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Futures Reverse Sharp Early Losses To Trade Near Session Highs Ahead Of Midterms

Futures Reverse Sharp Early Losses To Trade Near Session Highs Ahead Of Midterms

This morning’s price action has a whiff of what happened…



Futures Reverse Sharp Early Losses To Trade Near Session Highs Ahead Of Midterms

This morning's price action has a whiff of what happened two weeks ago when a relentless barrage of bad earnings reports by tech giants propelled stocks higher during the latest bear market meltup, amid speculation the worst news is priced in. Well, after last week's FOMC mauling, risk has once again started to meltup following Friday's stark divergence between the "good" payrolls number and "catastrophic" employment data, sending stocks sharply higher and the dollar sliding.

And while some may have expected the selling to return after Sunday's latest cut to high end iPhone 14 shipping forecasts, which Apple blamed on China but which appears to have been driven as much by a decline in demand and sent AAPL shares down 2%, this morning US stock futures have reversed earlier losses of more than 1% and looking to extend Friday’s rebound, as investor attention turns to the latest inflation report and the midterm elections later this week. At 7:30am ET, contracts on the Nasdaq 100 were up 0.4% after earlier sliding as much as 1.3% as Chinese officials reiterated their intention to “unswervingly” stick to a Covid Zero approach; S&P 500 futures also reversed early declines to rise 0.4%. The benchmark had snapped a four-day slump on Friday following a mixed jobs report. The dollar reversed earlier gains; while Monday’s partial gains in Treasuries were underpinned by a 4-basis point drop in the 10-year yield. The two-year rate, more sensitive to monetary policy, remained higher around the 4.68% level.

Among individual movers in premarket trading, Facebook parent Meta (which really should change its name back already) rose following a report that it is planning to start cutting thousands of jobs this week, about a week after we said it should do that immediately.

As noted above, Apple dropped after the company reduced the outlook for shipments of its latest premium iPhone due to China lockdowns. Chinese stocks listed in the US are on track to extend their rally to a fifth day even even though health authorities repeated their strict adherence to the country’s Covid Zero policies. Alibaba rose 1.3% in premarket trading, +1.4%, Baidu +2.1%, Li Auto +3.1%, XPeng +5.1%. Here are the other notable premarket movers:

  • Peabody Energy shares rise as much a 6% in premarket trading, after the US coal miner and Australia’s Coronado Global Resources ended merger talks.
  • Activision Blizzard shares fall 0.8% in US premarket trading after a NY Post report that Microsoft’s takeover of the entertainment software firm was facing heightened scrutiny from regulators, with some Activision insiders fretting that the transaction could crumble.
  • Redfin shares slide 8% as Oppenheimer cut the real estate brokerage to underperform, saying its core business model is “fundamentally flawed,” and putting a street-low $1.30 PT on the stock.
  • Keep an eye on Estee Lauder (EL US) as the stock was downgraded to hold from buy at Berenberg, which also cuts its price target, saying the cosmetics maker lacks visibility on a potential recovery.
  • Keep an eye on Ruth’s Hospitality after the stock was downgraded to market perform from strong buy at Raymond James, with the broker expecting higher inflation to limit earnings per share growth in 2023.

As BBG notes, US equities have tried to recover in the fourth quarter after slumping this year as investors wagered that signs of peaking in inflation would allow the Federal Reserve to slow the pace of rate hikes. The next clue will come on Thursday, with October’s consumer price index report expected to show a slight cooling in prices from the previous month.

"Markets are essentially in a struggle between people who argue the Fed has hiked rates too much and should pivot and the other group that says inflation needs to be fought harder and the Fed needs to hike more," said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. Victoria Scholar of Interactive Investor, agreed, saying she expects stock volatility to continue as markets face “an eclectic mix of drivers,” including the midterm elections on Tuesday.

Morgan Stanley's in house permabear Mike Wilson turned even more bullish on Monday saying investors should stay bullish on equities ahead of the midterms. Polls pointing to Republicans winning at least one chamber of Congress provide a potential catalyst for lower bond yields and higher equity prices, which would be enough to keep the bear-market rally going, they said. Meanwhile, the permabulls at JPMorgan said the same thing they have said since Jan 1 - buy the dip because a potential peak in bond yields and “very downbeat” sentiment may support stocks.

