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Futures, Cryptos Surge As Dip Buying Turns Into “Nasty Squeeze”

Futures, Cryptos Surge As Dip Buying Turns Into "Nasty Squeeze"

Following a relentless rout that erased nearly $2 trillion in market value…

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Futures, Cryptos Surge As Dip Buying Turns Into "Nasty Squeeze"

Following a relentless rout that erased nearly $2 trillion in market value from the S&P 500 last week, US equity futures have surged, extending their Monday holiday gains just as predicted on Sunday when we said that a "Nasty Squeeze" was on Deck following last week's "Second Largest Ever" shorting by hedge funds. Nasdaq 100 futures rose as much as 2.2% before trading 1.7% higher as major US tech and internet stocks advanced, poised to extend Friday’s gains; shares of Tesla and Twitter also rose following billionaire Elon Musk’s comments at the Qatar Economic Forum; S&P 500 futures gained 1.8%; the cash market was closed on Monday for a holiday. Asian and European stocks also advanced as did bitcoin which jumped above $21K after sliding below $18K briefly on Saturday. Meanwhile Treasuries and the US Dollar retreated.

US stocks came under renewed pressure last week, with the S&P plunged into bear market territory amid surging inflation and fears that aggressive rate hikes by the Federal Reserve will push the economy into a recession. The S&P 500 is set for an 11% drop in June, poised for the worst month since March 2020, which marked the lows of the pandemic selloff. Sentiment was somewhat boosted by Biden’s Monday comments on the economy in which he said that a recession isn't "inevitable" (what else will he say) but strategists have warned of more volatility ahead.

“Even if the mid-term investing landscape remains blurry to most market operators at the beginning of this summer season, some investors looking for opportunities to buy shares at a discounted price have been reassured,” said Pierre Veyret, a technical analyst at ActivTrades. “The fact central banks are moving quickly towards a super hawkish stance in order to tame inflation is also perceived as good news by some.”

In premarket trading, bank stocks also pushed higher amid a broader rebound in risk assets. In corporate news, HSBC has lost two senior investment bankers in Asia as global banks compete for financial technology talent and dealmaking slows. Meanwhile, the UK’s Payment Systems Regulator will focus a pair of market reviews on the rising card fees charged by Visa and Mastercard. Tech names were also solidly higher; notable movers included Apple +2.4%, Microsoft +2%, Amazon.com +2.6%, Alphabet +2.6%, Meta Platforms +2.1%, Nvidia +3.1% premarket; all six stocks closed higher on Friday, while US markets were closed for a holiday on Monday. Stocks related to cryptocurrencies were also indicating a rally as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Meanwhile, Revlon surged as much as 27% in premarket trading, extending Friday’s rally after the cosmetics firm filed for Chapter 11 bankruptcy. Here are some other notable premarket movers:

Tesla (TSLA US) and Twitter (TWTR US) shares rose in premarket trading on Tuesday after billionaire Elon Musk said the CEO label at the social media firm was less important than driving the product and that Tesla will cut its salaried workforce by about 10% over  the next three months. Tesla rose 3.1% and Twitter was up 1.2% in premarket trading

  • Revlon shares surge as much as 27% in US premarket trading, extending Friday’s rally after the cosmetics firm filed for bankruptcy.
  • Major US technology and internet stocks advanced in premarket trading on Tuesday, poised to extend Friday’s gains. Apple (AAPL US) +2.4%, Microsoft (MSFT US) +2%, Amazon.com (AMZN US) +2.6%, Alphabet (GOOGL US) +2.6%
  • Spirit (SAVE US) shares jump 13% in US premarket trading, to $24, after JetBlue (JBLU US) raised its offer to $33.50 per share from $31.50 on June 6, the latest move in a multi-billion dollar takeover contest with rival Frontier (ULCC US). Arrival shares jump 8.6% in US premarket trading after the electric- vehicle maker announced that its zero-emission van has achieved EU certification and received European Whole Vehicle Type Approval.
  • US-listed Chinese stocks are mostly higher in premarket trading, tracking a two-day 2.3% rise in the Hang Seng Tech Index.
  • Alibaba (BABA US) +4.6%, Baidu (BIDU US) +3.5%, Pinduoduo (PDD US)+3.3%
  • Stocks related to cryptocurrencies rise on Tuesday in US premarket trading as the price of Bitcoin continues to hold above $20,000 amid a tentative recovery and hopes that prices have bottomed. Riot Blockchain (RIOT US) +5.6%, Coinbase (COIN US) +4.7%, MicroStrategy (MSTR US) +5%
  • Citi cuts ratings on International Paper Co. and WestRock to neutral from buy, citing increasing questions about demand as supply additions loom. International Paper falls 1.1% in premarket trading, WestRock -1.5%
  • Keep an eye on Maxar shares as Wells Fargo said the stock is its top pick in the burgeoning space sector, initiating it at overweight, Rocket Lab at equal-weight and Virgin Galactic at underweight.
  • Adobe (ADBE US) shares may be in focus today as the stock was downgraded to equal-weight and given Street-low $362 target from $591 by Morgan Stanley, on expectation of a slowing structural growth profile for the computer software company.

