep pressure on this tape...anything close to last month’s shocking print of 528k would lead to real risk unwind into the wknd (I think at least a 200bp sell off). iii) Sweet spot for stocks tomorrow is a 0 – 100k headline reading...should get a 100+bp rally for S&P in this scenario after this recent drawdown. If we happen to get a negative number an even sharper rally", and the pivot will be right back on the Q1 calendar. “The risk of having another additional 75-basis-points hike is high and also to have a big rally on the real rates” depending on the outcome of the jobs report, said Claudia Panseri, a global equity strategist at UBS Global Wealth Management. “Volatility in the equity market will remain quite high until the picture on inflation becomes more clear than it is right now,” she told Bloomberg Television. In Europe, the Euro 50 rose 0.9%, with Germany's DAX outperforming peers, adding 1.5%, IBEX lags, rising 0.2%. Autos, financial services and energy are the strongest-performing sectors. Here are the biggest Europen movers: Nokia shares are up as much as 1.4% on Friday, adding to a weekly gain and outperforming the wider markets decline as the communications company will join the Euro Stoxx 50 benchmark Ashmore shares gain as much as 5.5%, reversing a small decline at the open, with Panmure Gordon upgrading the emerging markets fund manager to buy from hold following its FY results Smith & Nephew rises as much as 4.9%, extending a weekly gain. RBC says investors are viewing stock’s “historically low valuation” against orthopedic peers as a “buying opportunity.” Segro and Tritax Big Box gain 2.5% and 2.2%, respectively, after Shore Capital upgrades the REITs, saying downside risks for Segro are “fairly priced,” and the risk- reward balance for Tritax is more even UK homebuilders fall and are among the worst performers in the Stoxx 600 after HSBC cut its ratings on seven stocks, saying the UK is on the “cusp of a housing downturn” Sectra shares are down as much as 6.6% after the Swedish medical technology company presented its latest earnings, which included a drop in operating profit Alliance Pharma falls as much 11%, most since July, as the UK’s competition watchdog seeks to disqualify seven of the firm’s directors, including CEO Peter Butterfield Proximus falls to fresh record low, declining as much as 4.3% after Morgan Stanley resumes at underweight in note citing structural market headwinds and an unsupportive valuation Kofola CeskoSlovensko shares drop 2.5% after rising costs prompted the Czech producer of soft beverages to reduce its dividend proposal and rein in guidance Compleo Charging Solutions falls as much as 4% after Berenberg downgrades to hold and lowers its price target by 80%, citing resignation of the company’s co-founder Checrallah Kachouh Earlier in the session, Asian stocks fell, on course for their worst week in more than two months, as the dollar hit a new high amid worries about the Federal Reserve’s aggressive rate-hike path and as lockdowns continued in China.  The MSCI Asia Pacific Index declined as much as 0.7%, set for a weekly loss of nearly 4%. TSMC and other tech stocks contributed the most to the benchmark’s drop as Treasury yields climbed, sending the Bloomberg Dollar Spot Index to a record high.  Equity gauges in Hong Kong led declines in the region, dragged by the banking and tech sectors. Meanwhile, shares in Japan fell as the yen slipped to a 24-year-low against the dollar.  Fresh lockdowns in China are also weighing on sentiment, putting the Asian stock benchmark on track for its third-straight weekly decline. The sell-off reflects broad concerns of an economic slowdown amid weaker manufacturing data in the region’s major tech exporters. “Dollar momentum sees no sign of breaking,” Saxo Capital Markets strategists including Redmond Wong wrote in a note. “Fresh Covid lockdowns in China, in particular, the full lockdown of Chengdu and extended restriction in Shenzhen, have caused some demand concerns.”  Investors will keep a keen eye on the US August jobs report due later Friday to gauge the Fed’s next move in its September meeting.  While weak sentiment has kept Asian shares hovering near their two-year lows, hedge-fund giant Man Group said Asian stocks are set to outshine peers next year. The investment firm is betting on defensive stocks in India and Southeast Asia, Andrew Swan, Man GLG’s head of Asia ex-Japan equities, said in an interview Japanese stocks fell as investors awaited key US employment figures and assessed the yen’s decline to a 24-year low against the dollar. The Topix Index dropped 0.3% to 1,930.17 as of the market close in Tokyo, while the Nikkei 225 was virtually unchanged at 27,650.84. Sony Group contributed the most to the Topix’s decline, decreasing 1.1%. Out of 2,169 stocks in the index, 738 rose and 1,307 fell, while 124 were unchanged. “The US jobs report won’t be very positive no matter what’s out,” said Tatsushi Maeno, a senior strategist at Okasan Asset Management. “If it’s strong, the FOMC will lean toward a 0.75% rate hike and on the other hand, if it’s weak, there could be talk of a recession." India’s benchmark equities index closed slightly higher, after swinging between gains and losses several times throughout the session, as investors tried to gauge the impact of the US Federal Reserve’s hawkish stance in a week marked by volatility.     The S&P BSE Sensex rose 0.1% to 58,803.33 in Mumbai, but ended lower for a second consecutive week. The NSE Nifty 50 Index was little change on Friday. Housing Development Finance Corp and HDFC Bank provided the biggest support to the Sensex, which saw 19 of its 30 member stocks ending lower.  Thirteen of the 19 sector indexes compiled by BSE Ltd. declined, led by a measure of oil and gas companies.  “The effect of Jackson Hole is still revolving across financial markets, with a soaring dollar and falling equities as the main themes,” Prashanth Tapse, an analyst at Mehta Securities, wrote in a note.  In FX, the greenback fell against all of its Group-of-10 peers except the yen. The euro rose a fourth day in five against the greenback, to edge above parity. The pound languished near the lowest since March 2020 versus the dollar. Investors awaited the results of a vote to choose the country’s next prime minister on Monday, with expected winner Liz Truss aiming to cut taxes and increase borrowing. The Norwegian krone outperformed, and rebounded from a six-week low versus the greenback, amid a recovery in oil prices before an OPEC+ meeting on supply at which Saudi Arabia could push for output cuts. The yen weakened past 140 per dollar after a slight rally in Asian trading faded. In rates, treasuries were little changed while European bonds slipped. The 10-year Treasury yield held steady near 3.26%; while gilts 10-year yield is up 2.6bps around 2.90% and bunds 10-year yield is up 2bps to 1.58%. In commodities, WTI crude futures rebound 3% to around $89, within Thursday’s range; oil pared gains after news that the Group of Seven most industrialized countries is poised to agree to introduce a price cap for global purchases of Russian oil, while Russia looks set to resume gas supplies through its key pipeline. Gold rose $6 to around $1,704.  Meanwhile, zinc headed for its biggest weekly loss in over a decade on concern Chinese demand will be hamstrung by new virus restrictions. Bitcoin has reclaimed the USD 20k mark but the upward move is yet to gain any real traction amid the broader contained price action. Looking to the day ahead now, the main highlight will be the US jobs report for August. Otherwise on the data side, there’s US factory orders for July and Euro Area PPI for July. Market Snapshot S&P 500 futures little changed at 3,969.25 Gold spot up 0.4% to $1,704.52 MXAP down 0.5% to 154.28 MXAPJ down 0.5% to 506.44 Nikkei little changed at 27,650.84 Topix down 0.3% to 1,930.17 Hang Seng Index down 0.7% to 19,452.09 Shanghai Composite little changed at 3,186.48 Sensex up 0.4% to 59,025.66 Australia S&P/ASX 200 down 0.2% to 6,828.71 Kospi down 0.3% to 2,409.41 STOXX Europe 600 up 0.7% to 410.47 German 10Y yield little changed at 1.58% Euro up 0.3% to $0.9980 U.S. Dollar Index down 0.25% to 109.42 Top Overnight News from Bloomberg Under pressure from central bankers determined to quash inflation even at the cost of a recession, global bonds slumped into their first bear market in a generation. The Bloomberg Global Aggregate Total Return Index of government and investment-grade corporate bonds has fallen more than 20% from its 2021 peak, the biggest drawdown since its inception in 1990 The ECB remains behind the curve on tackling record euro- zone inflation and will have to act more forcefully than previously envisaged to wrest control of prices, according to a survey of economists Consumers’ expectations for inflation in three years rose to 3% in July from 2.8% in June, European Central Bank says in statement summarizing the results of its monthly survey. Russia looks set to resume gas supplies through its key pipeline to Europe, a relief for markets even as fears persist about more halts this winter. Grid data indicate that flows will resume on Saturday at 20% of capacity as planned German exports and imports both fell in July as surging prices and the war in Ukraine threaten to send Europe’s largest economy into a recession. The trade surplus shrank to 5.4 billion euros ($5.4 billion) from 6.2 billion euros in June, as exports dropped by 2.1% and imports by 1.5% A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were indecisive with price action relatively rangebound after the mixed lead from the US and with the region lacking firm commitment as participants await the upcoming US NFP jobs data. ASX 200 was lacklustre as earnings releases quietened and with strength in financials offset by losses across the commodity-related sectors. Nikkei 225 traded subdued amid underperformance in large industrials although losses in the index were stemmed by retailers after several reported strong August sales. Hang Seng and Shanghai Comp were mixed as Hong Kong underperformed amid notable losses in developers and with the mainland choppy but ultimately kept afloat after the PBoC recently cut rates on its Standing Lending Facility by 10bps from August 15th and after several officials pledged measures. Top Asian News PBoC official Ruan said monetary policy is to further improve cross-cyclical adjustments and maintain stable and moderate credit development, while they will keep liquidity reasonably ample. PBoC will also better coordinate structural and aggregate policy tools but will avoid flood-like stimulus and keep prices stable. Furthermore, the PBoC said China has not taken excessive monetary policy stimulus since the pandemic, leaving room for subsequent policy adjustments and that balanced consumer prices also create favourable conditions for monetary policy adjustments, according to Reuters. PBoC adviser Wang said banks need to increase financial support for infrastructure and that infrastructure is restricted by local government debt levels, while Wang added that they need to ensure property companies' financing needs are met, according to Reuters. China's securities regulator official said they will promote new legislation for overseas listings and will implement the China-US audit agreement, as well as continue strengthening communication with foreign institutional investors, according to Reuters. China's banking regulator official said they will steadily resolve the risks faced by small and medium-sized financial institutions, while they will improve monitoring and disposal of debt risks of large companies, according to Reuters. Japanese Finance Minister Suzuki said it is important for currencies to move stably reflecting economic fundamentals, while he noted that recent FX moves are big and they will take appropriate action on FX if necessary. Suzuki also stated that they are watching FX with a sense of urgency and will brief the media after the G7 finance ministers meeting tonight. European bourses are firmer across the board as hawkish yield action in the EZ has eased from yesterday's recent peaks, Euro Stoxx 50 +0.8%. Stateside, futures are contained and flat with all focus on the NFP report. Alphabet's Google (GOOG) is planning to accept the use of third-party payment services on its smartphone app in national such as Japan and India but not the US, according to the Nikkei Top European News British Chambers of Commerce said the UK is already in the midst of a recession and it expects the UK economy to decline for two more periods following the contraction in Q2, while it also sees inflation to reach 14% later this year EU warned UK Foreign Secretary Truss against triggering Article 16 and said they will refuse to engage in serious talks on reforms to the post-Brexit deal unless she takes the “loaded gun” of unilateral legislation off the table German Economy Gets Another Growth Warning as Trade Volumes Drop Russian Gas Link Set to Restart as Traders Weigh Further Halts ECB Says Consumers Now See Inflation in Three Years at 3% A Hot Jobs Report Could Send Bitcoin to $15,000, Hedge Fund Says Citi Favors Bets on 75Bps Hikes at Each of Next Two ECB Meetings FX DXY's overnight pullback has picked up pace in early European hours. The EUR stands as the best performer alongside reports that Nord Stream 1 flows are expected to resume on Saturday. Non-US dollars are all modestly firmer to varying degrees, whilst JPY fails to benefit from the dollar weakness. Yuan shrugged off another notably firmer-than-expected CNY fixing overnight. Fixed Income Comparably contained session overall thus far though Bunds are holding at the lower end of a 85 tick range in limited newsflow pre-NFP. Currently, the Bund low is circa. 10 ticks above 147.00, with yesterday’s 146.78 trough in focus and then 145.97/87 thereafter. Gilts and USTs are very similar thus far in that both benchmarks are essentially unchanged. Commodities WTI Oct and Brent Nov futures are firmer on the day amid a softer Dollar and narrowing prospects of an imminent Iranian Nuclear deal. Spot gold edges higher as the Dollar remains weak, with the yellow metal back on a 1,700/oz+. Base metals are mixed LME copper softer around the USD 7,500/t. US Event Calendar 08:30: Aug. Change in Nonfarm Payrolls, est. 298,000, prior 528,000 Change in Private Payrolls, est. 300,000, prior 471,000 Change in Manufact. Payrolls, est. 15,000, prior 30,000 Unemployment Rate, est. 3.5%, prior 3.5% Labor Force Participation Rate, est. 62.2%, prior 62.1% Underemployment Rate, prior 6.7% Average Hourly Earnings YoY, est. 5.3%, prior 5.2% Average Hourly Earnings MoM, est. 0.4%, prior 0.5% Average Weekly Hours All Emplo, est. 34.6, prior 34.6 10:00: July Durable Goods Orders, est. 0%, prior 0%; July -Less Transportation, est. 0.3%, prior 0.3% 10:00: July Factory Orders, est. 0.2%, prior 2.0% 10:00: July Cap Goods Orders Nondef Ex Air, prior 0.4% 10:00: July Factory Orders Ex Trans, est. 0.4%, prior 1.4% DB's Jim Reid concludes the overnight wrap If I'm not here on Monday it's not impossible that I've been eaten by a snake or a small crocodile, or poisoned by a tarantula. For our twins' 5th birthday party this weekend we've hired a professional reptile handler to come round and show 30-40 overexcitable kids some interesting animals. If I'm not eaten or bitten I'm a bit worried he won't do the full register on the way out and I'll be left with a huge lizard hiding in my bed. All I can say is that for my 5th birthday party we just had pin the tail on the donkey and a few stale sandwiches. Life was so much simpler then. Markets are pretty complicated at the moment with investors not being quite able to decide whether the newsflow was bad or good yesterday for risk assets. We went to both extremes with the US rallying back into positive territory by the close (S&P 500 +0.30% having been -1.23% just after Europe logged off). As the US starts it's day a bit later we'll have a fresh payroll print to throw into the mix which could be the swing factor between 50 and 75bps at the September Fed meeting. Last month’s strong print ratcheted up expectations that the Fed could hike by 75bps for a third meeting in a row, and markets are still pricing that as the more likely outcome than 50bps, with futures now pricing in +67.7bps worth of hikes. In terms of what to expect today, our US economists are looking for +300k growth in nonfarm payrolls, which should be enough to keep the unemployment rate at its current 3.5%. Ahead of that, the US labour market data we got yesterday was pretty good, continuing the run of decent releases over recent days. Initial jobless claims for the week through August 27 unexpectedly fell back to 232k (vs. 248k expected), and the previous week was also revised down by -6k. That’s the third week in a row that the jobless claims have fallen, marking a change from the mostly upward trend we’ve seen since late March. On top of that, the ISM manufacturing release also surpassed expectations, remaining at 52.8 (vs. 51.9 expected), with the employment component at a 5-month high of 54.2 (vs. 49.5 expected). Treasuries lost significant ground on the day, even before the data, with the 2yr yield rising +1bps to hit another post-2007 high of 3.50%, whilst the 10yr yield rose +6bps to 3.25%. The moves were driven by higher real yields across the curve, with the 5yr real yield hitting a 3-year high of 0.849%. It was a similar story in Europe too, where yields on 10yr bunds (+2.2bps), OATs (+2.5bps) and BTPs (+3.3bps) rose. Those European moves came as investors grew increasingly confident that the ECB would hike by 75bps at some point this year, which was aided by the latest data that showed Euro Area unemployment fell to a new low of 6.6% in July. That’s the lowest level since the single currency’s formation, and means that the latest data is showing that the Euro Area simultaneously has the highest inflation and the lowest unemployment of its existence. As discussed at the top, US equities turned round late in the session with the Nasdaq nearly making it back into the green (-0.26%) as well as the S&P after being -2.28% at 6pm London time. This was too late to save the European session as the STOXX 600 (-1.80%) took a significant hit. Sentiment was pretty downbeat from the outset after the lockdown of the Chinese city of Chengdu (population 21m) risked further disruption to supply chains and global economic demand. That said, the energy situation continued to develop in a positive direction, with German power prices for next year coming down by a further -9.11% to €523.40 per megawatt-hour. In fact they have halved since their intraday peak on Monday when they hit €1050, which just shows how amazingly volatile this market is right now. The EU is considering various interventions to deal with the current turmoil, including price caps and windfall taxes, and Commission President Von der Leyen is set to outline the measures in her State of the Union address on September 14. Staying on commodities, the decline in oil prices continued yesterday thanks to fears of further Chinese lockdowns and hawkish central banks. Brent crude was down -4.28% to $92.36/bbl, which is a substantial decline since its closing level on Monday of $105.09/bbl. As we go to print, crude oil prices are showing some recovery with Brent futures +1.91% higher at $94.12/bbl. There was a similar negative pattern among industrial metals, with copper (-2.96%) down for a 5th day running on the back of those same fears about demand. Meanwhile in the precious metal space, gold (-0.79%) slipped below $1700/oz, while hitting its lowest since July intraday as markets priced higher interest rates, thus raising the opportunity cost of holding a non-interest-bearing asset. Over in the FX space, a number of new milestones were reached yesterday, most notably a rise in the dollar index (+0.91%) to levels not seen since 2002. The greenback was supported yesterday by the strong data that added to expectations the Fed would keep hiking into next year, although the reverse picture was that the Euro fell back beneath parity against the dollar, and the Japanese yen fell to 140 per dollar for the first time since 1998. In Asia’ morning trade, the Japanese yen further weakened, touching 140.26 per US dollar. Here in the UK, sterling also fell just beneath the $1.15 mark in trading for the first time since March 2020. In Asia this morning, the Nikkei (-0.21%), the Hang Seng (-0.58%), and the CSI (-0.20%) are trading lower with the Shanghai Composite (+0.28%) bucking the trend. Elsewhere, the Kospi (+0.04%) is struggling to gain traction after South Korea’s headline inflation slowed after six months of accelerating (more below). Moving ahead, US stock futures are fairly flat with contracts on the S&P 500 (-0.08%) and NASDAQ 100 (-0.04%) treading water. Early morning data showed that Korea’s inflation eased to +5.7% y/y in August (v/s +6.1% expected) from +6.3% in July as energy prices eased. MoM prices dropped -0.1% in August (v/s +0.3% expected) after rising +0.5% in the prior month thus providing some comfort to the Bank of Korea (BoK) in its yearlong tightening cycle. Rounding off yesterday's data, there was plenty to digest from the global manufacturing PMIs, although they mostly confirmed the picture from the flash readings we’d already got. In the Euro Area, the reading came in at 49.6 (vs. flash 49.7), and the US had a 51.5 reading (vs. flash 51.3). The UK had a stronger revision up to 47.3 (vs. flash 46), but it was still in contractionary territory and the lowest since May 2020. Elsewhere, German retail sales grew by +1.9% (vs. -0.1% expected). To the day ahead now, and the main highlight will be the US jobs report for August. Otherwise on the data side, there’s US factory orders for July and Euro Area PPI for July.   Tyler Durden Fri, 09/02/2022 - 07:52.....»»

