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Futures Coiled Ahead Of Critical CPI Print

Futures Coiled Ahead Of Critical CPI Print

Having come dangerously close to dropping 6 days in a row, the longest streak since Feb 2020, US stock-index futures and European stocks hugged the unchanged line on Tuesday after rebounding furiousl

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Futures Coiled Ahead Of Critical CPI Print

Having come dangerously close to dropping 6 days in a row, the longest streak since Feb 2020, US stock-index futures and European stocks hugged the unchanged line on Tuesday after rebounding furiously in the last hour of trading on Monday ahead of key CPI data that is expected to show a fourth month of U.S. inflation at 5% or more, and which will shape investor expectations about the likely timing of the Fed taper. S&P 500 E-minis were up 2 points, or 0.04%, at 07:15 am ET. Dow E-minis were up 10 points, or 0.03%, while Nasdaq 100 E-minis were down 2.75 points, or 0.02%. Treasury yields and the dollar were steady.

Oil stocks, which were the best performers on Monday, extended gains into premarket trading, as crude prices hit a six-week high on expectations of more supply disruptions due to a hurricane in the Gulf Coast. Major technology stocks, which had lagged their broader peers in the previous session, were muted in premarket trade.

US-listed Chinese stocks slump in premarket trading Tuesday as China’s sweeping regulatory crackdown on industries from technology to after-school tutoring and ride-hailing continues to weigh on investor sentiment. Regulators in Beijing are going to accelerate the drafting and implementation of laws in order to protect minors on the internet, according to the official Xinhua News Agency. Large-cap tech stocks are leading the decline this morning with Alibaba -1.7%, Pinduoduo -1.9%, NetEase -2.8%, Baidu -1.9% and Didi -0.9% as of 6:35 am in New York. Apple shares rose in pre-market trading as the company patched a security flaw in its Messages app and prepares a highly anticipated product launch on Tuesday.

Here are some of the other notable biggest movers today:

  • Oracle Corp. (ORCL) shares decline 1.8% in U.S. premarket trading after the software maker posted sales that missed analysts’ estimates
  • SeaChange International Inc. (SEAC), the provider of streaming video services, climbs after posting 2Q revenue that beat the average analyst estimate
  • Communications Systems (JCS) shares jump 37% in U.S. premarket trading after the firm declared a special dividend
  • SmileDirectClub (SDC) and Aterian (ATER) both rise in U.S. premarket trading, continuing their gains from the prior session amid discussion and touts for the stocks on Reddit and StockTwits
  • Angi (ANGI) gained as much as 6% Tuesday postmarket after the digital platform for home services reported a 21% jump in total revenue for August
  • Atyr Pharma (LIFE) jump 19% in U.S. premarket as analysts raise their PTs on the stock following its announcement of positive results from a trial on its ATYR1923 lung disease treatment
  • Akerna (KERN) soared on Monday’s extended trading after saying it has signed an agreement to acquire 365 Cannabis in a $17 million deal

Focus now turns to August consumer price data, due at 8:30am ET (1230 GMT), which is expected to show if a spike in inflation this year is as transitory as the Federal Reserve has posited. A Bloomberg poll expects the reading to see a modest drop from July. Investors are concerned that a sustained rise in inflation could push the Fed into tightening policy earlier than signaled, especially after data last week showed a strong rise in August producer prices.

In terms of what to expect, Deutsche Bank economists think there’ll be a deceleration in the month-on-month figures for both headline CPI and core CPI, which should largely be a function of demand continuing to soften in Covid-affected sectors. They see the monthly readings at +0.4% for headline and +0.2% for core, both of which would be the slowest in six months (the YoY print is still expected to be 5.3% and 4.2% for headline and core respectively.). That said, DB's Jim Reid points out that "US inflation has had a regular habit of surprising to the upside in recent months, and you have to go back all the way to November’s print to find the last time that month-on-month headline CPI came in beneath the median estimate on Bloomberg."

“The market should take a breather for a CPI figure softer than the 5.3% expected, but a strong release will likely further dampen the mood,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “High inflation is the major reason why the Fed can’t keep doing what it does: throwing cheap liquidity into the market.”

“Investors don’t want to have massive positions before the inflation data as the risks are to the upside as Covid inflation continues to hamper supply chains,” Edward Moya, a senior market analyst at Oanda, said in a note. “If inflation comes in hotter-than-expected, taper expectations could shift from December to November.”

Focus is also on the possible passage of U.S. President Joe Biden’s $3.5 trillion budget package, which is expected to include a proposed corporate tax rate hike to 26.5% from 21%. A possible hike in corporate taxes comes as yet another uncertainty, along with recent concerns over slowing economic growth due to rising COVID-19 cases.

European equities recovered after selling off at the open; the Stoxx Europe 600 Index was little changed as carmakers gained but mining companies declined. JD Sports Fashion jumped 8.4% to an all-time high after the British retailer published results and guidance that exceeded investor expectations. The FTSE MIB outperformed with a 0.5% gain, DAX and IBEX recover into positive territory. CAC is the notable underpeformer, stalling around the lows as other indexes rebound. Autos, oil & gas and tech are best performers, while basic-resources shares declined as iron ore dropped for a fifth day, with production curbs in China weighing on demand and investors awaiting industrial and economic data due this week.

European luxury stocks slumped again on renewed China covid, regulatory worries: LVMH, Kering and Prada were downgraded at Alphavalue amid worries over sector’s reliance on China, which makes the luxury industry “very vulnerable.” The latest developments around Covid-19 in the country added to worries on the sector.

