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Futures Dip As Doubts Emerge About March Rate Cut, US Markets Closed For Holiday

Futures Dip As Doubts Emerge About March Rate Cut, US Markets Closed For Holiday

US equity futures were steady on Monday as investors were…



Futures Dip As Doubts Emerge About March Rate Cut, US Markets Closed For Holiday

US equity futures were steady on Monday as investors were displeased by hawkish comments from ECB's Holzmann , who said there may not be any rate cuts this year which pushed European stocks to session lows, while also bracing for more earnings later this week. With cash stock markets closed for Martin Luther King Jr. Day and global liquidity especially thin, S&P 500 and Nasdaq 100 futures were down about 0.1% and unchanged, respectively, as 8:00 a.m. ET, after both underlying benchmarks gained last week as the earnings season kicked off.

Treasury cash markets are also closed on Monday, although TSY futures suggested yields are higher by about 4bps to 3.98%; the Bloomberg dollar index edged higher following weekend news that a government shutdown had been delayed until March

The market is taking a breather after it rallied in nine of the past 10 weeks, with the S&P trading near its all-time high on optimism that the Federal Reserve could start cutting interest rates as soon as March (although over the weekend Morgan Stanley warned this is unlikely as "it would take either some serious stress in financial markets or notable downside surprises to inflation, jobs, or both to get a rate cut in March"). But data released last week showed US headline inflation re-accelerated in December, boosting warnings that funding costs may stay higher for longer.

"Markets could be jumping the gun when it comes to the likelihood of March rate cuts,” said Michael Hewson, chief analyst  at CMC Markets in London.

European stocks fell as economic data from Germany underscored the ugly backdrop for corporate profits ahead of a raft of speeches by policy makers at the World Economic Forum in Davos this week. The Stoxx Europe 600 index dropped  0.3%, trading at session lows and extending a lackluster start to the year after a 13% rise in 2023. Consumer goods and carmakers led the decline after Germany’s economy dodged a recession, though the latest data showed it contracted for the first time since the pandemic last year. Germany’s 10-year yield rose about five basis points as bonds across the euro region fell as the ECB's Holzmann.

“Today’s data could encourage the ECB to speed up monetary easing but we’re now getting at the stage when bad economic news no longer translates into good news for equity markets,” said Benoit Péloille, chief investment officer at Natixis Wealth Management. In the US, market pricing for as many as six quarter-point rate cuts “can be a stretch; bad economic news will start to hurt,” he said.

Among individual stock moves in Europe, Dassault Aviation SA slumped after the French aircraft maker reported a decline in 2023 jet orders. Delivery Hero SE and Just Eat NV dropped after BNP Paribas Exane analysts recommended steering clear of Europe’s food delivery sector. Volvo Car AB extended a decline sparked Friday when it said it’s temporarily halting some production due to shipping delays caused by Red Sea attacks.

Earlier in the session, the MSCI Asia Pacific share index climbed for a third session. Stocks advanced in Taiwan after the Democratic Progressive Party won the presidential election and the more China-friendly Kuomintang gained too few seats to control the assembly. Meanwhile, the gong show that is China continued, with the CSI 300 Index swinging between gains and losses amid speculation officials may lower the required reserve ratio after the People’s Bank of China unexpectedly left the rate on its one-year policy loans at 2.5% Monday. That was contrary to expectations among economists that it would trim the so-called medium-term lending facility by 10 basis points.

“Rate cuts are likely still on the cards, but China looks to be taking a more measured approach to policy easing,” said Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong. Well they better be because otherwise Beijing is looking at a mass revolt of a population facing a grim and recessionary economy and imploding capital markets.

In FX, the Bloomberg Dollar Spot Index rises 0.2%. The kiwi is the weakest of the G-10 currencies, falling 0.8% versus the greenback. The yen drops 0.6%.

In rates, bunds fall as economists still doubt the ECB will cut interest rates as much as market pricing currently suggests. German 10-year yields rise 3bp to 2.21%.

In commodities, oil prices decline, with WTI falling 0.8% to trade near $72.10, as the risk that air strikes by the US and allies against the Houthis would ignite a wider conflict and disrupt crude flows from the Middle East was balanced by soft fundamentals. Spot gold adds 0.2%.

The US is closed for the MLK day holiday today, and there are no official data releases. Looking at the week ahead, along with more US earnings reports, investors this week will be focused on inflation readings in Germany and the UK, as well as a swath of political leaders and officials including Chinese Premier Li Qiang attending the annual WEF. A speech by Federal Reserve Governor Christopher Waller, after officials last week attempted to temper any expectation of a looming rate cut, will also be closely watched.

