Futures Jump On China Reopening Rumors Ahead Of Key Jobs Report
US futures jumped and the Nasdaq 100 was poised to trim its biggest weekly drop since the start of the year as optimism about China’s reopening boosted Wall Street futures despite the looming risk of another hotter-than-expected payrolls report. As reported earlier, Chinese stocks in Hong Kong headed for their best week since 2015, and the yuan strengthened amid fresh speculation that Beijing was set to ease covid-zero policies. The frenzy was sparked earlier this week on unverified social media posts indicating Beijing could be preparing to exit the strict Covid zero policy. There's a flurry of new market-friendly headlines adding fuel to the rally, which boosted US-listed Chinese stocks while miners led gains in Europe as commodities rallied, while luxury stocks also got a boost.
After closing at the lowest level since July 2020 on Thursday, as tech stocks fell out of favor this year as the Federal Reserve tightened its monetary policy, Nasdaq 100 contracts rose 0.8% by 5 a.m. in New York after the tech-heavy gauge plunged 7.4% this week, erasing $1.1 trillion in market capitalization. S&P 500 futures gained 0.7%, putting the underlying gauge on track to pare a 4.6% weekly decline -- the steepest since September.
In premarket trading, US-listed Chinese stocks like Alibaba Group Holdings Ltd., JD.com Inc., and Baidu Inc. surged as China-linked sentiment got a lift after Bloomberg News reported China is working on plans to scrap a system that penalizes airlines for bringing virus cases into the country, a sign that authorities are looking for ways to ease the impact of the Covid Zero policy. Cloud software stocks dropped in premarket trading after revenue forecasts from peers Atlassian and Twilio fell short of expectations, triggering analyst downgrades. Atlassian falls 23% in premarket trading, the stock is set for its biggest drop since its debut; Twilio fell as much as 27% in premarket trading; the stock is set for its biggest drop since May 3, 2017. Here are some of the other notable premarket movers:
The conservative-targeting money processor PayPal fell 8.3% in premarket trading after the payments platform cut its forecast for annual revenue amid a slowdown in spending. Analysts note that a strong dollar and other macroeconomic headwinds are weighing on the company’s forecast.
Block Inc. shares surge 14% in US premarket trading after the digital payments company’s adjusted Ebitda beat expectations and boosted optimism that the company can weather a slowdown in the economy. Brokers in particular singled out the performance of the firm’s Cash App business, saying its potential isn’t fully recognized by investors.
DoorDash jumps 11% in premarket trading after the food delivery platform topped revenue estimates, driven by strong appetite for takeout. Analysts noted that demand remained resilient and the company does not seem to be affected by inflationary and macro headwinds.
Coinbase shares rallied as much as 9.1% in US premarket trading, with analysts saying that the cryptocurrency platform provider’s growth in subscription revenue and a narrower loss were reasons for optimism. These positives showed that the company’s efforts to control costs were working, even as trading volume was underwhelming as expected due to the slump in prices of digital currencies this year.
Kratos forecast adjusted Ebitda for the fourth quarter that missed the average analyst estimate, as the defense and security company faces hiring challenges and supply-chain disruptions. Shares declined 9.3% in US postmarket trading..
Twilio fell as much as 22% in premarket trading, after the infrastructure software company gave a fourth-quarter revenue forecast that came in below estimates. Analysts noted that the company’s analyst day left them wanting as it “raised new concerns” instead of extinguishing existing ones.
Focus next will turn to US payrolls data at 830am ET on Friday, where 195,000 jobs are expected for October, compared with 263,000 in September. Unemployment rate projected at 3.6% (our payrolls preview is here). The US two-year yield topped 4.75% for the first time since 2007 after a key segment of the curve reached an extreme of inversion not seen since the 1980s, an anomaly that historically preceded economic downturns.
“Key focal point could be the US NFP release tonight which could provide a better sense of tightening trajectory and the eventual peak of terminal rates,” said Fiona Lim, senior currency analyst at Malayan Banking Berhad in Singapore. “Investors chase that flickering light at the end of the Covid-Zero tunnel,” said Stephen Innes, a managing partner at SPI Asset Management.
“Today’s numbers need to be viewed in the light of other labor market statistics that shows labor demand holding up,” said Stuart Cole, head macro economist at Equiti Capital. “The concerns over still strong inflationary pressures will be trumping any meaningful easing that the labor market might be pointing to.”
Chair Jerome Powell left little doubt that he’s prepared to push interest rates as high as needed to stamp out inflation after the Fed raised rates by 75 basis points for the fourth time in a row. Traders will parse jobs data due later on Friday for signs of a slowing labor market, which could convince the bank to adopt a less hawkish stance. Swaps that reference future Federal Reserve meetings indicate an expected peak policy rate above 5.14% around mid-2023.
“We think the Fed is much closer to pausing than the market is pricing and much closer than what they’re trying to convey,” said Isaac Poole, chief investment officer at Oreana Financial Services, who expects the US central bank to end hiking by December or January. “Maybe we’ll see a bit more near-term volatility, but I think there are real opportunities for upside in equities over the next 12 months,” he told Bloomberg TV.