Spanish utilities stocks fell after the country’s government said it will cap windfall profits for power companies in a bid to curtail the impact of record-high energy prices. Endesa -2.9%, Iberdrola -1.2%; Red Electrica, Naturgy and Enagas all dip. The drop comes after Spanish Prime Minister Pedro Sanchez said the government will seek to “redirect” profits from companies to consumers by “capping gas bills and cutting the size of electricity bills." Meanwhile, Spain electricity prices just hit a new all time high in a bitter lesson for locals that "green" energy comes with soaring costs.

In Asia, Japan’s Nikkei 225 Stock Average closed at the highest level since 1990 as exporters cheered a weaker currency which briefly lifted the index to its highest in more than three decades, while the KOSPI (+0.7%) outperformed despite the lack of fresh catalysts aside from South Korean President Moon targeting fully vaccinating 70% of the population by the end of next month. The Hang Seng (-1.2%) and the Shanghai Comp. (-1.4%) were lacklustre ahead of tomorrow’s activity data and speculation the PBoC may not fully roll over this month’s MLF maturities, while the focus was on China Evergrande with the Co.’s May 2023 Shanghai exchange-traded bond paused due to abnormal fluctuations in which it rose by nearly 23% on denial of bankruptcy rumours, although its actual shares were down 10% after it flagged a continued significant decline in contract sales and is exploring asset sales, as well as hired financial advisers to assess its capital structure. Australia's ASX 200 (+0.2%) traded with a non-committal tone for most of the session as outperformance in energy was offset by losses in the tech sector and although New South Wales posted its lowest daily COVID infections in almost two weeks, this was still over 1,100 cases and there was also the announcement of a four-week lockdown extension for Canberra. 

Here are the main Asian news today:

  • Japanese stocks advanced for a third day, lifting the Nikkei 225 Stock Average to a level last seen during the bubble economy more than three decades ago: Japan’s Nikkei 225 Returns to Bubble-Economy Level Seen in 1990
  • Singapore is planning to boost its domestic stock market by investing in local and regional mid-cap companies, including IPOs: Singapore Is Said to Plan Local Stocks Boost With Temasek Fund
  • China’s government is assembling a group of accounting and legal experts to examine the finances of China Evergrande, a potential precursor to a restructuring of the world’s most indebted developer: China Hires Its Own Evergrande Advisers as Restructuring Looms
  • Indian stocks are throwing up rare signals pointing to the possibility of further gains after a powerful rally: Indian Stocks Outpacing World by Most Since 2018 Emboldens Bulls
  • Surging demand from China’s banks to offload excessive dollar holdings is adding to signs of liquidity stress in swap markets a day before monthly operations from the PBOC: Chinese Banks Are Dumping Dollars in Swap Markets, Traders Say
  • Indonesian high-yield dollar bonds are beating regional peers as prospects for the economy improve after Covid-19 cases dropped to their lowest since May: Junk Bonds Outperform as Economy Reopens

In rates, Treasuries were slightly lower as U.S. trading gets under way, trailing steeper declines for most EGB markets led by gilts, cheapening ahead of supply. Yields are higher across the curve, by as much as 1.2bp at long end, inside Monday’s ranges; 10-year is higher by 1.4bp at 1.339% vs increases of 4.4bp for U.K. 10-year, 2.2bp for German. Breakeven inflation rates for 5-, 10- and 30-year TIPS have stabilized since peaking in May at multiyear highs.

In FX, the Bloomberg Dollar Spot Index was little changed as the greenback traded mixed versus its Group-of-10 peers while Treasury yields were slightly higher. Sweden’s krona rallied to a two-month high against the euro and advanced versus all other G-10 currencies after inflation data out of the Nordic nation beat the highest forecasts in a Bloomberg survey. CPIF came in at 2.4% y/y, versus a median estimate of 1.9%; CPIF ex. energy came in at 1.4% y/y, versus a median estimate of 1.1%. The Australian dollar was the worst G-10 performer and the nation’s sovereign yields declined after Reserve Bank Governor Philip Lowe pushed back on current market pricing, reiterating that conditions for a rate hike are unlikely until 2024. The pound advanced after data showing a buoyant U.K. labor market, with the number of workers on company payrolls climbing above its pre-pandemic level. The yen dropped for a third day before U.S. inflation data; Japan’s benchmark bond wasn’t traded until 3pm Tokyo after recording no transactions on Monday.

In commodities, Crude oil marked up a third day of gains with another hurricane emerging just weeks after Ida encumbered local output. The dip in stocks heading into the European cash open prompted futures to come off best levels at the time. Aside from that, the main driver for prices has been Hurricane Nicholas which made landfall and eyes the Gulf coast. That being said, Nicholas is expected to weaken to a tropical depression by Wednesday. The morning also saw the release of the IEA OMR, which cut its 2021 global demand growth forecast by 105k BPD (in-line with OPEC) but upgraded the 2022 forecast by 85k BPD to 3.2mln BPD (vs OPEC's 4.2mln BPD) and noted signs of abating COVID cases means demand is expected to rebound sharply in Oct by 1.6mln BPD. IEA noted that strong pent-up demand, vaccinations should underpin robust rebound in oil demand from Q4 2021, whilst the report gave a hat-tip to the recent US SPR sales and China's reserves release, which should help balance some of the strong pent-up demand cited by the IEA and expected in Q4. The agency lowered its Aug and Sep demand forecasts by almost 600k BPD on China and Southeast Asia mobility curbs.

