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Futures Rebound As Yields Stabilize, Overheating Fears Fade

Futures Rebound As Yields Stabilize, Overheating Fears Fade

US equity futures faded yesterday’s weakness and rebounded from overnight lows, as European stocks snapped their longest streak of losses since October as 10Y yields steadied and…

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Futures Rebound As Yields Stabilize, Overheating Fears Fade

US equity futures faded yesterday's weakness and rebounded from overnight lows, as European stocks snapped their longest streak of losses since October as 10Y yields steadied and attention shifted to corporate earnings and economic data away from reflation fears.

Global shares edged up on Friday, reversing three days of losses, as investors clung to hopes of economic recovery ahead, even as German and British 10-year bond yields touched multi-month highs, spurred by bets of global reflation. Oil added to recent losses while the dollar slumped even as sentiment out of China remained muted after another day of liquidity drains from the PBOC.

The MSCI world equity benchmark was 0.2% stronger. On Thursday, Wall Street logged its biggest daily drop in nearly three weeks on a slide in technology-related firms, ahead of today's PMI report. At 715 a.m. ET, Dow e-minis were up 52 points, or 0.172%, S&P 500 e-minis were up 13.5 points, or 0.35%, and Nasdaq 100 e-minis were up 57.25.75 points, or 0.42%. Some of the notable pre-market movers include:

  • Uber fell 2.3% after Britain’s Supreme Court ruled on Friday that a group of Uber drivers are entitled to worker rights such as the minimum wage.
  • Applied Materials rose 5.1% after it forecast second-quarter revenue above market expectations, as demand for its semiconductor manufacturing tools picked up during a global shortage of semiconductors.
  • Roku added 3.8% after it reported quarterly revenue above market expectations, thanks to an influx

Amid strong earnings, progress in vaccination roll-outs and hopes of a $1.9 trillion federal stimulus package, U.S. stock indexes hit record highs at the start of the week but since slumped as fears that surging 10Y yields could lead to a drop in appetite for high duration stocks and hammer stocks if the plunge in 10Ys extended to 1.50% (according to Nomura). Late on Thursday, JPM strategists wrote that the "S&P is -53bps WTD but some of the client conversations seem to indicate a bit more panic than is warranted, potentially induced by the bond market moves this week." As a result of this "panic", the Dow was nearly flat for the week, while the benchmark S&P 500 and the tech-heavy Nasdaq were tracking their first weekly loss this month.

Concerns over higher stock market valuations and a potential snag in inoculation efforts have led to fears of a short-term pullback in equities. As noted last week, BofA expects a more than 10% pullback in stocks which are trading at more than 22 times 12-month forward earnings, the most expensive since the dotcom bubble of the late 1990s.

“It’s kind of odd to think that only a year ago investors were worried about depression and deflation and now they are worried about overheating and inflation,” said Shane Oliver, an economist for AMP.

“The big-picture backdrop of still-low underlying inflation and spare capacity in jobs markets, combined with economic and profit recovery and low interest rates, is a positive one for growth assets, particularly shares,” he said.

Stocks in Europe snapped their longest streak of losses since October with the Stoxx 600 index fluctuating before heading higher for the first time in four days. The Eurostoxx 50 rose 0.5% with France's CAC the marginal outperformer as miners, travel and insurance names rose while healthcare and media are soft. The energy and utilities sub-indexes are the two worst performers in the Stoxx 600 benchmark on a drag from renewable-energy names. The Energy index was down as much as 1.5%, utilities index down as much as 1.1% Solar firm Scatec and wind-turbine maker Vestas among the biggest fallers in the energy index, after Credit Suisse analyst Mark Freshney said in a Feb. 18 note that Vestas now trading close to the broker’s blue-sky valuation on the stock; remains at underperform on valuation grounds. Here are some of the biggest European movers today:

  • Hermes shares surge as much as 8.9% to a record high after the luxury group delivered what Bernstein said was an “outstanding” result given the tough year the luxury sector had.
  • Danone shares gain as much as 4.6%, hitting the highest since September 16, amid expectations of changes to come at the French yogurt maker after CEO and Chairman Emmanuel Faber said the potential split of his role may become a topic in the future and that the group may divest assets.
  • Moncler shares rise as much as 7.6%, hitting a record, with analysts saying the Italian luxury outdoor clothing maker delivered a strong end to 2020 and its full-year results were “significantly” above expectations.
  • BE Semiconductor shares jump as much as 8.7%, the most since April 30, with analysts at Kempen highlighting “blowout” guidance from the chip-equipment maker. Other chip stocks also gain, boosted by readacross from the strong results and outlook from U.S. bellwether Applied Materials.
  • Kingspan shares rise as much as 10% as Jefferies said it expects low-single-digit consensus upgrades for the Irish insulation supplier following a small beat on its FY results.
  • Sinch shares gain as much as 8.8% after analysts raised their price targets on the cloud communication software firm following this week’s deal to buy Inteliquent, which Handelsbanken says looks like a great match.
  • Copper miners continue to rally in line with the metal with Goldman Sachs warning that a “historic” shortage is on the horizon. Poland’s KGHM and Chile-focused Antofagasta are among the top gainers.
  • Renault shares slump as much as 8.5%, the most since July 30, after the carmaker posted a wider net loss than expected, with Jefferies highlighting the impact a global semiconductor shortage may have on the automaker.

The euro strengthened after Germany’s manufacturing PMI climbed more than forecast in February, though composite figures for the common-currency region were less encouraging. The German composite PMI increased by 0.5pt to 51.3 in February, above expectations for a small decline. The lockdown restrictions remained in place through February and have been extended recently (with non-essential shops closed until at least March 7). The composite improvement reflected divergent changes across sectors, with stronger manufacturing output (+3.2pt to 62.2) more than offsetting a weaker services PMI (-0.9 to 45.9). The headline manufacturing PMI was further supported by another lengthening of suppliers' delivery times (which reached a record high[1] of 80), with reports of raw material (often steel) shortages and squeezed transport capacity.

Earlier in the session, Asian stocks dropped for a second day, led by a group of energy names as oil prices slid on the restart of production in Texas. Australia’s S&P/ASX 200 led declines among national benchmarks, pulled lower by commodities-related shares including BHP and Rio Tinto. While energy was the worst-performing sector in the region, chipmaker TSMC was the biggest drag on the MSCI Asia Pacific Index. The benchmark was set for its first weekly drop of the month. The regional gauge pared a decline of as much as 1% to 0.2% in late-afternoon trading, as Chinese and South Korean shares erased earlier losses

Over in Japan, markets also fell, with the Topix capping its first weekly drop since January, as automakers and railways declined. Service-sector firms were also among the biggest contributors to the benchmark’s drop. Automakers fell as production was hampered in Mexico by the shortage of natural gas and in Japan by last weekend’s earthquake. The Nikkei 225 retreated but managed to stay above the 30,000 level it regained earlier this week for the first time since 1990. Semiconductor supply-chain stocks rose after U.S. peer Applied Materials forecast revenue that exceeded analyst estimates.

“It looks like the Nikkei 225 is trying to consolidate its moves around the 30,000 level. There’s a lot of investors, domestically, who continue to hold a bullish view on Japanese equities,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “The fall in U.S. equities against the backdrop of rising yields, is weighing on the market for now.”

India’s stock benchmark fell for a fourth day, capping its worst day in three weeks, as investors sold off equities after the gauge reached a record Monday. The S&P BSE Sensex slipped 0.9% to 50,889.76 at the close, completing its worst week this month. The NSE Nifty 50 Index dropped 0.9%, also down for the week. “The market is in an overbought scenario, and whenever this happens, a four-to-nine-day drop is possible. But I don’t see much downside,” said Vishal Wagh, head of research at Bonanza Portfolio Ltd. “This is just the market at its normal correction, which was overdue after a significant rally post-budget.”

Late on Thursday, Janet Yellen reiterated that the benefits of stimulus will outweigh the costs and she hopes to see progress on the bill in the next two weeks, while she added the Fed has the tools to deal with inflation and she wants to make sure stimulus checks are appropriately targeted. Yellen also stated that details of the infrastructure plan have not yet been provided but noted a tax increase would likely be used to pay for part of Biden's infrastructure package which will be proposed later this year and suggested that the US could return to full employment by next year.