European stocks rallied for the first time in the past three sessions on optimism about China’s reopening. Euro Stoxx 50 rallies 1.6%. CAC 40 outperforms peers, adding 1.7%, IBEX lags. Miners, consumer products and chemicals are the strongest performing sectors. Shares with high business exposure to China rallied the most on Friday as authorities were said to be making efforts to ease the impact of their Covid-Zero policy. Europe’s automobile and parts subsector outperformed the Stoxx 600 index, rising as much as 2.0%. Volkswagen, Mercedes-Benz, Ferrari are among the biggest contributors to the sector advance. European luxury stocks also jumped as key market China is said to be preparing a plan to end a system that penalizes airlines for bringing virus cases into the country. Swatch Group is among the best performing rising as much as 3.6%, Richemont +3.3%, Hermes International +2.3%, Burberry +1.3%, Christian Dior +2%, LVMH +1.7%, Pandora +2.6% Italian luxury stocks also jumped with Moncler +2.7%, Tod’s +1.6% and Salvatore Ferragamo +2.6%. Here are some of the biggest European movers:
Europe’s basic resources sector is the best-performing subindex in the Stoxx 600 benchmark as iron ore heads for its first weekly gain in two months, with traders buying on speculation China may be planning to remove some Covid Zero restrictions. KGHM leads advances, rising 10%, Anglo American +9.4%, Rio Tinto +7%
Andritz shares jump as much as 11%, the most since July, after results from the hydropower station equipment supplier that analysts said were “excellent” and show the company’s resilience to a tough macro environment
GN Store Nord climbs as much as 15% after company notified that William Demant Invest has increased its aggregate holding of shares to above 10% of the share capital and voting rights in company.
Rovi slides as much as 13% with Jefferies flagging that the Spanish pharmaceutical company’s guidance for 2023 as well as 9-month Ebitda missed consensus estimates.
Leonardo declines as much as 8.4% as worries over inflation overshadow the Italian aerospace technology company’s beat on 3Q Ebita and revenue and its strong orders.
Kering jumps as much as 5.5% after a report that the French company is in advanced talks to buy Tom Ford.
Enel falls as much as 3.5% after the Italian power utility cut its adjusted net guidance for the year, partly reflecting a decline in hydroelectric power generation.
Meanwhile, European Central Bank President Christine Lagarde said interest rates may need to be lifted to restrictive levels to drag inflation back to the 2% target. Bank of England Chief Economist Huw Pill said the BOE is trying to strike a balance between bringing inflation back to target and preventing an unnecessarily deep recession by raising interest rates too aggressively.
“Our view has been for a while that the only way central banks can credibly tame inflation is through tighter financial conditions and slower growth,” Barclays analysts wrote in a note. “Chairman Powell made it clear that over tightening may be a less costly option over the long run than doing too little. So as it stands, we find few reasons to stop worrying about a hard landing.”
Earlier in the session, Asian stocks rebounded as China and Hong Kong staged a strong comeback amid speculation that China is poised to exit its stringent Covid-zero policy. The MSCI Asia Pacific Index gained as much as 1.6%, lifted by consumer discretionary and financial shares. Chinese stocks in Hong Kong capped their best week since 2015 as shares linked to reopening jumped amid fresh signs of easing Covid restrictions. Hong Kong’s benchmark Hang Seng Index saw the biggest weekly jump since 2011 and China’s CSI 300 Index capped its best week since mid-2020. The rally follows days of speculation on the back of unverified social media posts detailing a reopening plan. While similar Chinese rallies have all fizzled in recent months, bulls are now betting that some of the world’s lowest valuations have left the nation’s shares primed to surge on any hint of good news. Separately, Chinese President Xi Jinping told German Chancellor Olaf Scholz he opposed the use of nuclear force in Europe, in his most direct remarks yet on the need to keep Russia’s war in Ukraine from escalating.
Part of China's gains were also spurred by tech companies, with a gauge of tech stocks listed in Hong Kong surging more than 7% after Bloomberg News reported progress in efforts to prevent delisting of hundreds of Chinese stocks from US exchanges. US audit officials completed their first on-site inspection round of Chinese companies ahead of schedule.
But the recent gains might not sustain, according to market watchers. “Market dynamics remain relatively subdued despite some short-lived excitement over chatter around Covid-Zero policy changes,” Morgan Stanley strategists including Laura Wang wrote in a note. She expects near-term volatility to “stay high with complexity around Covid relaxation.” Gains in other Asian markets were relatively subdued, with Japanese shares underperforming the region as the market returned from a holiday. The Asian stock benchmark was poised for a weekly gain of more than 2%, the first in four weeks, as the reopening boost in China offset downside risks from further monetary tightening by the Federal Reserve. Still, the gauge is down about 28% this year
In FX, the Bloomberg Dollar Spot Index slipped 0.5% after rising 0.7% Thursday and the dollar weakened against all of its Group-of-10 peers, in a commodity-currency led advance. DKK and EUR are the weakest performers in G-10 FX, AUD and NZD outperform.