The bout of optimism outweighs, for the moment, the Federal Reserve’s resolute campaign against price surges, signs of stress in US corporate performance and China’s announcement it will “unswervingly” adhere to current Covid Zero policy.  But corporate earnings are casting a dampener on sentiment as margins reel from the impact of high inflation. Goldman Sachs Group Inc. strategists lowered their S&P 500 profit estimates for each year until 2024, saying margin contraction in the third quarter signals more pain ahead.

European stocks and US futures pare earlier declines as dollar extends declines beyond Friday’s lows. Euro Stoxx 50 rises 0.5%. Travel, miners and autos are the strongest performing sectors in Europe. DAX outperforms peers, adding 0.7%, FTSE 100 is flat, underperforming peers. Here are some of the biggest European movers today:

  • Telecom Italia rises as much as 8.2% to its highest intraday level since mid August following a report that Vivendi, the biggest shareholder in the phone operator, is open to discussions with the Italian government on creating a single land-line phone network.
  • Ryanair shares rise as much as 4.9% as the low-cost airline flagged strong bookings through next summer, shrugging off impact from a potential recession in Europe.
  • PostNL rises as much as 5.4% after the company notes that 4Q will be its strongest quarter, as it takes mitigating actions amid a macroeconomic environment that has deteriorated.
  • Flutter Entertainment shares rise as much as 5.4% in Dublin after an arbitrator told Fox Corp. that exercising its option to acquire an 18.6% stake in sports-betting giant FanDuel, which is majority owned by Flutter, would cost it at least $3.72b.
  • GSK falls as much as 3.3% after its antibody blood cancer drug Blenrep failed its confirmatory phase 3 trial. Citi says the news is likely to result in the drug being taken off the market in the US and the EU, expressing “minimal” expectations for commercial success going ahead.
  • Novozymes falls as much as 3.3% as Credit Suisse flags lower earnings and peer multiples for the world’s largest maker of industrial enzymes.
  • UniCredit shares declined as much as 4.2% following a FT report on Nov. 6 that the ECB had clashed with the Italian lender over its distribution plans and its Russia presence. Shares were 3% down in early trading Monday, the worst performer on the Stoxx 600 Banks Index.
  • Kingfisher falls as much as 3.6% as it was cut to neutral from outperform and PT trimmed to 247p from 305p at Credit Suisse on macro risks facing the DIY retailer.

Earlier in the session, Asia stocks climbed as traders snapped up Chinese stocks in hopes of an eventual reopening and as US bond yields slipped. The MSCI Asia Pacific Index advanced as much as 1.8% to the highest in a month, led by materials and technology stocks. China’s tech shares extended their rally from Friday, which was spurred by reported progress in efforts to prevent the delisting of Chinese companies from US bourses.  Hong Kong topped gains in the region even though Chinese officials stuck to their Covid Zero approach over the weekend, as investors said extreme pessimism had already been priced into Greater China markets. Most gauges across Asia also advanced after 10-year Treasury yields edged lower. Supporting sentiment, the dollar slipped after a bigger-than-expected increase in the US unemployment rate spurred hope the Federal Reserve may eventually slow the pace of rate hikes. Vietnam’s shares, however, fell to their lowest in two years.

Japanese stocks climbed, as strong corporate earnings boosted investor sentiment while the market continued to look for clues on when the Federal Reserve’s monetary tightening may subside. The Topix rose 1% to close at 1,934.09, while the Nikkei advanced 1.2% to 27,527.64. Keyence Corp. contributed the most to the Topix Index gain, increasing 1.9%. Out of 2,165 stocks in the index, 1,520 rose and 558 fell, while 87 were unchanged. “Overall there there are more upward revisions,” said Mamoru Shimode, chief strategist at Resona Asset Management, regarding recent earnings reports. “The market is still looking six months to a year ahead, so the focus is gradually shifting” to results for the next fiscal year.

Australian stocks also extended gains with the S&P/ASX 200 index rising 0.6% to close at 6,933.70, extending gains for a second session, boosted by an advance in mining and energy shares.  The mining sector climbed to the highest in a month, after tracking Friday’s gains in commodity prices as US jobs data, a softer dollar and China reopening hopes boosted materials last week. In New Zealand, the S&P/NZX 50 index rose 0.5% to 11,290.34.

