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Futures Tumble After UK Double-Digit Inflation Shock Sparks Surge In Yields
Futures Tumble After UK Double-Digit Inflation Shock Sparks Surge In Yields
Futures were grinding gingerly higher, perhaps celebrating the…
Futures were grinding gingerly higher, perhaps celebrating the end of the Cheney family's presence in Congress, and looked set to re-test Michael Hartnett bearish target of 4,328 on the S&P (which marked the peak of yesterday's meltup before a waterfall slide lower when spoos got to within half a point of the bogey), when algos and the few remaining carbon-based traders got a stark reminder that central banks will keep hammering risk assets after the UK reported a blistering CPI print, which at a double digit 10.1% was not only higher than the highest forecast, but was the highest in 40 years.
The print appeared to shock markets out of their month-long levitating complacency, and yields - both in the UK and the US - spiked...
... and with yields surging, futures had no choice but to notice and after trading at session highs just before the UK CPI print, they have since tumbled more than 40 points and were last down 0.85% or 37 points to 4,271.
Nasdaq 100 futures retreated 0.9% signaling a selloff in technology names will continue. The dollar rose as investors awaited the minutes of the Fed’s last policy meeting for clues on policy makers’ sensitivity to weaker economic data.
In US premarket trading, retail giant Target slumped 4% after reporting earnings that missed expectations despite still predicting a rebound. Applied Materials and PayPal dropped at least 1.3%. Tech stocks are the forefront of the growing pessimism over equity valuations on the back of Fed rate increases. The S&P 500 had posted a small gain on Tuesday, aided by earnings reports from retailers Walmart Inc. and Home Depot. Here are some of the other biggest U.S. movers today:
- Manchester United (MANU US) rises as much as 17% in US premarket trading before trimming most of the gains, after Tesla CEO Elon Musk said he was buying the English football club but later added that he was joking.
- Hill International (HIL US) shares rise 61% in premarket trading hours after it announced Global Infrastructure Solutions will commence an all-cash tender offer for $2.85/share in cash, representing a premium of 63% to the last closing price.
- BioNTech (BNTX US) was initiated with a market perform recommendation at Cowen, which expects demand for Covid-19 vaccines to mirror annual flu trends as the pandemic enters its endemic phase.
- Bed Bath & Beyond (BBBY US) shares surge 20% in premarket trading, putting the stock on track for its sixth day of gains. The home-goods company has helped reinvigorate a wave of meme stock buying
- Agilent (A US) saw its price target boosted at brokers as analysts say the scientific testing equipment maker’s results were strong thanks to growth in biopharma and a recovery in China, while the company’s guidance was on the conservative side. Shares rose .
- Jefferies initiated coverage of Waldencast Plc (WALD US) class A with a buy recommendation as analyst Stephanie Wissink sees 29% upside potential.
- Sea Ltd. (SE US) ADRs slipped as much as 2.1% in US premarket trading, extending Tuesday’s declines, as Morgan Stanley cut its PT on expectations of slowing growth at the Shopee owner’s e-commerce business in the third quarter.
- Weber (WEBR US) downgraded to sell from neutral at Citi, which says there are too many concerns to remain on the sidelines, including a decline in point-of-sale traffic and macro factors like inflation weighing on consumer demand
In the past two months, US stocks rallied on signs of peaking inflation and an earnings-reporting season that saw four out of five companies meeting or beating estimates. Boosted by relentless systematic (CTA) buying and retail-driven short squeezes, as well as a surge in buybacks, stocks recovered more than 50% of the bear market retracement. Yet, continuing rate hikes and the likelihood of a recession in the world’s largest economy are weighing on sentiment. Meanwhile, concern is growing that Fed rate setters will remain focused on the fight against inflation rather than supporting growth.
“We expect the FOMC minutes to have a hawkish tilt,” Carol Kong, strategist at Commonwealth Bank of Australia Ltd., wrote in a note. “We would not be surprised if the minutes show the FOMC considered a 100 basis-point increase in July.”
In Europe, the Stoxx 600 fell after a strong start amid signs the continent’s energy crisis is worsening. Benchmark natural-gas futures jumped as much as 5.1% on expectations the hot weather will boost demand for cooling. In the UK, consumer-price growth jumped to 10.1%, sending gilts tumbling. Real estate, retailers and miners are the worst performing sectors. The Stoxx 600 Real Estate Index declined 2%, making it the worst-performing sector in the wider European market, as focus turned to UK inflation that soared to double digits for the first time in four decades and also to today's FOMC minutes. German and Swedish names almost exclusively account for the 10 biggest decliners. TAG Immobilien drops 5.4%, Wallenstam is down 4.7%, Castellum falls 4% and LEG Immobilien declines 3.3%. The sector tumbles on rising bond yields, with 10y Bund yield up 11bps, and dwindling demand for Swedish real estate amid rising rates.
