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Futures Steady Ahead Of Fed Decision

Futures Steady Ahead Of Fed Decision

US equity futures were unchanged after two days of declines in underlying gauges as investors brace for…



Futures Steady Ahead Of Fed Decision

US equity futures were unchanged after two days of declines in underlying gauges as investors brace for today's 2pm Fed interest-rate decision along with its monetary policy outlook (although a potentially more surprising treasury buyback announcement could come as soon as 830am when the Treasury publishes its quarterly refunding announcement). Contracts on the S&P 500 were little unchanged, while Nasdaq 100 futures advanced 0.2% as of 7:30 a.m. in New York. Stocks have stabilized after a drop in the S&P 500 on Tuesday that was triggered by a surprise surge in job openings. European stocks erased earlier gains while US-listed Chinese stocks rallied in premarket trading and the Hang Seng Index rose in a session cut short by a storm warning as growing speculation over China’s reopening spurred another rally in Asia. The US dollar dropped for the second day as the yen strengthened in a sign traders anticipate a muted impact of Fed tightening on the currency; 10Y yields traded unchanged around 4.04%.

All eyes will be on the Fed later, when the central bank is widely expected to raise rates by 75 basis points for a fourth time in a row; the question is what the Fed does in December and onward. Here is a summary of Fed rate-hike expectations from major banks for Sept and Dec:

  • Bank of America: 75 bps, 50 bps
  • Barclays: 75 bps, 75 bps
  • Citigroup: 75 bps, 50 bps
  • Deutsche Bank: 75 bps, 75 bps
  • JPMorgan Chase: 75 bps, 50 bps
  • Goldman Sachs: 75 bps, 50 bps
  • Morgan Stanley: 75 bps, 50 bps
  • Wells Fargo: 75 bps, 50 bps

Goldman expects a more dovish 50bps Dec rate hike, but also a slower rise to peak as it has now added a 25bps rate hike in March which brings the Fed to 5.00%.

Chair Jerome Powell’s comments will be key, especially after a 7.8% rally in the S&P 500 since Oct. 12, triggered mostly by expectations of easing in the central bank’s hawkish narrative given risks to economic growth. Our full FOMC preview can be found here.

“It’s a matter of balance here -- the Fed doesn’t want to signal too much hawkishness, but also doesn’t want to sound too dovish as that would result in a huge leg up in share prices and too much of an easing in financial conditions,” said Shane Oliver, head of investment strategy at AMP Services. Oliver feels caution is still needed. “We may have seen the bottom in the share market and certainly sentiment has been very negative, but by the same token given recession risks and the yield curve continuing to invert in the US, that suggests risks are still high,” he said on Bloomberg TV.

“It’s a challenge for messaging because they don’t want to ease financial conditions significantly,” said Julia Coronado, the founder of MacroPolicy Perspectives LLC. “They need tight financial conditions to keep cooling the economy off. So he doesn’t want to sound dovish, but he may want to go slower.”

“Continuation of the year-end rally is contingent on the Fed delivering on the pivot narrative,” said Barclays Plc strategists led by Emmanuel Cau, who see current market optimism as misplaced. “It feels premature for the Fed to loosen financial conditions via equity and bond markets -- inflation is just too high.” Former Treasury Secretary Larry Summers also warned that expectations the central bank would pivot were “badly misguided,” saying the Fed should “stay on the current course.”

In premarket trading, US-listed Chinese stocks rallied for the second day and were set to extend Tuesday’s gains, after new unverified social media posts claimed the government is considering a slew of changes to its Covid Zero policy, including a shorter quarantine period for inbound travelers. Chipmaker Advanced Micro Devices rose after topping profit estimates, but Airbnb slumped after its bookings outlook for the fourth quarter fell short of expectations. Apple shares slipped after China ordered a seven-day lockdown of the area around Foxconn Technology Group’s main plant in Zhengzhou, a move that will severely curtail shipments in and out of the world’s largest iPhone factory. Here are all the notable premarket movers:

  • AMD rose 4.9% after topping profit estimates as the semiconductor company’s expansion into the server processor market helped offset falling demand for chips used in PCs.
  • Airbnb shares decline 6% after giving a downbeat outlook for 4Q bookings. While analysts applauded the firm’s robust 3Q results, they also highlighted the moderately weaker prospects for the alternative accommodation specialist amid FX headwinds.
  • Arcturus Therapeutics shares surge 33% in US premarket trading after the biotech entered a collaboration and license agreement with a unit of CSL. The pact reduces execution risk, Cantor Fitzgerald says, prompting the broker to raise its price target.
  • Bally’s cut to hold at Stifel, which says macro, regulatory and development risks in the near-term force the broker into “capitulation” and a move to the sidelines. Shares decline 1.8%
  • Bandwidth shares jump 15% in US premarket trading after the company forecast fourth-quarter revenue above the average analyst estimate and raised its full-year outlook.
  • Benefitfocus shares rise 48% to $10.35 in US premarket trading, after Voya Financial agreed to buy the company at $10.50 a share in cash.
  • Canada Goose cut its non-IFRS adjusted earnings per share guidance for the full year; the guidance missed the average analyst estimate. Shares declined as much as 3.6%.
  • Coty and L’Oreal declined after peer Estee Lauder’s second-quarter and full-year forecasts trailed consensus estimates, sinking the stock as much as 13% in premarket trading. Coty shares decline 2.8% and L’Oreal shares fell 1.7%.
  • Chegg jumps as much as 17.5% after the education-focused company reported better-than-expected third- quarter earnings and boosted its full-year outlook for revenue and adjusted Ebitda.
  • Match Group surges as much as 14.7% after the owner of dating apps including Tinder and OkCupid reported third-quarter revenue that beat the average analyst estimate and pledged to control costs. Analysts said that while 4Q and initial 2023 guidance were below expectations, they look achievable based on the current macro environment.
  • DuPont gain 3.6% in thin premarket trading after the company scrapped a planned $5.2 billion acquisition of Rogers Corp., a move which analysts say will bolster DuPont’s balance sheet and improve the scope for share buybacks.
  • Offerpad Solutions slump 3.8% in US premarket trading on Wednesday, ahead of the real estate firm’s third-quarter results due after the market close.
  • TFF Pharmaceuticals Inc. plunges 38% in premarket trading as studies of two inhaled powder therapies have been impacted by challenges tied to “staffing shortages, shipping, and global supply chain delays,” the company said in a release.
  • Tupperware shares plunged 33.4% after the company reported worse- than-expected third quarter results, including revenue and adjusted EPS that both missed analyst estimates.
  • Yum China shares jump 13.6% in US premarket trading after the restaurant operator reported flat same-store sales growth in the third quarter, enough to impress analysts who had expected a decline, given stringent Covid control measures in China.
  • ZoomInfo Technologies (ZI) shares plunge as much as 22% as analysts cut their price targets following 3Q results. Despite a beat-and- raise, comments from the software company that the operating environment is becoming more challenging show that it could be susceptible to a slowdown in the economy, according to analysts, who see growth moderating next year.

European equities are mixed after euro-area manufacturing activity sank to the lowest level since May 2020. Euto Stoxx 50 little changed, erasing earlier gains; the CAC 40 outperforms peers, while FTSE 100 and DAX lag. Healthcare stocks outperformed in Europe after Novo Nordisk A/S raised its operating profit and sales forecasts for the year; consumer products and personal care are among the best performing sectors. Here are some of the biggest European movers today:

  • Sinch shares rally as much as 36% after 3Q results, with improved free cash flow, reduced net debt and prolonged short- term financing giving another boost to the heavily shorted stock.
  • Shares in Danish wind turbine manufacturer Vestas rose as much as 8.6%, the most since August, after positive pricing concealed a 3Q results miss which led to a 5.5% fall in early trading.
  • Novo Nordisk rises as much as 5.9%, hitting the highest since August, with analysts noting the Danish drugmaker’s guidance raise and its confirmation on the timeline for its Wegovy obesity treatment.
  • Hiscox climbs as much as 6.2%, the most since August, after the insurer reported smaller-than- anticipated Hurricane Ian losses and solid trading across the rest of its business.
  • Next Plc rises as much as 3.7% after maintaining its profit guidance, which is a “small positive read to the online retail space,” RBC said.
  • Demant falls as much as 15%, the most since mid August, after the company cut its full- year guidance.
  • VGP slumps as much as 12% after Barclays downgraded the real estate developer to underweight from overweight.
  • Maersk drops as much as 7.3%, with Citi noting that the shipping firm’s lower expectations for contract rates are likely to weigh on investor sentiment.
  • Smurfit Kappa declines as much as 5.1% in Dublin after results, with Goodbody analysts highlighting the company’s “challenging market conditions” and labor inflation pressures. Packaging peer DS Smith also slides.

Euro-area manufacturing activity sank to the lowest level since 2020 and A.P. Moller-Maersk A/S, a bellwether for global trade, cut its forecast for the global container market, saying inflation will persist even as demand drops as much as 4% this year. The company’s shares fell.

Earlier in the session, Asian stocks headed for a three-day advance as growing speculation over China’s reopening spurred another strong rally, while traders awaited the Federal Reserve’s decision on interest rates. The MSCI Asia Pacific Index rose as much as 0.9%, led by the consumer discretionary sector. Chinese and Hong Kong stocks drove gains in the region as investors scooped up shares following wide circulation of unverified posts outlining a loosening of the nation’s Covid Zero policy. Still, enthusiasm that sparked the rally in Chinese stocks could fade if authorities there don’t follow up on the speculation, Jun Rong Yeap, a market strategist at IG Asia Pte, wrote in a note.

The Hang Seng Index had its best two-day run since March before the session was cut short by a storm warning; The Hang Seng China Enterprises Index rose 2.8%, also capping its best two-day rally since March. Trading in Hong Kong closed earlier than usual due to a tropical storm.  Most other markets posted modest gains or declines as investors opted to wait and assess the Fed’s policy signals. Data on Tuesday showing a solid US labor market bolstered speculation that policy could remain aggressively tight even with the threat of a recession. The central bank is set to raise rates by 75 basis points for the fourth time in a row on Wednesday. 