Top Overnight News

  • Japan’s two-year government bond yield declined below zero for the first time since July as global yields have fallen on expectations that major central banks from the Federal Reserve to European Central Bank will start cutting benchmark interest rates this year
  • China’s central bank held a key interest rate steady on Monday while still pumping more cash into the financial system, bucking expectations that it would cut borrowing costs to support the economy
  • The US economy is set for an unexpected fiscal boost if lawmakers back a potential deal for $70 billion worth of tax breaks for businesses and families
  • Oil steadied as the risk that airstrikes by the US and allies against the Houthis would ignite a wider conflict and disrupt crude flows from the Middle East was balanced by softening fundamentals.
  • Global shipping rates are surging as tensions rise in the Red Sea, after the US and UK conducted air-strikes against the Iran-backed Houthi militants in retaliation for their attacks on merchant ships.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly rangebound after the lack of significant catalysts over the weekend and with global markets set for a quietened session on Monday owing to the extended weekend stateside.  ASX 200 lacked direction as strength in energy and telecoms offset the weakness in miners and defensives. Nikkei 225 continued on its upward trend and briefly reclaimed the 36,000 level for the first time since 1990. Hang Seng and Shanghai Comp were choppy after the PBoC refrained from cutting its 1-year MLF rate.

Top Asian News

  • PBoC injected CNY 995bln (exp. 900bln) in 1-year MLF loans with the rate kept at 2.50% (exp. 10bps cut).
  • China's military, AI institutes and universities have over the past year bought small batches of Nvidia (NVDA) chips banned by the US from export to China, according to a Reuters review of tender documents.
  • US Secretary of State Blinken had constructive discussions on a range of issues with a Chinese minister on Friday which included areas of potential cooperation and areas of differences, while Blinken emphasised the importance of resolving cases of American citizens wrongfully detained or subject to exit bans in China and raised US concerns about human rights abuses, according to Reuters.
  • Taiwan ruling DPP’s William Lai won the presidential election with around 40% of votes which represents an unprecedented third consecutive presidential term for the DPP, although the party did not win a parliamentary majority. Furthermore, President-elect Lai said he can resume healthy and orderly exchanges with China and will use dialogue to replace confrontation, according to Reuters.
  • US Secretary of State Blinken said the US is committed to maintaining cross-strait peace and stability, and peaceful resolution of differences, while he added the US will work with Taiwan to further a longstanding unofficial relationship, consistent with the US one-China policy, according to Reuters.
  • China’s Foreign Ministry said US Secretary of State Blinken’s statement on the Taiwan election sent a seriously incorrect signal to Taiwan's independence separatist forces and seriously violated US promises that it would only maintain cultural, economic and other non-official ties with Taiwan, according to Reuters.

The Stoxx Europe 600 extends earlier losses to fall as much as 0.4%, with autos and banks driving weakness. Among cyclical sectors: banks -0.8%, autos -0.7% and retail -0.7% the laggards; travel +0.7% is a rare bright spot. US futures slightly weaker, with S&P 500 contracts down 0.1%, Nasdaq 100 futures little changed; cash trading closed for a holiday

Top European News

  • ECB’s Lane said they will have key data by June to decide on rates and that changing rates too fast can be harmful, while he added that once the ECB begins lowering rates, this would not be by a single decision of a rate cut and there would likely be a sequence of rate cuts, according to an interview with Corriere Della Serra.

Geopolitics: Middle East

  • Israeli PM Netanyahu reiterated that no one will stop Israel from fighting in Gaza until victory and they will not end the war without closing the hole on the border with Egypt, while he added they must close Gaza’s border with Egypt and are considering several ways to do this, according to Reuters.
  • Israeli military chief said it will consider letting Palestinians displaced from north Gaza to return when there is no danger to them, according to Reuters.
  • Hamas armed wing spokesman Abu Ubaida said any talks before stopping Israeli aggression are worthless and the fate of many hostages has become unknown, while the spokesman added many have been killed and blamed their fate on Israel. Furthermore, the spokesman said they have been told by several parties on resistance fronts that they will expand their strikes in the coming days, while it was also reported that Hamas aired a video showing three Israeli hostages appealing to be freed and Hamas said the fate of hostages will be disclosed on Monday, according to Reuters.
  • US President Biden and other senior US officials are reportedly becoming increasingly frustrated with Israeli PM Netanyahu and his rejection of most of the administration’s recent requests related to Gaza, according to four US officials with direct knowledge of the matter cited by Axios.
  • White House’s Kirby said a lower intensity phase of operations in the Israel-Hamas war is approaching soon.
  • US military announced US forces conducted a strike against a Houthi radar site in Yemen and said strikes are designed to degrade the Houthi’s ability to attack maritime vessels, while a Houthi spokesman said US strikes on Yemen including the latest one on a military base in Sanaa are ineffective, according to Reuters.
  • US President Biden said the US delivered a private message to Iran about Houthi attacks and the US is confident that it is well prepared. It was separately reported that Iranian President Raisi condemned US air strikes on Yemen and said that Washington’s move revealed its true nature which is aggressive and against human rights, according to Reuters and IRNA.
  • Egypt and China are closely following up on developments in the Red Sea and expressed concern over the expansion of the conflict in the region, while they emphasised the importance of uniting international and regional efforts to stop the attack on Gaza, according to a joint statement.
  • Lebanon’s Hezbollah head said it is wrong and ignorant if US President Biden thinks the Yemenis will stop confronting the Israelis in the Red Sea, while he added that what the Americans did in the Red Sea will harm all maritime navigation, according to Reuters.
  • US Central Command said an anti-ship cruise missile was fired on Sunday from the Iranian-backed Houthi military area of Yemen towards USS Laboon operating in the Red Sea, while the missile was shot by a US fighter aircraft and there were no injuries or damage.
  • Iraqi armed factions said they attacked three American bases in Iraq and Syria, according to Al Arabiya.
  • Turkey’s military said it launched air strikes against Kurdish militant positions in Northern Syria and Iraq which destroyed 24 militant targets, according to Reuters.

