Connect with us

Government

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump

For the third day in a row, US equity futures have been weighed down by rising (real) rates even as traders moderated their expectations for monetary-policy tightening..

Published

on

Futures Slide As Dollar Jumps, Yields Rebound Ahead Of Massive Data Dump

For the third day in a row, US equity futures have been weighed down by rising (real) rates even as traders moderated their expectations for monetary-policy tightening after New Zealand’s measured approach to rate hikes where the central banks hiked rates but not as much as some had expected. Traders also braced for an epic data dump in the US, which includes is an epic data dump which includes an update to Q3 GDP, advance trade balance, initial jobless claims, wholesale and retail inventories, durable goods, personal income and spending, UMich consumer sentiment, new home sales, and the FOMC Minutes The two-year U.S. yield shed two basis points. The dollar extended its rising streak against a basket of peers to a fourth day. At 730am, S&P 500 e-mini futures dropped 0.3%, just off session lows, while Nasdaq futures dropping 0.34%.

In premarket trading, Nordstrom sank 27% after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. The company reported higher labor and fulfillment costs in the third quarter while sales remained stubbornly below pre-pandemic levels and profit missed analyst estimates. Telecom Italia SpA surged in Europe on enhanced takeover interest. Oil prices fluctuated as producers and major consuming nations headed for a confrontation. Other notable premarket movers:

  • Gap (GPS US) sank 20% premarket after the clothing retailer reported quarterly results that missed estimates and cut its net sales forecast for the full year. Analysts lowered their price targets.
  • Nordstrom (JWN US) tumbles 27% in premarket after the Seattle-based retailer posted third-quarter results featuring what Citi called a big earnings per share miss. Jefferies, meanwhile, downgrades the stock to hold from buy as transformation costs are rising.
  • Guess (GES US) posted quarterly results which analysts say included impressive sales and margins, and showed the company navigating supply-chain issues successfully. The shares closed 9.2% higher in U.S. postmarket trading.
  • HP (HPQ US) shares are up 8.4% in premarket after quarterly results. Analysts note strong demand and pricing in the personal computer market.
  • Meme stocks were mixed in premarket after tumbling the most since June on Tuesday as investors bailed out of riskier assets.
  • Anaplan (PLAN US) slides 18% in premarket as a narrower-than-expected quarterly loss wasn’t enough to stem a downward trend. Analysts slashed price targets.
  • Autodesk (ADSK US) shares slump 14% in premarket after the building software maker narrowed its full-year outlook. Analysts are concerned that issues with supply chains and the pandemic could impact its targets for 2023.
  • GoHealth (GOCO US) gained 8.4% in postmarket trading after the insurer’s CEO and chief strategy officer added to their holdings.

As Bloomberg notes, investors are on the edge as they face a wall of worry from a resurgence of Covid-19 in Europe to signs of persistent consumer-price growth. Damping inflation is now center-stage for policy makers, with ultra-loose, pandemic-era stimulus set to be wound down. The slew of U.S. data as well as Federal Reserve minutes due today may provide the next catalysts for market moves.

In Europe, the Stoxx 600 Index erased earlier gains of up to 0.4% to trade down -0.1%, with tech and travel and leisure leading declines. Miners gained 0.8%, tracking higher copper prices on easing concerns over Chinese demand, while travel stocks slid over 1% on prospects of harsher travel curbs: Italy and France are debating new measures to cope with Covid’s resurgence while Germany isn’t ruling out fresh curbs. Oil stocks rose 1.2%, set for their biggest jump in over a month, with crude prices inching higher as investors remained sceptical about the effectiveness of a U.S.-led release of oil from strategic reserves. Here are some of the most notable European equity movers:

  • Mulberry shares surge as much as 24%, the most since March 12, after the U.K. luxury company swung to a 1H profit from a year earlier and reported an increase in sales.
  • Telecom Italia shares rise as much as 10% following a Bloomberg report that KKR is considering to raise its offer for the company after top investor Vivendi said the bid was too low. However, the stock is still trading below the initial non-binding offer from KKR.
  • Golden Ocean gains as much as 9.6%, most since Feb., after earnings. DNB says “Golden Ocean delivered solid Q3 results” and adds “Furthermore, guidance for Q4 should lift consensus estimates and solidify further dividend potential in our view.”
  • Intertek shares gain as much as 6.7%, the most since May 2020, after the company issued a trading update. UBS says the company’s accelerating momentum and reiterated targets are “reassuring.”
  • Aegon shares rise as much as 5.5% after Credit Suisse upgraded its recommendation to outperform from neutral and raised the PT to EU5.30 from EU4.00.
  • IQE shares slump as much as 21% for the biggest intraday drop since March 2020, falling to their lowest level since June 2020 after the semiconductor company said it sees softening demand in 4Q.
  • Genus shares fall as much 15% after the animal genetics firm lowered its FY22 earnings guidance, leading Peel Hunt and Liberum to cut estimates.

European stocks are on course for weekly losses, as the return of COVID-19 curbs, rate hike and inflation concerns sparked fears of a weaker economic growth outlook.

"There's a two-way pull between macro concerns and what's happening bottoms-up in terms of corporate profits," said Nick Nelson, head of European equity strategy at UBS, adding that while the third quarter has been one of the decade's best reporting seasons for Europe, macro concerns such as a rise in U.S. bond yields and COVID-19 cases have been holding stocks back.

Earlier in the session, Asian equities declined, on track for a third-straight session of losses, as higher U.S. Treasury yields continued to weigh on technology stocks in the region. The MSCI Asia Pacific Index slid as much as 0.6%, with Japan stocks leading losses as traders returned from a holiday to access the prospect of tighter U.S. monetary policy to curb inflation. TSMC and Tencent were among the biggest drags on the regional gauge. READ: Samsung Plans $17 Billion Texas Chip Plant, Creating 2,000 Jobs The renomination of Jerome Powell as Federal Reserve chair earlier this week has sent U.S. 10-year Treasury yields to about levels near 1.65%, implying higher borrowing costs. That’s adding to concerns about weak earnings growth in Asia as well as ongoing supply-chain constraints. Investors will now turn their attention to U.S. gross domestic product data and FOMC minutes due out after Asian markets close Wednesday.  “A cautious tone may still seem to prevail for now,” Jun Rong Yeap, a market strategist at IG Asia, said in a note. “Markets continue to shift their expectations towards a tighter Fed monetary policy.” New Zealand’s stock gauge added 0.6% after the central bank raised interest rates by 25 basis points, less than the 50 points that some economists had predicted. Singapore authorities, meanwhile, expect gross domestic product to expand 3% to 5% next year, a slower pace than this year as the country rebounds from the pandemic.

Indian stocks fell ahead of the November monthly expiry on Thursday, led by technology companies. The S&P BSE Sensex slipped 0.6% to 58,340.99 in Mumbai to close at its lowest level in two months. The gauge gained 0.3% on Tuesday, snapping four sessions of selloff.   The NSE Nifty 50 Index declined 0.5% on Wednesday, reversing intraday gains of as much as 0.6%. Software exporter Infosys Ltd. was the biggest drag on both gauges and slipped more than 2%. Of the 30 shares in the Sensex, 21 dropped and nine rose.  Investors roll over positions ahead of the expiry of derivatives contracts on the last Thursday of every month. Fourteen of 19 sub-indexes compiled by BSE Ltd. fell, led by a measure of IT companies. “The scheduled monthly expiry would keep the traders busy on Thursday,” Ajit Mishra, vice president research at Religare Broking Ltd. wrote in a note. “We suggest continuing with negative bias on the index while keeping a check on leveraged positions.”