Looking at today's session, the focal point is August CPI data, which will help inform the Fed’s deliberations of asset-purchase tapering at next week’s meeting. Other releases include the US NFIB small business optimism index for August, and UK unemployment for July. From central banks, we’ll hear from Bank of England Governor Bailey, and separately, the UN General Assembly will be opening in New York City.

Market Snapshot

  • S&P 500 futures up 0.1% to 4,473.00
  • STOXX Europe 600 little changed at 467.19
  • MXAP little changed at 205.81
  • MXAPJ down 0.3% to 660.12
  • Nikkei up 0.7% to 30,670.10
  • Topix up 1.0% to 2,118.87
  • Hang Seng Index down 1.2% to 25,502.23
  • Shanghai Composite down 1.4% to 3,662.60
  • Sensex up 0.2% to 58,284.08
  • Australia S&P/ASX 200 up 0.2% to 7,437.30
  • Kospi up 0.7% to 3,148.83
  • German 10Y yield rose 1.7 bps to -0.314%
  • Euro up 0.1% to $1.1825
  • Brent Futures up 0.9% to $74.13/bbl
  • Gold spot down 0.2% to $1,789.65
  • U.S. Dollar Index down 0.16% to 92.52

Top Overnight News from Bloomberg

  • Boris Johnson will confirm Tuesday that booster vaccinations against the coronavirus will be rolled out to the most vulnerable people this fall, as he sets out the U.K.’s new approach to tackling the virus.
  • The U.K. delayed the introduction of additional post-Brexit border checks on goods from the European Union, as retailers battle a supply chain crisis fueled by the pandemic and the effects of quitting the EU
  • Surging demand from China’s banks to offload excessive dollar holdings is adding to signs of liquidity stress in swap markets ahead of monthly operations from the People’s Bank of China on Wednesday
  • A relentless rally in Europe’s energy prices is piling up pressure on governments, with Spain and Greece taking steps to cushion the blow for consumers

A snapshot breakdown of global markets courtesy of Newsquawk

Asia-Pac stocks eventually followed suit to the mostly positive handover from the US, where a late rebound helped Wall Street snap a five-day losing streak but with gains capped ahead of US CPI data. The ASX 200 (+0.2%) traded with a non-committal tone for most of the session as outperformance in energy was offset by losses in the tech sector and although New South Wales posted its lowest daily COVID infections in almost two weeks, this was still over 1,100 cases and there was also the announcement of a four-week lockdown extension for Canberra. The Nikkei 225 (+0.7%) gained as exporters cheered a weaker currency which briefly lifted the index to its highest in more than three decades, while the KOSPI (+0.7%) outperformed despite the lack of fresh catalysts aside from South Korean President Moon targeting fully vaccinating 70% of the population by the end of next month. The Hang Seng (-1.2%) and the Shanghai Comp. (-1.4%) were lacklustre ahead of tomorrow’s activity data and speculation the PBoC may not fully roll over this month’s MLF maturities, while the focus was on China Evergrande with the Co.’s May 2023 Shanghai exchange-traded bond paused due to abnormal fluctuations in which it rose by nearly 23% on denial of bankruptcy rumours, although its actual shares were down 10% after it flagged a continued significant decline in contract sales and is exploring asset sales, as well as hired financial advisers to assess its capital structure. Finally, 10yr JGBs were subdued as Japanese stocks traded at 31-year highs and amid the uninspired picture for T-notes and Bund futures, while firmer demand at the enhanced liquidity auction for longer-dated JGBs failed to inspire underlying bond prices.

Top Asian News

  • China Regulator Advises Against Overseas Travel Over Holidays
  • Tata Mulling Leadership Makeover of $106 Billion Indian Empire
  • Facing Pressure, Kakao Billionaire to Jettison Decade-Old Model
  • Evergrande’s Overdue Wealth Products Become Crisis Flashpoint

Bourses in Europe retain the mixed narrative seen at the cash open (Euro Stoxx 50 -0.1%; Stoxx 600 -0.1%), whilst losses in China accelerated towards the close. US equity futures have been largely moving in tandem with their European counterparts ahead of US CPI, albeit in a more contained range and with the tech-laden NQ (Unch) currently narrowly lagging vs cyclical RTY (+0.2%) – with traders also cognizant of Quad Witching this Friday. Sectors in Europe do not portray a particular theme, but Oil & Gas remains as one of the winners amid price action in the crude complex, whilst basic resources hold their spot as the laggard as base metal prices falter. Travel & leisure stays around the middle of the pack and relatively flat, with reports overnight suggesting that UK ministers are said to be mulling axing pre-departure tests to "low risk" countries for Britons who have been fully vaccinated. In terms of individual movers. Ocado (-2.6%) is pressured following a downbeat trading update, but the group expects retail to deliver strong revenue growth in FY22. SAP (-0.3%) is pressured as peer Oracle (-1.9% pre-market) fell post-earnings. Pandora (+5.8%) is bolstered as the group is to up its share buyback programme by some DKK 500mln. Finally, the morning saw the release of the BofA Fund Manager Survey, which noted that equity protection was at the lowest since Jan 2018 and liquidity conditions are viewed as best since just before the 2008 global financial crisis.