In rates, Treasuries were mixed ahead of FOMC rate decision at 2pm ET, with long-end yields slightly cheaper on the day and front-end yields richer by ~3bp, steepening the curve as the 2-year yield fell by around 3bps and 30-year yields added 2bps. 10-year TSY yields were little changed around 4.04% as the curve steepens around the sector; 2s10s, 5s30s spreads are wider by ~2bp and ~3bp on the day vs UK 2s10s, 5s30s spreads wider by ~9bp and ~13bp Broadly subdued price action compares with aggressive steepening in gilt curve, where 2- and 5-year UK yields are ~1bp richer on the day. Focus on Fed rate decision may limit price action over early US session; traders have been hedging prospect of Fed to hint at a slowdown in rate hikes for the December policy meeting over the past couple of weeks The quarterly refunding announcement at 8:30am is viewed as having limited potential for auction size changes and may signal progress toward a buyback program. Bunds bear-flattened, as yields rose up to 4bps. Italian bond yields rose by around 5bps across the curve.

In FX, the Bloomberg Dollar Spot Index fell by around 0.2% as the greenback was steady or weaker against all of its Group-of-10 peers amid positioning ahead of today’s Fed meeting. SEK and GBP are the weakest performers in G-10 FX, NZD and JPY outperform

  • The euro staged a slight rebound to trade around $0.99 after two days of losses against the dollar.
  • The pound was steady around $1.15 while front-end gilts rallied, sending 2- year yields down by around 11bps
  • The yen led G-10 gains along with New Zealand’s currency; the yen rose a second day versus the dollar. Bank of Japan Governor Kuroda told parliament the nation’s economy is no longer in deflation since the central bank started its current easing program, though added that inflation was seen slowing in fiscal year 2023; minutes of the BOJ’s September meeting noted it was desirable to keep an easing bias
  • The kiwi and sovereign yields advanced as unemployment stayed near a record low in the third quarter while wages surged.

In commodities, wheat futures fell after Turkey’s Erdogan said grain shipments via the Ukraine corridor would resume.  oil traded near $88 a barrel ahead of the Fed rate decision. West Texas Intermediate futures pared an earlier gain to trade little changed with prices stuck in a $12 band over the last month. Glencore Plc officials delivered cash in private jets to officials in west Africa, UK prosecutors said as they laid out a web of bribery and corruption orchestrated by the London oil trading desk. President Joe Biden’s threat to slap a tax on oil-company profits is more bluster than threat as the clock runs out on the administration’s efforts to tame fuel prices ahead of midterm elections. Spot gold rises roughly $8 to trade near $1,656/oz as traders mull the possibility of a rate-hike slowdown.



Market Snapshot

  • S&P 500 futures up 0.3% to 3,877.75
  • STOXX Europe 600 up 0.4% to 416.07
  • MXAP up 0.8% to 139.99
  • MXAPJ up 0.8% to 448.01
  • Nikkei little changed at 27,663.39
  • Topix up 0.1% to 1,940.46
  • Hang Seng Index up 2.4% to 15,827.17
  • Shanghai Composite up 1.2% to 3,003.37
  • Sensex down 0.5% to 60,846.16
  • Australia S&P/ASX 200 up 0.1% to 6,986.66
  • Kospi little changed at 2,336.87
  • Brent Futures up 0.2% to $94.81/bbl
  • Gold spot up 0.3% to $1,652.92
  • U.S. Dollar Index down 0.27% to 111.18
  • German 10Y yield up 0.5% to 2.14%
  • Euro up 0.3% to $0.9902

Top Overnight News from Bloomberg

  • Overnight volatility rallies for the major currencies as traders position for the Federal Reserve monetary policy decision later Wednesday. Pound hedging costs lead the race as the Bank of England also meets Thursday
  • The Federal Reserve looks set to deliver a fourth straight super-sized rate increase with Chair Jerome Powell repeating his resolute message on inflation and opening the door to a downshift -- without necessarily pivoting yet
  • Euro-area manufacturing activity sank to the lowest level since the first Covid-19 lockdowns in 2020 as record inflation and a weakening global economy erode demand for goods
  • German companies have never been so concerned about sales as they struggle with the energy crisis and a gloomy world economy, and they fear the worst is yet to come, a survey found
  • People’s Bank of China Governor Yi Gang gave an optimistic outlook for the economy on Wednesday, saying it remains “broadly on track” and he hoped the property market can achieve a “soft landing”

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mixed with the region cautious and price action mostly rangebound after the lacklustre handover from the US where strong JOLTS data spurred a more hawkish Fed terminal rate pricing and as markets await the FOMC. ASX 200 was kept afloat by strength in the commodity-related sectors but with upside capped after PM Albanese rejected providing cash handouts and with the property industry pressured after home loans and building approvals fell. Nikkei 225 was indecisive as earnings releases remained in focus and officials continued their currency jawboning. KOSPI wiped out nearly all its early gains amid geopolitical concerns after North Korea reportedly fired at least 10 missiles and which was the first time its missiles fell near South Korea’s territorial waters. Hang Seng and Shanghai Comp eventually extended their recent rumour-driven surge regarding China reopening despite the denial by a Foreign Ministry spokesperson and with officials pledging policy support measures, while Hong Kong markets were closed after half-day due to a storm signal 8.