Investors will focus on whether the subtle relaxation of China’s Covid Zero policy will gather momentum in the coming weeks, Saxo Capital Markets strategists wrote in a note. “This will be key not just for mainland and HK markets, but also for commodity markets.” Last week’s rally in Chinese shares, the biggest in years, helped lift Asia’s equity benchmark by more than 6% from an October trough. Whether that trend will continue depends on China’s tone on lockdowns and vaccinations. Investors will also keep an eye on US inflation data expected on Thursday

In FX, the Bloomberg Dollar Spot Index swung to a 0.3% loss after earlier rising by as much as 0.5%, as the greenback fell against most of its Group-of-10 peers. NZD and AUD are the weakest performers in G-10 FX, SEK and GBP outperform.

  • The euro rose above parity before paring gains. European bond yields were mostly lower as pricing for central major bank hikes were pared. Bund yields fell by up to 3bps while Italian yields fell by up to 5bps
  • The pound led G-10 gains after erasing earlier losses against the dollar. Gilt yields fell on the belly of the curve. The BOE is set to sell medium-maturity gilts held under its asset purchase facility later Monday. UK house prices fell at the sharpest pace in almost two years as rising mortgage rates and a gloomy outlook for the economy depressed demand
  • The New Zealand and Australian dollars pared losses after earlier dropping by more than 1% in a possible reflection of disappointment over the prospects of China easing its Covid-Zero stance
  • The yen pared losses as the the dollar lost traction in early European trading

In rates, Treasuries are mixed with the curve flatter into early US session as front-end cheapens led by losses in front-end of the German curve. Stocks rally and dollar extends Friday’s slide. 10-year yields are around 4.13%, richer by ~3bp on the day, outperforming bunds and gilts by 1bp and 4bp in the sector; long-end gains flatten 2s10s by 4bp, 5s30s by 3bp. Dollar issuance slate empty so far; desks expect $25b to $30b of new debt this week, front- loaded ahead of CPI and Friday’s market close for US Veterans Day. Bunds, gilts and USTs 10-year yields all decline about 1 basis point as bonds pare losses. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing 3.1bps to 213.4bps.

In commodities, WTI trades within Friday’s range, falling 0.6% to near $92; WTI and Brent futures have trimmed losses seen in wake of China sticking to its COVID policy over the weekend. Kuwait appointed Ahmed Jaber al-Aydan as the new CEO of Kuwait Oil Company and Wadha al-Khateeb as CEO of Kuwait National Petroleum Company, while new leaders were also appointed for Kuwait Integrated Petroleum Industries Company and other state companies in the energy sector, according to Reuters. Kuwait's KPC aims to export its first oil product cargo from its 615k Al Zour refinery by mid-November, according to Reuters sources. Spot gold reversed earlier losses and climbed back above USD 1,675/oz after printing a base at around USD 1,665/oz earlier today. Base metals have also trimmed earlier losses amid the improvement in risk appetite and decline in the Buck, with 3M LME copper re-eyeing USD 8,000/t to the upside after forfeiting the level overnight.

Bitcoin is under modest pressure though pivots the mid-point of a sub-USD 1/k range which itself is a similar magnitude above the USD 20k mark.

Market Snapshot

  • S&P 500 futures up 0.3% to 3,788.25
  • STOXX Europe 600 up 0.4% to 418.47
  • MXAP up 1.7% to 142.45
  • MXAPJ up 1.8% to 459.88
  • Nikkei up 1.2% to 27,527.64
  • Topix up 1.0% to 1,934.09
  • Hang Seng Index up 2.7% to 16,595.91
  • Shanghai Composite up 0.2% to 3,077.82
  • Sensex up 0.3% to 61,153.50
  • Australia S&P/ASX 200 up 0.6% to 6,933.71
  • Kospi up 1.0% to 2,371.79
  • German 10Y yield down 0.7% to 2.28%
  • Euro up 0.3% to $0.9986
  • Brent Futures down 0.3% to $98.24/bbl
  • Gold spot down 0.2% to $1,679.09
  • U.S. Dollar Index down 0.35% to 110.49