Top European News

  • Tesla-Loving Norway Picks Pro-Oil Labor as Coalition Talks Start
  • Ukraine Mulls Production of Turkish Bayraktar Drones: Ministry
  • European Gas Notches Fresh Records as Supply Woes Mount
  • Illumina Warns of Potential $400m EU Fine for Closing Grail Deal

In FX, the Aussie did not get much time to appreciate improvements in NAB business confidence and conditions or stronger than expected Q2 house prices before dovish commentary from RBA Governor Lowe relating to market pricing for tightening next year and in 2023. Although he stressed that the Delta outbreak has delayed rather than derailed the economic recovery, a first OCR hike is not envisaged until 2024 even though other countries may raise benchmark rates earlier. Lowe went on to predict a Q2 GDP contraction of at least 2% with risks of a significantly bigger fall and repeated that the Bank wants to see unemployment in the low 4% area ahead of jobs data on Thursday. Aud/Usd is pivoting 0.7350 amidst decent option expiry interest just below between 0.7340-45 (1 bn), but the Aud/Nzd cross is slipping towards 1.0300 from 1.0350+ at one stage as the Kiwi holds above 0.7100 vs its US rival in the run up to NZ Q2 GDP tomorrow. Meanwhile, the Pound has bounced firmly to top 1.3880 at best against a broadly flagging Greenback post-UK labour and earnings/pre-US CPI, but with barriers in Cable at 1.3900 likely to offer resistance in a similar vein to support via the 200 DMA that resides at 1.3831 today.

  • USD/EUR/CAD/JPY/CHF - As noted above, the Buck has back off a bit further from Monday’s best levels, with the DXY straddling 92.500 within a 92.481-664 range and looking for direction from the aforementioned inflation data in the absence of Fed input due to the usual purdah observed in advance of an FOMC meeting. Hence, the Euro is taking some advantage to form a base beyond 1.1800, but could be capped by 1.2 bn option expiries at 1.1835, while the Loonie is hugging a tight line either side of 1.2650 where 1 bn rolls off and does not appear likely to arouse the same size from 1.2600-10 unless WTI crude spikes or Canadian manufacturing sales are super strong. Elsewhere, the Yen is still clinging to 110.00 ahead of Japanese machinery orders and the Franc remains sub-0.9200 following a pick up in Swiss producer and import prices, though nothing strong enough to warrant any change in the SNB’s policy stance.
  • SCANDI/EM - Conversely, Swedish inflation readings may well resonate with the more hawkish Riksbank Board members given the scale of overshoots vs consensus and the Bank’s own estimate, and Eur/Sek is lower in response, while Eur/Nok is down on the back of another rise in Brent to breach Usd 74/brl briefly and bullish Norges Bank regional survey rather than any obvious reaction to the election result. However, the Rub and Mxn are both softer in the face of higher US Treasury yields and curve re-steepening that is also weighing on the Try and Zar in contrast to resilience in the Cnh and Cny irrespective of reports that the PBoC may not roll all this month’s maturing MLFs.
  • RBA Governor Lowe said the Delta outbreak has delayed but not derailed the recovery and reiterated the OCR is unlikely to rise before 2024, while he noted it is difficult to understand markets pricing in of hikes in 2022 and 2023. Lowe added that rates might increase in other countries but domestic factors are different and that the board judged fiscal policy is best response to current Delta lockdowns. Lowe sees Q3 GDP likely to shrink by at least 2% with risk of a significantly larger contraction and stated they cannot keep buying bonds forever with purchases likely to stop sometime next year. Furthermore, he stated that they need to see unemployment in low 4's to lift wages and that inflation temporarily above 3% would not be a problem. (Newswires)

In commodities, WTI and Brent front-month futures have been choppy but ultimately hold onto gains. The dip in stocks heading into the European cash open prompted futures to come off best levels at the time. Aside from that, the main driver for prices has been Hurricane Nicholas which made landfall and eyes the Gulf coast – although again, it's worth keeping in mind the impact on refinery demand for US crude. That being said, Nicholas is expected to weaken to a tropical depression by Wednesday. The morning also saw the release of the IEA OMR, which cut its 2021 global demand growth forecast by 105k BPD (in-line with OPEC) but upgraded the 2022 forecast by 85k BPD to 3.2mln BPD (vs OPEC's 4.2mln BPD) and noted signs of abating COVID cases means demand is expected to rebound sharply in Oct by 1.6mln BPD. IEA noted that strong pent-up demand, vaccinations should underpin robust rebound in oil demand from Q4 2021, whilst the report gave a hat-tip to the recent US SPR sales and China's reserves release, which should help balance some of the strong pent-up demand cited by the IEA and expected in Q4. The agency lowered its Aug and Sep demand forecasts by almost 600k BPD on China and Southeast Asia mobility curbs. On that note, Chinese regulators have advised against travel over national holidays – with the mid-Autumn festival taking place from Sep 20th. The IEA made no mention of Iranian oil – with participants on the lookout for a potential date for JCPOA talks to resume. From a data perspective, the weekly Private Inventories will be released tonight. WTI resides just under USD 71/bbl, having traded on either side of the figure (vs low USD 70.50/bbl), while its Brent counterpart trades choppily around USD 74/bbl (vs low 73.50/bbl). Elsewhere, spot gold and silver trade on the softer side of today's current tight range, with the former still under the USD 1,800/oz mark and below its 50 and 21 DMAs at 1,797.73 and 1,799.22, respectively. Elsewhere, LME copper is on the backfoot following late-door losses in Chinese stock markets, with the red metal back under USD 9,500/t. Meanwhile, Chinese coking coal and coke futures closed with losses in excess of 5% amid regulatory concerns, according to traders.