Earlier on Wednesday, stocks rose in Asia amid speculation that China may deploy more stimulus to shore up its ailing economy while Japanese exporters were boosted by a weaker yen. After a string of weak data driven by a property-sector slump and Covid curbs, China’s Premier Li Keqiang asked local officials from six key provinces that account for 40% of the economy to bolster pro-growth measures. The MSCI Asia Pacific Index advanced as much as 0.8%, with consumer-discretionary and industrial stocks such as Japanese automakers Toyota and Honda among the leaders on Wednesday. The benchmark Topix erased its year-to-date loss. Chinese food-delivery platform Meituan also rebounded after dropping more than 9% in the previous session on a Reuters report that Tencent may divest its stake in the firm. Chinese stocks erased declines early in the day, as investors hoped for more economic stimulus after a surprise rate cut on Monday failed to excite the market. Premier Li Keqiang has asked local officials from six key provinces that account for about 40% of the country’s economy to bolster pro-growth measures.
“I believe policymakers have the tools to prevent a hard landing if needed,” Kristina Hooper, chief global market strategist at Invesco, said in a note. “I find investors are overly pessimistic about Chinese stocks -- which means there is the potential for positive surprise.” Asia’s stock benchmark is trading at mid-June levels as traders attempt to determine the trajectory of interest-rate hikes and economic growth globally -- as well as the impact of China’s property crisis and Covid policies. Meanwhile, minutes of the US Federal Reserve’s July policy meeting, out later Wednesday, will be carefully parsed. New Zealand stocks closed little changed as the country’s central bank raised interest rates by a half percentage point for a fourth-straight meeting. Australia's S&P/ASX 200 index rose 0.3% to close at 7,127.70, supported by materials and consumer discretionary stocks. South Korea’s benchmark missed out on the rally across Asian equities, as losses by large-cap exporters weighed on the measure
In FX, the Bloomberg Dollar Spot Index rose as the dollar gained versus most of its Group-of-10 peers. The pound was the best G-10 performer while gilts slumped, led by the short end and sending 2-year yields to their highest level since 2008, after UK inflation accelerated more than expected in July. The yield curve inverted the most since the financial crisis as traders ratcheted up bets on BOE rate hikes in money markets, wagering on 200 more basis points of hikes by May. The euro traded in a narrow range against the dollar while the region’s bonds slumped, led by the front end. Scandinavian currencies recovered some early European session losses while the aussie, kiwi and yen extended their slide in thin trading. EUR/NOK one-day volatility touched a 15.12% high before paring ahead of Norges Bank’s meeting Thursday where it may have to raise rates by a bigger margin than indicated in June given Norway’s inflation exceeded forecasts for a fourth straight month, hitting a new 34-year high. Consumer sentiment in Norway fell to the lowest level since data began in 1992, according to Finance Norway. New Zealand’s dollar and bond yields both rose in response to the Reserve Bank hiking rates by 50bps, while flagging concern about labor market pressures and consequent wage inflation; the currency subsequently gave up gains in early European trading. The Aussie slumped after data showing the nation’s wages advanced at less than half the pace of inflation in the three months through June, backing the Reserve Bank’s move to give itself more flexibility on interest rates.
In rates, treasuries held losses incurred during European morning as gilt yields climbed after UK inflation rose more than forecast. US 10-year around 2.87% is 6.5bp cheaper on the day vs ~13bp for UK 10-year; UK curve aggressively bear-flattened following inflation data, with long-end yields rising about 10bp. Front-end UK yields remain cheaper by ~20bp, off session highs, leading a global government bond selloff. US yields are higher on the day by by 4bp-7bp; focal points of US session are 20-year bond auction and FOMC minutes release an hour later. Treasury auctions resume with $15b 20-year bond sale at 1pm ET; WI 20-year yield at around 3.35% is ~7bp richer than July’s sale, which stopped 2.7bp through the WI level.
In commodities, oil fluctuated between gains and losses, and was in sight of a more than six-month low -- reflecting lingering worries about a tough economic outlook amid high inflation and tightening monetary policy. Spot gold is little changed at $1,774/oz
Looking at the day ahead, the FOMC minutes from July will be the main highlight, and the other central bank speaker will be Fed Governor Bowman. Otherwise, earnings releases include Target, Lowe’s and Cisco Systems, and data releases include US retail sales and UK CPI for July.