Top Asian News

  • PBoC Governor Yi said China's economy is broadly on track and potential growth is to remain in a reasonable range, and noted that inflation remains subdued and accommodative monetary policy is to support the economy. PBoC Governor Yi added that they will continue to improve the business environment, while they will deepen supply-side reforms and step up targeted support for key and weak sectors, according to Reuters.
  • China state planner official said China's foreign investment increased steadily so far this year and will encourage more foreign investment in the manufacturing industry, according to Reuters.
  • China locked down the area around the world's largest iPhone factory, according to Bloomberg.
  • BoJ September Meeting Minutes stated a few members said they need to be vigilant to the impact monetary tightening by some central banks could have on global markets, while several members said a weak yen could hurt households, small firms and non-manufacturers. Members agreed that Japan's economy is picking up and several members said the BoJ must communicate to the public its monetary policy does not directly target FX moves.
  • RBNZ Financial Stability Report noted that the financial system remains resilient but added some households and businesses will be challenged by the rising interest rate environment, while it also stated that there are increasing downside risks to the global economic outlook and the extent to which the economic activity will slow due to monetary policy tightening remains uncertain. Furthermore, the RBNZ later stated it will consider tightening policy faster or slower at the Monetary Policy Statement.
  • Chinese Commerce Ministry says it will expand the imports of advanced technology, key equipment and components, and increase imports of energy and agricultural products in short supply, via a Party Congress supplementary reading cited by Reuters.

European bourses are mixed as the initial positive bias faded amid downward PMI revisions and increasing geopolitical tensions, Euro Stoxx 50 +0.2%. Health Care is the outperforming sector after Q3 earnings from GSK (+1.6%) and Novo Nordisk (+4.5%), more broadly sectors are mixed with no overarching bias. US futures are similarly contained but have been less reactive to the geopolitical and PMI developments as participants remain firmly affixed on the Fed, ES Unch. & NQ +0.2%. A.P. Moeller-Maersk (MAERSK DC) expect a slowdown of the global economy to lead to softer market in ocean. Cuts FY22 global container demand forecast to -2% to -4%. Freight rates have begun normalising during Q3; Maersk -5.0%. Moody's downgrades the outlook for the banking sector in Germany, Italy, Hungary, Poland, Slovakia, to negative from stable; citing energy crisis, high inflation, and rising rates, via Reuters.

Top European News

  • Germany's DIHK says German companies are bracing for another economic slump in the next 12 months; 52% of firms see business worsening in the next 12 months; says German GDP should be +1.2% in 2022 and -3% in 2023,
  • Germany's VDMA engineering orders in Sep -5% Y/Y (Domestic -4%, Foreign Orders +8%); in first 9M orders +1% Y/Y (Domestic -3%, Foreign +2%)
  • Next Sales Better Than Expected Despite UK’s Costs Crisis
  • Vestas Cuts Outlook Again as Wind Turbine Industry Spirals
  • North Korea Fires 17 Missiles in Biggest-Ever Daily Barrage
  • Novo Boosts Sales Forecast on Demand for Obesity Drug Wegovy
  • Sampo 3Q Pretax Profit Misses Estimates; Decides on Dual Listing
  • Britishvolt Says Loan Gives EV Battery Startup Weeks of Runway


  • USD is under modest pressure as we count down to the FOMC, action which is benefiting peers across the board with the antipodeans and JPY currently the main beneficiaries.
  • DXY has slipped to a 111.12 low from earlier highs above the 111.50 mark, with brief respite for the USD occurring alongside the NY Times article re. Russia.
  • EUR/USD relatively unreactive to the morning's PMI revisions, downbeat commentary and numerous surveys out of Germany featuring a similar narrative, single currency holding around 0.9900.
  • NZD outpaces and has lifted to a test of the 0.59 mark, where the current WTD peak resides, following domestic data which seemingly keeps hawkish impulses in focus.
  • JPY is the next best performer given its haven status and after BoJ Minutes noted several members said a weak yen could hurt; USD/JPY probing but yet to lose 147.00.
  • BoC Governor Macklem said they expect the policy rate will need to rise further and how much further rates will go up depends on how monetary policy is working, how supply chains are resolving and how inflation is responding to tightening. Macklem added that there are no easy outs to restoring price stability and reiterated the tightening phase will draw to a close and they are getting close but are not there yet.

Fixed Income

  • EGBs are modestly pressured with yields a touch higher as such, though the complex is currently relatively contained ahead of a busy PM docket incl. the FOMC.
  • USTs are essentially flat with yields incrementally steeper but similarly contained as such; note, the pre-FOMC docket is busy and features ADP alongside Quarterly Refunding.
  • Back to Europe, Bunds and peers haven't been too reactive to the downbeat PMI releases/commentary, with Bunds also conscious of upcoming Green supply; 10yr yield continues to lift from 2.10%.