The euro advanced after slumping all other trading days this week. Bunds were steady while Italian bonds inched up
The pound rebounded from a two-week low of 1.1150 per dollar and gilts inched up, led by the belly. Money markets pared pricing for BOE hikes by up to 10bps. BOE Chief Economist Huw Pill said the Bank of England is trying to strike a balance between bringing inflation back to target and preventing an unnecessarily deep recession by raising interest rates too aggressively. Pill speaks again later on Friday
The Australian dollar was the best G-10 performer. The currency rose by as much as 1.2% versus the dollar, and snapped six straight days of declines as Chinese stocks and iron ore prices surged amid China reopening speculation. Australia’s bonds bounced back with RBA’s quarterly monetary policy statement underscoring the central bank’s expectation it will soon reach peak rates even at a modest pace of hikes
In rates, the Treasury curve flattened as yields were between 3bps lower and 2bps higher from yesterday’s close while Germany’s 5y30y yield curve inverts for the first time since late September. Treasury yields slightly cheaper vs Thursday’s close with front-end underperforming -- 2-year touched 4.75%, new multiyear high -- as market braces for the October jobs report at 8:30am New York time. 2-year yield rose as much as 3.7bp, lagging rest of the curve; 10-year little changed near 4.16% with bunds slightly outperforming and gilts slightly lagging. Front-end underperformance continues to flatten 2s10s spread, which reached -61.9bp, new generational extreme; in Europe, German 5s30s curve inverts for the first time since end of September. Estoxx50 higher by almost 2% into early US session while S&P 500 futures climb 0.8%, paring Thursday’s drop; WTI futures up 3.5%. October jobs report expected to print 195k headline number (whisper number is 231k) with unemployment rate at 3.6%. Price action rangebound in the overnight session, also across core European bonds, while stocks have rallied, led by Estoxx50.
UK bonds fell after Andrew Hauser, executive director for markets at the BOE, said the central bank will outline how it will unwind its recent emergency gilt purchases “shortly.”
In commodities, crude futures rally. WTI up 3% to trade near $91. Brent rises 2.6% to top $97 amid optimism a China will boost oil demand; Commodities are also bolstered by the USD's pullback and. Saudi Arabia set December Arab light crude OSP to Asia at Oman/Dubai + USD 5.45/bbl, while it set OSP to NW Europe at ICE Brent + USD 1.70/bbl and to the US at ASCI + USD 6.35/bbl. Spot gold has struggled to surpass the USD 1650/oz mark where its 21-DMA lies just above at USD 1651.7/oz, while base metals are deriving broad support on the China/COVID narrative.
Bitcoin has broken out of the last few sessions tight parameters and resides towards the top end of this range just above the USD 20.5k mark.
Looking to the day ahead now, the main highlight will be the US jobs report for October. Meanwhile in Europe, there’s data on German factory orders, French industrial production and Euro Area PPI for September, alongside the final services and composite PMIs for October. Central bank speakers include ECB President Lagarde, Vice President de Guindos, Bundesbank President Nagel, the Fed’s Collins and BoE Chief Economist Pill.
S&P 500 futures up 0.3% to 3,740.50
STOXX Europe 600 up 0.7% to 412.46
MXAP up 1.2% to 139.46
MXAPJ up 2.3% to 449.33
Nikkei down 1.7% to 27,199.74
Topix down 1.3% to 1,915.40
Hang Seng Index up 5.4% to 16,161.14
Shanghai Composite up 2.4% to 3,070.80
Sensex down 0.2% to 60,727.51
Australia S&P/ASX 200 up 0.5% to 6,892.46
Kospi up 0.8% to 2,348.43
German 10Y yield down 1% to 2.22%
Euro up 0.3% to $0.9774
Brent Futures up 2% to $96.54/bbl
Gold spot up 1.1% to $1,647.66
U.S. Dollar Index down 0.36% to 112.52
Top Overnight News from Bloomberg
ECB President Christine Lagarde said interest rates may need to be lifted to restrictive levels to drag inflation back to its 2% target
Inflation in the euro zone will likely remain above the European Central Bank’s target for an extended period, raising the risk of a price-wage spiral, ECB Vice-President Luis de Guindos said in a speech
German factory orders continued to decline in September, adding to concerns that Europe’s largest economy is slipping into recession as it struggles with surging energy costs. Demand fell 4% from the previous month, a steeper drop than the 0.5% median estimate in a Bloomberg poll of economists and accelerating from a revised 2% decrease in August
A Federal Reserve Bank of New York experiment has found that a central bank digital currency using distributed ledger technology could reduce the time it takes to settle foreign exchange transactions from two days to under 10 seconds, a top New York Fed official said
Cash is king, with investors fleeing to the safety of cash funds at the fastest pace since the coronavirus pandemic as the Federal Reserve remains firmly hawkish, according to strategists at Bank of America Corp
A more detailed look at global markets courtesy of Newsquawk
Asia-Pac stocks were mixed with Chinese stocks rallying on unverified reopening rumours, although the rest of the region was contained after the wave of central bank rate hikes and ahead of the NFP jobs data. ASX 200 was kept afloat by strength in the commodity-related sectors although gains were limited by weakness in defensives and the top-weighted financial sector, while the RBA’s quarterly Statement on Monetary Policy provided little in the way of fresh insight and included a downgrade to growth projections. Nikkei 225 was hit on return from holiday and reacted to the recent FOMC and Powell’s hawkish remarks. Hang Seng and Shanghai Comp rallied with the Hong Kong benchmark spearheaded by tech and with EV makers boosted following a jump in BYD’s new energy vehicle sales, while sentiment was also boosted as US audit inspectors finished on-site China work ahead of schedule and amid unverified rumours of China reopening.