Top Overnight News from Bloomberg

  • The Federal Reserve “hasn’t accomplished anything” in loosening the US labor market even after four consecutive 75-basis-point hikes, former New York Fed President Bill Dudley said
  • The ECB should keep raising interest rates, even at a reduced pace, until inflation excluding energy and food prices starts to ease, Governing Council member Francois Villeroy de Galhau said
  • Chancellor Jeremy Hunt is drawing up plans for tax increases and public spending cuts worth up to £54bn a year to fill the black hole in the UK public finances, according to allies of Britain’s chancellor, the FT reported
  • European households are paying more than ever for their electricity and natural gas, even as governments spend billions to shield consumers from the energy crisis
  • China’s total debt as a percentage of gross domestic product climbed to new record high of 272.1% in the third quarter, surpassing the previous record of 271% just a quarter ago, data compiled by Bloomberg showed
  • The BOJ can end up holding more than 100% of benchmark debt as its ownership doesn’t fall even when it sells the securities to market participants using repurchase agreements
  • President Joe Biden’s national security adviser and senior Kremlin aides have held private talks in recent months to reduce the risk of a broader conflict over Ukraine, the Wall Street Journal reported. A peace settlement wasn’t a goal of the discussions, according to the report

APAC stocks mostly gained as investors continued to pile on the reopening bets despite China 'unswervingly' maintaining its COVID approach, while the region also shrugged off disappointing Chinese trade data. ASX 200 was higher as strength in the commodity-related and consumer sectors atoned for the weakness in tech and financials with the latter not helped by Westpac’s earnings which showed a decline in cash profit and revenue. Nikkei 225 strengthened from the open and climbed above the 27,500 level with the index unfazed by the weak earnings releases from the likes of Sharp and SoftBank Corp. Hang Seng and Shanghai Comp recovered from opening losses in which the Hong Kong benchmark briefly surged by more than 3% amid strength in property names and a continued tech rally, while the mainland index was less decisive amid disappointing Chinese trade data and after China stuck to its strict COVID policy, as well as reported its largest number of daily infections in 6 months.

A more detailed look at global markets courtesy of Newsquawk

  • China health commission spokesman said China will not waver in preventing a COVID rebound and in the dynamic clearing of cases as soon as they emerge, while it did not make adjustments to anti-COVID protocols and a China disease control official said they are to guide localities to continue strengthening COVID vaccination of the elderly. Furthermore, a Peking University infectious disease expert said the current prevention strategy is still able to control COVID despite the high transmissibility of variants and asymptomatic carriers, although an Education Ministry official noted that it is necessary to prevent excessive epidemic prevention and not add extra layers of measures, according to Reuters.
  • Beijing City is set to improve COVID rules for people entering the city, but vows to stick to COVID-Zero policy, according to a Beijing Official cited by Bloomberg.
  • Haizhu district of Guangzhou, China is to extend COVID restrictionsuntil November 11th, via Bloomberg.
  • China’s Zhengzhou city is taking steps to improve the precision of epidemic control measures after being criticised for a one size fits all approach and the city government apologised for the problems in the latest COVID fight, while it vowed to implement social management and control measures in a precise manner to avoid simply locking down communities.
  • China's new daily COVID-19 cases were rose to the highest in six months with the country reporting 5,436 new cases on Sunday, according to Bloomberg.
  • PBoC Deputy Governor Fan Yifei, who is a key driver of the digital yuan transition, was detained for investigation and is suspected of serious violations of discipline and law, according to SCMP.
  • Japan’s government releases a statement on the US inflation Reduction Act in which it stated that the requirement of EV tax credits is not consistent with the US and Japanese governments’ shared policy to work with allies and like-minded partners to build resilient supply chains. Japan added that if the IRA would be implemented as it is to provide discriminatory incentives, it is possible that Japanese automakers will hesitate to make further investments towards the electrification of vehicles, according to Reuters.
  • Japan is reportedly to fund its extra budget with bond issuance of JPY 22.9tln, via Bloomberg citing documents.

Top Asian News

Major bourses in Europe kicked off the session with mild losses across the board but the downside faded within the first hour of trade. Sectors are mostly firmer and have experienced a turnaround since the cash open – with defensives now largely towards the bottom of the bunch. US equity futures have also moved into the green after posting mild losses overnight and in the run-up to the European cash open. IATA September update: Total Traffic +57% YY; International Traffic +122% YY. All markets reported strong growth, led by APAC.