Category: blogSource: zerohedgeSep 2nd, 2022

Futures Bounce On Tech Optimism As Fed Looms

Futures Bounce On Tech Optimism As Fed Looms Global markets and US equity futures got a strong boost on Tuesday from reassuring big tech reports including Microsoft, Texas Instruments and Google, which delivered double-digit revenue growth reversing the doom and gloom from other reporters. Microsoft assuaged fears that the strong dollar and a weakening economy would hurt sales while Alphabet posted advertising revenue that surpassed analysts’ expectations amid an industry slowdown. Credit Suisse CEO Thomas Gottstein will to be replaced by asset-management head Ulrich Koerner next week after the Swiss bank posted its third straight quarterly loss and its worst trading first half in decades. All of that, of course, pales ahead of the day's main event Later today, the Federal Reserve is expected to increase its benchmark interest rate by three quarters of a percentage point. Nasdaq 100 contracts led gains rising 1.3% and reversing much of Tuesday's plunge. S&P futures rose 0.8% alongside European stocks which also rose, with the banking sector up even as Credit Suisse Group AG posted a larger-than-expected loss, Deutsche Bank AG warned on costs, and the outlook on Italy’s sovereign debt ranking was lowered by S&P. The dollar and Treasury yields slipped, while oil and European natural gas prices extended gains. In premarket trading, major technology and internet stocks were higher after both Microsoft and Google-parent Alphabet reported double- digit quarterly revenue growth amid tough macro conditions. Microsoft shares rose 4.3% after the software company said it expects double- digit sales growth for the fiscal year 2023. While quarterly revenue was weaker than expected, Barclays analysts say the report shows resilience despite a number of headwinds. Fellow tech giant Alphabet shares also rise 4% in premarket trading after the Google parent reported its 2Q revenue in line with Wall Street expectations. Analysts said the results were better than feared, but noted that “macro uncertainty remains high.” Here are some other notable premarket movers: Alphabet Inc (GOOGL) Q2 2022 (USD): EPS 1.21 (exp. 1.29), Revenue 69.70bln (exp. 70.04bln).Google advertising 56.29bln, (exp. 55.91bln). CFO said FX impact to be even greater in the current Q, according to CNBC. (Newswires/CNBC) +3.5% in the pre-market Microsoft Corp (MSFT) Q4 2022 (USD): EPS 2.23 (exp. 2.29/2.29 GAAP), Revenue 51.9bln (exp. 52.45bln). Intelligent Cloud revenue 20.91bln (exp. 21.07bln). Guides FY23 revenue double digits sales growth, FY23 FX impact of 4-points decrease in revenue growth, via its conference call. (Newswires) +3.8% in the pre-market Visa Inc (V) Q3 2022 (USD): Adj. EPS 1.98 (exp. 1.74/1.73 GAAP), Revenue 7.3bln (exp. 7.06bln). (Newswires) Co. seeing no evidence of a pullback in consumer spending. Unch. in the pre-market Twitter (TWTR) said it significantly slowed hiring in Q2 2022; in 2021 and H1 2022, macro factors had a negative impact on, and may negative impact in future periods, such as advertising revenue. Twitter is to hold shareholder vote on Musk deal on September 13th at 18:00BEST/13:00EDT, according to CNBC. (Newswires/CNBC) PayPal (PYPL US) shares jump as much as 6.5% premarket, following a report that activist investor Elliott is building a stake in the payments firm. Results from peer Visa also boost sentiment. Cryptocurrency-exposed stocks are higher in premarket trading as Bitcoin rebounds along with US stock futures after Alphabet, Microsoft and Texas Instruments results spur hopes that the technology sector can manage a slow economy. Coinbase (COIN US) +4.9%, Marathon Digital (MARA US) +7.6%, Riot Blockchain (RIOT US) +5.5%, Ebang (EBON US) +12% ObsEva (OBSV US) shares slump 75% in premarket trading after the biopharmaceutical company said it plans to initiate a corporate restructuring given the commercial landscape and potential additional capital is needed to fund the completion of the linzagolix clinical development program. Enphase Energy (ENPH US) shares surged as much as 12% in premarket trading as analysts hiked their price targets on the solar energy equipment maker, with brokers saying its results and guidance for the 3Q were robust and exceeded expectations thanks to strong demand. Texas Instruments (TXN US) shares rose 2.8% in postmarket trading on Tuesday after issuing a bullish forecast for the current quarter. Analysts note that the company exceeded its “overly conservative” estimates as lockdowns eased in China. Teva Pharmaceuticals shares jump as much as 16% in Tel Aviv, the most since May 2020, after the Israeli company said it had struck a deal with US state and local governments to pay more than $4 billion to settle thousands of lawsuits. US-listed ADRs also gain 16% in premarket trading. The mood remains edgy ahead of a much-anticipated Fed interest-rate increase - part of a global wave of monetary tightening to quell inflation that’s stoking concerns about a worldwide economic slowdown. Investors are also bracing for the busiest reporting day of the season, where Meta may sour the mood after the bell with a slowdown in ad spending. Qualcomm will give investors a view into a smartphone market that's losing steam. Boeing, Ford and Kraft are also due. That said, US company earnings are providing a sliver of hope -- more than three-quarters of firms that have reported so far either beat or met expectations. But there are doubts about how long they can weather economic challenges. Top-tier firms including Apple, Amazon and Mastercard will report tomorrow, on what will be a $9.4 trillion day in the US and Europe. Last but not least tomorrow the US will report the first estimate of Q2 GDP which is expected to print negative confirming a US technical recession.  “Inflation is hurting companies and the question is whether these policy rate hikes are going to do anything to alleviate the pain,” Quadratic Capital Management founder Nancy Davis said on Bloomberg Television. Elsewhere, President Joe Biden will speak with Chinese leader Xi Jinping on Thursday amid fresh tensions over Taiwan. The White House is also considering whether to lift some tariffs on Chinese imports to stem inflation. And speaking of the Fed, the swaps market currently prices in around 77bp of rate hikes for today’s Fed decision and combined additional 183bp by the December FOMC meeting. The projected 75 basis-point Fed move to tackle price pressures would cement the steepest two-month rise in rates since the 1980s. The key question is whether Chair Jerome Powell’s policy signals validate or refute scaled-back bets projecting a 3.4% peak fed funds rate around year-end and cuts in 2023 to shore up an economy at risk of recession. “The Fed hasn’t even gotten to neutral yet,” Jason England, global bonds portfolio manager at Janus Henderson Investors, said on Bloomberg Television. “For them to start easing already or for them to start seeing eases priced in is, I think, a little premature.” In any case, Powell is expected to acknowledge that downside risks to growth have increased and reiterate the Fed’s commitment to controlling inflation. A full FOMC preview can be found here. “The risk is that Powell starts to set markets up for a move back to a default position of 50bp moves, though we can see little reason for the Fed to lose the optionality of going 75bp when there is significant news that they may have to react to between this and the next meeting,” according to RBC Capital Markets strategist Adam Cole. Meanwhile, the ECB will deliver only 50 basis points of additional interest rate increases this year as the euro zone succumbs to a recession in the fourth quarter, according to JPMorgan. In Europe, the Stoxx 50 rose 0.6% with travel, personal care and tech are the strongest performing sectors. Credit Suisse shares gained as the bank replaced its embattled chief executive officer and said it would embark on a new turnaround plan just nine months after the last one, while Deutsche Bank fell after it scrapped an efficiency target for the year and warned a key profitability goal was getting harder to reach. Here are the most notable European movers: UniCredit shares jumped as much as 7.4% after what Jefferies said was a “bumper” quarter, with new 2022 profit guidance about 10% above consensus. The lender reported net income for 2Q that doubled analyst expectations. Reckitt shares jump as much as 6.7%, after the consumer-goods company reported 2Q sales that beat estimates and raised its outlook for the year. Worldline shares jump as much as 15% after the payment firm’s 2Q revenue and margin beat expectations, with strength driven by the in- focus merchant services arm, according to analysts. Holcim shares climb as much as 5.9% after it reported 2Q sales that beat the average estimate, with analysts highlighting the building materials company’s success in raising prices. Mercedes-Benz shares rise as much as 4.5% after the company reported 2Q results that beat estimates and raised its guidance. Oddo BHF calls the increased guidance “supportive.” Smurfit Kappa shares rose as much as 6.7% after reporting 2Q results which reassured analysts amid a challenging macro environment. Davy described the release as a “blow-out quarter” and further proof of the group’s business transformation. Rio Tinto shares decline as much as 4.6%, lagging peers in Europe’s Stoxx 600 Basic Resources subindex, after the miner reported 1H results that missed analyst estimates and cut its dividend in half. Adidas shares fall as much as 6.1%. The magnitude of the group’s outlook cut was bigger than anticipated by analysts and could signal challenges ahead for the rest of the sportswear sector. Eurofins Scientific shares fall as much as 11% after the French laboratory company presented its latest earnings. Analysts note that while the company boosted its guidance, organic growth disappointed. The stock trimmed some losses later. Aena drops as much as 7.7% after it reported results that missed the average estimates. Analysts’ worries focus around operating expenses’ inflation for 2H, the winter outlook and any impact from further impairment. Italian bonds fell after S&P lowered the nation’s outlook to stable from positive after recent political turmoil led to the resignation of the nation’s prime minister and the calling of fresh elections. The rating itself remains at BBB, two levels above junk. The news spread the spread between Italy and German 10Y yields to a new one-month highs. Earlier in the session, most Asian stocks were higher while gauges in China and Hong Kong fell, with trading volume thin as traders awaited the Federal Reserve’s monetary policy decision. The MSCI Asia Pacific Index fell 0.1%, dragged down by Chinese tech giants. Trading volume in Asia was among the lowest this year as investors took to the sidelines ahead of the Fed’s anticipated 75 basis point rate hike due later Wednesday.  Hong Kong’s equity benchmark fell more than 1%, with Alibaba’s retreat contributing the most to the loss as the focus shifted to next week’s earnings results. India’s gauges jumped, while those in South Korea, Japan and Australia advanced modestly.   The market is particularly keen to hear about the Fed’s post-July path, which will impact the dollar and flows to the global markets. “July looks like a very weak season for the market,” with sentiment damped by macroeconomic concerns, Covid and China’s property crisis, Jun Li, chief investment officer at Power Pacific Investment Management, said in an interview on Bloomberg TV. “We do have confidence in the second half of 2022,” she said.  A measure of Asian chip stocks reversed its earlier loss to rise for the first time in four sessions, as SK Hynix said it would significantly adjust its 2023 capital spending, which could limit declines in chip prices. In stocks, US futures rally after strong earnings. S&P futures rise 1%. Nasdaq contracts rally 1.7%. Euro Stoxx 50 rises 0.6%. Travel, personal care and tech are the strongest performing sectors. Bloomberg dollar spot index falls 0.2%. NZD and AUD are the weakest performers in G-10 FX. In FX, the Bloomberg dollar spot index fell 0.2%, giving up some of its 0.4% gain from Tuesday. The Fed is forecast to raise its key rate by 75 basis points for a second meeting. EUR/USD gained 0.3% to $1.0144; the pair had tumbled 1% Tuesday as traders focused on spiking natural gas prices on the prospect of reduced Russian supply. Sterling inched up, supported by early gains in UK and European share markets. The Aussie weakened as much as 0.4% after a government report showed inflation was slower in the second quarter than economists forecast, before rallying back to $0.6950. NZD and AUD are the weakest performers in G-10 FX. In rates, Treasuries were slightly richer across the curve with gains led by belly, outperforming core European rates market and steepening 5s30s spread. US 10-year yields around 2.795%, richer by 1.5bp on the day; belly outperformance re-steepens 5s30s spread back to around 14bp, near middle of Tuesday’s range. The 5-year yield across the Treasury curve continues to slightly outperform, while 2s5s10s butterflies are about 3 bps tighter. In European fixed income, bunds edge lower and gilts slightly bear steepen. The US IG issuance slate empty so far, expected to remain light with FOMC event risk; July volumes have already met expectations, helped by last week’s bumper $45b slate. In commodities, WTI trades within Tuesday’s range, adding 1.2% to trade near $96.12. Spot gold rises roughly $6 to trade near $1,724/oz. Most base metals trade in the green; LME copper rises 1.2%, outperforming peers.  Looking at the day ahead, the FOMC looms large in the day ahead, but US pending home sales, inventories, and goods trade balance data will also be released, along with consumer confidence figures in Germany, France, and Italy, and Chinese industrial profits. The day is chock full with earnings as well, including: Meta, T-Mobile, Qualcomm, Bristol-Myers Squibb, Boeing, Airbus, Rio Tinto, Kering, Iberdrola, Lam Research, Mercedes-Benz, Boston Scientific, Shopify, Ford, Kraft Heinz, BASF, Universal Music Group, Danone, Hilton, Vici, Spotify, Credit Suisse Market Snapshot S&P 500 futures up 1.0% to 3,963.50 STOXX Europe 600 up 0.4% to 427.68 MXAP down 0.2% to 158.84 MXAPJ down 0.3% to 520.24 Nikkei up 0.2% to 27,715.75 Topix up 0.1% to 1,945.75 Hang Seng Index down 1.1% to 20,670.04 Shanghai Composite little changed at 3,275.76 Sensex up 0.7% to 55,657.82 Australia S&P/ASX 200 up 0.2% to 6,823.23 Kospi up 0.1% to 2,415.53 German 10Y yield little changed at 0.94% Euro up 0.3% to $1.0144 Gold spot up 0.4% to $1,723.92 U.S. Dollar Index down 0.19% to 106.98 Top Overnight News from Bloomberg Oil Climbs as US Crude Stockpiles Shrink Ahead of Fed Decision Biden Will Speak to Xi on Thursday as US-China Ties Worsen A $9.4 Trillion Results Day Looms in a Test for Stock Market Deutsche Bank Warns of Costs as Inflation Headwinds Build Elliott Is Said to Amass PayPal Stake Seeking to Speed Cuts Europe Energy Prices Keep Soaring as Russia Turns the Screw Europe Gas Extends Scorching Rally as Russia Supply Set to Slump Cathie Wood Dumps Coinbase Shares for First Time This Year Apple Supplier SK Hynix’s Outlook Sours as Tech Demand Wanes Trump Efforts to Create Fake Electors Probed by US Prosecutors Teva Pharmaceutical to Pay Over $4 Billion in Opioid Accord Visa to Dole Out Annual Raises Earlier Amid Inflation Pressures Microsoft Shares Rise on Upbeat 2023 Sales Growth Forecast Trump Returns to D.C., Hinting on 2024 and Jabbing Jan. 6 Panel Google Reassures Investors With Ad Sales Showing Resilience Microsoft Shares Rise on Upbeat Forecast for Fiscal 2023 Growth Texas Instruments’ Rosy Forecast Counters Fears of Slowdown Carson Block Sued Over $14 Million SEC Whistle-Blower Award A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks eventually traded mixed following a mostly subdued session, but within narrow intraday ranges. ASX 200 moved between gains and losses with the Healthcare sector leading the gains whilst Metals & Mining lagged. Nikkei 225 was similarly contained whilst Canon shares fell as much as 3% post-earnings. KOSPI declined with Apple-supplier SK Hynix warning of a slowing in memory chip demand in H2. Hang Seng underperformed with Alibaba retracing yesterday's gains whilst the property sector was also hit. Shanghai Comp was caged following another modest net liquidity drain by the PBoC, whilst multiple sources suggested the Biden-Xi call is to take place on Thursday. Top Asian News Hong Kong will have no choice but to raise interest rates, although the pace or scale need not follow US hikes and it is unlikely to trigger the kind of property market crisis seen in 1998, according to SCMP citing the Hong Kong Financial Secretary. Magnitude 7.2 earthquake hits Philippines region of Luzon, according to ESMC; no tsunami warnings issue, according to Reuters. China overnight rate fell below 1% for the first time since last year, according to Bloomberg. PBoC injected CNY 2bln via 7-day reverse repos with the maintained rate of 2.10% for a net drain of CNY 1bln. PBoC set USD/CNY mid-point at 6.6.7731 vs exp. 6.7680 (prev. 6. 7483); weakest fix since May 17th. European bourses are firmer across the board continuing the MSFT & GOOG driven early APAC action amidst numerous European earnings; Euro Stoxx 50 +0.6%. US futures are firmer across the board though the NQ +1.4% outperforms amid those after-market developments though participants are looking to the FOMC. Top European News     Central Banks Deutsche Bank and Goldman Sachs have revised their August RBA calls to a 50bps hike (prev. 75bps hike) following the Australian Q2 CPI metrics. FX Buck backs off before the Fed and US data in the lead up, DXY slips into range around 107.000 and just shy of yesterday's 107.290 recovery high. Sterling secures firmer foothold above 1.2000 vs Dollar and maintains momentum through key technical level against Euro, EUR/GBP cross probes 0.8400 after breach of 200 DMA. EUR/USD retains 1.0100+ status as Greenback wanes and hefty option expiry interest supplements underlying bids, 1.84bln rolls off at the strike. Aussie sags as mixed inflation data sparks round of revised RBA hike forecasts from 75bp to half point, AUD/USD around 0.6950 following test of Fib resistance just under 0.7000 on Tuesday. Loonie pares losses as crude prices settle down and Nokkie makes clean break of 10.0000 vs Euro, USD/CAD closer to 1.2850 than 1.2900. Fixed Income Whip-saw trade in debt ahead of the Fed as Bunds veer from 156.07 to 155.36, Gilts between 117.67-12 parameters and T-note within a 113-31/119-19+ range 2032 German tap and 2051 UK linker sale sluggish Italian BTPs underperform amidst the political void and S&P revising the sovereign's outlook to stable from positive after interim ratings review Commodities Dutch TTF Aug’22 is the standout commodity mover, amid a reduction in physical flows through Nord Stream 1; thus far, TTF has printed a high of EUR 228/mWh. Crude benchmarks modestly firmer, but significantly more contained. NEC Director Deese said there are no plans to continue SPR releases beyond the originally set out 6mth period, according to Reuters. US Private Inventory Data (bbls): Crude -4.0mln (exp. -1mln), Distillates -0.6mln (exp. +0.5mln), Gasoline -1.1mln (exp. -0.9mln), Cushing +1.1mln. US Deputy Treasury Secretary Adeyemo met with European counterparts to discuss a price cap on Russian oil. Chinese National Energy Administration expects energy consumptions growth to increase in H2, via Reuters. Spot gold has staged a recovery on the session from earlier lows of USD 1713/oz; however, the yellow metal remains well within recent ranges and continues to move predominantly as a function of USD action. US Event Calendar 07:00: July MBA Mortgage Applications -1.8%,  prior -6.3% 08:30: June Durable Goods Orders, est. -0.4%, prior 0.8%; - Less Transportation, est. 0.2%, prior 0.7% 08:30: June Cap Goods Orders Nondef Ex Air, est. 0.2%, prior 0.6% Cap Goods Ship Nondef Ex Air, est. 0.2%, prior 0.8% 08:30: June Advance Goods Trade Balance, est. -$103b, prior -$104.3b 08:30: June Retail Inventories MoM, est. 1.0%, prior 1.1% Wholesale Inventories MoM, est. 1.5%, prior 1.8% 10:00: June Pending Home Sales YoY, est. -13.5%, prior -12.0% 10:00: June Pending Home Sales (MoM), est. -1.0%, prior 0.7% 14:00: July FOMC Rate Decision (Lower Boun, est. 2.25%, prior 1.50% DB's Jim Reid concludes the overnight wrap Burgeoning energy and political crises in Europe, and the specter of the Fed pouring cold water on the recent dovish repricing of its policy weighed on risk yesterday. Diving in. It was a bad day for the gas crisis in Europe, ultimately seeing European natural gas futures climb +21.2% to €214, their highest since the aftermath of the invasion, bringing them +33.9% higher on the week. As intimated in yesterday’s EMR, Russia was halting another Nord Stream 1 turbine to cut capacity down to 20%. At those levels, the continent would need to countenance rationing unless exports were cut (see our gas monitor here for more details), voluntary curbs which would be politically difficult. Yesterday gave a sense how difficult. While EU countries reached a deal on emergency gas cuts for this winter, the deal lacks the teeth of the original plan, as member states have more flexibility to determine demand curbs, which was a necessary concession to reach a bloc-wide deal. In particular, states can reduce their cuts if they commit to export more gas to neighbors and also exempt certain industries from demand reductions. Member states are due to prepare emergency plans by the end of September to show how they will curb demand. That drove demand for most sovereign bonds, with 10yr bund yields falling -9.3bps. The STOXX 600 marched to a staccato rhythm all day, fluctuating around unchanged and ultimately closing a hair lower at -0.03%, while continental bourses closed on the downbeat, with the DAX -0.86% lower and the CAC down -0.42%. Along with the lackluster risk environment, S&P lowered Italy’s credit outlook from positive to stable, amid political uncertainty. 10yr BTP spreads widened +5.1bps to 232bps against bunds, their widest since mid-June. Rising prices will of course be front and center at today’s key macro event, the July FOMC. The market is pricing +78bps of hikes today. That’s in line with our US economics call of another +75bp hike (see preview here). The team expects the Committee to downshift to a +50bp hike in September, reaching 3.6% by the end of the year and 4.1% early in the next one. They see risks to both sides of that modal path; continued hot inflation prints would enable another +75bp hike in September, while material labor market deterioration could flatten the path of hikes. While the Fed will probably offer guidance about how they are currently thinking about policy actions at the September meeting, the amount of data between now and then means investors shouldn’t assign too strong a prior to any forward guidance. For most investors, however, the key question will be how restrictive the Fed ultimately needs to get policy. That is, how high is the terminal rate? The Chair will certainly be quizzed on the path to terminal during the press conference, but his elucidation about how restrictive policy needs to get will be more informative. DB research has spilled a fair bit of ink on that question in recent days, including US econ on what would trigger cuts next year (here), Alan Ruskin on terminal rate scenarios (here), and yours truly on the predictive power of forward looking rates during FOMC hiking cycles and periods of elevated inflation (here). Today’s Fed decision kept Treasury markets calm, with 2yrs rising +3.7bps and 10yrs just +1.1bps higher at 2.81%. The market has assumed slowing growth numbers will factor into the Fed’s reaction function since the June FOMC, driving 2yr Treasuries -13.8bps lower, 10yr Treasuries -47.7bps lower, the S&P 500 +3.5% higher, and the NASDAQ +4.18% higher over that time, with around one fewer 25bp hike priced into terminal rates. How the Committee and Chair view that assessment will be a crucial element of today’s meeting. While US risk has enjoyed an optimistic intermeeting period, more jitters creeped in today, with the S&P 500 closing -1.15% lower. A panoply of less-than-inspiring data weighed on the tone set by geopolitical risk and the Fed; with FHFA house prices (+1.4% vs. +1.5% expectations), New Home Sales (590k v 655k) Richmond Fed Manufacturing (0 vs. -14), and Conference Board Consumer Confidence (95.7 vs. 97.0) all pointing toward a looming (or present) growth slowdown. Consumer expectations continue to be weakest since 2013, while present situation figures are the lowest since April 2021. Earnings added to the malaise. Shopify reported plans to cut staff, continuing last week’s theme from major tech earnings. However, after the close, Microsoft missed estimates but shares climb more than +4% in after-hours trading on the back of an optimistic forecast, while Alphabet’s shares were around +5% higher after hours as their ad revenues look to be more resilient than some of their tech peers. That has pointed to a more optimistic open today, with S&P 500 futures +0.72% higher and NASDAQ futures +1.33% higher. Elsewhere, the Presidents Biden and Xi will speak Thursday. The reportedly ‘robust’ agenda does not include tariffs, as of yet. One to keep an eye on once we’re through the Fed. Heading into the open, the moves in the US and European equities reverberated across Asia overnight with all the equity markets trading in negative territory. The Hang Seng (-1.25%) is the largest underperformer across the region with the Kospi (-0.58%), the CSI (-0.57%), the Shanghai Composite (-0.32%) and the Nikkei (-0.13%) all lagging. Australia’s inflation rose +6.1% y/y in the June quarter (v/s +6.3% expected), the fastest annual pace in more than 30 years as food and energy costs increased, accelerating from last quarter’s +5.1% rate. Elsewhere, China’s industrial profits rebounded +0.8% y/y in June, recovering from a -6.5% decline in May as factory activity resumed in major manufacturing hubs. The FOMC looms large in the day ahead, but US pending home sales, inventories, and goods trade balance data will also be released, along with consumer confidence figures in Germany, France, and Italy, and Chinese industrial profits. The day is chock full with earnings as well, including: Meta, T-Mobile, Qualcomm, Bristol-Myers Squibb, Boeing, Airbus, Rio Tinto, Kering, Iberdrola, Lam Research, Mercedes-Benz, Boston Scientific, Shopify, Ford, Kraft Heinz, BASF, Universal Music Group, Danone, Hilton, Vici, Spotify, Credit Suisse Tyler Durden Wed, 07/27/2022 - 08:00.....»»