Top Asian News
US audit inspectors finished on-site China work ahead of schedule, according to Bloomberg.
Chinese President Xi met with German Chancellor Scholz and said as big nations with influence, China and Germany should work together all the more in times of change and turmoil to make a greater contribution to world peace and development, according to state media.
German Chancellor Scholz said his meeting with Chinese President Xi is at a time of big tension and that the Russian war on Ukraine brings big problems for rule-based order, while they will talk about Europe-China relations and the fight against climate change and world hunger. Scholz added they will also talk about how to develop economic relations and on topics where their perspectives are different.
Japan's government is said to issue JPY 22.8tln in bonds for the extra budget with total issuance for FY22/23 revised upward to a record JPY 62.5tln, according to Reuters.
RBA Statement on Monetary Policy said the board expects rates will need to increase further and policy is not on a pre-set path, while they will hike in larger steps or pause if considered necessary. Furthermore, the RBA cut economic growth forecasts in which it sees GDP at 2.9% in December 2022, 1.4% in December 2023 and 1.6% in December 2024, while it lifted the inflation forecast which it sees at 8.0% in December 2022, 4.7% in December 2023 and 3.2% in December 2024.
China is working on a plan to scrap COVID flight suspensions, according to Bloomberg.
China's Health Authorities are to hold a presser on targeted COVID prevention on November 5th at 15:00 local time (07:00GMT/03:00ET).
European bourses are firmer across the board as the complex benefits from further rumours around an easing of China's COVID policy, with a presser on prevention due on the weekend; Euro Stoxx 50 +1.4%. Additional upside occurred in wake of upward revisions to the regions PMI metrics; however, the magnitude of this was limited as internal commentary remained downbeat and the metrics are still in contractionary territory. Stateside, futures are firmer across the board with magnitudes a touch more contained vs Europe, ES +0.7%, as the region awaits the NFP print.
Top European News
Rolex Lifts Prices Again in Europe as US Dollar Stays Strong
German Factory Orders Accelerate Drop as Recession Looms
EU’s Breton Urges Carmakers to Keep Producing Combustion Engines
Paschi Completes Full Rights Offer Subscription, Shares Fall
GN Store Nord Shares Soar as Demant Invest Raises Holding
Naspers Surges in Johannesburg on China Reopening Hopes
DXY has pulled back from overnight peaks, where it tested but failed to attain 113.00; a pullback in the context of constructive overall sentiment amid China-COVID rumours/reports and upward PMI revisions.
Antipodeans outperform given base metal action on the mentioned COVID rumours, a narrative which has also buoyed the Yuan which itself was subject to a firmer-than-expected Yuan midpoint.
EUR/USD has been unable to reclaim 0.98 despite favorable PMI revisions and the USD's pullback; note, substantial OpEx lies between 0.9790-0.9800.
Cable was unreactive to the BoE's Chief Economist reiterating lines from Bailey in pushing-back on market pricing; nonetheless, the Pound has eclipsed 1.12 and is among the outperformers following Thursday's underperformance.
Core benchmarks are little changed overall with USTs essentially flat on the session and yields holding within recent parameters as we count down to the NFP print.
Bund has trimmed initial 50 tick upside following remarks from ECB's Lagarde which incl. hawkish undertones on the wage front, German benchmark now little changed overall.
In contrast, Gilts continue to slip and are lower by 50 ticks around 101.50 post-Pill highlighting that recent turmoil has not distracted them from their QT goals.
Commodities are bolstered amid the USD's pullback and on further reopening rumours re. China
WTI and Brent front-month futures are firmer on the day with the former just under USD 91/bbl and the latter around USD 97.00/bbl.
Saudi Arabia set December Arab light crude OSP to Asia at Oman/Dubai + USD 5.45/bbl, while it set OSP to NW Europe at ICE Brent + USD 1.70/bbl and to the US at ASCI + USD 6.35/bbl.