US Event Calendar

  • 8:30am: Aug. CPI MoM, est. 0.4%, prior 0.5%; YoY, est. 5.3%, prior 5.4%
  • 8:30am: Aug. CPI Ex Food and Energy MoM, est. 0.3%, prior 0.3%; YoY, est. 4.2%, prior 4.3%
  • 8:30am: Aug. Real Avg Weekly Earnings YoY, prior -0.7%, revised -0.9%
  • 8:30am: Aug. Real Avg Hourly Earning YoY, prior -1.2%

DB's Jim Reid concludes the overnight wrap

Yesterday I released my annual Long-Term Asset Return Study (link here). This year's edition is called “Fiat, Fifty and Frail”, and marks the 50th anniversary of today’s system of fiat money. We show how the last half-century has been the most inflationary in history. So don’t be fooled by the lower inflation in recent years. Fiat money has always been inflationary in aggregate. Indeed in the modern world we’ve stress-tested our monetary system to extremes, with ever-higher levels of debt and unprecedented money printing from central banks. If anything this is increasing post covid. If the exogenous forces keeping inflation down (e.g. globalisation and demographics) reverse then we may have to question what will happen to fiat money. For most of the last few centuries very few would have questioned gold as the permanent anchor of money. So it shouldn’t be too controversial to question whether we will still have fiat money for the entirety of our careers. Please see the full report for much more, including asset returns and economic stats from multiple countries spanning back centuries in some places.

Inflation was one of the big themes of the report, and turning from hundreds of years of data to what’s in front of us today as investors turn their attention to the US CPI release for August later on. In terms of what to expect, our US economists think there’ll be a deceleration in the month-on-month figures for both headline CPI and core CPI, which should largely be a function of demand continuing to soften in Covid-affected sectors. They see the monthly readings at +0.4% for headline and +0.2% for core, both of which would be the slowest in six months. That said, US inflation has had a regular habit of surprising to the upside in recent months, and you have to go back all the way to November’s print to find the last time that month-on-month headline CPI came in beneath the median estimate on Bloomberg. For completeness the YoY print is still expected to be 5.3% and 4.2% for headline and core respectively.

Speaking of inflation, there was continued evidence of building price pressures yesterday from a number of sources. Firstly, there were yet further advances in commodity prices that sent the Bloomberg Commodity Spot index (+0.58%) to its highest level in over a decade by the close, which just shows that for all the discussion about isolated moves lower for specific commodities, it doesn’t appear that we’re yet seeing a broad-based move lower in the aggregate. Among the gainers yesterday were oil prices, with Brent crude (+0.81%) and WTI (+1.05%) both closing at their highest levels in over a month, whilst aluminium rose above $3,000/ton in trading in London before closing down -0.94%, closing at the second highest level since 2008. Liam Fitzpatrick from the DB Metals and Mining team is hosting an expert call on the aluminium market next week, Tuesday 21 September, 15:00 BST / 10:00 EST. Register and access the webinar details (Zoom) here. All important for the macro and for earnings.

The CPI release from the US should reveal more on the inflation front, but equities have put in a steady positive performance over the last 24 hours ahead of that, in spite of continued concerns about the elevated levels of valuations right now. Indeed our survey (link here) results yesterday suggested that 68% expect at least a 5% correction by year end.

By the close of trade, the S&P 500 (+0.23%) had stabilised following a run of 5 successive declines and Europe’s STOXX 600 (+0.29%) also recovered its poise after a run of 4 declines. It was a reasonably broad-based advance given the small overall moves, with over 60% of the S&P’s constituents moving higher on the day. However, energy stocks were the biggest winners on both sides of the Atlantic given those fresh moves higher for commodities mentioned above. Alongside the rally in energy stocks, US cyclicals were broadly very strong yesterday with banks (+1.86%), autos (+1.21%), and airlines (+1.77%) all outperforming at the expense of growth industries such as biotech (-1.16%) and software (-0.31%).

Meanwhile in sovereign bond markets, 10yr US Treasuries ended the session -1.5bps lower at 1.326%, with inflation breakevens (-2.4bps) moving lower over the course of the day, even as the New York Fed’s survey of consumer expectations showed that inflation expectations for 3 years ahead were at a series high of 4%. Over in Europe yields on 10yr bunds (-0.1bps) were little changed on the day,but breakevens (+1.9bps) rose to a post-2013 high of 1.642%, just as the Italian breakeven (+2.3bps) hit a post-2013 high too of 1.557%.

Asian markets are following Wall Street’s lead this morning with the Nikkei (+0.51%) on track for its highest close since 1990. The Kospi (+1.00%), Asx (+0.19%) and India’s Nifty (+0.35%) have advanced too. The Hang Seng (-0.05%) and CSI (-0.29%) are trading weak though while the Shanghai Comp (+0.05%) and ShenZhen Comp (+0.73%) are up. Futures on the S&P 500 are up +0.19% while those on the Stoxx 50 are +0.26%. Elsewhere, crude oil prices are up c. +0.60% as supply in the US is constrained by extreme weather with Tropical Storm Nicholas likely to hit hurricane strength before it makes landfall in Texas, although it’s expected to mostly bypass offshore oil and natural gas platforms.

Turning to the latest on the pandemic, China is experiencing a renewed cluster of cases just a month after it brought the broadest outbreak in the country since the virus first emerged in Wuhan under control. The latest outbreak, which has yet to escape the Fujian province, includes 103 cases in three cities thus far. In order to tame the spread, China has imposed a very strict lockdown for 4.5 million people in the costal city of Xiamen where residents are not allowed to leave for anything other than exceptional circumstances.

Here in the UK, the country’s chief medical officers said that they were in favour of giving children aged 12-15 a single dose of the Pfizer vaccine, which brings them into line with other countries who’ve already been vaccinating healthy individuals in that age bracket. Today, Prime Minister Johnson is expected to outline the government’s plan to manage Covid over the autumn and winter, with details of a booster programme expected next week from the vaccination committee. And that comes against the backdrop of cases having begun to fall again, with the numbers testing positive down -8.4% on the previous week. Separately, Italy’s government announced the country would start administering third doses of Covid-19 vaccines for the most “at-risk” citizens starting next Monday. This comes as a panel of scientists from around the world, including two prominent US FDA experts, published a report in the medical journal The Lancet that stated most vaccinated individuals do not yet need a booster and that governments should focus on getting the unvaccinated their first shots instead.