After unexpectedly accelerating to a fresh 40-year high in May, US consumer price growth is seen slowing, with a Bloomberg survey of economists predicting 6.5% by the fourth quarter and to 3.5% by the middle of next year. Yet fears are rampant that Federal Reserve policy makers intent on cooling price pressures will go too far and trigger an economic slowdown. Strategists at Morgan Stanley and Goldman Sachs Group Inc. warned equities may have further to fall to fully price in the risk of recession, reflecting wider skepticism about Tuesday’s rebound.

“We think equities will struggle to rebound sustainably until earnings expectations reset lower and/or central banks turn more dovish, which seems unlikely for now,” said Emmanuel Cau, head of European equity strategy at Barclays Plc.

European stocks also extended their recent recovery, with the region’s benchmark Stoxx 600 Index rising 1%, led by gains in basic resources and chemical companies’ shares. Consumer discretionary, chemicals and autos also trade well. CAC 40 outperforms.

  • Leonardo jumps as much as 9.7% in Milan trading after its DRS unit agreed to buy Israeli radar-maker RADA Electronic in an all-stock transaction.
  • Valneva rises as much as 23% after CEO Franck Grimaud said the company’s Lyme disease vaccine has the potential of becoming a “blockbuster” with sales of more than 1 billion euros.
  • K+S and OCI shares gain after JPMorgan said valuations are “compelling” and fundamentals remain positive. European fertilizer shares had dropped recently because of rising gas prices. OCI rises as much as 4.6%; K+S +6.3%
  • Air Liquide climbs as much as 3.9%, after the French industrial gas company signed a long-term power purchase agreement with Vattenfall.
  • Mithra rises as much as 21% after the pharmaceutical company said it received subscription commitments for 3.87m new shares at an issue price of EU6.07 apiece, representing a 5% discount to last close.
  • Richemont and Swatch advance after Swiss watch exports for the month of May showed strong demand versus the year-earlier period in the US and Japan as well as in European countries such as France and the UK. Luxury peers also trading higher in a wider rebound. Richemont gains as much as 2.8%, Swatch +2.8%, Hermes +3.3%, LVMH +3.7%
  • European apparel retail shares drop after JPMorgan downgrades Asos, About You, Boohoo and Primark owner AB Foods to neutral from overweight, citing the cost of living crisis with cracks emerging in discretionary spending. Asos declines as much as 5.1%, Boohoo -4.8%, About You -4.3%, AB Foods -3.2%
  • Proximus and Telenet slide after a statement by the Belgian telecom regulator showed that new entrant Citymesh partnered with Romanian carrier Digi Communications and acquired spectrum across various bands. Proximus shares fall as much as 7.8%, Telenet -3.9%

Earlier in the session, MSCI’s Asia-Pacific index snapped an eight-day slide to add more than 1% as Asian equities headed for their biggest gain this month. The MSCI Asia Pacific Index climbed as much as 1.8%, set to snap an eight-day losing streak, with financial and tech stocks among the biggest contributors to its advance. The US president spoke overnight after a conversation with former Treasury Secretary Lawrence Summers, as the White House and congressional Democrats are in talks on legislation that aims to fight inflation. Benchmarks in Taiwan, Japan and Hong Kong led gains in the region. Australia’s index advanced for the first time in days after central bank chief Philip Lowe signaled he will only raise interest rates by 25-to-50 basis points at the July meeting. Chinese shares edged lower after recent gains.  “It’s a respite, not a rebound,” said Charu Chanana, a market strategist at Saxo Capital Markets. “We are still in a bear market that is facing a double whammy of Fed tightening and building recession fears, and the second-quarter earnings season is likely to be particularly painful for the markets” due to cost pressures, she added.  Valuations for the MSCI Asia gauge have continued to slide toward pandemic lows, with the index down 18% this year. Still, it’s outperforming a measure of global shares, supported by a rally in Chinese equities this month as the country emerges from Covid-triggered lockdowns.