  • Crude benchmarks have given up their USD and China induced APAC upside amid downbeat commentary from Maersk and the EZ Final Manufacturing PMIs.
  • Currently, the benchmarks are incrementally softer on the session and in proximity to the USD 88/bbl and USD 94/bbl handles for WTI and Brent respectively.
  • Spot gold is deriving support from the USD's pullback and renewed geopolitical focus on both N.Korea and Russia, with the yellow metal having surpassed its 10-DMA but currently capped by the 21-DMA at USD 1659/oz; base metals similarly firmer on the USD action and overnight trade.
  • Russia's Kremlin exports of Russian fertiliser was an integral part of grain deal, but difficulties remain; says Russia's participation in the deal remains suspended, via Reuters; prior to this, Turkish President Erdogan said the Russian Defence Minister told his Turkish counterpart the the grain deal will resume; grain deal will resume on mid-day Wednesday.
  • Most recently, Russia is to resume participation in the Black Sea grain deal, according to Reuters citing the Defence Ministry; it was possible to obtain written guarantees from Kyiv not to use grain corridor for military operations against Russia.


  • Ukrainian President Zelensky said they need reliable, long-term defence for the grain corridor and that Russia must be told it will receive a firm world response if it takes steps to disrupt Ukrainian food exports, according to Reuters.
  • Senior Russian military leaders recently had conversations to discuss when and how Moscow might use a tactical nuclear weapon in Ukraine, according to NYT citing sources, President Putin was not part of the conversations; "The intelligence about the conversations was circulated inside the U.S. government in mid-October.".
  • North Korea has reportedly fired at least 23 missiles in total from the east and west coasts on Wednesday the initial rounds of which prompted South Korea to place its Ulleung Island under an air raid warning and was the first time North Korean missiles fell near the South's territorial waters, according to Yonhap and YTN.
  • South Korean President Yoon ordered a swift and firm response and South Korea launched air-to-ground missiles which were fired towards the north of the maritime border, while South Korea closed some air routes off the east coast of the Korean peninsula after North Korea's missile launches, according to the Transport Ministry cited by Reuters.

US Event Calendar

  • 07:00: Oct. MBA Mortgage Applications, prior -1.7%
  • 08:15: Oct. ADP Employment Change, est. 185,000, prior 208,000
  • 14:00: Nov. FOMC Rate Decision

DB's Jim Reid concludes the overnight wrap

As we arrive at the latest decision day for the Fed, any remaining hopes of a dovish pivot continued to fizzle out over the last 24 hours, with futures once again pricing in a terminal fed funds rate above 5%. The main driver behind that was another round of US data yesterday, which showed that labour markets were tighter and the economy was in better shape than previously thought, which in theory should give the Fed more space to keep hiking rates. In turn, that prompted a big turnaround for risk assets, with the S&P 500 (-0.41%) losing ground for a second day running, whilst 10yr Treasury yields shot up by more than +15bps intraday after the releases came out.

Ahead of those releases, there had actually been a strong rally across multiple asset classes thanks to speculation that China might ease up on their Covid restrictions (more on which below). But the latest data caused a sharp reversal shortly after US markets opened, particularly given the news that US job openings had unexpectedly risen in September to 10.717m (vs. 9.750m expected), alongside an upward revision to the August number. That means there were still 1.86 job openings per unemployed worker in September, which is creating significant inflationary pressures, and suggests that the decline in job openings in August to a one-year low might have been a blip. On top of that, the quits rate of those voluntarily leaving their jobs (which is strongly correlated with wage growth) remained at 2.7% for a third month running.

Just as the labour market appeared to be in surprising strength, there was an additional dose of optimism about the economy from the ISM manufacturing reading for October, which came in at 50.2 (vs. 50.0 expected). Although it’s true that was the weakest reading since May 2020, it was still a touch better than expected and came amidst improvements in the employment (50.0) and new orders (49.2) components relative to last month, which gave further ground for optimism. In addition, the final manufacturing PMI for October was revised up half a point from the flash reading to 50.4, leaving it back above the 50-mark that separates expansion from contraction.

When it comes to today’s policy decision, the Fed are widely expected to hike rates by 75bps for a fourth consecutive meeting. But the more important question for markets today (and where there’s considerably more doubt) is whether the Fed might signal a downshift in the pace of hikes at subsequent meetings. This is a tricky balancing act for them, since any signal of a pivot risks leading to easier financial conditions that makes their job of bringing down inflation even harder. That was what happened after the July meeting, where investors interpreted matters in a dovish light, and the Fed had to reiterate their hawkish intent, culminating in Chair Powell’s August speech at Jackson Hole. Our US economists write in their preview (link here) that Chair Powell’s press conference will likely not pre-judge the outcome of the December meeting and will emphasise the data dependence of the decision, not least with another couple of CPI reports and jobs reports beforehand. They expect him to leave open the prospects of another 75bp hike in December, but present a strong base case for downshifting the pace of hikes by early 2023 at the latest.

Ahead of the Fed’s decision, markets moved to ratchet back up their expectations of how high they’re set to take rates over the coming months. Indeed, the rate priced in by end-2023 moved up another +9.9bps to 4.66%, which brings its gains over the last 3 sessions to +37.1bps and means that the bulk of the move lower after October 21 thanks to Nick Timiraos’ WSJ article has now reversed. In light of that, 2yr Treasuries yield gained +6.2bps on the day to reach 4.54%, with the moves higher occurring entirely after those strong US data releases mentioned above. The 10yr Treasury yield (-0.6bps) did close slightly lower at 4.04%, but that was still more than +10bps above its intraday levels prior to the releases and in overnight trading they’re back up +0.9bps to 4.05%. Over in Europe, sovereign bonds followed a similar pattern over the day, with a sharp intraday reversal following the US data, although yields on 10yr bunds (-1.0bps), OATs (-0.1bps) and BTPs (-3.5bps) still ended the session lower.