Geopolitics: Other

  • Ukraine promoted a peace plan at Davos on Sunday ahead of the World Economic Forum although China decided not to attend and Russia was not invited to the meeting, according to FT.
  • North Korea fired an intermediate-range ballistic missile which landed outside of Japan’s exclusive economic zone, while North Korea said that it successfully launched a mid- to long-range solid fuel ballistic missile which was equipped with a hypersonic manoeuvring unit and that the launch did not pose a threat to countries around it, according to Yonhap.
  • North Korea’s Foreign Minister travelled to Russia and led a delegation which left Pyongyang on Sunday, according to KCNA.


  • DXY remained within a tight range of between 102.30-102.55 amid the US holiday closure.
  • EUR/USD traded indecisively around 1.0950 after last week's whipsawing and lack of pertinent drivers.
  • GBP/USD price action was limited following a very quiet weekend of newsflow from the UK.
  • USD/JPY was marginally higher and reclaimed the 145.00 status amid outperformance in Japanese stocks.
  • Antipodeans were mixed on cross-related flows and after the PBoC disappointed calls for a MLF rate cut.
  • PBoC set USD/CNY mid-point at 7.1084 vs exp. 7.1684 (prev. 7.1050)

Fixed Income

  • 10yr UST futures were lacklustre and traded rangebound with US cash markets to remain closed on Monday.
  • Bund futures traded uneventfully in the absence of any major pertinent catalysts for Europe over the weekend.
  • 10yr JGB futures extend on recent gains amid the presence of the BoJ in the market for almost JPY 1.2tln of JGBs, while 2-year JGB bond yields briefly returned to negative territory and printed its lowest since July 2023.


  • Crude futures were rangebound as demand-related woes offset the geopolitical risk premium.
  • Iraq set February Basrah medium crude OSP to Asia at minus USD 0.80/bbl to Oman/Dubai average and to Europe at minus USD 5.15/bbl vs dated Brent, while it set the price to North and South America at minus USD 1.00/bbl vs ASCI, according to SOMO.
  • Iraq’s Oil Minister said the oil market suffers from many challenges that affect its stability and that OPEC+ is working to limit these factors by taking the measures necessary, according to Reuters.
  • Qatar appears to have halted sending LNG tankers through the Bab el-Mandeb Strait after US-led airstrikes on Houthi targets raised risks in the key waterway, according to Bloomberg.
  • Spot gold edged marginal gains amid an uneventful dollar and with US participants on an extended weekend.
  • Copper futures nursed some of last week's losses but with the rebound capped by PBoC-related disappointment.

DB's Jim Reid concludes the overnight wrap

It’s a US holiday today (Martin Luther King Day), so it will be a very quiet start to the week. My wife was away at a spa weekend so I’m worn out from shouting at the kids non-stop for 2 days so its a shame I’m not in the US for a break. Although it’ll be quiet, we do have the Iowa Caucus during what is a brutally cold spell in the state with -25C forecast for the vote tonight that traditionally kick-starts the election campaign. The key things to watch are whether Donald Trump can get above the psychological 50% share of the Republican vote (the level recent polls suggest he’s hovering around in the State), and/or how close either Ron DeSantis or Nikki Haley can get to him. While there is clearly a long way to go until November, this will give us some early idea of how successful and deep into the primaries Donald Trump’s opposition for the nomination might go.

Staying with politics, on Saturday, Lai Ching-te of the incumbent DPP won the presidential election in Taiwan, as expected, with 40.1% of the vote, ahead of KMT’s Hou Yu-ih. Attention is likely to turn to the risks of increased tensions between Taiwan and mainland China, with Bejing’s officials having referred to Lai as a “troublemaker” and “separatist” ahead of the election. So far there hasn't been any escalating rhetoric from the winning party or from China so markets will probably see the immediate tail risk as reduced although this is something that probably bubbles under the surface for a long time ahead. For more information on the context of what is at stake, Marion Laboure and Cassidy Ainsworth-Grace published a presentation pack on the election and surrounding issues last week. See the full report here . The other geopolitics to watch out for are those around the US/UK strikes against Houthi rebels in Yemen towards the end of last week.