In rates, the 10Y reversed and traded lower after buying in the Asian turned to selling; the 10Y yield was 2bps wider last seen at 1.31%. Japan’s 10-year sovereign bond yield rose to the highest in more than two years Friday, intensifying speculation about the central bank’s next move at an upcoming review.

In FX, the Bloomberg Dollar Spot Index fell a second day as the greenback weakened against all of its Group-of-10 peers. The pound shrugged of data showing that U.K. retail sales fell more than twice as fast as expected in January and surged through $1.40 for the first time in nearly three years as expectations for negative rates faded; Gilts bear steepened, underperforming bunds as pricing for easier monetary policy continued to be unwound. Australia’s dollar climbed against all its Group-of-10 peers after influential Westpac Banking Corp. economist Bill Evans boosted his forecast for the nation’s 10- year bond yield.  The euro strengthened after Germany’s manufacturing PMI climbed more than forecast in February, though composite figures for the common-currency region were less encouraging.

In commodities, oil dropped below $60 a barrel as wells slowly restarted in Texas after being hit by a big freeze. The White House said it would be willing to meet with Iran, potentially paving the way for more crude exports from the Persian Gulf nation.

LME copper rallies over 2% to outperform what is a well bid base metals complex. Elsewhere, gold dropped to a seven-month low on Friday, and futures also declined, deepening gold's worst start to a year in three decades as it fell through a support level that analysts say could portend further losses. Bitcoin had no such concerns as it continued to rise to new all time highs, trading just shy of $53,000.

Looking at the day ahead now, the highlight will be latest flash PMIs from the US. On top of this, we’ll get January data on UK retail sales, German PPI and US existing home sales. From central banks, we’ll hear from the Fed’s Barkin and Rosengren.

Market Snapshot

  • S&P 500 futures up 0.3% to 3,919.75
  • SXXP Index up 0.3% to 413.84
  • MXAP little changed at 218.13
  • MXAPJ little changed at 734.81
  • Nikkei down 0.7% to 30,017.92
  • Topix down 0.7% to 1,928.95
  • Hang Seng Index up 0.2% to 30,644.73
  • Shanghai Composite up 0.6% to 3,696.17
  • Sensex down 1.1% to 50,774.33
  • Australia S&P/ASX 200 down 1.3% to 6,793.79
  • Kospi up 0.7% to 3,107.62
  • Brent futures down 0.7% to $63.49/bbl
  • Gold spot down 0.1% to $1,774.27
  • U.S. Dollar Index down 0.3% to 90.28
  • German 10Y yield up 2 bps to -0.33%
  • Euro up 0.4% to $1.2137

Top Overnight News from Bloomberg

  • The euro should now play a bigger role at the international level and this should be a priority for the euro zone member countries, Bank of France governor Francois Villeroy de Galhau says in an interview with French business daily Les Echos published on Friday
  • Business activity in the euro-area economy shrank for a fourth month in February as services struggled with continued lockdowns and factories ran into increasing supply constraints. A composite gauge for both sectors stood at 48.1, slightly higher than in January but still below the 50 mark that separates expansion from contraction. Services deteriorated at the fastest pace since November, while manufacturing output rose the most in four months
  • Markit said its composite U.K. Purchasing Managers Index rose to 49.8 in February, well above the 42.6 forecast by economists. It’s still below the critical 50 mark that signals expansion. A gauge of services activity climbed to 49.7, while manufacturing rose to 54.9
  • Bitcoin is closing in on a market value of $1 trillion, a surge that’s helping cryptocurrency returns far outstrip the performance of more traditional assets like stocks and gold
  • The pandemic is still making developments uncertain, and the need for expansionary monetary policy and low interest rates will remain for a long time, Sweden’s Riksbank says in minutes from its Feb. 9 meeting