In Fx, the most notable movers was the drop in the kiwi: New Zealand’s currency ironically slid to the weakest in nearly two months and the nation’s bond rallied as the central bank’s 25 basis-point rate hike disappointed traders betting on a bigger increase. The central bank projected 2% benchmark borrowing costs by the end of 2022. The Bloomberg Dollar Spot Index advanced a fourth consecutive day as the greenback gained versus all Group-of-10 peers apart from the yen, which reversed its losses after falling to the lowest since March 2017. The euro underperformed, nearing the $1.12 handle amid broad dollar strength even before data showing German business confidence took another hit in November and amid renewed fears that Germany may be considering a full lockdown and mandatory vaccines. RBNZ Governor Adrian Orr said policy makers considered a 50bps move before deciding on 25bps, and he sees the OCR climbing to around 2.5% by end-2023. 

Elsewhere, Turkey’s lira stabilized after Tuesday’s plunge. MSCI’s gauge of emerging-market stocks edged lower for a sixth session.  

In rates, Treasuries were richer by 1bp to 2bp across the curve, paced by European bonds ahead of a raft of U.S. data preceding Thursday’s market close. 10-year Treasury yields were richer by ~1bp on the day at around 1.655%, slightly trailing bunds; most curve spreads are within a basis point of Tuesday’s close with comparable shifts across tenors. During Asia session, Treasuries were supported by wider gains across Kiwi bonds after RBNZ hiked policy rates, but still erred on the dovish side. Bunds remain supported during European morning as haven demand stems from prospect of a nationwide German lockdown. Italian bonds snapped a two-day decline.

In commodities, oil futures in New York swung between gains and losses following an announcement by the U.S. and other nations of a coordinated release of strategic reserves. Focus now turns to OPEC+ on how the group will respond to the moves. The alliance has already said that such releases were unjustified by market conditions and it may reconsider plans to add more supply at a meeting next week.

Base metals are well bid with LME nickel adding over 2% to outperform peers. LME copper rises over 1% to best levels for the week. Crude futures fade a modest push higher fading after a brief push through Tuesday’s best levels. WTI trades flat, having briefly printed above $79; Brent prints highs of $83 before fading. Spot gold holds a narrow range close to $1,790/oz

To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro.

Market Snapshot

  • S&P 500 futures down 0.1% to 4,683.50
  • STOXX Europe 600 up 0.3% to 480.66
  • MXAP down 0.5% to 196.76
  • MXAPJ down 0.1% to 643.18
  • Nikkei down 1.6% to 29,302.66
  • Topix down 1.2% to 2,019.12
  • Hang Seng Index up 0.1% to 24,685.50
  • Shanghai Composite up 0.1% to 3,592.70
  • Sensex down 0.3% to 58,499.84
  • Australia S&P/ASX 200 down 0.2% to 7,399.44
  • Kospi down 0.1% to 2,994.29
  • Brent Futures up 0.4% to $82.63/bbl
  • Gold spot up 0.1% to $1,791.37
  • U.S. Dollar Index little changed at 96.57
  • German 10Y yield little changed at -0.22%
  • Euro down 0.2% to $1.1231

Top Overnight News from Bloomberg

  • Olaf Scholz is set to succeed Angela Merkel as German chancellor after forging an unprecedented alliance that aims to revamp Europe’s largest economy by tackling climate change and promoting digital technologies
  • The European Commission is set to announce the recommendations for the entire EU as soon as Thursday, Politico’s Playbook newsletter reported, citing three unidentified officials and diplomats
  • Italy’s government is debating tough new measures to stem an increase in coronavirus cases, which could include restrictions on unvaccinated people and be approved as soon as Wednesday
  • The ECB’s pandemic purchasing program may enter a “waiting room” rather than be abolished completely once net purchases are set to end in March, Governing Council member Robert Holzmann said at briefing in Vienna
  • The U.K.’s biggest business lobby group has urged Prime Minister Boris Johnson to back down in its dispute with the European Union over Northern Ireland and not follow through with threats to suspend parts of the Brexit divorce deal
  • Polish central bank Governor Adam Glapinski said further weakening of the zloty wouldn’t be consistent with the country’s economic fundamentals, helping lift the embattled currency from 12-year lows
  • The supply crunch that’s helped drive inflation to multi- decade highs shows some signs of easing in the U.S. -- but it’s still getting worse in Europe. That’s the takeaway from the latest readings on Bloomberg Economics’ new set of supply indicators
  • The unraveling of the Turkish lira threatens to erode Recep Tayyip Erdogan’s grasp on the economy and is already emboldening his political opponents. Small protests erupted in Istanbul and Ankara overnight, calling for an end to economic mismanagement that’s unleashed rapid inflation and triggered the currency’s longest losing streak in two decades

A more detailed breakdown of global news courtesy of newsquawk

Asia-Pac equity indices were mixed following the choppy performance of their US counterparts where energy rallied despite the SPR announcement and tech lagged as yields continued to gain, with the latest RBNZ rate hike, as well as looming FOMC Minutes and US data releases adding to the tentative mood. ASX 200 (-0.2%) was rangebound with the index subdued by losses in tech and gold miners which suffered from the rising yield environment, but with downside cushioned by strength in the largest weighted financials sector and with outperformance in energy after oil prices rallied in the aftermath of the widely anticipated SPR announcement. The strength in oil was attributed to several reasons including a “sell the rumour/buy the news” play and expectations of a response from OPEC+, while an administration official kept the prospect of an oil export ban on the table which is seen as bullish as it would remove US supply from the global market. Nikkei 225 (-1.6%) was the laggard on return from holiday amid flows into the local currency and with reports also suggesting the BoJ is considering tweaking its pandemic relief program. Hang Seng (+0.1%) and Shanghai Comp. (+0.1%) swung between gains and losses with early indecision due to the broad tech weakness tech which was not helped by reports that Chinese cyberspace regulators and police summoned Alibaba (9988 HK) and Baidu’s (9888 HK) cloud unit for telecoms network fraud, although the losses for Chinese bourses were eventually reversed amid gains in the energy heavyweights and after a mild PBoC liquidity injection. Finally, 10yr JGBs opened lower on spillover selling from global peers but gradually pared some of the losses after rebounding from support at 151.50 and with the BoJ in the market for nearly JPY 1.5tln of JGBs with up to 10yr maturities.

Top Asian News

  • Shinsei Drops Poison Pill Against SBI in Japan Takeover Saga
  • Morgan Stanley to Repay Hong Kong Staff $5,100 for Quarantine
  • KKR, Equinix Among Suitors for $11 Billion Global Switch
  • Japan to Issue $192 Billion in Debt for Stimulus: Nikkei