Those expectations of a more hawkish Fed led to a reversal for equities too, and the S&P 500 (-0.41%) swiftly gave up its gains after the open to fall back for a second consecutive session. Tech stocks led the declines once again, and there was a significant milestone for the FANG+ index (-0.95%) of megacap tech stocks, with the index closing at a 2-year low, having now shed -45.65% since its peak just under a year ago. European equities ended the day in positive territory, albeit only after giving up a decent chunk of their earlier gains, with the STOXX 600 moving from an intraday peak of +1.51% to only close up +0.53%.

That earlier momentum had been propelled in large part thanks to speculation about a potential end to Covid restrictions in China, with that backdrop seeing the CSI 300 post its strongest daily performance since March yesterday. The moves were triggered by unconfirmed posts on social media that China was forming a committee which would look at relaxing restrictions, with a suggestion for reopening in March 2023. However, a spokesman for the Chinese Foreign Ministry said that he was “not aware of what you mentioned” when asked about the issue at a press briefing on Tuesday.

Overnight in Asia, that continued speculation about a policy reversal has seen a fresh outperformance in a number of equity indices, with the Hang Seng (+2.50), the CSI 300 (+1.48%) and the Shanghai Comp (+1.29%) all recording solid gains. That’s in spite of the absence of any official confirmation about a change in China’s policy. Elsewhere, some of the other indices have been more mixed, with the Nikkei (-0.10%) slightly lower and the Kospi (+0.24%) recording a modest advance, although US futures are pointing in a more positive direction, with those on the S&P 500 up +0.32% ahead of the Fed’s decision.

On the data side, there were some fresh indications of global inflationary pressures overnight, with South Korea’s CPI inflation seeing its first rebound in three months as it rose to +5.7% as expected, whilst core CPI surpassed expectations to hit a 13-year high of +4.8% (vs. 4.5% expected). In the meantime, we also heard from Bank of Japan Governor Kuroda who reiterated their dovish policy, saying that they were not thinking of rate hikes or changing their yield curve control policies now.

Back in the US, we’re now less than a week away from the mid-term elections on Tuesday, and momentum has remained with the Republicans in recent days. According to FiveThirtyEight’s model, they now have a 51% chance of taking the Senate, which is up from 30% only six weeks ago, whilst the chances of them regaining the House now stand at 83%.

To the day ahead now, and the main highlight will be the Fed’s latest policy decision and Chair Powell’s press conference. In the meantime, ECB speakers today include Makhlouf, Villeroy and Nagel. On the data side, we’ll get October data on German unemployment, the final Euro Area manufacturing PMIs, and the ADP’s report of private payrolls for the US. Finally, earnings releases include Qualcomm, CVS Health and Booking Holdings.

Tyler Durden Wed, 11/02/2022 - 08:10

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Economic Death Spiral

Economic Death Spiral

Authored by Robert Stark via Substack,

Fed Trap: Financial Collapse or Hyper Inflation?

With this banking crisis,…



Economic Death Spiral

Authored by Robert Stark via Substack,

Fed Trap: Financial Collapse or Hyper Inflation?

With this banking crisis, which has serious Lehman vibes, it is a good time to revisit my article, Is This The End of The End of History, from March of last year. The article dealt with the theme of collapse vs stagnation, and historical cycles, in light of the Ukraine war, the post-pandemic climate, the onset of inflation, and speculation about economic collapse. A point of mine, that has especially been vindicated, is that “a delay in the Fed raising interest rates, could cause a short term rally in stocks, further expanding the bubble. The bigger the bubble, the worse inflation gets, and the longer the Fed keeps delaying raising rates, the worse the crash will be down the road.” For the most part, most of my geopolitical and economic forecasts have come true, though I actually predicted an economic collapse to occur sooner, which actually vindicates that point, that kicking the can down the road will just create a much worse crisis.

Despite countless signs of economic volatility, the recent bank failures, with shockwaves to the entire financial system, are a turning point, where it is clear that there is going to be a severe economic downturn. For instance, Elon Musk recently said, lot of current year similarities to 1929, and Moody’s cut the outlook on the entire U.S. banking system to negative from stable, citing a "rapidly deteriorating operating environment." Even the perma bulls, mainstream media, and financial “experts,” can no longer deny the obvious signs of economic peril. However, the bullish propaganda was still strong as recently as January, which was really the bulls’ last gasp, with the monkey rally, in response to the Fed only raising interest rates by .25 points, plus economic data showing record low unemployment plus a dip in inflation.