A quick look at global markets courtesy of Newsquawk

Asian equity markets traded initially negatively, though China did pick-up towards the close, following a weak handover from Wall St where major indices declined as markets remained in consolidation mode following discouraging releases. ASX 200 (-1.3%) was dragged lower by underperformance in the commodity-related stocks, especially energy names due to the pullback in oil prices and after Woodside Petroleum was forced to delay talks to sell LNG to China amid ongoing trade frictions, with a miss on Retail Sales adding to the glum mood. Nikkei 225 (-0.7%) retreated beneath the 30k level with large automakers suffering from recent disruptions due to chip supply issues and Toyota also warned its Mexico operations will be impacted by a natgas shortage. Hang Seng (+0.2%) and Shanghai Comp. (+0.6%) were initially uninspired before posting mild gains. Baby-related stocks were underpinned by reports China is considering lifting birth restrictions in the northeast part of the country. The PBoC continued with its liquidity drains and Chinese press reports stated that the central bank may keep its open market operations at a limited scale, although PBoC-affiliated media suggested not to mistake the recent liquidity withdrawal as a policy signal. Finally, 10yr JGBs were subdued after failing to benefit from the widespread risk aversion and despite the presence of the BoJ in the market for nearly JPY 1.2tln of JGBs in 1yr-10yr maturities, while the 10yr JGB yield hovered around 0.10% to reach its highest since November 2018.

Top Asian News

  • Myanmar Protester Shot in Head Dies, First Death Since Coup
  • Honda Appoints Japan R&D Chief Toshihiro Mibe as New CEO
  • China Gives New Details of Deadliest India Clash in Decades
  • Distressed Japan Hotel Chain Unizo Sparks Hedge Fund Battle

European stocks opened the last session of the week with a firmer footing evident across the board (Euro Stoxx 50 +0.5%) following a mixed/softer APAC lead. Meanwhile, US equity futures are trading with mild upside as the RTY outpacing peers and perhaps provides some weight to the reflationary narrative. Back to Europe, bourses did trade mixed during the early cash hours, although the region was lifted into positive territory following the release of regional Flash PMI figures. The FTSE 100 (unch) felt early pressure due to the firm up of the Pound as GBP/USD eclipsed 1.4000 to the upside, with mass vaccination a potential driving force. The UK benchmark then staged a brief recovery following blockbuster UK PMI figures which topped forecasts on all fronts, although the Sterling strength took the helm again. Moving on, sectors in Europe opened predominantly in the green but are currently trading mixed with no indicative risk bias. The Personal & Household goods (+0.7%) sector is an outperformer due to Moncler (+6.8%) and Hermes (+5.5%) reporting stellar earnings. Banking (+0.3%) opened firmer amid higher yields and NatWest (+1.0%) has seen morning gains despite underwhelming earnings metrics as the Co. looks to resumed payments. Oil & Gas (-0.6%) is the laggard which is in-fitting with WTI and Brent price action. On to individual movers, Leonardo (+7.7%) is gaining after reports the Co. is set to raise over EUR 2bln from the listing of its US unit DRS. Porsche (+3.0%) is seeing further upside after yesterday’s news of the potential IPO which would in turn boost VW’s market cap. Sticking with the auto sector, Renault (-5.5%) is dented after they reported sub-par earnings whilst announcing they will not pay a 2020 dividend and warning that the chip shortage is likely to impact 100k vehicles for the year and will likely reach a peak in Q2. The chip shortage news could result in a follow through action for other Autos and be used as a gauge of what is expected by auto-makers going forward. Other notable earnings include Allianz (+1.3%) and Swiss Re (+0.4%).

Top European News

  • U.K. Retail Sales Plunge More Than Expected in January Lockdown
  • Sunak Delays Consideration of U.K. Online Sales Tax to the Fall
  • Danone CEO Faces Mounting Pressure Amid Tough Start to 2021
  • Eni Reports Surprise Quarterly Profit With Recovery in Crude

In FX, a strong end to the week for the Antipodean Dollars and considerably firmer rebounds from lows vs their US counterpart, as Aud/Usd takes a firmer grasp of the 0.7800 handle and Nzd/Usd tags along. The Aussie has shrugged aside somewhat disappointing preliminary consumption figures for January amidst a spike in bond yields, partly in catch up trade, but also on the back of Westpac lifting its 10 year cash rate forecast for end 2021 to 1.9% from 1.5% and a tad more than the US Treasury equivalent to widen the differential marginally (latter now seen at 1.8% vs 1.5% previously). Meanwhile, the Kiwi has revisited 0.7265+ w-t-d peaks by virtue of the fact that the Aud/Nzd cross remains capped below 1.0800 more than anything NZ specific although the output component of Q4 PPI rose 0.4% from -0.3% in the prior quarter.