Category: blogSource: zerohedgeJul 27th, 2022

Futures, Global Markets Rally, Bonds Slide As Traders Turn More Bullish

Futures, Global Markets Rally, Bonds Slide As Traders Turn More Bullish Following the best week for stocks in one month, global stocks extended gains on Monday on continued easing of fears for a hawkish Fed; US futures rose, with the Nasdaq 100 advancing 0.5% as by tech giants Amazon, Apple and Microsoft all rose in premarket trading. Tech shares also boosted indexes in Europe and Asia. Treasuries slipped, pushing the rate on the US 10-year note to 3.17%. Yields have retreated from June highs on growth worries, but whether that marks the end of the Treasury bear market is a live debate. The dollar fluctuated while oil and bitcoin rose. In the US premarket, major US technology and internet stocks were higher, poised to extend gains. The tech-heavy Nasdaq 100 closed up 7.5% last week, its best week since March. Among notable movers: Apple +0.6%, Microsoft +0.6%, Amazon.com +1%, Meta +0.8%, Nvidia +1.6% in premarket trading. Other notable premarket movers include: JD.com (JD US) is among the top performers in US-listed Chinese stocks, rising 5% in premarket trading, after tech investor Prosus disposed of its stake in JD.com for about $3.67 billion. Coinbase (COIN US) shares fall 4% in premarket trading as the stock was downgraded to sell from neutral, with a joint Street-low price target of $45 at Goldman Sachs, which cited the “continued downdraft” in crypto prices and drop in industry activity levels. Robinhood (HOOD US) shares rise 3.9% in premarket trading as Goldman Sachs analyst William Nance raised the recommendation on the stock to neutral from sell Epizyme (EPZM US) jumps 64% to $1.56 in US premarket trading after Ipsen announced the acquisition of the US biotech firm for $1.45/share in cash plus a contingent value right of $1/share. Selective Insurance Group (SIGI US) shares may be in focus after Morgan Stanley initiated an overweight rating on the stock, citing a favorable business model that will help the company’s margin to outperform peers. Keep an eye on WEC Energy Group (WEC US) as KeyBanc Capital Markets raised the recommendation on the stock to overweight from sector weight, citing “valuation dislocations” triggered by the recent industry volatility. As Goldman traders speculated over the weekend, Friday's massive Russell rebalance may have helped flush out any leftover liquidation trades, while the upcoming month- and quarter-end portfolio rebalancing by pensions could boost stocks by as much as 7% this week according to JPM's Marko Kolanovic. Further boosting bullish sentiment - if only temporarily - one of Wall Street’s biggest bears sees the rally in US stocks extending, prior to the selloff recommencing. Morgan Stanley's Michael Wilson say the S&P 500 Index may climb another 5% to 7%, before resuming losses. Meanwhile, investors are also parsing incoming data to work out if the highest inflation in a generation is close to topping out as that will give the Fed latitude to ease up on sharp interest-rate hikes, something the market last week aggressively repriced. A more troubling scenario is of lasting price pressures and tighter policy even as the global economy falters. “There’s a feeling that things aren’t as bad as we thought they were going to be,” Carol Pepper, founder of Pepper International, said on Bloomberg Radio. She added “there’s a hope that perhaps we’ve oversold, perhaps there’s not going to be a recession.” Traders are also monitoring a summit of the Group of Seven leaders, who plan to commit to indefinite support for Ukraine in its defense against Russia’s invasion. The G-7 in addition is weighing a price cap on Russian oil. As reported yesterday, the US, UK, Japan and Canada also plan to announce a ban on new gold imports from Russia during the G-7 summit. Prices for the precious metal naturally rose. European equities trade off session highs as an earlier rally in Asian tech stocks buoys sentiment. Miners, tech and autos are the strongest performing sectors in Europe. Euro Stoxx 50 rallies 1%. DAX outperforms peers, adding 1.2%, FTSE MIB lags, dropping 0.2%.  Among notable European stock moves, Prosus NV soared on plans to sell more of its $134 billion stake in Chinese internet giant Tencent Holdings Ltd. to finance a buyback program. Mediobanca SpA fell after the death of Italian entrepreneur Leonardo Del Vecchio, the single largest investor in the bank.  Here are some of the biggest European movers today: Prosus shares surge as much as 17% in Amsterdam after the tech investor said it will sell down its holding in Tencent to finance an open-ended share buyback program, which could help close the gap between the firm’s market value and the value of the Tencent stake, according to analysts. Mining stocks lead gains in the Stoxx 600 Index on Monday as iron ore and base metals recover ground amid signs of improvement in China’s economy. Rio Tinto shares rise as much as 4.4%, Anglo American +4.6%, Glencore +4.2% Nordex shares jump as much as 12% after the firm announced a EU139.2m cash injection from Acciona in a bid to increase liquidity and strengthen its balance sheet to shield itself against the risks of short term headwinds in the industry. Kion shares rise as much as 7.7% after Morgan Stanley upgraded the stock to overweight from underweight, saying that the structural case for warehouse and forklift companies remains intact even amid a de-rating for the stocks. Lundbeck soars as much as 15% after the Danish pharmaceutical company reported positive data in a clinical study of agitation in patients with Alzheimer’s dementia. Ocado shares fall as much as 3.1% after the stock was cut to neutral from outperform and PT slashed to 960p from 1,600p at Credit Suisse, with the broker saying new disclosures from the online grocer indicate that its prior assumptions were “too optimistic.” Ipsen shares drop as much as 5.1% after the pharmaceutical company announced the acquisition of US biotech Epizyme for $1.45/share in cash plus a contingent value right of $1/share. Analyst had mixed reactions to the deal. Mediobanca shares fall as much as 4.4% in Milan after news that Italian entrepreneur Leonardo Del Vecchio, the single largest investor in the bank with a stake of about 19.4%, has died. Wise shares drop as much as 5.3% after the money transfer firm said its CEO is facing a probe by UK regulators. Tecnicas Reunidas shares tumble as much as 17% after the company said it began arbitrage to recover excess costs in a dispute with the Sonatrach-Neptune Energy consortium over a contract for the Touat Gaz Plant in Algeria. Elsewhere, Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes. Earlier in the session, Asian stocks advanced after battered technology shares rebounded as easing recession fears underpinned investor sentiment.  The MSCI Asia Pacific Index rose as much as 2.1%, its biggest intraday gain this month, as chip and internet companies including TSMC and Alibaba climbed. Tech-heavy markets such as Taiwan and South Korea extended gains made Friday, while an index of Asian tech stocks rallied for a second straight session after dropping to the lowest since September 2020.  Asian equities are bouncing back from a two-year low, as US Treasury yields retreat. Almost all markets in the region rose, with Hong Kong’s Hang Seng Index leading gains and China’s benchmark coming closer to a bull market as Shanghai’s leader declared victory in defending the financial hub against Covid. A Chinese tech index in Hong Kong advanced 4.7%. Still, the rally in technology shares may be short-lived, as global demand for consumer electronics remains fragile.  “Korea and Taiwan have high leverage to tech products, and we’ve seen a lot of that come under pressure so the end demand has slowed down,” Ray Sharma-Ong, investment director at Abrdn Asia, said in an interview with Bloomberg TV. “We expect continued outflows post this relief rally.” Japanese equities climbed as the latest comments from Federal Reserve officials buoyed sentiment on the economy and a reading on US inflation expectations eased.  The Topix Index rose 1.1% to 1,887.42 as of market close Tokyo time, while the Nikkei advanced 1.4% to 26,871.27. Sony Group Corp. contributed the most to the Topix’s gain, increasing 2.3%. Out of 2,170 shares in the index, 1,490 rose and 568 fell, while 112 were unchanged. Australia's S&P/ASX 200 index rose 1.9% to close at 6,706, the benchmark’s biggest daily gain since Jan. 28, as investors in Asia assessed whether inflation is bottoming and recession can be averted. The index’s biggest gains were seen in the financial, energy and tech sectors. In New Zealand, the S&P/NZX 50 index closed 1.7% higher at 10,997.92, the benchmark’s best day since March 1 Emerging-market stocks climbed to the highest in more than a week as China’s recovery from its virus-induced slump propels the Asian nation’s equities toward a bull market. Technology stocks led emerging-market equity gains, with China’s economy showing some improvement in June amid a further easing of pandemic curbs in Shanghai. Chinese shares look to be the best home for fresh money in Asia amid a tough investment environment, according to abrdn plc’s regional chairman Hugh Young. China plans to extend the yuan’s trading hours as it seeks to increase global investor participation in onshore currency trading as part of its internationalization push. In FX, the Bloomberg dollar spot index fell 0.2% as the greenback weakened against all of its Group-of-10 peers apart from the Australian dollar.  AUD and CHF are the weakest performers in G-10 FX, SEK and GBP outperform. The volatility term structures for the Group-of-4 currencies focus on the upcoming central bank meetings as there is little demand for long gamma in the front-end. The euro advanced, nearing $1.06 and European bonds fell broadly, with the exeption of Greece and Sweden, as focus turns to ECB President Christine Lagarde’s speech. Sterling rose for a second day, supported by a rally in global stocks that is limiting demand for the dollar. Gilts extended their slide across the curve, while money markets raised BOE tightening bets as haven- buying was unwound amid equity advances. In rates, Treasuries are weaker amid a selloff in core European rates, which extended losses after EU’s sale of EU2.5b four-year bonds. US yields are cheaper by nearly 4bp at long end, steepening 2s10s by ~2.4bp, 5s30s by ~1bp on the day; 10-year is up 3.6bp at ~3.17% with bunds and gilts lagging by additional 8bp and 5bp in the sector.  As Bloomberg notes, the broad risk-asset rally puts added cheapening pressure on Treasury yields with S&P 500 futures and Estoxx50 rising led by big gains for Asia stocks. Two coupon auctions slated for Monday may also weigh: Monday’s auctions include $46b 2- year at 11:30am ET and $47b 5-year notes at 1pm. The WI 2-year yield near 3.07% (vs 2.519% last month) is above auction stops since 2007; WI 5Y near 3.22% (vs 2.736% in May) exceeds results since 2008. IG dollar issuance expectations for the week are around $15b, although remain highly dependent on market conditions. The long- end of the curve may benefit this week from anticipated month- end demand; Bloomberg Indices estimated a 0.07yr Treasury index duration extension for July 1, slightly below 12-month average. In Europe, Gilts underperform Treasuries and bunds, cheaper by about 5-6bps at the long end. In commodities, industrial metals rebounded, while oil rose. Copper steadied and most other base metals rebounded after their worst week in a year as China’s economy showed signs of recovering and Goldman Sachs said global supplies were still constrained. Oil fluctuated near $107 a barrel in New York as investors monitored developments from the gathering of Group of Seven leaders; G7 leaders met to decide on a Russian oil price cap ahead of Iranian nuclear talks and on the week of the OPEC+ meeting. French CGT unions will participate in strikes at LNG terminals and gas storage facilities this week; strike in the energy sector on June 28th. Most base metals trade in the green; LME tin rises 6.8%, outperforming peers. LME zinc lags, dropping 0.9%. Spot gold maintains gains, adding ~$13 to trade near $1,840/oz. as some G-7 nations plan to announce ban on new gold imports from Russia Looking at today's US calendar, we get the May durable goods orders, capital goods orders, pending home sales, and June Dallas Fed manufacturing index. Market Snapshot S&P 500 futures up 0.7% to 3,944.50 STOXX Europe 600 up 1.2% to 417.68 MXAP up 1.6% to 161.83 MXAPJ up 1.8% to 538.51 Nikkei up 1.4% to 26,871.27 Topix up 1.1% to 1,887.42 Hang Seng Index up 2.4% to 22,229.52 Shanghai Composite up 0.9% to 3,379.19 Sensex up 1.2% to 53,368.36 Australia S&P/ASX 200 up 1.9% to 6,705.95 Kospi up 1.5% to 2,401.92 Brent Futures up 0.2% to $113.31/bbl Gold spot up 0.7% to $1,840.40 U.S. Dollar Index down 0.29% to 103.88 German 10Y yield little changed at 1.49% Euro up 0.3% to $1.0580 Top Overnight News from Bloomberg ECB policy makers gather on a Portuguese hillside on Monday with the sinking feeling that their rush to tackle the inflation shock they failed to forecast risks both a recession and echoes of the euro area’s sovereign debt crisis It was while sitting apparently alone in a London hotel basement that Christine Lagarde engineered a fix to the euro zone’s most alarming debt turmoil since the pandemic struck The ECB is pushing back its policy decisions and the timing of the subsequent press conferences by 30 minutes as of July The US, UK, Japan and Canada plan to announce a ban on new gold imports from Russia during a summit of Group of Seven leaders that’s getting underway Sunday. Prices of the precious metal climbed Monday President Joe Biden rebooted his effort to counter China’s flagship trade-and- infrastructure initiative after an earlier campaign faltered, enlisting the support of Group of Seven leaders at their summit in Germany China’s economy showed some improvement in June as Covid restrictions were gradually eased, although the recovery remains muted China plans to extend the yuan’s trading hours as it seeks to increase global investor participation in onshore currency trading as part of its internationalization push Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes to overseas creditors The world economy risks entering a new era of high inflation which central banks need to keep in check, the Bank for International Settlements said Signs of distress flashing in bond markets suggest the world’s poorest nations are set to see a wave of debt restructurings. But a growing cohort of investors say that’s a buying opportunity A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were higher across the board as the region took impetus from last Friday's firm gains on Wall St heading closer into month-end. ASX 200 enjoyed broad gains across its sectors although gold miners lagged as Evolution Mining shares dropped by more than 20% due to a cut in its FY output guidance. Nikkei 225 was lifted after the BoJ’s Summary of Opinions reiterated that they must maintain easy policy and with Tepco among the biggest gainers on tight electricity supply amid the hot weather. Hang Seng and Shanghai Comp. conformed to the upbeat mood as Hong Kong benefitted from a rampant tech sector and with the mainland encouraged by further easing of restrictions in Shanghai and Beijing, while the PBoC also upped its liquidity efforts with a CNY 100bln injection. Top Asian News Beijing will permit schools to resume in-class teaching as soon as Monday, ending one of the last major curbs in the capital, according to Bloomberg. Shanghai is to gradually resume dining-in at restaurants from June 29th, according to an official cited by Reuters. PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.10% for a CNY 90bln net injection, according to Reuters. China requested that banks make preparations for longer trading hours for the CNY, with trading in the onshore CNY potentially to extend until 03:00 local time the following day (20:00BST/15:00CDT), according to Bloomberg. BoJ Summary of Opinions from the June meeting stated the BoJ must maintain easy policy and keep a close eye out on the market and FX impact on the economy and prices. It also noted the number of goods seeing prices rise is increasing due to higher raw material costs and a weak yen but it is appropriate to keep easy policy as inflation is not driven by a positive economic cycle. Furthermore, it said maintaining ultra-easy policy is effective in sustaining a rise in wages and that a sharp fall in Yen would hurt the economy and heighten uncertainty. Japanese government issued power shortage warnings for Tuesday, for a second straight day, according to Reuters. Japan has proposed removing reference to the goal of 50% zero-emission vehicles by 2030; wants less concrete target, according to a draft cited by Reuters. BoJ's holding of JGBs has reportedly topped 50% of its total, according to Nikkei. European bourses are kicking off the week on the front-foot as global equities see tailwinds from Wall Street’s bounce on Friday. Sectors in Europe are mostly positive – but Utilities and Insurance are subdued, with the overall picture being a cyclical one. Stateside, US equity futures track sentiment higher – with the NQ the current outperformer vs the ES, YM, and RTY. Top European News ECB says as of the July meeting, the policy decisions will be released at 14:15CET and presser at 14:45CET, according to Reuters. ECB’s Pivot Toward Rate Hikes Feeds Fears of New Bond Crisis; ECB to Announce Rate Decisions 30 Minutes Later From July EU Confronts Low Gas Storage Risk in Test of Unity on Russia Gas Jumps as Europe Struggles to Fill Russian Gap UK’s Battered Economy Is Sliding Toward a Breaking Point FX Greenback continues to gravitate as risk sentiment improves, but could get a month end boost given models indicating broad rebalancing requirement - DXY pivots 104.000 within 104.120-103.790 range just shy of last week's low. Yen benefits from all round fix buying ahead of final trading day of June and Q2 on Thursday - Usd/Jpy not far from 134.50 at one stage overnight alongside declined in Yen crosses. Pound perks up as IMM spec accounts trim short positions again and Euro tests technical resistance ahead of 1.0600 vs Buck amidst firmer rebound in EGB yields - Cable probes 1.2300 at best, Eur/Usd touches 21 DMA at 1.0591. Aussie lags on Aud/Nzd headwinds, but Loonie pares losses in tandem with oil - Aud/Usd sub-0.6950, cross under 1.1000, Nzd/Usd hovering over 0.6300 and Usd/Cad back below 1.2900. Yuan underpinned by net PBoC liquidity injection and easing of Covid restrictions in China - Usd/Cnh and Usd/Cny both beneath 6.6900. Lira knee jerks higher after Turkey cuts credit to firms with more than Try 15 mn FX cash assets - Usd/Try down to 16.1040 or so before rebound towards 16.8900. Fixed Income Debt futures unwind more recovery gains with EGBs leading the way. Bunds retreat towards 146.50 vs 149.00 at one stage last Friday. Gilts closer to 113.00 than 114.00 and 10 year T-note near the base of 116-31/117-13 overnight range. US durable goods data ahead and a double dose of issuance comprising Usd 46 bn 2 year and Usd 47 bn 5 year auctions. Commodities WTI and Brent futures consolidate with modest intraday losses as G7 leaders meet to decide on a Russian oil price cap ahead of Iranian nuclear talks and on the week of the OPEC+ meeting. French CGT unions will participate in strikes at LNG terminals and gas storage facilities this week; strike in the energy sector on June 28th. Spot gold piggy-backs off the softer Dollar – with the yellow metal currently eyeing its 21 DMA (1,841.60/oz) and 200 DMA (1,845.20/oz) to the upside Base metals are largely rebounding following the recent rout – also aided by the Buck. US Event Calendar 08:30: May Durable Goods Orders, est. 0.2%, prior 0.5%; -Less Transportation, est. 0.3%, prior 0.4% 08:30: May Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 0.4% 08:30: May Cap Goods Ship Nondef Ex Air, est. 0.2%, prior 0.8% 10:00: May Pending Home Sales YoY, prior -11.5% 10:00: May Pending Home Sales (MoM), est. -3.9%, prior -3.9% 10:30: June Dallas Fed Manf. Activity, est. -6.5, prior -7.3 DB's Jim Reid concludes the overnight wrap This morning we are launching our monthly survey which hopefully comes at an opportune time to assess what you all think about recession risk, whether the next big move in markets will be up or down, whether the BoJ will be able to hold the line on YCC, whether your market view includes the risk of Russian gas being cut off from Europe, and whether you think negative rates will be seen again in the next decade after the ECB likely moves away from it by September. There are a couple of other repeat questions to answer. It should take 2-3 minutes, is all anonymous, with answers likely Thursday morning. The link is here and all help gratefully received. A reminder that my chart book was out last week with lots of charts on one of the worst H1s in history, recession risks and lots more. See here for more. Without having a blockbuster event to look forward to this week there are plenty of things to keep us occupied in what are highly uncertain times. Perhaps the ECB's Forum on Central Banking in Sintra will be the key event to watch, with a policy panel on Wednesday which will bring together Chair Powell, President Lagarde and Governor Bailey together the likely highlight. Staying in Europe, all eyes will be on the June CPI numbers released for Germany (Wednesday), France (Thursday) and Italy and the Eurozone on Friday. Consensus expectations don’t suggest we’re yet at peak headline inflation with CPI expected to pick up a few tenths YoY this week. With commodity prices fading sharply in June the hope is that we will be near the top soon. In fact, our US economists put out an inflationary chart book last week that suggested that the peak will be in September (9.1% headline and 6.3% core). The problem is that even if headline dips because of energy, core won’t necessarily fall as quickly with wages and second round effects in full force. We had a small indicator of that last week as our economists also pointed out that the recent acceleration in US hospital workers’ wage growth from around 2.5% to almost 5% should serve to add an additional 50bps to core PCE inflation next year (link here). On Thursday, we’ll get the latest reading of the US core PCE deflator within the personal income and spending data. Core PCE is the Fed's preferred inflation measure so this and the healthcare news is important. Staying with US data, we have a fair amount to look forward to with the all important ISM on Friday (53.2 expected vs 56.1 last month). We'll also see the Chicago PMI on Thursday and regional Fed's manufacturing indices throughout the week. Durable goods orders (today) and wholesale and retail inventories (tomorrow) will be key to assessing inventory pressures flagged by several firms in recent weeks as well as corporate behaviour amid some easing in supply-chain backlogs. How the consumer is faring under rising rates and stubborn inflation will be another key theme, with the Conference Board’s June consumer confidence index out tomorrow (99.9 expected vs 106.4 last month). Elsewhere, China's industrial data and PMIs (Thursday), as well as key economic indicators from Japan, will be in focus. Even though we at the very back end of Q2 earnings, this week will see some bellwether consumer spending companies such as Nike (Monday), H&M and General Mills (Wednesday) report. Other corporates releasing results will include Prosus (Monday), Micron and Walgreens Boots Alliance (Thursday). Overnight in Asia, equity markets are continuing last week’s rally with the Hang Seng (+2.72%) leading gains thanks to a strong performance in Chinese tech firms. The Kospi (+2.08%), Nikkei (+1.04%), Shanghai Composite (+0.89%) and CSI (+1.24%) are all also up. Outside of Asia, DM equity futures point to further gains with contracts on the S&P 500 (+0.19%), NASDAQ 100 (+0.44%) and DAX (+0.79%) moving higher. Bitcoin is above $21,000 after falling to as low as $17,600 last week for the first time since December 2020, while 10yr US yields are up around +2.5bps. Earlier today, data released showed that China’s industrial profits (-6.5% y/y) contracted at a slower pace in May following a big fall of -8.5% in April as companies resumed their activity in major manufacturing hubs amid easing Covid restrictions. In other overnight news, Russia has defaulted on its foreign-currency sovereign debt ($100 million) for the first time in more than 100 years, after the grace period for the payment deadline expired on Sunday. Recapping last week now, markets grew increasingly concerned about a recession as the week went on, thanks to weak economic data, hawkish central bank rhetoric, and the threat of a Russian gas cut-off in Europe. That led to a significant rally in sovereign bonds as investors sought out safe havens and cast doubt on whether central banks could keep hiking into a downturn. Indeed, yields on 10yr bunds came down by -21.9bps over the week as a whole (+1.0bps Friday), which is their 3rd biggest weekly decline in the last decade. Yields on 10yr Treasuries also saw a similar, albeit less marked decline, with yields down -9.6bps (+4.3bps Friday). That decline in yields came in spite of continued hawkish central bank commentary, and on Friday we saw San Francisco Fed President Daly say that a 75bps hike in July was “where I’m starting”, thus joining a growing number of officials who’ve openly backed a 75bps move again. Bear in mind if the Fed did move by 75bps in July, that would mean the hiking cycle since March would now be at 225bps, which matches the entire hiking cycle we saw in 3 years between 2015 and 2018. Nevertheless, when it came to monetary policy expectations, the growing fears of a recession led investors to take out the probability of more aggressive tightening, with the fed funds rate priced in by December’s meeting down by -16.0bps over the week (-5.0bps Friday). And looking at the entire profile of meetings ahead, futures are now expecting the peak Federal funds rate to come as soon as March 2023, before pricing in cuts after that. With investors expecting somewhat more dovish central banks, global equities rallied strongly last week as they recovered from their worst weekly performance since the pandemic began. The S&P 500 gained +6.45% on the week, and its Friday advance of +3.06% was the best daily performance for the index since May 2020. Europe’s STOXX 600 put in a weaker +2.40% advance (+2.62% Friday), but matters weren’t helped by German equities, with the DAX losing -0.06% (+1.59% Friday) as concerns grew about a potential cut-off in Russian gas. That’s sent natural gas futures in Europe to a 3-month high, with last week seeing a further +9.14% gain (-3.63% Friday). Lastly, after the poor mid-week data including the flash PMIs for June, Friday’s releases did bring some modest respite. First, the final reading of the University of Michigan’s long-term inflation expectations was revised down to 3.1% (vs. 3.3% previously). The unexpected jump in that measure before the Fed’s meeting was said to be a factor in their move to 75bps, as they’re very concerned about the prospect that longer-term inflation expectations could become unanchored, making inflation much harder to control. Furthermore, new home sales for the US in May rose to an annualised rate of 696k (vs. 590k expected), whilst the previous month also saw upward revisions. To be fair though, it wasn’t all positive on Friday, and Germany’s Ifo business climate indicator fell to 92.3 in June (vs. 92.8 expected), which marks an end to two successive monthly increases in April and May. Tyler Durden Mon, 06/27/2022 - 08:06.....»»

Category: blogSource: zerohedgeJun 27th, 2022

Meta"s (META) Recent Loss in Russian Court Impacts Ad Revenues

Meta Platforms (META) faces another blow in its tussle with Russian authorities. A Moscow court on Friday ruled against Meta's appeal to withdraw the extremist activity tag. Meta Platforms META has faced another blow in its tussle with Russian authorities. A Moscow court on Jun 17 ruled against Meta’s appeal to withdraw the extremist activity tag.On Mar 11, Russian authorities launched a criminal investigation against Meta, and prosecutors asked a court to mark Meta as an extremist organization. Russian authorities banned Facebook and Instagram to counter Meta’s decision to allow violent posts against Russian forces citing that such posts threaten the safety of Russian citizens.Meta has since then narrowed its guidance to block death threats against the Russian head of state and defended the company's policy against the Russian authorities’ complaints. Meta stated that its policies do not support Russophobia or any sort of violence against Russian citizens on its platform.The changes to standard content policies by Meta are directed toward Ukrainians as the company is supporting their rights to speech in self-defense against Russian military aggression in Ukraine.The ban on Instagram and Facebook has impacted revenue growth negatively due to the loss of ad revenues in Russia. Meta expects this trend to continue in the second quarter of 2022 and might keep Global MAU flat. As a result, Meta has reduced the second-quarter revenue guidance.Meta Platforms, Inc. Price and Consensus Meta Platforms, Inc. price-consensus-chart | Meta Platforms, Inc. QuoteMeta Shares Hurt by the Russia-Ukraine WarThe recent ban by Russia not only impacts Meta’s ad revenues but also indirectly impacts the stock price movement negatively.Opposing Russia, the Biden organization banned the import of Russian oil and other petroleum products. This changed the oil supply forecast negatively, and crude oil prices climbed exponentially. This resulted in a broader increase in inflation, which increased to 8.6% in May 2022 — the highest in the last 41 years.Rising inflation has compelled customers in the United States and Europe specifically to pull back on their purchases. This, in turn, slowed down growth in Meta’s online commerce vertical, which increased quickly during the COVID-19 pandemic.The geopolitical tensions have impacted the S&P 500 index negatively, which plunged 23.2% in the year-to-date period. This was reflected in the falling stock prices of Meta’s FAAAM peers, Apple AAPL and Alphabet GOOGL. Twitter TWTR, another social media giant, faced a ban in Russia. Negative sentiments among investors after the ban and macro-economic turmoil hampered Twitter’s stock prices.Shares of Meta have tumbled 51.6% in the year-to-date period compared with the Zacks Internet – Software industry and Zacks Computer and Technology sector’s decline of 53.1% and 32.3%, respectively.Apple’s shares have fallen 25.2% in the year-to-date period compared with the Zacks Computer - Mini computers industry’s decline of 24.7%.Alphabet shares have lost 26% in the year-to-date period compared with the Zacks Internet – Services industry’s decline of 28.9%.Twitter shares have fallen 12.3% compared with the Zacks Internet Software Industry’s decline of 53.1%.Although Meta’s short-term revenue growth looks bleak, the company is confident about its long-term opportunities and growth. Meta has divided its investment priorities into three parts — Reels, ads and the Metaverse.Reels are the newest trend right now, and the feeds are increasingly being recommended by AI. This will enable Meta to evolve its ad systems to do more with less data, thus reducing its privacy policy issues substantially. Meta is looking to grow video monetization in Reels, where people spend 20% of their time on Instagram.As the company is looking to create the Metaverse, Meta’s Quest 2 continues to be the leading virtual reality headset. The company will release the higher-end headset Project Cambria later this year, which is anticipated help Meta retain its leading position in VR/AR hardware products. Meta will expectedly enjoy the first-mover advantage in developing the Metaverse where they are trying to create AR as a self-reliant economy.Meta currently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Apple Inc. (AAPL): Free Stock Analysis Report Twitter, Inc. (TWTR): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJun 21st, 2022

Simple Fixes for the Labor Market

    Today is NFP day: We learned employment increased by 428,000 in April, and the unemployment rate was unchanged at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, transportation, and warehousing. There are now two job openings for every unemployed person, the number of participants not in the labor… Read More The post Simple Fixes for the Labor Market appeared first on The Big Picture.     Today is NFP day: We learned employment increased by 428,000 in April, and the unemployment rate was unchanged at 3.6%. Job growth was widespread, led by gains in leisure and hospitality, manufacturing, transportation, and warehousing. There are now two job openings for every unemployed person, the number of participants not in the labor force continues to grow, and the lack of workers is being blamed for everything from supply chain issues to inflation. I’ve discussed wages and employment incessantly for the past decade, and the current circumstance looks like it can be moderated with a few simple steps. To do so requires decisive action from the White House and Congress (which perhaps explains why it’s unlikely to happen anytime soon in our dysfunctional partisan dystopia). We can improve the labor market and benefit all parties with two simple steps, but they require action from Congress and the White House: 1. Restore Immigration to 1995 Levels: Immigration in the United States has been slowing for decades. You can see the downturn in immigration on the two charts nearby. Immigration peaked in the 1990s, slowed in the 2000s, dove under President Trump in 2016, and continues at low levels under President Biden in 2021-22.1 Just over the past 5 years, the labor force is short about 3 million immigrant workers missing from the U.S. economy. If we were to return to the level of immigration that we saw in the 1990s, the labor shortage would be solved. The decreases since 2015 levels alone subtracted ~3,000,000 new workers from the labor market. Allowing more immigrant workers into the U.S. on either H-1B Visas or other work Visas would help make up the shortfall in labor. That requires action from Congress and the White House. 2. Make the Federal Minimum Wage Adjust Automatically: The current turmoil in the labor markets did not spring out of anywhere – it is the result of a concerted and successful lobbying effort to prevent the minimum wage from rising. Wages in the bottom quartile have lagged every relevant factor for decades: Inflation, corporate profits, productivity, and C-Suite compensation. In 1964, the minimum wage was 50% of hourly earnings; today the $7.25 minimum wage is only 23% of the $31.85 average hourly wage. There ramifications of this are far-reaching and deeply negative. While wages have been a deflationary factor since 1964, it creates other issues. (My pet peeve is taxpayers subsidizing the profits of publicly traded companies). The resulting market dislocations persisted until wealthy Tech firms – most notably Amazon – saw an opportunity to take advantage. With the federal minimum wage at $7.25 per hour, they offered $15 and forced everybody else to scramble. It should come as no surprise that given an opportunity to better than themselves, an entire generation of workers did so, taking full advantage to exit the bottom of the labor pool. Labor markets are experiencing a generational reset: after decades of lagging wages, the a spasmodic readjustment is now better reflecting the dynamics between capital and labor, between employers and employees. One solution to this would be to remove remove minimum wages from the lobbyists and politicans hands and build in a cost-of living adjustment (COLA) that rose automatically with CPI. It could be capped at some reasonable level (e.g., 5% a year) but would not lag for decades at a time. We are still dealing with the fallout from this labor market one-two punch. There are numerous other thorny issues that are much more difficult to fix: Daycare is an issue; disability, early retirement, and people leaving the labor force entirely are all problematic. So too are Covid deaths, lack of health care, and too many others. Still, it would go a long way towards lowering inflation, reducing supply chain problems, and finding a sufficient supply of willing workers if Congress would address these two issue.     See also: America needs immigration to grow and thrive (Noah Smith, January 2022) State of Working America 2021 (EPI, April 27, 2022)   Previously: America’s Corporate Welfare Queens (November 13, 2013) The Minimum Wage and McDonald’s Welfare (Dec 17, 2013) Minimum Wage Solution: $12/hour with COLA (February 12, 2021) The Great Reset (June 2, 2021) Elvis (Your Waiter) Has Left the Building (July 9, 2021) Wages in America   _________ 1. We are back to 1960s levels of immigration. If the U.S. keeps immigration at those levels, perhaps we can anticipate 1970s levels of inflation.   The post Simple Fixes for the Labor Market appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureMay 7th, 2022

Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony

Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony With the new year just weeks away, Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell will testify before the Senate Banking Committee on Tuesday, part of routine testimony required by the CARES act. Just two weeks ago, investors could be forgiven for writing off Tuesday's testimony as a likely snoozefest now that Powell has been nominated for his second term as Fed chairman. But over the last week, the emergence of the omicron variant has (according to some) thrown the recovery timeline out of whack. After the release of Powell's prepared remarks last night, markets eagerly priced in a more dovish outlook at the Fed. But hours later, warnings from Moderna CEO Stephane Bancel sent markets back into turmoil, as investors struggled to decide who to trust more: the "science" (ie trial data which haven't yet been gathered or released), or the authoritative executives who have been talking their book this entire time (whether the market realizes that or not is unclear). In yet another indication of just how confused Wall Street has become, Deutsche Bank described Powell's prepared testimony as "hawkish", an assessment that we (and plenty of investors, judging by the market reaction) would strongly disagree with. Although DB specifies that the only hawkish aspects of Powell's statement pertained to inflation. We would agree with DB that nobody cares much about the pair's prepared remarks. The "real fireworks" - as DB put it - will likely land during the Q&A, where Powell and Yellen will be grilled by Senators of both parties. Fed Chair Powell set to appear before the Senate Banking Committee at 15:00 London time, where he may well be asked about whether the Fed plans to accelerate the tapering of their asset purchases although it’s hard to believe he’ll go too far with any guidance with the Omicron uncertainty. The Chair’s brief planned testimony was published on the Fed’s website last night. It struck a slightly more hawkish tone on inflation, noting that the Fed’s forecast was for elevated inflation to persist well into next year and recognition that high inflation imposes burdens on those least able to handle them. On omicron, the testimony predictably stated it posed risks that could slow the economy’s progress, but tellingly on the inflation front, it could intensify supply chain disruptions. The real fireworks will almost certainly come in the question and answer portion of the testimony. Keep in mind: regardless of what Moderna CEO Bancel says, only a tiny minority on Wall Street actually expect omicron to be a major issue a few weeks from now. In other news, concerns about the next debt ceiling fight, which will kick into high gear in the coming days, is already creating kinks in the US Treasury Bill Curve. But that still presents some difficulties for the central bank as it weighs whether to continue tapering asset purchases, as well as what it should signal regarding the pace of rate hikes. Read Yellen's prepared remarks, released Tuesday morning: Chairman Brown, Ranking Member Toomey, members of the Committee: It is a pleasure to testify today. November has been a very significant month for our economy, and Congress is a large part of the reason why. Our economy has needed updated roads, ports, and broadband networks for many years now, and I am very grateful that on the night of November 5, members of both parties came together to pass the largest infrastructure package in American history. November 5th, it turned out, was a particularly consequential day because earlier that morning we received a very favorable jobs report– 531,000 jobs added. It’s never wise to make too much of one piece of economic data, but in this case, it was an addition to a mounting body of evidence that points to a clear conclusion: Our economic recovery is on track. We’re averaging half a million new jobs per month since January. GDP now exceeds its pre-pandemic levels. Our unemployment rate is at its lowest level since the start of the pandemic, and our economy is on pace to reach full employment two years faster than the Congressional Budget Office had estimated. Of course, the progress of our economic recovery can’t be separated from our progress against the pandemic, and I know that we’re all following the news about the Omicron variant. As the President said yesterday, we’re still waiting for more data, but what remains true is that our best protection against the virus is the vaccine. People should get vaccinated and boosted. At this point, I am confident that our recovery remains strong and is even quite remarkable when put it in context. We should not forget that last winter, there was a risk that our economy was going to slip into a prolonged recession, and there is an alternate reality where, right now, millions more people cannot find a job or are losing the roofs over their heads. It’s clear that what has separated us from that counterfactual are the bold relief measures Congress has enacted during the crisis: the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan Act. And it is not just the passage of these laws that has made the difference, but their effective implementation. Treasury, as you know, was tasked with administering a large portion of the relief funds provided by Congress under those bills. During our last quarterly hearing, I spoke extensively about the state and local relief program, but I wanted to update you on some other measures. First, the American Rescue Plan’s expanded Child Tax Credit has been sent out every month since July, putting about $77 billion in the pockets of families of more than 61 million children. Families are using these funds for essential needs like food, and in fact, according to the Census Bureau, food insecurity among families with children dropped 24 percent after the July payments, which is a profound economic and moral victory for the country. Meanwhile, the Emergency Rental Assistance Program has significantly expanded, providing muchneeded assistance to over 2 million households. This assistance has helped keep eviction rates below prepandemic levels. This month, we also released guidelines for the $10 billion State Small Business Credit Initiative program, which will provide targeted lending and investments that will help small businesses grow and create well-paying jobs. As consequential as November was, December promises to be more so. There are two decisions facing Congress that could send our economy in very different directions. The first is the debt limit. I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession. The second action involves the Build Back Better legislation. I applaud the House for passing the bill and am hopeful that the Senate will soon follow. Build Back Better is the right economic decision for many reasons. It will, for example, end the childcare crisis in this country, letting parents return to work. These investments, we expect, will lead to a GDP increase over the long-term without increasing the national debt or deficit by a dollar. In fact, the offsets in these bills mean they actually reduce annual deficits over time. Thanks to your work, we’ve ensured that America will recover from this pandemic. Now, with this bill, we have the chance to ensure America thrives in a post-pandemic world. With that, I’m happy to take your questions. And readers can find Powell's prepared remarks, first released last night, below: Chairman Brown, Ranking Member Toomey, and other members of the Committee, thank you for the opportunity to testify today. The economy has continued to strengthen. The rise in Delta variant cases temporarily slowed progress this past summer, restraining previously rapid growth in household and business spending, intensifying supply chain disruptions, and, in some cases, keeping people from returning to work or looking for a job. Fiscal and monetary policy and the healthy financial positions of households and businesses continue to support aggregate demand. Recent data suggest that the post-September decline in cases corresponded to a pickup in economic growth. Gross domestic product appears on track to grow about 5 percent in 2021, the fastest pace in many years. As with overall economic activity, conditions in the labor market have continued to improve. The Delta variant contributed to slower job growth this summer, as factors related to the pandemic, such as caregiving needs and fears of the virus, kept some people out of the labor force despite strong demand for workers. Nonetheless, October saw job growth of 531,000, and the unemployment rate fell to 4.6 percent, indicating a rebound in the pace of labor market improvement. There is still ground to cover to reach maximum employment for both employment and labor force participation, and we expect progress to continue. The economic downturn has not fallen equally, and those least able to shoulder the burden have been the hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on African Americans and Hispanics. Pandemic-related supply and demand imbalances have contributed to notable price increases in some areas. Supply chain problems have made it difficult for producers to meet strong demand, particularly for goods. Increases in energy prices and rents are also pushing inflation upward. As a result, overall inflation is running well above our 2 percent longer-run goal, with the price index for personal consumption expenditures up 5 percent over the 12 months ending in October. Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate. It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace. We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation. We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions. To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to support a full recovery in employment and achieve our price-stability goal. Thank you. I look forward to your questions. The big question now: will Powell sound dovish, or hawkish, under questioning? What's more, investors should be on the lookout for Yellen's comments on the debt ceiling - particularly anything she says about the timing for when the Treasury might run out of funds. Tyler Durden Tue, 11/30/2021 - 09:56.....»»