It is important to emphasize that the same figures in media, banking, and government, who were recently shilling a soft landing or mild recession, were previously saying that inflation is transitory. It is especially laughable to think that there are people who take someone like CNBC’s, Jim Cramer, seriously, who in 2008 told his audience don’t be silly on Bear Stearns, right before it crashed, and more recently shilled for Silicon Valley Bank, and is still predicting a soft landing. A lot of the recent propaganda is practically identical to right before the 08 crash, as well as during stagflation in the 70s, and even before the Great Depression, as the media has vested economic and political interests in propping up the markets. The financial YouTuber, Maverick of Wall Street, brilliantly uses this “self-love” gif of  Jack Nicholson, from the film, One Flew Over the Cuckoo’s Nest, as a metaphor for whenever perma-bulls see any data that may signify a Fed pivot, causing stocks to rally. As the desperation really kicks in, expect further talk of a soft landing, as well as more rallies in stocks, as we saw in response to the bailouts, as well as desperate investors switching back and forth between the NASDAQ and S&P500, which happened in 08. So any return to bullish sentiment is actually a sign of greater economic catastrophe. The stock market rallying over bad economy news, as a sign of a potential pivot, just further shows that the markets are not a good metric for the health of the economy. Not to mention that the top 1% own over half of all stocks.

It has always been the case with bubbles, that the greater the size of the bubble, the more copes to deny reality, and the more vested interests there are in preventing the inevitable crash. Certainly many corporations and banks have made economic decisions based upon an assumption of a soft landing or Fed pivot. This also explains the gaslighting to justify that the 2010s economic boom, especially in tech, was based upon productivity and innovation, when it was primary due to Fed monetary policy, plus data mining in the case of Big Tech. While it is silly for conservatives to blame wokeness as the primary culprit of bank failures, wokeness and bullshit DEI jobs, are a symptom of the corruption that Fed policy enabled. 

Fed Balance Sheet: Return to QE


The current banking crisis is triggering more stock buybacks, and a return to Quantitative Easing with the bank bailouts, including plans to inject another $2 Trillion into the banking system, on top of the $300 billion increase in the Fed’s Balance Sheet, in just the last week. This seems counter intuitive, as QE caused inflation, but the economy is so addicted to the “Cocaine,” that is  cheap money. So basically quantitative tightening is being implemented and interest rates raised  to stop inflation, but as soon as the first major economic disruption of raising rates is felt, then a return to financial policies to further prop up the bubble, causing more inflation. Now the Fed is trapped with two bad options, raise rates or pivot, both of which will lead to inevitable economic doom.

Populists can talk about nationalizing the banks into public debt free banking, and Austrian School libertarians can call for ending the Fed, and returning to a gold standard. While it is true that the Federal Reserve is a corrupt system, that is quasi private in how private banks own shares, the reality is that we are stuck with this system of relying upon the Fed’s interest rates, for the incoming economic crisis. If the Fed continues raising rates, there will be a liquidity crisis, with more bank failures. While interest rates were close to zero, banks used uninsured deposits to both invest in securities and purchase bonds, and thanks to fractional reserve banking, banks are only required to hold a fraction of deposits. So when rates rose, bonds fell in value and unrealized losses surged, so the banks were not able to pay off their depositors.


Regional banks make up about half of all US banking, so any contagion in the banking system, as people and businesses move their deposits to mega banks, deemed “too big to fail,” could trigger a Depression. One of the main reasons that the economy has not crashed sooner is because more people have been tapping into their savings and maxing out their credit cards. However, high interest rates will cause many people to default on their credit card debt, which will exacerbate the banking crisis. Not to mention Auto loans defaults wiping out credit unions, and the potential for another mortgage crisis, due to rising mortgage rates. There is a ripple effect, as far as rising interest rates being felt by debt holders, and now is just the tip of the iceberg. This could end up being a multifaceted debt crisis, in banking, corporate debt, personal debt, and government debt.

Besides the Fed likely pivoting soon due to the banking crisis, higher rates will make interest payments on the National Debt too expensive to pay off, risking a default on government debt. Overall levels of debt, both public and private, are much worse than when Fed Chair, Volcker, raised rates very high to successfully quell inflation. Any freeze in Federal spending or a default on the national debt, in response to the debt ceiling, will crash the economy, and any major extension in the debt ceiling will accelerate inflation. There is a good chance that inflation will be tolerated, with the dollar greatly devalued, to make government debt cheaper so that creditors eat the costs.

Source: Peter G. Peterson Foundation

A tight labor market is the main case that the bulls make to prove a strong economy. However, the official BLS jobs numbers are “baked” to exclude those who have given up on seeking employment, as well as counting 2nd or 3rd jobs. Not to mention that the BLS numbers were exposed by the Fed as overstating 1 million jobs during 2022. Even if one accepts the “baked” numbers, layoffs have a lagging effect on unemployment, including by industry (eg. tech layoffs before service sector). Now new jobless claims have grown at the fastest pace since Lehman'. It is also noteworthy that just about every recession has been preceded by low unemployment numbers. The increase in layoffs will put further pressure on the Fed to pivot, which on top of increased unemployment benefits, will cause inflation to surge again. This creates another doom loop, as inflation leads to more unemployment, as consumers are forced to cut back on spending.

