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Futures Slide Ahead Of ECB, Sentiment Hit By Latest China Crackdown

Futures Slide Ahead Of ECB, Sentiment Hit By Latest China Crackdown

US index futures fell along with European stocks amid jitters that the ECB could taper its asset purchases today as well as growing concerns over the slowing economic recover

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Futures Slide Ahead Of ECB, Sentiment Hit By Latest China Crackdown

US index futures fell along with European stocks amid jitters that the ECB could taper its asset purchases today as well as growing concerns over the slowing economic recovery while China's ongoing regulatory crackdown on the tech sector weighed on sentiment. Nasdaq 100 and S&P 500 futures were each down 0.2%, but off worst levels, hinting at further losses after the underlying indexes dropped on Wednesday. Europe’s equity benchmark headed for a five-week low, while 10Y Treasury yields dropped along with the dollar. The dollar dropped, the euro snapped three days of losses and European bond yields steadied ahead of a European Central Bank policy announcement in which investors will be looking for information about bond buying plans for the fourth quarter. Treasuries advanced.

Heavyweight technology stocks including Apple, Microsoft, Alphabet, Netflix and Amazon.com Inc all fell about 0.3% each in premarket trading.  In U.S. premarket trading, China’s tech stocks slid after Beijing officials told firms including Tencent and NetEase to end their focus on profit in gaming. The selloff extended to the U.S. premarket hours when NetEase and Alibaba tumbled, underscoring the market’s continued vulnerability to policy risks. NetEase (NTES) slips 6.4% and Bilibili (BILI) falls 6.9%, while the likes of Alibaba (BABA), Pinduoduo (PDD) and Baidu (BIDU) also dropped as did Roblox, Activision Blizzard, Electronic Art and Take-Two, all down between 0.3% and 1.6%. Digital Realty, which manages technology-related properties, declined 3.6% after entering into forward sale agreements with banks for 6.25 million shares at $160.50 each.

Lululemon surged 14% as analysts increased their price targets on the stock after the athletic clothing retailer boosted its outlook for the year and reported 2Q sales that outpaced expectations. The company continues to benefit from the trend toward casual and athleisure fashion, according to Jefferies. Peer Nike (NKE) rises 1.6%. Here are some other notable movers this morning:

  • Cardiff Oncology (CRDF) soars 16% after the company said Wednesday that data from a colorectal cancer drug trial showed “robust objective response rate and progression free survival.”
  • GameStop (GME) declines 6.8% after reporting a second-quarter loss that was wider than Wall Street projections. It also held a very brief earnings call in which it said it wouldn’t provide guidance. Its peer among the day trader crowd, AMC Entertainment (AMC) also slips 2.7%.
  • Humanigen (HGEN) shares tumble 53% after the U.S. FDA declined its request for emergency use authorization of lenzilumab to treat newly-hospitalized Covid-19 patients.

Investors are reassessing valuations in U.S. stock markets and are fretting over the implications of a slowing recovery. The (now fading) spread of the delta virus variant has taken its toll on the U.S. economy as well as global supply chains, depressing growth while boosting inflation (as does the Fed's $120BN in monthly liquidity injections), while China’s regulatory crackdown on the technology sector worsens the macro outlook.

The fear of delta “is driving the downside risks to the U.S. economy, but also more broadly the global economy as that delta strain spreads around the world,” Kim Mundy, a currency strategist and international economist at the Commonwealth Bank of Australia, said on Bloomberg Television.

On Wednesday, the Fed's Beige Book survey showed U.S. economic activity decelerated in the past two months as consumers pulled back on spending due to safety concerns. However, shortages meant inflationary trends remained stubborn, according to the findings. Further evidence of global price pressures came from China, where factory-gate inflation surged to a 13 year high.

European equities were under pressure for a third day as investors await the European Central Bank’s update on the timing of a possible reduction in stimulus. Euro Stoxx 50 dropped as much as 1% before halving losses. FTSE 100 and IBEX underperform, remaining off ~1% as European peers stage a modest bounce. Oil & gas, travel and mining stocks are the worst performers.  Miners were among the declining sectors as iron ore futures slipped on demand concerns. EasyJet shares fell as much as 14% after the low-cost airline announced it will raise GBP1.2b via a share sale and was said to have rejected a takeover offer from Wizz Air. The Stoxx 600 Health Care index sank to a session low following a report that the White House will release a plan to cut prescription-drug prices. Sub-group falls as much as 1.2%, touching the lowest intraday level since Aug. 6; heavyweight constituents Roche, Novartis, AstraZeneca, Sanofi and Norvo Nordisk all lower. Here are some of the biggest European movers today:

  • Assa Abloy shares rise as much as 7.3% after analysts gave the thumbs-up to the Swedish lockmaker’s plan to buy Spectrum Brands’ hardware & home improvement unit for $4.3 billion.
  • Hays gains as much as 4.1% as Barclays upgrades the employment- services company to overweight, citing a strong market rebound.
  • Beiersdorf climbs as much as 2.6% as Goldman Sachs upgrades to buy, saying the stock offers robust growth at an attractive valuation.
  • Genus tumbles as much as 11% after the breeding firm warned on its 2022 sales outlook amid a slump in the price of pork in China.
  • Prosus falls as much as 6.6% as China gaming concerns hit Tencent

Earlier in the session, Asia stocks closed lower for a second day, weighed down by declines in Chinese and Korean tech firms on concerns about how government regulations will affect earnings. The MSCI Asia Pacific Index slid as much as 1.2%, the most since Aug. 20, in a broad selloff led by benchmarks in Hong Kong and Australia. Tencent was the biggest drag on the regional gauge, as Chinese regulators took aim at gaming firms for focusing solely on profit. Kakao and Naver extended losses sparked by warnings from lawmakers about abuse of market dominance. Investors’ tech-sector worries widened after authorities in South Korea seemed to echo China’s months-long crackdown, with the Financial Services Commission in Seoul saying it would sternly respond if fintech firms show no efforts to correct practices that could violate local rules. Thursday’s decline in regional stocks followed hawkish comments made by some Federal Reserve officials overnight, with traders also focusing on the European Central Bank meeting later.

“The negative lead from Wall Street is being taken as an excuse for a bit of profit-taking in Asia after the strong rally in late August,” said Ilya Spivak, head of Greater Asia at DailyFX. Australia’s S&P/ASX 200 had its worst day since mid-May as iron ore miners slumped amid lower prices for the steel-making ingredient. The broad Asia selloff also saw Japan stocks snap their eight-day winning run.

In Fx, the dollar slipped after a three-day gain, the JPY and GBP topped the G-10 leaderboard, while EUR holds within Wednesday’s range ahead of today’s ECB meeting. The Bloomberg Dollar Spot Index inched lower and the greenback fell against most of its Group-of-10 peers even as many currencies traded in tight ranges; the Treasury curve bull- flattened modestly. The yen was the top performer among G-10 peers amid haven demand. The euro came off yesterday’s one-week low while Bunds and Italian bonds were little changed before the ECB’s meeting; the pound advanced to a day-high in the European session. 

In rates, Treasuries held small gains from intermediate sector to long-end of the curve with S&P 500 following declines in FTSE 100 and Euro Stoxx 50. Yields richer by ~1bp across long-end of the curve, flattening 2s10s, 5s30s spreads slightly; 10-year yields around 1.33%, outperforming gilts by almost 3bp. Curve and outright concession have faded ahead of 30-year bond reopening during U.S. afternoon, focal point of U.S. session after ECB policy decision at 7:45am ET.  The weekly US auction cycle concludes with $24b 30-year bond sale at 1pm ET; 3- and 10-year auctions drew strong demand. WI 30-year yield at 1.947% is below auction stops since February and ~9bp richer than last month’s, which tailed the WI by 1bp. Peripheral spreads tighten a touch. Gilts bear flatten with the short end cheaper by ~2bps

In commodities, crude futures were little changed, maintaining Asia’s narrow range. WTI drifts just above $69, Brent near $72.60. Spot gold puts in a ~$5 move to the upside to trade near $1,794/oz. Base metals are well bid with LME nickel and tin outperforming. LME copper reverses Wednesday’s drop, adding 1.4%. Bitcoin fluctuated between gains and losses, trading around $46,000.

Looking at the day ahead now, and the main highlight will be the ECB meeting and President Lagarde’s subsequent press conference. Other central bank speakers include the Fed’s Daly, Evans, Bowman, Williams, Kaplan, Kashkari and Rosengren, and Bank of Canada Governor Macklem. In addition, data releases include the weekly initial jobless claims from the US.