MMG said it has been forced to commence a progressive slow-down of its Las Bambas operation amid disruptions due to blockades by communities, while it continues to work with the government of Peru and communities along the site's logistic route.
US and allies have reached agreement on which sales of Russian oil will be subject to a price cap, WSJ reports; "Each load of seaborne Russian oil will only be subject to the price cap when it is first sold to a buyer on land, meaning resales of the same oil won’t have to fall under the cap", according to WSJ sources.
Spot gold has struggled to surpass the USD 1650/oz mark where its 21-DMA lies just above at USD 1651.7/oz, while base metals are deriving broad support on the China/COVID narrative
US officials have no clear timing for when North Korea might conduct a nuclear test and would like to see China and Russia use their leverage on North Korea to head off a nuclear test. Furthermore, the US is prepared to engage directly with North Korea and has sought to communicate with North Korea in private channels and through third parties, while it rejects the notion that the international community should treat North Korea as a nuclear power, according to a senior US administration official.
At least 180 North Korean warplanes take off in apparent show of force, via Yonhap; subsequently, South Korean has scrambled around 800 jets.
Taiwan Defence Ministry says 12 Chinese air force planes crossed the Taiwanese Strait Median Line on Friday, via Reuters.
US Event Calendar
08:30: Oct. Change in Private Payrolls, est. 200,000, prior 288,000
08:30: Oct. Change in Nonfarm Payrolls, est. 195,000, prior 263,000
08:30: Oct. Change in Manufact. Payrolls, est. 12,000, prior 22,000
08:30: Oct. Unemployment Rate, est. 3.6%, prior 3.5%
08:30: Oct. Underemployment Rate, prior 6.7%
08:30: Oct. Labor Force Participation Rate, est. 62.3%, prior 62.3%
08:30: Oct. Average Hourly Earnings MoM, est. 0.3%, prior 0.3%
08:30: Oct. Average Hourly Earnings YoY, est. 4.7%, prior 5.0%
08:30: Oct. Average Weekly Hours All Emplo, est. 34.5, prior 34.5
DB's Jim Reid concludes the overnight wrap
It’s been another rough 24 hours in markets, with risk assets continuing to struggle after Fed Chair Powell’s Wednesday statement that “the ultimate level of interest rates will be higher than previously expected”. Indeed, fed funds futures are now pricing in their most hawkish expectations to date, with terminal rate expectations closing above 5.1% for the first time.
This fresh bout of hawkishness served to knock equities yet again, with the S&P 500 (-1.06%) building on the previous day’s losses to fall for a 4th consecutive session. That brings its losses for the week to -4.64%, and the effects have been particularly pronounced among the more interest-sensitive sectors like tech. For example the NASDAQ (-1.73%) is now on track for its second-worst weekly performance since March 2020, having lost -6.84% over the last four days. Furthermore, the FANG+ index of megacap tech stocks fell a further -1.53% yesterday, meaning that it’s now down by over -48% since its peak exactly a year ago today.
If that wasn’t bad enough, a number of recessionary indicators were flashing with increasing alarm yesterday, and the 2s10s Treasury yield curve flattened by another -5.0bps to -57.3bps. That’s the most inverted that curve has been since 1982, and bear in mind that it’s inverted prior to every single one of the last 10 US recessions, so a concerning sign if you value the yield curve as a recession indicator. That push even deeper into inversion territory came as the 2yr yield rose by +9.4bps yesterday, hitting a fresh post-2007 high of 4.71%. In the interests of balance however, we should point out that the Fed’s preferred yield curve (the 18m forward 3m yield minus the spot 3m yield) did steepen +11.9bps yesterday to 46.0bps, moving it yet further away from its near-inversion last week, when it closed at a new low for this cycle of 3.2bps.
When it comes to expectations of future rate hikes, the big event today will be the US jobs report for October, which will feed into the debate as to whether the Fed might slow down their pace of hikes at the December meeting. In terms of what to expect, our US economists are forecasting that nonfarm payrolls will have risen by +225k, which they think should be enough to keep the unemployment rate steady at 3.5%. Nevertheless, there’s still next month’s jobs report as well as a further two CPI prints ahead of the next Fed meeting, so there’s plenty to digest before they have to make that decision.
Here in the UK, the focus was also on central banks yesterday after the BoE delivered a 75bps rate hike as expected, thus taking Bank Rate to a post-2008 high of 3%. But even though it was the biggest single hike in decades, several details leaned in a dovish direction. First, although a majority of the MPC said that further hikes might be required if the economy progressed in line with their forecasts, they also said it would be “to a peak lower than priced into financial markets.” That was evident from their forecasts too, since their inflation projection which was conditioned on market interest rate expectations showed inflation falling below the 2% target in a couple of years. Separately, two of the nine MPC members were also in favour of a smaller hike, with one wanting a 50bps move and another preferring a 25bps move.