Category: blogSource: zerohedgeNov 30th, 2021

Watch Live: Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony

Watch Live: Powell, Yellen Weigh In On Omicron, Debt Ceiling During Senate CARES Act Testimony With the new year just weeks away, Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell will testify before the Senate Banking Committee on Tuesday, part of routine testimony required by the CARES act. Just two weeks ago, investors could be forgiven for writing off Tuesday's testimony as a likely snoozefest now that Powell has been nominated for his second term as Fed chairman. But over the last week, the emergence of the omicron variant has (according to some) thrown the recovery timeline out of whack. After the release of Powell's prepared remarks last night, markets eagerly priced in a more dovish outlook at the Fed. But hours later, warnings from Moderna CEO Stephane Bancel sent markets back into turmoil, as investors struggled to decide who to trust more: the "science" (ie trial data which haven't yet been gathered or released), or the authoritative executives who have been talking their book this entire time (whether the market realizes that or not is unclear). In yet another indication of just how confused Wall Street has become, Deutsche Bank described Powell's prepared testimony as "hawkish", an assessment that we (and plenty of investors, judging by the market reaction) would strongly disagree with. Although DB specifies that the only hawkish aspects of Powell's statement pertained to inflation. We would agree with DB that nobody cares much about the pair's prepared remarks. The "real fireworks" - as DB put it - will likely land during the Q&A, where Powell and Yellen will be grilled by Senators of both parties. Fed Chair Powell set to appear before the Senate Banking Committee at 15:00 London time, where he may well be asked about whether the Fed plans to accelerate the tapering of their asset purchases although it’s hard to believe he’ll go too far with any guidance with the Omicron uncertainty. The Chair’s brief planned testimony was published on the Fed’s website last night. It struck a slightly more hawkish tone on inflation, noting that the Fed’s forecast was for elevated inflation to persist well into next year and recognition that high inflation imposes burdens on those least able to handle them. On omicron, the testimony predictably stated it posed risks that could slow the economy’s progress, but tellingly on the inflation front, it could intensify supply chain disruptions. The real fireworks will almost certainly come in the question and answer portion of the testimony. Keep in mind: regardless of what Moderna CEO Bancel says, only a tiny minority on Wall Street actually expect omicron to be a major issue a few weeks from now. In other news, concerns about the next debt ceiling fight, which will kick into high gear in the coming days, is already creating kinks in the US Treasury Bill Curve. But that still presents some difficulties for the central bank as it weighs whether to continue tapering asset purchases, as well as what it should signal regarding the pace of rate hikes. Read Yellen's prepared remarks, released Tuesday morning: Chairman Brown, Ranking Member Toomey, members of the Committee: It is a pleasure to testify today. November has been a very significant month for our economy, and Congress is a large part of the reason why. Our economy has needed updated roads, ports, and broadband networks for many years now, and I am very grateful that on the night of November 5, members of both parties came together to pass the largest infrastructure package in American history. November 5th, it turned out, was a particularly consequential day because earlier that morning we received a very favorable jobs report– 531,000 jobs added. It’s never wise to make too much of one piece of economic data, but in this case, it was an addition to a mounting body of evidence that points to a clear conclusion: Our economic recovery is on track. We’re averaging half a million new jobs per month since January. GDP now exceeds its pre-pandemic levels. Our unemployment rate is at its lowest level since the start of the pandemic, and our economy is on pace to reach full employment two years faster than the Congressional Budget Office had estimated. Of course, the progress of our economic recovery can’t be separated from our progress against the pandemic, and I know that we’re all following the news about the Omicron variant. As the President said yesterday, we’re still waiting for more data, but what remains true is that our best protection against the virus is the vaccine. People should get vaccinated and boosted. At this point, I am confident that our recovery remains strong and is even quite remarkable when put it in context. We should not forget that last winter, there was a risk that our economy was going to slip into a prolonged recession, and there is an alternate reality where, right now, millions more people cannot find a job or are losing the roofs over their heads. It’s clear that what has separated us from that counterfactual are the bold relief measures Congress has enacted during the crisis: the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan Act. And it is not just the passage of these laws that has made the difference, but their effective implementation. Treasury, as you know, was tasked with administering a large portion of the relief funds provided by Congress under those bills. During our last quarterly hearing, I spoke extensively about the state and local relief program, but I wanted to update you on some other measures. First, the American Rescue Plan’s expanded Child Tax Credit has been sent out every month since July, putting about $77 billion in the pockets of families of more than 61 million children. Families are using these funds for essential needs like food, and in fact, according to the Census Bureau, food insecurity among families with children dropped 24 percent after the July payments, which is a profound economic and moral victory for the country. Meanwhile, the Emergency Rental Assistance Program has significantly expanded, providing muchneeded assistance to over 2 million households. This assistance has helped keep eviction rates below prepandemic levels. This month, we also released guidelines for the $10 billion State Small Business Credit Initiative program, which will provide targeted lending and investments that will help small businesses grow and create well-paying jobs. As consequential as November was, December promises to be more so. There are two decisions facing Congress that could send our economy in very different directions. The first is the debt limit. I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession. The second action involves the Build Back Better legislation. I applaud the House for passing the bill and am hopeful that the Senate will soon follow. Build Back Better is the right economic decision for many reasons. It will, for example, end the childcare crisis in this country, letting parents return to work. These investments, we expect, will lead to a GDP increase over the long-term without increasing the national debt or deficit by a dollar. In fact, the offsets in these bills mean they actually reduce annual deficits over time. Thanks to your work, we’ve ensured that America will recover from this pandemic. Now, with this bill, we have the chance to ensure America thrives in a post-pandemic world. With that, I’m happy to take your questions. And readers can find Powell's prepared remarks, first released last night, below: Chairman Brown, Ranking Member Toomey, and other members of the Committee, thank you for the opportunity to testify today. The economy has continued to strengthen. The rise in Delta variant cases temporarily slowed progress this past summer, restraining previously rapid growth in household and business spending, intensifying supply chain disruptions, and, in some cases, keeping people from returning to work or looking for a job. Fiscal and monetary policy and the healthy financial positions of households and businesses continue to support aggregate demand. Recent data suggest that the post-September decline in cases corresponded to a pickup in economic growth. Gross domestic product appears on track to grow about 5 percent in 2021, the fastest pace in many years. As with overall economic activity, conditions in the labor market have continued to improve. The Delta variant contributed to slower job growth this summer, as factors related to the pandemic, such as caregiving needs and fears of the virus, kept some people out of the labor force despite strong demand for workers. Nonetheless, October saw job growth of 531,000, and the unemployment rate fell to 4.6 percent, indicating a rebound in the pace of labor market improvement. There is still ground to cover to reach maximum employment for both employment and labor force participation, and we expect progress to continue. The economic downturn has not fallen equally, and those least able to shoulder the burden have been the hardest hit. In particular, despite progress, joblessness continues to fall disproportionately on African Americans and Hispanics. Pandemic-related supply and demand imbalances have contributed to notable price increases in some areas. Supply chain problems have made it difficult for producers to meet strong demand, particularly for goods. Increases in energy prices and rents are also pushing inflation upward. As a result, overall inflation is running well above our 2 percent longer-run goal, with the price index for personal consumption expenditures up 5 percent over the 12 months ending in October. Most forecasters, including at the Fed, continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate. It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace. We understand that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation. We are committed to our price-stability goal. We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched. The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions. To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to support a full recovery in employment and achieve our price-stability goal. Thank you. I look forward to your questions. The big question now: will Powell sound dovish, or hawkish, under questioning? What's more, investors should be on the lookout for Yellen's comments on the debt ceiling - particularly anything she says about the timing for when the Treasury might run out of funds. Tyler Durden Tue, 11/30/2021 - 09:56.....»»

Category: blogSource: zerohedgeNov 30th, 2021

A Brief History Of West African Slavery

A Brief History Of West African Slavery Submitted by ICE-9 via The Burning Platform Slave [sleyv] from Middle English, from Old French sclave, from Medieval Latin sclāvus (“slave”), from Late Latin Sclāvus (“Slavic Person”), from Byzantine Greek Σκλάβος (Sklábos), from Proto-Slavic slověninъ … The seminal image many 50+ year old Americans have regarding the West African slave trade’s operating model can be traced back to the 1977 television miniseries Roots.  Some of you may recall sitting in front of your CRT television screen unknowingly watching the roots of a future social justice movement unfold before your eyes as a gang of European men magically appear deep within the Heart of Darkness wielding nets, superior numbers, and incredible brutality and snatch up a young and happy Kunta Kinte from his ancestral homeland. Like me, I bet the knot in your gut got tighter at each stage as Kunta Kinte was first shipped off in chains to a slave depot, sold at auctioned, and finally sent to America where his foot got cut off and he was renamed Toby.  The miniseries was a monumental success at implanting those first seeds of suburban white guilt into what had previously been infertile terrain.  Afterwards, many Americans could never innocently watch OJ Simpson run through airports in quite the same way. Roots was the initial vector that dug its pernicious roots into the formerly oblivious white collective consciousness.  It succeeded where back in the 1960s continuous years of three minute lead story action clips on the Six O’clock Evening News showing groups of helpless southern Negroes getting pummeled by police truncheons and slammed with water cannons had failed.  Thus those January nights back in 1977 unleashed the power of humanized myth that unequivocally proved superior to the old ways of cold impersonal facts.  It was through this new found power of myth and the visceral emotions it conjured that a primordial wokeness was spawned. Today, when discussing even the most oblique references to slavery in America, the emotions ignite, misguided passions reign supreme, facts equate to racism, and the phenomenology of history devolves into one where history becomes but a construct derived to aid and abet a white supremacist patriarchy.  Case in point – according to current woke orthodoxy, evil cis-male Europeans just up and sailed 3,500 miles south to forgotten lands like Zenaga, trekked hundreds of miles inland without roads, maps, or logistic support, and – according to some extraordinary unverified estimates – kidnapped up to six million innocent Africans. But was this the reality on the ground in West Africa circa 1619, or did Europeans instead rely on intermediaries to conduct their dangerous, high opex dirty work and if so, who were these intermediaries?  Do Americans have an accurate understanding of the West African slavery supply chain, or have they instead meekly decided to go along to get along and ingest without question a toxic narrative that is an antipathy encumbered product tainted by a combination of pop culture and political agenda?  And last, did slavery in West Africa materialize out of thin air with the first appearance of Europeans, or did it exist long before their arrival? The answer to this last question is both morally and legally significant, as it could nullify any and all claims to both tangible and ethical debts of reparation borne by ancestral liability.  For if Caucasian Americans are collectively guilty – including those who immigrated here after the Civil War – as a result of their ancestors’ theoretical participation in the West African slave trade, would not a basis be equally established to extend slavery’s collective culpability to African Americans if it were shown that their ancestors too participated to an equal degree in the West African slave trade?  Would not equal culpability on both ancestral sides of the Atlantic nullify any and all claims by one party against the other?  Further still, if slavery in West Africa was shown to be prevalent long before the arrival of Europeans, based on the premise of hereditary culpability, then slavery in America could no longer exist as some kind of alleged “Original Sin”. The forthwith exposition can be considered a template for countering the unreasonable and fanciful woke dogma surrounding the realities of West African slavery and specifically, the false claims regarding Europe’s and America’s sole complicity in this industry.  It is an attempt – described here in broken wokespeak – to deconstruct the prevailing narrative derived to aid and abet a People of Color aligned, non-binary, trans-supremacist heterarchy.  Let us begin our journey of enlightenment. The Songhai Empire as Gateway to Europe’s Appetite for African Slaves Between the 4th and early 16th centuries AD, through a succession of kingdoms that included Wagadou (Ghana), Mali, and Songhai, the West African Sahel was among the wealthiest regions on earth during a period when most of Europe wallowed in medieval feudalism.  Prior to the discovery of the Americas, West Africa was the world’s largest source of gold – so much gold in fact that when the Malian king Mansa Musa visited Mecca during his 14th century hajj, his 60,000 strong retinue (including 12,000 slaves) distributed so much gold that he crashed its value and created a decade of economic chaos on the Arabian peninsula. The Niger River during this time possessed six times more arable land than the Nile.  In the adjacent Sahara to the north, Africans operated extensive salt mining operations.  With the arrival of the Arabs in the 8th century AD, a prodigious iron smelting and blacksmithing industries occupied entire villages from one end of the Sahel to the other.  The West African political economy was such that no king ever enforced strict ownership over the entirety of his realm, so after the millet harvest an African peasant could earn good extra income panning for alluvial gold, mining iron ore, harvesting trees to make charcoal fuel for iron smelting, or travelling north to labor in the salt mines. The Sahel during this period was awash in food and gold and large prosperous cities like Gao grew into architectural wonders.  So what happened that would drain not only the wealth of an established long-standing power center yet leave nothing behind but piles of dirt from what were formerly majestic structures of timber and adobe brick?  The short answer is that it all fell to pieces due to horses. In the 9th and 10th centuries AD, trade caravans from what are today Morocco and Algeria began regularly making their way south through the Sahara desert during the winter months. These caravans initially brought with them manufactured goods and luxury items to exchange for gold, ivory, specialty woods, animal skins, and salt.  But during the 13th century these caravans started supplying a vital military component to the various competing rulers of the Sahel – Barb horses.  Ownership of horses gave each ruler a cavalry, and ownership of large herds could facilitate military superiority over rivals. The Malian, Hausa, Mossi, Bornu, Kanem and Songhai cavalries regularly battled each other for over three hundred years to what could be considered an equilibrium sometimes punctuated with transient victories and an occasional ebb or flow of juxtaposed borders.  Continuous combat was made possible only by a steady supply of Barb horses from the Maghreb, a market that traders were happy to oblige as the supply of gold from the Sahel appeared endless. But with its monsoonal climate and tropical diseases like trypanosomiasis, the Sahel Africans found it difficult to breed horses – the local Dongola sub-breed had a short life expectancy – and thus a steady flow of imported Barb horses were required to both replenish the high equine mortality rates and maintain at least military parity with the surrounding kingdoms. These imported horses were expensive and were initially paid for with alluvial gold, which was starting to go into productive decline during the 15th century at about the same time the Songhai king Sonni Ali Ber led a successful campaign to defeat his enemy Mali and consolidate rule over the Sahel from Lake Chad to the Cap-Vert peninsula.  So the height of Songhai power coincided with maximum operating costs to retain that power just as alluvial gold production from the Niger River went into decline. Saddled with the mounting expense of maintaining many cavalry regiments stretching across an 1,800 mile expanse, the Songhai lords began to launch slave raids upon the various Sahel peoples.  So as the 15th and 16th centuries progressed, slaves rather than gold became more and more the medium of exchange between the Songhai lords and the horse traders of the Maghreb.  As these traders brought more and more slaves to the Mediterranean coast of North Africa, most were purchased by Arabs but many were sold on to Europeans where they were employed as domestic servant in wealthy cities like London and Antwerp and were considered a high status symbol – the “negars and blackmoores” of 16th century Elizabethan England.  So it was not the Europeans that first procured slavery in West Africa, but the Songhai themselves that introduced Europe to African slaves via Arab and Berber intermediaries.  Europeans at this time were a minor end customer, where the primary slave demand was provided by Arabs. As the 16th century ground out successive years, the gold really began to play out.  Continuous and devastating slave raids depopulated the Niger River goldfield regions – crashing not only gold but also food production – and drove its inhabitants onto marginal lands that had been earlier deforested to manufacture charcoal for the formerly prodigious iron smelting industry.  Over a period of 200 years the once prosperous Sahel was transformed into a land inhabited by subsistence food scavengers and all powerful cavalry lords where the incessant demand for horses laid economic waste to this once prosperous region. With Songhai power in the late 16th century at its nadir as a result of internecine strife and succession wars among the dead king Askia Daoud’s many sons, the Sultan of Morocco, Ahmad al-Mansur, took advantage of the ensuing political instability and sent a military expedition across the Sahara and in 1591 these 4,000 Moroccans and their cannons defeated the Songhai at the battle of Tondibi. Thus with the defeat of the powerful Songhai Empire the coast of West Africa south of the Arab stronghold Nouakchott was left wide open to European maritime exploitation.  By 1625 the Dutch had established a permanent settlement at Gorée and the Portuguese likewise at Portudal, both located in modern day Senegal.  These initial European forays onto West African soil provided the vital resupply anchorage that enabled further permanent settlements along the entirety of the Gulf of Guinea and as far south as Namibia.  And it is at this point where the Kunta Kinte mythology begins with the permanent settlement of Europeans on African soil who allegedly trekked hundreds of miles inland into dangerous areas they did not control to randomly kidnap happy Africans into slavery.  Was this the reality on the ground in Africa back in 1619?  The Angolan experience provides the answers. The Angolan Model of Contracted Slave Procurement The gradual encroachment of European settlements down the Atlantic coast of West Africa did not lead to immediate mass colonization as malaria and tsetse flies kept out all but the hardiest and most rapacious adventurers.  But how did these Europeans procure so many slaves to service the burgeoning and incredibly profitable sugar and tobacco charters of the Caribbean?  The Kunta Kinte procurement model would have eventually led to depopulation of the local areas as the traditionally semi-mobile Africans would have just up and moved out of reach like they did to avoid the Songhai lords, and Africans were beginning to adopt European weapons in their defense.  So – how did so many Africans end up as slaves in the Americas despite their overwhelming numbers back in Africa? The answer lies in the Angolan model which was by no means confined to this region alone.  During the first half of the 16th century the Portuguese established a permanent trading station at the port of Soyo, a province within the Kingdom of Kongo on the south bank at the mouth of the Congo River.  The significance of Soyo was it established the first European occupation in West Africa outside the provenance of the tsetse fly, and with trypanosomiasis absent, colonists could settle and import European livestock for the first time on the African Atlantic coast.  Entire families of Portuguese colonists began to arrive and by 1575 the city of Luanda was founded, followed by Benguela in 1587.  With Angola’s drier, more temperate climate, these early European colonists got to the business of building homes, clearing land, farming, fishing, and raising their livestock.  But one thing they did not do was get to the business of travelling hundreds of miles inland to hunt down and capture slaves.  They left that to others – and these others weren’t Europeans. Soon after the Portuguese planted their flag at Soyo, they granted a trade monopoly to the Kingdom of Kongo which ruled over what is now northwestern Angola.  But as Portugal established colonies to the south of Soyo, these new colonies were located in lands claimed by Kongo but occupied by Ambundu peoples of the N’Dongo and Kisama states within the Kwanza River valley.  Because of the trade monopoly specifics granted to Kongo, the Bakongo could sweep through the Kwanza River valley and capture the local Ambundu and sell them into slavery to the Portuguese, but the Ambundu could not capture these Bakongo raiders and sell them into slavery to the same customer.  This egregious injustice incensed the N’Dongo king to the point of declaring war on – not the Portuguese – but the Bakongo in an attempt to break the discriminatory trade monopoly.  The Ambundu were successful and in 1556 they defeated the Bakongo in a war fought not to end the enslavement of their fellow Africans, but to extend to themselves the right to capture, enslave, and sell their Bakongo neighbors to the Portuguese. Despite the N’Dongo victory and elimination of Kongo influence in the Kwanza River valley, the Portuguese insisted on upholding their original trade agreement, so the Kongo trade monopoly remained in place with the Ambundu still cut out of all commercial activity with the Portuguese.  Realizing they had prosecuted a war for nothing, the N’Dongo spent the next several decades threatening colonists and harassing Portuguese interests up and down the Kwanza River valley without any penetration into the colonial economy.  In 1590 N’Dongo had had enough of the commercial status quo so it allied itself with its eastern Ambundu neighbor Matamba and together they declared war on all Portuguese interests across Angola. This war led the Portuguese to construct a network of fortalezas up and down the Angolan coastline and after years of protracted violence the Portugal finally defeated the N’Dongo in 1614.  Portugal’s first act after victory was to invite their old trading partner – the Bakongo – to commence mop-up operations across the Kwanza River valley in order to clear out the defeated Ambundu and bring them in chains to the new network of fortalezas, which not only served as troop garrisons and acropoli for the local inhabitants, but also as slave depots that accommodated the swelling numbers of captured Ambundu before being auctioned off and sent to Brazil. With the defeat of the Ambundu the N’Dongo matriarchal dynasty fled east to their ally Matamba.  There, a royal refugee named N’Zinga M’Bandi betrayed the hospitality shown her by Matamba and began secret negotiations with Luanda for a return of the Ambundu to the Kwanza River valley.  N’Zinga M’Bandi secured agreements that not only deposed the sitting Matamban queen – handing her the crown by subterfuge – but also convinced the Portuguese to nullify their long standing trade monopoly granted to the Kingdom of Kongo which, in effect, established the Ambundu peoples in the slave procurement business. The new Matamban queen made haste regarding her political and business affairs and quickly consolidated N’Dongo and the neighboring Kasanje states under her rule.  By 1619, Queen N’Zinga had grown her realm into the most powerful African state in the region using the wealth generated from her industrial scale slave procurement undertaking.  Within a few decade of Queen N’Zinga’s ascension, the regions surrounding central Angola were depopulated of not only the rival Bakongo peoples, but of its Ovimbundu, Ganguela, and Chokwe peoples too. The lucrative Angolan slave trade not only flourished under female African leadership, but grew scientific and efficient and continued unabated until the Portuguese crown outlawed the colonial slave trade in 1869.  However, avarice and ingenuity always prevail so after this slavery prohibition a vibrant slave black market continued unabated as abolition only served to drive up the price of slaves and therefore the incentive to procure them in the field.  These lucrative smuggling operations from Angola lasted up until the day its primary customer Brazil abolished slavery in 1888. Today the dominance of the Ambundu peoples in the business, political, and military affairs of modern day Angola is directly traced to the business acumen, organizational skills, and operational efficiency that the Ambundu peoples’ developed during their 269 year monopoly over slave procurement in Angola.  From the tens of thousands of their fellow African “brothers” and “sisters” that the Ambundu sold into slavery, they accumulated incredible wealth that enabled them to occupy a position of respect, influence, and near equality in colonial Angola unparalleled anywhere in colonial Africa.  They became, in a sense, the “Master Ethnicity” of the region. Twilight of the Woke Idols The irony behind the etymology for the word slave, lost upon the woke and the allies of Critical Race Insanity, is that slave derives from ancient words describing Caucasian Slavic peoples.  If slavery were at the core of the “American Experience”, America long ago would have adopted a word for slave that describe African peoples just as the Romans employed Sclāvus to describe a Slav.  But in the 402 years since 1619, Americans have not made this linguistic transition because there is an older and deeper collective history of slavery that can be traced back millennia to Eastern Europeans who constitute a large proportion of the American population. Yet somehow this deeper history has not affected Caucasians of eastern European descent – even the generational poor – in the same way it has tormented the collective psyche of African Americans.  Maybe these demons are not so much the product that African Americans were once slaves, but instead a manifestation of the incessant bombarded of acerbic messages from the Academia-Media-Technocracy Complex demanding that African Americans play the role of perpetual victims and that they deserve some abstract redress from those who themselves have never benefitted from systemic anything. Or is there a deeper pathological diagnosis, a sepsis of personal ontology whereby the current woke narrative is a desperate attempt at mass cognitive dissonance to blot out the humiliating reality that one’s ancestors were traded in bulk by one’s own kind for the likes of a horse? Africans were one of many peoples in a long line of slaves procured by Europeans but they are the last group before the prohibitions of the Utilitarian campaigns of universal human rights put an end to the practice. Thus it is this ‘Last In, First Out” queuing that gives African Americans claim to their title of “systemic victims” without regard to the broader history of European slavery during the preceding two millennia – including Medieval feudalism.  The reality on the ground for centuries in Europe was that slave relations were between Caucasian Master and Caucasian slave. And with the advent and maturing scientific efficiency of institutions such as central banking, nation states, denominational religions, non-governmental organizations, together with the application of mass psychology, one finds upon further scrutiny that this predominant relationship between Master and slave has changed little over the millennia.  We Americans are, in a sense, all slaves – caught in a systemic nexus of control with few options of escape.  Therefore, claims of “systemic injustice” and demands for redress are nothing more than demands to be promoted from field hand to domestic slave unless the true, invisible system of enslavement is abolished for all Americans. Slavery existed for millennia throughout the entirety of the Bantu populated African continent prior to the arrival of Europeans.  African slaves were captured, worked hard in the millet fields, scolded, beaten, sold multiple times, raped, and murdered well before the first European footprint was impressed on a West African beach.  Slavery was the natural African social condition, it continued as Europeans colonized the continent, and in some places it continues today after most Europeans have left.  Thus any conception of an “Original Sin” borne by Americans through ancestry lies not with Caucasians, but with those of African ancestry as Africans themselves were the origination point for the West African slavery supply chain where they occupied the roles of contractor, planner, procurer, and transporter to distribution hubs. The indigenous Africans were, in modern terms, the Chief Operating Officers of the West African slave trade.  Europeans played the roles of wholesale customer, clearing house, and retail distributor of a product offered to them by brazen and entrepreneurial local rulers who amassed great wealth from their endeavors and whose ancestors today are the beneficiaries of an “ethnic privilege” derived from this wealth and societal status as former Masters. The truth is that this seminal enduring image created with Kunta Kinte’s abduction is a fraud and was fabricated to not only impugn the Caucasian audience and henceforth brand them evil and complicit through ancestry, but was also consciously constructed to expiate the guilt surrounding the ugly and brutal truth that Africans themselves were the culpable party.  Had indigenous Africans not captured and sold so many of their brethren into slavery, there would likely be very few African Americans today. Epilogue The woke will never mention the 800 years of an East African slave trade conducted by Arab merchants up and down the Indian Ocean coast.  The woke won’t utter a word regarding present day slavery across the Sahel countries of Mauritania, Mali, Niger, Chad, and Sudan.  One hears only silence from the woke when one mentions the “Systemic Ethniscism” that permeates every Bantu nation where wealth and power are concentrated into the hands of a dominant ethnic group. The woke ignore the 3,000+ freed African slaves who show up in the ante bellum US census who were granted manumission, inherited plantations from their former owners, and kept the slaves.  No woke person ever admits that American Indians owned African slaves nor will they / them accept that slavery permeated Nahuatl culture even as they / them espouse the virtues of Greater Aztlán.  And the woke will never accept that it was Europeans who eventually stamped out slavery within the Bantu cultural world despite it being the natural human condition there for centuries. And, most importantly, the woke will never acknowledge that all Americans are trapped in a nexus of corporate, bureaucratic, technological, and psychological control where the true “American Experience” has devolved into one where everyone is a slave serving invisible Masters. Until these Masters’ hands are removed from every lever of power and influence in our nation – by any means necessary – abstractions like “equality” and “equity” are nothing more than job promotions on the American plantation.  The woke will never become unwoke because they love their servitude, it has opened the door for them to serve an irresponsible existence free of rationality, logic, true meaning in their existence.  Through their wokeness, they have essentially been freed from Freedom – they can place no hope in death, and their blind lives are so abject that they are envious of every other fate.  The world should let no fame of theirs endure; both true Justice and Compassion must disdain them. One final comment about those 4,000 Moroccans at the Battle of Tondibi.  The invading Moroccan army was commanded by a one Judar Pasha, but he was not always known by this name.  Judar was born Diego de Guevara, an inhabitant of the Spanish region of Andalusia who as a boy was captured by Arab slave raiders, packed off in chains to Morocco, and sold into slavery to the Moroccan Sultan.  And just like Kunta Kinte, Diego’s name got changed, but where Kunta Kinte had his foot cut off, Judar was castrated and forced to serve this foreign Sultan as a eunuch.  But we will never see a TV miniseries where an Arab slave wrangler hangs one Diego de Guevara upside down by his ankles, thrashes him with a bull whip, and screams repeatedly, “Your name is not Diego, your name is Judar!” Tyler Durden Fri, 11/19/2021 - 23:40.....»»