European equities attempted to claw back some of the week’s losses (Euro Stoxx 50 -0.2%; Stoxx 600 -0.2%) at the open with Monday and Tuesday’s session dominated by ongoing COVID angst in the region. Lockdown measures were enough to see investors shrug off yesterday’s better-than-expected PMI metrics for the Eurozone with today’s slightly softer than hoped for German Ifo report having little sway on price action. Despite the upside seen at the open, optimism has faded throughout the session as speculation mounts over whether the announcement of the German coalition deal (set to be unveiled at 14:00GMT) could prompt further lockdown measures for the nation. Furthermore, reports note that the Italian government is debating potential restrictions on the unvaccinated; measures could be approved as soon as today. On a more positive footing French Finance Minister Le Maire says at the moment he does not see any need for further COVID-related restrictions in France. However, it remains to be seen how long this viewpoint can be sustained. Stateside, futures are a touch softer with losses across the majors of a relatively equal magnitude (ES -0.1%) in the final full session of the week ahead of the Thanksgiving Holiday. Given the shortened week, today sees a deluge of data from the US with releases including key personal income, spending and PCE data for October, a second look at Q3 GDP, final Michigan consumer sentiment data, as well as weekly jobless claims and energy inventory data. All of which is followed by the FOMC minutes from the November meeting. In a recent note, BNP Paribas stated it is of the view that equities will go on to provide the highest returns across asset classes in 2022 with the French bank targeting 5100 (currently 4690) for the S&P 500 by the end of next year. From a European perspective, BNP expects the Euro Stoxx 50 to close 2022 out at 4500 (currently 4300) with the market “too pessimistic” on margins; albeit the Bank concedes that the resurgence of COVID presents a risk to its view. Sectors in Europe are mostly constructive with Oil & Gas and Basic Resources underpinned by gains in the underlying commodities with the former continuing to garner support post-yesterday’s SPR announcement. The Travel & Leisure sector lags peers with the Travel element of the group hampered by reports that the European Commission is preparing new COVID travel recommendations for the whole of the EU. For Leisure names, Entain (-5.0%) and Flutter Entertainment (-3.0%) have been hit by news that over 160 UK MPs and peers are said to be demanding that online gambling limits are lowered. Finally, Telecom Italia (+9.7%) is the best performer in the Stoxx 600 after source reports suggesting that KKR is considering a higher bid for the Co. in an attempt to win over support from Vivendi.

 

Top European News

  • Scholz Seals Coalition Deal to Become Next German Chancellor
  • Italy Readies Curbs on the Unvaccinated as Covid Cases Rise
  • Booking Agrees to Buy CVC’s Etraveli for About EU1.63b
  • Orange CEO Convicted in $453 Million Arbitration Fraud Case

In FX, the Dollar index has gained traction and continued its gains above 96.500+ status in early European hours before eclipsing resistance at 96.700 to a fresh YTD peak at 96.758, with US players also preparing to wind down for the long weekend. Before that, the Buck will be facing a plethora of Tier 1 US data, including Prelim GDP (Q3), weekly Jobless Claims, and monthly PCE in the run-up to the FOMC Minutes – which will be eyed for clues on what could warrant an adjustment of the pace of tapering (Full preview available in the Newsquawk Research Suite). On the downside, immediate support will likely be at yesterday’s 96.308 low before this week’s current 96.035 trough. In terms of early month-end FX flows (on account of the holiday-shortened week), Morgan Stanley’s model points towards USD weakness against most G10 peers.

  • EUR, GBP - The single currency dipped a 16-month low just before the release of the German Ifo survey, which unsurprisingly voiced cautiousness against the backdrop of COVID and supply chain issues – with Ifo forecasting a growth stagnation this current quarter, whilst ING believe that today’s Ifo signals that “The risk of stagnation or even recession in the German economy at the turn of the year has clearly increased.” The currency came under further pressure in what coincided with reports that Germany is mulling a full COVID lockdown and mandatory vaccinations, although the piece failed to cite any sources nor officials and seemed to be more an extrapolation of recent remarks from the German Health Minister. EUR/USD fell through pivotal support at 1.1210 to a current low at 1.1206 ahead of 1.1200. Traders should also be cognizant of several chunky OpEx clips including EUR 1.3bln between 1.1195-1.1200. Ahead, the SPD, Greens and FDP set to unveil their coalition deal at 14:00GMT. ECB speak today include from the likes Schnabel after Panetta and Holzmann failed to spur action across EU assets. Elsewhere, the GBP/USD is flat intraday and saw little reaction to BoE Governor Bailey yesterday, suggesting he does not think the MPC will go back to a hard form of guidance and stated that it is not off the table that they give no guidance at all on rates. Bailey also stated that decisions are made meeting by meeting and that they have a very tight labour market. From a political standpoint, European Commission VP Sefcovic said EU-UK talks on Northern Ireland trade rules will probably drag into 2022. Cable remains within a 1.3353-89 range whilst EUR/GBP trades on either side of 0.8400. Looking ahead, BoE’s Tenreyro speaking at the Oxford Economics Society – with early-Nov commentary from the MPC member suggesting that monetary policy will have to bite if there are signs of second-round inflation effects, but policy cannot fix energy price spikes.
  • NZD, AUD - The Kiwi stands as the G10 laggard following a dovish 25bps hike by the RBNZ, with the board citing optionality. Desks suggest that FX was clearly gearing for a hawkish surprise from the central bank, with markets pricing some 35% of a 50bps hike heading into the meeting given the inflation survey earlier this month. Money markets were also disappointed, with participants flagging that the 2yr swap fell over 15bps despite the RBNZ upping its 2023 OCR forecast to 2.3% (prev. 1.7%). NZD/USD fell further beneath the 0.7000 mark to a current 0.6957 low. AUD meanwhile sees its losses cushioned from another day of firm gains in iron ore, whilst cross-currency flows help the AUD/NZD test 1.0450 to the upside. Nonetheless, the cautious market mood keeps AUD/USD around the flat mark after the pair found support at 0.7200.
  • JPY - The traditional haven outperforms as risk aversion creeps into the market. USD/JPY pivots the 115.00 market after hitting an overnight high of 115.23. Some desks suggest that offers are seen from 115.30 on Wednesday, with more around the 115.50 area, according to IFR citing Tokyo sources. In terms of notable OpEx, USD/JPY sees USD 1.7bln between 115.00-10.

In commodities, WTI and Brent Jan futures consolidate following yesterday’s gains post-SPR announcement. The release disappointed the oil bears given the widely telegraphed nature of the announcement coupled with relatively small contributions from members. Desks have also highlighted that the reserves will need to be replenished at some time in the future, and thus, analysts have passed the effects from the SPR release as temporary; although, cautioning that if the desired impact is not achieved, then further action can be taken – with a temporary export ban still on the table. Meanwhile, on the demand side, futures dipped after CNBC reported that Germany could head into a full lockdown, but the piece did not make a mention of officials nor sources but seemed to be more an extrapolation of recent comments from the Germany Health Minister, with an announcement on this matter potentially to come today. Further, tomorrow could see revised travel guidance for the whole of the EU, according to Politico sources, although "The biggest overall change will be a move away from a country-based approach and to a person-based one, which takes into account a citizen’s individual COVID status." Despite this month’s European COVID developments, JPMorgan sees global oil demand growing by another 3.5mln BPD next year to reach 99.8mln BPD (280k BPD above 2019 level); 2023 demand is expected to average around 101.5mln BPD (1.9mln BPD above pre-COVID levels) and suggested that global oil demand is on track to exceed 2019 levels by March 2022 and strengthen further. As a reminder, next week also sees the OPEC+ meeting whereby the group is expected to continue with plans of monthly output increases of 400k BPD, with a risk of a more dovish decision and/or commentary. WTI Jan trades around USD 78.50/bbl (vs high 79.23/bbl) and Brent Jan around USD 82.25/bbl (vs high 83.00/bbl). Elsewhere, spot gold is interestingly unfazed by the rampant Dollar as prices remain caged within a cluster of DMAs (100 around 1,793, 200 around 1,791 and 50 around 1,788). Copper prices are again on the grind higher with LME around USD 9,800/t at the time of writing – with participants citing underlying demand, particularly from China.