- S&P 500 futures down 0.3% to 4,293.00
- STOXX Europe 600 little changed at 443.30
- MXAP up 0.5% to 163.48
- MXAPJ up 0.2% to 530.38
- Nikkei up 1.2% to 29,222.77
- Topix up 1.3% to 2,006.99
- Hang Seng Index up 0.5% to 19,922.45
- Shanghai Composite up 0.4% to 3,292.53
- Sensex up 0.5% to 60,168.83
- Australia S&P/ASX 200 up 0.3% to 7,127.68
- Kospi down 0.7% to 2,516.47
- German 10Y yield little changed at 1.06%
- Euro little changed at $1.0178
- Gold spot down 0.0% to $1,775.21
- U.S. Dollar Index little changed at 106.50
Top Overnight News from Bloomberg
- More market prognosticators are alighting on the idea of benchmark Treasury yields sliding to 2% if the US succumbs to a recession. That’s an out-of-consensus call, compared with Bloomberg estimates of about a 3% level by the end of this year and similar levels through 2023. But it’s a sign of how growth worries are forcing a rethink in some quarters
- The euro-area economy grew slightly less than initially estimated in the second quarter as signs continue to emerge that momentum is unraveling. Output rose 0.6% from the previous three months between April and June, compared with a preliminary reading of 0.7%, Eurostat said Wednesday
- Egypt became a prime destination for hot money by tethering its currency and boasting the world’s highest interest rates when adjusted for inflation
- Norway’s $1.3 trillion sovereign wealth fund, the world’s largest, posted its biggest loss since the pandemic as rate hikes, surging inflation and Russia’s invasion of Ukraine spurred volatility. It lost an equivalent of $174 billion in the six months through June, or 14.4%
A more detailed look at global markets courtesy of Newsquawk
Asia-Pac stocks just about shrugged off the choppy lead from the US where markets were tentative amid mixed data signals and strong retailer earnings, but with gains capped overnight ahead of the FOMC Minutes and as participants digested another 50bps rate hike by the RBNZ. ASX 200 swung between gains and losses with the index indecisive amid a slew of earnings and with strength in the consumer sectors offset by underperformance in tech, energy and healthcare. Nikkei 225 climbed above the 29,000 level with the index unfazed by mixed data releases in which Machinery Orders disappointed although both Exports and Imports topped forecasts. Hang Seng and Shanghai Comp were somewhat varied with Hong Kong led higher by tech amid plenty of attention on Meituan after reports its largest shareholder Tencent could reduce all or the bulk of its shares in the Co. which a Tencent executive later refuted, while the mainland was less decisive amid headwinds from the ongoing COVID situation and with power restrictions disrupting activity in Sichuan, although reports also noted that Chinese Premier Li told top provincial officials that they must have a sense of urgency to consolidate the economic recovery and reiterated to step up macro policies.
Top Asian News
- RBNZ hiked the OCR by 50bps to 3.00%, as expected, while it stated that conditions need to continue to tighten and they agreed that maintaining the current pace of tightening remains the best means. RBNZ also agreed that further increases in the OCR were required to meet the remit objective and that domestic inflationary pressures had increased since May. Furthermore, the RBNZ raised its projections for the OCR and inflation with the OCR seen at 3.69% in Dec. 2022 (prev. 3.41%) and at 4.1% for both Sept. 2023 and Dec. 2023 (prev. 3.95%), while it sees annual CPI at 4.1% by Sept. 2023 (prev. 3.0%).
- RBNZ Governor Orr stated at the press conference that they are not forecasting a recession but expected below-potential growth amid subdued consumer spending. Governor Orr also stated that they did not discuss a 75bps rate hike today and that 50bps moves have been orderly and sufficient, while he added that getting rates to 4% would buy comfort for the policy committee and that a Cash Rate of around 4% is unambiguously above neutral and sufficient to meet the inflation mandate.
- Chongqing, China is to curb power use for eight days for industry.