Japanese stocks advanced as investors weighed the impact of the yen’s weakness and the extent of the recent selloff. The Topix Index rose 2% to 1,856.20 as of market close Tokyo time, while the Nikkei advanced 1.8% to 26,246.31. Sony Group Corp. contributed the most to the Topix Index gain, increasing 4%. Out of 2,170 shares in the index, 2,023 rose and 108 fell, while 39 were unchanged. “Stocks that are expected to have an upward revision from the weak yen may be firm,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management.

In Australia, the S&P/ASX 200 index rose 1.4% to close at 6,523.80, snapping a seven day losing steak. The benchmark was led by gains in banks and miners, with the financials sub-gauge rising the most since March 10.  In early trade, Australia’s central bank Governor Philip Lowe said he didn’t see a recession on the horizon for the nation.  In New Zealand, the S&P/NZX 50 index rose 1.1% to 10,701.59

India’s benchmark share index posted its biggest two-day advance since May 30, boosted by a recovery in information technology stocks and as investors looked for bargains after a sharp selloff last week.  The S&P BSE Sensex rose 1.8% to close at 52,532.07 in Mumbai, taking its two-day advance to 2.3%. The NSE Nifty 50 Index advanced 1.9%. All of the 19 sectoral indexes compiled by BSE Ltd. gained, led by a measure of oil & gas companies. “Crude prices have corrected by almost 10% from its recent peak, providing some breather to the Indian market,” Motilal Oswal Financial analyst Siddhartha Khemka wrote in a note.   Reliance Industries contributed the most to the Sensex’s gain, increasing 1.6%. All but one of 30 shares in the Sensex index rose. Of the top ten performers on the measure, half were information technology companies, led by Tata Consultancy Services Ltd. that clocked its biggest advance this month. 

In rates, treasuries were cheaper across the curve as trading resumed after Monday’s US holiday; cash USTs bear steepened, but trim losses after cheapening ~5bps at the Asia reopen.  Long-end leads losses with stock futures rising after last week’s rout. US yields are ere cheaper by as much as 6bp at long end, steepening 2s10s by nearly 3bp, 5s30s by nearly 4bp; 10-year, higher by ~5bp at 3.27% lags bund and gilts by 3bp and 4.5bp while Italian bonds outperform Treasuries by 12bp in the sector. Bunds and gilts outperform Treasuries, while Italian bonds extend recent gains after ECB’s Olli Rehn reiterated determination to combat unwarranted spikes in borrowing costs for some of the region’s most vulnerable economies.  That said the ECB has yet to disclose said measures, a move which most agree will lead to selling the news. Gilts bull flatten, 10y yields drop 4bps after stalling near 2.6%. Bunds are comparatively quiet. Shorter-maturity Australian bonds rallied after central bank chief Philip Lowe said interest rates are likely to rise by 50 basis points at most in July. Money markets subsequently scrapped bets he would track the Federal Reserve with a 75 basis-point move. Japanese government bonds were mixed after a five-year note sale that drew the weakest demand in more than two years in the aftermath of wild price swings in futures that have made some traders uneasy about their exposure to cash bonds.

In FX, Bloomberg dollar spot index fell 0.3% as the greenback weakened against all of its Group-of-10 peers apart from the yen. JPY is the weakest in G-10, plunging to a fresh 24 year low of 136. NOK and SEK outperform. The euro advanced and European bonds rallied, led by the front end even as ECB Governing Council Member Peter Kazimir said negative rates must be history by September. Governing Council member Olli Rehn separetely said that “there has been good reason to expedite the normalization of monetary policy”. The pound extended gains amid broad dollar weakness while UK government bonds inched up. BOE Chief Economist Huw Pill said policy makers would sacrifice growth in order to bring down inflation, saying there’s a risk of prices developing a “self-sustaining momentum.

In commodities, WTI drifted 2.3% higher to trade near $112. Most base metals trade in the green; LME zinc rises 2.8%, outperforming peers. LME aluminum lags, dropping 0.3%. Spot gold is little changed at $1,838/oz.