US Event Calendar

  • 8:30am: 3Q GDP Annualized QoQ, est. 2.2%, prior 2.0%
    • 8:30am: 3Q GDP Price Index, est. 5.7%, prior 5.7%
    • 8:30am: 3Q PCE Core QoQ, est. 4.5%, prior 4.5%
    • 8:30am: 3Q Personal Consumption, est. 1.6%, prior 1.6%
  • 8:30am: Oct. Durable Goods Orders, est. 0.2%, prior -0.3%
    • 8:30am: Oct. Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.8%; - Less Transportation, est. 0.5%, prior 0.5%
    • 8:30am: Oct. Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 1.4%
  • 8:30am: Oct. Retail Inventories MoM, est. 0.3%, prior -0.2%; Wholesale Inventories MoM, est. 1.0%, prior 1.4%
  • 8:30am: Oct. Advance Goods Trade Balance, est. - $95b, prior -$96.3b
  • 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 268,000; Continuing Claims, est. 2.03m, prior 2.08m
  • 9:45am: Nov. Langer Consumer Comfort, prior 50.7
  • 10am: Oct. Personal Income, est. 0.2%, prior -1.0%;
    • 10am: Oct. Personal Spending, est. 1.0%, prior 0.6%
    • 10am: Oct. Real Personal Spending, est. 0.6%, prior 0.3%
  • 10am: Oct. New Home Sales, est. 800,000, prior 800,000
    • 10am: Oct. New Home Sales MoM, est. 0%, prior 14.0%
  • 10am: Oct. PCE Deflator MoM, est. 0.7%, prior 0.3%
    • 10am: Oct. PCE Core Deflator MoM, est. 0.4%, prior 0.2%
    • 10am: Oct. PCE Deflator YoY, est. 5.1%, prior 4.4%
    • 10am: Oct. PCE Core Deflator YoY, est. 4.1%, prior 3.6%
  • 10am: Nov. U. of Mich. Sentiment, est. 67.0, prior 66.8
    • 10am: Nov. U. of Mich. 5-10 Yr Inflation, prior 2.9%
    • 10am: Nov. U. of Mich. 1 Yr Inflation, prior 4.9%
    • 10am: Nov. U. of Mich. Current Conditions, prior 73.2
    • 10am: Nov. U. of Mich. Expectations, prior 62.8
  • 2pm: Nov. FOMC Meeting Minutes

DB's Jim Reid concludes the overnight wrap

We’ve had a number of requests to bring back our Covid tables in the EMR. At the moment I’m resisting as they take a considerable amount of time. While we work out an efficient form of articulating the current wave on a daily basis, in today’s EMR we show graphs of the daily rolling 7-day cases and fatalities per million in the population for the G7. We’ve also included Austria, given how topical that is, and also The Netherlands, given mounting problems there. These act as a useful reference point for some of the more stressed countries. The cases chart should be in the text below and the fatalities one visible when you click “view report”. Germany is probably the main one to watch in the G7 at the moment and overnight reported 66,884 new cases (a record) compared with 45,362 the day before.

A reminder that yesterday we published our 2022 credit strategy outlook. See here for the full report. Craig has also put out a more detailed HY 2022 strategy document here and Karthik a more detailed IG equivalent here. Basically we think spreads will widen as much as 30-40bps in IG and 120-160bps in HY due to a response to a more dramatic appreciation of the Fed being well behind the curve. This sort of move is consistent with typical mid-cycle ranges through history. We do expect this to mostly retrace in H2 as markets recover from the shock and growth remains decent and liquidity still high.

We also published the results of our ESG issuer and investor survey where around 530 responded. Please see the results here.

As we hit Thanksgiving Eve and a US data dump of a day given the holiday tomorrow, the big story over the last 2-3 business days has been real rates in the US. As recently as Friday, after the Austria lockdown news, 10yr real rates hit -1.2%. Yesterday they traded above -0.95% before closing at -0.97%, +4.0bps higher than the previous close. Our view in the 2022 credit strategy document is that credit is more tied to real rates than nominal rates and if the market attacks the Fed as we expect, then they should go up. However, note that I’ve also said I suspect they’ll stay negative for the rest of my career so while higher real yields are likely, I suspect that this is a trade rather than a structural long-term journey given likely long-term financial repression.

Anyway, rising real yields, a fresh covid wave and belief over a less dovish Fed post the Powell reappointment saw a tough day for equities, especially in Europe, before the US managed to eke out a gain into the close. The S&P 500 (+0.17%) was up for the first time in 3 days, whilst Europe’s STOXX 600 (-1.28%) posted its worst daily performance in nearly 2 months. On a sector level, it was the same story in the US, where energy (+3.04%) shares benefitted from climbing oil prices and financials (+1.55%) gained on steeper and higher yields. Larger tech firms retreated on the higher discount rates, with the Nasdaq declining -0.50%.

Meanwhile the VIX index of volatility was back above the 20-mark for the first time in over a month, coinciding with a broader tightening of financial conditions. However, we dipped back below 20 into the stronger close.

Honing in on bonds now and there was a major selloff yesterday that hit a number of European countries in particular. By the close of trade, yields on 10yr bunds were up +8.1bps, which is their single-biggest daily increase in over a year, actually since the day we found out that the Pfizer/BioNTech vaccine had proven successful in trials and was set to be rolled out. The move came about entirely due to higher real rates, with Germany 10yr inflation breakevens actually down -2.0bps on the day. Similar moves were seen elsewhere on the continent, with yields on 10yr OATs (+8.6bps) and BTPs (+10.5bps) seeing sharp rises of their own, which occurred in part on the back of stronger than expected flash PMI data raising the prospect of a quicker drawdown in monetary stimulus, not least with inflation still running some way ahead of the ECB’s target.

For US Treasuries, yields were a touch more subdued, and the yield curve twist steepened. 2yr yields declined -1.8bp whilst every other maturity increased, and all tenors out to 7 years are at post-pandemic highs. The 5yr nominal yield increased +2.2bps to 1.34%. The 10yr was up +4.1bps to 1.67% due, as we discussed above, to real yields. 10yr breakevens were flat (+0.2bp) at 2.63%. The 10 year is 7.5bps off of 2021 closing highs and in the 430 plus business days since the pandemic started there have only been 14 days with a higher close than last nights.

Elsewhere yesterday, we had an important piece of news on the energy front, as the US announced that it would be releasing 50m barrels of oil from the Strategic Petroleum Reserve, with the move occurring alongside similar decisions in China, India, Japan, South Korea and the UK. 32m of those 50m will be an exchange, whereby oil is released over the next few months that is then returned over the coming years, while another 18m are coming from an acceleration of an oil sale that Congress had already authorised. Oil prices rose following the release however, with Brent crude (+3.27%) and WTI (+2.28%) both seeing decent advances, in part because the contribution from other nations was smaller than many had anticipated, but also because the potential release from the SPR had been widely reported in advance, thus sending prices lower from their peak around a month ago.

Even with the news, there’s no sign that inflationary pressures will be going away just yet, since much of what happens next will depend on the reaction of the OPEC+ group. If they move to cancel plans to increase production, then that could put upward pressure on prices again and help counter the impact of the move from the various energy consumers. And as we’ve been discussing, inflationary pressures have been widening for some time now, stretching beyond specific categories like energy and used cars to an array of other areas.

Overnight in Asia stocks are trading mostly in the red with the CSI (-0.03%), Hang Seng (-0.06%), Shanghai Composite (-0.10%), KOSPI (-0.48%) and the Nikkei (-1.35%) all lower. The Reserve Bank of New Zealand has raised interest rates for the second consecutive month and lifted the official cash rate 25bps to 0.75%. There was some who expected 50bps so bonds are rallying with 2yr and 10yrs -5.5bps and -7.5bps lower, respectively. The central bank were pretty hawkish in their comments though. US Treasuries are 2-4bps lower across the curve overnight as well.

