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Futures Rise On Expectations For A Post-Midterm Rally

Futures Rise On Expectations For A Post-Midterm Rally

US equity futures rose as bond yields dipped as Americans headed to the polls on Tuesday…

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Futures Rise On Expectations For A Post-Midterm Rally

US equity futures rose as bond yields dipped as Americans headed to the polls on Tuesday for midterm elections where Republicans are expected to gain as many as 75 seats in the House and 11 in the Senate, while traders were also bracing for a key CPI print later this week. Nasdaq 100 futures were up 0.5% by 7:30 a.m. in New York, while S&P 500 futures rose 0.2% to trade at 3,820 and above a key CTA threshold level (as Goldman notes overnight "CTA short term momentum flipped from negative to positive w/ the close north of 3804"). The US Dollar was little changed as was the yield on the 10-year Treasury after rising for the past four days.

Among notable movers in premarket trading, NVidia climbed in early New York trading as it began producing a processor for China. Bitcoin tumbled as part of a crypto selloff trigged by the growing Binance-FTX feud. Lyft plunged 20%, on track to hit their lowest level on record. The ride-sharing company’s 3Q results appear to confirm it is losing market share to rival Uber and raise questions on its outlook in 4Q and beyond, analysts say. TripAdvisor shares also cratered after the online travel agency issued a disappointing fourth-quarter forecast. Take-Two Interactive Software Inc. fell 18% and was set for its biggest drop in 13 years after the video-game developer’s results showed weakness in its mobile business, which drove a cut to its bookings guidance. Lordstown Motors, on the other hand, surged after the EV maker struck a deal to sell a $170 million stake to Foxconn and give two board seats to its manufacturing partner, boosting investor confidence over its prospects.

  • SolarEdge shares rise 9.6% in US premarket trading after third-quarter results that analysts say were strong and indicated a further improvement in margins for the solar company in the future.
  • Take-Two shares drop 18% in US premarket trading. The video-game developer’s results show weakness in its mobile business, which drove a cut to its bookings guidance, though analysts remain positive on its pipeline of future releases. Video-game stocks could be in focus on Tuesday after Take-Two reduced its full-year net bookings guidance, while Nintendo cut its forecast for sales of Switch consoles by 10%. Keep an eye on stocks like Electronic Arts (EA US), Roblox (RBLX US), AppLovin (APP US).
  • Five9’s shares decline 13% in premarket trading as reduced guidance indicates a slowdown ahead for the cloud software firm against a tough macro picture, with Jefferies saying that the outlook was “worse than feared.” Still, some analysts think there may be an opportunity to buy shares on any weakness.
  • Lyft shares drop about 18% in US premarket trading, on track to hit their lowest level on record. The ride-sharing company’s 3Q results appear to confirm it is losing market share to rival Uber and raise questions on its outlook in 4Q and beyond, analysts say.
  • TripAdvisor shares slump 19% in premarket trading after the online travel agency reported third-quarter results. While revenue for the period came in ahead of estimates, the fourth-quarter guidance disappointed, with analysts noting that increased spending on Viator was the main reason for the soft outlook.
  • Cryptocurrency- exposed stocks fall in US premarket trading as a selloff among digital currencies spreads to Bitcoin and Ether. Investors are paring risky bets ahead of US midterm elections and following a renewed slump in cryptocurrency exchange FTX’s token. Riot Blockchain declines 4.9%, Marathon Digital (MARA US) -4.8%, Coinbase (COIN US) -2.1%, Hut 8 Mining (HUT CN) -4.5%
  • Watch US semiconductor stocks after peer Nvidia began making a chip for China that the company said meets a US export ban, boosting hopes that companies impacted won’t see a sizable hit to their revenues from the curbs.
  • Keep an eye on stocks including Intel (INTC US), Qualcomm (QCOM US), Advanced Micro Devices (AMD US), Lam Research (LRCX US), Applied Materials (AMAT US), KLA (KLAC US).

Investors will be closely monitoring the outcome of the midterm vote while the CPI reading will be significant in assessing the impact of Fed hikes on inflation. President Joe Biden acknowledged that Democrats face a “tougher” challenge holding the House than the US Senate. Polls pointing to Republicans winning at least one chamber of Congress provide a potential catalyst for lower bond yields and higher equity prices, according to Morgan Stanley’s Michael Wilson, who said that a "clean sweep" by the Republicans could greatly increase the chance of fiscal spending being frozen and historically high budget deficits being reduced, fueling a rally in 10-year Treasuries that can keep the equity market rising.

"The US debt burden could stop the Democrats from putting in place many economic reforms that they would’ve otherwise, if Republicans are sufficiently crowded to block them moving forward," Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “Hence, slowing debt under GOP could slow growth.”

That said, sentiment has improved in recent days, and major equity markets aren’t likely to see “another big leg down” as a lot of the bad news seems to be priced in, according to Altaf Kassam, head of EMEA investment strategy and research at State Street Global Advisors.  The Fed is likely to shift away from rate increases after the effects of hikes start showing up, especially in the second half of next year, he said. “Equity markets have already kind of started to anticipate that, so if you are patient you might miss out on the beginning of a rally, but that’s when we think it’s going to happen,” he told Bloomberg TV.