Bitcoin is bid and above the USD 21k mark, after last week's slip to a sub-USD 18k low. Elon Musk says he intends to personally support Dogecoin, via BBG TV. Coinbase (COIN) says connectivity issues across Coinbase and Coinbase Pro could cause failed trades and delayed transactions; issue was subsequently resolved.

To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill.

Market Snapshot

  • S&P 500 futures up 1.9% to 3,744.50
  • STOXX Europe 600 up 1.0% to 411.06
  • MXAP up 1.5% to 158.77
  • MXAPJ up 1.5% to 528.18
  • Nikkei up 1.8% to 26,246.31
  • Topix up 2.0% to 1,856.20
  • Hang Seng Index up 1.9% to 21,559.59
  • Shanghai Composite down 0.3% to 3,306.72
  • Sensex up 2.2% to 52,741.19
  • Australia S&P/ASX 200 up 1.4% to 6,523.81
  • Kospi up 0.7% to 2,408.93
  • German 10Y yield little changed at 1.76%
  • Euro up 0.5% to $1.0567
  • Brent Futures up 1.2% to $115.53/bbl
  • Brent Futures up 1.2% to $115.52/bbl
  • Gold spot down 0.2% to $1,835.31
  • U.S. Dollar Index down 0.61% to 104.06

Top Overnight News from Bloomberg

  • UK rail workers began Britain’s biggest rail strike in three decades after unions rejected a last-minute offer from train companies, bringing services nationwide to a near standstill. Britain’s local authorities say they can’t afford to pay a mandated increase in the legal minimum wage over the next year without a £400 million cash injection from the national government
  • A majority of European businesses are worried about their ability to meet employee demands for higher wages amid the current spike in inflation, according to a regional survey by Intrum AB
  • Companies in Germany, the UK, France, Spain and Italy are the most distressed since August 2020, according to the Weil European Distress Index. The study aggregates data from more than 3,750 listed European firms

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks gained across amid a broad constructive global risk tone despite a lack of fresh macro drivers and the recent holiday closure in the US, with Bitcoin and Chinese commodity prices also stabilising after the recent tumultuous price action. ASX 200 was led higher by the energy sector and after RBA's Lowe effectively ruled out a 75bps hike next month. Nikkei 225 outperformed and reclaimed the 26,000 level amid a predominantly weaker currency. Hang Seng and Shanghai Comp. were positive with sentiment in Hong Kong underpinned by news the SAR is to propose a quarantine-free business travel corridor with mainland China, while mainland bourses lagged with the US ban on imports from Xinjiang taking effect from today. Japan's PM Kishida says rapid JPY weakening is a source of concern, must closely watch FX moves and consider monetary policy and FX measures separately.

Top Asian News

  • Chinese Developer Accepts Wheat, Garlic as Payment to Woo Buyers
  • China Junk Bond Selloff in New Phase With Record Fosun Rout
  • Gold Steady as Traders Weigh Central Bank Plans to Hike Rates
  • Australian Tesla-Supplier Eyes First Lithium Exports
  • Over- Optimism Among China Steel-Makers Behind Iron Ore’s Plunge

European bourses are firmer and building on Monday's upside, Euro Stoxx 50 +1.1%; thus far, newsflow has largely focused on familiar themes. Additionally, participants are awaiting the return of the US after Monday's market holiday. Currently, ES +1.7% with the region incrementally outperforming European peers. Elon Musk says there a still a few unresolved matters with Twitter (TWTR) including the number of spam users, via BBG TV; still awaiting a resolution, very significant. Adds, they are reducing the salaried workforce of Tesla (TSLA) by circa. 10% over the next three-months.

Top European News

  • French President Macron will invite all parties able to form a group in the new parliament for talks on Tuesday and Wednesday, according to Reuters.
  • BDI revises down 2022 German GDP forecasts: 1.5% (prev. 3.5%); return to pre-COVID level expected at end-2022 at the earliest