  • EUR/JPY/DXY - The Euro has also taken advantage of EGB/UST yield divergence, though unlike the Aussie Eur/Usd has extended gains beyond 1.2100 to around 1.2140 with assistance from flash Eurozone PMIs showing ongoing strength in manufacturing to more than offset services sector underperformance. Similarly, the Yen is putting the squeeze on Greenback as the index retreats further from 91.000 through the 21 DMA (90.662), 90.500 and the 50 DMA (90.378) to 90.243, with Usd/Jpy back below 105.50 and the 21 DMA (105.48) in wake of fractionally firmer expected Japanese CPI.
  • CHF/CAD/GBP - Also firmer vs the Buck, as the Franc pivots 0.8950, Loonie hovers around 1.2650 awaiting Canadian retail sales and Pound probes barrier defences at 1.4000 following significant beats in UK PMIs, including services that were so ravaged by the return to lockdown last time. On that note, ONS retail sales data was extremely weak in contrast to public finances, but neither impacted that much.
  • SCANDI/EM/PM - Dovish-leaning Riksbank minutes have not derailed the Sek from its 10.0500 axis against the Eur, but retreating oil prices amidst efforts to restore US crude output after weather enforced shutdowns are undermining the Nok circa 10.2400 in cross terms, Rub and Mxn to varying degrees. However, precious metals are reeling again and cryptos continue to rally, with Gold tripping some stops sub-key support around Usd 1765/oz and Bitcoin posting yet another ATH close to Usd 53k.

In commodities, WTI and Brent Apr’21 futures continue to post losses with the former extending losses below USD 60/bbl (vs high USD 60.16/bbl) whilst the latter dips below USD 63.50/bbl (vs high 63.62/bbl). The complex has waned off lows as the broader risk sentiment picked up following the EZ and UK flash PMI data, although oil prices remain pressured amid some supply-side developments - as the complex carries on unwinding the Texas deep-freeze premium with the oil patch is slowly restarting wells – reflected in the steeper losses in WTI vs Brent. Some geopolitical premium is also potentially unravelling amid reports the Biden admin is willing to negotiate with Iran, with an interim agreement mulled in a bid to build confidence on both sides. Expanding on the first point, Texas produced some 4.6mln BPD of oil according to the latest EIA data, whereby a bulk was shuttered throughout the week. However, as the deep-freeze in the region abates and power is restored, the question now turns to how swiftly operations can fully resume. Oil traders, alongside executives, hope for production to be re-available within days, although warned that a small number may remain shut for longer due to repairs – with the actual timeframe for full restoration still up in the air. Elaborating on the geopolitical factor, markets have been flirting with the prospect of Iranian oil returning to the market amid hopes US will lift some sanctions against the country. Cold water was poured on this earlier in the month after President Biden firmly suggested he will not lift sanctions to get Iran to the negotiating table with regards to its nuclear activity. However, reports overnight via Politico suggested scope for a new deal between the countries, with an interim deal touted as an option to ease tensions between the sides. “A broader deal could possibly include non-nuclear aspects, such as limits on Iran’s ballistic missile program, and have provisions that last longer than the original deal or are permanent”, the report said. This development raises the possibility of Iranian oil returning to the market, albeit it’ll then have to tackle the OPEC+ hurdle in relation to the output cut quotas – likely to be a topic to touch upon in the upcoming JMMC and OPEC+ meetings on Mar 3rd and 4th respectively. Meanwhile, the demand backdrop remains constructive with reports also suggesting that vaccines appear to lower COVID-19 infections and transmissions by 2/3, according to data from Public Health England (set to be published later this month), as disclosed by The Telegraph in which it labels the study as the first to use "real world data”. Elsewhere precious metals are mixed with spot gold resuming its real-yield-driven downside after yesterday testing support at around USD 1,764/oz, whilst the technical “death cross” confirmation earlier in the weak flagged a bearish signal. Spot silver meanwhile is firmer as a function of the softer Dollar. Turning to base metals, Dalian iron ore futures fell overnight amid a significant increase in post-Lunar New Year inventories. Meanwhile, LME copper rallied past USD 8,700/oz on rosy demand prospects, the softer Buck, and mild recovery in stocks. On this note, analysts at GS raised their 3/6/12M copper targets to USD 9,200/t, USD 9,800/t, and USD 10,500/t respectively (from USD 8,500/t, UDF 9,000/t, and USD 10,000/t previously).

