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Euro slips to 5-month low

The euro remains under pressure, and EUR/USD has fallen below the 1.1200 level for the first time since late June. The euro is trading at 1.1194 in the North American session, down 0.51% on the day. The euro is having a dreadful month of November, down…



The euro remains under pressure, and EUR/USD has fallen below the 1.1200 level for the first time since late June. The euro is trading at 1.1194 in the North American session, down 0.51% on the day. The euro is having a dreadful month of November, down 3.17%.

German business confidence declines

The euro is having another bad day at the office, courtesy of a drop in the German Ifo business climate survey. In November, business confidence fell to 96.5, down from 97.7 in November. The index has declined for a fifth straight month, pointing to a prolonged downtrend. The survey found that supply bottlenecks and the fourth wave of Covid were the top concerns of businesses. Manufacturing continues to expand, but the production has been scaled back due to a shortage in materials, such as auto microchips. A spike in Covid cases and supply shortages is a recipe for trouble, and the German central bank has warned that Q4 could show negative growth due to the shortage in goods and workers, combined with health restrictions due to Covid.

With US markets closed for Thanksgiving, attention will be focused on the ECB. The minutes of the November policy meeting will be released, and investors will be looking for clues ahead of the key December policy meeting. The ECB is expected to announce at the meeting that the Pandemic Emergency Programme (PEPP) will be terminated in March 2022. As well, ECB Christine Lagarde will address an ECB legal conference on Thursday and Friday. Lagarde has done her best to dampen expectations of a rate hike before 2023 and has dismissed inflation as being transient. However, as other major central bankers are finding, rising inflation can only be ignored for so long.

Lagarde’s sanguine view on inflation is not shared by everybody at the ECB. Executive Board member Isabel Schnabel said in an interview this week that “risks to inflation are skewed to the upside”. This assessment wasn’t earth-shattering, but a hawkish opinion from an ECB member is very unusual and therefore newsworthy. Following her comments, the markets factored in a 0.10% rate increase in December 2022.


 EUR/USD Technical

  • EUR/USD has broken below support at 1.1201, which had held since July. This is followed by support at 1.1118
  • There is resistance at 1.1415. Above, there is resistance at 1.1546

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This Week in Apps: Twitter launches livestream shopping, Netflix snags new games, Tile gets acquired

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy. The app industry continues to grow, with a record 218 billion downloads and $143 billion in global..



Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry continues to grow, with a record 218 billion downloads and $143 billion in global consumer spend in 2020. Consumers last year also spent 3.5 trillion minutes using apps on Android devices alone. And in the U.S., app usage surged ahead of the time spent watching live TV. Currently, the average American watches 3.7 hours of live TV per day, but now spends four hours per day on their mobile devices.

Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In 2020, investors poured $73 billion in capital into mobile companies — a figure that’s up 27% year-over-year.

This Week in Apps offers a way to keep up with this fast-moving industry in one place with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions, and suggestions about new apps and games to try, too.

Do you want This Week in Apps in your inbox every Saturday? Sign up here:

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Twitter launches livestream shopping

Image Credits: Twitter

Twitter’s e-commerce initiatives now include livestream shopping, the company announced this week, and Walmart will be the first retailer to test the new platform. The Live Shopping service will take advantage of Twitter’s existing capabilities in livestreaming content and its newer e-commerce features, like the Shop Module for business profiles. During the upcoming livestream event, users will be able to watch the show, tweet to join the conversation from the Live Events page, and browse products on the “Shop” and “Latest” tabs just below the video. When ready to purchase, users will click through to the retailer’s website where the livestream will continue — so they don’t have to miss any of the show.

Walmart was a sensible first partner for the new effort, as the retailer has been increasingly investing in livestream events across social media. Over the past year, it hosted more than 15 livestream events across five platforms, including YouTube, TikTok and its own website, among others.

Its Twitter livestream will focus on Cyber Deals and will kick off on November 28 at 7 PM ET in the U.S. The stream will also be broadcast on, and across the retailer’s Facebook, Instagram, TikTok and YouTube accounts.

Twitter says this is the first-ever e-commerce livestream on its platform, but it plans to bring more experiences like this to its customers in the future.