Central Banks

  • ECB’s Lane said very high inflation means there is a risk inflation psychology could take hold and said the larger increment for rate increase in September does not represent a red alert assessment of inflation. Lane also commented that he doesn’t see a situation where they would need to revisit the plan for a July decision and there is no preview beyond September of what will be the appropriate pace of tightening, according to Reuters.
  • ECB’s Villeroy said the new instrument should be available as much as necessary to make the no-limit commitment to protect the Euro very clear and the more credible such an instrument is, the less it may have to be used in practice. Villeroy added the new instrument will have rules but there will be elements of judgement also and said they would not necessarily need to hold purchases of government or private sector securities to maturity, according to Reuters.
  • ECB's Rehn says EZ inflation pressured are broader and stronger; very likely the September move is more than 25bp in magnitude.
  • BoE's Pill says if there is evidence of persistent price pressures, the MPC is certainly prepared to act, expects further tightening in the coming months, need to consider the exchange rate when assessing inflationary pressures. Worries that using monetary policy to stabilise the FX rate in the short-term would be a distraction from the BoE's goals.
  • HKMA purchases HKD 9.6bln from the market, as the HKD hits the weak-end of the trading range.

FX

  • Euro firm as risk revival continues and ECB’s Rehn says 50bp hike in September is highly probable, EUR/USD eyeing 1.0600 after breaching 1.0550, but could be capped by 1bln option expiry interest between 1.0575-85.
  • Sterling rebounds ahead of CBI industrial trends and after BoE chief economist Pill underlines willingness to act if price pressures prove persistent; Pound probes 1.2300 vs Dollar as DXY slips further from recent peaks through 104.000.
  • Loonie and Nokkie boosted by firmer crude prices, as former awaits Canadian retail sales data; USD/CAD close to 1.2900 vs circa 1.3078 double top, EUR/NOK sub-10.4000 within 104.4200+/10.3400 range.
  • Kiwi and Aussie underpinned by improvement in risk appetite, but hampered as NZ consumer sentiment slides to record low and RBA Governor Lowe pushes back on the amount of 2022 tightening priced in at present; NZD/USD hovers above 0.6350 and AUD/USD shy of 0.7000.
  • Franc and Yen remain divergent with SNB and BoJ policy paths, latter largely ignoring latest verbal intervention; USD/CHF pivots 0.9650 and USD/JPY back above 135.00.
  • Israel PM Bennett and Foreign Minister Lapid agreed on dissolving the Knesset and going for an early election, while the vote will take place next week and Lapid will become PM once the vote passes, according to Walla News.

Fixed Income

  • Debt divergent and erratic awaiting the return of US cash markets from long holiday weekend.
  • Bunds hold within 143.05-144.01 range and Gilts between 111.11-68 parameters.
  • Treasury futures retreat and curve flits from marginal flattening to steepening ahead of US existing home sales and more Fed speak via Mester and Barkin

Commodities

  • WTI and Brent are bid amid broader risk sentiment with newsflow focusing on familiar themes primarily around the reduction in Russia's gas supply to Europe.
  • Thus far, Brent has tested but failed to connivingly breach the USD 116.00/bbl mark ahead of touted USD 116.37/bbl resistance.
  • US Treasury Secretary Yellen said she does not see resuming the Keystone XL oil pipeline as a short-term measure that can address high oil prices, while she added it would take years to have an impact. Yellen also commented that evidence is mixed on the level of pass-through from a gasoline tax holiday to lower prices and said that an exception or ban on insurance for certain Russian oil shipments would effectively provide a price cap on oil, according to Reuters.
  • Brazilian Economy Minister Guedes said Brazil is part of the western energy security, particularly for Europe, while he added that privatising and moving Petrobras to Novo Mercado would increase its market cap from BRL 450bln to BRL 750bln. Guedes added that they will conduct new measures again if the war in Ukraine is escalating, according to Reuters.
  • PetroEcuador may have to stop exports if protests continue and it declared a force majeure to avoid contract penalties, according to Reuters.
  • Vitol CEO says markets are faced with underinvestment and falling production capacity for crude and there is a relatively tight refining situation, via Reuters; if China exports some more products, the tightness felt today won't be felt.
  • Denmark's energy agency declared an 'early warning' stage of gas supply preparedness, according to Reuters.
  • German regulator says they are not in a hurry to declare the highest gas emergency level yet, via Reuters citing BR; however, Sweden declares an "early warning" stage of gas supply preparedness for Western and Southern parts of the nation.
  • Codelco's union presidents ratified the start of a national strike beginning on Wednesday, according to Reuters; an update which, alongside broader risk, is supporting LME Copper.