Market Snapshot

  • S&P 500 futures down 0.3% to 4,500.75
  • MXAP down 1.0% to 204.62
  • MXAPJ down 1.3% to 662.15
  • Nikkei down 0.6% to 30,008.19
  • Topix down 0.7% to 2,064.93
  • Hang Seng Index down 2.3% to 25,716.00
  • Shanghai Composite up 0.5% to 3,693.13
  • Sensex little changed at 58,202.28
  • Australia S&P/ASX 200 down 1.9% to 7,369.53
  • Kospi down 1.5% to 3,114.70
  • STOXX Europe 600 down 0.5% to 465.53
  • German 10Y yield down 0.07 bps to -0.331%
  • Euro up 0.1% to $1.1829
  • Brent Futures down 0.1% to $72.51/bbl
  • Gold spot up 0.3% to $1,793.85
  • U.S. Dollar Index little changed at 92.59

Top Overnight News from Bloomberg

 

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stock markets were mostly negative as the downbeat mood rolled over from the US and Europe amid lingering global growth concerns, recent Fed taper rhetoric and China's ongoing regulatory crackdown. ASX 200 (-1.9%) declined beneath the 7,500 level and was heavily pressured by the losses in mining names, with sentiment also clouded by the rampant COVID-19 infection rates and despite the announcement by NSW Premier Berejiklian of the recovery road map whereby restrictions will be relaxed when 70% of adults are fully vaccinated but with some parts of regional New South Wales are to end lockdowns on Saturday. Nikkei 225 (-0.6%) was subdued amid currency headwinds and with Japan confirming plans to seek an extension of the state of emergency for Tokyo and other areas through to at least month-end although other reports suggested November was being considered for the easing virus restrictions. Hang Seng (-2.3%) and Shanghai Comp. (+0.5%) traded mixed with notable losses in tech names including Tencent after the government and cyberspace regulator summoned gaming companies to instruct them to implement measures against gaming and entertainment, as well as warned of severe punishment for those not implementing regulations. China also reiterated it is to crackdown on illegal behaviour in the ride-hailing industry and banned private tutors from offering courses through online platforms, while debt concerns surrounding Evergrande and mixed inflation data that showed softer than expected consumer prices but firmer factory gate prices to suggest an uneven recovery, further added to the cautious mood. Finally, 10yr JGBs were steady with only minimal gains despite the mostly negative risk tone across the region and amid mixed results at the 5yr JGB auction in which a higher b/c was counterbalanced by lower accepted prices.

Top Asian News

  • Kim Oversees First Military Parade Since Biden Became President
  • Alibaba Sex Crime Suspect’s Release Shows China #MeToo Woes
  • Corn Hits Seven-Month Low as Traders Count Down to Key Crop Data
  • Solar Startup Born in Garage Is Beating China to Cheaper Panels

Eurozone bourses have rebounded off worst levels on ECB day but remain softer overall (Euro Stoxx 50 -0.5%; Stoxx 600 -0.4%) after experiencing pronounced downside at the cash open. The UK’s FTSE has failed to stage a rebound of a similar degree amid Sterling dynamics, and with mixed messaging out of the BoE regarding the conditions for a rate hike – which at face value could be perceived with a hawkish tilt – FTSE 100 futures tested 7k to the downside. US equity futures, meanwhile, trade softer across the board but in tighter ranges and off earlier lows after early weakness seeped from Europe – with the more cyclically-tailored RTY (-0.5%) narrowly lagging its ES (-0.3%), NQ (-0.3%) and YM (-0.3%) counterparts. There has been little in terms of fresh fundamental drivers behind the rebound in EZ cash/futures and US equity futures. However, the waters were choppy in early trade and in the run-up to the ECB (full preview available in the Newsquawk Research Suite), whilst participants also eye the weekly US jobless claims alongside a plethora of Fed speakers. Sectors in Europe are predominately in the red with clear underperformance experience in the Travel & Leisure sector, with losses led by easyJet (-10.8%), who announced a rights issue at a discount in a bid to raise USD 1.7bln. Furthermore, the airliner also announced that the Board recently received a prelim takeover approach (speculated to be Wizz Air), which was evaluated and then unanimously rejected. The bidder has since confirmed it is no longer considering an offer for the Co. Back to sectors, Oil & Gas and Retail also reside towards the bottom of the bunch, whilst Real Estate, Autos & Parts post the shallowest losses. In terms of individual movers, Morrisons (+0.2%) is cushioned after topping H1 revenue forecasts, whilst sources via UK press suggested a bidding war for the Co. could take the final offer above the highest current bid of GBP 7bln. Elsewhere, RWE (+1.5%) is bolstered amid reports. that activist ENKRAFT bought over 500k shares of the Co. and is calling for the Co. to divest its brown coal assets. Finally, Sanofi (-1.8%) holds onto losses as its phase 3 PEGASUS trial evaluating rilzabrutinib did not meet its primary or key secondary endpoints.

Top European News

  • Young U.K. Staff Have Forgotten How to Do Work Chat
  • 888 Holdings Shares Slip on New Equity to Fund William Hill Deal
  • Morrison Says U.K. Food Industry Faces More Price Pressure
  • Russian Inflation at Five-Year Peak Boosts Chances for Rate Hike

In FX, the Buck is waning after reaching new recovery highs on Wednesday and perhaps overextending its retracement when setting fresh m-t-d and/or multi-week peaks. In index terms, the DXY has slipped back into a narrower 92.762-528 range compared to yesterday’s 92.864-472 extremes, and the yield backdrop is less supportive in wake of another strong 10 year T-note auction, while the latest Fed Beige Book does little to enhance the prospects for tapering at the September FOMC as growth moderated last month, largely due to Delta-related factors. However, the Greenback and markets in general get more jobs data to assess substantial progress via claims, plus a raft of Fed speakers flanking the final leg of refunding in the form of Usd 24 bn long bonds.

  • JPY/GBP/NZD/CHF/AUD - It’s a close call, but the Yen is just outperforming a group of five majors and gleaning a bit more from the softer/flatter US Treasury dynamic allied to still suppressed levels of overall risk appetite. Hence, Usd/Jpy is retesting support and underlying bids sub-110.00, while Sterling is probing 1.3800 and rebounding further from lows under 0.8600 vs the Euro in response to BoE Governor Bailey’s hawkish MPC rate revelations in front of the TSC. Elsewhere, the Kiwi is trying to form a base around 0.7100, but gaining momentum against the Aussie as the Aud/Nzd cross inches nearer 1.0350 compared to 1.0450+ at one stage in the immediate aftermath of the RBA, and Aud/Usd lags Nzd/Usd between 0.7383-47 parameters. Meanwhile, the Franc has clawed back some ground conceded following verbal intervention from SNB’s Zurbruegg, with Usd/Chf back beneath 0.9200 and Eur/Chf towards the bottom of a 1.0870-97 band.
  • EUR/CAD - The Euro is holding above 1.1800 into the ECB and awaiting direction from the GC with all eyes on PEPP developments amidst very diverse opinions regarding the pace of purchases in Q4 and what happens when the emergency QE envelope is sealed at the end of March 2022 - check out the Research Suite for a full preview of the event. Note, options pricing has ticked up again for Eur/Usd, to 47 pips, and expiries are stacked mostly to the topside, bar 1 bn at the 1.1750 strike that may come into play on a very dovish outturn - see 7.27BST post on the Headline Feed for details and other G10 pairings that have hefty option expiry interest rolling off at the NY cut today, including Aud/Usd and Usd/Jpy. Back to Central Bank impulses, the Loonie has regrouped after the BoC and is pivoting 1.2700 ahead of Governor Macklem’s post-policy meeting speech and Canadian jobs data on Friday.
  • SCANDI/EM - The Nok is straddling 10.3000 against the Eur, as disappointing Norwegian monthly mainland GDP growth offsets some traction derived from the firm line in Brent beyond Usd 72/brl, while the Cny and Cnh are taking mixed Chinese inflation largely in stride along with latest Chinese efforts to crack the whip on tech and keep a lid on commodity prices.

In commodities, WTI and Brent front-month futures are choppy and caged in tight ranges, albeit the benchmarks came off best and worst levels in tandem with stocks. WTI October tested USD 69/bbl (vs high USD 69.55/bbl) while Brent November briefly dipped under USD 72.50/bbl (vs high 72.94/bbl). News flow for the complex has remained light as all eyes turn to the ECB and Fed commentary slated for the rest of the week. In terms of fundamentals, crude production in the Gulf of Mexico is slowly coming back online – but still, some 77% from GoM production remains shuttered (vs prev. 79%), according to the BSEE. Aside from that, supply updates have been minimal post-OPEC+, with attention in the East now turning to any developments on the Iranian nuclear deal. On the demand side, the COVID situation in APAC remains a concern, and Japan confirmed the extension of the Tokyo State of Emergency, whilst the latest EIA STEO cut its 2021 world oil demand forecast by 370k BPD to 4.96mln BPD Y/Y increase but raised forecast for 2022 world oil demand growth by 10,000 BPD to 3.63mln BPD Y/Y increase. Note, OPEC+ last week revised its 2022 oil demand growth up to 4.2mln BPD (prev. 3.28mln BPD), according to sources. In terms of data, the delayed Private Inventory report yesterday was largely bearish, but prices were unfazed. As a reminder, the DoEs today will be released at 16:00BST/11:00EDT. Over to metals, spot gold and silver were trading within narrow bands overnight and throughout the first half of the European morning before the softening Dollar provided prices with a mild lift. From a technical standpoint, the yellow metal sees its 21 DMA (1,794,85/oz) and 50 DMA (1,797.85/oz) in proximity. In terms of industrial metals, LME metals are firmer across the board with nickel and copper outpacing, with some tailwinds felt by the receding Buck. Aluminium hit a fresh 13yr peak amid the ongoing supply woes emanating from the coup in Guinea. Conversely, Dalian iron ore futures saw renewed weakness overnight – with traders citing the dampened demand from steel mills after China lowered its steel output target last month.