US Event Calendar

  • 9:45am: Feb. Markit US Composite PMI, prior 58.7
  • 9:45am: Feb. Markit US Services PMI, est. 58.0, prior 58.3
  • 9:45am: Feb. Markit US Manufacturing PMI, est. 58.8, prior 59.2
  • 10am: Jan. Existing Home Sales MoM, est. -2.4%, prior 0.7%

DB's Jim Reid concludes the overnight wrap

It’s complicated. No, not my relationship status on Facebook from the noughties but financial markets this year. As regular readers will be aware I think the forces that will be unleashed on markets this year will be too big to see perfect calibration. So a much more complicated and higher vol environment than many believe. Ironically the smoothest period will likely be when we’re mostly locked down as we will be for several weeks/a few months longer. After that it gets more interesting with likely very strong growth, inflationary concerns mounting (whether realised or not), and bubbles being more vulnerable to burst. As I mentioned yesterday, I think this week might be a mini dress rehearsal with the spike in yields. Indeed yesterday global equities resumed their decline as concerns continued to rise among investors that higher sovereign bond yields could call a halt on the recent strong rally in risk assets. Indeed, both the S&P 500 (-0.44%) and Europe’s STOXX 600 (-0.82%) lost ground for a 3rd day running, which is the first time that’s happened for either index this year. It was the lowest closing level for the S&P in just over a week, with both higher bond yields (especially real yields yesterday) as well as weak economic data putting pressure on valuations.

In terms of the specifics, tech stocks led the declines once again, with the NASDAQ losing a further -0.72% and the NSYE FANG+ index seeing an even larger -1.07% decline, which marks the biggest 2-day decline for the index (-2.54%) since the end of January. Meanwhile Walmart (-6.48%) had its worst day since March last year after the company said that net sales and earnings per share were both expected to decline in FY22. As mentioned, matters weren’t helped by weaker-than-expected data from the US, where the weekly initial jobless claims for the week through February 13 hit a 4-week high of 861k (vs. 773k expected), and the previous week’s reading was also revised up by +55k. The weekly frequency of this reading means it’s one of the timeliest indicators we get on the state of the economy, and the 4-week moving average has now been stuck between 814k and 857k since mid-December, which raises questions as to the speed of the recovery in the labour market. On top of this, Oil prices reversed after hitting their highest levels in more than a year as the disruption to oil refineries in Texas remains the dominant story. WTI fell -1.01% and Brent retreated -1.35% on the day – the largest one day decline since January 15 for both crude futures. WTI (-1.39%) and Brent (-1.14%) are again trading lower this morning as Texas shale oil production has started to slowly comeback online. Oil prices are also being weighed down by news that the White House is willing to talk to Iran to discuss a “diplomatic way forward” in efforts to return to the nuclear deal, a move which could potentially lead to more crude exports from the nation.

Back to bond yields and the selloff resumed yesterday even though there was a swift turn in US rates just before the European session closed. Yields on 10yr Treasuries were up as much as +4.6bps to 1.316% before coming back in and settling +2.5bps higher on the day at 1.296%. Notably, it was higher real yields rather than inflation expectations which drove the moves, with yields on inflation-protected US debt climbing +6.9bps to move above -0.90% for the first time since November. In contrast 10yr breakevens actually fell -4.5bps to 2.17% - the biggest one day drop since the end of January. It was much the same story in Europe, where a similarly sharp rise in real yields sent bond yields higher, with those on 10yr bunds up +2.2bps at -0.35%, their highest level since June last year, and real yields up +2.2bps to their highest level since November too.

Overnight, Asian markets have taken Wall Street’s lead with the Nikkei (-0.82%), Hang Seng (-0.67%), Shanghai Comp (-0.03), CSI (-0.30%) and Kospi (-0.16%) all trading lower. Futures on the S&P are down -0.21%. In keeping with the theme of rising yields, those on 10yr JGBs have also moved up by +1bp this morning to 0.1%, the highest level since 2018.