Staying on New Zealand, the country eased its travel restrictions by allowing fully vaccinated travellers (and other eligible travellers) from Australia without any isolation from Jan 17 and those from the rest of the world from February 14. Elsewhere, South Korea reported its highest ever daily new cases of 4,115 with 586 critical cases with the PM announcing the situation is "more serious than expected". Futures are indicating a slightly weaker start in the US and Europe with the S&P 500 (-0.24%) and DAX (-0.09%) lower.

Over in Europe, there’s no sign of the pandemic letting up just yet, with French health minister Veran saying in parliament that “we are sadly well and truly in a fifth wave of the epidemic” as France announced 30,454 new cases yesterday. Austria has been the main country in the headlines recently as it moved into a nationwide lockdown, but the reality is that the trend lines have been moving higher across the continent, raising the prospect of fresh restrictions. In terms of yesterday’s developments, the Netherlands announced that social distancing would be reintroduced on a mandatory basis, and that people should stay 1.5m apart, and Poland saw the biggest daily increase in hospitalisations since April. Elsewhere, Slovakia’s PM said that he was considering following the steps adopted in Austria, and the outgoing Czech PM said that mandatory vaccines for the over-60s were being considered.

In spite of the growing Covid wave across Europe, the flash PMIs released yesterday actually proved better than the consensus was expecting, and even saw something of an uptick from the October readings. The Euro Area composite PMI ended a run of 3 successive declines as it rose to 55.8 (vs. 53.0 expected), with both manufacturing (58.6) and services (56.6) rising relative to a month ago. And both the German (52.8) and the French (56.3) composite PMIs were also better than expected. On the other hand, the US had somewhat underwhelming readings, with the flash services PMI down to 57.0 (vs. 59.0 expected), as the composite PMI fell to 56.5.

To the day ahead now, and there’s a significant amount of US data ahead of tomorrow’s Thanksgiving holiday. That includes the weekly initial jobless claims, the second estimate of Q3 GDP, October’s personal income and personal spending, new home sales, and the preliminary October readings for durable goods orders and core capital goods orders. Over in Germany, there’s also the Ifo’s business climate indicator for November. Finally on the central bank side, there’s the release of the FOMC’s November meeting minutes, and speakers include the ECB’s Panetta and Schnabel, and the BoE’s Tenreyro.

Tyler Durden Wed, 11/24/2021 - 08:07

Read More

Continue Reading

Government

Woke Airline Policies Threaten Safety, Workers Say

Woke Airline Policies Threaten Safety, Workers Say

Authored by Janice Hisle via The Epoch Times (emphasis ours),

Southwest Airlines Co. is…

Published

on

Woke Airline Policies Threaten Safety, Workers Say

Authored by Janice Hisle via The Epoch Times (emphasis ours),

Southwest Airlines Co. is basking in accolades for its “diversity, equity, and inclusion” (DEI) efforts, award-winning customer service, and record-breaking quarterly revenues.

A traveler walks past a Southwest Airlines airplane as it taxies from a gate at Baltimore Washington International Thurgood Marshall Airport on October 11, 2021 in Baltimore, Maryland. (Kevin Dietsch/Getty Images)

Behind the scenes of that rosy picture, heartaches are afflicting Southwest, called “the airline with Heart” because of its heart-shaped logo and a corporate culture steeped in “The Golden Rule,” treating others the same way they’d like to be treated.

But eight current Southwest employees, including three minorities, told The Epoch Times that “woke, leftist” DEI policies, as implemented, have tarnished the cherished Golden Rule principle, fractured a once-cohesive workforce, and, ultimately, may put safety at risk.

Faced with pandemic-related staffing shortages and pressure to add minorities, the company has changed the way it hires, trains, and disciplines workers—mostly to benefit less-qualified new hires representing the diversity rainbow, the employees say.

One Southwest flight attendant, a Hispanic female, said: “They are compromising safety for the sake of race, gender identity, and sexual preference … They’re risking people’s lives because of agendas.”

Southwest, one of America’s largest air carriers, didn’t respond to messages seeking comment.

Similar issues have spread industry-wide, according to 10 airline employees who agreed to be interviewed. Four are pilots and six are flight attendants; most have 20 or more years of experience. All of them, including two American Airlines pilots, spoke on condition of anonymity to protect their jobs.

While no one thinks the policies are causing an imminent threat of a plane falling out of the sky tomorrow, all of the interviewees agreed that each time a standard is lowered, or a less-qualified employee is hired, the risk that something can go horribly wrong inches forward a notch or two. In an industry that depends on a near-miracle integration of people, machinery, and computers, even a few deviations can culminate in catastrophe.

Still, some employees worry about what could happen if current trends continue to stress out and distract safety professionals. Said one flight attendant: “It’s a recipe for disaster. I just hope I’m not at work when it happens.”

Us-Versus-Them Mentality

While promoting diversity sounds like a great idea, the inclusionary policies have actually become exclusionary at Southwest, employees say. Disparate treatment has divided their ranks into two distinct camps: those with “desirable” or “approved” personal, social, or political characteristics—and those without.

Minorities or people with leftist political views, varying gender identities, and alternative sexual orientations appear to be given wide latitude. This “protected class” is allowed to bend or break rules, and new hires in these classifications may be given extra chances to pass required skills tests, the employees said.

At the same time, veteran workers—especially those who are white, heterosexual, and conservative—find themselves in the crosshairs for almost anything, including making a personal statement of religious or political beliefs, the Southwest workers said. Even minorities can be shifted into this targeted group if they espouse personal beliefs running counter to causes that the company supports.

There are two sets of standards: One for us and one for them,” said an experienced flight attendant.

One of her colleagues said: “The company is trying to eliminate anybody who does not agree with their agenda. The last few years, anybody who speaks up against them, they want gone.” That flight attendant said she had no problems at work until she posted her Christian religious beliefs on her personal Facebook page, along with her support of President Donald Trump. A coworker reported the posts to Southwest, and the flight attendant said she has faced repercussions ever since.

She and others say the targeting of conservatives is common—and they point to the recently publicized case of fired Southwest flight attendant Charlene Carter as a prime example.

‘Targeted Assassinations’ of Conservatives

Last month, a federal jury in Texas awarded Carter more than $5 million after finding that Southwest wrongfully terminated her and that her union didn’t live up to its duty to represent her. The company fired Carter after she expressed her pro-life views to a union leader via social media and opposed the union’s pro-abortion activism.

The company supported the union’s political activism, Carter’s suit says, by accommodating work-shift changes for union members so they could participate in the Women’s March on Washington, D.C., in January 2017. Marchers were protesting Trump’s inauguration; one of the primary sponsors of the event was Planned Parenthood. Southwest also showed “solidarity” with the protesters by bathing its airplane cabins in pink lights on some D.C.-bound flights, Carter’s lawsuit says.

Documents in the case revealed that some union officials and political activists were singling out dissenting Southwest employees for “targeted assassinations,” meaning that they would try to get the company to fire them, using the company’s social media policy as a bludgeon.

In an interview with The Epoch Times on Aug. 8, Carter, who lives near Denver, Colorado, said she can’t believe that some leaders of Transport Workers Union of America Local 556, who helped set her up to be fired, are still working for Southwest.

Carter also validated her coworkers’ concerns about the disparate treatment of employees who dare to oppose leftist agendas. “I think there are a ton of cases out there just like mine,” she said. Terminated employees from Southwest and other airlines have been continuously contacting Carter for help after learning about the July 14 verdict in her case.

Carter spent five years fighting in court; she thinks she was one of the first casualties of the erosion of Southwest’s unique corporate culture, which she witnessed during the latter part of her 20-plus years at the airline.

“We all loved our jobs; we all loved each other—our CoHearts, that’s what we called each other,” Carter said, pointing out that the airline’s stock ticker is LUV, a nod to its birthplace at Love Field, Texas.