Category: blogSource: zerohedgeNov 20th, 2021

The War Has Just Begun

The War Has Just Begun Via 'Big Serge' Thoughts Substack, The Winter of Yuri I have been attempting for several days to collect my thoughts on the Russo-Ukrainian War and condense them into another analysis piece, but my efforts were consistently frustrated by the war’s stubborn refusal to sit still. After a slow, attrititional grind for much of the summer, events have begun to accelerate, calling to mind a famous quip from Vladimir Lenin: “There are decades where nothing happens; and there are weeks where decades happen.” “You should know, by and large, we haven’t even started anything yet in earnest.” This has been one of those weeks. It began with the commencement of referenda in four former Ukrainian oblasts to determine whether or not to join the Russian Federation, accompanied by Putin’s announcement that reservists would be called up to augment the force deployment in Ukraine. Further excitement bubbled up from the Baltic seabed with the mysterious destruction of the Nordstream pipelines. Nuclear rumors circulate, and all the while the war on the ground continues. In all, it is clear that we are currently in the transitional period towards a new phase of the war, with higher Russian force deployment, expanded rules of engagement, and greater intensity looming. Season 2 of the Special Military Operation looms, and with it the Winter of Yuri: Let’s try to process all the developments of the past few weeks and get a handle on the trajectory in Ukraine. Annexation The keystone event at the heart of recent escalation was the announcement of referenda in four regions (Donetsk, Lugansk, Zaporizhia, and Kherson) to determine the question of entry into the Russian Federation. The implication of course was that if the referenda succeeded (a question that was never in doubt), these regions would be annexed to Russia. While there were some rumors circulating that Russia would delay the annexation, this was never really plausible. To allow these regions to vote in favor of joining Russia only to leave them out in the cold would be monumentally unpopular and raise serious doubts about Russia’s commitment to its people in Ukraine. Formal annexation is a certainty, if not on September 30th as rumored, then within the next week. All of this is rather predictable, and completes the first layer of annexations which I noted in previous analysis. The reasoning is not particularly complex: clearing the Donbas and securing Crimea were the absolute minimum Russian objectives for the war, and securing Crimea requires both a land bridge with road and rail connections (Zaporizhia oblast) and controlling Crimea’s water sources (Kherson). These minimum objectives have now been formally designated, though of course Ukraine maintains some military activity on these territories and will have to be dislodged. The Big Serge Annexation Map: Phase 1 Complete I think, however, that people lost focus as to what the referenda and the ensuing annexation means. Western talking points focused on the illegitimacy of the votes and the illegality of any annexation, but this is really not very interesting or important. The legitimacy of annexation is derived from whether or not Russian administration can succeed in these regions. Legitimacy, as such, is merely a question of efficacy of state power. Can the state protect, extract, and adjudicate? In any case, what is far more interesting than the technicalities of the referenda is what the decision to annex these regions says about Russian intentions. Once these regions become formally annexed, they will be viewed by the Russian state as sovereign Russian territory, subject to protection with the full range of Russian capabilities, including (in the most dire and unlikely scenario) nuclear weapons. When Medvedev pointed this out, it was bizarrely spun as a “nuclear threat”, but what he was actually trying to communicate is that these four oblasts will become part of Russia’s minimum definition of state integrity - non-negotiables, in other words. I think the best way to formulate it is as such: Annexation confers a formal designation that a territory has been deemed existentially important to the Russian state, and will be contested as if the integrity of the nation and state is at risk. Those fixating on the “legality” of the referenda (as if such a thing exists) and Medvedev’s supposed nuclear blackmail are missing this point. Russia is telling us where it currently draws the line for its absolute minimum peace conditions. It’s not walking away without at least these four oblasts, and it considers the full range of state capabilities to be in play to achieve that goal. Force Generation The move to hold referenda and eventually annex the southeastern rim was accompanied with Putin’s long-awaited announcement of a “partial mobilization”. Ostensibly, the initial order calls up just 300,000 men with previous military experience, but the door is left upon for further surges at the discretion of the president’s office. Implicitly, Putin can now ramp up the mobilization as he sees fit without needing to make further announcements or sign more paperwork. This is similar to American Lend-Lease or the “Authorization for Use of Military Force” in America, where the door is opened once and the President is then free to move at will without even informing the public. It was increasingly clear that Russia needed to raise its force deployment. Ukraine’s successful drive to the Oskil River was made possible by Russian economy of force. The Russian army had completely hollowed out Kharkiv Oblast, leaving only a thin screening force of national guardsmen and LNR militia. In places where the Russian Army has chosen to deploy sizeable regular formations, the results have been disastrous for Ukraine - the infamous Kherson Counteroffensive turned into a shooting gallery for Russian artillery, with the Ukrainian Army haplessly funneling men into a hopeless bridgehead at Andriivka. A Shooting Gallery So far in this war, Ukraine has achieved two big successes retaking territory: first in the spring, around Kiev, and now the late summer recapture of Kharkov Oblast. In both cases, the Russians had preemptively hollowed out the sector. We have yet to see a successful Ukrainian offensive against the Russian Army in a defensive posture. The obvious solution, therefore, is to raise the force deployment so that it is no longer necessary to hollow out sections of the front. The initial surge of 300,000 men is being a bit muddled. Not all of the men being called up will be sent to Ukraine. Many will remain in Russia on garrison duty so that existing ready formations can be rotated to Ukraine. Therefore, it is likely that we will see more Russian units arriving in theater much sooner than expected. Additionally, many of the units originally committed to Ukraine have been off the front for refitting and resting. The scale and pace of Russia’s new force generation is likely to shock people. On the whole, the timing of Russia’s manpower surge coincides with the depletion of Ukrainian capabilities. Ukraine spent the summer sending its 2nd tier conscripts to the front in the Donbas as it lovingly collected NATO-donated weapons and trained units in the rear. With generous NATO help, Ukraine was able to accumulate forces for two full scale offensives - one in Kherson (which failed spectacularly) and one in Kharkov (which succeeded in pushing past the Russian screening force and reaching the Oskil). Much of that carefully accumulated fighting power is now gone or degraded. Rumors circulated of a third offensive towards Melitipol, but Ukraine does not seem to have the combat power to achieve this, and strong Russian forces are in the region behind prepared defensive lines. On the whole, therefore, Ukraine’s window for offensive operations has closed, and what remains is closing quickly. The last zone of intense Ukrainian operations is around Lyman, where aggressive Ukrainian attacks have so far failed to either storm or encircle the town. It is still possible that they take Lyman and consolidate control of Kupyansk, but this would likely represent the culmination of Ukrainian offensive capability. For now, the area around Lyman is a killing zone that exposes attacking Ukrainian troops to Russian air and ground fires. The large scale view of force ratios is as follows: Ukraine has spent much of the combat power that they accumulated with NATO help during the summer, and will have an urgent need to reduce combat intensity for refitting and rearming at precisely the same time that Russian combat power in the theater begins to surge. Simultaneously, NATO’s ability to arm Ukraine is on the verge of exhaustion. Let’s look at this more closely. Depleting NATO One of the more fascinating aspects of the war in Ukraine is the extent to which Russia has contrived to attrit NATO military hardware without fighting a direct war with NATO forces. In a previous analysis I referred to Ukraine as a vampiric force which has reversed the logic of the proxy war; it’s a black hole sucking in NATO gear for destruction. There are now very limited stockpiles to draw from to continue to arm Ukraine. Military Watch Magazine noted that NATO has drained the old Warsaw Pact tank park, leaving them bereft of Soviet tanks to donate to Ukraine. Once these reservoirs are fully tapped, the only option will be giving Ukraine western tank models. This, however, is much harder than it sounds, because it would require not only extensive training of tank crews, but also an entirely different selection of ammunition, spare parts, and repair facilities. Tanks are not the only problem, however. Ukraine is now staring down the barrel (heh heh) of a serious shortage of conventional tube artillery. Earlier in the summer, the United States donated 155mm howitzers, but with stockpiles of both guns and shells dwindling, they’ve recently been forced to turn to lower caliber towed trash. After the announcement of yet another aid tranche on September 28th, the USA has now put together five consecutive packages which do not contain any conventional 155mm shells. Shells for Ukraine’s Soviet vintage artillery were running low as early as June. In effect, the effort to keep Ukraine’s artillery arm functioning has gone through a few phases. In the first phase, Warsaw Pact stockpiles of Soviet shells were drained to supply Ukraine’s existing guns. In the second phase, Ukraine was given mid-level western capabilities, especially the 155mm howitzer. Now that 155mm shells are running low, Ukraine has to make do with 105mm guns which are badly outranged by Russian howitzers and will be, in a word, doomed in any kind of counterbattery action. As a substitute for adequate tube artillery, the latest aid package does include 18 more of the internet’s favorite meme weapon - the HIMARS Multiple Launch Rocket System. What is not explicitly mentioned in the press release is that the HIMARS systems don’t exist in current US inventories and will have to be built, and are thus unlikely to arrive in Ukraine for several years. The increasing difficulties in arming Ukraine coincide with the rapid closing of Ukraine’s window of operational opportunity. The forces accumulated over the summer are degraded and fought out, and every subsequent rebuild of the Ukrainian first tier forces will become harder as manpower is destroyed and NATO arsenals are depleted. This depletion comes precisely as Russian force generation is surging, foretelling the Winter of Yuri. The Winter War Anyone who expects the war to slow down during the winter is in for a surprise. Russia is going to launch a late autumn/winter offensive and achieve significant gains. The arc of force generation (both Russia’s increasing force accumulation and Ukraine’s degradation) coincide with the approach of cold weather. Let’s make a brief note about combat in the cold. Russia is perfectly capable of waging effective operations in the snow. Going back to World War Two, the Red Army was more than capable of offensive success during the winter, starting in 1941 with the general counteroffensive at Moscow, again in 1942 with the destruction of the German 6th Army at Stalingrad, and in 1943-44 with two successful large scale offensives beginning in the winter. Now, of course World War Two is not directly applicable in all ways, but we can establish that from a technical standpoint there is a clearly established capability to wage operations in cold weather. We also have more recent examples. In 2015, during the first Donbas War, LNR and DNR forces launched a pincer operation which successfully encircled a Ukrainian battalion at the Battle of Debaltseve. And, of course, the Russo-Ukrainian War begin in February, when much of northern Ukraine was below freezing temperatures. Nice Move Winter weather actually favors a Russian offensive for multiple reasons. One of the paradoxes of military operations is that freezing weather actually enhances mobility - vehicles can get stuck in mud, but not on frozen ground. From 1941-43, German troops celebrated the arrival of spring, because the thaw promised to bog the Red Army down in mud and slow their momentum. The winter death of foliage also reduces the cover available to troops in a defensive posture. And, of course, cold weather favors the side with more reliable access to energy. As for where Russia will choose to commit its newly generated forces, there are four realistic possibilities, which I will enumerate in no particular order: Reopening the Northern Front with an operation around Kharkov. The attractiveness of this option is clear. A Russian move in force towards Kharkov would immediately collapse all of Ukraine’s gains towards the Oskil by compromising their rear areas. An offensive on Nikolayev out of the Kherson region. This would move further towards the goal of a landlocked Ukraine, and would take advantage of the fact that Ukrainian forces in this region are badly chewed up after their own failed offensive. Massive commitment to the Donbas to finish the liberation of DNR territory by capturing Slovyansk and Kramatorsk. This is less likely, as Russia has demonstrated comfort with the slow tempo of operations on this front. A push north from the Melitopol area towards Zaparozhia. This would safeguard the nuclear powerplant and end any credible threats to the land bridge to Crimea. Other possibilities I regard as unlikely. A second advance on Kiev would make little operational sense, as it would not support any of the existing fronts. I would expect action around Kiev only if the new force generation is significantly larger than the headline number of 300,000. Otherwise, Russia’s winter offensives are likely to be concentrated on mutually supporting fronts. I think some movement to reopen the northern is likely, as it would completely compromise Ukraine’s gains in the Izyum-Kupyansk direction. There are rumors that forces are being moved into Belarus, but I actually think the Chernigov-Sumy axis would be more likely than a new Kiev operation, as it could be supportive of an offensive on Kharkov. Potential Axes of Winter Advance (Base Map Credit: @War_Mapper) On the broadest level, it is clear that Ukraine’s window to conduct offensive operations is nearing its close, and the force generation ratios on the ground are going to swing decisively in Russia’s favor through the winter. Nordstream and Escalation As we were pondering these developments on the ground, yet another plotline emerged underwater. The first hint that something was amiss was the news that pressure in the Nordstream 1 pipeline was dropping mysteriously. It was then revealed that the pipeline - along with the non-operational Nordstream 2 - had suffered serious damage. Swedish seismologists recorded explosions on the floor of the Baltic Sea, and it was revealed that the pipelines are heavily damaged. Let’s be frank about this. Russia did not blow up its own pipelines, and it is ludicrous to suggest that they did. The importance of the pipeline to Russia lay in the fact that it could be switched on and off, providing a mechanism for leverage and negotiation vis a vis Germany. In the classic carrot and stick formulation, one cannot move the donkey if the carrot is blown up. The *only* feasible scenario in which Russia might be responsible for the sabotage would be if some hardliner faction within the Russian government felt that Putin was moving too slowly, and wanted to force an escalation. This would imply, however, that Putin is losing internal control, and there is no evidence whatsoever for such a theory. And so, we return to elementary analysis, and ask: Cui bono? Who benefits? Well, considering Poland celebrated the opening of a new pipeline to Norway only a few days ago, and a certain former Polish MP cryptically thanked the United States on Twitter, it is fair to make a few guesses. The first lesson of doing crimes is not to brag about it on twitter Let us briefly meditate on the actual implications of Nordstream’s demise. Germany loses what little autonomy and flexibility it had, making it even more dependent on the United States. Russia loses a point of leverage over Europe, reducing the inducements to negotiation. Poland and Ukraine become even more critical transit hubs for gas. Russia clearly perceives this as a bridge burning move of sabotage by NATO, designed to back them into a corner. The Russian government has decried it as an act of “international terrorism” and argued that the explosions occurred in areas “controlled by NATO” - the concatenation of these statements is that they blame NATO for an act of terrorism, without explicitly saying that. This precipitated another meeting of the Russian National Security Council. Many western nations have advised their citizens to leave Russia immediately, suggesting they are worried about escalation (this coincides with Ukraine’s unhinged claim that Russia may be about to use nuclear weapons). For the time being, I expect Russian escalation to remain confined to Ukraine itself, likely coinciding with the deployment of additional Russian ground forces. If Russia feels compelled to undertake an out of theater escalation, targeting American satellites, digital infrastructure, or forces in Syria remain the most likely option. On the Precipice I am fully cognizant that my views will be spun as “coping” after Ukraine’s gains in Kharkov oblast, but time will tell out. Ukraine is on its last legs - they drained everything usable out of NATO stockpiles to build up a first tier force over the summer, and that force has been mauled and degraded beyond repair just as Russia’s force generation is set to massively increase. Winter will bring not only the eclipse of the Ukrainian army, the destruction of vital infrastructure, and the loss of new territory and population centers, but also a severe economic crisis in Europe. In the end, the United States will be left to rule over a deindustrialized and degraded Europe, and a rump Ukrainian trashcanistan sequestered west of the Dnieper. For now, though, we are in the interregnum as the last flames of Ukraine’s fighting power flickers out. Then there will be an operational pause, and then a Russian winter offensive. There will be several weeks where nothing happens, and then everything will happen. During that operational pause, you may be tempted to ask - “is it done, Yuri?” No, Comrade Premiere. It has only begun. Tyler Durden Sun, 10/02/2022 - 07:00.....»»

Category: blogSource: zerohedgeOct 2nd, 2022

Top Tech Stocks to Buy in October and Hold for Long-Term Growth

Let's explore two great large-cap technology stocks for investors to consider buying in October at levels that might look like bargains in the not-too-distant future. Now might not be time to call a market bottom, with inflation still clocking in at 40-year highs and the Fed determined to do all it can to drag prices down. Thankfully, investors who plan to own stocks for years to come don’t need to pinpoint an exact bottom and should instead consider slowly starting positions in blue-chip stocks with great fundamentals that should look like steals at these levels down the road.  The S&P 500 is trading at new 2022 lows, with it at levels last seen in late November of 2020. Meanwhile, the Nasdaq is down over 6% in the past two years to trade where it was in the summer of 2020. The market could continue to slide. But investors should take solace in the fact that higher interest rates and soaring inflation are already showing up in corporate earnings outlooks.Wall Street had been waiting for the current economic turmoil to take its toll on sales and, more importantly, earnings before they consider nibbling at stocks again. With the heart of Q3 earnings season set to begin in the middle of October and September’s CPI data due out on Oct. 13, the market might not have to wait too much longer for an even clearer picture.Image Source: Zacks Investment ResearchEarnings and interest rates drive stock prices and the more clarity Wall Street gains on those fronts, the better. The outlook for Q3 FY22 earnings and full-year fiscal 2023 have already dropped significantly and the 10-year and two-year Treasury yields are responding to the Fed’s rate hikes and projected course of action.The major money managers are rather good at pricing in the future into stock prices, which is part of the reason why Wall Street is often ahead of Main Street, as we saw during the covid comeback and the subsequent beating growth and tech stocks started to take in late 2021 as investors realized the Fed would have to raise rates to cool the economy.The best investors use bear markets and major periods of panic to start positions in their favorite stocks. Just remember the average investor is often the most bullish to buy stocks near what turns out to be the tops and terrified to buy, with a penchant to panic sell, at what might one day turn out to be near the lows. Let’s explore two great large-cap technology stocks for investors to consider buying in October at levels that might look like bargains in the not-too-distant future.Adobe Inc. ADBE Adobe might be the best of the rest when it comes to big tech. Though it is not in the same rarefied air as Apple and Microsoft, Adobe is a champion of a vital segment of the software market with an impressive subscription-based business model that’s helped it post between 15% to 25% revenue growth for seven-straight years. That kind of growth is highly impressive for a company that went public in the mid-1980s.Adobe’s portfolio of subscription software includes Photoshop, Premiere Pro, and many others for a total of nearly 30 rather unique offerings. Its products help users, from Hollywood filmmakers to students, edit videos and images, create artwork and books, and do almost anything else in the larger creative/design world that one might imagine can be done on a computer, tablet, or smartphone.Image Source: Zacks Investment ResearchAdobe’s documents and business portfolio ranges broadly from PDFs and e-signatures to marketing, commerce, and workflow digitalization. And it’s prepared to expand its reach through its planned, roughly $20 billion cash and stock deal to buy privately held software firm Figma. The little-known company specializes in helping digital creators collaborate through shared software. Figma’s offerings should integrate well into Adobe’s portfolio and provide real benefits in a world where work gets done on individual computers even when people are in the same office.Wall Street is worried that Adobe is overpaying for Figma and sold the stock heavily when it announced the deal alongside its Q3 earnings release on Sept. 15. It is possible ADBE is paying too much at a time when growth-focused tech valuations have been crushed. But it’s difficult to argue with Adobe’s track record and its outlook in an increasingly crowded software market.The post-announcement drop helps set up a potentially attractive entry point for patient investors, with ADBE shares down roughly 30%. The recent decline is part of a larger recalibration of Adobe and other growth names to account for higher interest rates. ADBE stock has fallen 60% from its peaks to below its covid-lows.  Image Source: Zacks Investment ResearchADBE’s falling price, coupled with its strong earnings outlook, has it trading where it was before it changed to a subscription model roughly a decade ago at 22.3X forward earnings. Plus, ADBE’s earnings estimates have largely held up in the face of the economic slowdown causing Micron and many others to dramatically lower their guidance.Adobe’s revenue is projected to jump 12% in 2022 and another 13% in 2023 to hit nearly $20 billion to help lift its adjusted EPS by 9% and 14%, respectively. ADBE currently lands a Zacks Rank #3 (Hold), alongside “A” grades for Growth and Momentum in our Style Scores system.Analog Devices, Inc. ADI Semiconductor maker Analog Devices expanded its reach to help it challenge the biggest player in the analog space, Texas Instruments TXN, when it completed its acquisition of Maxim Integrated in August 2021. Analog semiconductors are on the less flashy side of the booming chip industry that will remain the backbone of technology and arguably the entire economy for the foreseeable future.  Analog semiconductors play crucial roles in countless devices and industries that next-generation digital semiconductors cannot meet. Analog chips help handle information not easily understood with 1s and 0s, such as temperature, speed, sound, electrical currents, and much more.Image Source: Zacks Investment ResearchAnalog Devices boasts around 125K customers globally for its over 75K products, which helps provide diversification in a time of economic uncertainty, which is hitting the cyclical chip sector particularly hard. ADI executives project the firm will benefit from continued expansion within six secular growth segments, from connectivity & data centers and digital healthcare to industrial 4.0 and automotive ecosystems.Analog Devices’ revenue and adjusted earnings both climbed by roughly 31% in fiscal 2021, driven in part by its Maxim Integrated deal. Current Zacks estimates call for ADI’s revenue to climb another 63% in FY22 to help lift its adjusted earnings by 46%. ADI is expected to grow both its top and bottom lines next year as well, even as it comes up again difficult to compete against periods.ADI shares have held up far better than its Zacks Semiconductor industry, down 17% in the past 12 months vs. 32%. ADI trades around where it was in December 2020 at roughly $140 per share. And its current Zacks consensus price target offers 38% upside to its closing levels Friday. Analog Devices is now trading right near its decade-long lows at 14.9X forward earnings.Image Source: Zacks Investment ResearchEarlier this year, Analog Devices lifted its dividend by 10% for its 19th raise in the last 18 years. ADI’s dividend yields 2.2% right now to top many of its peers and the S&P 500’s 1.7%. The company boasts a solid history of stock buybacks, supported by a solid balance sheet. On top of that, 11 of the 16 brokerage recommendations Zacks has are “Strong Buy,” with nothing below a “Hold.” And now might be a solid time to add this chip stock that’s holding up somewhat well as semiconductor names tumble. This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.>>Yes, I Want to Help Protect My Portfolio During the RecessionWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Analog Devices, Inc. (ADI): Free Stock Analysis Report Texas Instruments Incorporated (TXN): Free Stock Analysis Report Adobe Inc. (ADBE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 30th, 2022