Tuesday’s two-way moves in Treasuries, however, underscored the fragile sentiment in markets where the Federal Reserve’s monetary tightening remains the biggest headwind. Thursday’s consumer-price-index data will offer the next cue for traders even as money markets are raising their peak-rate wagers.  The inflation reading is coming after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.

“Inflation is going up. It may be coming down periodically. But it’s going up,” Richard Harris, chief executive of Port Shelter Investment Management, said on Bloomberg Television. “The market is kind of uncertain -- it’s hoping for the best but really should be preparing for the worst.”

In Europe, tech, telecoms and utilities are the strongest performing sectors while energy and miners lag. Euro Stoxx 50 is little changed. FTSE 100 lags peers, dropping 0.2%. Here are some of the biggest European movers today:

  • BE Semi shares rise as much as 6.5%, hitting the highest in three months and leading gains in the Stoxx 600 Tech index, as Morgan Stanley initiates coverage with an overweight rating
  • Pandora gains as much as 8.8%, the most since May, after 3Q net income beat estimates. The Danish jeweler said that despite macroeconomic and geopolitical uncertainty, the shopping patterns of its consumers are so far largely unchanged.
  • AB Foods jumps as much as 6.7%, the most since March 9, after the UK company announced a £500m share buyback. The amount was bigger than Citi had expected, while RBC said the repurchase program will be well received.
  • Coca-Cola HBC gains as much as 4.2%, among the top performers in the FTSE 100 Index, after the bottler reported third-quarter sales that beat estimates and said it now sees FY comparable Ebit in the range of €860m-€900m.
  • Persimmon falls as much as 9.3% after the homebuilder’s trading update flagged rising cancellations, falling sales rates and prices, increased provisions for cladding remediation and changes to the capital return policy which Morgan Stanley (underweight) says points to a “meaningful decline” in the FY23 dividend.
  • DCC drops as much as 8.7%, the most since March 2020, after 1H results that RBC says came in slightly below expectations.
  • Bayer falls as much as 5%, the most intraday since Aug. 29, after reporting results that beat estimates while reiterating guidance given in August -- leaving limited room for any changes to consensus expectations, according to Morgan Stanley.
  • Direct Line drops as much as 7.8%, the most intraday since July, after the insurer’s gross written premium for the third quarter was weaker than expected due to lower motor premiums. Shares of peer Admiral Group also fall.

Asian stocks also rose amid investor optimism that the potential outcome of the US midterm elections could be good for equities. Chinese shares, meanwhile, pulled back after a two-day rally as pandemic concerns flared once again.  The MSCI Asia Pacific Index advanced as much as 0.8%, poised for a third day of gains, driven by technology stocks. Benchmarks in Japan, South Korea and Taiwan led gains, while Indian markets were closed for a holiday.

China’s Covid cases surged by the most since April, halting a recent rally in the Hong Kong and mainland markets. Chinese shares had been rising on growing hopes for an eventual reopening even as health officials reiterated a strict adherence to Covid Zero policy. The market is also wagering that a US Congress split between Democrats and Republicans could be good for stocks. A post-election rally will provide some respite for investors amid concerns over the Federal Reserve’s monetary-policy tightening. “Gridlock cross-checks each party’s ‘worst impulses,’ and less activist fiscal policy is conducive to lower market volatility,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note. “That could be particularly helpful in 2022 and 2023 to the extent it calms rates volatility.”

Japanese equities climbed for a second day, following US peers higher as investors awaited the outcome of US midterm elections and further direction on Federal Reserve policy. The Topix rose 1.2% to close at 1,957.56, while the Nikkei advanced 1.3% to 27,872.11. Sony Group Corp. contributed the most to the Topix gain, increasing 3.3%. Out of 2,165 stocks in the index, 1,662 rose and 410 fell, while 93 were unchanged. “Japanese stocks followed the gain in overseas stocks,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “There seems to be more buybacks after the release of employment statistics that investors were originally cautious about.”

In FX, the dollar consolidates and is marginally firmer against most majors; the Bloomberg Dollar Spot Index swung between gains and losses after touching a seven-week low. The greenback advanced against all of its Group-of-10 peers apart from the yen.

  • The euro weakened to trade around parity versus the dollar. Bunds and Italian bond curves twist- flattened modestly. One trader has bought an upside strategy in Euribor calls that seeks to profit from the ECB easing policy rates significantly by the middle of 2024
  • The pound was among the worst performers, while gilts were steady. The Debt Management Office kicked off a 15-year syndication in a busy week for supply. UK retailers said sales growth slowed in October as a surge in prices pushed more consumers to focus on essentials instead of new clothing and household accessories. Bank of England Chief Economist Huw Pill said market turmoil in the UK in recent weeks led to some “de-anchoring” of inflation expectations, and the central bank is working hard to tamp down those views; Pill speaks twice today
  • The Australian dollar erased a loss. It earlier slumped after the nation’s consumer sentiment tumbled to the lowest level in 2-1/2 years and business confidence also weakened as higher interest rates and surging inflation stoke concern about the nation’s economic outlook

In rates, fixed income trading was fairly muted; Treasury yields are flip to slightly cheaper on the day, follow wider drop in bunds after Germany plans to more than double the 2023 net debt to €45 billion. US 10-year yields back up to around 4.22%, cheaper by less than 1bp on the day while bunds underperform by 2bp in the sector as bund futures test session lows

In commodities, WTI falls 1.2% to near $90.73. Spot gold falls roughly $5 to trade near $1,671/oz.  Oil futures are softer intraday as DXY picked up overnight and in early European trade, whilst China’s COVID woes remain a grey cloud for the complex, with daily new cases in China rising to a six-month high for Sunday. Spot gold moves in tandem with the Buck and oscillates on either side of its 50 DMA at USD 1,672/oz today in the run-up to the midterms. Base metals are mixed with LME copper trading with mild gains just under the USD 8,000/t mark.