In terms of the rest of the week ahead, the highlight is likely to be US December retail sales on Wednesday which will have a impact on Q4 GDP forecasts and momentum into Q1. Housing starts and permits (Thursday) and existing home sales (Friday) will also sharpen those forecasts. The latest UoM consumer survey is out Friday, including the latest inflation expectations series which has moved markets in recent months. Our economists point out that in a week of lots of Fed speak, Waller tomorrow (11am EST) might be the most important as his dovish shift in November helped spark the momentum towards the Fed’s dovish pivot. Earnings season will also slowly build in the US too this week. In addition, US lawmakers will vote after today's holiday on yet another stopgap spending bill to avert a partial government shutdown this Saturday. It seems they are pushing this into March. So no doubt we'll be in a similar position again then.

In Europe, UK labour market indicators (tomorrow), inflation data (Wednesday) and retail sales (Friday) will be of interest, especially the CPI data. Over in the continent, notable indicators will include industrial production for the Eurozone today and the ZEW survey for Germany tomorrow. Davos also kicks off today so expect lots of headlines and Canada Goose jackets on your business TV screens.

Moving on to Asia, the focus in Japan will be on the national CPI release on Thursday and China’s Q4 GDP and December economic activity indicators on Wednesday. Check out the full week ahead calendar at the end as usual with key data, speaker and earnings releases flagged.

Asian equity markets are mostly trading higher this morning with the Nikkei (+1.16%) again leading gains, while Chinese stocks are recovering from earlier losses with the CSI (+0.17%) and the Shanghai Composite (+0.36%) moving higher even after the PBOC left its medium-term policy loans rate unchanged (more on this below). Elsewhere, the KOSPI (-0.07%) is swinging between gains and losses with the Hang Seng (-0.15%) seeing minor losses. US stock futures are flat with cash Treasury trading closed due to today's holiday.

Coming back to China, the PBOC defied market expectations for a cut as it held the rate on some 995 billion yuan ($139 billion) worth of one-year medium-term lending facility (MLF) loans intact at 2.50%. The MLF was last cut in August 2023, from 2.65%.

Recapping last week now. Despite the upside surprise to the CPI on Thursday, investors grew increasing confident that the Fed is likely to cut rates soon, with the CPI details suggesting more moderate PCE inflation, the Fed’s preferred gauge. This momentum continued on Friday after data showed a greater-than-expected decline in the PPI. US December PPI fell -0.1% (vs 0.1%) month-on-month and rose 1.0% in year-on-year terms (vs 1.3% expected). With some measures in the PPI, like healthcare and portfolio management, also captured in the core PCE, a weaker PPI therefore implies a softer core PCE print and greater justification for the Fed to cut rates. Off the back of this, investors raised their expectations of a 25bps Fed cut by March, rising from 78% to 83% on Friday, up from 63% at the start of the week. And 168bps of cuts are now priced it by end-2024, 30bps more than a week earlier. So that’s nearly seven 25bps cuts now expected by the market from the Fed this year.

With the soft producer price data reinforcing Fed cut bets, 10yr Treasury yields declined by -2.6bps on Friday, and -10.6bps on the week to 3.94%. The short-end outperformed, as 2yr yields fell -10.2bps to 4.15% (-23.7bps week-on-week), their lowest level since last May. The bond rally was driven by real rates, with the 10yr real yield down -15.7bps and the 2yr -32.2bps on the week. By contrast, 10yr breakevens (+4.1bps Friday and +5.1bps over the week), reached their highest level since November at 2.28%. Over in Europe, 10yr bund yields fell -5.0bps on Friday but rose +2.8bps in weekly terms.

Equities fluctuated on Friday but rallied over the week, supported by the rates rally. The S&P 500 gained +1.84% last week (+0.08% Friday), ending the week just 0.3% below its record high at the start of 2022. Soft earnings releases by several US banks on Friday drove the S&P 500 Banks index down -1.27% on Friday, and -3.37% in weekly terms. The tech-heavy NASDAQ outperformed, up +3.09% over the week (+0.02% on Friday) in its largest weekly move up since the start of November. Gains were largely driven by the tech giants, as the Magnificent Seven index of megacap stocks rose +4.25% (-0.16% on Friday). In Europe, the STOXX 600 jumped +0.84% on Friday but traded near flat (+0.08%) on the week.