US Event Calendar

  • 8:30am: Aug. Continuing Claims, est. 2.73m, prior 2.75m
  • 8:30am: Sept. Initial Jobless Claims, est. 335,000, prior 340,000
  • 9:45am: Sept. Langer Consumer Comfort, prior 58.2

DB's Jim Reid concludes the overnight wrap

If anyone has directions handy for DB’s main London building then I’d appreciate them ASAP as this morning I’m venturing back into the office for the first time in 18 months. I’m assuming I’ll find my way as I expect a ticker tape parade and a red carpet. Remembering what floor I work on will be the next challenge. At least now when I ask one of my team for a chat I’m unlikely to get “go away I’m too busy to talk” as I do at home. It will be nice to assert my authority again so apologies to my team today.

A final reminder that our latest monthly survey ends today. All responses gratefully received here. There’s a few themes but I’d be especially interested in your latest WFH thoughts and plans in a month where more people are getting back into the office even if the steady state won’t be here for a few months due to delta. The survey asks how many days you’ll likely to work from home after covid has gone. I get the sense that there’s been a push from many firms to get more people back into offices (post covid) since then so it’ll be interesting to see if this appears in the data. It may not or there may be an upcoming clash between workers and employees.

For those interested in the future of work Marion Laboure in my team put out a piece earlier this week (link here) looking at a part of this. It argues that cities will come roaring back. We will see.

Markets had another risk-off session yesterday as investors cast increasing doubt on the sustainability of current valuations. Upcoming central bank meetings (including today’s ECB decision) have added to these jitters, given the prospect that monetary stimulus might start to be withdrawn.

In light of this, global equities lost ground for a second day running, with investors instead moving into safe havens such as sovereign bonds and the US Dollar. By the close of trade, both the S&P 500 (-0.13%) and Europe’s STOXX 600 (-1.06%) had fallen back, thanks to an underperformance among cyclicals on both sides of the Atlantic. It was the third straight daily loss for the S&P, the longest losing streak since mid-July, but this still only amounts to a -0.50% pullback. Consumer durables (-1.67%) and energy (-1.30%) were among the largest laggards, while in Europe autos (-2.23%) and industrial goods (-1.66%) underperformed. In the US, both the small-cap Russell 2000 (-1.14%) and the FANG+ Index (-1.19%) of megacap tech stocks also saw relatively large declines. The former has remained range bound since recording it’s all-time high back in March, while the latter just closed at record highs on Tuesday after recently breaking out of its own 6-month trading range.

Looking ahead though, today’s main highlight will come from the ECB policy decision at 12:45 London time, where investors will be focused on what the Governing Council will decide about the pace of purchases under the Pandemic Emergency Purchase Programme. Previously, investors were much more focused on when the Fed would begin to taper, but comments from ECB Chief Economist Lane that didn’t rule out a move in September, along with a rise in inflation to +3.0% in August (the highest in almost a decade), have brought the decision today into focus. Our European economists are expecting that they will announce a reduction in the pace today, thinking it’s slightly more likely to happen now than in December, but there is still a risk that it could be stalled until then. They think that they’ll drop the word “significantly” from the guidance on the pace of PEPP purchases, and are also expecting that the ECB will raise their staff inflation forecasts relative to the last round in June.

With all that to look forward to, sovereign bonds in Europe were mostly steady yesterday, with yields moving just slightly lower at the long end of the curve. By the close of trade, yields on 10yr bunds (-0.1bps), OATs (-0.6bps) and BTPs (-0.1bps) had all seen modest declines, though that came in spite of a notable rise in inflation expectations. Indeed, the 5y5y forward inflation swap for the Euro Area was up +0.9bps to 1.75% yesterday, just short of its highest level in over 3 years, which was recorded earlier this week. Meanwhile, the 10yr German breakeven was up +1.2bps to 1.585%, its highest level since 2013. Over in the US, 10yr Treasuries saw a -3.6bps decline in yields to 1.338%, though as in Europe that came in spite of a rise in breakevens (+1.4bps), as 10yr real yields (-4.8bps) moved back below the -1% mark.

One of the key headlines overnight has come from the WSJ as it reported that a split in the Democrat camp is deepening over current Fed Chair Jerome Powell’s reappointment. The report added that progressive Democrats are pushing to replace him even though he has firm support elsewhere in the party. Earlier reports had indicated that we will likely hear from President Biden in the current week on the (re)appointment. We will see if this battle has slowed anything down.

Risk appetite has continued to remain weak overnight in Asia with the Nikkei (-0.82%), Hang Seng (-1.60%), CSI (-0.61%), Shenzhen Comp (-0.45%) and Kospi (-1.42%) all losing ground. Futures on the S&P 500 are also down -0.33% while those on the Stoxx 50 are -0.40%. In terms of overnight data releases, China’s August CPI printed at +0.8% yoy (vs. +1.0% yoy expected) while PPI came in at +9.5% yoy (vs. +9.0% yoy expected). So a decent discrepancy.

One asset class that put in a strong performance yesterday were commodities, with Brent Crude (+1.27%) and WTI (+1.39%) the highlight. We also saw natural gas prices in New York (+7.57%) climb to a 7-year high in light of supply concerns ahead of the winter, and aluminium prices rose (+1.4%) to their highest level since 2008 as political unrest in Guinea continued to coincide with rising global demand.

Elsewhere yesterday, we heard a bit more on the US debt ceiling, which is a potential issue coming up soon on the horizon, as Treasury Secretary Yellen said in a letter to Congress that “the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October.” So not long after government funding also runs out on September 30. This comes as Congress works to get the majority of the Biden Administration’s economic policy passed by the end of the month. Speaker Pelosi has promised a vote on the bipartisan infrastructure package by September 27 and has said repeatedly that she wants to pass the USD 3.5 trillion budget resolution that encapsulates the rest of President Biden’s agenda along with that package. While some moderates have balked at the price tag, Pelosi yesterday seemed open to negotiating, saying “I don’t know what the number will be… we will not go beyond ($3.5 trillion).” Her statement comes amidst Axios reporting yesterday that Democrat holdout Senator Joe Manchin has indicated to the White House and congressional leaders that he has specific policy concerns with President Biden's $3.5 tn spending plan and he'll support as little as $1tn of it. The report went on to add that at most he is open to supporting $1.5tn.

Meanwhile on the German election, a fresh poll from Allensbach yesterday pointed to a somewhat tighter race than other recent polls. That had the centre-left SPD on 27%, just 2 points ahead of Chancellor Merkel’s CDU/CSU bloc on 25%, while the Greens were much further behind on 15.5%. In addition, unlike most other polls recently, it still had the two major parties winning a majority of the votes between them.

On the data side, the main release yesterday was the US job openings for July, which rose by more than expected to a record 10.934m (vs. 10.049m expected), and just goes to illustrate the supply constraints firms are facing as the economy reopens from the pandemic. Job vacancies outnumbered hires by 4.3 million, the most since 2000 – when the data series began. In fact there were around 2 million more openings than people unemployed. This never happens so a remarkable US labour market at the moment and one only constrained by supply. Meanwhile the quits rate, which measures the number of people who voluntarily quit their job, and is often a good gauge of how much relative power workers have over their employees, remained at 2.7% - near the record high.

To the day ahead now, and the main highlight will be the ECB meeting and President Lagarde’s subsequent press conference. Other central bank speakers include the Fed’s Daly, Evans, Bowman, Williams, Kaplan, Kashkari and Rosengren, and Bank of Canada Governor Macklem. In addition, data releases include the weekly initial jobless claims from the US.

Tyler Durden Thu, 09/09/2021 - 07:44

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Distraction As Policy While Our Economic Rome Burns

Distraction As Policy While Our Economic Rome Burns

Authored by Matthew Piepenberg via GoldSwitzerland.com,

Desperation and distraction are masquerading as economic policy. Below we see how and why…and at what cost…

COVID: The Great..