To the day ahead now, and the highlight will be the US midterm elections. From central banks, we’ll hear from the ECB’s Nagel and Wunsch, as well as BoE chief economist Pill. Otherwise, data releases include Euro Area retail sales for September, and earnings releases include Disney.

Market Snapshot

  • S&P 500 futures up 0.2% to 3,821.00
  • STOXX Europe 600 up 0.2% to 419.27
  • MXAP up 0.7% to 143.54
  • MXAPJ up 0.4% to 461.67
  • Nikkei up 1.3% to 27,872.11
  • Topix up 1.2% to 1,957.56
  • Hang Seng Index down 0.2% to 16,557.31
  • Shanghai Composite down 0.4% to 3,064.49
  • Sensex up 0.4% to 61,185.15
  • Australia S&P/ASX 200 up 0.4% to 6,958.87
  • Kospi up 1.1% to 2,399.04
  • German 10Y yield down 0.1% at 2.34%
  • Euro down 0.2% to $0.9999
  • Brent Futures down 0.9% to $97.06/bbl
  • Gold spot down 0.3% to $1,670.56
  • U.S. Dollar Index up 0.20% to 110.34

Top Overnight News from Bloomberg

  • Donald Trump said on the eve of US midterm elections that he would be making a “big announcement” next week, all but confirming his widely anticipated third White House bid that he’s been teasing for weeks
  • The term structures in the major currencies remain inverted as US risk events, including midterm elections and a key inflation report, make the case for long gamma exposure in the front-end
  • The ECB will start reducing its bond holdings through so-called quantitative tightening “sooner or later, for sure in 2023,” Vice President Luis de Guindos tells Politico in an interview
  • The ECB needs to continue increasing interest rates even if that weighs on economic output, according to Bundesbank President Joachim Nagel
  • Japan’s cabinet approved a 29.1 trillion yen ($198 billion) extra budget to fund an economic stimulus package that aims to ease the impact of inflation on people and companies

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mixed as the region only partially sustained the early momentum seen following the positive handover from Wall St with Chinese stocks pressured overnight as infections continued to rise. ASX 200 traded marginally higher with the index kept afloat by strength in the top-weighted financial industry and gains in consumer-related sectors. Nikkei 225 was firmer and edged closer to the 28,000 level as participants digested earnings releases and shrugged off mixed household spending data although Average Cash Earnings accelerated. Hang Seng and Shanghai Comp were subdued despite the reopening rumours which officials pushed back against, while the number of daily new infections continued to climb from 6-month highs.

Top Asian News

  • Hong Kong Chief Executive Lee dismissed calls to drop the health code for travellers and mask-wearing rules, according to SCMP.
  • Japanese PM Kishida is to approve USD 198bln extra budget for the stimulus plan, according to Bloomberg. Furthermore, Japan's government is to add JPY 1.4tln of fiscal loans for the second extra budget and will issue JPY 20.4tln in deficit-covering bonds, according to a draft cited by Reuters.
  • Japan's cabinet has approved a second supplementary budget with JPY 29.1tln (in-line with prior reports) for FY to fund an economic stimulus package, according to MoF.
  • BoJ Summary of Opinions stated that Japan's consumer inflation is likely to continue accelerating as firms pass on higher costs. Furthermore, consumer inflation is likely to slow back below 2% next fiscal year due to the impact of slowing global growth but cannot rule out chances that prices will sharply overshoot forecasts.
  • RBNZ reappointed Governor Orr as the head for another five-year term, according to Reuters.
  • Chinese interbank market regulator is to boost support by financing to private firms, will initially support around CNY 250bln of bond financing by private firms including property developers; supported by central bank refinancing.

Major bourses in Europe portray a mixed picture with no clear conviction seen heading into the US mid-term elections. Sectors are mostly firmer (vs a mostly lower open) with Tech leading the charge with additional help from declining bond yields. Energy and Basic Resources sit as the sectoral laggards amid declines in underlying commodity prices. US equity futures post mild gains but with price action contained; ES +0.1%.

Top European News

  • BoE urged lenders to do more to avoid a repeat of the pensions fund turmoil seen in September, according to FT.
  • UK PM Sunak is expected to increase pensions and benefits in line with inflation, according to The Times.
  • UK Chancellor Hunt is to announce a tax raid on inheritance in the Autumn statement, according to The Telegraph and FT.
  • UK plan to review or repeal all EU laws by end-2023 suffered another setback after 1,400 additional pieces of legislation were discovered, according to FT.
  • UK and France are reportedly in the final stage of reaching an agreement concerning illegal English Channel crossing, according to FT.
  • ECB's de Guindos says ECB will continue raising rates to levels that ensure price stability; levels will depend on data, the evolution of inflation, economic conditions, demand, and energy prices, via Reuters.
  • ECB's Nagel says he will do his utmost to make sure the ECB does not let up in the inflation fight, according to Reuters.
  • SNB's Jordan says policy decisions must be based on firm commitment to price stability objective; policy decisions must not be based exclusively on inflation forecast, via Reuters.
  • BoE Chief Economist Pill says there is a danger of self-fulfilling dynamics on wage-cost nexus. Cannot declare victory against second-round effects but is entering a recession. Pill reiterated that there is more to do, and need to raise rates to tighten monetary policy. Pill is sceptical that front-loading hikes has big expectations effect, via Reuters.
  • UBS (UBSG SW) branches have been searched by German criminal investigators in relation to sanctioned Russian oligarch Usmanov, according to Der Spiegel; searches related to money laundering.