Lastly in commodities, geopolitical risks returned to the fore after the US and UK launched air strikes against Houthi rebels in Yemen. With risks escalating for Red Sea commercial shipping, Danish fuel-tanker company, Torm, announced its intention to pause transits through the Southern Red Sea on Friday. These developments drove Brent Crude prices above $80/bbl in early trading on Friday, before finishing the day at $78.29/bbl (+1.14% on the day). That said, they were down slightly (-0.60%) on the week after an earlier decline on news of Saudi Arabia lowering its selling price. WTI crude similarly rose +0.92% on Friday to $72.68/bbl but was down -1.53% on the week. Rising geopolitical risks in the Middle East also saw gold rally +1.72% on Friday (+0.18% on the week)

Tyler Durden Mon, 01/15/2024 - 08:26

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Copper Soars, Iron Ore Tumbles As Goldman Says “Copper’s Time Is Now”

Copper Soars, Iron Ore Tumbles As Goldman Says "Copper’s Time Is Now"

After languishing for the past two years in a tight range despite recurring…



Copper Soars, Iron Ore Tumbles As Goldman Says "Copper's Time Is Now"

After languishing for the past two years in a tight range despite recurring speculation about declining global supply, copper has finally broken out, surging to the highest price in the past year, just shy of $9,000 a ton as supply cuts hit the market; At the same time the price of the world's "other" most important mined commodity has diverged, as iron ore has tumbled amid growing demand headwinds out of China's comatose housing sector where not even ghost cities are being built any more.

Copper surged almost 5% this week, ending a months-long spell of inertia, as investors focused on risks to supply at various global mines and smelters. As Bloomberg adds, traders also warmed to the idea that the worst of a global downturn is in the past, particularly for metals like copper that are increasingly used in electric vehicles and renewables.

Yet the commodity crash of recent years is hardly over, as signs of the headwinds in traditional industrial sectors are still all too obvious in the iron ore market, where futures fell below $100 a ton for the first time in seven months on Friday as investors bet that China’s years-long property crisis will run through 2024, keeping a lid on demand.

Indeed, while the mood surrounding copper has turned almost euphoric, sentiment on iron ore has soured since the conclusion of the latest National People’s Congress in Beijing, where the CCP set a 5% goal for economic growth, but offered few new measures that would boost infrastructure or other construction-intensive sectors.

As a result, the main steelmaking ingredient has shed more than 30% since early January as hopes of a meaningful revival in construction activity faded. Loss-making steel mills are buying less ore, and stockpiles are piling up at Chinese ports. The latest drop will embolden those who believe that the effects of President Xi Jinping’s property crackdown still have significant room to run, and that last year’s rally in iron ore may have been a false dawn.

Meanwhile, as Bloomberg notes, on Friday there were fresh signs that weakness in China’s industrial economy is hitting the copper market too, with stockpiles tracked by the Shanghai Futures Exchange surging to the highest level since the early days of the pandemic. The hope is that headwinds in traditional industrial areas will be offset by an ongoing surge in usage in electric vehicles and renewables.

And while industrial conditions in Europe and the US also look soft, there’s growing optimism about copper usage in India, where rising investment has helped fuel blowout growth rates of more than 8% — making it the fastest-growing major economy.

In any case, with the demand side of the equation still questionable, the main catalyst behind copper’s powerful rally is an unexpected tightening in global mine supplies, driven mainly by last year’s closure of a giant mine in Panama (discussed here), but there are also growing worries about output in Zambia, which is facing an El Niño-induced power crisis.

On Wednesday, copper prices jumped on huge volumes after smelters in China held a crisis meeting on how to cope with a sharp drop in processing fees following disruptions to supplies of mined ore. The group stopped short of coordinated production cuts, but pledged to re-arrange maintenance work, reduce runs and delay the startup of new projects. In the coming weeks investors will be watching Shanghai exchange inventories closely to gauge both the strength of demand and the extent of any capacity curtailments.

“The increase in SHFE stockpiles has been bigger than we’d anticipated, but we expect to see them coming down over the next few weeks,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said by phone. “If the pace of the inventory builds doesn’t start to slow, investors will start to question whether smelters are actually cutting and whether the impact of weak construction activity is starting to weigh more heavily on the market.”

* * *

Few have been as happy with the recent surge in copper prices as Goldman's commodity team, where copper has long been a preferred trade (even if it may have cost the former team head Jeff Currie his job due to his unbridled enthusiasm for copper in the past two years which saw many hedge fund clients suffer major losses).

As Goldman's Nicholas Snowdon writes in a note titled "Copper's time is now" (available to pro subscribers in the usual place)...

... there has been a "turn in the industrial cycle." Specifically according to the Goldman analyst, after a prolonged downturn, "incremental evidence now points to a bottoming out in the industrial cycle, with the global manufacturing PMI in expansion for the first time since September 2022." As a result, Goldman now expects copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25.’

Here are the details:

Previous inflexions in global manufacturing cycles have been associated with subsequent sustained industrial metals upside, with copper and aluminium rising on average 25% and 9% over the next 12 months. Whilst seasonal surpluses have so far limited a tightening alignment at a micro level, we expect deficit inflexions to play out from quarter end, particularly for metals with severe supply binds. Supplemented by the influence of anticipated Fed easing ahead in a non-recessionary growth setting, another historically positive performance factor for metals, this should support further upside ahead with copper the headline act in this regard.