Corporate Culture Shift

But corporate leadership and philosophy shifted. Carter said, her former coworkers tell her the culture is now one where people are fired on a whim, and they’re encouraged to file complaints against each other over perceived insults, such as failure to use the “preferred pronoun” of a person asserting an alternative gender identity.

Employees who face such accusations are presumed guilty, a current flight attendant said, and they risk suspension or termination. “That is how we are treated now,” she said.

“It’s gotten ridiculous,” Carter said. She was astounded to learn that lapel pins, designating preferred pronouns, are being offered to staff.

A fellow flight attendant says the company’s priorities are misplaced.

“We used to be focused on hiring ‘the best of the best,’” she said. “So why is it now that we feel at Southwest Airlines that we have to use the right pronouns and we have to acquiesce to someone’s gender-fluid mentality?”

The DEI Effect

The interviewed employees blame DEI policies for sowing the seeds of division. Ironically, before DEI was implemented, “people were never labeled,” a flight attendant said. “I find it very divisive,” she said, “because now everyone is labeled, divided by race, gender sexual orientation … whatever.”

This is wrong—all the way wrong,” she said.

The company’s annual report, in its DEI section, says, “Southwest Airlines recognizes, respects, and values differences. … At Southwest, DEI is and always has been a part of our DNA.”

All four major airlines—and many other American companies—publicly disclose DEI-related information, such as data on minority recruitment and the racial makeup of their workforce.

Every airline is trying to push forward with minority hiring because they want to ‘show that they care,’” aviation analyst Jay Ratliff said. “They’re being asked, ‘How many women are within your pilot ranks? … How many pilots of color?’”

If an airline’s diversity metrics seem low in comparison to their competitors’ numbers, the company’s reputation and bottom line can suffer, Ratliff said.

That’s not necessarily fair, he said, because few people have the ability, interest, and financial means to qualify as a commercial airline pilot. Amassing the FAA-required 1,500 hours of flight time with an instructor can cost $75,000 or more, pilots said.

Last year, United Airlines announced its goals: to train 5,000 new pilots by 2030 at its new flight school, with “at least half of those students to be women or people of color.” The first class of new recruits “exceeded that goal,” with 80 percent of the 30 students fitting that category, the airline said in a report.

Considering that white males make up about one-third of the American population, a Southwest pilot said that composing a class with 80 percent minorities and women looks like “DEI special-status hiring on steroids.”

Scoring Systems Push Diversity

DEI data play a significant role in corporate ESG scores—ratings of a company’s “environmental, social, and governance” performance. It’s a complex—and controversial—way to assess which companies are considered “good corporate citizens.”

Most of the interviewed airline employees believe that the pursuit of ESG scores is driving corporate personnel practices, including ignoring well-qualified male applicants while eagerly hiring less-experienced female and minority candidates.

Increasingly, ESG scores can help determine whether a company sinks or swims. A good ESG score can attract investors, government contracts, and favorable loan-interest rates—benefits that are especially important for the airline industry, in which lucrative U.S. Department of Defense contracts are at stake and profit margins are razor-thin because of astronomical costs for equipment and personnel.

ESG ratings have existed in some form for decades, yet they barely registered a blip on internet searches until a few months ago, amid the Biden administration’s continued push for businesses to address environmental concerns and to institute “green” policies, which weigh heavily in ESG scores and DEI metrics.

Florida Gov. Ron DeSantis recently announced his intent to push back against ESG, calling it “leveraging corporate power to impose an ideological agenda on society.”

Refinitiv, a company that produces ESG scores, says its process for calculating the ratings starts with collecting more than 630 ESG measures from each company’s public disclosures. Other ESG assessors have their own rating systems, which means results can vary depending on which assessment method is being used. ESG advocates are now working on standardizing how these scores are calculated.

Several airline employees said it would benefit their company, their industry, and society in general if ESG scores and DEI programs were abolished.

One Southwest pilot with decades of experience said such measures create unnecessary complications with no positive effect on the airline’s core mission.

Why do we need DEI programs? Why do we need ESG? A lot of the public isn’t even aware these things exist,” he said. “The passengers just want people like me to get them, and their bags, to the same place at the same time, safely … DEI and ESG do nothing to support that—zero.”

“I need these DEI programs and ESG scores to go out the back of the airplane like the jet fuel that we burn.”

Non-Pilots Hiring Pilots

Southwest’s annual report says it has been “evolving hiring and development practices to support diversity goals.”

Those changes are troubling to the interviewed employees and to the pilots’ union. In a letter to members last month, the Southwest Airlines Pilots Association pointed out that, for the first time in the company’s 51-year history, a non-pilot is in charge of hiring pilots. The “system chief pilot” used to have that responsibility. “We are just a single step away” from hiring pilots based upon mere reviews of their resumes, association president Casey Murray wrote to union members. Southwest has about 9,600 pilots, the letter said.

Putting a non-pilot in charge of hiring pilots most likely will affect the quality of the pilots who are being hired, Southwest interviewees said. People who lack specific knowledge of this specialized job would have a hard time telling the difference between a good hire and a bad one, pilots said. One of the interviewed pilots said that the chief pilot told him: “The diversity department has a very strong voice in who gets hired.”

Southwest wants to hire more than 2,000 pilots in the next year, the union’s letter said, questioning whether those new hires will be required to meet Southwest’s traditionally high standards. “Across the entire commercial aviation industry, employers are fighting for an ever-shrinking pool of qualified pilots,” yet Southwest may be at a disadvantage to compete for those pilots. Contract negotiations with Southwest’s pilots are lagging, compared to progress with other airlines’ pilot unions, Murray said.

“Pilots are the fuel that powers Southwest Airlines, and right now Southwest’s supply of fuel is running low. Time is growing critical, and options are becoming limited,” Murray wrote.

Seeking the Best (Non-White) Pilots?

Current pilots also say they have learned that hiring decisions are being driven by a job candidate scoring system; they’re unsure how long it has been in place, how it works, or whether it unfairly elevates minorities. The company controls all of that information.

Still, the employees feel confident in anecdotal evidence suggesting that the scoring system, coupled with other hiring practices, could be producing a pattern of discrimination against men, especially white men who come from military backgrounds—previously highly sought-after job candidates. “We could be wrong, but I don’t think we are,” said one pilot who has military experience.

That pilot said he thinks the vast majority of his colleagues have heard accounts of possible discrimination similar to the following:

When a well-qualified former military pilot applied for a job, Southwest never contacted him for an interview. But the applicant learned that a woman was hired as a pilot, despite having half as much experience in the airline industry.

Further, the man had experience as a captain while the woman had only been a first officer, who sits next to the captain in the cockpit. “It’s a completely different world” when a person shifts into the captain’s chair, said the pilot.

We’re leaving a lot of people behind who are better-qualified, just because they’re the wrong color, or they’re identified the wrong way. That’s concerning. We’re not putting the best up-front,” he said. “We have people’s lives in our hands. It’s just like with doctors. If you go to a doctor, you want to go to the best doctor you can.”

An American Airlines pilot with decades of experience said he was less troubled than some of the Southwest interviewees who worried about the effects of reduced standards as a result of the increased emphasis on diversity hiring. However, that pilot said he would become very concerned if standards are lowered “to the point where people aren’t flying as confidently.”

A second American Airlines pilot said he has observed that “training is not nearly as comprehensive as it used to be,” he said. “But these people who are starting out are flying with people who are supremely qualified to be flying airplanes—so mistakes can be covered.”

He thinks the reduced standards could eventually cause problems if the hyperfocus on diversity continues: “If you’re looking for a diverse workforce and not a qualified workforce, you’ve got issues. … You haven’t seen any accidents because of ‘diversity,’ but the potential is there.”