On the political scene, there was some important news on US taxation from House Democrats, as the Ways and Means Committee released a proposal that would see the top corporate tax rate rise to 26.5% (with an 18% rate on the first $400,000 of income and 21% on income up to $5 million), as the Committees continue to put together the broader reconciliation package that would advance President Biden’s economic agenda. The plan also includes increasing the top personal income tax rate (on dollars earned above $518.4k) to 39.6% from the current 37%, and increasing the capital gains rate on “certain high income individuals” to 25% (from 20%) with an additional 3.8% tax specifically earmarked for Obamacare. The carried interest tax break would be restricted and applied more narrowly, but not eliminated as President Biden has called for in the past. Overall the full tax plan could generate $2.1 trillion of revenue over 10 years, and the committee believes it can derive another $870bn in revenue when tax break language is taken into account. This could go a long way to assuaging some moderate Democrats around the $3.5 trillion over ten year budget reconciliation plan price tag. We will see.

Separately in Germany, with just 12 days left until the federal election, yesterday saw another poll put the centre-left SPD’s lead beyond the margin of error. That was from INSA, and had the SPD on 26%, ahead of Chancellor Merkel’s CDU/CSU on 20.5%, and the Greens on 15%. That pattern of the SPD in first place, followed by the CDU/CSU and then the Greens has been echoed in the averages more broadly as well, with Politico’s poll of polls now putting the SPD on 25%, ahead of the CDU/CSU on 21% and the Greens on 16%.

To the day ahead now, and the aforementioned US CPI reading will be the main data highlight, whilst other releases include the US NFIB small business optimism index for August, and UK unemployment for July. From central banks, we’ll hear from Bank of England Governor Bailey, and separately, the UN General Assembly will be opening in New York City.

Tyler Durden Tue, 09/14/2021 - 07:55

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CDC Warns Thousands Of Children Sent To ER After Taking Common Sleep Aid

CDC Warns Thousands Of Children Sent To ER After Taking Common Sleep Aid

Authored by Jack Phillips via The Epoch Times (emphasis ours),

A…

Published

on

CDC Warns Thousands Of Children Sent To ER After Taking Common Sleep Aid

Authored by Jack Phillips via The Epoch Times (emphasis ours),

A U.S. Centers for Disease Control (CDC) paper released Thursday found that thousands of young children have been taken to the emergency room over the past several years after taking the very common sleep-aid supplement melatonin.

The Centers for Disease Control and Prevention (CDC) headquarters in Atlanta, Georgia, on April 23, 2020. (Tami Chappell/AFP via Getty Images)

The agency said that melatonin, which can come in gummies that are meant for adults, was implicated in about 7 percent of all emergency room visits for young children and infants “for unsupervised medication ingestions,” adding that many incidents were linked to the ingestion of gummy formulations that were flavored. Those incidents occurred between the years 2019 and 2022.

Melatonin is a hormone produced by the human body to regulate its sleep cycle. Supplements, which are sold in a number of different formulas, are generally taken before falling asleep and are popular among people suffering from insomnia, jet lag, chronic pain, or other problems.

The supplement isn’t regulated by the U.S. Food and Drug Administration and does not require child-resistant packaging. However, a number of supplement companies include caps or lids that are difficult for children to open.

The CDC report said that a significant number of melatonin-ingestion cases among young children were due to the children opening bottles that had not been properly closed or were within their reach. Thursday’s report, the agency said, “highlights the importance of educating parents and other caregivers about keeping all medications and supplements (including gummies) out of children’s reach and sight,” including melatonin.

The approximately 11,000 emergency department visits for unsupervised melatonin ingestions by infants and young children during 2019–2022 highlight the importance of educating parents and other caregivers about keeping all medications and supplements (including gummies) out of children’s reach and sight.

The CDC notes that melatonin use among Americans has increased five-fold over the past 25 years or so. That has coincided with a 530 percent increase in poison center calls for melatonin exposures to children between 2012 and 2021, it said, as well as a 420 percent increase in emergency visits for unsupervised melatonin ingestion by young children or infants between 2009 and 2020.

Some health officials advise that children under the age of 3 should avoid taking melatonin unless a doctor says otherwise. Side effects include drowsiness, headaches, agitation, dizziness, and bed wetting.

Other symptoms of too much melatonin include nausea, diarrhea, joint pain, anxiety, and irritability. The supplement can also impact blood pressure.

However, there is no established threshold for a melatonin overdose, officials have said. Most adult melatonin supplements contain a maximum of 10 milligrams of melatonin per serving, and some contain less.

Many people can tolerate even relatively large doses of melatonin without significant harm, officials say. But there is no antidote for an overdose. In cases of a child accidentally ingesting melatonin, doctors often ask a reliable adult to monitor them at home.

Dr. Cora Collette Breuner, with the Seattle Children’s Hospital at the University of Washington, told CNN that parents should speak with a doctor before giving their children the supplement.

“I also tell families, this is not something your child should take forever. Nobody knows what the long-term effects of taking this is on your child’s growth and development,” she told the outlet. “Taking away blue-light-emitting smartphones, tablets, laptops, and television at least two hours before bed will keep melatonin production humming along, as will reading or listening to bedtime stories in a softly lit room, taking a warm bath, or doing light stretches.”