Goldman then turns to what it calls China's "green policy put":

Much of the recent focus on the “Two Sessions” event centred on the lack of significant broad stimulus, and in particular the limited property support. In our view it would be wrong – just as in 2022 and 2023 – to assume that this will result in weak onshore metals demand. Beijing’s emphasis on rapid growth in the metals intensive green economy, as an offset to property declines, continues to act as a policy put for green metals demand. After last year’s strong trends, evidence year-to-date is again supportive with aluminium and copper apparent demand rising 17% and 12% y/y respectively. Moreover, the potential for a ‘cash for clunkers’ initiative could provide meaningful right tail risk to that healthy demand base case. Yet there are also clear metal losers in this divergent policy setting, with ongoing pressure on property related steel demand generating recent sharp iron ore downside.

Meanwhile, Snowdon believes that the driver behind Goldman's long-running bullish view on copper - a global supply shock - continues:

Copper’s supply shock progresses. The metal with most significant upside potential is copper, in our view. The supply shock which began with aggressive concentrate destocking and then sharp mine supply downgrades last year, has now advanced to an increasing bind on metal production, as reflected in this week's China smelter supply rationing signal. With continued positive momentum in China's copper demand, a healthy refined import trend should generate a substantial ex-China refined deficit this year. With LME stocks having halved from Q4 peak, China’s imminent seasonal demand inflection should accelerate a path into extreme tightness by H2. Structural supply underinvestment, best reflected in peak mine supply we expect next year, implies that demand destruction will need to be the persistent solver on scarcity, an effect requiring substantially higher pricing than current, in our view. In this context, we maintain our view that the copper price will surge into next year (GSe 2025 $15,000/t average), expecting copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25’

Another reason why Goldman is doubling down on its bullish copper outlook: gold.

The sharp rally in gold price since the beginning of March has ended the period of consolidation that had been present since late December. Whilst the initial catalyst for the break higher came from a (gold) supportive turn in US data and real rates, the move has been significantly amplified by short term systematic buying, which suggests less sticky upside. In this context, we expect gold to consolidate for now, with our economists near term view on rates and the dollar suggesting limited near-term catalysts for further upside momentum. Yet, a substantive retracement lower will also likely be limited by resilience in physical buying channels. Nonetheless, in the midterm we continue to hold a constructive view on gold underpinned by persistent strength in EM demand as well as eventual Fed easing, which should crucially reactivate the largely for now dormant ETF buying channel. In this context, we increase our average gold price forecast for 2024 from $2,090/toz to $2,180/toz, targeting a move to $2,300/toz by year-end.

Much more in the full Goldman note available to pro subs.

Tyler Durden Fri, 03/15/2024 - 14:25

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The millions of people not looking for work in the UK may be prioritising education, health and freedom

Economic inactivity is not always the worst option.




Taking time out. pathdoc/Shutterstock

Around one in five British people of working age (16-64) are now outside the labour market. Neither in work nor looking for work, they are officially labelled as “economically inactive”.

Some of those 9.2 million people are in education, with many students not active in the labour market because they are studying full-time. Others are older workers who have chosen to take early retirement.

But that still leaves a large number who are not part of the labour market because they are unable to work. And one key driver of economic inactivity in recent years has been illness.

This increase in economic inactivity – which has grown since before the pandemic – is not just harming the economy, but also indicative of a deeper health crisis.

For those suffering ill health, there are real constraints on access to work. People with health-limiting conditions cannot just slot into jobs that are available. They need help to address the illnesses they have, and to re-engage with work through organisations offering supportive and healthy work environments.

And for other groups, such as stay-at-home parents, businesses need to offer flexible work arrangements and subsidised childcare to support the transition from economic inactivity into work.

The government has a role to play too. Most obviously, it could increase investment in the NHS. Rising levels of poor health are linked to years of under-investment in the health sector and economic inactivity will not be tackled without more funding.

Carrots and sticks

For the time being though, the UK government appears to prefer an approach which mixes carrots and sticks. In the March 2024 budget, for example, the chancellor cut national insurance by 2p as a way of “making work pay”.

But it is unclear whether small tax changes like this will have any effect on attracting the economically inactive back into work.

Jeremy Hunt also extended free childcare. But again, questions remain over whether this is sufficient to remove barriers to work for those with parental responsibilities. The high cost and lack of availability of childcare remain key weaknesses in the UK economy.

The benefit system meanwhile has been designed to push people into work. Benefits in the UK remain relatively ungenerous and hard to access compared with other rich countries. But labour shortages won’t be solved by simply forcing the economically inactive into work, because not all of them are ready or able to comply.

It is also worth noting that work itself may be a cause of bad health. The notion of “bad work” – work that does not pay enough and is unrewarding in other ways – can lead to economic inactivity.

There is also evidence that as work has become more intensive over recent decades, for some people, work itself has become a health risk.