Top European News

  • UK PM Sunak and Chancellor Hunt are to announce a stealth tax raid on pensions later this month, according to The Telegraph. It was also reported the Chancellor is set to outline GBP 60bln in tax and spending cuts with early drafts of the autumn statement containing plans for up to GBP 35bln of spending cuts and GBP up to GBP 25bln on tax increases, according to The Guardian.
  • UK PM Sunak warned that people cannot expect the state to “fix every problem” and vowed to regain the trust of voters by being honest about the scale of the economic difficulties ahead, according to The Times.
  • UK PM Sunak is reportedly under pressure regarding bullying claims concerning one of his closest political allies with the opposition Labour party calling for an independent investigation of allegations of bullying by Sir Gavin Williamson who was appointed as Minister of State without Portfolio last month, according to FT.
  • UK stamp duty in Q3 rose to a record high of GBP 3.6bln although property market analysts warned the trend will reverse as house prices decline, according to FT.
  • UK steel industry warned that it needs state aid to survive a green transition with two large producers calling for the government to match the support offered to suppliers across Europe, according to FT.
  • Traders have pointed to a squeeze in the “repo” market and short-dated gilts, according to The Times and The Telegraph.
  • ECB and UniCredit (UCG IM) are reported to clash regarding capital plans and Russia presence with tensions building amid the Italian lender's aggressive strategy to overhaul lending operations, according to FT.
  • Germany is to allocate EUR 83.3bln or 42% of a major protection scheme that was launched in October to finance a cap on gas and power prices next year, according to Reuters.
  • ECB's Villeroy said shouldn't stop rate hikes as long as underlying inflation has not clearly peaked, adds we are not far from the neutral rate, beyond which the hiking pace could be more flexible and slower, according to Irish Times.


  • DXY has faded significantly from an initial rebound to 111.28 highs; however, this was shortlived amid renewed China/COVID reopening chatter, in its wake the DXY has slipped to a 110.33 low.
  • Despite this, performance for peers is fairly mixed with APAC FX lagging and European FX benefitting from the USD moves.
  • At the top-end, Cable has moved to within circa. 30pips of the 1.15 mark with EUR similarly bid, though has failed to sustain brief momentum above parity.
  • Antipodeans, CAD and JPY are modestly pressured/narrowly mixed against the USD, and have been fairly choppy within 0.6404-77, 1.3466 to 1.3554 & 147.57-146.58 parameters for the AUD, CAD & JPY respectively.

Fixed Income

  • Core counterparts have spent the morning under pressure amid the increasingly constructive risk tone; however, this has eased and USTs are now essentially unchanged.
  • In the EZ, Bunds have seemingly derived encouragement from the 136.00 handle holding and have since breached 137.00.
  • Gilts have been the slim outperformer; however, as the clock ticks down to the latest QT operation in the medium-term, this has eased to near unchanged around 101.30


  • WTI and Brent futures have trimmed losses seen in wake of China sticking to its COVID policy over the weekend.
  • Kuwait appointed Ahmed Jaber al-Aydan as the new CEO of Kuwait Oil Company and Wadha al-Khateeb as CEO of Kuwait National Petroleum Company, while new leaders were also appointed for Kuwait Integrated Petroleum Industries Company and other state companies in the energy sector, according to Reuters.
  • Kuwait's KPC aims to export its first oil product cargo from its 615k Al Zour refinery by mid-November, according to Reuters sources.
  • Spot gold reversed earlier losses and climbed back above USD 1,675/oz after printing a base at around USD 1,665/oz earlier today.
  • Base metals have also trimmed earlier losses amid the improvement in risk appetite and decline in the Buck, with 3M LME copper re-eyeing USD 8,000/t to the upside after forfeiting the level overnight.


  • Ukrainian President Zelensky said Russian forces are suffering serious losses in the east and Russia is readying new attacks on Ukrainian infrastructure, particularly energy, according to Reuters. There were also separate reports that Zelensky said Iran lied about sending a limited number of drones to Russia and he noted that Kyiv forces were shooting down at least 10 of them daily.
  • Ukrainian authorities in Kyiv have begun planning for a complete blackout which would require the evacuation of 3mln residents and are establishing 1,000 heating centres although it was noted that the situation was currently manageable, according to NYT.
  • Ukrainian forces damaged the Russian-held Nova Kakhova dam in a HIMARS strike, according to an emergency services representative cited by TASS.
  • US National Security Adviser Sullivan held confidential discussions with Russian counterparts in recent months in an effort to reduce the risk of a broader conflict over Ukraine and to warn about the use of nuclear or other weapons of mass destruction, according to WSJ. On this, the Kremlin declined to comment.
  • China's President Xi to visit Saudi Arabia before end-2022, via WSJ; tentatively scheduled for the second week of December.