The event will also serve as a means of testing the Twitter user base’s appetite for live shopping, which today often takes place on other social apps, like Instagram and Facebook, on dedicated live commerce platforms and on video services like YouTube and TikTok. But Twitter —  a place where users tend to track news, events, pop culture trends, politics and more — hasn’t yet defined itself as a platform. Its overabundance of new features released in the past year feel more like spaghetti being thrown at the wall to see what sticks, instead of a carefully planned roadmap. Twitter today wants to be a home to live audio, creator subscriptions, newsletters, bitcoin tipping, NFTs, private communities and more. But, in reality, only some of these things will actually work. For example, Twitter already had to kill its Stories feature (Fleets) due to lack of traction. And its early days of Super Follow, subscriptions didn’t produce much revenue.

Whether or not it will be able to offer the sort of live commerce experience that resonates with consumers and delivers retailers’ objectives still remains to be seen.

Weekly News

Platforms: Google

  • Google’s Play Store is testing out a new “Offers” section that’s different from the existing “Offers & Notifications” page in the app menu. Instead, it’s being used to bring up carousels of deals, limited-time specials and paid apps going free, while the “Offers & Notifications” section had only delivered a heavily curated list of offers, or, if none were available, the option to add a promo code.
  • Android 10 is still the most-used version of the Android OS, according to numbers crunched by 9to5Google using data provided through Android Studio. The Android 10 OS has a 26.5% market share, edging out Android 11’s 24.2%. Android 12 hasn’t yet made an appearance in the numbers.

E-commerce and delivery services

  • Uber enters the cannabis delivery market. The ride-hailing app announced that users in Ontario, Canada would be able to place cannabis orders on its Uber Eats app following its listing of cannabis retailer Tokyo Smoke on its marketplace. The company had said it would consider expanding cannabis delivery in the U.S. when the legality of doing so is made more clear.
  • Mobile advertising and app monetization company Tapjoy announced the launch of a rewarded shopping product, Tapjoy Shopping. The in-app marketplace lets consumers shop from hundreds of brands and retailers, and earn rewards in their favorite apps — like virtual currency — for their purchases. The feature is available in any of the over 10,000 apps that belong to Tapjoy’s network. Tapjoy says shopping offers like this have been increasingly important to mobile publishers after Cost Per Engagement app ads were banned on iOS.
  • France has asked search engines and app stores to remove the popular e-commerce platform Wish, which mostly sources products from China-based merchants. The order comes following France’s investigations into fraud, product safety and counterfeit goods on Wish, which found that 95% of toys on Wish didn’t comply with EU regulation, 45% were dangerous, 95% of electronics didn’t comply with regulation and 90% were dangerous.

Augmented Reality

Image Credits: Snap

  • Snapchat is bringing AR to holiday shopping. On Black Friday (11/26), the company will launch the Snap Holiday Market, which will feature immersive AR experiences from a half-dozen brand partners, including Amazon Prime Video, Coca-Cola, Hollister, Under Armour, Verizon and Walmart. Each brand will have a dedicated storefront where Snapchat users can browse their products and deal in an AR space designed for each brand. The market will be available from the Lens Carousel and the top of the “For You” tab in the Lens Explorer.
  • Snap also plans to offer AR try-on and e-commerce Lenses throughout the holiday shopping season, including those from brands like American Eagle, Fendi, Diork Kaja Beauty, NYX Cosmetics, Shein and Tory Burch.
  • The company announced a new AR stat, as well: Snapchat now sees over 6 billion AR Lens plays every day on average, it said.


  • The German neobank N26 will shutter its U.S. operations. The company’s 500,000 U.S. customers will see their accounts closed on January 11 and will be provided with instructions on how to withdraw their funds. The company said it made the decision to better focus on its core European business and plans to launch to more countries in Eastern Europe, as well as Brazil. The bank had previously shut down its business in the U.K., citing post-Brexit difficulties.


  • TikTok hires a new head of diversity and inclusion. The company has hired Shavone Charles, previously of VSCO, Instagram and Twitter, to fill the newly created role. The exec will be LA-based and report to TikTok’s head of comms, Hilary McQuaide.
  • Kuaishou, the Chinese maker of the largest short-form video platform after TikTok, reported earnings. Revenue rose 33% as the company reported 20.5 billion yuan ($3.2 billion) for the three months ended September, versus the 20.1 billion yuan average forecast. Total MAUs on its main app reached 573 million, though the company had to shut down its U.S. TikTok rival Zynn earlier this year.
  • Twitter made a change to its crowdsourced fact-checking program, Birdwatch, which now allows users to submit their contributions anonymously. Twitter says pilot users “overwhelmingly” requested this feature, particularly women and Black contributors. “Research has shown that aliases have the potential to reduce bias, by putting focus on the content of a note, not the author,” Twitter said, adding that aliases may also “reduce polarization by helping people feel comfortable crossing partisan lines.”