Those dovish implications meant that sterling fell significantly in response, and in fact was the worst-performing G10 currency with a -2.04% decline against the dollar. That said, sterling’s weakness did support the FTSE 100 (+0.62%), which was the only major equity index to close in positive territory yesterday. In his recap (link here), our UK economist sticks to his view that Bank Rate will peak at 4.5%, but sees more downside risks to the call as a result of the more dovish message from yesterday. In the meantime, the focus on the UK economy will now shift to the fiscal side, as the government’s fiscal statement is set to be delivered on November 17.
When it came to gilts, the 10yr yield was up +11.1bps on the day, but that was basically in line with other European countries, with yields on 10yr bunds (+10.9bps), OATs (+10.0bps) and BTPs (+12.2bps) seeing similar increases. That followed remarks from an array of ECB officials, including President Lagarde who said that there was “still a way to go” when it came to raising rates. As with the Fed, market expectations of future ECB interest rates have ticked up again over recent days, but unlike the Fed they remain beneath their recent highs over the last month or so.
Overnight in Asia we’ve seen a massive surge in Hong Kong and mainland Chinese stocks, driven by continued speculation about a potential shift in their zero-Covid strategy. That’s helped the Hang Seng to gain a massive +7.46% on the day, whilst the CSI 300 (+3.53%) and the Shanghai Comp (+2.76%) have also seen sizeable gains. And unlike the US, tech stocks are surging even faster, with the Hang Seng Tech index up by +10.87%. Elsewhere in Asia we haven’t seen a surge on that scale, with the Kospi up by a more modest +0.61%, and the Nikkei (-1.81%) experiencing a decent loss as it reopens following the holiday during the previous session. Looking forward however, equity futures in the US and Europe are pointing higher this morning, with those on the S&P 500 up +0.25%.
Overnight we’ve also heard from the Reserve Bank of Australia, who released their quarterly Statement on Monetary Policy and upgraded their forecasts for inflation, which they now see peaking at 8% this year. Meanwhile on the data front, Japan’s composite and services PMI both hit a 4-month high in October, climbing to 51.8 and 53.2 respectively.
Looking at yesterday’s other data, the US weekly initial jobless claimed fell to 217k (vs. 220k expected) over the week ending October 29, and the 4-week moving average also ticked lower for the first time in 5 weeks. However, the ISM services came in somewhat beneath expectations, and the 54.4 reading (vs. 55.3 expected) was the worst month since May 2020 during the pandemic contraction, and the employment component also moved back into contractionary territory with a 49.1 reading. Finally, the Euro Area unemployment rate fell to 6.6% in September, which is the lowest since the formation of the single currency, since the August number was revised up a tenth to show a 6.7% reading.
To the day ahead now, and the main highlight will be the US jobs report for October. Meanwhile in Europe, there’s data on German factory orders, French industrial production and Euro Area PPI for September, alongside the final services and composite PMIs for October. Central bank speakers include ECB President Lagarde, Vice President de Guindos, Bundesbank President Nagel, the Fed’s Collins and BoE Chief Economist Pill.
“[…] we set out to explore the effects of removing p16Ink4a+ senescent cells on the proliferative capacity and mass of β-cells […].”
Credit: 2023 Bahour et al.
“[…] we set out to explore the effects of removing p16Ink4a+ senescent cells on the proliferative capacity and mass of β-cells […].”
BUFFALO, NY- January 31, 2023 – A new research paper was published on the cover of Aging (listed as “Aging (Albany NY)” by Medline/PubMed and “Aging-US” by Web of Science) Volume 15, Issue 2, entitled, “Clearance of p16Ink4a-positive cells in a mouse transgenic model does not change β-cell mass and has limited effects on their proliferative capacity.”
Type 2 diabetes is partly characterized by decreased β-cell mass and function which have been linked to cellular senescence. Despite a low basal proliferative rate of adult β-cells, they can respond to growth stimuli, but this proliferative capacity decreases with age and correlates with increased expression of senescence effector, p16Ink4a.
In a new study, researchers Nadine Bahour, Lucia Bleichmar, Cristian Abarca, Emeline Wilmann, Stephanie Sanjines, and Cristina Aguayo-Mazzucato from the Joslin Diabetes Center at Harvard Medical School hypothesized that selective deletion of p16Ink4a-positive cells would enhance the proliferative capacity of the remaining β-cells due to the elimination of the local senescence-associated secretory phenotype (SASP).
“We aimed to investigate the effects of p16Ink4a-positive cell removal on the mass and proliferative capacity of remaining β-cells using INK-ATTAC mice as a transgenic model of senolysis.”
Clearance of p16Ink4a-positive subpopulation was tested in mice of different ages, males and females, and with two different insulin resistance models: high-fat diet (HFD) and insulin receptor antagonist (S961). Clearance of p16Ink4a-positive cells did not affect the overall β-cell mass. β-cell proliferative capacity negatively correlated with cellular senescence load and clearance of p16Ink4a positive cells in 1-year-old HFD mice improved β-cell function and increased proliferative capacity in a subset of animals. Single-cell sequencing revealed that the targeted p16Ink4a subpopulation of β-cells is non-proliferative and non-SASP producing whereas additional senescent subpopulations remained contributing to continued local SASP secretion.