Published

on

Distraction As Policy While Our Economic Rome Burns

Authored by Matthew Piepenberg via GoldSwitzerland.com,

Desperation and distraction are masquerading as economic policy. Below we see how and why...and at what cost...

COVID: The Great Economic and Political Hall-Pass

If every time I stole a cookie from the jar in front of my mom (age 8), or drove dad’s car (sometimes into a tree) without permission (age 16), failed a dorm-room inspection (age 17), broke a lawnmower for driving over a fence post (each year) or forgot a key anniversary (eh-hmm), it would have been so convenient to have a universal “hall pass” to excuse what is/was otherwise just plain stupid behavior.

Luckily for the grown children running our global financial system into the ground, the COVID pandemic is becoming precisely that: “A global hall pass for excusing decades of stupid.”

As we’ve written many times, inexcusably high debt levels, tanking growth data, struggling work force figures, embarrassing wealth disparity and insider market rigging between Wall Street and DC was well in play long before COVID made the headlines.

But now, the architects of such “pre-COVID stupid” have the current COVID narrative to justify and excuse even, well… more stupid.

The Latest Jobs Report “Explained” …

Take, for example, the latest job reports data from those DC-based creative writers at that comic-book publication otherwise known as the Bureau of Labor Statistics (BLS).

Known for years on Wall Street as mathematical magicians capable of turning 12% inflation into a 2% CPI lie, that same BLS is operating yet again to fib away the latest (and otherwise telling) jobs data.

The September jobs report was the second consecutive and disappointing report from the BLS, which they were quick to blame on “pandemic-related staffing fluctuations.”

Hmmm. That’s a nice phrase, no? “Pandemic-related staffing fluctuations.”

But the real description boils down to something more PRAVDA-like under the new Biden Vaccine Mandate, namely: “Obey or we take your job away.”

Needless to say, not everyone is obeying.

Since 2020, employment in local government education is down by 310,000; in state government education, employment is down by 194,000 jobs, and in private education the numbers are down by 172,000.

Ouch.

Why such “staffing fluctuations”?

The answer is simple: Many educated folks in the education sector don’t like being mandated to inject a vaccine into their bodies which by all reports from vaccinated infection rates, is no vaccine at all, but a debatable form of treatment at best.

Thankfully for all of us, I’m not interested in debating the hard vaccine data here, as folks like me should not be proffering unwanted medical expertise, which I clearly lack.

No one, myself included, really knows everything about mutating virology, but I’d wager to say that many of us are more mathematically dubious than Fauci is medically honest…

Jefferson (and History) Ignored

For followers of American history and markets, however, certain ideals and facts are easier to track despite distraction-as-policy tactics.

We are reminded, for example, of how passionately Thomas Jefferson warned us circa 1776 that a private central bank would eventually destroy our nation, and that only an educated population could save it.

Sadly, the new President is taking the inverse approach: Firing teachers and propping bankers.

Fast-forward some 240+ years from our founding fathers to our semi-conscious Biden, and we discover a nation wherein a private central bank effectively finances our national debt while the teachers, students and institutions charged with making citizens wiser, educated and free now find themselves locked out of their offices, classrooms and lecterns.

Seems a little upside down, no?

Red or blue, most of us can agree than nothing coming out of the White House in recent memory remotely resembles the vision or freedom-driven intellect of founding fathers like Jefferson, despite his known flaws.

Instead, we have seen red and blue administrations whose grasp on coherency, let alone math, history, economics or even Afghan geography is questionable at best.

Biden’s Response

And what does Biden (or his “advisors”) have to say about the recent and scary numbers within a gutted and “locked-out” educational labor force?

Well, you’ll have to see it to believe it..

Really? Really? Really?

That’s right folks.

The President of the United States, home to the world’s reserve currency and former beacon of global freedom, is telling Americans not to worry about the slow death of genuinely informed dissent (as well as educational access and jobs) or the attempted popularizing of otherwise tyrannical mandates, but to focus instead on the vaccine rates at United Airlines?

Yes. Really.

The leader of the free world is boastfully telling us that the “bigger story” is a fully vaccinated United Airlines (who were forced to choose between a jab or job), so why worry about the problems in that silly ol’ educational sector or outdated Bill of Rights?

Playing with Minnows While Ignoring Whales

Where ever one stands on the understandably divisive vaccine issue, how can anyone compare a private airline’s vaccine rate to a national education, civil liberty and employment crisis?

Why are politicians, Davos dragons, statisticians, media bobble-heads and central bankers focusing our/your attention more on a virus with a case fatality rate of less than 0.5% than they are on openly addressing whale-sized issues like unsustainable debt, rising inflation, embarrassing labor inequality, a dying currency or even more declining GDP?

Deliberate and Desperate Distraction as Policy

Well, history tells us why.

As anyone not banned from a classroom knows, the history of desperate leaders seeking to distract, censor and control the masses in times of a self-inflicted and debt-induced cycle of internal economic rot is long and distinguished.

As Biden doubles down on the bad (yet deliberately distracting) hand of what was hoped to be an optically humanitarian policy of vaccine mandates, the masses are getting restless as well as fired…

Solution?

Criminalize the non-consenting as anti-vaccine, anti-science or anti-American “flat-earthers” while denying open discussion on such otherwise relevant topics as basic math, constitutional law, calm science or individual rights…

Meanwhile, those who won’t tow Biden’s increasingly incoherent mandate (or Don Lemmon’s always coherent ignorance) are losing jobs and/or forced to prioritize (in a Jeffersonian way) individual liberty over financial security.

Ben Franklin, of course, said those who surrender liberties for security deserve neither.

In such a polarized backdrop, everyone, pro or anti-vaccine, loses.

Informed, open and calm debate has been replaced by a contradictory, censored, sanctimonious and hysterical autocracy from prompt-readers to political puppets.

So much for leading the free world… Let me remind Biden to consider the words of another founding father, Thomas Paine:

“I have always strenuously supported the right of every man to his own opinion, however different that opinion might be to mine. He who denies to another this right, makes a slave of himself to his present opinion, because he precludes himself the right of changing it.”

As someone who studied and practiced constitutional law, worked within a rigged Wall Street and read nearly every book I could find on America’s founding fathers, I can say without hyperbole that I no longer recognize the country (or values) of my birth nation.

As Franklin also noted, “All democracies eventually die; usually by suicide.”

Hmmm.

But let’s get off my high-horse and back to those job reports…

Conviction vs. Employment

As Bloomberg recently noted, the result of these “pandemic-related staffing fluctuations” is a bit alarming.

The following critical industries are witnessing the following job-loss percentages: Nursing and Residential Care (-1.26%); Local Government Education (-1.83%); Community Care for the Elderly (-2.20%) and lodging (-2.25%).

But thank goodness that despite a deliberate weaning of nurses, teachers and elderly care experts, United Airlines is nearly fully vaccinated and our Motion Picture Industry (universally known for its astounding political and financial wisdom) is seeing a +4.21% job increase.

Awe, but as Johny Mellencamp would say, “Aint that America?”

Now instead of more employed and free-thinking nurses, teachers and students allowed to gather, speak and think freely at their own campus or clinic, we can be glad that jobs in Hollywood, like DC, are growing to keep us living on more fantasy rather than actual, informed and hard-earned knowledge.

Oh, and the Economy…

But rather than just rant otherwise rhetorical sarcasm, let’s get back to those other barbaric (and soon-to-be empty) old-school disciplines like economics…

Biden’s mandates are more than just evidence of distraction as policy and constitutional interpretation/usurpation, they have direct impacts on our financial lives outside of the deliberately exaggerated vaccine debacle/debate.

Let’s go down the list of what economics taught us years ago, when we were allowed to enter a classroom:

  1. Stagflation Ahead.

As more and more folks are locked out of work, the entitlement costs for these “un-American” free-thinkers will rise, placing greater inflationary pressures upon a deliberately constrained rather than open economy.

Rising inflation + slowing economic activity = stagflation.

Prepare for this, as that’s what’s coming.

Inflation, by the way, is an invisible tax on those who can afford it the least. Thanks again Powell et al for shafting the middle class…

  1. A Divided States of America

A country which once revered open rather than censored debate, investigative rather than complicit journalism, and respected rather than polarized differences of opinion, is becoming increasingly factionalized, divided and angry.

Jab or no jab, I fully respect both views. Can’t we all do the same without a “mandate”?

Like Thomas Paine, I hope so, because as Thomas Jefferson warned, we face far greater economic and political threats ahead than COVID.

Rather than accountability, transparency and cooperation, leadership today is defined by fantasy and magic, from magical money created at the Fed to magical employment and CPI data downplayed at the BLS.

Such left or right fantasy-as-policy is as old as history—it’s darker side, that is. Just ask Lenin, Castro, Nixon or Greenspan.

