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Firmer Bonds and Stocks, but the Dollar Presses Ahead

Overview: The S&P 500 hit three-month lows
yesterday, while the Conference Board’s measure of consumer confidence fell to
a four-month low. New home…



Overview: The S&P 500 hit three-month lows yesterday, while the Conference Board's measure of consumer confidence fell to a four-month low. New home sales fell to their lowest level in five years. The US federal government appears headed for a partial shutdown on October 1. Still, the greenback rides high. It is extending its gains against several G10 currencies, including the euro and sterling. The Swiss franc is moving lower for the 12th consecutive session. The beleaguered yen and yuan are consolidating near their recent lows. Most emerging market currencies are also softer. Gold has been sold below $1900 for the first time this month.

Despite yesterday's sharp losses in the US, equities are trading higher today. Aside from Australia and New Zealand, the large bourses in Asia rose, and the MSCI Asia Pacific Index rose for the first time this week and only the second time since September 15. The same is true of Europe's Stoxx 600. It is posting a small gain through the European morning. US index futures are also trading with a firmer bias. The sell-off in bonds is stabilizing today. European benchmark yields are mostly 2-4 bp lower. The 10-year US Treasury yield is four basis points lower to hover around 4.50%. The US two-year yield, which was near 5.20% last week, is near 5.05% now (20-day moving average is ~5.02%). Lastly, November WTI recovered smartly from a pullback to $88.20 and settled near $90.40. It has approached $91.60 today and the high for the year, set last week, was slightly shy of $92.45.  

Asia Pacific

News is light from Japan and China today, where intervention watch is on high alert. Japanese officials have warned that they are ready to take appropriate action if necessary and Chinese officials continue to use the fix to signal their concerns, after using both soft and hard power tools to discourage yuan selling. The dollar has rallied from nearly JPY147.30 last Thursday to almost JPY149.20 yesterday and a little higher in Europe today. Over the same time, the 10-year US Treasury yield has risen from about 4.40% to 4.56%. After the dollar reached almost CNY7.35 on September 8, it backed off to about CNY7.2465 a week later. It poked slightly above CNY7.3125 on Monday and consolidated yesterday. China's PMI is now scheduled to be released over the weekend. The numerous modest measures announced to support the economy are expected to begin being reflected in the data. However, concerns about the property market continue to weigh on sentiment and blunt better cyclical readings.

Australia's monthly CPI report was lifted by rising energy prices. It stands at 5.2%, as expected, after 4.9% in July. Except for April (and now August), Australia's monthly CPI has trended lower this year after peaking at 8.4% at the end of last year. The market expects the new central bank governor Bullock to stand pat in Q4 but sees a strong chance of a hike in Q1 24. The RBA meets on October 3 and the cash rate is at 4.10%.

The market appears to be turning more cautious as the JPY150 level is approached, which is a testament to its psychological importance. Last year, Japan spent around $60 bln to support the yen. It does not seem to be in particular hurry to do it again. Officials have been using the word cues, like watching with a "sense of urgency" that has signaled imminent intervention in the past. Still, with US yields still rising, an intervention led drop in the dollar will likely simply provide a better buying opportunity. Meanwhile, without intervention, the dollar may be supported near JPY148.60-70. The Australian dollar settled yesterday slightly below $0.6400, its lowest close in about 2 1/2 weeks. There is little standing in the way of a test on the year's low set earlier this month near $0.6355. It reached almost $0.6370 today. On the upside, sellers emerged in front of $0.6410. Chinese officials have tried several measures to stem the yuan's slide. The cost of borrowing the offshore yuan (CNH) is near the highest for the year and this is intended to make it less attractive to short. However, macro considerations, like China's largest discount to US 10-year Treasuries since 2007, and near 185 bp is about a third larger since mid-July. Watch CNH relatively to CNY. Because the offshore yuan is somewhat freer than the onshore yuan, it has led the sell-off. When the CNH begins to trade higher against the dollar than CNY, it is worth paying closer attention. The PBOC set the dollar's reference rate at CNY7.1717 and the gap with the average in the Bloomberg survey (CNY7.3071) remains stark. The rhetoric also appears to be intensifying. Still, and even with a recovery in industrial profits (17.2% year-over-year in August after -6.7% in July), which points to the possibility manufacturing is bottoming out, the yuan cannot sustain even modest upticks. The dollar rebounded from about CNY7.2915 back above CNY7.31. 