  • Twitter also updated its iOS app to address the annoying bug (which Twitter must have thought was a feature) where your timeline would refresh automatically, making the tweets you were actively reading disappear from view. After first fixing this issue on the web, Twitter is now rolling it out to iOS users.
  • Reddit said it’s shutting down Dubsmash, the short-form video app it acquired late last year, and is integrating video tools into its own app.  Reddit said its camera features will now include the ability to change recording speeds and the option to set a timer, similar to other short-form video apps. Users can now also upload videos in landscape, portrait mode and fill, as well as adjust and trim multiple clips. The company is also adding a new editing screen that includes text Stickers, a drawing tool and filters. And users have the option to add voiceovers or adjust the volume directly on the editing screen.
  • Social networking app for women Peanut announced a new feature called “Go Global,” which will allow its users to connect with other women around the world, instead of only those nearby. The company said there was demand for the option after it launched its live audio feature Pods. But it could also make Peanut more useful in markets where there just aren’t that many local users to connect with.

Image Credits: Peanut

  • The TikTok app ecosystem is huge. Correction! In our last newsletter, we pointed to Sensor Tower’s analysis of the TikTok app ecosystem and mistakenly referred to its “400 or so mobile apps.” The ecosystem saw 400 apps debut in 2020, but in total, there are some 900 apps tied to TikTok to offer things like downloading videos, viewing analytics, tracking hashtags and more. Meanwhile, those 900 apps reached over 1 billion downloads worldwide, not 3 billion. (But TikTok, including its sister app Douyin, have 3.3 billion installs, for comparison.)


  • Facebook, err Meta, said it’s delaying the launch of end-to-end encryption (E2EE) across its messaging products until 2023 following warnings from child safety campaigns, including the National Society for the Prevention of Cruelty to Children. Such a system would prevent law enforcement and tech platforms from being able to detect child abusers, critics warned, and asked Meta to not proceed until it had a plan in place to prevent child abuse from being undetected on its platform. A former Facebook employee also accused Meta of announcing an absurdly accelerated timeline for E2EE to preempt antitrust action and for “good marketing,” which would have resulted in systems to identify child grooming, sextortion and CSAM distribution operating at less than 10% of the effectiveness of the systems that did inspect content.
  • WhatsApp introduced a new feature that would allow its web and desktop users to make their own custom stickers for use in the messaging app. The sticker maker is available from any chat from the paperclip icon, then clicking on “Sticker.”

Streaming & Entertainment

  • Apple Podcasts gets a suspicious boost in its App Store ratings. At first, it looked like angry podcast listeners and creators would finally have their say about the app’s decline by downrating Apple’s Podcasts app after Apple, for the first time, made its first-party apps reviewable by the public. But soon thereafter, the previously (embarrassingly) 1.8 star-rated app jumped, in a little over a month, to a 4.6 star rating. What gives? Apple critic Kosta Eleftheriou first noticed the change, and theorizes it’s because Apple is now intelligently prompting users for reviews — which, to be fair, is its right. But many of the reviews seem to be people reviewing the podcasts themselves, not the actual app, which is odd and…a bit suspicious.
  • Spotify will drop its shuffle feature on albums, after Adele asked. The streamer would previously default to shuffle mode but Adele had asked Spotify to allow her new album to play in the intended order. The artist tweeted that “our art tells a story and our stories should be listened to as we intended,” when thanking Spotify for the adjustment.
  • Music streaming app Tidal introduced direct artist payments, which aims to more equitably distribute funds to artists, compared with the models used by Apple and Spotify. With this user-centric payment system, subscription fees are directly distributed to the artists a user streams.
  • TikTok expands its TV footprint. The short-form video app rolled out to more TV devices across the U.S. and Canada with the addition of support for Google TV and Android TV OS, as well as LG and Samsung Smart TVs. Amazon Fire TV was previously supported.
  • Spotify tests a TikTok-like feed. The company is the latest to experiment with short-form video in its app as a means of content discovery. Except in Spotify’s case, it’s capitalizing on its existing Canvas video format but presenting it in a new place.
  • Spotify also debuted a “Netflix Hub” on its app, which features playlists, soundtracks and podcasts tied to Netlflix shows and movies. The companies had partnered on other initiatives before now, and see the hub as a way to serve their respective audiences with new and, sometimes exclusive, entertainment content.