The pandemic showed us how certain groups of workers (including so-called “essential workers”) suffered more ill health due to their greater exposure to COVID. But there are broader trends towards lower quality work that predate the pandemic, and these trends suggest improving job quality is an important step towards tackling the underlying causes of economic inactivity.


Another big section of the economically active population who cannot be ignored are those who have retired early and deliberately left the labour market behind. These are people who want and value – and crucially, can afford – a life without work.

Here, the effects of the pandemic can be seen again. During those years of lockdowns, furlough and remote working, many of us reassessed our relationship with our jobs. Changed attitudes towards work among some (mostly older) workers can explain why they are no longer in the labour market and why they may be unresponsive to job offers of any kind.

Sign on railings supporting NHS staff during pandemic.
COVID made many people reassess their priorities. Alex Yeung/Shutterstock

And maybe it is from this viewpoint that we should ultimately be looking at economic inactivity – that it is actually a sign of progress. That it represents a move towards freedom from the drudgery of work and the ability of some people to live as they wish.

There are utopian visions of the future, for example, which suggest that individual and collective freedom could be dramatically increased by paying people a universal basic income.

In the meantime, for plenty of working age people, economic inactivity is a direct result of ill health and sickness. So it may be that the levels of economic inactivity right now merely show how far we are from being a society which actually supports its citizens’ wellbeing.

David Spencer has received funding from the ESRC.

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Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

By Autumn Spredemann of The Epoch Times

Tens of thousands of illegal…



Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

By Autumn Spredemann of The Epoch Times

Tens of thousands of illegal immigrants are flooding into U.S. hospitals for treatment and leaving billions in uncompensated health care costs in their wake.

The House Committee on Homeland Security recently released a report illustrating that from the estimated $451 billion in annual costs stemming from the U.S. border crisis, a significant portion is going to health care for illegal immigrants.

With the majority of the illegal immigrant population lacking any kind of medical insurance, hospitals and government welfare programs such as Medicaid are feeling the weight of these unanticipated costs.

Apprehensions of illegal immigrants at the U.S. border have jumped 48 percent since the record in fiscal year 2021 and nearly tripled since fiscal year 2019, according to Customs and Border Protection data.

Last year broke a new record high for illegal border crossings, surpassing more than 3.2 million apprehensions.

And with that sea of humanity comes the need for health care and, in most cases, the inability to pay for it.

In January, CEO of Denver Health Donna Lynne told reporters that 8,000 illegal immigrants made roughly 20,000 visits to the city’s health system in 2023.

The total bill for uncompensated care costs last year to the system totaled $140 million, said Dane Roper, public information officer for Denver Health. More than $10 million of it was attributed to “care for new immigrants,” he told The Epoch Times.

Though the amount of debt assigned to illegal immigrants is a fraction of the total, uncompensated care costs in the Denver Health system have risen dramatically over the past few years.

The total uncompensated costs in 2020 came to $60 million, Mr. Roper said. In 2022, the number doubled, hitting $120 million.

He also said their city hospitals are treating issues such as “respiratory illnesses, GI [gastro-intenstinal] illnesses, dental disease, and some common chronic illnesses such as asthma and diabetes.”

“The perspective we’ve been trying to emphasize all along is that providing healthcare services for an influx of new immigrants who are unable to pay for their care is adding additional strain to an already significant uncompensated care burden,” Mr. Roper said.

He added this is why a local, state, and federal response to the needs of the new illegal immigrant population is “so important.”

Colorado is far from the only state struggling with a trail of unpaid hospital bills.

EMS medics with the Houston Fire Department transport a Mexican woman the hospital in Houston on Aug. 12, 2020. (John Moore/Getty Images)

Dr. Robert Trenschel, CEO of the Yuma Regional Medical Center situated on the Arizona–Mexico border, said on average, illegal immigrants cost up to three times more in human resources to resolve their cases and provide a safe discharge.

“Some [illegal] migrants come with minor ailments, but many of them come in with significant disease,” Dr. Trenschel said during a congressional hearing last year.

“We’ve had migrant patients on dialysis, cardiac catheterization, and in need of heart surgery. Many are very sick.”

He said many illegal immigrants who enter the country and need medical assistance end up staying in the ICU ward for 60 days or more.

A large portion of the patients are pregnant women who’ve had little to no prenatal treatment. This has resulted in an increase in babies being born that require neonatal care for 30 days or longer.

Dr. Trenschel told The Epoch Times last year that illegal immigrants were overrunning healthcare services in his town, leaving the hospital with $26 million in unpaid medical bills in just 12 months.

ER Duty to Care

The Emergency Medical Treatment and Labor Act of 1986 requires that public hospitals participating in Medicare “must medically screen all persons seeking emergency care … regardless of payment method or insurance status.”

The numbers are difficult to gauge as the policy position of the Centers for Medicare & Medicaid Services (CMS) is that it “will not require hospital staff to ask patients directly about their citizenship or immigration status.”