- China’s Infrastructure Boom Gets Swamped by Property Woes
- Tencent 2Q Revenue Misses Estimates
- Hong Kong Denies Democracy Advocates Security Law Jury Trial
- UN Expert Says Xinjiang Forced Labor Claims ‘Reasonable’
- Singapore’s COE Category B Bidding Hits New Record
- Delayed Deals Add to Floundering Singapore IPO Market: ECM Watch
European bourses have dipped from initial mixed/flat performance and are modestly into negative territory, Euro Stoxx 50 -0.5%. Stateside, futures are under similar pressure awaiting fresh corporate updates and the July FOMC Minutes, ES -0.6%. Fresh drivers relatively limited throughout the session with known themes in play and focus on upcoming risk events; stocks also suffering on further hawkish yield action. Lowe's Companies Inc (LOW) Q1 2023 (USD): EPS 4.68 (exp. 4.58), Revenue 27.47 (exp. 28.12bln); expect FY22 total & comp. sales at bottom-end of outlook range, Operating Income and Diluted EPS at top-end. Target Corp (TGT) Q1 2023 (USD): EPS 0.39 (exp. 0.72), Revenue 26.0bln (exp. 26.04bln); current trends support prior guidance.
Top European News
- German Gas to Last Less Than 3 Months if Russia Cuts Supply
- European Gas Surges Again as Higher Demand Compounds Supply Pain
- Entain Falls; Citi Views Fine Negatively but Notes Steps by Firm
- UK Inflation Hits Double Digits for the First Time in 40 Years
- Crypto.com Receives Registration as UK Cryptoasset Provider
- Greenback underpinned ahead of US retail sales data and FOMC minutes, DXY holds tight around 106.500.
- Pound pegged back after spike in wake of stronger than expected UK inflation metrics, Cable hovers circa 1.2100 after fade into 1.2150.
- Kiwi retreats following knee jerk rise on the back of hawkish RBNZ hike, NZD/USD near 0.6300 from 0.6380+ overnight peak.
- Aussie undermined by marginally softer than anticipated wage prices and lower RBA tightening bets in response, AUD/USD well under 0.7000 vs 0.7026 at one stage.
- Yen weaker as yield differentials widen again, but Euro cushioned by more pronounced EGB reversal vs USTs, USD/JPY probes 21 DMA just below 135.00, EUR/USD bounces from around 1.0150 towards 1.0200.
- Loonie and Nokkie soft amidst latest slippage in oil, USD/CAD closer to 1.2900 than 1.2800, EUR/NOK nudging 9.8600 within 9.8215-9.8740 range.
- Debt retracement ongoing and gathering pace ahead of Wednesday's key risk events.
- Bunds now closer to 154.00 than 156.00 and 157.00 only yesterday, Gilts not far from 114.50 vs almost 116.00 and 117.00+ earlier this week and T-note sub-119-00 vs 119-31 at best on Monday.
- Sonia strip hit hardest as markets price in aggressive BoE hikes in response to UK inflation data toppy already elevated expectations.
- Crude benchmarks are currently little changed overall, having recovered from a bout of initial pressure; newsflow thin awaiting fresh JCPOA developments
- Spot gold is little changed overall but with a slight negative bias as the USD remains resilient and outpaces the yellow metal as the haven of choice.
- Aluminium is the clear outperformer amid updates from Norsk Hydro that they are shutting production at their Slovalco site (175k/T year) by end-September, due to elevated energy prices.
- OPEC Sec Gen says he sees a likelihood of an oil-supply squeeze this year, open for dialogue with the US. Still bullish on oil demand for 2022. Too soon to call the outcome of the September 5th gathering. Spare capacity at around the 2-3mln BPD mark, "running on thin ice".
- US Private Inventory Data (bbls): Crude -0.4mln (exp. -0.3mln), Cushing +0.3mln, Gasoline -4.5mln (exp. -1.1mln), Distillates -0.8mln (exp. +0.4mln).
- Shell (SHEL LN) announced it is to shut its Gulf of Mexico Odyssey and Delta crude pipelines for two weeks in September for maintenance, according to Reuters.
- Uniper (UN01 GY) says the energy supply situation in Europe is far from easing and gas supply in winter remains "extremely challenging".
- China sets the second batch of the 2022 rare earth mining output quota at 109.2k/T, via Industry Ministry; smelting/separation quota 104.8k/T.
- China's military is to partake in a military exercise in Russia, their participation has nothing to do with the international situation.
- Taiwan's Defence Ministry says they have detected 21 Chinese aircraft and five ships around Taiwan on Wednesday, via Reuters.
- Iran is calling on the US to free jailed Iranian's, says they are prepared for prisoner swaps, via Fars.