Image Credits: Spotify/Netflix


  • Netflix’s new gaming service added two more titles, including the return of Gameloft’s “Asphalt Xtreme.” The streamer recently expanded its service worldwide across iOS and Android, with a handful of titles, including a few casual games and two “Stranger Things”-themed games. Now, it’s added another arcade title, “Bowling Ballers,” and a reboot of Gameloft’s action racing game, “Asphalt Xtreme,” which had officially shut down just in September.

Travel and Transportation 

  • Telsa’s app experienced an outage that prevented car owners from opening their doors or starting their vehicles. Users reported getting a 500 server error on their iOS app, leading them to tweet at Elon Musk directly for help.

Government & Policy

  • The EU passed new rules that may impact major European and U.S. tech companies. The Digital Markets Act’ would make messaging apps interoperable, bans behavioral ad targeting to minors and would fine a company as much as 20% of total global annual sales for breaches of the law. The vote was the final step toward finalizing the rules, expected to come into action in 2022.
  • WhatsApp is reorganizing its privacy policy to provide more information on the data it collects and how it’s protected, used and shared across borders, after Irish regulators fined the service a record €225 million ($267 million USD) for breaching EU data privacy rules.
  • Instagram head Adam Mosseri is the next big tech rep who will testify before Congress. The exec will appear before lawmakers for the first time, and will answer the senators’ questions about Instagram’s impact on young people following the whistleblower leaks.
  • China’s state media reported Tencent has to submit new apps or updates for regulatory inspection through December 31 after Beijing determine Tencent’s apps infringed on users’ rights and interests. Tencent said its apps are still functional and available for download.
  • Apple pushed back the feature that would allow U.S. users to store their state’s driver’s license or state ID on their iPhone. The company said Arizona and Georgia would be the first states to get the feature, with Connecticut, Iowa, Kentucky, Maryland, Oklahoma and Utah to follow. The feature was originally set to launch in late 2021, but will now arrive in early 2022.

Security & Privacy

  • Privacy-focused search engine DuckDuckGo added to its Android app the ability to block hidden trackers, as part of its new “App Tracking Protection for Android” feature. The new option, now in beta, aims to block data collection from happening inside apps, where third-party trackers are hidden away in the app’s code.
  • Apple sued NSO Group, the maker of the nation-state spyware Pegasus. The suit is asking for a permanent injunction that would prevent NSO Group from using any Apple product or service, to “prevent further abuse and harm to its users.”

Funding and M&A

 Family locator and communication app Life360 announced it would acquire lost-item tracking company Tile for $205 million. The deal will see Tile continue to be led as its own brand under its existing CEO CJ Prober. The company says no further changes to the Tile team are currently planned and Prober will also now join the Life360 board of directors. Tile, an Apple critic, claims that its business suffered from the AirTag’s arrival and Apple’s anti-competitive practices. It had recently announced a $40 million debt round to keep the business going.

Niantic raised $300 million from Coatue at a $9 billion valuation to build the “real-world metaverse.” The Pokémon GO maker is betting on a metaverse that blends the real world with augmented reality, not virtual reality. This month, Niantic unveiled the Lightship AR Developer Kit which offers tools for AR game development. It also recently launched a new AR game, Pikmin Bloom.

Triller, the one-time TikTok rival turned live events company, has acquired Thuzio, a live events company co-founded by NY Giants’ Tiki Barber. The business had suffered during the pandemic when live events were shuttered. TrillerNet (Triller’s parent) confirmed the deal to the New York Post but didn’t disclose terms.

Creator-driven marketplace LTK raised $300 million from SoftBank’s Vision Fund, valuing the business at $2 billion. The company, which was previously branded RewardStyle and, helps social media influencers make their posts shoppable from a centralized marketplace on the web and the LTK app. Brands can also use LTK to connect with creators on marketing campaigns.

Mobile DevOps company Bitrise announced a $60 million round of funding led by Insight Partners to help developers build better mobile apps. Bitrise aims to create an end-to-end platform for mobile development that automates core workflows, shortens release cycles and provides a better understanding of how new pieces of code will affect live apps before their release, and counts over 100,000 developers as users.