FX

  • DXY gleaned some traction across the board amidst a firmer rebound in Treasury yields, renewed weakness in the Yuan and general consolidation ahead of impending risk events.
  • Yen managed to keep afloat of 147.00 and bucked the overall trend after Japan’s Cabinet approved a second supplementary budget and the BoJ’s SOO highlighted risks of a sharp price overshoot.
  • European G10s sit as the current laggards, with EUR, GBP, and CHF towards the bottom of the bunch.

Fixed Income

  • US Treasuries were first off the block in terms of paring more losses from worst levels to turn marginally positive
  • Gilts followed suit as books closed on a well sought after 2038 syndicated offering.
  • Bunds remain depressed in wake of a somewhat mixed Schatz auction given a bigger retention and hefty concession needed to achieve a 1.2 cover ratio for the new 2 year benchmark.

Commodities

  • WTI and Brent futures are softer intraday as DXY picked up overnight and in early European trade, whilst China’s COVID woes remain a grey cloud for the complex, with daily new cases in China rising to a six-month high for Sunday.
  • Spot gold moves in tandem with the Buck and oscillates on either side of its 50 DMA at USD 1,672/oz today in the run-up to the midterms.
  • Base metals are mixed with LME copper trading with mild gains just under the USD 8,000/t mark.
  • Chile's Codelco offers Chinese copper buyers 2023 supply at a premium USD 140/t (prev. USD 105/t; +33.3% Y/Y) according to Reuters sources.

Geopolitical

  • Ukrainian President Zelensky said it is vital to force Russia to participate in genuine peace negotiations, according to Reuters.
  • White House Press Secretary said US President Biden has no intention of meeting Russian President Putin, while State Department spokesman Price said Russia signals that it is focused on escalation, according to Bloomberg.
  • North Korea’s military denied exporting weapons to Russia in which it stated that it has never exported weapons or ammunition to Russia and has no plans to do so, according to Yonhap.
  • Chinese Foreign Ministry, on President's Xi's visit to Saudi Arabia, says don't know the information referred to, according to Reuters.
  • Chinese President Xi will comprehensively strengthen military training and preparation for any war, according to state media. China's security is increasingly unstable and uncertain.

US Event Calendar

  • 06:00: Oct. SMALL BUSINESS OPTIMISM 91.3, est. 91.4, prior 92.1

DB's Jim Reid concludes the overnight wrap

It’s been a long two years, but today we’ve finally arrived at the US midterm elections, which is clearly the most important political milestone between the presidential elections. I have my own electoral success story to report as my 7-year old daughter Maisie was voted onto her school council on Friday. I asked her what platform she stood on. She said that she campaigned on having more homework and that the school should have a pet fish. In case you think she’s a swot, nothing can be further from the truth. Getting her to do homework is the most stressful part of every weekend and often brings floods of tears. Maisie cries too. How she got elected on that mandate is beyond me. Maybe the others stood on bringing back corporal punishment!

On to weightier matters, as a reminder for our non-US readers, today will see every seat in the US House of Representatives (the lower chamber) up for grabs, along with a third of the seats in the Senate (the upper chamber), on top of the governorships in 36 of the 50 US states. And when it comes to markets, it’s no exaggeration to say that midterm elections are one of the best historic buy signals for equities we have. In fact, in the 19 midterm elections since WWII, the S&P 500 has always been higher one year after the vote. Whether any of those cycles had to contend with the macro tsunami that's coming in the next 12 months is a moot point but it shows the underlying technicals.

Currently the Democrats control both chambers in Congress, but by the narrowest of margins. The Senate is currently split 50-50 their way thanks to the tie-breaking vote from Vice President Harris, so the Republicans only need a net gain of one to win the majority there. Meanwhile in the House of Representatives, it was split 222-213 to the Democrats in the 2020 election, meaning the Republicans only need a net gain of five seats to take control.

In terms of what’s expected to happen, most forecasters think that the Republicans are likely to win control of the House of Representatives. For instance, FiveThirtyEight’s model gives them an 83% chance of the majority, and Politico’s forecast puts it as “Likely Republican”. In the Senate however, the Republicans are generally seen as having a weaker chance, with FiveThirtyEight’s model giving them a smaller 55% chance of the majority, and Politico’s forecast leaving it as a “Toss-Up”. Part of the reason why the Republicans have a much weaker chance in the Senate relative to the House is because only a third of the Senate is up for election, and most of the seats up for grabs are ones already held by the Republicans, which limits their scope to make net gains from the Democrats.