“In conclusion, deletion of p16Ink4a cells did not negatively impact beta-cell mass and blood glucose under basal and HFD conditions and proliferation was restored in a subset of HFD mice opening further therapeutic targets in the treatment of diabetes.”
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Launched in 2009, Aging (Aging-US) publishes papers of general interest and biological significance in all fields of aging research and age-related diseases, including cancer—and now, with a special focus on COVID-19 vulnerability as an age-dependent syndrome. Topics in Aging go beyond traditional gerontology, including, but not limited to, cellular and molecular biology, human age-related diseases, pathology in model organisms, signal transduction pathways (e.g., p53, sirtuins, and PI-3K/AKT/mTOR, among others), and approaches to modulating these signaling pathways.
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Las Vegas December 2022: Visitor Traffic Down 4.6% Compared to 2019; Convention Traffic Down 38.2%
Note: I like using Las Vegas as a measure of recovery for both leisure (visitors) and business (conventions).From the Las Vegas Visitor Authority: December 2022 Las Vegas Visitor StatisticsFrom the initial shadow of the omicron variant to record‐shatte…
From the initial shadow of the omicron variant to record‐shattering room rates later in the year, Las Vegas enjoyed a robust recovery trajectory across core tourism indicators in 2022. With December 2022 visitation just 4.6% shy of December 2019, the year closed out with 38.8M annual visitors, 20.5% ahead of 2021 and ‐8.7% under 2019's tally.
Convention attendance for the year approached 5.0M attendees, dramatically ahead of pandemic‐suppressed volumes of 2021 and recovering to about three‐quarters of 2019's tally of 6.6M convention attendees.
Overall hotel occupancy reached 79.2% for the year , +12.4 pts YoY and down ‐9.7 pts vs. 2019. For the year, Weekend occupancy reached 89.3%, +8.0 pts over 2021 and ‐5.6 pts vs. 2019, while Midweek occupancy reached 74.7%, up 14.2 pts vs. 2021 but down ‐11.6 pts vs. 2019.
Strong room rates continued throughout 2022 as annual ADR reached $171, +24.5% higher than 2021 and +28.9% ahead of 2019 while RevPAR reached approx. $135 for the year, +47.6% YoY and +14.9% over 2019.
Click on graph for larger image.
The first graph shows visitor traffic for 2019 (dark blue), 2020 (light blue), 2021 (yellow) and 2022 (red)
Visitor traffic was down 4.6% compared to the same month in 2019.
Visitor traffic was up 10.1% compared to last December.
The second graph shows convention traffic.
Convention traffic was down 38.2% compared to December 2019.
Note: There was almost no convention traffic from April 2020 through May 2021.
US Job Opening Far Lower Than Reported By Department Of Labor, UBS Finds
When it comes to labor market data (or rather "data"), Biden's labor department is a study in contrasts (and pats on shoulders). One day we get a contraction in PMI employment (both manufacturing and services), the other we get a major beat in employment. Then, one day the Household survey shows a plunge in employment (in fact, there has almost been no employment gain in the past 9 months) and a record in multiple jobholders and part-time workers, and the same day the Establishment Survey signals a spike in payrolls (mostly among waiters and bartenders). Or the day the JOLTS report shows an unexpected jump in job openings even as actual hiring slides to a two year low. Or the straw the breaks the latest trend in the labor market's back, is when the jobs report finally cracks and shows the fewest jobs added in over a year, and yet initial jobless claims tumble and reverse all recent increases despite daily news of mass layoffs across all tech companies, as the relentless barrage of conflicting data out of the Bureau of Labor Statistics (which is the principal "fact-finding" agency for the Biden Administration and a core pillar of the Dept of Labor) just won't stop, almost as if to make a very political point.
But while one can certainly appreciate Biden's desire to paint the glass of US jobs as always half full, reality is starting to make a mockery of the president's gaslighting ambitions, as one by one core pillars of the administration's "strong jobs" fabulation collapse. First it was the Philadelphia Fed shockingly stating that contrary to the BLS "goalseeking" of 1.1 million jobs in Q2 2022, the US actually only added a paltry 10,000 jobs (just as the Fed unleashed an unprecedented spree of 75bps rate hikes).
Then, it was Goldman's turn to make a mockery of the "curiously" low initial jobless claims, by comparing them to directly reported state-level WARN notices (mandatory under the Worker Adjustment and Retraining Notification (WARN) Act) which no low-level bureaucrat and Biden lackey can "seasonally adjust" because there they are: cold, hard, fact, immutable and truly representative of the underlying economic truth, and what they show is that - as the Goldman chart below confirms - layoffs are rising far faster than what the DOL's Initial Claims indicates.