US Event Calendar

  • 15:00: Sept. Consumer Credit, est. $30b, prior $32.2b

Central Banks

  • 15:40: Fed’s Collins and Mester Speak at Women in Economics...
  • 18:00: Fed’s Barkin Speaks at Event on Inflation

DB's Jim Reid concludes the overnight wrap

The warm weather here in Europe continues to be great news for energy storage preservation across the continent. However, there has been one big causality. Me! Over the weekend I had horrible hay fever. I've no idea what caused it, but I couldn't stop sneezing in a manner only consistent with an allergy. I usually get it bad from late January to April but this is the first time ever in November. If anyone has had similar experiences, please let me know so we can swap notes and solutions/remedies.

As I splutter into a new week, it feels odd to say that US mid-terms (tomorrow) might be more important than US CPI (Thursday), so I won’t! However, history suggests the mid-terms are a big influence on markets as they always seem to rally once mid-terms (or Presidential elections) are out the way. Although regular readers should be in little doubt that my base case is that 2023 is going to be a bad year for the global economy and risk, in every 12-month period post mid-terms over the last century, the equity market has always gone up with the inflexion point being immediately after mid-terms.

While I think the US recession of 2023 will overpower that historical track record, Tuesday being out the way could be a catalyst for a more positive short-term period. So a big moment. Before we preview these two events in more detail, elsewhere in the US this week the highlight will probably be the University of Michigan survey out on Friday with the latest inflation expectations series. It’s a light week for data outside of that. There is plenty of Fed speak so see that in our day-by-day calendar at the end as usual. You’ll also see from that that Lagarde speaks today.

Other important data releases in other parts of the globe will feature trade balances for key global economies as well as CPI and PPI data for China (Wednesday). Here in Europe, GDP from the UK (Friday) and industrial production data from Germany (today) will be in focus. In earnings, Berkshire Hathaway, Disney, Occidental, adidas and BioNTech will be among the companies reporting. Elsewhere, COP27 kicked off yesterday so we’ll likely see plenty of headlines from that.

Asian equity markets are rallying this morning following the broadly positive cues from global markets on Friday. Across the region, the Hang Seng (+3.42%) is outperforming, after quickly reversing its morning losses, followed by the Nikkei (+1.32%) and the KOSPI (+1.00%). Elsewhere, mainland Chinese equities are gaining traction with the Shanghai Composite (+0.46%) and the CSI (+0.49%) both in the green after trading broadly lower in early trade as Chinese health officials indicated that it would stick to its strict zero-Covid policy (more below). In overnight trading, US stock futures are slightly lower with contracts on the S&P 500 (-0.17%) and NASDAQ 100 (-0.25%) both dipping.

Early morning data showed that China exports as well as imports unexpectedly contracted simultaneously for the first time since May 2020 as elevated inflation and rising interest rates hurt global demand. Outbound shipments declined (-0.3% y/y) in October (v/s +4.5% expected) after a +5.7% increase in September while inbound shipments fell (-0.7% y/y) following a +0.3% gain in the previous month. Meanwhile, the overall trade surplus slightly widened to +$85.15 billion (v/s +$84.74 billion in September, but missing a forecast of $95.97 billion).

Over the weekend, the Chinese government reiterated that they would stick "unswervingly" to their ‘zero-tolerance Covid’ strategy, following several days of speculation to the contrary. Staying on China, Apple has warned that it is anticipating lower shipments of its high-end iPhone 14 models with customers experiencing longer wait times because of Covid-19 restrictions at its primary assembly plant in Zhengzhou, thus dampening the company’s sales outlook for the year-end holiday season. There also seems to be a softer demand element to it too.

Lastly, on overnight stories, the WSJ has reported that the US national security advisor has been having secret talks with senior Kremlin officials in recent months to try to ensure that the conflict doesn't move up to the next level. There is no suggestion that a route to peace has been discussed but it shows there are high level diplomatic discussions though.