If the Republicans do end up retaking control of either chamber in Congress (or both), the result will likely be legislative gridlock for the next two years, and our US economists do not see any major legislation on economic policy ahead of the 2024 election in this circumstance. Remember that President Biden will still have a veto on legislation, and the Republicans will not have the two-thirds majority in both houses required to override a veto (it’s mathematically impossible in the Senate where only a third of seats are up for grabs). If there is divided government however, one area we might see more action again is the debt ceiling, since there’s a chance that a Republican-controlled Congress use the need to raise the ceiling as leverage to get some of their policy priorities through. See Henry's piece (here) from yesterday for more on that.

When it comes to the results, it could be some time before we know the full picture. In fact, for the Georgia Senate race, state law requires the candidate to win over 50% of the vote to win, so if nobody does today then the top two will go to a runoff on December 6, meaning it could theoretically be another month before we find out who controls the Senate if it does hinge on that race like last time. Even absent any runoffs, it’s also possible that it takes some days anyway. Last time at the presidential election, it wasn’t until the Saturday after the Tuesday that we had final confirmation of Biden’s victory.

Whatever ends up happening today, there’ll be plenty of extrapolation onto the 2024 presidential election from the results. However, it’s important to remember that 2 years is also a very long time in politics and a number of presidents have come back from very bad midterm results to win re-election. Indeed, the last two Democrats in the White House (Presidents Obama and Clinton) both suffered major midterm losses before coming back to win re-election. So be cautious in saying anything is inevitable!

Ahead of the midterms there were some familiar themes in markets, with yields on 2yr US Treasuries up +6.3bps to a post-2007 high of 4.72%, whilst the 10yr yield was up +5.5bps to 4.21% (4.23% in Asia). Those moves were driven pretty much entirely by higher inflation breakevens rather than real rates, and came as Brent crude oil prices traded closer to $100/bbl than at any point since August, intraday, before falling into the close to finish the day slightly lower at -0.66%. The trend towards higher sovereign bond yields was evident in Europe too, where yields on 10yr bunds (+4.9bps), OATs (+3.3bps) and gilts (+7.6bps) all rose on the day.

Whilst there was a clear trend in rates, for equities it was a pretty choppy session, with the S&P 500 fluctuating between gains and losses to eventually post a very healthy gain of +0.97%. Cyclical stocks led the way while defensives like Utilities were stark underperformers, falling -1.94%. The Nasdaq advanced for the second straight day for the first time in November, climbing +0.85%. Meanwhile in Europe, the major indices mostly rose, with the STOXX 600 (+0.33%) hitting a 7-week high, but the FTSE 100 (-0.48%) lagged behind amidst a +1.19% rebound in sterling.

Asian stock markets are mixed this morning with the Nikkei (+1.42%) sharply higher, notching an 8-week high. The KOSPI (+0.98%) is also trading in positive territory. In China, the Shanghai Composite (-0.52%) and the CSI (-0.75%) are losing ground with the Hang Seng (-0.04%) struggling to gain traction as the speculation about China’s reopening continues to add market volatility. US stock futures tied to the S&P 500 (-0.09%) and NASDAQ 100 (-0.09%) remain rangebound at the time of writing.

We have data from Japan showing that household spending rose +2.3% y/y in September coming in slightly lower than market expectations of a +2.6% increase (v/s a +5.1% gain in August). However, household consumption faces increasing inflationary pressures because of a weaker yen with real wages (adjusted for inflation) falling -1.3% y/y in September (v/s -1.8% expected), its sixth-consecutive decline. This was less than August’s -1.7% drop.

From the Bank of Japan, the Summary of Opinions released overnight showed that policymakers debated the future exit from ultra-low interest rates and its impact on financial markets amid rising prices. According to the summary, some board members argued that the cost-driven inflationary pressures are broadening with one member stressing that a "big overshoot of inflation cannot be ruled out”.

There wasn’t much data of note yesterday, with German industrial production rising by a faster-than-expected +0.6% in September (vs. +0.1% expected). However, the previous month’s contraction was revised to show a worse performance than before.

To the day ahead now, and the highlight will be the US midterm elections. From central banks, we’ll hear from the ECB’s Nagel and Wunsch, as well as BoE chief economist Pill. Otherwise, data releases include Euro Area retail sales for September, and earnings releases include Disney.

Tyler Durden Tue, 11/08/2022 - 08:06

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Why are crypto fans obsessed with micronations and seasteading?

From repurposed cruise ships like MS Satosh, to the blockchain governed Liberland and Satoshi Island, crypto fans are trying to create utopian new communities…

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From repurposed cruise ships like MS Satosh, to the blockchain governed Liberland and Satoshi Island, crypto fans are trying to create utopian new communities built around new rules.

We cant blame Elon Musk for dreaming of moving to Mars the human race has always been curious about finding a better life somewhere else. 

But not everyone in crypto is looking up to the stars to find new worlds; others stay on earth and attempt to build a new micronation, or a crypto community, here. There are dozens of projects in development and a few actually operational including Liberland, Satoshi Island and Puertopia/Sol attracting interest from the blockchain world.

Liberland

While many head out to sea to build their new communities, another option is to find land left over after conflicts. This is not as crazy as it sounds, and in the shifting territorial landscape after the breakup of the Yugoslavian empire, small pockets of land have turned up. Vt Jedlika, a Czech economist and Libertarian, founded Liberland on April 13, 2015 on Thomas Jeffersons birthday on a small track of terra nullius (unclaimed land) on the banks of the Danube between Croatia and Serbia. At seven square kilometers, it is larger than Vatican City and Monaco and similar in size to Gibraltar.