Whenever backed into a debt corner of their own design, leaders employ a familiar combo of boogeyman and salvation narratives to divert the masses away from the slow-drip erosion of their personal liberties, dying currencies and debt-driven stagnation.

This distraction-as-policy is happening right now. The rise of the COVID narrative in 2020 is more than a coincidence. It’s a conveniently exploited opportunity for political and financial opportunists.

  1. More Centralized Controls and Fake Markets

With debt levels far beyond the Pale of productivity levels (i.e., embarrassing debt to GDP ratios), the U.S. and other developed economies are mathematically and factually unable to ever grow their way out of the debt hole they have been digging us into for years.

Period. Full stop.

If I know this, and if you know this, well…they certainly know this too in DC.

The only difference is that these policy makers, like most kids caught with a hand in the cookie jar, are incapable of admitting fault.

Instead, today’s “leadership” can blame their economic and policy failures (and self-preservation rather than “service” instincts) on something else—i.e., “COVID did it.”

But as we’ve voiced elsewhere, the debt time bomb, growth declines, social unrest, wealth disparity and failing political credibilities in play today were already a major problem BEFORE COVID.

Now, as then, the empirical data objectively confirms that tanking manufacturing data, jobs growth, economic productivity, broken supply chains, scary transport numbers and political mistrust can never service the over $28.5T in public debt sitting on Uncle Sam’s bar-tab.

As a natural result, we can therefore expect far more “accommodation” (i.e., monetary expansion) from the Fed, and far more “Fiscal Stimulus” (i.e., deficit spending) from our comical legislature ahead.

Stated otherwise: Get ready for more real debt, fake money, centralized controls and hidden wealth destruction.

Zombie Stocks, Bonds and Bankers: Too Big to Fail 2.0

Sadly, one of the only forms of income which Uncle Sam enjoys today is the capital gains receipts from a bloated, rigged and artificially Fed-supported stock market.

This means we can anticipate more “stimulus” for a zombie, crack-up-boomed market well past its natural expiration date.

The same is true of for government IOU’s.  No one wants our bonds. 2020 saw $500B in foreign outflows rather than inflows for US Treasuries.

So, who will pay Uncle Sam’s bar tab now?

Easy:  Uncle Fed at the Eccles Building down the avenue from a Treasury Department now led by a former Fed Chairwoman.

One really can’t make this crazy up. It’s all that real, that rigged and that true.

The U.S. debt crisis is now being “solved” by a circular loop of a Wall Street and a White House children tossing their hot potatoes of bad debt (MBS and sovereign) around until they are bought with money created out of thin air by the Fed.

And yet despite such insider support, rigged markets and “accommodated” securities, even the rising tax receipts from these bloated markets are not enough to cover the interest expense on Uncle Sam’s bar tab.

In short, US Treasury bonds and stocks are openly supported Frankenstein-assets kept alive by a central bank and White House cabal (sorry, Mr. Jefferson…) who blame every problem (and justify every expenditure) on a virus rather than confess to the cancerous reality of over 20+ years of their open and obvious mismanagement of a rigged banking and distorted financial system.

But rather than account for such sins, we can expect a bigger bail-out rather than an honest confession…

In 2008, for example, the response from DC and NYC to bankers gone mad was to declare bankrupt banks as “Too Big to Fail.”

Fast-forward some 13 years later and that same toxic duo of bankers and politicos have now effectively telegraphed that bankrupt government bonds and private stocks are also “too big to fail.”

That ought to anger an informed population. But instead, we are fighting about masks, vaccine shaming and Prince Harry’s sensitive upbringing.

So far, the distraction-as-policy technique seems to be working in favor of the foxes guarding our financial henhouse.

Signal More Currency-Debasing “Miracle Solutions”

Which brings us right back to a harsh but increasingly undeniable yet ironic reality.

If objectively broken bonds, stocks and financial regimes are too big to fail, then the only way to “save” them is with more mouse-click-created currencies which are too debased to succeed.

As precious metal and other long-term, real-asset investors long ago understood, currency expansion is just another name for currency debasement.

In other words, eventually, all that “system saving” new money simply drowns the system it was allegedly designed to save in ever more debased dollars.

Again, it’s just that tragic and just that simple.

Yes: More monetary and debt expansion can buy time and rising markets.

But those markets are measured in currencies which time has equally taught us lose their value with each passing second.

And the only ones paying for that time are you and I–with dollars, euros, yen and pesos whose purchasing power and inherent value are tanking faster than the credibility of the folks who brought us to this historical and debt-driven turning point.

Stated bluntly: The financial and political leadership of the last 20+ years has placed the global financial system into a debt corner for which there is no exit other than deliberate inflation (and hence currency debasement).

This foreseeable disaster, however, is now conveniently blamed on a current pandemic rather than a grotesque history of equally grotesque mismanagement by policy markets who have confused debt with prosperity and double-speak with accountability.

Wouldn’t it be nice if such economic topics were making at least as many headlines as the latest infection rates?

Meanwhile, the mainstream media pursues plays chess with context-empty headlines, bogus job data and ignored debt bombs as our economic Rome (and currencies) burns silently around us all.

Tyler Durden Sat, 10/16/2021 - 10:30

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Bitcoin Education For Indonesia

The Indonesia Bitcoin Conference is a chance to educate Indonesians about a better savings technology.

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The Indonesia Bitcoin Conference is a chance to educate Indonesians about a better savings technology.

Bitcoin represents a new and open internet standard for hard money. Nowadays, with the increasing awareness about bitcoin’s superior properties, it is increasingly being adopted by global financial institutions as pristine collateral, a longer-term store of value, and unstoppable money. We believe that bitcoin was not formed in a vacuum. Like any other technology, bitcoin was invented to fix problems; in this case, the global economic problem.

Indonesia represents the fourth-largest population in the world, with 60% of the citizens owning smartphones. As a country that has experienced hyperinflations in the past, it is crucial for Indonesians to understand what bitcoin stands for. Most Indonesians at the moment see and treat bitcoin as a get-rich-quick scheme. Due to lack of information and comprehensive education in Bahasa Indonesia, many have fallen into scams that are associated with the words bitcoin, blockchain, ”crypto” and mining.

Indonesians wanting to invest have also struggled with mismanagement and corruption. Over the years, we’ve seen cases of fund managers and property developers (similar to the crypto space) who were unable to deliver on their promises and failed to return their customers’ money. This has happened both in the private sector and also in government. News of these cases can easily be found online, both in Indonesian and in English. Even some of Indonesia’s Covid-19 relief funds were embezzled. For these reasons, Indonesians desperately need savings that not only perform, but are also trustworthy.

For years, Indonesians have preferred savings in gold and property; now bitcoin, a better alternative, has dawned. Since Covid-19, all of the other markets have experienced stagnation. The latest government bond SR015 yields 5.1%. The economy was declared to be in a recession since Q3 2020, and is currently trying to climb out of the recession. In the midst of this, bitcoin continues to gain traction, with an approximate 90% gain YTD (October 2021) as an indicator of its dominating performance.

We believe the majority of Indonesians will leapfrog from gold and property markets straight into digital assets (bypassing bonds and securities). This would be similar to how most Indonesians bypassed the use of PCs and most adopted Android smartphones. The government data shows that the number of people in the digital assets space already reached 6.5 million people at the end of May 2021, way more than the 5.4 million people in the stock market. 20 years of user growth in the stock market was easily surpassed by 1 year of user growth in the digital assets space.

Number of smartphone users in Indonesia from 2017 to 2020 with forecasts until 2026. Source: Statista

Indonesia Bitcoin Conference: A Leap For Better Education

There are many challenges for bitcoin adoption as the best savings technology in the country. It is not easy to understand Bitcoin, and requires a multidisciplinary approach. The Indonesia Bitcoin Conference is a way for Indonesians to get proper information and education about Bitcoin. This conference features speakers from Indonesia and abroad such as Saifedean Ammous, Robert Breedlove and Danny Taniwan.

With topics such as the future of crypto exchanges, mining, retiring with bitcoin, Lightning Network, and bitcoin through the islamic lense, we hope to change the mindset of Indonesians about bitcoin.

The Indonesia Bitcoin Conference will happen on October 31, 2021, the same date as when Satoshi Nakamoto published his Bitcoin whitepaper as the beginning of the monetary revolution.

Visit the conference website for ticketing information: http://indonesiabitcoinconference.com

This is a guest post by Konsultan BTC . Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

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Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000

Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000

One day after the S&P posted its biggest one-day surge since March, index futures extended this week’s gains, helped by a stellar bank earnings, while the latest…

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Futures Jump On Profit Optimism As Oil Tops $85; Bitcoin Nears $60,000

One day after the S&P posted its biggest one-day surge since March, index futures extended this week’s gains, helped by a stellar bank earnings, while the latest labor market data and inflation eased stagflation fears for the time being. . The 10-year Treasury yield rose and the dollar was steady. Goldman Sachs reports on Friday. At 715 a.m. ET, Dow e-minis were up 147 points, or 0.42%, S&P 500 e-minis were up 16.5 points, or 0.37%, and Nasdaq 100 e-minis were up 42.75 points, or 0.28%.