US Event Calendar
- 07:00: Aug. MBA Mortgage Applications, prior 0.2%
- 08:30: July Retail Sales Advance MoM, est. 0.1%, prior 1.0%
- 08:30: July Retail Sales Ex Auto MoM, est. -0.1%, prior 1.0%
- 08:30: July Retail Sales Control Group, est. 0.6%, prior 0.8%
- 10:00: June Business Inventories, est. 1.4%, prior 1.4%
- 14:00: July FOMC Meeting Minutes
DB's Tim Wessel concludes the overnight wrap
Starting in Europe, where the looming energy crisis remains at the forefront. An update from our team, who just published the fourth edition of their indispensable gas monitor (link here), where they note the surprisingly fast rebuild of German gas storage, driven by reductions in industrial activity, reduces the risk that rationing may become reality this winter. Many more insights within, so do read the full piece for analysis spanning scenarios. Keep in mind, that while gas may be available, it is set to come at a higher clearing price, which manifest itself in markets yesterday where European natural gas futures rose a further +2.64% to €226 per megawatt-hour, just shy of their closing record at €227 in March. But, that’s still well beneath their intraday high from March, where at one point they traded at €345. Further, one-year German power futures increased +6.30%, breaching €500 for the first time, closing at €507. Germany is weighing consumer relief measures in light of climbing consumer prices and also announced that planned nuclear facility closures would be “temporarily” postponed.
The upward energy price pressure and attenuated (albeit, not eliminated) risk of rationing pushed European sovereign yields higher. 10yr German bunds climbed +7.1bps to 0.97%, while 10yr OATs kept the pace, increasing +7.4bps. 10yr BTPs increased +15.9bps, widening sovereign spreads, while high yield crossover spreads widened +10.2bps in the credit space.
Equities were resilient, however, with the STOXX 600 posting a +0.16% gain after flitting around a narrow range all day. Regional indices were also robust to climbing energy prices, with the DAX up +0.68% and the CAC +0.34% higher. In the States the S&P 500 registered a modest +0.19% gain, with the NASDAQ mirroring the index, falling -0.19%. Retail shares drove the S&P on the day, with the two consumer sectors both gaining more than +1%, following strong earnings reports from Wal Mart and Home Depot.
Treasury yields also climbed, but the story was the further flattening in the curve. 2yr yields were +7.5bps higher while 10yr yields managed to increase just +1.6bps, leaving 2s10s at its second most negative close of the cycle at -46bps. 10yr yields are another basis point higher this morning. A hodgepodge of data painted a mixed picture. Housing permits beat expectations (+1674k vs. +1640k) while starts (+1446k vs. +1527k) fell to their slowest pace since February 2021. However, under the hood, even permits weren’t necessarily as strong as first glance, as single family permits fell -4.3% with gains in multifamily pushing the aggregate higher. Indeed, year-over-year, single family permits have now fallen -11.7% while multifamily permits are +23.5% higher. So the single family housing market continues to feel the impact of Fed tightening. Meanwhile, industrial production climbed +0.6% month-over-month (vs. +0.3%), with capacity utilization hitting its highest level since 2008 at 80.3%.
Drifting north of the border, Canadian inflation slowed to 7.6% YoY in July in line with estimates, while the average of core measures climbed to a record 5.3%. Bank of Canada Governor Macklem penned an opinion piece saying that while it looks like inflation may have peaked, “the bad news is that inflation will likely remain too high for some time.” In turn, Canadian OIS rates by December climbed +16.2bps.
In other data, the expectations component of the German ZEW survey fell to -55.3, its lowest level since October 2008 at the depths of the GFC. In the UK, regular pay (excluding bonuses) fell by -3.0% in real terms over the year to April-June 2022, its fastest decline on record.
On the Iranian nuclear deal, EU negotiators reportedly found Iran’s response constructive, though Iran still had some concerns. Notably, Iran is looking for guarantees that if a future US administration withdraws from the JCPOA the US will "have to pay a price”, seeking insulation from the vagaries of representative democracy.
Asian equity markets are trading higher after Wall Street’s solid performance overnight. The Nikkei (+0.76%) is leading gains across the region with the Hang Seng (+0.57%), the Shanghai Composite (+0.23%) and the CSI (+0.51%) all rebounding from its opening losses this morning. US futures are struggling to gain traction this morning with the S&P 500 (-0.02%) and NASDAQ 100 (-0.09%) trading just below flat.
The Reserve Bank of New Zealand lifted its official cash rate (OCR) for the fourth consecutive time by an expected +50bps to 3%, a seven-year high, while bringing forward the estimate of future rate increases. The central bank expects the OCR will reach 3.69% at the end of this year and expects it to peak at 4.1% in March 2023, higher and sooner than previously forecast.
Early morning data coming out from Japan showed that exports rose +19.0% y/y in July (v/s +17.6% expected) posting 17 straight months of gains while imports advanced +47.2% (v/s +45.5% expected) driven by global fuel inflation and a weakening yen. With the imports outweighing exports, the nation reported trade deficit for the 14th consecutive month, swelling to -2.13 trillion yen in July (v/s -1.91 trillion yen expected) compared to a revised deficit of -1.95 trillion yen in June.