All 11 people who were interviewed for this story, including Carter, the ex-flight attendant, said personal traits such as gender and race shouldn’t be part of the equation at all.

“From the cockpit door forward, guys and gals of all ethnicities are after the same thing—and that’s a safe flight,” said one of the American Airlines pilots. “They don’t care who sits next to them as long as they can do the job.”

More Than Snack Servers

Most air passengers think of flight attendants as hospitality ambassadors who make them comfortable with beverages, snacks, blankets, and pillows. But their main purpose is to assist in the rare event of an in-flight emergency.

Six Southwest flight attendants, along with Carter, say they feel less able to perform crucial duties because of the climate in which they’re now operating—and new hires appear to be less equipped to shoulder those responsibilities.

They have just made it such a hostile work environment. Southwest has made it that way, and flight attendants are afraid to do their jobs,” a flight attendant said. “But you’re supposed to put a smile on your face and pretend that everything is grand.”

The flight attendants describe feeling as though a backstabber is always ready to pounce, to report any action or statement that doesn’t fit the corporate ideology. They’re being held to strict conduct and uniform standards while “accommodations” are extended to people in protected classes, such as a minority woman who was allowed to wear a nose ring—which got a white female in trouble—and a male flight attendant who described himself as “nonbinary”—neither totally male nor totally female—being allowed to wear a skirt that appeared to be shorter than regulations allowed.

The nonbinary employee seemed to be using his position at the airline as a platform for LGBTQ activism and self-promotion, rather than focusing on benefiting the company or its customers, fellow flight attendants said. They shared screenshots of the nonbinary employee’s social media posts. One is a selfie of the mustached man posing in his Southwest uniform, with the comment, “My dress looks better on me than most chicks.”

That employee no longer works for Southwest, flight attendants said. Yet they said they were aware that a couple of employees faced disciplinary action for referring to the nonbinary employee as “he” in a members-only Facebook group for flight attendants.

Antics Embarrass Fellow Flight Attendants

One flight attendant perceives that the company is making skewed, unfair hiring decisions, and creating a level of absurdity that’s hard to stomach. She knows of people who are related to Southwest employees and have college degrees—which go beyond the high-school education requirement for flight attendants—“and they don’t get hired, and yet we have this guy, with a mustache, in a skirt, distracting us all because the company wants to fight over his pronouns.”

Being a flight attendant used to be considered prestigious and classy; Southwest was viewed as “Mount Rushmore,” a pinnacle for flight attendants, who felt proud just to be hired.

Now the pride is not about the brand of Southwest Airlines,” a flight attendant said. “It’s about how different I can be as an employee of Southwest Airlines—like, ‘Y’all need me more than I need you.’”

Public perception of the role has diminished, not just at Southwest, but across the industry. Airlines grant diversity-based exceptions to people who don’t want to look or act professional, the flight attendants said.

It used to be unusual to see flight attendants behave in ways that brought embarrassment to their coworkers. Now, quite a few of the new hires who were prized for their diversity “are rather risqué,” a flight attendant said. “They become very emboldened; they feel they can get away with this because they are in a protected class.”

Still, Southwest has had to fire employees who pushed the envelope too far, including one minority flight attendant who solicited sex in a social media video and another who videoed herself twerking. In both instances, the videos, provided to the Epoch Times, show the employees in Southwest uniforms.

Such conduct disgusts the flight attendants, and their concern is more than superficial. “If we relax the appearance standards and we’re letting people lower their professional standards, then they obviously are not equipped to handle any type of safety issue that can happen on that plane,” a flight attendant said.

“Where do you draw the line and say enough is enough?”

Commitment, Skills Insufficient

One of the flight attendants who has been targeted for religious and political views said her commitment to her job boils down to this: “I will give my life for my passengers and my crew, if that’s what I need to do. My last words will be, ‘Let’s roll,’” she said, referencing the famous words spoken by a passenger on one of the U.S. airplanes that were hijacked on Sept. 11, 2001.

She doesn’t see that same level of grit from the new hires. “They don’t have the same tough mentality,” she said. Nor do they have the same work ethic, which might be attributable to differences between the younger and older generations.

The older flight attendant described being busy from the beginning to the end of each flight while many of the new hires tend to just serve one round of drink orders, “then they go back to the back (of the airplane) and sit down for the rest of the flight.”

The new employees aren’t demonstrating mastery of the skills they were supposed to have been taught, or willingness to perform them. A passenger was having a medical emergency but the flight attendant in charge of that section “wouldn’t even come out of the galley to assist,” said one flight attendant. Instead, she and a second colleague had to take care of the ailing passenger.

Such an incident stokes her worst fear: “Somebody’s gonna die. With the lack of training that we’re seeing in the new hires that are coming out … there’s going to be somebody who’s not trained, facing an emergency.”

Read more here...

Tyler Durden Thu, 08/11/2022 - 06:30

Read More

Continue Reading

Government

‘Ding, Dong Inflation Is Dead’… But Probably Isn’t So Don’t Get Your Hopes Up Yet

‘Ding, Dong Inflation Is Dead’… But Probably Isn’t So Don’t Get Your Hopes Up Yet

Authored by Bill Blain via MorningPorridge.com,

“Inflation…

Published

on

'Ding, Dong Inflation Is Dead'... But Probably Isn't So Don't Get Your Hopes Up Yet

Authored by Bill Blain via MorningPorridge.com,

“Inflation is everywhere a misunderstanding of what actually caused it..“

The pace of US CPI inflation moderated slightly, but it’s too early for the market to conclude rate hikes are over. There are many imbalances still to resolve – especially in consumer credit. Meanwhile, the new UK premier’s clumsy attempts to blame the BOE raise questions.

Markets surged last night on the back of lower-than-expected US inflation. Markets globally rallied, anticipating a slowdown in the pace of Fed Interest Rate Hikes, and a resumption of the long bull Equity market. Bonds rallied. Joy, joy… joy..

Oh dear. It may be well to remember the Happy Munchkins in the Wizard of Oz singing Ding Dong, Inflation’s Dead…” but, that occurs right at the start of the film… before things get “challenging”. I’m not saying End-of-the-World.. just not-quite-as-rosy-as-you-hope!

The pace of US consumer price inflation fell to 8.5% y-o-y, down from 9.1% in June. It’s well to remember what the CPI number shows is fast prices are rising, not how much they have risen – it’s a subtle, but critical difference…

8.5% Inflation means prices are still rising, (Doh!), just less quickly than last month. Rising prices mean the Fed, and other Central Banks still have to address them. (Which is why expecting Central Banks to mellow rate rises/tighter monetary policy on a single snapshot number is a foolish hope.) 8% inflation sounds so much better than 9%, but it’s still inflation; an imbalance between supply and demand that prices are trying to correct. Result: central banks will keep raising rates to stun demand – if they are brave enough to court criticism from politicians.

The US number shows there are still significant inflationary pulses – and concurrent consequences – surging through the US economy. The lower number will focus analysts on just how quickly the inflation pace will start to fall. The oil shocks in the 1970s lasted effectively a decade. The first 1973 shock took around three years to abate, and was followed by an even stronger price shock in 1977 that took till the early 80s to resolve.

A one-month reversal in a longer-term inflation trend is not unusual – it’s far too early to say a one-month slight improvement in the pace of rising prices means the top has been crossed. But the inflation charts do show it is unusual to get consecutive months of declines, and then a sharp increase again. Its more common for inflation to remain stubbornly high for a number of years following an upspike. (That said… in time of “policy experimentation”, like 2010, an upspike was swiftly followed by a down spike.)