US Event Calendar

  • 08:30: May Chicago Fed Nat Activity Index, est. 0.47, prior 0.47
  • 10:00: May Existing Home Sales MoM, est. -3.7%, prior -2.4%
  • 10:00: May Home Resales with Condos, est. 5.4m, prior 5.61m

Central Banks

  • 11:00: Fed’s Barkin Interviewed During NABE Event
  • 12:00: Fed’s Mester Speaks at Women in Leadership Event
  • 15:30: Fed’s Barkin Speaks in Richmond

DB's Jim Reid concludes the overnight wrap

I’ll be publishing my latest monthly chartbook later today so keep an eye out for it. It will include the slides for last week’s webinar on the default study “The end of the ultra-low default world”. See here for the webinar replay and here for the original default study.

Welcome to the longest day of the year although most in markets will already say we've had numerous of those already so far this year. Actually if you're outside of London, trying to get in it could be a very, very long day as the UK is today gripped by the first of three alternate day rail strikes. There is a tube strike today thrown in for good measure. It does seem industrial relations with the government are on a knife edge across the UK as at least 3 million workers across different professions are considering industrial action at the moment over pay and working conditions. So this could become a much bigger story if tensions are not eased. With inflation this high it's not easy to see how they can be without big pay rises being offered.

However on this day of wall to wall sun (sorry to the Southern Hemisphere readers), there has been a little more light than dark in markets over the last 24 hours after what was the worst week for global equities since March 2020. The next major event(s) to look forward to are Fed Chair Powell’s congressional testimonies from tomorrow. To be honest though, its been a fairly quiet start to the week given the US holiday yesterday, with the biggest news instead being a fresh rise in European sovereign bond yields after President Lagarde reiterated the ECB’s intentions to start hiking next month, and also shone a bit more light on their plans to deal with any potential fragmentation.

We’ll start with those remarks from Lagarde, who appeared in a hearing at the European Parliament yesterday and spoke strongly against any potential fragmentation in the Euro Area. Indeed, she said that “we need to be absolutely certain” that monetary policy was being transmitted to the different Euro Area countries and went as far to say that it was “right at the core of the mandate”, whilst adding “anybody who doubts that determination will be making a big mistake”. So not quite “whatever it takes” but along the same lines.

Given the ECB has promised to deal with any fragmentation, that should make life easier for them when it comes to raising rates, and European sovereign bond yields responded accordingly yesterday. Looking at the specific moves, yields on 10yr bunds (+9.0bps), OATs (+11.8bps) and BTPs (+12.3bps) all moved noticeably higher, although by the standards of last week that seemed quite modest given that 10yr bund yields had seen absolute moves of 11bps in either direction on 3 out of 5 days last week.

When it came to bonds though, it was UK gilts who were one of the biggest underperformers yesterday after we heard from one of the more hawkish members of the Bank of England’s MPC. Catherine Mann (who was in the minority that favoured of a 50bps move last week) said in a speech that “the incoming data on inflation show increasingly domestic embeddedness, persistence, and momentum”. Furthermore, she also warned about the risk of embedded domestic inflation being “further boosted by inflation imported via a Sterling depreciation”. Against that backdrop, 10yr gilt yields rose by +10.6bps to close above 2.6% for the first time since 2014, whilst overnight index swaps are continuing to price in a more aggressive response from the BoE after the next meeting, with 50bp moves priced in for each of the next 3 meetings, which would be the fastest pace of hikes since they gained operational independence in 1997.

In spite of the sovereign bond selloff, equities put in a much better performance yesterday, with the STOXX 600 (+0.91%) seeing a broad-based advance that was supported by all the main sector groups. Other indices on the continent also moved higher, including the FTSE 100 (+1.50%), the DAX (+1.06%) and the FTSE MIB (+0.99%). The worst performer on a relative basis was France’s CAC 40 (+0.64%), which struggled following the news that President Macron had lost his parliamentary majority, which will make passing his agenda much more difficult in the coming years. See our economists’ piece on the topic here.

With the US holiday we only had futures to look at, but those on the S&P 500 had moved around +1% higher by the time of the European close. They are +1.62% higher this morning with the NASDAQ 100 futures (+1.71%) also meaningfully higher. Meanwhile, Fed funds futures were again moving in the direction of pricing in a more aggressive path of rate hikes, with the implied rate by the December meeting up +7.18bps to 3.625%, albeit still beneath their closing peak of 3.72% just before the Fed meeting, which meant that Treasury futures were also pointing to fresh declines yesterday as well.