In terms of the day ahead, the FOMC minutes from July will be the main highlight, and the other central bank speaker will be Fed Governor Bowman. Otherwise, earnings releases include Target, Lowe’s and Cisco Systems, and data releases include US retail sales and UK CPI for July.
UK life science competitiveness indicators 2022: measuring what matters most?
The latest life science competitiveness indicators (LSCIs) were published by the Office of Life Sciences (OLS) in July
The post UK life science competitiveness…
The latest life science competitiveness indicators (LSCIs) were published by the Office of Life Sciences (OLS) in July 2022. The indicators did not bring universal good news, but Leela Barham argues we need to consider whether the indicators are measuring what matters most if we are to understand more about the health of the UK life sciences industry and, most importantly, what it means for patients.
Interest in indicators
There are a lot of people who have an interest in just how well the life sciences industry is doing in the UK (and beyond), not only patients who can benefit from today’s treatments, but society more generally too. If we aren’t already, we’re all likely to be patients one day, or caregivers of one at some point in the future.
That explains why there’s been an interest for years in bringing together indicators on the industry in the UK.
The life sciences ecosystem
The 2022 LSCIs are notable not only for the worrying trends that they suggest – the ABPI said that the data should ring alarm bells across government – but also because they have been published this time alongside a narrative on the life sciences ecosystem. This is an attempt to identify today’s key drivers of success in the UK life sciences industry and a timely reminder of the dual focus of the industry on patient outcomes as well as economic growth.
Whilst it’s easy to pick holes – for example, why is only industry identified as a key player in the tax environment? – that there is a narrative like this helps to remind people that it’s not a simple input/output equation for innovation and getting treatments to patients who need them.
This effort has also been undertaken to more closely link indicators with each part of the ecosystem. This can be taken as an attempt to be a little more systematic.
What’s in the indicators…
There’s no effort to present any weighting for the indicators and stakeholders are likely to focus on those that matter most to them.
Access and uptake have been highlighted in particular by the ABPI, which said that “[the UK is] falling behind our global competitors when it comes to crucial areas like the use of diagnostics, patient uptake of new medicines, recruitment to clinical trials and pharmaceutical exports.” The Ethical Medicines Industry Group (EMIG) also highlighted access and uptake and said, “This data builds on the worrying picture presented in the previous report and clearly demonstrates the argument industry has been making to the government about the low and slow availability of new medicines in the UK. The data on uptake is particularly damning with the UK consistently falling well below the average levels of uptake observed in comparator countries.”
The 2022 LSCIs includes access by taking analysis from the European Federation of Pharmaceutical Industries and Association (EFPIA) WAIT indicators, looking at the rate of availability for new medicines in England – and for the first time, Scotland – versus other countries. The median number of days between marketing authorisation and medicines being made available is included too.
Uptake is also included by looking at the UK uptake (days of therapy) of new medicines, per capita, as a ratio of comparator countries’ average.
Welcome as well is a new indicator on the availability and utilisation of diagnostic technologies. It’s a reminder about the wider context of ensuring patients get the treatments that they can benefit from most and it highlights how the NHS needs to be ‘ready’ so treatments can be used in practice, not just given the stamp of approval from the regulator and NICE.
…and what’s not
The 2022 LSCIs don’t, however, include the speed and volume of NICE Technology Appraisals that were in previous iterations. The user guide explains that these have been replaced to “allow an international comparison of access to new medicines through a standardised methodology”. That’s as may well be, but the speed of NICE’s work has an obvious impact on whether patients can have timely routinely funded access to positively appraised treatments.
NICE’s board has discussed the speed of the agency’s work and the challenge of presenting the numbers. In part, this is because speed is not just down to NICE: Companies can slow things down, and COVID-19 was a reminder of external shocks to the system that can affect day-to-day work. Could capturing and presenting these complexities also be a reason to drop it from the LSCIs? The user guide notes how NICE was the original source for the speed of TAs and that they have changed the methodology behind their Key Performance Indicator (KPI). Sidestepped is exactly how it’s been changed and where the new KPI can be found.
The 2022 LSCIs also highlight – albeit in an appendix – how pharmaceutical expenditure is not currently part of the indicators. To summarise the argument, it’s too hard to compare UK spending to other countries in a meaningful way. But there are some warm words about how monitoring spend can be a useful context for understanding value for money and that this “should be looked at within the context of uptake and access to medicines.”