The tiny nation is not yet habited despite boasting 785,000 citizens, all of whom currently reside abroad.

Jedlika wanted to form a new nation with low taxes and greater freedoms, and he found the land literally by Googling the term terra nullius.

Liberland
President Vt Jedlika at the 2019 Floating Man Festival in Liberland. Source: Supplied

We had a need to start a new country in order to defend the personal and economic freedoms of certain groups of people that really enjoy freedom and want to live in a free society, says Jedlika.

Liberland is a pristine piece of land; its a beautiful place with sandy beaches, and I think its actually one of the most beautiful places on the Danube. People can actually come there for recreation, and people are coming camping there as we speak even though its winter right now.

Of course, there are some major challenges, including geopolitical challenges that we have to overcome.

Liberland is in phase one and preparing the groundwork for future recognition and urban development. So, nothing has yet been built, although you can sign up for residency online. The would-be country has signed memorandums of understanding with Ghana, Malawi and Haiti, and while official recognition has not been achieved, Jedlika is convinced it is only a matter of time.

The crypto angle

The government has selected the Polkadot ecosystem to develop the countrys governance and will rely on DAOs to run everything transparently.

We will be running everything at the speed of light. Everything, including Congress, the land registry, the courts system and budgeting, will be registered on the blockchain. This will allow for all decisions to be transparent and to happen at speed. We are also planning for citizens to run the nodes on their IT infrastructure on their computers at home and to make money while supporting Liberland.

Liberland flag
The flag of Liberland. Source: Liberland

There will be two houses of parliament in Liberland. The first is more meritocratic where citizens who hold the official Merit token, pay voluntary taxes and contribute to Liberland can vote on decisions in the country. The other house is the Senate and will be populated with people who helped build Liberland and will have more of an oversight role, including Jedlika moving into a steward position if he is voted out of his current position.

Voting will be frequent, every three months, to ensure that the citizens can actually influence decision-making rather than in traditional four-year election cycles. The code is in place and is scheduled to be launched on the eighth anniversary of the foundation of the state, April 13, 2023. In time, there will be a maximum of 14,000 active voters at any given time.

Liberland is being put together in the Arctic Village next door in Serbia, which is largely neutral to Liberland, while it seeks to improve its still uncomfortable relationship with Croatia.

Verdis next door

A neighboring strip of land was also claimed by a passionate founder this time, by 14-year-old Daniel Jackson in 2019, who wishes to establish Verdis. Jackson was born and raised in Australia to English parents, and the now 18-year-old does not see his age as an impediment. 

A group of people and I decided to create Verdis in order to help make a difference in the world, especially around reconciliation of ethnic groups, neutrality zone, a new government structure, and a way to hopefully help boost tourism and economy in Slavonia and Vojvodina as an extra benefit for neighboring Croatia and Serbia, says Jackson.

Verdis
Daniel Jackson, president of Verdis, with the new national flag. Source: Supplied

Verdis is roughly 0.451 square kilometers, making it slightly larger than Vatican City. 

In some ways, I did see inspiration from Liberland, but we still have different goals and aspirations. I think that with enough effort and hard work, Verdis is feasible, especially with our right to the land under international law.

Around 27 people are currently involved in Verdis government. The nation is in the process of having its passports recognized by the Chief Immigration Officer of Eswatini (formerly Swaziland).

According to Jackon, most of Verdis citizens plan to move to Verdis in the future, starting with houseboats along the Danube.

We believe Verdis will survive, as long as it is actively worked on, and works to keep its voice loud in its search for international recognition, says the young acting president.

Satoshi Island

Satoshi Island was founded in 2021 by acquiring an entire island in the South Pacific Ocean. Aimed at digital professionals and based 100% on cryptocurrencies, the island looks to attract tech professionals looking to work alongside like-minded people.

The vision behind Satoshi Island was born out of a feeling of wishing that industry-based events and conferences would last longer. Online is fine but even better is to have a year-round venue where crypto enthusiasts and professionals could live, work and visit.

Unlike some of the other projects, Satoshi Island is simply about celebrating crypto, and the island venue was simply to give it a sense of freedom and community.

Satoshi Island c
Satoshi Island concept art. Source: Satoshi Island

The Satoshi Island project has no political agenda, separatist or ideological ideas, a spokesperson tells Magazine. Whereas some people might think that the vision stems from wanting to escape due to being disenfranchised with the rest of the world, this couldnt be further from the truth. The only goal is to create a place for people in the industry to congregate and have the ability to utilize blockchain technology to the fullest. The island could be most likely compared to a private retreat or golf course where only members can visit.

Starting with a blank slate allowed them to look at the master planning of the island with fresh ideas. All the systems (where possible) will be blockchain-based and sustainable, with everything 100% powered by renewable energy generated on the island. Modular development is also an important aspect of the island. This type of architecture allows them to build in ways that significantly reduce the time, disturbance and impact on the nature and landscape.

The rep tells us that families with children seem to be attracted to the idea, often with the female being the main proponent. 

 

We are expecting the population to be a mix of people living and working on the island all year round, as well as people who live there half the year as they escape colder or hotter climates.

You can also take a holiday there. Take a look at the interesting Satoshi Island video here.