Column Tax, a company that makes income tax software designed to be embedded in other fintech apps, raised $5.1 million in seed funding led by Bain Capital Ventures. The company’s Tax Refund Unlock feature also recently became available to 2 million users of the cash advance app Klover.

Berlin-based same-day grocery delivery app Yababa raised $15.5 million in seed funding led by Creandum and Project A, to expand its service within Germany and across Europe. The service, which currently offers items that cater to Turkish and Arabic communities, plans to expand its product mix in the future.

Coinbase acqui-hired the team behind BRD, a crypto wallet startup that first launched its mobile wallet back in 2014. BRD’s co-founders say nothing will be changing for BRD users for the time being, but users will have the option to migrate to Coinbase’s wallet in 2022.

TabTrader raised $5.8 million in Series A funding for its mobile app that aggregates crypto exchange data. The app has more than 400,000 active users, with a particularly strong presence in Europe and Asia. Investors include 100X Ventures, Hashkey Capital, Spartan Capital, SGH Capital, SOSV and Artesian Venture Partners.


Fold AR (Fold)

Image Credits: Fold

Of course, the metaverse has bitcoin? I mean, for sheer rubbernecking purposes we have to check out Niantic’s latest app. The Pokémon GO maker has weirdly teamed up with a bitcoin rewards and payments app, Fold, to launch an AR bitcoin mining experience called Fold AR. Currently in beta, Fold AR lets users earn bitcoin and other in-app benefits by exploring their physical surroundings using augmented reality. Unlike in Pokémon GO, where users seek out rare creatures, Fold users will collect bitcoin and other prizes, including those that increase their bitcoin cashback rewards. The company believes the game will appeal to bitcoin newcomers and existing cryptocurrency fans alike and will drive users to Fold’s app — where the in-app AR experience lives. Before the AR launch, Fold was focused on its bitcoin cashback experience where users connect their credit card, their Fold card or a bitcoin wallet, in order to purchase gift cards and receive cash back in the form of BTC. Fold AR rolls out on November 23 to select users and will add more users over time.

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The Economist on the growth of government

The Economist devotes its last cover to “The triumph of big government”. The brief is an interesting piece on governments getting bigger all the time. A citation of Bob Higgs’ Crisis and Leviathan would have been nice, as the piece deals with the…



The Economist devotes its last cover to “The triumph of big government”. The brief is an interesting piece on governments getting bigger all the time. A citation of Bob Higgs’ Crisis and Leviathan would have been nice, as the piece deals with the core ideas of that, marvelous book, but to its credit The Economist interviewed and quoted a couple of libertarians, like John Cochrane, Johan Norberg and Mark Littlewood of the IEA. Mark is credited with the only thing which looks like a proposal in the entire piece, albeit a vague one. He suggests allowing people to pay less in taxes in return for renouncing some state services. If the tax cut is attractive, but still less than the cost of supplying the service, that saves money”. But, writes The Economist, “because the people keenest to step out from under the umbrella of the state will always be those who already rely least on its protection, the state’s tax revenue would probably decline by a lot more than demand for its services.”

The article insists on the many forces behind government growth and quite correctly puts the decade of the 1980s in perspective. Though Reagan and Thatcher’s rhetoric produced such a shock on the international left that they are still dreaded by many, in fact the cases in which government spending was reduced are very few:

Examples of genuine state retrenchment in developed countries are few and far between. Sweden managed it in the 1980s. In the early 1990s Ruth Richardson, then New Zealand’s finance minister, cut the size of the state drastically. Wags called her plan “Ruthanasia”. The patient did not die. State spending is now six percentage points lower as a share of GDP than it was in 1990. But this is a rare achievement, and perhaps one doomed to pass. Grant Robertson, the current finance minister, pledged to “address the most inequitable of the changes made 30 years ago” as he promised a large boost to welfare payments.

Even austerity, The Economist writes, has been little more than a left wing scapegoat:

Some countries buck the trend, a bit, for a while. Germany’s spending as a share of GDP in 2019 was the same as it was in 2006, Angela Merkel’s first full year as chancellor. But the stable level was also a pretty high one. And German attempts to impose frugality elsewhere were short-lived. Spain and Italy both went on courses of strict austerity during the euro-zone crisis of the early 2010s. But in both cases public-sector spending, relative to GDP, was higher in 2019 than in 2006.