Onto more details of this week now. Looking first at tomorrow’s midterms, our economists' base case is that Republicans will take the House but Democrats will maintain their slim majority in the Senate, although the latter is a close call. It is highly unlikely that either party will achieve a two-thirds majority in Congress, thus effectively maintaining President Biden's veto power. Currently, FiveThirtyEight's model gives the Republicans a 54% chance of winning the Senate and 82% for the House. Their chance of winning both is 53%. See our economist’s midterms preview here. They will be hosting a zoom webinar on Wednesday to review the results and implications for the economic outlook. To register please click here.

With regards to US CPI on Thursday, our economists believe energy will boost the headline (DB forecast at +0.62% vs. +0.39% previously. Consensus +0.6%). Last month core surprised on the upside (+0.6% MoM, vs +0.4% consensus) so this month’s reading will get the most focus (DB at +0.46% vs. +0.58% previously. Consensus +0.5%). In terms of YoY, DB expect headline to dip -0.2pp and core -0.1pp to 8.0% (consensus 7.9%) and 6.5%, respectively.

In terms of corporate earnings, there will be a couple of corporate heavyweights reporting this week even with around 85% of the S&P 500 index having now released Q3 results. The highlights are likely Disney and Occidental (tomorrow) but we also have Activision Blizzard, Lyft (today) and Roblox (Wednesday) in tech and BioNTech (today), adidas (Wednesday), AstraZeneca (Thursday) and SoftBank (Friday) elsewhere.

Recapping last week now and the dovish pivot trade pivoted one way and the other across the week but ultimately Powell’s FOMC press conference put the hawks back in the ascendency.

Treasury yields moved higher and a fresh round of curve flattening materialised. 2yr Treasury yields gained +24.4bps over the week (-5.5bps Friday) while 10yr yields climbed +14.6bps (+1.2bps Friday). Adding evidence to Chair Powell’s main arguments, the employment situation report out of the US on Friday painted a still robust picture of the US labour market, where +261k jobs were added (vs. +193k expected), while average hourly earnings ticked up to +0.4% (vs. +0.3%). Labour force participation tightened, dropping to 62.2% (vs. 62.3%), while unemployment actually increased slightly to a still-tight 3.7% (vs. 3.6%). Elsewhere, the BoE painted a much more dovish outlook as they hiked 75bps, which led to a much different curve shape, as 2yr gilt yields fell -19.1bps (-2.5bps Friday) and 10yr yields were 'only' +5.9bps higher (+1.6bps Friday). The bund curve split the difference between the US and UK moves and moved in parallel, with 2yrs climbing +18.9bps (+4.3bps Friday) and 10yrs +19.2bps higher (+5.0bps Friday).

The pivot unwind trade showed up in equity prices, too, where the S&P 500 tumbled -3.34% (+1.36% Friday) and the tech-heavy NASDAQ bore the brunt of a hawkish Chair by falling -5.65% (+1.28% Friday). European equities, meanwhile, managed to finish up over the week, with the STOXX 600 gaining +1.51% (+1.81% Friday) and the DAX +1.63% higher (+2.51% Friday). As you can see, a lot of those gains took place on Friday following headlines that China was considering easing its Covid restrictions, potentially unleashing a major engine of global growth. In turn, Brent crude oil prices also rallied hard to finish the week +3.11% (+4.12% Friday). Over the week, the Shanghai Composite climbed +5.31%, with the Hang Seng +8.73%.

Tyler Durden Mon, 11/07/2022 - 08:09

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Aging | Clearance of p16Ink4a+ cells: limited effects on β-cell mass and proliferation in mice

“[…] we set out to explore the effects of removing p16Ink4a+ senescent cells on the proliferative capacity and mass of β-cells […].” Credit: 2023…



“[…] 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.”



Corresponding Author: Cristina Aguayo-Mazzucato 

Keywords: beta cells, mass, proliferation, senolysis, senescence

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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…



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 Statistics
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.

Las Vegas Visitor Traffic
Convention traffic was down 38.2% compared to December 2019.

Note: There was almost no convention traffic from April 2020 through May 2021.

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US Job Opening Far Lower Than Reported By Department Of Labor, UBS Finds

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…



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.

  1. 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.
  2. A few weeks ago, Goldman also put the credibility of DOL's weekly jobless claims report under question, when it found that initial claims as measured at the state level without seasonal adjustments or other "fudge factors" were running far higher than what the DOL reports every week.
  3. 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.

The full UBS report available to pro subs.

Tyler Durden Tue, 01/31/2023 - 15:43

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