To be honest, though, it’s pretty hard to know just what the UK spends in any case, let alone how that compares to other countries. Better data has been emerging for England with expenditure estimates taking account of central rebates and at least England is the biggest share of the market, but there’s no headline figure for real spending for the UK.
The latest iteration of indicators and invitation for feedback
As ever, the same thing comes back in new guises. Indicators from the 2000s were captured in the Pharmaceutical Industry Competitiveness Task Force (PICTF) Indicators. The July 2022 LSCIs are the eighth version. They are a stripped-down version with 29 indicators; the 2005 PICTF had 46.
PICTF used to present the marginal rate of corporation tax, something that has become more relevant today because rebates from companies are predicted to be even higher than corporation tax in 2023. Maybe it’s time for a throwback?
However, the evolution of PICTF to LSCIs and the latest iteration of these, just shows how it’s tricky to decide what to measure – let alone what it is possible to measure with meaning – and the balance between seeing the wood for the trees. There’s no such thing as a perfect set of indicators and the efforts to improve the LSCI are welcome.
The OLS says it welcomes user feedback, including any changes for the future. I vote to bring back the speed of NICE appraisals, including a breakdown for who drives this; companies, NICE, or something else. And why not complement new data on access and uptake in Scotland and add in the speed of the Scottish Medicines Consortiums (SMC) recommendations too? Stakeholders should take the option to give feedback and share their views on what they would find most useful.
About the author
Leela Barham is a researcher and writer who has worked with all stakeholders across the health care system, both in the UK and internationally, on the economics of the pharmaceutical industry. Leela worked as an advisor to the Department of Health and Social Care on the 2019 Voluntary Scheme for Branded Medicines Pricing and Access (VPAS).
The post UK life science competitiveness indicators 2022: measuring what matters most? appeared first on .economic growth covid-19 link clinical trials therapy european uk
How Long Will This Recession Last?
The most important question for asset prices right now, from stocks to houses to Bitcoin, is whether we’re due for a recession. Last week we got confirmation…
The most important question for asset prices right now, from stocks to houses to Bitcoin, is whether we’re due for a recession. Last week we got confirmation that according to the traditional definition of a recession – 2 quarters of negative growth – we are already in a recession.
The response from this administration has been denial and word games rather than actually trying to stop the slide. At which point the betting shifts to whether it’ll be a shallow 1991-style recession or a big, 2008-style one, perhaps with a financial crisis to spice things up.
Bigger-picture, what we’re seeing is a concentrated version of the world that paper money delivers: an endless series of booms, busts, and financial crises, all to sustain a permanent siphon of the peoples’ wealth towards subsidizing federal deficits and Wall Street-brokered leverage. Millions are waking up to what fiat money does, which could be bullish for Bitcoin in the long run.
First, the GDP numbers. Going by the Bureau of Economic Analysis (BEA), real GDP shrank at an annualized rate of 1.6% in Q1 and then dropped another annualized 0.9% in this most recent Q2. GDP is revised several times through the quarter, so that could change for better or worse. Meanwhile, of course, if they’re under-estimating inflation, as many believe, then the real decline could be much worse. Perhaps on the scale of a 3% annual drop in GDP.
To put that in perspective, in 2008 real GDP shrunk 1.6% in the first bad quarter (Q1 ’08), then rebounded to plus 2.3% in Q2 before falling to -2.1% in Q3. So, just reading the numbers, we’re in a substantially worse spot at the moment than 2008, even if we believe the inflation numbers.
By the way, about those definitions, the administration correctly claims that the private economics outfit NBER has the final say on what’s a recession. The problem is that over the past 75 years the NBER has never failed to call two down quarters a recession. Rather, they’ve only used their discretion to call a zig-zag a recession, as in 2008. So NBER only calls it worse, never better than the two-quarter standard. Why the chicken-little NBER is suddenly dismissing falling boulders is a very valid question, but then you probably already know why.
How Long will the Pain Last?
So where to next? Given the Fed is openly engineering a recession in order to slow inflation, the key question is whether inflation comes down on its own or will the Fed try to engineer harder.
Now, to be fair, inflation could come down to some degree. After all, if you shut down half the economy worldwide, there will be some hiccups along the way. Considering there’s little public appetite for new lockdowns and Ukraine is settling into a slog, barring a still-unlikely Chinese escalation over Taiwan things should continue ironing out.
Indeed, money printing is settling down to more normal rates: Over the past year, money supply in M2 has grown 5.6%, similar to the Obama and Trump eras. That’s down from 25% in the first year of the pandemic and 11% in the second year.