Puertopia, I mean, Sol


Puerto Rico was another hot spot for crypto bros. People such as Brock Pierce of EOS and Tether fame and Joel Comm of the Bad Crypto Podcast relocated to the U.S. territory where taxes are favorable and the crypto rich were welcomed, at least initially by locals enjoying income growth, especially in hospitality. There were grand plans to build a blockchain-powered city called Puertopia in the derelict remains of the Roosevelt Roads Naval Base in Ceiba, which would include a crypto-exclusive bank and showcase what a crypto future could look like. The New York Times reported that someone told it Puertopia translates to eternal boy playground (which sounds suspiciously like a joke directed at Pierce), so they changed the name to Sol. A backlash against crypto and the effects of crypto winter in 2022 has seen updates on the project dry up of late.

Crypto Utopia

Kyle Chase of Master Ventures fame and crypto influencer attempted to set up a Libertarian crypto community and business incubator in his beloved Thailand. Magazine paid a visit in February last year and heard wild tales of unchecked merrymaking, crypto-influencers, police grillings, a reported $20,000-a-month burn rate and a collision between idealism and reality. After shifting locations a number of times, the concept has yet to be fully realized.

MS Satoshi

The project that was the Satoshi Cruise ship suffered an ignominious ending through red tape rather than political inference. Launched by three cryptocurrency advocates in 2020 when cruise ships were relatively cheap as a result of the pandemic, the ill-fated Satoshi Cruise Ship failed to ignite real interest in Libertarians interested in making it their home.

MS Satoshi
Artists impression of the MS Satoshi. Source: MS Satoshi

Attempts were made to sell off rooms, but limits on cooking and general living on a cruise ship did little to attract citizens, and then the enormous running costs and regulations around running and maintaining a ship (even down to permits and sewage) proved too much for the founders. It has now been converted back into a luxury cruising vessel.

Seasteading

Arktide pod
Arktide is working on a 250-foot diameter dome, which will be a total of five floors with a height of 50 feet from base to dome top. Source: Arktide

Seasteading refers to the idea of building permanent homes on the sea, known as seasteads, in areas that are not under the jurisdiction of any government.

At present no one has actually created a seastead that has been officially recognized as a sovereign state. Different designs for seasteads have been proposed, such as modified cruise ships, repurposed oil rigs and specially constructed floating islands. It is fraught with legal difficulties, however, as a Bitcoiner couple who set up a floating home off the coast of Thailand discovered when the navy hauled them and charged them with violating Thai sovereignty.

The concept itself has been around for decades. The 2020 Netflix film Rose Island highlighted the attempt by Italian engineer Giorgio Rosa to build a sovereign island in the Adriatic Sea back in the 1960s, complete with a restaurant, bar, souvenir shop and post office. The short-lived experiment ended when Italian warships accosted the platform, removed the last inhabitants and then completely removed all evidence from the sea. 

California-based nonprofit the Seasteading Institute was founded in 2008 by activist, software engineer and political economic theorist Patri Friedman, grandson of Nobel Prize-winning economist Milton Friedman.

Development director Carly Jackson tells Magazine she is currently aware of 12 seasteading projects in various stages of development (see the full list here), of which the leading ones are Arktide, Atlas Island, Atlantis Sea Colony and Freedom Haven.

The genesis of some of the projects is based on politics, including Atlas Island and Freedom Haven. Other projects, such as Arktide, a project that bought property in Puerto Rico as a base to build from, have incorporated blockchain from the very beginning.

I expect one or more of the active projects to launch platforms in the next year or so. It will probably take a few more years to have enough of a community to move out to international waters. Im not sure if that will make seasteading mainstream, but I hope it will be normalized for people to consider living on a floating city in a decade or so.

The Maldives Floating City


The Floating City is scheduled to begin construction this year and has 5,000 housing units linked by waterways and laid out in hexagonal segments. The city boasts that it is a climate change solution, but with each house priced at $250,000, it appears to want to attract investors or nomadic professionals looking for somewhere to lay their hats.

Oceanix Busan


Oceanix Busan is planned to be located just one mile from the southeastern coast of South Korea. Initially, the project will consist of three triangular platforms, each capable of accommodating 12,000 people. The goal is for the project to expand into a hexagonal city of more than 20 platforms. The project (officially named Oceanix City) was presented by Bjarke Ingels Group and Samsung Group at the United Nations Roundtable of Sustainable Floating Cities in 2019, and it was agreed by the U.N. that it will be a prototype for sustainable floating cities. In addition to being a floating city, it will also serve as a testing ground for various sustainable living technologies.

The prototype of the floating city is due for completion this year and will comprise interconnected platforms that have a total surface area of 15.5 acres. Each modular piece of the city, which floats on water, is specifically designed for a particular purpose such as residential space, research facilities or accommodation.

Oceanix Buscan
An artists impression of Oceanix Buscan. Source: Unhabitat.org

For details on other micronations click here.

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Cardboard Box Demand Plunging At Rates Unseen Since The Great Recession

Cardboard Box Demand Plunging At Rates Unseen Since The Great Recession

By Rachel Premack of FreightWaves,

Demand and output for cardboard…

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Cardboard Box Demand Plunging At Rates Unseen Since The Great Recession

By Rachel Premack of FreightWaves,

Demand and output for cardboard boxes and other packaging material fell sharply in the fourth quarter of 2022, according to data released by the American Forest & Paper Association and Fibre Box Association on Friday.