In southern California, again close to the border with Mexico, some hospitals are struggling with an influx of illegal immigrants.

American patients are enduring longer wait times for doctor appointments due to a nursing shortage in the state, two health care professionals told The Epoch Times in January.

A health care worker at a hospital in Southern California, who asked not to be named for fear of losing her job, told The Epoch Times that “the entire health care system is just being bombarded” by a steady stream of illegal immigrants.

“Our healthcare system is so overwhelmed, and then add on top of that tuberculosis, COVID-19, and other diseases from all over the world,” she said.

A Salvadorian man is aided by medical workers after cutting his leg while trying to jump on a truck in Matias Romero, Mexico, on Nov. 2, 2018. (Spencer Platt/Getty Images)

A newly-enacted law in California provides free healthcare for all illegal immigrants residing in the state. The law could cost taxpayers between $3 billion and $6 billion per year, according to recent estimates by state and federal lawmakers.

In New York, where the illegal immigration crisis has manifested most notably beyond the southern border, city and state officials have long been accommodating of illegal immigrants’ healthcare costs.

Since June 2014, when then-mayor Bill de Blasio set up The Task Force on Immigrant Health Care Access, New York City has worked to expand avenues for illegal immigrants to get free health care.

“New York City has a moral duty to ensure that all its residents have meaningful access to needed health care, regardless of their immigration status or ability to pay,” Mr. de Blasio stated in a 2015 report.

The report notes that in 2013, nearly 64 percent of illegal immigrants were uninsured. Since then, tens of thousands of illegal immigrants have settled in the city.

“The uninsured rate for undocumented immigrants is more than three times that of other noncitizens in New York City (20 percent) and more than six times greater than the uninsured rate for the rest of the city (10 percent),” the report states.

The report states that because healthcare providers don’t ask patients about documentation status, the task force lacks “data specific to undocumented patients.”

Some health care providers say a big part of the issue is that without a clear path to insurance or payment for non-emergency services, illegal immigrants are going to the hospital due to a lack of options.

“It’s insane, and it has been for years at this point,” Dana, a Texas emergency room nurse who asked to have her full name omitted, told The Epoch Times.

Working for a major hospital system in the greater Houston area, Dana has seen “a zillion” migrants pass through under her watch with “no end in sight.” She said many who are illegal immigrants arrive with treatable illnesses that require simple antibiotics. “Not a lot of GPs [general practitioners] will see you if you can’t pay and don’t have insurance.”

She said the “undocumented crowd” tends to arrive with a lot of the same conditions. Many find their way to Houston not long after crossing the southern border. Some of the common health issues Dana encounters include dehydration, unhealed fractures, respiratory illnesses, stomach ailments, and pregnancy-related concerns.

“This isn’t a new problem, it’s just worse now,” Dana said.

Emergency room nurses and EMTs tend to patients in hallways at the Houston Methodist The Woodlands Hospital in Houston on Aug. 18, 2021. (Brandon Bell/Getty Images)

Medicaid Factor

One of the main government healthcare resources illegal immigrants use is Medicaid.

All those who don’t qualify for regular Medicaid are eligible for Emergency Medicaid, regardless of immigration status. By doing this, the program helps pay for the cost of uncompensated care bills at qualifying hospitals.

However, some loopholes allow access to the regular Medicaid benefits. “Qualified noncitizens” who haven’t been granted legal status within five years still qualify if they’re listed as a refugee, an asylum seeker, or a Cuban or Haitian national.

Yet the lion’s share of Medicaid usage by illegal immigrants still comes through state-level benefits and emergency medical treatment.

A Congressional report highlighted data from the CMS, which showed total Medicaid costs for “emergency services for undocumented aliens” in fiscal year 2021 surpassed $7 billion, and totaled more than $5 billion in fiscal 2022.

Both years represent a significant spike from the $3 billion in fiscal 2020.

An employee working with Medicaid who asked to be referred to only as Jennifer out of concern for her job, told The Epoch Times that at a state level, it’s easy for an illegal immigrant to access the program benefits.

Jennifer said that when exceptions are sent from states to CMS for approval, “denial is actually super rare. It’s usually always approved.”

She also said it comes as no surprise that many of the states with the highest amount of Medicaid spending are sanctuary states, which tend to have policies and laws that shield illegal immigrants from federal immigration authorities.

Moreover, Jennifer said there are ways for states to get around CMS guidelines. “It’s not easy, but it can and has been done.”

The first generation of illegal immigrants who arrive to the United States tend to be healthy enough to pass any pre-screenings, but Jennifer has observed that the subsequent generations tend to be sicker and require more access to care. If a family is illegally present, they tend to use Emergency Medicaid or nothing at all.

The Epoch Times asked Medicaid Services to provide the most recent data for the total uncompensated care that hospitals have reported. The agency didn’t respond.

Continue reading over at The Epoch Times

Tyler Durden Fri, 03/15/2024 - 09:45

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