The magazine’s editorial asks how classical liberals should respond to the new era of Big Government which has been ushered by the pandemic and generous fiscal policies made possible by non-conventional monetary policies. Its response is a catalog of good intentions:

One task is to maximise the role of markets and individual choice. Climate change should be fought with a price for carbon, research-and-development subsidies and highly scrutinised public investments, not by rationing flights, promoting green national champions or enlisting central banks to distort financial markets. The welfare state should focus on redistributing cash and letting those in need choose what to do with it, not setting up new bureaucracies such as President Joe Biden’s proposed federal child-care system. Taxes should be broad-based and friendly to investment.

The state must also seek to be nimble and efficient. Income support for households should be automated where possible as the financial sector becomes more digitised. Much form-filling can be eliminated, as Estonia’s war on paperwork has shown. If there were fewer, better-paid bureaucrats, the public sector could attract more talented staff. And politicians should be willing to start afresh when tackling new problems, rather than relying on lacklustre incumbent departments. The biggest successes of governments during the pandemic have come from internal startups like Operation Warp Speed, which helped bring about America’s development of vaccines.

The state should strive to be impartial. Narrow interests, whether the unions and anointed victim groups favoured by the left, or the right’s chums in business, will always seek to capture it. To resist, bureaucrats do not need relentless cynical, self-serving attacks on their integrity from politicians, but transparency and support for the ethos of public service. Though rising total spending on the old is justified, a full-scale gerontocracy is not. Retirees with deep pockets do not need public handouts. On the contrary, they should bear a heavier burden as taxes shift from wages, towards property, inheritance and consumption.

We have here something which is often troubling in classical liberal accounts of current affairs. Classical liberals tend to be realists: they see the “objective” forces behind government growth (pressure groups but also, for the Economist, “prices of the services welfare states provide, such as health care and education, grow faster than the economy because of their high labour intensity and low rates of productivity increase”) but then, when it comes to a positive program, they come up with a few good ideas which would nonetheless require a profound modification in the very system of politics which produced bigger government in the first instance. We tend to be (me included) consistent realists when it comes to the reason why we got here, but idealists when it comes to how to move forward, by appealing to the best sense of the people and leveraging the rationality of our message. Does this work? I would have expected, in the Economist’s piece, some attempt at creative constitutional engineering. Tipping points could be searched for to make the growth of government at least a bit more difficult. When it comes to how (if) the growth of government could be slowed or stopped, there are two relevant questions the Economist seems not to consider.

The first one is to what extent is the growth of government economically harmful. Are people suffering, and will they be poorer because of it? Who will it harm the most? Answering this question will be useful to try to identify who could be the next constituency for limited government. The Economist seems to think that, since the world is more complex, governments needs to do more, hence the case for classical liberalism is intellectually more challenging now than it was at Thatcher’s time. I don’t think that is the case. Actually, perhaps the sophistication of the argument of statists would be an interesting test for that assumption. Do we find contemporary advocates of bigger governments to be more sophisticated than, say, John Maynard Keynes or William Beveridge? My impression is that the argument for government is actually less sophisticated and simply assumes that government is the best answer to a whole series of problems, without proving very much. I think the problem is different. In Thatcher’s time, it was pretty clear that the constituency for reducing the scope and action of government lay within the productive middle class that saw itself as penalized by taxation and regulation and which retained a strong culture of autonomy and self help. Is that still the case now? It seems to be that it is now, but another constituency for a smaller government hasn’t been found yet.


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Jobs (US) and Inflation (EMU) Highlight the Week Ahead

The new covid variant and quick imposition of travel restrictions on several countries in southern Africa have injected a new dynamic into the mix.  It may take the better part of the next couple of weeks for scientists to get a handle on what the new…



The new covid variant and quick imposition of travel restrictions on several countries in southern Africa have injected a new dynamic into the mix.  It may take the better part of the next couple of weeks for scientists to get a handle on what the new mutation means and the efficacy of the current vaccination and pill regime.

The initial net impact has been to reduce risk, as seen in the sharp sell-off of stocks.  Emerging market currencies extended their losses.  The JP Morgan Emerging Market Currency Index has fallen in eight of the nine sessions.  Among the major currencies, the currencies used to fund the purchase of other financial assets, namely the yen, Swiss franc, and euro, strengthened in response to the covid news.  The currencies that are seen levered to growth,  like the dollar bloc and Scandis, fell. 