It’s the latest indicator that consumer demand is eroding following the pandemic. Dwindling savings, inflation, rising interest rates and fears of a recession may all be swaying consumers to spend less. 

Such pressures would show up in the humble box industry, which serves as an excellent barometer for the larger economy. Practically everything we consume and use spends some time in a box, ranging from online orders to food sent to grocery stores.

Box shipments have plunged at a rate not seen since the Great Recession. (Source: Fibre Box Association, KeyBanc Capital Markets) 

U.S. box shipments fell by 8.4% in the fourth quarter, according to the Fibre Box Association. KeyBanc’s Adam Josephson, who leads the bank’s analysis of the packaging industry, wrote in a Sunday note that this was “the most severe quarterly decline since the Great Financial Crisis (2Q09).”

Inventories of containerboard in the U.S. are unusually high. (Source: American Forest & Paper Association, Fibre Box Association, KeyBanc Capital Markets) 

U.S. box operating rates fell to 80.9%, the Fibre Box Association said, which was also a low last seen in the first quarter of 2009. This means nearly 20% of the U.S. capacity to produce boxes was stagnant last quarter. Supply of containerboard, which is used to make corrugated boxes, stood at 4.3 weeks, according to the American Forest & Paper Association. That’s down from last quarter, but still historically high. 

Inventories of containerboard in the U.S. are unusually high. (Source: American Forest & Paper Association, Fibre Box Association, KeyBanc Capital Markets) 

The American Forest & Paper Association reported that another type of packaging material called boxboard had its lowest operating rate in its five-year record during 2022’s final quarter. Boxboard is typically thinner than cardboard and lacks air pockets.

Box bloodbath? Cardboard crisis?

Box demand normally sees modest upticks of 1% to 2% each year. But government stimulus and the shift from service to goods demand through 2020 and 2021 shocked box demand into some of its fastest growth in history. Prices rose as much as 55% through this time, Josephson said. 

A hangover after a yearslong cardboard carnival would be in order — and this one looks nasty.

To Josephson, the end of 2022 in the packaging world had “echoes of the Great Financial Crisis everywhere one looks,” he wrote in the Sunday note. What’s more, significant capacity — that is, more facilities that produce packaging materials — is set to enter the market through the next several years. It’s a tricky time for more packaging production to open up, given the shaky outlook for demand and falling consumer spending.

Consumer debt is growing at nearly the same pace it was prior to 2020. But that debt is more expensive as interest rates soar. (FreightWaves SONAR)

 

 

"Inflationary pressures on the consumers have also added to the problem by reducing the consumers’ discretionary spending capabilities,” said Thomas Hassfurther, executive vice president of corrugated products at WestRock, in a Thursday call to investors. WestRock is the No. 2 largest packaging company in the U.S.

“In addition, consumer behavior changed very quickly as we exited the extreme COVID period, resulting in more of a preference towards travel, entertainment and experience versus that of tangible goods,” Hassfurther said. “Containerboard and box demand continues to be negatively impacted from the deterioration in U.S. and global economic conditions, rising interest rates and a cooler housing market.”

However, WestRock executives maintained that demand in 2023 still appeared “healthy” compared to pre-COVID times. On the Thursday call, they forecast shipments to be 6% higher in first-quarter 2023 compared to the same period in 2019, on a per-day basis.

What goes up must come down … and down …

Many of the industries that saw wild demand during the pandemic are now crashing, like container shipping, used cars and home building

A downturn after a wild upswing isn’t particularly shocking. What’s troublesome is that executives grew or made plans to grow in response to this unprecedented demand. An increase in supply will further drive down already-plummeting prices.

In the cardboard world, for example, more than 2 million tons per year of additional containerboard output is coming to the North American market. Ocean carriers expect to add a record-breaking number of new container ships through the next two years. And nearly 60 real estate firms, most of which expanded payrolls during the pandemic, have already had to lay off more than 13,000 workers through 2022 and 2023, according to Insider.

It’s not all doom and gloom. Outbound requests for truckload services were slightly up in late January 2023, compared to the same period in 2019 and 2020. That’s a chipper indicator for goods demand. The Fed’s offensive on inflation has appeared to slow the rate of price increases without halting an unusually strong job market. Payrolls across the U.S. remain historically strong, with an unemployment rate of just 3.5%.

Tyler Durden Tue, 01/31/2023 - 17:40

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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…

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“[…] 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.”

 

DOI: https://doi.org/10.18632/aging.204483 

Corresponding Author: Cristina Aguayo-Mazzucato cristina.aguayo-mazzucato@joslin.harvard.edu 

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

Sign up for free Altmetric alerts about this article:  https://aging.altmetric.com/details/email_updates?id=10.18632%2Faging.204483

 

About Aging-US:

Launched in 2009, Aging (Aging-US) publishes papers of general interest and biological significance in all fields of aging research and age-related diseases, including cancer—and now, with a special focus on COVID-19 vulnerability as an age-dependent syndrome. Topics in Aging go beyond traditional gerontology, including, but not limited to, cellular and molecular biology, human age-related diseases, pathology in model organisms, signal transduction pathways (e.g., p53, sirtuins, and PI-3K/AKT/mTOR, among others), and approaches to modulating these signaling pathways.

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