Asian equity markets are relatively buoyant this morning with the Nikkei (+1.76%) leading the pack followed by the Hang Seng (+1.42%). In mainland China, the Shanghai Composite (+0.18%) and CSI (+0.12%) are also trading in positive territory whilst the Kospi (+1.03%) is sharply higher in early trade.

Elsewhere, the meeting minutes from the Reserve Bank of Australia (RBA) released this morning indicated that the central bank is leaning towards more monetary policy tightening over the coming months. The minutes also revealed that inflation was expected to increase to 7% by the end of the year due to pandemic-related supply chain disruptions, before coming back towards the 2-3% inflation range in 2023. Meanwhile, the RBA Governor Philip highlighted that interest rates were still "very low" but watered-down expectations of 75bps rate hikes thus signaling a 25 or 50bps move at the July meeting.

On the FX side, the Aussie Dollar did witness a sharp dip during the RBA Governor’s Q&A session but is reversing losses, trading +0.35% at 0.697 per US dollar, as I type. Elsewhere the Japanese yen has remained under pressure at 135.03 per dollar, not far off a 24-year low of 135.58 hit early last week. Separately, oil prices are higher this morning with Brent futures (+1.04%) at $115.32/bbl and WTI futures increasing +1.79% to $111.52/bbl.

To the day ahead now, and data releases include US existing home sale for May, as well as the Chicago Fed’s national activity index for the same month. Otherwise, central bank speakers include the Fed’s Barkin and Mester, the ECB’s Rehn and the BoE’s Pill.

Tyler Durden Tue, 06/21/2022 - 08:02

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The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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A major cruise line is testing a monthly subscription service

The Cruise Scarlet Summer Season Pass was designed with remote workers in mind.

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While going on a cruise once meant disconnecting from the world when between ports because any WiFi available aboard was glitchy and expensive, advances in technology over the last decade have enabled millions to not only stay in touch with home but even work remotely.

With such remote workers and digital nomads in mind, Virgin Voyages has designed a monthly pass that gives those who want to work from the seas a WFH setup on its Scarlet Lady ship — while the latter acronym usually means "work from home," the cruise line is advertising as "work from the helm.”

Related: Royal Caribbean shares a warning with passengers

"Inspired by Richard Branson's belief and track record that brilliant work is best paired with a hearty dose of fun, we're welcoming Sailors on board Scarlet Lady for a full month to help them achieve that perfect work-life balance," Virgin Voyages said in announcing its new promotion. "Take a vacation away from your monotonous work-from-home set up (sorry, but…not sorry) and start taking calls from your private balcony overlooking the Mediterranean sea."

A man looks through his phone while sitting in a hot tub on a cruise ship.

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This is how much it'll cost you to work from a cruise ship for a month

While the single most important feature for successful work at sea — WiFi — is already available for free on Virgin cruises, the new Scarlet Summer Season Pass includes a faster connection, a $10 daily coffee credit, access to a private rooftop, and other member-only areas as well as wash and fold laundry service that Virgin advertises as a perk that will allow one to concentrate on work

More Travel:

The pass starts at $9,990 for a two-guest cabin and is available for four monthlong cruises departing in June, July, August, and September — each departs from ports such as Barcelona, Marseille, and Palma de Mallorca and spends four weeks touring around the Mediterranean.

Longer cruises are becoming more common, here's why

The new pass is essentially a version of an upgraded cruise package with additional perks but is specifically tailored to those who plan on working from the ship as an opportunity to market to them.

"Stay connected to your work with the fastest at-sea internet in the biz when you want and log-off to let the exquisite landscape of the Mediterranean inspire you when you need," reads the promotional material for the pass.

Amid the rise of remote work post-pandemic, cruise lines have been seeing growing interest in longer journeys in which many of the passengers not just vacation in the traditional sense but work from a mobile office.

In 2023, Turkish cruise line operator Miray even started selling cabins on a three-year tour around the world but the endeavor hit the rocks after one of the engineers declared the MV Gemini ship the company planned to use for the journey "unseaworthy" and the cruise ship line dealt with a PR scandal that ultimately sank the project before it could take off.

While three years at sea would have set a record as the longest cruise journey on the market, companies such as Royal Caribbean  (RCL) (both with its namesake brand and its Celebrity Cruises line) have been offering increasingly long cruises that serve as many people’s temporary homes and cross through multiple continents.

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