What the US CPI number did confirm is the US economy is in a very different place, and a different stage, to Europe and the Global economy. The key difference is the US report showed energy prices are normalising and reducing as petrol prices moderate. Jet fuel costs declined bringing down the cost of travel. In Europe – there is little chance of energy price moderation – if anything consumer energy bills will become increasingly chaotic and damaging to sentiment. Queue the great divergence between US and Europe – and what that means in terms of investment opportunities.

On the other hand; the US numbers show rising interest rates are impacting consumers cash, food prices continue to rise sharply while housing costs are also spiking. Ah… common experiences Europe and the US share.

The CPI numbers suggest the US economy is still in trouble. Over the past few months I’ve been watching things like Auto-loan delinquencies – as rates rise, and car prices surged on the back of availability and supply chain issues (primarily the shortage of chips), car financing costs became increasingly unaffordable. Auto-loan defaults are rising – but they have not become a crisis because – thus far – the used-car market can very quickly absorb repossessed cars. The reality is 20% of US autoloans go to sub-prime borrowers – who are the ones living pay-check to pay-check, and following years of declining real income (and now a crashing real-income shock) lack the financial resilience to keep paying.

Figures from the Fed show US Household debt is increasing – up 2% in Q2 2022 to $16.15 trillion (!). Officially, that’s because of repressed spending during the pandemic.

In reality, it’s cash-strapped US consumers are living off credit. Much of that credit is real: mortgage and auto-lending, but other numbers like credit cards and  from new DeFi lenders showing rising shadow-banking sector lending problems. The default crisis impacting lenders like Klarna comes on the back of cash-strapped consumers using credit to buy their daily milk, bread and petrol. You can’t repossess a bag of shopping.

The inflation driven economic threat in Europe is also about consumers. Years of low incomes, wage constraints, and job insecurity across much of Southern Europe leaves a massive number of consumers with precious few savings. The middle classes have been decimated by rising costs, consumer debt, and taxes.

(It’s a truism: if you can afford a lawyer and an accountant, you can avoid taxes… which is why tax gatherers, like the UK HRMC go for the weakest targets to collect unpaid dues. It takes less effort to extract a million in taxes from 10 struggling middle-class businessmen that it takes to get Amazon to pay a single cent. If there businesses collapse – so what, the tax got its money…)

Who is to blame for inflation?

The UK’s prime minister in waiting, Tank Girl Liz Truss ,says it’s all the Bank of England’s doing. Which is somewhat harsh.

  • I was unaware Bank of England Governor Andrew Bailey triggered the Russian invasion of Ukraine after first persuading Angela Merkle to close her nuclear plants and give German energy security to Vladmir Putin. `I though the Energy shock and food inflation shock were exogenous.

  • I was unaware it was Andrew Bailey who decided Tory MPS could give billions of govt money to their chums to not deliver functional PPE to the health service during the pandemic.

  • I was unaware it was Andrew Bailey who came up with (actually brilliant) furlough scheme to preserve jobs and consumer security (that was a very clever civil servant who has got zero credit for his efforts.)

  • I was unaware it was Andrew Bailey who set the government’s spending plans…

What I thought was Andrew Bailey and his colleagues at the Bank of England were maintaining a low interest rate economy to keep the pandemic economy functioning through the challenging pandemic years, and to keep the gilt market looking attractive so the UK Debt Management Office could continue to fund the Government’s funding schemes – all the while fretting about how to normalise ultra-low interest rates put in place to stimulate the economy in the 20-teens without destabilising everything.

Liz Truss doesn’t think so. That’s why she will not be getting my vote. (Not that I have one to give her.. but that’s not the point.)

The point is our next prime minister and First Lord of the Treasury will be chosen by 160,000 rank and file conservative party members. They are generally older, well-off, white, male and Eurosceptic. 63% are male. 80% are in the wealthy ABC demographic. 58% are over 55 and remember the Glory of Margaret Thatcher with religious reverence.

Which is why I think someone has been whispering in Tank Girl’s ear – I suspect the Minister for the Spanish Inquisition (Jacob Rees-Mogg). Now, Tank Girl wants to remove the Bank’s independence and replace inflation targeting with money supply targeting. Christ-on-a-bike: did I just drop through a worm hole into 1981? Big hair, shoulder pads, Duran-Duran and economic disaster…

I fear She opened the door into the Treasury’s Black Museum – and unlocked the box of Tragic Economic Mistakes, unleasing the Zombies of Monetarist Economic thinking like Mad Paddy Mitford (who says her plans are brilliant – unsurprisingly) and Tim Condon. Oh dear. Lord spare us…

If so, then we really are rubber ducked. Monetarism, ahem,  was such a success back in the 1980s – NOT! In the form of Thatcherism, the consequences are today’s broken Britain, the imbalance between London and the regions unknown outside the M25, the rebellious Scots and a host of long-term structural problems.

If someone had unleashed the Zombie Vampyres of Monetarism, then I’ll be sure to carry my crucifix, a sharp pointy wooden stake, and flask of Lagavulin (my holy water) when next in London.

Although its only August, the Christmas shops are already opening. I am tempted to write to Santa now. “Dear Father Christmas… I have been a very good boy all year. Please can we have a completely new UK Government?”

Tyler Durden Thu, 08/11/2022 - 07:20

Read More

Continue Reading

Spread & Containment

COVID antibody declines prompts call for booster jabs ASAP

Figures from the UK Office for National Statistics (ONS) have revealed that the number of people with higher
The post COVID antibody declines prompts call…

Published

on

Figures from the UK Office for National Statistics (ONS) have revealed that the number of people with higher levels of COVID-19 antibodies in their blood is declining quickly – leading to calls for booster vaccination campaigns to be started as soon as possible.

The ONS survey – based on swab and blood samples from thousands of households across the country – found that the proportion of people in England with antibody levels of at least 800 ng/ml fell from 82.4% in March to 71.9% in mid-July.

The 12.7% decrease is “obviously concerning,” according to Dr Quinton Fivelman, chief scientific officer at private testing company London Medical Laboratory, who says the trend is the same in other countries of the UK.

“We already know the latest Omicron BA.4 and BA.5 sub-variants are the most contagious yet and remain a potentially considerable threat to our health,” he said. “The UK population needs to retain a substantial number of antibodies going into the dangerous winter months.”

The finding comes as the percentage of people testing positive for COVID-19 continues to decrease in England, Wales and Scotland, with an uncertain trend, in Northern Ireland, according to the ONS’ latest update, which was published on 5 August.

Fivelman’s concern is that if the rate of decline continues, only 60% of the UK population will retain substantial antibodies if the next booster campaign for the over-50s and vulnerable people gets underway in early October.

“The new Omicron BA.4 and BA.5 sub-variants do not produce as high an immune response as the previous strains, so re-infection is more likely to occur,” he points out. “Higher levels of antibodies are important to neutralise the virus, stopping infection and limiting people transmitting the virus to others.”

On the plus side, the UK’s baseline antibody level of at least 179 ng/ml, determined at the height of the Delta variant, has held firm. In all 97.8% of people in England had antibody levels of 179 ng/ml in mid-March, and this had fallen only fractionally, to 96.3% by mid-July.

One issue facing the government is that new versions of the Pfizer and Moderna vaccines that have been tweaked to improve efficacy against Omicron may not be available in time for an earlier start for the booster campaign – or indeed October, unless the Medicines and Healthcare products Regulatory Agency (MHRA) can approve them quickly.

Both shots – based on the original Wuhan strain of SARS-CoV-2 and the BA.1 Omicron subvariant – are currently under review at the regulator.

The post COVID antibody declines prompts call for booster jabs ASAP appeared first on .

Read More

Continue Reading

Trending