Amylyx (AMLX) Secures the FDA"s Approval for ALS Drug

Amylyx (AMLX) obtains the FDA's approval for its oral, fixed-dose combination therapy for treating adults with amyotrophic lateral sclerosis (ALS) after a few roadblocks. Amylyx Pharmaceuticals, Inc. AMLX has received a major boost as the FDA finally approved its drug for the treatment of adults with amyotrophic lateral sclerosis (ALS) under the brand name of Relyvrio (sodium phenylbutyrate and taurursodiol). Shares were up in after-market trading in response to the news.The drug, an oral, fixed-dose combination therapy, was previously known as AMX0035 in the United States.ALS is a progressive and fatal neurodegenerative disorder caused by motor neuron death in the brain and spinal cord. The disease affects approximately 29,000 people in the United States.The approval of Relyvrio is based on data from the multicenter phase II study, CENTAUR, in 137 participants with ALS encompassing a six-month randomized, placebo-controlled phase and an open-label extension (OLE) long-term follow-up phase. Data showed that the drug significantly slowed the loss of physical function in the randomized, placebo-controlled study.The FDA’s and Central Nervous System Drugs Advisory Committee voted in a majority (7:2) favoring the drug’s approval for ALS earlier in the month in a surprise move after voting against it in March, questioning the efficacy of the drug.Thereafter, the FDA extended the target action date from June 2022 to September 2022 to review additional analyses of data from the clinical studies. The FDA determined the submission of data to constitute a major amendment to the NDA, resulting in an extension of the PDUFA goal date.Nevertheless, the company has finally won approval in the United States despite the controversies regarding the CENTAUR study. Now the commercialization of the drug and uptake thereafter will be in the spotlight. Management expects that specialty pharmacies will be able to start filling prescriptions given by the physicians and ship Relyvrio to ALS patients in the next four to six weeks.In the year so far, the stock has surged 67.1% against the industry’s 27.5% decline. Image Source: Zacks Investment ResearchThe drug is also under review in the European Union, and a decision is expected in the first half of 2023. AMX0035 has already received marketing authorization in Canada and is being marketed under the trade name Albrioza albeit approved with conditions.AMX0035 is also being evaluated for the potential treatment of other neurodegenerative diseases.In May 2022, the FDA approved Radicava ORS (edaravone) oral suspension for the treatment of adults with ALS, marketed by Mitsubishi Tanabe Pharma America, Inc. Radicava ORS is an orally administered version of Radicava, which was originally approved in 2017 as an intravenous (IV) infusion to treat ALS.Zacks Rank & Stocks to ConsiderAmylyx currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare sector are Sanofi SNY, Dynavax DVAX and Bolt Pharmaceuticals BOLT. All three carry a Zacks rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Earnings estimates for Sanofi are up 4 cents each for 2022 and 2023 in the past 30 days. Sanofi surpassed estimates in all of the trailing four quarters, the average being 9.37%.Loss estimates for BOLT have narrowed to $2.25 from $2.87 in the past 60 days. Earnings surpassed estimates in three of the trailing four quarters and missed the mark in the remaining one, the average beat being 2.39%.Dynavax’s earnings estimates have increased to $1.73 from $1.14 for 2022 over the past 60 days. Earnings of DVAX surpassed estimates in two of the trailing four quarters and missed the mark in the remaining two, the average beat being 70.57%.  This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.>>Yes, I Want to Help Protect My Portfolio During the RecessionWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Sanofi (SNY): Free Stock Analysis Report Dynavax Technologies Corporation (DVAX): Free Stock Analysis Report Amylyx Pharmaceuticals, Inc. (AMLX): Free Stock Analysis Report Bolt Biotherapeutics, Inc. (BOLT): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 30th, 2022

Bounce In Futures Fizzles As Dollar Surge Returns

Bounce In Futures Fizzles As Dollar Surge Returns If yesterday markets made little sense, when the dollar and yields slumped yet stocks and other risk assets tumbled alongside them in a puzzling reversal of traditional risk relationships (a move which was likely precipitated by the plunge in AAPL and KMX), today things are a bit more logical with the dollar initially extending its slide helping futures rise to session highs just below 3,700, before the dollar surged just after 5am as sterling tumbled after Bloomberg reported that Prime Minister Liz Truss’s government signaled it was sticking with its plan for tax cuts after a meeting with the UK’s fiscal watchdog, dashing market expectations that a policy U-turn might be imminent which has pushed cable briefly above 1.12 overnight, wiping out a week's worth of losses. As a result, after rising as much as 0.8%, S&P futures were flat, up just 0.1%, the same as Nasdaq futures. Government bonds rallied across Europe and the US, as the dollar strengthened after reversing its earlier loss. In premarket trading, Nike shares fall 10% after the sportswear giant cut its margin outlook for the year while reporting surging inventory, fueling worries over consumers’ ability to spend as inflation takes a toll. Micron shares rose 3% in premarket trading, after analysts said the ongoing inventory correction was only a short-term hurdle and that the bottom is near, a potential relief for semiconductor stocks that have taken a beating this year. Amylyx Pharmaceuticals’s (AMLX US) shares soared as much as 13% in US premarket trading after winning FDA approval for its Relyvrio drug, for the treatment of amyotrophic lateral sclerosis (ALS) in adults. Analysts said they expected the drug to see a strong launch given demand from patients. Xos jumped 6.3% in extended trading after delivering 13 battery-electric vehicles to FedEx. Thursday's bruising session took the S&P 500 down 2% to the lowest in almost two years and the Nasdaq 100 tumbling almost 4%. The S&P 500 Index has dropped on seven of the past 8 days, and is headed for its third straight quarter of losses for the first time since 2008-2009 and the Nasdaq 100 Stock Index for the first time in 20 years. Fears of global recession are growing by the day as the threat of higher rates saps growth and as the Fed confirms with every speech that not even a recession will stop it. The case of the UK shows how faultlines between government and central bank policy on tackling inflation can erupt into a crisis. Hopes evaporated that the British government would succumb to pressure to back down from tax cuts that brought the pound to the edge of dollar parity. “Today, everything is just oversold so you are seeing a rebound,” said Esty Dwek, chief investment officer at Flowbank SA. “We are closer to bottoms and sentiment is so negative the downside is becoming more limited.” Elsewhere, Global equity funds garnered inflows of $7.6 billion in the week to Sept. 28, according to data compiled by EPFR Global. Bonds had $13.7 billion of outflows in the week, while $8.9 billion flowed into US stocks, the data showed. In Europe, the Stoxx 50 rose 0.9%. Real estate, energy and retailers are the strongest-performing sectors.  Here are some of the biggest European movers today: Krones shares rose as much as 2.7% to their highest intra-day level since Feb. 2022, after HSBC increased the German machinery and equipment company’s price target to EU102 Clariant shares rally by the most intraday since mid-May after Credit Suisse raises to outperform, partly as it expects Clariant’s new management team to boost performance ABN Amro jumped as much as 6.3% after Goldman Sachs raised the stock to buy from neutral, citing its gearing toward higher interest rates, increasing estimates on net interest income Zealand Pharma rise as much as 35%, the most on record, after the company announced positive data from its phase 3 trial of glepaglutide to treat patients with short bowel syndrome Sinch shares rise as much as 24% after SoftBank sold its entire stake in Sinch AB following a share price collapse of more than 90% in the Swedish cloud-based platform provider Adidas and Puma drop as their US peer Nike slumped in late trading Thursday after it said inventory buildup forced it to push through margin-busting discounts Hurricane Energy shares drop as much as 5.6% after 1H earnings; Canaccord Genuity notes the results did not surprise, and flags lack of regulatory reassurance on gas-management approvals Fingerprint Cards shares drop as much as 17% after saying it is raising fresh capital in order to strengthen the balance sheet and to address a forecasted covenant breach Earlier in the session, Asian stocks fell again, putting the regional benchmark on course for its worst monthly performance since 2008, as a selloff spurred by concerns over higher interest rates and a global recession deepened. The MSCI Asia Pacific Index slid 0.5% after earlier falling as much as 1% on Friday. Still down over 12% this month, the gauge has trailed global peers and is set to cap a seventh straight week of declines. That matches its losing streak from September 2015, which was the longest since 2011. Equities in Japan, which has the highest weight in the Asia index, were among the biggest losers on Friday, with the Topix falling 1.8%. Consumer discretionary and industrials were the worst sectors, while Chinese tech shares listed in Hong Kong also fell. READ: China Shares Plunge to Lowest Valuation on Record in Hong Kong Global funds have pulled almost $10 billion from Asian emerging-market stocks excluding China this month, as the dollar and Treasury yields climbed after Federal Reserve officials ramped up their rate-hike rhetoric. Taiwan’s tech-heavy market has suffered the bulk of the outflow from Asia. Its regulators tightened short selling rules as shares extended their slide.  “I think emerging markets as a whole are still going to have a pretty difficult six months until the Fed rate peaks,” Louis Lau, a fund manager at Brandes Investment Partners, said in an interview with Bloomberg TV. How much damage is a strong dollar causing? That’s the theme of this week’s MLIV Pulse survey. It’s brief and we don’t collect your name or any contact information. Please click here to share your views. The turmoil in the UK has been another source of market volatility for Asia investors, who continue to grapple with the fallout from strict lockdowns in China, the region’s biggest economy. “There’s been some correlation (between risk assets and sterling) recently,” said Takeo Kamai, head of execution services at CLSA. Overall, “the theme hasn’t changed. The scenario that the Fed will cut rates next year is breaking down. I think we could see further downside in stock prices towards November,” he said. Stocks in India gained after the central bank raised the benchmark rate by an expected 50 basis points. The MSCI Asia Pacific Index is down 4% this week and on course for its lowest close since April 2020 Japanese equities extended declines on Friday as a global market rout deepened, capping its worst month since the onset of the pandemic in 2020.    The Topix Index fell 1.8% to 1,835.94 as of market close Tokyo time, taking declines in September to 6.5%. The Nikkei declined 1.8% to 25,937.21. Toyota Motor Corp. contributed the most to the Topix Index decline, decreasing 4.2%. Out of 2,169 stocks in the index, 299 rose and 1,823 fell, while 47 were unchanged.  Federal Reserve officials reiterated Thursday that they will keep raising interest rates to rein in high inflation.  “There are concerns that the economy will slow from further rate hikes while inflation doesn’t stop,” said Kenji Ueno, a portfolio manager at Sompo Asset Management. In Australia, the S&P/ASX 200 index fell 1.2% to close at 6,474.20, dragged by banks and industrials, after another plunge on Wall Street as the prospect of higher interest rates and turmoil in Europe stoked fears of global recession. The benchmark notched its third-straight week of losses. In New Zealand, the S&P/NZX 50 index fell 1.2% to 11,065.71 Stocks in India outperformed Asian peers after the Reserve Bank of India raised borrowing costs and exuded confidence to tackle inflation without any major impact to its growth projections. The S&P BSE Sensex added 1.8% to 57,426.92, while the NSE Nifty 50 Index rose by 1.6% as the indexes posted their biggest single-day jump since Aug. 30. Despite the rally, the key gauges fell more than 1% each for the week and over 3% for the month, their biggest decline since June. India’s central bank raised its repurchase rate by 50 basis points to 5.90%, matching the expectations of most economists. The RBI trimmed the economic growth outlook for the financial year ending March to 7% while retaining it 6.7% forecast for inflation.  The increase in the benchmark interest rate “mainly supports stocks of financial companies, which have been seeing strong credit growth,” said Prashanth Tapse, an analyst at Mehta Securities.  In FX, the Bloomberg Dollar Spot Index rebounded after sliding initially, as cable tumbled when it emerged that Liz Truss is not backtracking on its massive fiscal easing. Iniitlally, the pound advanced a fourth day, to briefly trade above $1.12, fully reversing the moves since last Friday, however it then tumbled, wiping out all gains after Prime Minister Liz Truss’s government signaled it’s sticking with its plan for tax cuts after a meeting with the UK’s fiscal watchdog, dashing market expectations that a policy U-turn might be imminent. Notable data: U.K. 2Q final GDP rises 0.2% q/q versus preliminary -0.1%. The Aussie and kiwi crept higher, but are still set for their biggest monthly declines since April as rising Fed interest rates and fears of a global economic slowdown sap demand for risk assets In rates, Treasuries advanced, 10-year yield dropping 8bps while bunds 10-year yield drops 6bps to 2.11%. Treasury 10-year yields around 3.685%, richer by 10bp on the day -- largest moves seen in UK front-end where 2-year yields are richer by 25bp on the day as BOE tightening premium fades out of interest-rate swaps. Short-end UK bonds surged amid political pressure on the government to water down some of its budget proposals, while the pound regained its budget-shock losses. US session focus is on PCE data and host of Federal Reserve speakers while month end may add some support into long end of the curve.  Long end of the Treasuries curve may find additional month-end related buying support over the session; Bloomberg index projects 0.07yr Treasury extension for October. Gilts rallied, with short-end bonds leading gains as traders trimmed BOE tightening bets amid political pressure on the government to water down some of its budget proposals. Meanwhile in Japan, JGBs gained after the BOJ boosted purchases for maturities covering the benchmark 10-year zone. The Bank of Japan will buy more bonds with maturities of at least five years in the October-December period, according to a statement from the central bank In commodities, WTI trades within Thursday’s range, adding 1.3% to near $82.26. Spot gold rises roughly $10 to trade near $1,671/oz.  Bitcoin is essentially unchanged and in very tight ranges of circa. USD 400 and as such well within the week's existing parameters Looking to the day ahead now, and data releases include the flash Euro Area CPI release for September, as well as the Euro Area unemployment rate for August and German unemployment for September. In the US, we’ll also get August data on personal income and personal spending, the MNI Chicago PMI for September, and the University of Michigan’s final consumer sentiment index for September. Finally, central bank speakers include Fed Vice Chair Brainard, the Fed’s Barkin, Bowman and Williams, as well as the ECB’s Schnabel, Elderson and Visco. Market Snapshot S&P 500 futures up 0.9% to 3,686.00 STOXX Europe 600 up 1.3% to 387.83 MXAP down 0.5% to 139.25 MXAPJ little changed at 453.72 Nikkei down 1.8% to 25,937.21 Topix down 1.8% to 1,835.94 Hang Seng Index up 0.3% to 17,222.83 Shanghai Composite down 0.6% to 3,024.39 Sensex up 2.0% to 57,539.66 Australia S&P/ASX 200 down 1.2% to 6,474.20 Kospi down 0.7% to 2,155.49 Brent Futures up 1.2% to $89.55/bbl Gold spot up 0.7% to $1,671.56 U.S. Dollar Index down 0.52% to 111.67 German 10Y yield little changed at 2.10% Euro up 0.3% to $0.9840 Top Overnight News from Bloomberg Prime Minister Liz Truss is under pressure to cut spending on the same scale as George Osborne’s infamous austerity drive of 2010 in order to stabilize the UK public finances and win back the confidence of investors Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng are holding talks Friday with the UK government’s fiscal watchdog, amid intense criticism over their unfunded tax cuts that roiled markets A dash for cash among sterling investors after market turmoil sparked by pension fund margin calls is coming at a bad time, according to an M&G Investments executive The ECB shouldn’t let concerns about its profitability obstruct decision-making over monetary policy, according to Governing Council member Gediminas Simkus The SNB trimmed its foreign-exchange portfolio in the second quarter as the franc gyrated against the euro before rising above parity for the first time since 2015. The central bank sold 5 million francs ($5.1 million) worth of foreign currencies in the three months through June Norway’s central bank will increase its purchases of foreign currency to 4.3 billion kroner ($400 million) a day in October from 3.5 billion in September as it deposits energy revenues into the $1.1 trillion sovereign wealth fund. Japan’s factory output expanded by 2.7% in August from July, according to the economy ministry Friday, beating analysts’ 0.2% forecast. The output of semiconductor and flat-panel making equipment hit its highest level in data going back to 2003, as the effect of lockdowns in China abated Japanese Prime Minister Fumio Kishida instructed the government Friday to come up with an economic stimulus package by the end of October to help mitigate the impact of inflation, as economists warned against over-sized spending China’s factory activity continued to struggle in September, while services slowed, as the country’s economic recovery was challenged by lockdowns in major cities and an ongoing property market downturn. The official manufacturing purchasing managers index rose to 50.1 from 49.4 in August An organization formed by China’s biggest foreign- exchange traders asked banks to trade the currency at levels closer to the central bank’s fixing at the market open, according to people familiar with the matter A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly lower after the negative performance across global peers amid inflationary headwinds and with risk appetite subdued heading quarter-end, while the region also digested mixed Chinese PMI data. ASX 200 declined amid weakness across most sectors and with tech the notable underperformer after the recent upside in yields and with Meta the latest major industry player to announce a hiring freeze. Nikkei 225 was pressured and fell below the 26,000 level with better-than-expected Industrial Production and Retail Sales data releases overshadowed by the broad risk aversion. Hang Seng and Shanghai Comp were indecisive after the PBoC conducted its largest weekly cash injection in more than 32 months ahead of the week-long closure in the mainland, while participants also digested mixed PMI data in which Official Manufacturing PMI topped forecasts with a surprise return to expansion, but Non-Manufacturing and Composite PMIs slowed and Caixin Manufacturing PMI printed at a wider contraction. NIFTY eventually notched mild gains in the aftermath of the RBI rate decision in which it hiked the Repurchase Rate by 50bps to 5.90% as expected via 5-1 split and with the central bank refraining from any major hawkish surprises. Top Asian News Japan's Chief Cabinet Secretary Matsuno said they want to compile an extra budget swiftly after the economic package in late October, while they will consider further support for hard-hit consumers and businesses in view of higher energy and food prices, as well as consider steps to promote wage hikes, according to Reuters. Chinese Finance Ministry is to offer a tax refund for people who sell their homes and repurchases new ones by the end of 2023; additionally, China has told banks to provide USD 85bln in property funding by the end of the year, according to Bloomberg. Chinese NBS Manufacturing PMI (Sep) 50.1 vs. Exp. 49.6 (Prev. 49.4); Non-Manufacturing PMI (Sep) 50.6 vs Exp. 52.4 (Prev. 52.6) Chinese Composite PMI (Sep) 50.9 (Prev. 51.7) Chinese Caixin Manufacturing PMI Final (Sep) 48.1 vs. Exp. 49.5 (Prev. 49.5) Japanese Industrial Production MM SA (Aug P) 2.7% vs. Exp. 0.2% (Prev. 0.8%); Retail Sales YY (Aug) 4.1% vs. Exp. 2.8% (Prev. 2.4%) European equities are attempting to claw back some of yesterday’s downside on quarter and month end. Sectors are firmer across the board with Real Estate outperforming peers in what has been a tough week for the UK property market. Stateside, futures are also attempting to recover from yesterday’s losses which saw a tough session for the tech sector after Apple shed the best part of 5%. Top European News UK OBR Chair Hughes says a statement will be released today after the meeting with UK PM Truss and Chancellor Kwarteng. On this, the UK Treasury has not sought to accelerate watchdog's economic forecast, according to Bloomberg. Reminder, UK PM Truss to conduct emergency talks with the OBR on Friday after failing to calm markets, according to the Guardian. UK cross-party MPs in the Treasury Select Committee called for Chancellor Kwarteng to release a full economic forecast from the OBR by end of October, according to Sky News. UK PM Truss has confirmed she will attend next week's European Political Community summit, via BBC. Reports that technical level discussions between the UK and EU could resume as soon as next week, via BBC's Parker; writing, that there has been a 'warmer' tone in recent weeks, some believe pressure from the US on the UK has had influence. German VDMA, survey of members: majority expect nominal sales growth in 2022 and 2023. FX GBP's revival has continued ahead of a meeting between PM Truss and the OBR, with a statement expected, a move that has taken Cable above 1.12 but shy of mini-Budget levels. USD is firmer overall but continues to retreat from YTD peaks, though the DXY is seemingly drawn to the 112.00 area. Yuan derived further, fleeting, support from reports the FX body has asked banks to trade closer to the onshore fixing. Elsewhere, FX peers are under modest pressure but more contained vs USD; EUR unfased by a record EZ flash CPI print of 10.0%. Fixed Income Benchmarks bid but modestly off best levels with Bunds leading the charge, but well within recent ranges, amid potential month/quarter-end influence. Gilts lifted, but the 10yr yield remains above 4.0% ahead of the OBR statement. Stateside, USTs are equally buoyed ahead of a packed PM agenda include PCE Price Index and Fed speak. Commodities The broader commodity market is benefitting from a pullback in the USD coupled with a broader risk appetite. Metals are buoyed by the recent pullback in the Dollar with spot gold edging above its 10 DMA (USD 1,656.72/oz) and towards the USD 1,680/oz mark which coincides with the yellow metal’s 21DMA (USD 1,680.56/oz) and 200WMA (USD 1,680.20/oz). Base metals are also firmer across the board with 3M LME copper back above the USD 7,500/t mark, whilst nickel and aluminium outperform on the exchange. Central Banks China loosened FX restrictions in response to the Fed rate hike and the yuan's fall over the past week, according to people familiar with the matter cited by FT. China's FX body is reportedly asking banks to trade the Yuan closer to the PBoC fixing, according to Bloomberg. PBoC injected CNY 128bln via 7-day reverse repos with the rate kept at 2.00% and injected CNY 58bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 184bln net daily injection and a net CNY 868bln weekly injection. RBI hiked Repurchase Rate by 50bps to 5.90%, as expected, via 5-1 vote and the Standing Deposit Facility was adjusted to 5.65%. RBI Governor Das said MPC is to remain focused on the withdrawal of accommodation and that the persistence of high inflation necessitates further calibrated withdrawal of monetary accommodation. However, Das noted that the Indian economy continues to be resilient with economic activity stable and overall monetary and liquidity conditions still remain accommodative, while Real GDP growth forecast for 2022/23 was revised lower to 7.0% from 7.2% and 2022/23 CPI was seen at 6.7%. RBI is reportedly encouraging state-run refiners to reduce USD buying in the spot market; asking to lean on USD 9bln credit line instead, according to Reuters sources. BoE was reportedly warned about a looming catastrophe in the pensions sector within the next 5 years before it was forced to intervene to prevent a market collapse, according to The Telegraph. Fed's Daly (2024 voter) said a downshift in economic activity and labour is needed to bring down inflation and additional rate increases are necessary and appropriate. Daly also stated that a myriad of risks narrows the path to a smooth landing but does not close it, while she added they have gotten rates to neutral and expect to raise rates further in coming meetings and early next year. Norges Bank will purchase FX equivalent to NOK 4.3bln/day in October (3.5bln in September); reflecting an increase in projected NOK revenues from petroleum activity. Geopolitics Russian President Putin signed decrees recognising occupied Ukrainian regions of Kherson and Zaporizhzhia as independent territories which is an intermediate step before the regions are formally incorporated into Russia, according to Reuters. ** Russia's Kremlin says strikes against the new territories incorporated into Russia will be considered an act of aggression against Russia**; says Ukraine has shown no willingness to negotiate, via Reuters. Russia's Spy Chief says they have material which show a Western role in Nord Stream incidents, via Ifx. Armenia's Foreign Ministry says their Ministers and Azerbaijani counterparts will meet in Geneva on October 2nd, via AJA Breaking. US Event Calendar 08:30: Aug. Personal Spending, est. 0.2%, prior 0.1% Aug. Real Personal Spending, est. 0.1%, prior 0.2% Aug. Personal Income, est. 0.3%, prior 0.2% Aug. PCE Deflator MoM, est. 0.1%, prior -0.1% Aug. PCE Core Deflator MoM, est. 0.5%, prior 0.1% Aug. PCE Core Deflator YoY, est. 4.7%, prior 4.6% Aug. PCE Deflator YoY, est. 6.0%, prior 6.3% 09:45: Sept. MNI Chicago PMI, est. 51.8, prior 52.2 10:00: Sept. U. of Mich. Current Conditions, est. 58.9, prior 58.9 U. of Mich. Sentiment, est. 59.5, prior 59.5 U. of Mich. Expectations, est. 59.9, prior 59.9 U. of Mich. 1 Yr Inflation, est. 4.6%, prior 4.6%; 5-10 Yr Inflation, est. 2.8%, prior 2.8% Central Bank Speakers 08:30: Fed’s Barkin Speaks at Chamber of Commerce Event 09:00: Fed’s Brainard Speaks at Fed Conference on Financial Stability 11:00: Fed’s Bowman Discusses Large Bank Supervision 12:30: Fed’s Barkin Discusses the Drivers of Inflation 16:15: Williams Speaks at Fed Conference on Financial Stability DB's Jim Reid concludes the overnight wrap As we arrive at the end of a tumultuous month in financial markets, there’s been little sign of respite for investors over the last 24 hours, with the S&P 500 (-2.11%) reversing the previous day’s gains to close at a 21-month low. There were a number of factors behind the latest selloff, but fears of further rate hikes were prominent after the US weekly initial jobless claims showed that the labour market was still in decent shape, whilst the PCE inflation readings for Q2 were revised higher as well. That came alongside fresh signals of inflationary pressures in Europe, where German inflation in September moved into double-digits for the first time in over 70 years. Thanks to some hawkish rhetoric from central bank officials on top of that, the result was that the synchronised selloff for equities and bonds continued. In fact, barring a massive turnaround today, both the S&P 500 and the STOXX 600 are on course for their third consecutive quarterly decline, which is the first time that’s happened to either index since the financial crisis. We’ll come to some of that below, but here in the UK there were signs that the market turmoil was beginning to stabilise slightly relative to earlier in the week. For instance, sterling (+2.09%) strengthened against the US Dollar for a third consecutive session, moving back above $1.10 for the first time since last Friday when the mini-budget was announced, and at a couple of points overnight was very briefly trading above $1.12. Indeed, it was the strongest-performing G10 currency on the day, so this wasn’t simply a case of dollar weakness. In the meantime, investors moved again to lower the chances of an emergency inter-meeting hike from the Bank of England, instead looking ahead to the next scheduled MPC meeting on November 3. That followed a speech from BoE Chief Economist Pill, in which he said “it is hard to avoid the conclusion that the fiscal easing announced last week will prompt a significant and necessary monetary policy response in November.” However, gilts continued to struggle yesterday following the massive Wednesday rally after the BoE’s intervention. Yields on 10yr gilts were up by +13.0bps by the close, a larger increase than for German bunds (+6.4bps) or French OATs (+8.0bps). Furthermore, the spread on the UK’s 5yr credit default swaps closed at its highest level since 2013, so there are still plenty of signs of investor jitters. That came as the government showed no signs of U-turning on their programme of tax cuts, with Prime Minister Truss saying “I’m very clear the government has done the right thing”. It’s also worth noting that one factor seen as supporting sterling overnight was growing speculation that Truss might come under political pressure to reverse course on the fiscal announcements, particularly after a YouGov poll gave the opposition Labour Party a 33-point lead, which is its largest in any poll since the late-1990s. We also heard from the Conservative chair of the Treasury Select Committee, who tweeted that Chancellor Kwarteng should bring forward the November 23 statement on his medium-term fiscal plan and publish the independent OBR forecast as soon as possible. Away from the UK, the broader selloff in financial markets resumed yesterday as investors priced in a more hawkish response from central banks over the months ahead. In the US, that followed a fresh round of data that was collectively seen as offering the Fed more space to keep hiking rates. First, the weekly initial jobless claims fell to a 5-month low of 193k over the week ending September 24. That was beneath the 215k reading expected, and the previous week was also revised down by -4k. Nor was this just a blip either, as the 4-week moving average is now at its lowest level since late May as well. In the meantime, we had an upward revision to core PCE in Q2, taking the rate up by three-tenths to an annualised +4.7%. Those data releases came alongside some pretty hawkish Fed rhetoric, with Cleveland Fed President Mester saying that a recession wouldn’t stop the Fed from raising rates. And in turn, that led markets to price in a more aggressive Fed reaction, with the terminal rate expected in March 2023 up by +3.0bps on the day. Incidentally, we saw yet further signs that the Fed’s tightening was having an effect on the real economy, with Freddie Mac’s mortgage market survey showing that the average 30-year fixed rate had risen to 6.70%, which is their highest level since 2007. The more hawkish developments were reflected in US Treasury yields too, particularly at the front end, with yields on 2yr Treasuries up +5.8bps to 4.19%, and those on 10yr Treasuries up +5.4bps to 3.79%. Overnight in Asia, yields on the 10yr USTs are fairly stable as we go press, seeing a small +0.3bps rise, whilst those on 2yr Treasuries are up +1.8bps to 4.21%. Europe got a fresh reminder about inflation as well yesterday, after the German CPI release for September came in well above expectations. Using the EU-harmonised measure, inflation rose to +10.9% (vs. +10.2% expected), which marks the first time since 1951 that German inflation has been running in double-digits. Earlier in the day, the German government separately announced that they’d be borrowing another €200bn to cap gas prices, with the previously planned consumer levy not going ahead. Looking forward, it’ll be worth looking out for the flash CPI release for the entire Euro Area today at 10am London time, where the consensus is expecting we’ll see the highest inflation since the formation of the single currency. That would keep the pressure on the ECB, and markets are continuing to price in another 75bps hike as the most likely outcome at the October meeting. With investors digesting the prospect of continued hawkishness from central banks, equities lost further ground over yesterday’s session. The S&P 500 fell -2.11%, meaning the index is now down by nearly a quarter (-24.10%) since its closing peak in early January. The declines were incredibly broad-based across sectors, but interest-sensitive tech stocks struggled in particular, with the NASDAQ (-2.84%) and the FANG+ index (-3.38%) seeing even larger losses. Those heightened levels of volatility were also reflected in the VIX index (+1.7pts), which closed at 31.8pts. For European equities it was much the same story, with the STOXX 600 (-1.67%) closing at a 22-month low. Adding to the tech woes, Meta (-3.67%) joined the growing list of firms announcing a hiring freeze, with the tech giant also issuing a warning of potential restructuring, so it’ll be important to see if this is echoed more broadly and what this means for the labour market. In overnight trading, equity futures are pointing to further losses today, with those on the S&P 500 (-0.25%) and NASDAQ 100 (-0.27%) both moving lower. As we arrive at the final day of the month, Asian equities are similarly retreating this morning, putting a number of indices on course for their worst monthly performance in years. For instance, the Nikkei is currently on track for its worst month since March 2020, and the Hang Seng is on track for its worst month since September 2011. In terms of today, the Nikkei (-1.67%) is leading losses in the region with the Shanghai Composite (-0.21%), the CSI (-0.14%), the Kospi (-0.11%) and the Hang Seng (-0.07%) following after that overnight sell-off on Wall Street. One source of better news came from the Chinese PMIs, with the official manufacturing PMI unexpectedly in positive territory in September with a 50.1 reading (vs. 49.7 expected), which is up from a contractionary 49.4 in August. The composite PMI was also in positive territory with a 50.9 reading. However, the Caixin manufacturing PMI unexpectedly deteriorated further to 48.1 in September, so not every indicator was positive. In the meantime, Japanese data showed that industrial production growth came in above expectations with a +2.7% reading (vs. +0.2% expected), as did retail sales with growth of +1.4% (vs. +0.2% expected). There wasn’t much in the way of other data yesterday. However, the European Commission’s economic sentiment indicator for the Euro Area fell for a 7th consecutive month to 93.7 in September (vs. 95.0 expected). To the day ahead now, and data releases include the flash Euro Area CPI release for September, as well as the Euro Area unemployment rate for August and German unemployment for September. In the US, we’ll also get August data on personal income and personal spending, the MNI Chicago PMI for September, and the University of Michigan’s final consumer sentiment index for September. Finally, central bank speakers include Fed Vice Chair Brainard, the Fed’s Barkin, Bowman and Williams, as well as the ECB’s Schnabel, Elderson and Visco. Tyler Durden Fri, 09/30/2022 - 08:10.....»»