Oil futures topped $85/bbl, jumping to their highest in three years amid an energy crunch that’s stoking inflationary pressures and prices for raw materials. A gauge of six industrial metals hit a record high on the London Metal Exchange.  Energy firms including Chevron and Exxon gained about half a percent each, tracking Brent crude prices that scaled the 3 year high.

Solid earnings in the reporting season are tempering fears that rising costs and supply-chain snarls will hit corporate balance sheets and growth. At the same time, the wider debate about whether a stagflation-like backdrop looms remains unresolved.

“We don’t sign up to the stagflation narrative that is doing the rounds,” said Hugh Gimber, global strategist at the perpetually optimistic J.P. Morgan Asset Management. “The economy is being supported by robust consumer balance sheets, rebounding business investment and a healthy labor market.”

“After a choppy start to the week, equity markets appear to be leaning towards a narrative that companies can continue to grow profits, despite the combined pressures of higher energy prices and supply chain disruptions,” said Michael Hewson, chief market analyst at CMC Markets in London.

Bitcoin and the crypto sector jumped after Bloomberg reported late on Thursday that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading in a watershed moment for the cryptocurrency industry. Bitcoin traded off session highs having tested $60k during Asian hours, but will likely rise to new all time highs shortly.

Also overnight, Joe Biden signed a bill providing a short-term increase in the debt limit, averting the imminent threat of a financial calamity. But it only allows the Treasury Department to meets its financial obligations until roughly Dec. 3, so the can has been kicked for less than two months - brace for more bitter partisan battles in the coming weeks.

This week’s move into rate-sensitive FAAMG growth names looked set to continue, with their shares inching up. Moderna rose 3.0% after a U.S. FDA panel voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and high-risk people. Western Digital slipped 2.5% as Goldman Sachs downgraded the storage hardware maker’s stock to “neutral” from “buy”. Here are some of the key premarket movers on Friday morning:

  • Virgin Galactic (SPCE US) shares slump as much as 23% in U.S. premarket trading as the firm is pushing the start of commercial flights further into next year after rescheduling a test flight, disappointing investors with the unexpected delay to its space tourism business plans
  • Cryptocurrency-exposed stocks rise in U.S. premarket trading after a report that the Securities and Exchange Commission is poised to allow the first U.S. Bitcoin futures exchange-traded fund to begin trading.  Bit Digital (BTBT US) +6.7%, Riot Blockchain (RIOT US) +4.6%, Marathon Digital (MARA US) +3.6%
  • Alcoa (AA US) shares jump 5.6% in thin volumes after co. reported profits that beat the average analyst estimate and said it will be paying a dividend to its shareholders
  • Moderna (MRNA US) extends Thursday’s gains; Piper Sandler recommendation on Moderna Inc. to overweight from neutral, a day after co.’s Covid-19 booster got FDA nod for use in older, high-risk people
  • Duck Creek Technologies (DCT US) shares fell 12% in Thursday postmarket trading after the software company projected 2022 revenue that fell short of the average analyst estimate
  • 23andMe Holdings (ME US) soared 14% in Thursday postmarket trading after EMJ Capital founder Eric Jackson called the genetics testing company “the next Roku” on CNBC
  • Corsair Gaming (CRSR US) shares fell 3.7% in post-market trading after it cut its net revenue forecast for the full year

Early on Friday, China's PBOC broke its silence on Evergrande, saying risks to the financial system are controllable and unlikely to spread. Authorities and local governments are resolving the situation, central bank official Zou Lan said. The bank has asked lenders to keep credit to the real estate sector stable and orderly.

In Europe, gains for banks, travel companies and carmakers outweighed losses for utilities and telecommunications industries, pushing the Stoxx Europe 600 Index up 0.3%. Telefonica fell 3.3%, the most in more than four months, after Barclays cut the Spanish company to underweight. Temenos and Pearson both slumped more than 10% after their business updates disappointed investors. Here are some of the biggest European movers today:

  • Devoteam shares rise as much as 25% after its controlling shareholder, Castillon, increased its stake in the IT consulting group to 85% and launched an offer for the remaining capital.
  • QinetiQ rises as much as 5.4% following a plunge in the defense tech company’s stock on Thursday. Investec upgraded its recommendation to buy and Berenberg said the shares now look oversold.
  • Hugo Boss climbs as much as 4.4% to the highest level since September 2019 after the German apparel maker reported 3Q results that exceeded expectations. Jefferies (hold) noted the FY guidance hike also was bigger than expected.
  • Mediclinic rises as much as 7.7% to highest since May 26 after 1H results, which Morgan Stanley says showed strong underlying operating performance with “solid metrics.”
  • Temenos sinks as much as 14% after the company delivered a “mixed bag” with its 3Q results, according to Baader (sell). Weakness in Europe raises questions about the firm’s outlook for a recovery in the region, the broker said.
  • Pearson declines as much as 12%, with analysts flagging weaker trading in its U.S. higher education courseware business in its in-line results.

Earlier in the session, Asian stocks headed for their best week in more than a month amid a list of positive factors including robust U.S. earnings, strong results at Taiwan Semiconductor Manufacturing Co. and easing home-loan restrictions in China.  The MSCI Asia Pacific Index gained as much as 1.3%, pushing its advance this week to more than 1.5%, the most since the period ended Sept. 3. Technology shares provided much of the boost after chip giant TSMC announced fourth-quarter guidance that beat analysts’ expectations and said it will build a fabrication facility for specialty chips in Japan.

Shares in China rose as people familiar with the matter said the nation loosened restrictions on home loans at some of its largest banks.  Conditions are good for tech and growth shares now long-term U.S. yields have fallen following inflation data this week, Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “If data going forward are able to provide an impression that demand is strong too -- on top of a sense of relief from easing supply chain worries -- it’ll be a reason for share prices to take another leap higher.”  Asia’s benchmark equity gauge is still 10% below its record-high set in February, as analysts stay on the lookout for higher bond yields and the impact of supply-chain issues on profit margins. 

Japanese stocks rose, with the Topix halting a three-week losing streak, after Wall Street rallied on robust corporate earnings. The Topix rose 1.9% to close at 2,023.93, while the Nikkei 225 advanced 1.8% to 29,068.63. Keyence Corp. contributed the most to the Topix’s gain, increasing 3.7%. Out of 2,180 shares in the index, 1,986 rose and 155 fell, while 39 were unchanged. For the week, the Topix climbed 3.2% and the Nikkei added 3.6%. Semiconductor equipment and material makers rose after TSMC said it will build a fabrication facility for specialty chips in Japan and plans to begin production there in late 2024.  U.S. index futures held gains during Asia trading hours. The contracts climbed overnight after a report showed applications for state unemployment benefits fell last week to the lowest since March 2020.  “U.S. initial jobless claims fell sharply, and have returned to levels seen before the spread of the coronavirus,” said Nobuhiko Kuramochi, a market strategist at Mizuho Securities in Tokyo. “The fact that more people are returning to their jobs will help ease supply chain problems caused by the lack of workers.”

Australian stocks also advanced, posting a second week of gains. The S&P/ASX 200 index rose 0.7% to close at 7,362.00, with most sectors ending higher.  The benchmark added 0.6% since Monday, climbing for a second week. Miners capped their best week since July 16 with a 3% advance. Hub24 jumped on Friday after Evans & Partners upgraded the stock to positive from neutral. Pendal Group tumbled after it reported net outflows for the fourth quarter of A$2.3 billion. In New Zealand, the S&P/NZX 50 index fell 0.3% to 13,012.19

In rates, the U.S. 10-year Treasury yield rose over 3bps to 1.54%. Treasuries traded heavy across long-end of the curve into early U.S. session amid earning-driven gains for U.S. stock futures. Yields are higher by more than 3bp across long-end of the curve, 10- year by 2.8bp at about 1.54%, paring its first weekly decline since August; weekly move has been led by gilts and euro-zone bonds, also under pressure Friday, with U.K. 10-year yields higher by 3.3bp. Today's bear-steepening move pares the weekly bull-flattening trend. U.S. session features a packed economic data slate and speeches by Fed’s Bullard and Williams.  