So the main driver of inflation — federal spending — is easing.
Of course, that doesn’t mean the pain is over; inflation famously lags money supply, typically around 18 months. And M2 growth has only recently calmed down. Meaning money could continue driving high inflation for, going by history, another 16-odd months.
At the same time, the slowing economy itself will probably start slowing inflation via “demand destruction” — fewer people buying less stuff. Indeed, that’s the Fed’s goal in driving higher rates, to choke off the private economy. But the question is will private demand come down a little or a lot? Literally, nobody knows — as so often in economics, we’ve never had precisely this sequence of economic shocks, so we can only guess from history.
By the way, a few weeks ago I did guess based on history, and the punchline is it gets ugly depending on the comparables, but nobody knows which will happen. Indeed at a recent conference in Europe, Chairman Powell himself remarked, “We now understand better how little we understand about inflation.” Invites the question of why he didn’t resign on the spot. But underlining that nobody knows how fast inflation will fall – if it falls at all -- and how much of the economy it takes down with it.
Of course, this “demand destruction” is up against the shrinking economy itself. That is, if the real economy is shrinking because of Biden’s War on Production or because new climate or race mandates are imposed on the economy, then inflation rises simply because there’s less stuff being produced.
Finally, I think the biggest unknown on inflation, hence on GDP’s future path, is what happens to the giant lump of fresh money that was pumped out during Covid — indeed, almost $5 trillion. Much of that new money isn’t showing up in inflation yet because it remains stashed in bank accounts. It’s stashed either because people didn’t need the free money and saved it, or because they saved up as a cushion during the scary times of Covid.
Effectively, all that money has been buried in the backyard in terms of inflation – it’s not for sale. But once those bank accounts start to empty, which should happen both as Covid fears recede and as the economy slows, all those frozen trillions are released into the wild to go chase a now dwindling pile of goods, giving inflation a second wind. You can see in the chart below it’s just starting to trickle out, with much more to go.
So, in sum, the main drivers of inflation these past two and a half years are fading, but most of that fresh money is still locked up. So we could still have a long period of elevated inflation. And, if we do, the Fed could continue panic-hiking into a serious recession or even a financial crash.
One interesting Zerohedge chart this week noted that bouts of high inflation tend to last two and a half years before coming down. Which would put us at another year or so of pain. Of course, that two and a half year cycle doesn’t drop from the sky; it’s driven by the central bank itself reacting to bad numbers and jacking rates, noting that lag between M2 and inflation.
Having said, the orgy of money printing these past two years has been substantially higher even than the “Great Inflation” of the 1970’s – it turns out it took a lot of trillions to tranquilize the population into accepting lockdowns. So the magnitudes are likely to be larger, or the timelines longer, than what we’ve seen since the 1950’s.
Recession: How Long and How Deep
The shape of recession will be a question of how those four inflation factors (slowing M2, fading Covid, falling production, draining savings) impact Fed rate decisions, which in turn either crash harder or soften the blow.
If inflation does come down a lot due to those four factors (“on its own” is how the news will frame it), then the Fed will pause or reverse hikes, and we’ll probably limp along like the Obama years. That is, government will continue to excrete new economy-hobbling regulations and taxes, but the economy will be able to handle it, cleaning up the messes as quickly as government makes them.
Indeed, that’s the going bet on Wall Street, with current projections for positive but fading GDP growth the rest of this year and 2023, ending next year at 1.3% real growth – pathetic, but not a 1970’s-style catastrophe.
So that’s the best case: we coast like a car that’s run out of gas, slowing gradually until either a new administration reverses course or until enough economic deadwood has been cleared that the economy turns back to growth.
And if inflation doesn’t come down “on its own?” Then the Fed, after its habitual several quarters of denial, gets back to economy-crushing hikes. Ushering in a potentially severe recession.
Of course, there is an out-of-box solution, which is to end inflation by dramatically lowering federal spending. Simply getting back to pre-Covid could drop federal spending by some $1.5 trillion per year, while getting back to a Bill Clinton-scale government drops more like $4 trillion every year. We’d have the debt paid off in a decade.
Trimming a couple trillion off federal spending would indeed tame inflation for decades to come. But then you’d have to be pretty naïve to think this administration and Fed will go that path.
So that leaves the most likely stubborn-inflation scenario: Fed pretends it’s not there for a while, then crashes the economy so We the People get to, once again, tighten our belts.
So, bottom line, it’s a recession at the moment; whether it gets worse depends on inflation, and policymakers goofing around whistling past graveyards should give anyone pause.stocks pandemic bitcoin
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