Category: blogSource: zerohedgeSep 30th, 2022

UK prime minister says pound"s slump is due to fallout from Russia-Ukraine war as she defends tax cuts in aftermath of market turmoil

UK's prime minister defended the tax cut plan slammed by economists this week, noting that "currencies are under pressure around the world." Lord Chancellor Liz Truss.Reuters UK prime minister Liz Truss defended the plan to cut taxes after the plan caused chaos in markets.  She blamed the pound's slump on the fallout from Russia-Ukraine war.  "Currencies are under pressure around the world," Truss said. UK prime minister Liz Truss said the pound's slump last week was due to the fallout from the Russia-Ukraine war, defending newly unveiled tax cuts days after a spasm of turmoil in the country's currency and government bond markets.The pound plunged to a 37-year low on Friday after Truss announced the UK's new mini-budget, which includes cutting taxes for the highest earners and slashing planned corporate tax hikes. Turmoil stemming from a loss of confidence in the ability of the UK economy to withstand further inflation and concern over government debt led to the steep decline in the pound and a sell-off in UK government bonds.But the slump in the UK currency can't be blamed on the new tax plan, Truss said to the BBC on Thursday, per the Wall Street Journal. She pointed instead to the Russia-Ukraine war and its impact on the global economy, particularly its effect on energy prices around the world. "This is a global financial situation. Currencies are under pressure around the world," Truss said. She added that she would not retreat on plans to cut taxes, as there was a need to take "decisive action" in the economy. Currently, the UK is strapped with 9.9% inflation, down slightly from 10.1% recorded in July.Meanwhile, experts have ripped into the new mini-budget, with Noble economist Paul Krugman calling the pound's fall the price the UK is paying for "moronic" economic policy, and top economist Mohamed El-Erian urging the Bank of England to issue a super-sized emergency rate hike or risk of letting inflation soar even further.Unfunded tax cuts and increased debt could exert more inflationary pressure on the economy when prices are already sky-high, economists say. It could also force the Bank of England to hike rates more aggressively than planned and increase the risk of a recession. Read the original article on Business Insider.....»»

Category: worldSource: nytSep 29th, 2022

The UK should ditch tax cuts, hike rates, and accept a deeper recession to avoid higher inflation, Mohamed El-Erian says

An aggressive rate hike could cause a recession, but the UK is past the point of hoping for a soft-landing, Mohamed El-Erian warned. Mohamed El-ErianREUTERS/Fred Prouser The UK needs to ditch its plan to cut taxes and instead hike interest rates immediately, Mohamed El-Erian said. Though aggressive rate hikes could cause a recession, the UK is past the point of hoping for a soft-landing, he warned. El-Erian has been a vocal critic of the UK's mini-budget, which will exert more inflationary pressure on its economy. The UK needs to abandon its plan to cut taxes and instead hike interest rates, according to top economist Mohamed El-Erian, who added that the country must accept a deeper recession to avoid sky-high inflation.El-Erian has been a vocal critic of the UK's proposed mini-budget, which will involve hikes in government spending while slashing taxes for the wealthy. Fears of worse inflation and unsustainable deficits sent the pound to a record low against the dollar on Monday, prompting the Bank of England to start snapping up bonds on Wednesday to stabilize debt markets.While the central bank averted an immediate financial crisis with its intervention, that's the opposite of what it should be doing to lower inflation, El-Erian warned. He urged the nation to throw out its tax-cut plan and hike rates by 100 basis points. "It would be a tragedy if this ends up resulting in further [tax] cuts. What we need is for the tax reductions to be withdrawn, we need the Bank of England to act on interest rates," El-Erian said in an interview with BBC on Wednesday. "Without [tax cuts], I would look to the Bank of England to make incredible increases in interest rates and I would accept a much deeper recession," he added.El-Erian previously said that the turmoil in British markets was a sign of a paradigm shift in the global economy, as central banks are pivoting from quantitative easing to quantitative tightening to combat inflation. He's criticized central banks around the world for not acting on rising inflation soon enough, forcing them to raise rates too aggressively later. "We are now deep into the world of third- and fourth- best. There is no action that doesn't have some collateral damage to it. The least bad action right now is not to go forward with the tax cuts," he warned.Read the original article on Business Insider.....»»

Category: worldSource: nytSep 29th, 2022

"QE + Rate Hikes" This Is The Way To Lehman, Bubbles Or MMT

"QE + Rate Hikes" This Is The Way To Lehman, Bubbles Or MMT By Michael Every of Rabobank "This is the Way" to Lehman, bubbles, or MMT Yesterday saw more *wild* market action. It started with a key Tory official arguing not with the EU, but markets (“Tory Peer Lord Frost Doesn't Think 'Anything Has Gone Wrong' As Pound Touches Record Low: The former chief Brexit negotiator dismisses market turmoil since the mini-budget as “unwarranted” and an “over-reaction) while Tory supporters argued on social media with the IMF (“Embarrassed for the IMF. This is the IMF self-declaring as a left-wing body. The UK should now withhold its IMF contributions.”) There were rumors, long heard on the Street, that Janet Yellen is out as Treasury Secretary after the mid-term elections. Who, without a key role at present, has been all over the press talking about the need for higher rates? Larry Summers. So who is next in line, perhaps? What a shock for markets that would be. From someone who once ran the Fed to someone who wanted to run the Fed. How apt given the increased link-up between fiscal and monetary policy. While GBP was around 1.07, EUR was at 0.9550, CNY at 7.23, AUD below 0.64, and NZD lower than it’s Covid trough. In bonds, Europe --which sadly cannot keep burning Angela Merkel’s reputation for heat forever-- heard the ECB’s Holzmann hold up the UK up as an example of how he would carry out QT - like ripping a plaster off a wound. Pension funds long Gilts were getting crushed, with the 30-year yield at 5.10%, and a spiral of events beginning that threatened an imminent Lehman-like event (as Yellen told us would never happen again in her lifetime: just don’t mention what FRA-OIS spreads are doing again). Then the BOE announced it would buy unlimited long Gilts, which is now apparently to be GBP5bn a day for 13 days, just ahead of when it was supposed to be selling them, to prevent “a material risk to UK financial stability”. Down went UK long yields, the 30-year closing at 3.93%; down went yields everywhere – the US 10-year was at 4% yesterday morning and went straight back to 3.75% (potentially blowing up anyone who was short); and up went global equities. After all, if the BOE could U-turn, surely the ECB and the Fed could too? Indeed, earlier in the day, the ECB’s Lagarde did not make it entirely clear to all listeners whether she was a buyer or a seller of bonds, or both, when she spoke around the issue and her long list of pet acronyms. For those not paying attention, what we just got was something I believe only this Daily has been flagging all year (but do please correct me if I am wrong on that claim) – QE and rate hikes. Of course, as a colleague pointed out, it was not the MMT plus rate hikes I have been saying is inevitable, because the BOE action was “not intended to be useful”: ironically, the budget behind the extra Gilt issuance also isn’t useful. Yet the BOE action was useful for markets, as there were no other buyers at that point. It was therefore an emergency pension fund bailout. The market reaction shows they think “This is the Way”. Watch everyone start saying QE and rate hikes can work together, and expecting their own bailouts. I will be in the corner wishing I had printed T-shirts saying “QE + rate hikes”, like the “DM = EM” ones I also didn’t make, and which I would not have accepted sterling for if I had. (Sorry, dollars only.) Yet the problems with assuming we are now ‘saved’ are: We just saw another huge easing of financial conditions that means central banks need to raise rates even more - and they are determined to do so. As Bloomberg reports today, “Some big bond investors say don’t be deceived by the Treasury market’s torrid rally Wednesday. The hawkish signals still coming out of the Federal Reserve are what matters. The rest is noise.” Indeed, otherwise there is no point in inflation targeting and independent central banks at all. The market will smash currencies of those doing QE. While GBP closed higher despite the BOE de facto paying for rich people to buy more stuff(!), the DXY dollar index collapsed on the mere idea that the Fed might start doing QE again too. That is as the US leans on a strong dollar to suppress inflation Brent leaped 3.5% on the day even as physical demand is faltering and recession looms, while Bitcoin and gold leaped too. This is the yields-down-so-commodities-up *SO YIELDS ARE WRONG* argument I have been making this year. Central banks won’t watch a systemic crisis unfold (and Summers being quoted on Bloomberg as backing the BOE move only underlines that he is likely to fill Yellen’s shoes) but large market losses as they raise rates are clearly fine in their/his eyes. It may not be “Liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate”, but there must still be a lot of liquidation, or else we can’t remove inflation now supply chains are “geopolitical” and workers are “political”. I stand by my view that MMT plus rate hikes will be “the Way” because there is nothing else on the table. Unless we want to go back to bubbles, which the market clearly does because that is all it does. (As another colleague yesterday quipped, people who think they are a solution to our problems also think we can house the homeless in the Metaverse.) Emergency actions aside, on QE vs. MMT, the BOE’s actions wouldn’t be bubble-blowing if it bought bonds from the government directly, not the secondary market. That way there would be no lower yields except in as much as the total bond supply hitting the market is partly absorbed. That would also force differential borrowing costs within the economy to reallocate resources to the supply side: the state borrows for free to do so, the private sector borrows at whatever the non-emergency bond yield is plus the usual spread to do what it wants to do. Part of the “QE is not MMT” argument also rests on a view QT will soon reverse QE: but can that really happen now? The BOE just cancelled a speech on balance sheet contraction pencilled in for today. But if so then the imperative must surely be NOT to do more of the same old QE, when everyone can see what vast nothingness its trillions of dollars have bought us in our unequal, inflation-struck, and geopolitically-unprepared real economy? To hammer that home, ask critics of the UK what they would do instead. “Not this” is not a policy. Watch the realisation slowly sink in that there is nothing that logically could be done from here BUT rate hikes and supply-side MMT. Apart from just suffering for years. Meanwhile, China and UK both just said “This is NOT the Way” via warnings to speculators not to bet against their currencies. In neither case will this work while the dollar is still going up, which it soon will be again - especially with Summers in the background. Yet that parallel warning makes sense given both economies are likely going to end up with similar MMT-led supply-side policies… once all the others have been tried and failed. After all, Bloomberg reports today that the likely next China ‘economic czar’ will be He Lifeng, who favours more credit and more growth, which will likely mean de facto MMT either on or off book. Which, by the way, will be hugely inflationary for everyone from the commodity side. So, don’t think the volatility is over yet: vastly more lies ahead. Especially since the word is the British government absolutely refuses to accept that this is a crisis, or driven by its own actions in any way, or is something that the general public is either noticing or worried about(!) Tyler Durden Thu, 09/29/2022 - 10:15.....»»

Category: dealsSource: nytSep 29th, 2022

Stocks Slide, Ugly Mood Returns As Traders Ask "Did Anything Change"