In FX, the Bloomberg Dollar Spot Index was little changed even as the greenback weakened against most of its Group-of-10 peers; the euro hovered around $1.16 while European and U.S. yields rose, led by the long end. Norway’s krone led G-10 gains as oil jumped to $85 a barrel for the first time since late 2018 amid the global energy crunch; the currency rallied by as much as 0.6% to 8.4015 per dollar, the strongest level since June. New Zealand’s dollar advanced to a three-week high as bets on RBNZ’s tightening momentum build ahead of Monday’s inflation data; the currency is outperforming all G-10 peers this week. The yen dropped to a three-year low as rising equities in Asia damped demand for low-yielding haven assets. China’s offshore yuan advanced to its highest in four months while short-term borrowing costs eased after the central bank added enough medium-term funds into the financial system to maintain liquidity at existing levels.

In commodities, crude futures trade off best levels. WTI slips back below $82, Brent fades after testing $85. Spot gold slips back through Thursday’s lows near $1,786/oz. Base metals extend the week’s rally with LME nickel and zinc gaining over 2%.

Today's retail sales report, due at 08:30 a.m. ET, is expected to show retail sales fell in September amid continued shortages of motor vehicles and other goods. The data will come against the backdrop of climbing oil prices, labor shortages and supply chain disruptions, factors that have rattled investors and have led to recent choppiness in the market.

Looking at the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs.

Market Snapshot

  • S&P 500 futures up 0.3% to 4,443.75
  • STOXX Europe 600 up 0.4% to 467.66
  • German 10Y yield up 2.4 bps to -0.166%
  • Euro little changed at $1.1608
  • MXAP up 1.3% to 198.33
  • MXAPJ up 1.2% to 650.02
  • Nikkei up 1.8% to 29,068.63
  • Topix up 1.9% to 2,023.93
  • Hang Seng Index up 1.5% to 25,330.96
  • Shanghai Composite up 0.4% to 3,572.37
  • Sensex up 0.9% to 61,305.95
  • Australia S&P/ASX 200 up 0.7% to 7,361.98
  • Kospi up 0.9% to 3,015.06
  • Brent Futures up 1.0% to $84.83/bbl
  • Gold spot down 0.5% to $1,787.54
  • U.S. Dollar Index little changed at 93.92

Top Overnight News from Bloomberg

  • China’s central bank broke its silence on the crisis at China Evergrande Group, saying risks to the financial system stemming from the developer’s struggles are “controllable” and unlikely to spread
  • The ECB has a good track record when it comes to flexibly deploying its monetary instruments and will continue that approach even after the pandemic crisis, according to policy maker Pierre Wunsch
  • Italian Ministry of Economy and Finance says fourth issuance of BTP Futura to start on Nov. 8 until Nov. 12, according to a statement
  • The world’s largest digital currency rose about 3% to more than $59,000 on Friday -- taking this month’s rally to over 35% -- after Bloomberg News reported the U.S. Securities and Exchange Commission looks poised to allow the country’s first futures-based cryptocurrency ETF
  • Copper inventories available on the London Metal Exchange hit the lowest level since 1974, in a dramatic escalation of a squeeze on global supplies that’s sent spreads spiking and helped drive prices back above $10,000 a ton

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers including the best day for the S&P 500 since March after strong US bank earnings, encouraging data and a decline in yields spurred risk appetite. The ASX 200 (+0.7%) was positive as the tech and mining sectors continued to spearhead the advances in the index in which the former took impetus from Wall St where the softer yield environment was conducive to the outperformance in tech, although mining giant Rio Tinto was among the laggards following weaker quarterly production results. The Nikkei 225 (+1.8%) was buoyed as exporters benefitted from the JPY-risk dynamic but with Fast Retailing failing to join in on the spoils despite an 88% jump in full-year net as its profit guidance underwhelmed with just 3% growth seen for the year ahead, while Taiwan's TAIEX (+2.2%) surged with the spotlight on TSMC earnings which reached a record high amid the chip crunch and with the Co. to also build a factory in Japan that could receive JPY 500bln of support from the Japanese government. The Hang Seng (+1.5%) and Shanghai Comp. (+0.4%) were initially indecisive amid the overhang from lingering developer default concerns although found some mild support from reports that China is to relax banks' mortgage limits through the rest of 2021. Focus was also on the PBoC which announced a CNY 500bln MLF operation, although this just matched the amount maturing this month and there are mixed views regarding prospects of a looming RRR cut with ANZ Bank's senior China strategist recently suggesting the potential for a 50bps cut in RRR or targeted MLF as early as today, although a recent poll showed analysts had pushed back their calls for a RRR cut from Q4 2021 to Q1 2022. Finally, 10yr JGBs marginally pulled back from this week’s advances after hitting resistance at the 151.50 level, with demand hampered amid the firm gains in Japanese stocks and the lack of BoJ purchases in the market today.

Top Asian News

  • Hong Kong Probes Going Concern Reporting of Evergrande
  • U.S. Futures Hold Gains as Oil Hits 3-Year High: Markets Wrap
  • Toyota Cuts November Outlook by 15% on Parts Shortage, Covid
  • Yango Group Wires Repayment Fund for Onshore Bond Due Oct. 22

Bourses in Europe have held onto the modest gains seen at the cash open (Euro Stoxx 50 +0.4%; Stoxx 600 +0.3%), but the region is off its best levels with the upside momentum somewhat faded heading into the US open, and amidst a lack of fresh newsflow. US equity futures have remained in positive territory, although the latest leg lower in bonds has further capped the tech-laden NQ (+0.2%), which underperforms vs the ES (+0.3%), YM (+0.3%) and RTY (+0.7%), with traders on the lookout for another set of earnings, headlined by Goldman Sachs at 12:25BST/07:25EDT. Back to Europe, bourses see broad-based gains, whilst sectors are mostly in the green with clear underperformance experienced in defensives, with Telecoms, Utilities, Healthcare and Staples at the foot of the bunch. On the flipside, Banks reap rewards from the uptick in yields, closely followed by Travel & Leisure, Autos & Parts and Retail. Renault (+4%) drives the gains in Autos after unveiling a prototype version of the Renault Master van that will go on sale next year. Travel & Leisure is bolstered by the ongoing reopening trade with potential tailwinds heading into the Christmas period. Retail meanwhile is boosted by Hugo Boss (+1.8%) topping forecasts and upgrading its guidance.

Top European News

  • Autumn Heat May Curb European Gas Demand, Prices Next Week
  • Bollore Looking for Buyers for Africa Logistics Ops: Le Monde
  • U.K. Offers Foreign Butchers Visas After 6,000 Pigs Culled
  • Europe’s Car-Sales Crash Points to Worse Year Than Poor 2020

In FX, the Greenback was already losing momentum after a relatively tame bounce on the back of Thursday’s upbeat US initial claims data, and the index failed to sustain its recovery to retest intraday highs or remain above 94.000 on a closing basis. However, the Buck did reclaim some significant and psychological levels against G10, EM currencies and Gold that was relishing the benign yield environment and the last DXY price was marginally better than the 21 DMA from an encouraging technical standpoint. Nevertheless, the Dollar remains weaker vs most majors and in need of further impetus that may come via retail sales, NY Fed manufacturing and/or preliminary Michigan Sentiment before the spotlight switches to today’s Fed speakers featuring arch hawk Bullard and the more neutral Williams.

  • GBP/NZD/NOK - Sterling has refuelled and recharged regardless of the ongoing UK-EU rift over NI Protocol, though perhaps in part due to the fact that concessions from Brussels are believed to have been greeted with welcome surprise by some UK Ministers. Cable has reclaimed 1.3700+ status, breached the 50 DMA (at 1.3716 today) and yesterday’s best to set a marginal new w-t-d peak around 1.3739, while Eur/Gbp is edging closer to 0.8450 having clearly overcome resistance at 1.1800 in the reciprocal cross. Similarly, the Kiwi continues to derive impetus from the softer Greenback and Aud/Nzd flows as Nzd/Usd extends beyond 0.7050 and the Antipodean cross inches nearer 1.0500 from 1.0600+ highs. Elsewhere, the Norwegian Crown is aiming to add 9.7500 to its list of achievements relative to the Euro with a boost from Brent topping Usd 85/brl at one stage and a wider trade surplus.
  • CAD - The Loonie is also profiting from oil as WTI crude rebounds through Usd 82 and pulling further away from 1.5 bn option expiry interest between 1.2415-00 in the process, with Usd/Cad towards the base of 1.2337-82 parameters.
  • EUR/AUD/CHF/SEK - All narrowly mixed and rangy vs the Greenback, or Euro in the case of the latter, as Eur/Usd continues to straddle 1.1600, Aud/Usd churn on the 0.7400 handle, the Franc meander from 0.9219 to 0.9246 and Eur/Sek skirt 10.0000 having dipped below the round number briefly on Thursday.