Rising interest rates is beginning to strain core-periphery spreads. Italy's 10-year premium over Germany is near 190 bp, the most since mid-May. The low for the year was set in mid-June around 155 bp. Similarly, Spain's premium has risen to almost 110 bp, which is also the most since mid-May. The year's low was set in mid-June a little above 90 bp. Italy's two-year premium over Germany reached a new high for the year around 78 bp yesterday. The low for the year was set in mid-January near 27 bp. Spain's two-year premium over Germany is about 35 bp. At the start of the year, Spain's premium was less than 15 bp.

Amid the capital strike against the UK last September, the UK 10-year premium over Germany reached almost 230 bp. That appears to be the most at least 30 years. It fell to around 86 bp in early February but climbed back above 200 bp in June-August, peaking at 205 bp in mid-August. It has fallen back to around 150 bp to probe the 200-day moving average. The UK's two-year premium over Germany approached 265 bp last September. It briefly traded at a 45 bp premium in early March but climbed back to 220 bp in July and made a marginal new high earlier this month. The premium has since pulled back to around 155 bp. The 200-day moving average is slightly below 135 bp.

Since breaking below $1.06, the euro has not traded above $1.0610. The lower Bollinger Band is near $1.0550 today, and the euro has approached it. While $1.05 may offer psychological support, the next important technical target is around $1.04. Note that without resurfacing above the $1.0655 area at the end of the week, the euro's slump will extend to the 11th consecutive week. For its part, the Swiss franc comes into today with an 11-session losing streak, its longest since 1975. That means it was already selling off before the Swiss National Bank surprised many by not hiking rates at the September 21 meeting. Through late July, when the franc peaked, it had risen by more than 7% to lead the G10 currencies. In the two months since the peak, the franc has fallen by 6.1% against the greenback, hobbled by similar considerations as the yen and yuan. The Swiss deposit rate is set at 1.75%, compared with 5.5% in the US and 4.0% in the eurozone. Sterling cannot get out of its own way. It convincingly took out $1.26 in early September, then $1.24 in the middle of the month, and in recent days, has pushed through $1.2200. It reached almost $1.2135 today. The lower Bollinger Band is around $1.2125. There are options for about GBP1.2 bln that expire tomorrow at $1.20. There are also GBP1.4 bln of options struck at $1.22 that expire tomorrow, and we suspect some of the selling pressure yesterday involved neutralizing them.


Weaker Boeing orders likely dragged durable goods orders in August lower for the second consecutive month. Boeing orders surged by 304 in June and fell to 52 in July and 45 in August. The three-month moving average in Q1 was 40. What is notable about August's orders was nearly 29% were domestic orders after practically none since January. Deliveries are less volatile than orders and the three-month average was 43 in Q1 and 46 average in the three months through August. Excluding transportation orders, durable goods orders may have risen by 0.2% after a 0.4% gain in July. The shipment of non-defense orders, excluding transportation are expected to have been flat in August and have not risen since May.

Mexico reports August trade figures today. Through July, Mexico's exports have risen by 3.8% in dollar terms from a year ago. Over the same time, imports are nearly flat (~0.2%). Through July, Mexico has recorded $7.22 bln trade deficit this year. In the first seven months of last year, Mexico's trade deficit was $19 bln. As we will be reminded next week, Mexico's worker remittances more than cover the trade shortfall. Through July, worker remittances back into Mexico totaled near $36 bln, almost 10% more than the year ago period. The central bank meets tomorrow. It has already signaled its intention to leave the overnight target rate at 11.25%. The Fed's higher-for-longer signal dovetails with the swaps market pushing the first cut by Banxico toward the middle of next year.

Although the swaps market favors Bank of Canada rate hike in Q4, the Canadian dollar is no match for the greenback. The US dollar rose to around CAD1.3525 yesterday and is testing the lower end of the CAD1.3540-75 band that is the next technical objective. The CAD1.3500 area now offers support. The risk-off sentiment and strong US dollar has taken a toll on the Mexican peso. The US dollar, which traded briefly below MXN17.00 a week ago, settled above MXN17.50 yesterday. The dollar has been confined to a narrow range near yesterday's highs today in a somewhat better risk mood, though it remains fragile. The high from earlier this month was near MXN17.7080. Above there is the 200-day moving average (~MXN17.86). The greenback has not traded above this moving average since last September. 



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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…



To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….



Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 


About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. 

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Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.



Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 


This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

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With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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