More importantly, Goldman also found that WARN notices also track the JOLTS layoff rate: WARN notice counts remained elevated in late 2020 even as the layoff rate declined, but this likely reflects unusual reporting delays during the pandemic and the exclusion of layoffs at closing establishments in the JOLTS survey, which WARN notices capture provided firms remain in business. Not surprisingly, Goldman's tracking estimate based on December and January WARN notices for the large states covered not only shows that the recent drop in initial claims is unlikely, but that it is also consistent with a layoff rate of around 1.1%, higher than the 0.9% in the November JOLTS report.
And now, another core pillar of the US labor market is being dismantled, and it has to do with the Fed's favorite labor market indicator: the JOLTS report of job openings.
As UBS economist Pablo Villaneuva writes in a recent report by the bank's Evidence Lab group, Job openings in the JOLTS survey have not declined much since the March peak. Indeed, the BLS reports that openings were only 12% below the March 2022 peak in November and remain 48% above the pre-pandemic, 2019 average. This slight move downward has, as we noted recently, led to only a small decline in the vacancies-to-unemployment ratio, from 1.99 in March to 1.74 in November, still well above the 2019 average of 1.19.
Of course, such a high level of job openings is alarming to the Fed for the simple reason that it means Powell has failed at his mission at cooling off what appears to be a red hot jobs market; no wonder the Fed Chair has frequently flagged the high level of job openings as a sign of ongoing strength in the labor market. The bottom line, as UBS notes, is that "the BLS measure, although it has declined, remains historically high."
However, as in the abovementioned case of unexpectedly low jobless claims, there may be more here than meets the eye. According to Villanueva, "a range of other measures of job openings suggest normalization in the labor market—softening much more convincingly, often to pre-pandemic levels" - translation: whether on purpose or accidentally, the BLS is fabricating data.Also, the UBS economist flags, job openings are not a great indicator of current labor market conditions—they lagged the last two downturns in the labor market.
So what's the real story?
Well, as usual there is BLS "data" and everyone else... and as UBS cautions, other measures of openings tell a very different story: "Our UBS Evidence Lab data on job listings is weekly and more timely than the BLS series. The last datapoint is for the week of December 31. It shows openings down 30% from the March 2022 peak and only 25% higher than the 2019 average."
While BLS bureaucrats and Biden sycophants can argue UBS data is inaccurate, other longer dated series also indicate weaker openings. Take for example the NFIB Small Business Survey includes labor market measures that have correlated strongly with the JOLTS data over time but have weakened more sharply than the JOLTS measure in recent months. The percentage of small firms unable to fill open positions has a correlation of 0.95 with JOLTS openings since 2000. This series has declined 20% relative to the peak in May 2022 and is only 13% above the 2019 average. The NFIB series on percentage of firms with few or no qualified applicants tells a similar story.
Finally, the "Opportunity Insights" measure of openings (see here) is also below pre-pandemic levels.
So what's going on here?
As the UBS economist puts it, "in short, other surveys of job openings generally suggest that the BLS measure may be overstating labor market tightness. One reason to think the accuracy of the JOLTS data may have declined is that the sample shrank noticeably at the start of the pandemic. In 2019, the survey response rate was 60%. In December, it was 30%."
Or perhaps it's not gross BLS incompetence (or propaganda): maybe it's just a data quirk at key economic inflection points. As UBS observed in August, job openings tend to lag other labor market indicators. Ahead of the 2001 recession, the private sector job openings rate was still rising as private employment peaked and started printing negative. Again in 2007, as job openings were peaking, payroll employment in the revised data had slowed considerably, and job openings remained near their peak as employment was beginning to contract outright.
Whatever the reason for the discrepancy in this latest labor series, the bigger picture is getting troubling.
We already knew that the employment as measured by the Household survey has been flat since March even as the Establishment survey signaled 2.7 million job gains since then. Shortly thereafter the Philadelphia Fed found that contrary to the BLS "goalseeking" of 1.1 million jobs in Q2 2022, the US actually only added a paltry 10,000 jobs in the second quarter of 2022. As such, the validity and credibility of the US nonfarm payrolls report is suspect at best.
And now, we can also stick a fork in the JOLTS report, whose accuracy has just been steamrolled by UBS with its finding that job openings - a critical component of the US labor market and the Fed's preferred labor market indiator - are far lower than what the Dept of Labor suggests.
Bottom line: while it is obvious why the Biden admin would try hard to put as much lipstick as it can on US jobs data, the same data when measured with alternative measures shows a far uglier picture, one of a US labor market on the verge of cracking and hardly one meriting consistent rate hikes by the Fed.
Which, considering that in less than 24 hours the Fed will hike rates by another 25 bps, is extremely important, and we wish that we weren't the only media outlet to lay out the facts as the negative impact of continued policy error and tightening by the Fed will impact tens of millions Americans, not to mention the continued errors - whether premeditated or accidental - by the US Department of Labor. Alas, as so often happens, since nobody else in the "independent US press" is willing to touch the story of manipulated jobs data with a ten foot pole, it is again up to us to explain what is really going on.