In 2022, researchers found that in 2021, U.S. poison control centers received more than 52,000 calls about children consuming worrisome amounts of the dietary supplement. That’s a six-fold increase from about a decade earlier. Most such calls are about young children who accidentally got into bottles of melatonin, some of which come in the form of gummies for kids, the report said.

Dr. Karima Lelak, an emergency physician at Children’s Hospital of Michigan and the lead author of the study published in 2022 by the CDC, found that in about 83 percent of those calls, the children did not show any symptoms.

However, other children had vomiting, altered breathing, or other symptoms. Over the 10 years studied, more than 4,000 children were hospitalized, five were put on machines to help them breathe, and two children under the age of two died. Most of the hospitalized children were teenagers, and many of those ingestions were thought to be suicide attempts.

Those researchers also suggested that COVID-19 lockdowns and virtual learning forced more children to be at home all day, meaning there were more opportunities for kids to access melatonin. Also, those restrictions may have caused sleep-disrupting stress and anxiety, leading more families to consider melatonin, they suggested.

The Associated Press contributed to this report.

Tyler Durden Mon, 03/11/2024 - 21:40

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International

Red Candle In The Wind

Red Candle In The Wind

By Benjamin PIcton of Rabobank

February non-farm payrolls superficially exceeded market expectations on Friday by…

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Red Candle In The Wind

By Benjamin PIcton of Rabobank

February non-farm payrolls superficially exceeded market expectations on Friday by printing at 275,000 against a consensus call of 200,000. We say superficially, because the downward revisions to prior months totalled 167,000 for December and January, taking the total change in employed persons well below the implied forecast, and helping the unemployment rate to pop two-ticks to 3.9%. The U6 underemployment rate also rose from 7.2% to 7.3%, while average hourly earnings growth fell to 0.2% m-o-m and average weekly hours worked languished at 34.3, equalling pre-pandemic lows.

Undeterred by the devil in the detail, the algos sprang into action once exchanges opened. Market darling NVIDIA hit a new intraday high of $974 before (presumably) the humans took over and sold the stock down more than 10% to close at $875.28. If our suspicions are correct that it was the AIs buying before the humans started selling (no doubt triggering trailing stops on the way down), the irony is not lost on us.

The 1-day chart for NVIDIA now makes for interesting viewing, because the red candle posted on Friday presents quite a strong bearish engulfing signal. Volume traded on the day was almost double the 15-day simple moving average, and similar price action is observable on the 1-day charts for both Intel and AMD. Regular readers will be aware that we have expressed incredulity in the past about the durability the AI thematic melt-up, so it will be interesting to see whether Friday’s sell off is just a profit-taking blip, or a genuine trend reversal.

AI equities aside, this week ought to be important for markets because the BTFP program expires today. That means that the Fed will no longer be loaning cash to the banking system in exchange for collateral pledged at-par. The KBW Regional Banking index has so far taken this in its stride and is trading 30% above the lows established during the mini banking crisis of this time last year, but the Fed’s liquidity facility was effectively an exercise in can-kicking that makes regional banks a sector of the market worth paying attention to in the weeks ahead. Even here in Sydney, regulators are warning of external risks posed to the banking sector from scheduled refinancing of commercial real estate loans following sharp falls in valuations.

Markets are sending signals in other sectors, too. Gold closed at a new record-high of $2178/oz on Friday after trading above $2200/oz briefly. Gold has been going ballistic since the Friday before last, posting gains even on days where 2-year Treasury yields have risen. Gold bugs are buying as real yields fall from the October highs and inflation breakevens creep higher. This is particularly interesting as gold ETFs have been recording net outflows; suggesting that price gains aren’t being driven by a retail pile-in. Are gold buyers now betting on a stagflationary outcome where the Fed cuts without inflation being anchored at the 2% target? The price action around the US CPI release tomorrow ought to be illuminating.

Leaving the day-to-day movements to one side, we are also seeing further signs of structural change at the macro level. The UK budget last week included a provision for the creation of a British ISA. That is, an Individual Savings Account that provides tax breaks to savers who invest their money in the stock of British companies. This follows moves last year to encourage pension funds to head up the risk curve by allocating 5% of their capital to unlisted investments.

As a Hail Mary option for a government cruising toward an electoral drubbing it’s a curious choice, but it’s worth highlighting as cash-strapped governments increasingly see private savings pools as a funding solution for their spending priorities.

Of course, the UK is not alone in making creeping moves towards financial repression. In contrast to announcements today of increased trade liberalisation, Australian Treasurer Jim Chalmers has in the recent past flagged his interest in tapping private pension savings to fund state spending priorities, including defence, public housing and renewable energy projects. Both the UK and Australia appear intent on finding ways to open up the lungs of their economies, but government wants more say in directing private capital flows for state goals.

So, how far is the blurring of the lines between free markets and state planning likely to go? Given the immense and varied budgetary (and security) pressures that governments are facing, could we see a re-up of WWII-era Victory bonds, where private investors are encouraged to do their patriotic duty by directly financing government at negative real rates?

That would really light a fire under the gold market.

Tyler Durden Mon, 03/11/2024 - 19:00

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Fauci Deputy Warned Him Against Vaccine Mandates: Email

Fauci Deputy Warned Him Against Vaccine Mandates: Email

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Mandating COVID-19…

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Fauci Deputy Warned Him Against Vaccine Mandates: Email

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Mandating COVID-19 vaccination was a mistake due to ethical and other concerns, a top government doctor warned Dr. Anthony Fauci after Dr. Fauci promoted mass vaccination.