Although it may not always seem that way, there are few sure things.  We occupy a probability world.  What is known and not known about the new variant leads market participants to reduce the odds that the old trajectory would continue unabated.  In the context of the sensitivity of foreign exchange prices to monetary policy, that trajectory was characterized by an elevated risk of a BOE hike next month and for Fed to accelerate the pace of tapering.  The sharp rally in the fed funds and Eurodollar near-term futures contracts reflect the market reassessing the odds.  The implied yield of the December 2021 short-sterling interest rate futures contract fell to its lowest level since September 23.  

The week ahead features the US November jobs report and the eurozone's preliminary estimate of November CP, which are the stuff that moves markets typically.  Yet, the new variant may overshadow the economic data.   

Before the emergence of the new variant, the rising infections in Europe seemed to be having a minimal economic impact.  The flash composite eurozone PMI rose in November, the first increase in four months, and at 55.8 suggest output remains robust even if not as much as in Q3 (average composite PMI was 58.5) and Q2 (average composite PMI was 56.8). Moreover, the eurozone Sentix expectation survey for November rose for the first time in May.  Indeed, it fell more in July and August than it did in September and October.  

That said, economists have been anticipating a sharp slowdown in EMU growth in Q4.  Recall that after contracting in Q4 20 and Q1 21, the eurozone economy expanded by 2.1% in Q2 and 2.2% in Q3 (quarter-over-quarter). The median forecast in Bloomberg's survey sees 0.8% quarterly expansion through the first half of next year.  It is bound to be more volatile than that, and the risks are on the downside in Q4 21 and into Q1 22. 

On the other hand, the US economy is accelerating after the disappointing 2% annualized pace in Q3.  Nearly all of the high-frequency monthly data was stronger than the median (Bloomberg) forecast in October.  Rising consumption is a critical factor.  Consumer durable purchases are important, and next week's news is expected to include the second consecutive increase in auto sales after a collapse from April (18.5 mln vehicles seasonally adjusted annual rate) through September (12.18 mln).   

Two main forces drive US consumption. First, the wealth effect is captured in rising financial assets and house prices.  It is arguably what has let many people retire early since the pandemic struck.  Then there is the income effect.  Government transfer payments are essential even in "normal" times.  While some programs, like the federal supplemental unemployment compensation, have expired, others, such as the enhanced child-earned tax credit, have only recently begun.  Still, wages and salaries are key, which brings us to the November jobs report on December 3.  

From a high level, the US labor market is sizzling.  It filled an average of 582k jobs a month through October.  Economists look around another 500k people to have joined the payrolls in November.  The ADP private-sector jobs estimate has been lower than the national estimate by an average of 23k a month over the past three months and about 51k a month so far this year.  The median forecast in Bloomberg's survey projects that about 525k private sector jobs were filled in November.  Manufacturing employment, which surged by 60k in October, the most since last June, is expected to have slowed to 45k, which is still about 50% higher than this year's average pace. 

Unemployment is expected to fall to 4.4% from 4.6%.   Recall that it was above 6% until May.  The underemployment rate is also falling.  While much of the labor market has evolved as Fed officials, investors, and households had hoped, a problem remains.  The (relatively) low participation rate remains problematic.  Before the tech bubble burst in 2000, it hovered around 67% and was bouncing around 66% when the Great Finance Crisis hit.  It fell to about 62.5%, and 2014-2019 appears capped approximately 63%, though, in late 2019, it reached an eight-year peak of 63.4%.  Covid saw the rate plummet to 60.2%.  It has recovered, but it has been 61.6%-61 since April.7%, first seen in August 2020.   

Outside of regulatory issues and where climate change and monetary policy intersect, this is one of the few issues that seem to separate Powell and Brainard.  Given the trade-offs, theFed Chair seems open-minded about it but is unsure that the previous participation rate can be achieved. Dr. Brainard also seems open-minded but tilts in the other direction.  This appears to be one of the few issues that former Treasury Secretary Summers agrees with Bernanke.  

The eurozone is in a difficult position.  While the preliminary composite PMI ticked up to rise for the first time since July, the news has been overshadowed by the rising pandemic in Europe.  Some new social restrictions have been implemented, spurring large-scale protests in some countries.  It may take a little while for the impact to be seen in the real sector data. However, sentiment indicators may detect it first.  The November German IFO assessment of the overall business climate, reported last week, fell to its lowest level since April.  It had been pulling back since recording the cyclical peak in June.  