Stocks Slide, Ugly Mood Returns As Traders Ask 'Did Anything Change' The brief post-BOE euphoria has worn off, and risk-off sentiment returned to markets as concern about inflation and the global economy overshadowed the Bank of England’s desperate attempt to restore calm by restarting QE, exacerbated by more hawkish central bank talk and defiance by British PM Liz Truss's tax plan (which has been slammed from the IMF all the way to the White House). Treasuries resumed their slide with UK gilts, while US equity futures fell as European stocks extended a selloff that’s caused valuations to drop to their lowest since 2012. As of 730am, emini S&P futures slid 0.7% to 3704, recovering from losses as big as 1.5% earlier. The dollar rose and Treasuries resumed their slump as investors focused on expectations the Federal Reserve will continue to deliver aggressive interest-rate hikes. The pound snapped a two-day gain and UK gilt yields rose as Prime Minister Liz Truss defended a giant package of unfunded tax cuts that sent markets into turmoil. “Other than the dollar, there are not many assets that are trading constructively,” said Julia Raiskin, Asia-Pacific head of markets for Citigroup Inc. “The markets are very pessimistic. Investors are fairly on the sidelines.” In premarket trading, US-listed Chinese stocks drop in premarket trading, following in the footsteps of Hong Kong- listed peers as the Hang Seng Tech Index erased almost all gains since a March nadir. Alibaba (BABA US) -3%, Nio (NIO US) -2.9%, Baidu (BIDU US) -2.4%, Pinduoduo (PDD US) -2.6%, JD.com (JD US) -2.4%. Bank stocks also slumped after snapping a six-day losing streak the day earlier. Here are other notable premarket movers: Coinbase falls 2.5% in premarket trading after Wells Fargo starts coverage at underweight, with operating results set to remain under pressure. Bakkt (BKKT US) and Riot Blockchain (RIOT US) are both initiated at equal-weight, with Riot declining 3% in premarket trading. Altus Power (AMPS US) slumped 16% in premarket trading after the company’s secondary offering priced at $11.50 per share, below Wednesday’s record close of $14.23. First Solar (FSLR US) gained 1.3% in premarket trading after Evercore ISI analyst Sean Morgan raised the recommendation to outperform from inline, saying the company is poised to benefit from the Inflation Reduction Act. Apple (AAPL US) shares were down 2.6% in premarket trading, set to extend Wednesday’s decline, as BofA Global Research cut the recommendation on the stock to neutral from buy. European stocks bounced off session lows amid heightened risk-off mood. Euro Stoxx 50 slumped as much as 1.2%. Autos, retailers and real estate are the worst performing sectors as all slump. European miners rose after news that the London Metal Exchange is launching a discussion paper that marks the first step toward a potential ban on new supplies of Russian metal.  Porsche AG rose as much as 5.2% as its shares started trading in Frankfurt after parent Volkswagen AG set the final listing price for the sports-car maker at the upper limit of its offer range. Here are some other notable European movers: Accor shares jumped as much as 8.1%, before paring gains, after the French hospitality company raised FY22 Ebitda guidance to a level which analysts said was above consensus estimates. Rational rose as much as 16% after the German kitchen appliances manufacturer raised its sales and Ebit guidance, citing improvements in the supply chain picture. Capricorn Energy shares rose as much as 8.9% to 261p amid a proposed merger with NewMed Energy that’s expected to deliver total value to Capricorn shareholders of 271 pence per share. H&M shares dropped as much as 7.2%, heading for the lowest close since September 2004, after it reported 3Q results that missed estimates and highlighted “very negative” market conditions. Next fell as much as 10% after the UK high street retailer cut its FY guidance, citing the cost of living crisis and saying the devaluation of the pound is set to prolong inflationary pressures. Colruyt shares plunged 24%, the most intraday on record, after it said the consolidated net result for FY22/23, ex. one-offs, is expected to decrease considerably compared with last year. Ubisoft shares fell after the video-game company pushed back its Skull & Bones title to March 2023 from November, despite maintaining FY guidance. Analysts say the decision raises concern. Wacker Chemie shares dropped as much as 7.8% after Stifel cut its price target, saying lower silicone and polysilicon prices hit sentiment. Hornbach shares dropped as much as 7% after it published its latest 2Q report. The home improvement retailer posted a worse-than expected Ebit decline y/y, Warburg said. European auto stocks fell and were among the worst performing subgroups on the wider market, with Volkswagen and its parent Porsche Automobil Holding SE leading declines. European bond yields also rose as investors digested the latest inflation data and commentary from European Central Bank officials. Euro-area economic confidence dropped to the lowest since 2020. Investors are contending with threats posed by discordant moves from central banks over the past few days, with Fed officials adamant on further monetary tightening, the BOE unveiling a £65 billion ($71 billion) plan to support government debt and authorities in Asia trying to prop up weakening currencies. “The central bank is in a very difficult position right now,” Julie Biel, Kayne Anderson Rudnick portfolio manager and senior research analyst, said of the BOE in an interview with Bloomberg TV. “Everyone has been a little bit backed into a corner in seeing the volatility and market reaction.” Former Bank of England Governor Mark Carney accused the UK government of “undercutting” the nation’s economic institutions, and said that its fiscal plans were to blame for the drop in the pound and bonds. Simon Wolfson, the boss of Next Plc and a Conservative peer, also appeared to blame the Tory government for a crash in the currency and a worsening outlook for UK inflation, which the company cited as it lowered guidance for sales and profits. Separately, the European Commission announced an eighth package of sanctions that would include a price cap on Russia’s oil exports as Russia vowed to go ahead with the annexation of the parts of Ukraine that its troops currently control after UN-condemned votes, putting the Kremlin on a fresh collision course with the US and its allies. Earlier in the session, Asian stocks pared earlier gains spurred by the Bank of England’s unlimited bond-buying plan, as sentiment again turned cautious with fears over a global recession. The MSCI Asia Pacific Index was up 0.2%, having earlier gained as much as 1.2%. Benchmarks in Australia and Japan outperformed, while South Korea’s market closed almost flat. Gauges in Hong Kong and China ended in the red with tech stocks sliding near the lowest since to a sector index was introduced in 2020. Hang Seng Tech Index Slides Toward Lowest Since 2020 Inception The key Asian equity benchmark slumped Wednesday to its lowest since April 2020 on concerns over the Federal Reserve’s ongoing rate hikes. While the the UK central bank’s intervention to avert a crash in the gilt market helped calm investor nerves briefly, few saw the rally as a signal for a full-fledged rebound.  “We remain very cautious on the markets and would exercise a degree of patience,” Kerry Craig, a global market strategist at JPMorgan Asset Management, said in an interview with Bloomberg TV. Central bank moves, inflation and “the looming risk of recession” need to be monitored, he said. Down almost 12% in September, the MSCI Asian benchmark is set to post its worst monthly performance since the pandemic-triggered crash in March 2020. An index of Asia Pacific stocks excluding Japan is on course for its fifth-straight quarterly loss, its longest losing streak in 21 years. Japanese equities rose, rebounding along with global peers as investors assessed the Bank of England’s move to buy government bonds. More than 1,100 Topix stocks traded without rights to the next dividend. The Topix rose 0.7% to close at 1,868.80, while the Nikkei advanced 0.9% to 26,422.05. Out of 2,169 stocks in the Topix, 1,854 rose and 271 fell, while 44 were unchanged. “Though there is still a strong uncertainty in the US and UK markets over the rise in long-term interest rates, for now there is a sense of relief in the markets as government bond yields in the UK settled down due to the unlimited purchase plan,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management. In Australia, the S&P/ASX 200 index rose 1.4% to close at 6,555.00, boosted by gains in mining shares and banks.  In New Zealand, the S&P/NZX 50 index rose 0.7% to 11,200.04 Stocks in India declined for a seventh straight day in the longest losing streak since February, tracking a selloff across global markets amid worries over possible recession.  The S&P BSE Sensex gave up an advance of as much as 1% to end 0.3% lower at 56,409.96 in Mumbai. The NSE Nifty 50 Index slipped 0.2% as both indexes posted their longest stretch of declines in seven months. The key gauges have dropped more than 5% each this month and are on track to record their worst monthly performance since the pandemic led crash of March 2020. Ten of the 19 sector sub-indexes compiled by BSE Ltd. declined Thursday led by the utilities gauge which has lost 11% for the month, making it the worst sectoral performer. In FX, the Bloomberg Dollar Spot Index first rose then fell, as Treasuries slumped to unwind some of the previous day’s swift rally. The euro fell as much as 1% to $0.9636, before paring losses. It’s significantly more costly to hedge against euro price swings compared to a week ago, as traders bet on wider ranges with risks skewed to the downside. The pound erased losses amid month-end flows, after earlier falling by as much 1.2% to $1.0763. UK bonds extended losses after Prime Minister Liz Truss defended her new government’s giant fiscal package of unfunded tax cuts, which have tipped markets into chaos. Commodity currencies led declines among G-10 peers.  Onshore yuan eked out the first gain in nine days following a stern PBOC warning against “one-sided” speculation, but offshore yuan weakened 0.4% In rates, Treasuries pared Wednesday’s gains with yields cheaper by up to 11bp across the 5-year tenor into early US session, with the belly’s underperformance helped by a large block sale in 5-year note futures. Treasury 10-year yields near highs of the day at around 3.83%, outperforming bunds and gilts by 3.5bp and 4.5bp in the sector; belly-led losses cheapens 2s5s30s Treasuries fly by 7bp on the day. Moves follow a more aggressive bear flattening move in gilts, wit front-end yields are cheaper by 20bp on the day. US session focus on GDP and Fed speakers throughout the day.   Bunds, Italian bonds dropped and money markets raised ECB tightening bets after German state CPIs rose in September while euro-area economic confidence dropped to 93.7 in September, the lowest since 2020. UK 10-year bonds decline after Truss doubled down on her economic package; In commodities, Brent rebounded from earlier lows, to trade near $89.50 following reports of OPEC+ considering production cuts. Spot gold falls roughly $12 to trade near $1,648/oz. Bitcoin is under modest pressure but lies within narrow ranges of less than USD 500 at present and well within recent parameters as such. Looking to the day ahead now, and data releases include German CPI for September, Italian PPI for August, and UK mortgage approvals for August (the calm before the storm). We’ll also get the weekly initial jobless claims from the US, as well as the third estimate of Q2 GDP. From central banks, we’ll also hear from an array of speakers, including ECB Vice President de Guindos, and the ECB’s Simkus, Panetta, Centeno, Villeroy, Knot, Elderson, Rehn, Vasle, Kazaks, Muller and Lane. In addition, there’ll be remarks from the Fed’s Bullard, Mester and Daly, as well as BoE Deputy Governor Ramsden and the BoE’s Tenreyro. Market Snapshot S&P 500 futures down 1.1% to 3,692.25 MXAP up 0.2% to 139.97 MXAPJ little changed at 453.71 Nikkei up 0.9% to 26,422.05 Topix up 0.7% to 1,868.80 Hang Seng Index down 0.5% to 17,165.87 Shanghai Composite down 0.1% to 3,041.21 Sensex down 0.3% to 56,446.56 Australia S&P/ASX 200 up 1.4% to 6,554.97 Kospi little changed at 2,170.93 STOXX Europe 600 down 1.6% to 383.23 German 10Y yield little changed at 2.23% Euro down 0.9% to $0.9650 Brent Futures down 1.2% to $88.23/bbl Brent Futures down 1.2% to $88.23/bbl Gold spot down 0.9% to $1,644.68 U.S. Dollar Index up 0.92% to 113.64 Top Overnight News from Bloomberg Britain is in a self-inflicted financial crisis that threatens to accelerate the economy’s dive into recession -- and the country’s new prime minister is coming under intense pressure to blink The ECB should opt for a “big” increase in interest rates in October, according to Governing Council member Martins Kazaks, who said in an interview that subsequent hikes are likely to be smaller. His Baltic counterparts Gediminas Simkus and Madis Muller also indicated they’d back significant moves, while Mario Centeno of Portugal called for a “measured and balanced” approach The ECB must ensure pay pressures don’t get out of control in its efforts to keep expectations stable, according to Governing Council member Olli Rehn The Riksbank believes it is very important that monetary policy continues to act for inflation to fall back and stabilize at the target of 2% within a reasonable time perspective, the Swedish central bank says in minutes from its latest monetary policy meeting Japan’s capital markets suffered the biggest foreign outflow in three months last week as growing fears of a global downturn fueled a search for liquidity China’s economy stabilized in the current quarter, and the final three months of the year will be key to the nation’s economic recovery, Premier Li Keqiang said As doubts grow over whether Xi Jinping still prioritizes expanding China’s economy over other goals, he’s tipped to appoint a new economic adviser who’s vowed to put growth first OPEC+ has begun discussions about making an oil-output cut when it meets next week, a delegate said A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks traded higher as the region took impetus from the rally on Wall St where risk sentiment was buoyed and yields retreated following the BoE's announcement to resume Gilt purchases. ASX 200 outperformed in which the commodity-related sectors led the broad advances across industries following the recent upside in energy and metal prices, while firm monthly CPI data did little to dent risk sentiment. Nikkei 225 was also positive but with gains initially capped as more than half of the stocks traded ex-dividend. Hang Seng and Shanghai Comp were also firmer with the Hong Kong benchmark spearheaded by tech and energy stocks, while the mainland also digested reports that the PBoC is setting up a more than CNY 200bln re-lending facility quota for equipment upgrades which aims to expand market demand in the manufacturing sector. Top Asian News PBoC injected CNY 105bln via 7-day reverse repos with the rate kept at 2.00% and injects CNY 77bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 180bln net injection. Chinese President Xi told Japanese PM Kishida that they attach great importance to the development of China-Japan relations and he is willing to work with Kishida to build relations, while Kishida told Xi that bilateral relations are currently facing many issues and challenges but he hopes to build constructive and stable relations to boost peace and prosperity, in messages to mark 50 years of diplomatic relations. Hong Kong’s Worst Trading Debut in 2022 Sends EV Maker Down 34% US’s Harris Goes to DMZ Hours After North Korea Missile Launch Japan’s First Bond to Help Ocean Planned by Major Seafood Firm Best HK IPO Quarter in Year Ends With Disaster Debut: ECM Watch Yuan Bears Bet China Is Powerless to Fight the Mighty Dollar China Vows to Speed Up Delayed Homes With Special Loans European stocks are experiencing another bleak session thus far as the overnight gains in futures dissipated heading into the cash open. Sectors are in a sea of red with no clear theme. Autos kicked off the day as the outperformer as the Porsche AG IPO occurred at a premium to the guided price of EUR 82.50/shr. US equity futures are also trading with losses across the board, with relatively broad-based downside of 1.3-1.5% seen across the front-month contracts. Top European News UK PM Truss says the fiscal statement (i.e. mini-Budget) is the correct plan. UK Chief Secretary to the Treasury says the growth plan will get the economy growing, one of the reasons growth plans included tax cuts was to alleviate the household burden. BoE intervention has had the desired effect. Disagrees with the IMF's remarks. US President Biden's administration was reportedly alarmed by the market turmoil caused by the UK's economic program and is seeking ways to encourage PM Truss's team to dial back its tax cuts, according to Bloomberg. France is reportedly considering proposals for up to two hour power cuts for parts of the country on a rotating basis, via Reuters sources; additionally, telecom names have highlighted power issues with the German and Swedish gov'ts. German Network Regulator says recent gas consumption by households is too high to remain sustainable, via Reuters; gas savings of 20% are required to avoid an emergency. German gov't could make a "low three-digit billion amount" available for the gas price break, discussion of EUR 150-200bln, via Handelsblatt citing gov't circles; will reportedly be announced today. Europe Gas Eases With Traders Weighing Impact of Pipeline Blasts Rational Jumps After Boosting Sales Guidance Above Consensus Truss Says UK Tax Cuts Are the ‘Right Plan’ Amid Market Rout German Economy Seen Shrinking Next Year Due to Energy Crisis Profligate Government to Blame for Pound Drop, Says Wolfson FX USD has regained some poise after a mid-week pullback; though, the DXY remains off earlier 113.79 highs and thus shy of the YTD/WTD peak at 114.78. Yuan has derived pronounced support from Reuters reports that China's state banks have been told to stock up for intervention offshore, sending USD/CNH to 7.1437 from circa. 7.20 pre-release. Cable managed to 'recover' to a test of 1.09 but failed to breach the level with multiple BoE speakers in focus later. EUR/USD moving at the whim of broader USD action and failing to glean any real traction from multiple speakers and German state/Spanish mainland CPI data. Fixed Income Core benchmarks are pressured across the board in a modest pullback of the pronounced BoE-induced 'recovery' seen yesterday, with numerous speakers due and the second BoE operation. Specifically, Bund lies towards the bottom of a 200 tick range while Gilts are holding onto the 95.00 handle with the associated yield lifting further above 4.0%. Stateside, USTs are similarly at the lower-end of parameters ahead of data and numerous speakers while the curve flattens further Central Banks ECB's Simkus says his choice of hike for October is 75bp, says 50bp would be the minimum, via Bloomberg. A 100bp hike would be too much at this point. ECB's Centeno says decisions must be measured and balanced, still far from the neutral rate, via Bloomberg. ECB's Rehn says prospect of recession in Euro Area is likely. ECB's Vasle says current hike pace is "appropriate" response to inflation; expects to raise rates at the next several meetings. ECB's de Cos says so far there is no clear evidence of de-anchoring of inflation expectations. Based on current models, median terminal rate value is at 2.25-2.5% (significant uncertainty). ECB's Kazaks says 75bp will likely be appropriate for October, via Bloomberg. PBoC says they are to add more loans to ensure property delivery when required, via Reuters. China's state banks have reportedly been told to stock up for Yuan intervention offshore, according to Reuters sources, in a bid to defend the weakening Yuan.. State banks were asked to asked offshore branches, such as those in Hong Kong, New York and London, to review holding of the CNH to ensure dollar reserves are ready to be deployed. RBI likely selling USD via state-run banks around 81.92-81.93 levels, according to traders cited by Reuters NBH hikes one-week deposit rate by 125bp, to 13.00%. Turkish President Erdogan says interest rates need to come down further; CBRT needs to lower rates at the next meeting, via Reuters. Geopolitics Japanese Chief Cabinet Secretary Matsuno said North Korea's multiple missile launches are unacceptable and Japan will maintain close contact with allies including the US to monitor and deal with North Korea, according to Reuters. Turkish President Erdogan said Turkey will increase its military presence in northern Cyprus, according to Sky News Arabia. EU Official expects an agreement on the next Russian sanctions package, or at least major parts of this, before the EU Summit next week. Expects the discussion to focus on referendums, possible annexation, nuclear threat and Nord Stream. Russian State Duma representatives have received invitations to the Kremlin for Friday, September 30th at 13:00BST, via Ria. Russian Kremlin says the ceremony on incorporating new territories will occur on Friday, September 30th - President Putin will speak. US Event Calendar 08:30: Sept. Initial Jobless Claims, est. 215,000, prior 213,000 08:30: Sept. Continuing Claims, est. 1.39m, prior 1.38m 08:30: 2Q GDP Annualized QoQ, est. -0.6%, prior -0.6% 08:30: 2Q PCE Core QoQ, est. 4.4%, prior 4.4% 08:30: 2Q Personal Consumption, est. 1.5%, prior 1.5% 08:30: 2Q GDP Price Index, est. 8.9%, prior 8.9% Central Bank Speakers 09:30: Fed’s Bullard Discusses Economic Outlook 13:00: Fed’s Mester and ECB’s Lane Take Part in Policy Panel 16:45: Fed’s Mary Daly Speaks at Boise State University DB's Jim Reid concludes the overnight wrap How could you have earned a 42% return yesterday from a AA-rated investment? Simple. At anytime between 8-11am all you had to do was buy 40yr Gilts before the BoE effectively restarted QE only days before QT was suppose to start (it’s been postponed until October 31st - ironically Halloween). The buying operation is aimed at restoring liquidity to a broken long end market and is temporary but it’s another stunning development to a stunning year. I’ve always felt that this debt supercycle would end up with central banks doing QE even if interest rates were positive. The reason being is that the economy can be growing and seeing inflation at a point when investors baulk at funding all the debt. I appreciate this BoE operation is slightly different and I would have never have guessed the series of events that got us here but it might not be the last time a central bank buys government bonds when not at the zero bound given how much debt there is and how much there's likely to be going forward. It's becoming clearer the extent to which Tuesday's rout at the long-end was exacerbated by collateral calls on LDIs (liability driven investments) that pension funds have typically used in some size in recent years. With these swaps moving so far out of the money, the risk was that investors would have to sell liquid assets to meet margin calls. If they didn't have this (which a lot don't), then obviously there would have been huge liquidity events. To understand the fears that were around over the last 48 hours, Sky News’ economics editor Ed Conway said yesterday that “I am told there were a swathe of pension funds that … would have essentially collapsed by this afternoon”. Whether that's true, we'll never know but it shows the level of fear. Overall, this isn't quite monetising debt in the purest sense but at the end of the day we have seen fresh central bank buying of debt after unfunded tax cuts pushed up yields dramatically. Despite the BoE’s insistence that these are targeted, temporary purchases designed to ease market dysfunction, global pricing reacted as if they were launching a new QE program to ease financial conditions. Global equities increased, with the S&P 500 (+1.97%) breaking a run of 6 consecutive losses and global bond yields fell across the curve. In yield terms, 30yr gilts had been trading above 5% prior to the BoE’s announcement, but afterwards they staged a stunning turnaround to fall by an astonishing -105.9bps yesterday. That was easily the largest decline in the 30 years of available Bloomberg data, with the next two closest being a -39.7bps and -30.5bps decline in 1997 and 2009, respectively. It was also the largest absolute daily yield move in the 30yr, with the next two closest being Monday and Tuesday’s sell-offs. The decline takes 30yrs back to 3.92%, which is still above the c.3.5% level prior to the fiscal announcement last Friday but more within normal market reaction levels. Yields on 10yr gilts were down by a smaller -49.8bps, although that reflected the BoE only purchasing gilts with a residual maturity of more than 20 years. Sterling also managed to strengthen for a second day running, with a +1.45% gain against the US Dollar. But that overall performance hides some incredible intraday swings, with sterling moving sharply higher immediately after the BoE’s announcement before tumbling by -2.74% over the subsequent hour and a half before paring back those losses once again. It is down -0.75% in Asia as I type. Remember that markets are still pricing in around +150bps worth of hikes by the next BoE meeting on November 3, and implied sterling-dollar volatility for the next month remains at levels we’ve only previously seen around the GFC, the Covid pandemic and Brexit in the 21st century, so we certainly haven’t heard the end of the UK’s turmoil just yet. That intervention from the BoE helped sovereign bonds across the world. Indeed, yields on 10yr US Treasuries had been trading just above 4% immediately prior to the intervention, before reversing course to close -21.0bps lower on the day at 3.71%, which is their biggest move lower since the wild intraday swings we had in March 2020 when the Fed was stepping in to buy Treasuries and MBS in unlimited size; sound familiar? Those gains came as investors moved to downgrade the likelihood that the Fed would be pursuing aggressive policy into next year, with the rate priced in for December 2023 coming down by -23.3bps. This morning in Asia, yields on 10yr USTs (+3.6bps) have edged higher again to 3.77% as we type. In terms of the Fed, we did hear from Atlanta Fed President Bostic, who said he favoured another 125bps of hikes this year, but Chair Powell didn’t comment on policy in an appearance at a Community Banking Research Conference. Over at the ECB, we heard from an array of speakers yesterday, including President Lagarde who said that the ECB would “continue hiking rates in the next several meetings”. Multiple speakers separately endorsed another 75bps hike next month as well, including Latvia’s Kazaks who said that “I would side with 75 basis points”, Austria’s Holzmann who said that “I think 75 would be a good guess”, and Slovakia’s Kazimir who said that 75bps was “a good candidate to continue and keep tightening.” However, sovereign bonds still rallied across the continent, with yields on 10yr bunds (-11.1bps), OATs (-11.8bps) and BTPs (-22.2bps) all down significantly. When it came to equities, yesterday also finally brought a reprieve from the heavy selling over recent days, which had taken a number of major indices to their lowest levels since late-2020. As mentioned at the top, the S&P 500 (+1.97%) ended its run of 6 consecutive declines with a strong advance that took the index back into positive territory for the week. Despite the rally, the Vix managed to finish above 30 again, as it has every day this week. Indeed, the Vix has finished above 30 on nearly 19% of trading days this year, which is the fourth most in the last 20 years, behind just the crisis years of 2008, 2009, and 2020. The count hides how skewed the distribution is as in ten of those years, the Vix never once finished the trading day above 30. Yesterday's equity rally was less extreme in Europe, with the STOXX 600 (+0.30%), the DAX (+0.36%) and the FTSE 100 (+0.30%) seeing modest gains. In Asia, the Hang Seng (+1.05%) is leading gains, rebounding from recent steep losses with the Kospi (+1.01%), the CSI (+0.50%), the Shanghai Composite (+0.24%) and the Nikkei (+0.25%) are trading higher. Stock futures in the US are pointing to a slightly more negative start though with contracts on the S&P 500 (-0.11%) and NASDAQ 100 (-0.22%) both in the red. As we go to print, the Swedish media is reporting that coast guards have found a fourth leak on the Nord Stream pipeline. What worries me is that if this can be done to this pipeline what stops it being done to a fully working pipeline. Elsewhere, the People’s Bank of China (PBOC) stepped up its efforts to limit FX weakness by warning banks against betting on the yuan, after its rapid decline against the US dollar this week which pushed the Chinese currency to as high as 7.25 yesterday. Indeed, the US dollar index (+0.59%) at 113.27 is trending upwards this morning, after hitting a fresh two-decade peak yesterday before pulling back. There wasn’t much in the way of data yesterday, although US pending home sales for August were down -2.0% (vs. -1.5% expected). With the exception of April 2020 during the lockdowns, that takes them to their lowest level in over a decade. In the meantime, the US goods trade deficit for August narrowed to $87.3bn (vs. $89.0bn expected), which is its smallest level since October 2021. To the day ahead now, and data releases include German CPI for September, Italian PPI for August, and UK mortgage approvals for August (the calm before the storm). We’ll also get the weekly initial jobless claims from the US, as well as the third estimate of Q2 GDP. From central banks, we’ll also hear from an array of speakers, including ECB Vice President de Guindos, and the ECB’s Simkus, Panetta, Centeno, Villeroy, Knot, Elderson, Rehn, Vasle, Kazaks, Muller and Lane. In addition, there’ll be remarks from the Fed’s Bullard, Mester and Daly, as well as BoE Deputy Governor Ramsden and the BoE’s Tenreyro. Tyler Durden Thu, 09/29/2022 - 08:08.....»»

Category: dealsSource: nytSep 29th, 2022

Bank of England Steps in to Restore Stability After IMF Warning

The central bank moved to restore stability after the IMF said unfunded tax cuts in the U.K. may fuel inflation and are likely to increase economic inequality LONDON — The Bank of England said Wednesday that it will launch a temporary government bond-buying program to stave off “material risk to UK financial stability” after unfunded government tax cuts spooked markets and sent the British pound tumbling. The emergency intervention means the central bank will buy government bonds in an effort to stabilize the market and drive down yields. In a statement, the bank says it’s “monitoring developments in financial markets very closely’’ in light of the significant repricing of U.K. and global financial assets. The move came after the International Monetary Fund has urged the U.K. government to “reevaluate” unfunded tax cuts that it says may fuel inflation and are likely to increase economic inequality. [time-brightcove not-tgx=”true”] The value of the pound sagged Wednesday morning after the rare IMF warning to a Group of Seven economy, trading at under $1.07. The British government said it was underwriting the central bank’s emergency bond purchases, which are due to last for two weeks and are designed “to restore orderly market conditions.” “To enable the Bank to conduct this financial stability intervention, this operation has been fully indemnified by HM Treasury,” it said. Treasury chief Kwasi Kwarteng also was meeting Wednesday with executives from investment banks as the new Conservative government seeks to soothe markets. The government of Prime Minister Liz Truss on Friday unveiled a 45 billion-pound ($48 billion) package of tax cuts in an effort to spur economic growth. But the plan wasn’t accompanied by spending cuts, or even an independent cost estimate, raising concerns that it would swell government debt and add to inflation that is already running at close to a 40-year high of 9.9%. Read More: Britain’s Economy Is at a Pivotal Moment “Given elevated inflation pressures in many countries, including the U.K., we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” the IMF said in a statement. “Furthermore, the nature of the U.K. measures will likely increase inequality.” The British pound fell to a record low against the U.S. dollar Monday, to $1.0373, amid investor concern about the government’s policies, which also include borrowing billions to help shield homes and businesses from soaring energy prices. The Bank of England sought to stabilize markets, saying Monday that it was prepared to raise interest rates “as much as needed” to rein in inflation. But the bank’s next scheduled meeting is not until November, and the lack of immediate action did little to bolster the pound. The British currency is still down 4% since Friday, and the pound has fallen 20% against the dollar in the past year. The turmoil is already having real-world effects, with British mortgage lenders pulling hundreds of offers from the market amid expectations the Bank of England will sharply boost interest rates to offset the inflationary impact of the pound’s recent slide. The U.K. government says it will set out a more detailed fiscal plan and independent analysis from the Office for Budget Responsibility on Nov. 23. “The Nov. 23 budget will present an early opportunity for the U.K. government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high income earners,” the IMF said. In response, the U.K. Treasury said the government was “focused on growing the economy to raise living standards for everyone.” Read More: Britain’s New Prime Minister Liz Truss Is Inheriting a Mess The November statement will set out further details of the government’s plan and ensure that debt falls as a share of gross domestic product “in the medium term,” a spokeswoman said. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the stinging criticism by the IMF also comes at at time that UK gilt yields—the interest paid on government debt—are “sky high,” with the yield on 10-year gilts hovering around 4.4%, up by more than 340% in a year. “The IMF’s move has added to worries that the UK is fast taking on the characteristics of an emerging market economy, and risks ditching its developed country status,” Streeter wrote in an analyst note......»»

Category: topSource: timeSep 28th, 2022

El-Erian: The Cost Of The Fed"s Challenged Credibility

El-Erian: The Cost Of The Fed's Challenged Credibility Authored by Mohamed El-Erian via Project Syndicate, After previously eschewing interest-rate hikes, the US Federal Reserve has been tightening monetary policy at an unprecedented rate. But the current market turmoil and the central bank’s own revised projections show that a great deal of damage has already been done. Financial markets’ reaction to the US Federal Reserve’s latest policy move was reminiscent more of developing countries than of the world’s most powerful economy. Given that the Fed is the world’s most systemically important central bank, this is more than just a curiosity. It has implications for America’s economic well-being – and that of the rest of the world. On September 21, the Fed reinforced its two-month-old “HFL” approach of pushing interest rates higher, faster, and for a longer duration than previously anticipated. It implemented an unprecedented third successive 75-basis-point rate increase and sent a strong signal that hikes totaling another 125 basis points are on tap for the year’s last two policy meetings. It also signaled that the possibility of a “pivot” to lower rates is unlikely before 2023. The Fed’s revision of its economic projections painted a darkening picture for the United States and most other economies. It is forecasting not only lower growth but also, and more surprisingly, higher inflation – something that it has done repeatedly in recent quarters. The Fed’s latest moves are consistent with a central bank that is continuously scrambling to catch up with realities on the ground. It is the kind of thing that one typically finds in developing countries with weak institutions, not in the issuer of the world’s reserve currency and the custodian of the world’s most sophisticated financial markets – where many other countries and companies entrust their savings. The comparison is even more troubling when one considers what the recent market turmoil implies. For starters, markets see a central bank that, as hard as it tries, is still struggling to catch up with both market expectations and what is needed to contain cost-of-living pressures. Having been consistently pushed by markets to do more – and for good reason, given that core inflation is running at 6.3% and still rising – the Fed’s latest policy actions duly caused another sharp reduction in prices for both stocks and bonds. Second, markets see a central bank that expects to cause more collateral damage as it tries to meet its inflation target. Fed Chair Jerome Powell said as much this month when he continued to distance himself from the possibility of a soft or “softish” landing, as he once put it. Powell has now repeatedly signaled more “pain” ahead, implying an uncomfortably high probability of recession. The market appears to agree with this outlook: the yield curve is inverted, with the yield on ten-year Treasury bonds having fallen to around 40 bps below that on two-year bonds. Ominously, these market signals indicate that the US economy (and therefore the global economy) lacks both a monetary-policy anchor and a sufficiently credible central bank. As a result, the US needs more monetary-policy tightening than it would have if the Fed had reacted in a timely and credible fashion. That will indeed produce “pain,” in the form of foregone growth (actual and potential) and higher unemployment, which will hit the most vulnerable segments of society the hardest. For the global economy, this will translate into even greater growth fragility at a time when Europe is heading into recession, China’s performance is increasingly lagging its economic potential, and little fires are burning across the developing world. Despite this increased fragility, many other central banks will have no choice but to follow the Fed in raising interest rates beyond what would have otherwise been needed, in order to avoid “importing” more damaging inflation and unsettling financial instability. Now that the Fed finds itself in such an uncomfortable situation – one mostly of its own making – it may be inclined to eschew further rate hikes, particularly given the growing criticism that it is tipping the economy into recession, destroying wealth, and fueling instability. Yet such a course of action would risk repeating the monetary-policy mistake of the 1970s, saddling America and the world with an even longer period of stagflationary trends. Instead, the Fed should be doing much more to contain the adverse spillovers of its policy mistake, including through innovative thinking about its monetary-policy framework and more proactive collaboration with other policymaking entities (domestic and abroad). Sadly, it is too late to avoid all the detrimental economic and social consequences of the damage the Fed has caused to its own credibility. The central bank was notably late with its response to inflation. But it is not too late to contain the harm. Doing so is crucial. Tyler Durden Wed, 09/28/2022 - 13:45.....»»

Category: dealsSource: nytSep 28th, 2022

"Ruthless" King Charles To "Permanently Exile" Prince Harry

'Ruthless' King Charles To 'Permanently Exile' Prince Harry Prince Harry will be permanently exiled by King Charles, as the royal family plans to follow the playbook drawn up to overcome a crisis triggered in 1936, when Edward VIII abdicated and was obliged to live the rest of his life outside the UK, according to the Daily Beast. "The royals handled the abdication crisis by exiling Edward which meant he and Wallis ultimately came to seem like unimportant, misguided, disloyal, and even treacherous individuals to almost the entirety of the British people. It was a masterful operation in the service of which the Queen Mother, in particular, worked tirelessly," a friend of the king's told the Beast. "The same thing is already happening with Harry and Meghan, and will only gather pace over the next few years under the rule of King Charles. And of course a wayward second son is far less of an existential threat to the fabric of the monarchy than a wayward king." Let's not forget that Prince Harry's upcoming memoir has the royal family up in arms, with King Charles reportedly wanting to read it before granting Harry's children royal titles. According to another source, a Buckingham Palace Staffer, King Charles' accession statement encouraged Harry and Meghan to "continue to build their lives overseas," which was an undisguised message not to disrupt his reign by making frequent trips to the UK. "Harry and Meghan will get an invite to the coronation but they will be firmly seated in the cheap seats along with Beatrice and Eugenie, as they were at the funeral. That will be it. Charles will be ruthless when it comes to protecting the Crown, and that means keeping Harry and Meghan as far from the center of gravity as possible," the former staffer told the Beast. The news follows the revelation, reported by the Sun Thursday night, that Harry snubbed Charles’ offer of dinner the night he was at Balmoral following Queen Elizabeth’s death, after Charles had forbidden Meghan from joining Harry at Balmoral. Instead of joining Charles, Camilla, and William for supper at Charles’ home on the Balmoral estate, Birkhall, Harry stayed with Prince Andrew, Prince Edward and wife Sophie at Balmoral Castle itself. -Daily Beast "Harry was so busy trying to get Meghan to Balmoral and rowing with his family that he missed the flight. Charles has an open invitation for Harry to dine with him whenever he is in the country. But Harry was so furious that he refused to eat with his father and brother. It was a massive snub. And he got out of Balmoral at the earliest opportunity to catch the first commercial flight back to London," said a source. Kate Middleton, Prince Harry, Prince William, and Meghan Markle on the long Walk at Windsor Castle arrive to view flowers and tributes to the queen on Sept. 10, 2022, in Windsor, England. Chris Jackson/Getty Harry and Meghan had initially said that they "plan to balance our time between the United Kingdom and North America," and were open about their desire to continue to "represent" the royal family while also being able to earn money - a plan which was rebuffed by the queen, who told them at the so-called Sandringham Summit that they could have no role in public life as part-time royals. "In stepping away from the work of the Royal Family it is not possible to continue with the responsibilities and duties that come with a life of public service," read a palace statement at the time. Harry and Meghan rebuffed the decision, saying in a statement "We can all live a life of service. Service is universal." When Harry left for the United States, he made it explicitly clear via legal action against the British government (to obtain police protection) that he still sees the UK has his home and wants to operate there. In January, Harry's legal team said "The U.K. will always be Prince Harry’s home and a country he wants his wife and children to be safe in. With the lack of police protection, comes too great a personal risk." And at a February court hearing, Harry's barrister said "It goes without saying that he does want to come back to see family and friends and to continue to support the charities that are so close to his heart." The idea of Harry popping back over every few weeks to do public appearances is likely to give Charles the chills. So while the decision about Harry’s security is, strictly speaking, a matter for the courts, it is probably safe to rule out the establishment pulling any strings to get Harry what he wants. Charles’ advisers will be mindful of the fact that when Harry and Meghan dropped into the U.K. at the beginning of this month, having announced what was supposed to be a four-day whirlwind trip supporting charities “close to their hearts” (that phrase again) it completely dominated royal newsfeeds for days on end. -Daily Beast Prior to the Queen's death, tempers flared between Meghan Markle and the royals after she gave an inflammatory interview to The Cut in which she threatened to release more secrets about her time in the royal family. In short, as the Beast puts it, "Harry and Meghan are a huge distraction that the royals don't need. Charles wants them out of sight and out of mind. So he is likely to feel far more comfortable if Harry and Meghan are safely on the other side of the world..." Tyler Durden Sun, 09/25/2022 - 07:35.....»»

Category: blogSource: zerohedgeSep 25th, 2022