Coercing or forcing people to take a vaccine can have negative consequences from a biological, sociological, psychological, economical, and ethical standpoint and is not worth the cost even if the vaccine is 100% safe,” Dr. Matthew Memoli, director of the Laboratory of Infectious Diseases clinical studies unit at the U.S. National Institute of Allergy and Infectious Diseases (NIAID), told Dr. Fauci in an email.

“A more prudent approach that considers these issues would be to focus our efforts on those at high risk of severe disease and death, such as the elderly and obese, and do not push vaccination on the young and healthy any further.”

Dr. Anthony Fauci, ex-director of the National Institute of Allergy and Infectious Diseases (NIAID. in Washington on Jan. 8, 2024. (Madalina Vasiliu/The Epoch Times)

Employing that strategy would help prevent loss of public trust and political capital, Dr. Memoli said.

The email was sent on July 30, 2021, after Dr. Fauci, director of the NIAID, claimed that communities would be safer if more people received one of the COVID-19 vaccines and that mass vaccination would lead to the end of the COVID-19 pandemic.

“We’re on a really good track now to really crush this outbreak, and the more people we get vaccinated, the more assuredness that we’re going to have that we’re going to be able to do that,” Dr. Fauci said on CNN the month prior.

Dr. Memoli, who has studied influenza vaccination for years, disagreed, telling Dr. Fauci that research in the field has indicated yearly shots sometimes drive the evolution of influenza.

Vaccinating people who have not been infected with COVID-19, he said, could potentially impact the evolution of the virus that causes COVID-19 in unexpected ways.

“At best what we are doing with mandated mass vaccination does nothing and the variants emerge evading immunity anyway as they would have without the vaccine,” Dr. Memoli wrote. “At worst it drives evolution of the virus in a way that is different from nature and possibly detrimental, prolonging the pandemic or causing more morbidity and mortality than it should.”

The vaccination strategy was flawed because it relied on a single antigen, introducing immunity that only lasted for a certain period of time, Dr. Memoli said. When the immunity weakened, the virus was given an opportunity to evolve.

Some other experts, including virologist Geert Vanden Bossche, have offered similar views. Others in the scientific community, such as U.S. Centers for Disease Control and Prevention scientists, say vaccination prevents virus evolution, though the agency has acknowledged it doesn’t have records supporting its position.

Other Messages

Dr. Memoli sent the email to Dr. Fauci and two other top NIAID officials, Drs. Hugh Auchincloss and Clifford Lane. The message was first reported by the Wall Street Journal, though the publication did not publish the message. The Epoch Times obtained the email and 199 other pages of Dr. Memoli’s emails through a Freedom of Information Act request. There were no indications that Dr. Fauci ever responded to Dr. Memoli.

Later in 2021, the NIAID’s parent agency, the U.S. National Institutes of Health (NIH), and all other federal government agencies began requiring COVID-19 vaccination, under direction from President Joe Biden.

In other messages, Dr. Memoli said the mandates were unethical and that he was hopeful legal cases brought against the mandates would ultimately let people “make their own healthcare decisions.”

“I am certainly doing everything in my power to influence that,” he wrote on Nov. 2, 2021, to an unknown recipient. Dr. Memoli also disclosed that both he and his wife had applied for exemptions from the mandates imposed by the NIH and his wife’s employer. While her request had been granted, his had not as of yet, Dr. Memoli said. It’s not clear if it ever was.

According to Dr. Memoli, officials had not gone over the bioethics of the mandates. He wrote to the NIH’s Department of Bioethics, pointing out that the protection from the vaccines waned over time, that the shots can cause serious health issues such as myocarditis, or heart inflammation, and that vaccinated people were just as likely to spread COVID-19 as unvaccinated people.

He cited multiple studies in his emails, including one that found a resurgence of COVID-19 cases in a California health care system despite a high rate of vaccination and another that showed transmission rates were similar among the vaccinated and unvaccinated.

Dr. Memoli said he was “particularly interested in the bioethics of a mandate when the vaccine doesn’t have the ability to stop spread of the disease, which is the purpose of the mandate.”

The message led to Dr. Memoli speaking during an NIH event in December 2021, several weeks after he went public with his concerns about mandating vaccines.

“Vaccine mandates should be rare and considered only with a strong justification,” Dr. Memoli said in the debate. He suggested that the justification was not there for COVID-19 vaccines, given their fleeting effectiveness.

Julie Ledgerwood, another NIAID official who also spoke at the event, said that the vaccines were highly effective and that the side effects that had been detected were not significant. She did acknowledge that vaccinated people needed boosters after a period of time.

The NIH, and many other government agencies, removed their mandates in 2023 with the end of the COVID-19 public health emergency.

A request for comment from Dr. Fauci was not returned. Dr. Memoli told The Epoch Times in an email he was “happy to answer any questions you have” but that he needed clearance from the NIAID’s media office. That office then refused to give clearance.

Dr. Jay Bhattacharya, a professor of health policy at Stanford University, said that Dr. Memoli showed bravery when he warned Dr. Fauci against mandates.

“Those mandates have done more to demolish public trust in public health than any single action by public health officials in my professional career, including diminishing public trust in all vaccines.” Dr. Bhattacharya, a frequent critic of the U.S. response to COVID-19, told The Epoch Times via email. “It was risky for Dr. Memoli to speak publicly since he works at the NIH, and the culture of the NIH punishes those who cross powerful scientific bureaucrats like Dr. Fauci or his former boss, Dr. Francis Collins.”

Tyler Durden Mon, 03/11/2024 - 17:40

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