At the same time, price pressures are accelerating.   Higher energy prices, a weaker euro, and the base effect point to the risk of a large rise when the preliminary estimate of this month's aggregate CPI is reported on November 30.  The statement that accompanied the preliminary November PMI noted that the selling price in the manufacturing and service sectors accelerated to almost 20-year highs.  Brent crude oil is off slightly this month, but natural gas prices have soared by more than 40% since the end of October.  

The euro was having a poor month, falling more than 3% against the US dollar to levels not seen since July 2020.  It pared some of these losses ahead of the weekend, leaving it off about 2.3%.  And to aggravate the situation, recall that EMU CPI fell by 0.3% in November 2020.  When this drops out of the 12-month comparison, the chances of a shockingly strong number rises. The median forecast in Bloomberg's survey for CPI to rise to 4.3% from 4.1% seems too cautious.   The report will provide fodder for the debate at the December 16 ECB meeting.  

The meeting is expected to confirm that the Pandemic Emergency Purchase Program will end in March as currently planned.  The "modalities" of the Asset Purchase Program will also be announced.  The size,  flexibility, and duration are of prime interest.  The hawks may crow about the high inflation. Still, the ECB's leadership appears to have majority support that the price pressures are temporary and mostly related to the distortions around the pandemic.   While a surge in CPI could embolden the hawks, the virus wave works against looking past the emergency too early.   

Three other events will draw attention in the week ahead.  The first is China's November PMI.  We don't think the details matter so much.  It is manufacturing PMI has fallen without interruptions since March and has been below the 50 boom/bust level in September and October.    The non-manufacturing PMI recovered from the drop below 50 in August (47.5) but slipped in October and is expected to have fallen in November.  The composite has been trending lower this year.  It peaked last November at 557. and stood at 50.8 in October.  Officials are dissatisfied with the growth and the risks to the economy.  Beijing is encouraging lending, including to the property market, and wants local governments to step up their spending.  Word cues by the PBOC have renewed speculation about a cut in reserve requirements (the last reduction was in July). 

Second, on November 30, Treasury Secretary and Federal Reserve Chair Powell testify before the Senate Banking Committee on the CARES Act, the first (of several) fiscal responses to the pandemic.  It was a $2.2 trillion effort approved in March 2020.  The Federal Reserve welcomed the initiative, and Powell has often recognized the importance of fiscal support. To the extent that either official talks about the current economic conditions, investors will take notice.  

Third, OPEC+ meets next week to set policy.  It had been set to boost output by another 400k barrel per day in December, but several countries announced intentions to sell some of their oil reserves, which may change their calculus.  It looks like the consumer nations may release 65-70 mln barrels.  It was led by a 50 mln barrel commitment by the US, which includes accelerating the sale of 18 mln barrels that it had previously planned, which was related not to an emergency but a previous budget deal.  

The remaining 32 mln barrels are not entirely sold, more like lent out and would be returned. It could take several months for the operation to be completed.  Reports indicated that China would provide more oil, but it seemed to cast doubt on a coordinated effort. The UK offered 1.5 mln barrels of oil but conditioned it on the willingness of the private sector to participate.  

The oil that the US is making available is the heavy sour crude that needs more refining and is not desired by US refiners. A gasoline shortage remains.  Reports suggest India and China refiners have been the beneficiaries of the sales of US crude this year.  Paradoxically,  the US wants to deter Chinese companies with military ties while selling it oil used to fuel tanks, ships, and planes.  Lenin's quip about capitalists selling the rope that will be used to hang them comes to mind, despite the Trump tariffs remaining in place.    

OPEC+  may want to send a signal that it will avoid another devastating price war. Investing in crude capacity and carbon, more generally, is not in vogue.   Ironically, the risk is that the reluctance to invest in the old economy may deter the transition to the new economy.  Several OPEC+ members do not have the capacity to boost output and therefore have been falling shy of their 400k barrels a day increases, but the members who have the capacity have not made up for it. January WTI peaked a month ago near $83.85.  Before the weekend, amid the volatility unleashed by the new variant, it tumbled to $67.40, a 13% decline and more than a three-sigma move.  It is slightly above the 200-day moving average, which it has not traded below this year.    


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