In commodities, WTI and Brent front month futures remain on a firmer footing, aided up the overall constructive risk appetite coupled with some bullish technical developments, as WTI Nov surpassed USD 82/bbl (vs 81.39/bbl low) and Brent Dec briefly topped USD 85/bbl (vs 84.16/bbl low). There has been little in terms of fresh fundamental catalysts to drive the price action, although Russia's Gazprom Neft CEO hit the wires earlier and suggested that reserve production capacity could meet the increase in oil demand, whilst a seasonal decline in oil consumption is possible and the oil market will stabilise in the nearest future. On the Iranian JCPOA front, Iran said it is finalising steps to completing its negotiating team but they are absolutely decided to go back to Vienna discussions and conclude the negotiations, WSJ's Norman. The crude complex seems to have (for now) overlooked reports that the White House is engaged in diplomacy" with OPEC+ members regarding output. UK nat gas prices were higher as European players entered the fray, but prices have since waned off best levels after Russian Deputy PM Novak suggested that gas production in Russia is running at maximum capacity. Elsewhere, spot gold has been trundling amid yield-play despite lower despite the Buck being on the softer side of today’s range. Spot gold failed to hold onto USD 1,800/oz status yesterday and has subsequently retreated below its 200 DMA (1,794/oz) and makes its way towards the 50 DMA (1,776/oz). LME copper prices are on a firmer footing with prices back above USD 10,000/t – supported by technicals and the overall risk tone, although participants are cognizant of potential Chinese state reserves releases. Conversely, Dalian iron ore futures fell for a third straight session, with Rio Tinto also cutting its 2021 iron ore shipment forecasts due to dampened Chinese demand.

US Event Calendar

  • 8:30am: Sept. Retail Sales Advance MoM, est. -0.2%, prior 0.7%
  • 8:30am: Sept. Retail Sales Ex Auto MoM, est. 0.5%, prior 1.8%
  • 8:30am: Sept. Retail Sales Control Group, est. 0.5%, prior 2.5%
  • 8:30am: Sept. Retail Sales Ex Auto and Gas, est. 0.3%, prior 2.0%
  • 8:30am: Oct. Empire Manufacturing, est. 25.0, prior 34.3
  • 8:30am: Sept. Import Price Index MoM, est. 0.6%, prior -0.3%; YoY, est. 9.4%, prior 9.0%
  • 8:30am: Sept. Export Price Index MoM, est. 0.7%, prior 0.4%; YoY, prior 16.8%
  • 10am: Aug. Business Inventories, est. 0.6%, prior 0.5%
  • 10am: Oct. U. of Mich. 1 Yr Inflation, est. 4.7%, prior 4.6%; 5-10 Yr Inflation, prior 3.0%
  • 10am: Oct. U. of Mich. Sentiment, est. 73.1, prior 72.8
  • 10am: Oct. U. of Mich. Current Conditions, est. 81.2, prior 80.1
  • 10am: Oct. U. of Mich. Expectations, est. 69.1, prior 68.1

DB's Jim Ried concludes the overnight wrap

A few people asked me what I thought of James Bond. I can’t say without spoilers so if anyone wants my two sentence review I will cut and paste it to all who care and reply! At my age I was just impressed I sat for over three hours (including trailers) without needing a comfort break. By the time you email I will have also listened to the new Adele single which dropped at midnight so happy to include that review as well for free.

While we’re on the subject of music, risk assets feel a bit like the most famous Chumbawamba song at the moment. They get knocked down and they get up again. Come to think about it that’s like James Bond too. Yesterday was a strong day with the S&P 500 (+1.71%) moving back to within 2.2% of its all-time closing high from last month. If they can survive all that has been thrown at them of late then one wonders where they’d have been without any of it.

The strong session came about thanks to decent corporate earnings releases, a mini-collapse in real yields, positive data on US jobless claims, as well as a further fall in global Covid-19 cases that leaves them on track for an 8th consecutive weekly decline. However, inflation remained very much on investors’ radars, with a range of key commodities taking another leg higher, even as US data on producer prices was weaker than expected.

Starting with the good news, the equity strength was across the board with the S&P 500 experiencing its best daily performance since March, whilst Europe’s STOXX 600 (+1.20%) also put in solid gains. It was an incredibly broad-based move higher, with every sector group in both indices rising on the day, with a remarkable 479 gainers in the S&P 500, which is the second-highest number we’ve seen over the last 18 months. Every one of the 24 S&P 500 industry groups rose, led by cyclicals such as semiconductors (+3.12%), transportation (+2.51%) and materials (+2.43%). A positive start to the Q3 earnings season buoyed sentiment, as a number of US banks (+1.45%) reported yesterday, all of whom beat analyst estimates. In fact, of the nine S&P 500 firms to report yesterday, eight outperformed analyst expectations. Weighing in on recent macro themes, Bank of America Chief, Brian Moynihan, noted that the current bout of inflation is “clearly not temporary”, but also that he expects consumer demand to remain robust and that supply chains will have to adjust. I’m sure we’ll hear more from executives as earnings season continues today.

Alongside those earnings releases, yesterday saw much better than expected data on the US labour market, which makes a change from last week’s underwhelming jobs report that showed the slowest growth in nonfarm payrolls so far this year. In terms of the details, the weekly initial jobless claims for the week through October 9, which is one of the most timely indicators we get, fell to a post-pandemic low of 293k (vs. 320k expected). That also saw the 4-week moving average hit a post-pandemic low of 334.25k, just as the continuing claims number for the week through October 2 hit a post-pandemic low of 2.593m (vs. 2.670m expected). We should get some more data on the state of the US recovery today, including September retail sales, alongside the University of Michigan’s consumer sentiment index for October.

That optimism has fed through into Asian markets overnight, with the Nikkei (+1.43%), the Hang Seng (+0.86%), the Shanghai Comp (+0.29%) and the KOSPI (+0.93%) all moving higher. That came as Bloomberg reported that China would loosen restrictions on home loans amidst the concerns about Evergrande. And we also got formal confirmation that President Biden had signed the debt-limit increase that the House had passed on Tuesday, which extends the ceiling until around December 3. Equity futures are pointing to further advances in the US and Europe later on, with those on the S&P 500 (+0.30%) and the STOXX 50 (+0.35%) both moving higher.

Even with the brighter news, inflation concerns are still very much with us however, and yesterday in fact saw Bloomberg’s Commodity Spot Index (+1.16%) advance to yet another record high, exceeding the previous peak from early last week. That was partly down to the continued rise in oil prices, with WTI (+1.08%) closing at $81.31/bbl, its highest level since 2014, just as Brent Crude (+0.99%) hit a post-2018 high of $84.00/bbl. Both have posted further gains this morning of +0.58% and +0.61% respectively. Those moves went alongside further rises in natural gas prices, which rose for a 3rd consecutive session, albeit they’re still beneath their peak from earlier in the month, as futures in Europe (+9.14%), the US (+1.74%) and the UK (+9.26%) all moved higher. And that rise in Chinese coal futures we’ve been mentioning also continued, with their rise today currently standing at +13.86%, which brings their gains over the week as a whole to +39.02% so far.

As well as energy, industrial metals were another segment where the recent rally showed no sign of abating yesterday. On the London metal exchange, a number of multi-year milestones were achieved, with aluminum prices (+1.60%) up to their highest levels since 2008, just as zinc prices (+3.73%) closed at their highest level since 2018. Separately, copper prices (+2.56%) hit a 4-month high, and other winners yesterday included iron ore futures in Singapore (+1.16%), as well as nickel (+1.99%) and lead (+2.43%) prices in London.

With all this momentum behind commodities, inflation expectations posted further advances yesterday. Indeed, the 10yr US Breakeven closed +1.0bps higher at 2.536%, which is just 3bps shy of its closing peak back in May that marked its highest level since 2013. And those moves came in spite of US producer price data that came in weaker than expected, with the monthly increase in September at +0.5% (vs. +0.6% expected). That was the smallest rise so far this year, though that still sent the year-on-year number up to +8.6% (vs. +8.7% expected). That rise in inflation expectations was echoed in Europe too, with the 10yr UK breakeven (+5.6bps) closing at its highest level since 2008, whilst its German counterpart also posted a modest +0.7bps rise.

In spite of the rise in inflation expectations, sovereign bonds posted gains across the board as the moves were outweighed by the impact of lower real rates. By the end of yesterday’s session, yields on 10yr Treasuries were down -2.6bps to 1.527%, which came as the 10yr real yield moved back beneath -1% for the first time in almost a month. Likewise in Europe, yields pushed lower throughout the session, with those on 10yr bunds (-6.3bps), OATs (-6.2bps) and BTPs (-7.1bps) all moving aggressively lower.

To the day ahead now, and US data releases include September retail sales, the University of Michigan’s preliminary consumer sentiment index for October, and the Empire State manufacturing survey for October. Central bank speakers include the Fed’s Bullard and Williams, and earnings releases include Charles Schwab and Goldman Sachs.

Tyler Durden Fri, 10/15/2021 - 07:50

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