Speaking of real yields, the release of the ECB minutes yesterday actually touched on this issue, with Isabel Schnabel’s review of financial markets mentioning that “stock prices could eventually become vulnerable to a rise in real yields globally.” So an indication that policymakers are paying attention to this risk, not least given higher real yields would also threaten the inflation outlook. Another notable line from the minutes was that “it was argued that the fast rebound in growth foreseen in the December staff projections might be too optimistic, with growth in the second quarter of 2021 possibly at risk from extended lockdowns.” So it’ll be very interesting to see how the growth and inflation forecasts are revised in March to take account of this given the extended lockdowns seen in numerous countries.

Staying on Europe, Mario Draghi’s new government in Italy resoundingly won a confidence vote in the lower house yesterday by a 535-56 vote, which comes on the heels of the big victory in the Senate the previous day. However, a notable consequence of the vote has been a split in the Five Star Movement, from which 15 senators were expelled yesterday following their vote against the government. The decision to back Draghi has been contentious in the party given its roots as an anti-establishment force, but a 59% majority of its members voted to support the Draghi government in an online vote last week.

Today’s main highlight for markets will be the release of the flash PMIs from around the world, which will give us an initial indication of how the global economy has been faring into February. Overnight we’ve already had the releases from Japan and Australia, which showed Japan’s manufacturing reading climbing back above 50 to 50.6 (vs. 49.8 last month) despite the extension of a state of emergency in most prefectures including Tokyo. Japan’s services PMI was a touch softer at 45.8 (vs. 46.1 last month). Australia’s manufacturing (at 56.6 vs. 57.2 last month) and services (54.1 vs. 55.6) PMI both printed a bit softer.

Later this morning we’ll get the releases from Europe, where the consensus expectations are pointing towards little change on last month, when the Euro Area composite PMI remained in contractionary territory at 47.8. According to our European economists, based on the historic relationship between mobility and the PMIs, we’re unlikely to see any big changes given that the mobility readings have been pretty flat since the start of the year. It’ll be interesting to keep an eye out on the US later too, since last month their composite PMI (58.7) rose to its highest level since March 2015.

Turning to the pandemic, there were concerning signs that the weather disruption in the US was slowing down the pace of vacinations. Florida Governor DeSantis said that the shipment from Moderna would arrive late, while NYC Mayor de Blasio said that 30-35k appointments had to be held back. Massachusetts announced that they could send the National Guard to receive vaccine shots if the weather continues to disrupt supply chains. In more positive vaccine news out of the US, Bloomberg estimated that the US vaccine supply is expected to double by March. Given statements from Pfizer, Moderna, Johnson & Johnson executives and government officials vaccine supply could rise from 10-15 million per week currently to 20 million in March and 25 million in April and over 30 million in the following months. Elsewhere, in the UK, it was announced that the Northern Ireland lockdown would be extended until April 1, although children aged 4-7 would return to school on March 8. Cases have continued to fall across the UK, with the 7-day average now down to 12,084, the lowest since early October.

Overnight, the UK has said that it will share the “majority” of any future surplus coronavirus vaccines with the Covax program while Novavax has said that it will supply the program with 1.1bn doses. Novavax shares were up +7% in post market trading on the news. President Biden has also pledged that the US will contribute $4bn to Covax and France has said that it will donate 5% of its secured doses to the WHO initiative which aims to distribute vaccines to lower income countries. Meanwhile, reaffirming the high efficacy of a single shot of Pfizer/ BioNTech, the Lancet medical journal published a study overnight that said among health-care workers who received the vaccine, symptomatic infections were reduced by 85% in the 15 to 28 days after the first dose, compared with those who didn’t get a shot.

Looking at yesterday’s other data releases, US housing starts fell to an annualised rate of 1.580m in January (vs. 1.660m expected), though building permits rose to an annualised 1.881m (vs. 1.680m expected), their highest level since 2006. Elsewhere, the European Commission’s advance consumer confidence reading for the Euro Area in February rose to -14.8 (vs. -15.0 expected).

To the day ahead now, and the likely highlight will be the aforementioned release of the flash PMIs from around the world. On top of this, we’ll get January data on UK retail sales, German PPI and US existing home sales. From central banks, we’ll hear from the Fed’s Barkin and Rosengren.

 

Tyler Durden Fri, 02/19/2021 - 07:59

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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

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

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

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

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…

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The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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