Source: ZeroHedge

While bulls can say that this time is different from past crashes, all of the signs are pointing to this crisis being much worse than previous crashes. For instance, the economic recovery, after Volcker was done raising rates to fight inflation, was possible because of lower levels of debt, but the US has never entered a recession with debt/GDP at 125% and deficit/GDP at 7% in at least 85 years. Also the fallout of the 2008 crash was mitigated by a strong dollar, which also minimized the effects of inflation last year, but inflation will surge if the dollar is weakened. Despite signs of a pivot, the Fed has been moving much faster to fight inflation, then in the past, even with Volker. This crisis is also unique in that rates are being raised while entering a severe recession, and inflation could coincide mass layoffs. While the general assumption is that severe economic downturns are deflationary, financial commentator, Peter Schiff, makes a compelling case as for why an Inflationary Depression is a likelihood. Under this nightmare scenario, which would be much worse than even the Great Depression, inflation will negate any of the remedies that ended past crises, such as the New Deal, quantitative easing in 08, and the covid stimulus. Other signs of economic peril include, the steepest yield curve inversion since the early 80s recession, which is a barometer that has predicted just about every single recession, a major decline in ISM manufacturing sales, a big decline in savings rates, and Americans’ credit card debt approaching a record $1 Trillion.


This is the perfect storm with inflation, stagflation, recession, a potential debt crisis, as well as energy and supply chain issues. With this bubble to end all bubbles or too big to fail on steroids, the Fed has two choices, cause a liquidity crisis by shrinking the money supply, or letting inflation rip. While raising rates appears to be the least bad of these two options, further rate hikes are futile with the return of QE. A combo of QE plus interest rates having to remain high, is what could lead to that scenario of inflationary financial collapse, that Peter Schiff warned about. Though most likely it will either be long term stagflation or a deflationary Depression. This is not a hyperbole, nor clickbait, but a Depression is a very real possibility, especially if policy makers continue to kick the can down the road, to prop up the bubble.

*  *  *

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Tyler Durden Tue, 03/21/2023 - 17:25

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Three Years To Slow The Spread: COVID Hysteria & The Creation Of A Never-Ending Crisis

Three Years To Slow The Spread: COVID Hysteria & The Creation Of A Never-Ending Crisis

Authored by Jordan Schachtel via ‘The Dossier’…



Three Years To Slow The Spread: COVID Hysteria & The Creation Of A Never-Ending Crisis

Authored by Jordan Schachtel via 'The Dossier' Substack,

Last Thursday marked the three year anniversary of the infamous “15 Days To Slow The Spread” campaign.

By March 16, yours truly was already pretty fed up with both the governmental and societal “response” to what was being baselessly categorized as the worst pandemic in 100 years, despite zero statistical data supporting such a serious claim.

I was living in the Washington, D.C. Beltway at the time, and it was pretty much impossible to find a like-minded person within 50 miles who also wasn’t taking the bait. After I read about the news coming out of Wuhan in January, I spent much of the next couple weeks catching up to speed and reading about what a modern pandemic response was supposed to look like.

What surprised me most was that none of “the measures” were mentioned, and that these designated “experts” were nothing more than failed mathematicians, government doctors, and college professors who were more interested in policy via shoddy academic forecasting than observing reality.

Within days of continually hearing their yapping at White House pressers, It quickly became clear that the Deborah Birx’s and Anthony Fauci’s of the world were engaging in nothing more than a giant experiment. There was no an evidence-based approach to managing Covid whatsoever. These figures were leaning into the collective hysteria, and brandishing their credentials as Public Health Experts to demand top-down approaches to stamping out the WuFlu.

To put it bluntly, these longtime government bureaucrats had no idea what the f—k they were doing. Fauci and his cohorts were not established or reputable scientists, but authoritarians, charlatans, who had a decades-long track record of hackery and corruption. This Coronavirus Task Force did not have the collective intellect nor the wisdom to be making these broad brush decisions.

Back then, there were only literally a handful of people who attempted to raise awareness about the wave of tyranny, hysteria, and anti-science policies that were coming our way. There were so few of us back in March in 2020 that it was impossible to form any kind of significant structured resistance to the madness that was unfolding before us. These structures would later form, but not until the infrastructure for the highway to Covid hysteria hell had already been cemented.

Making matters worse was the reality that the vast majority of the population — friends, colleagues, peers and family included — agreed that dissenters were nothing more than reckless extremists, bioterrorists, Covid deniers, anti-science rabble rousers, and the like.

Yet we were right, and we had the evidence and data to prove it. There was no evidence to ever support such a heavy-handed series of government initiatives to “slow the spread.”

By March 16, 2020, data had already accumulated indicating that this contagion would be no more lethal than an influenza outbreak.

The February, 2020 outbreak on the Diamond Princess cruise ship provided a clear signal that the hysteria models provided by Bill Gates-funded and managed organizations were incredibly off base. Of the 3,711 people aboard the Diamond Princess, about 20% tested positive with Covid. The majority of those who tested positive had zero symptoms. By the time all passengers had disembarked from the vessel, there were 7 reported deaths on the ship, with the average age of this cohort being in the mid 80s, and it wasn’t even clear if these passengers died from or with Covid.

Despite the strange photos and videos coming out of Wuhan, China, there was no objective evidence of a once in a century disease approaching America’s shores, and the Diamond Princess outbreak made that clear.

Of course, it wasn’t the viral contagion that became the problem.

It was the hysteria contagion that brought out the worst qualities of much of the global ruling class, letting world leaders take off their proverbial masks in unison and reveal their true nature as power drunk madmen.

And even the more decent world leaders were swept up in the fear and mayhem, turning over the keys of government control to the supposed all-knowing Public Health Experts.

They quickly shuttered billions of lives and livelihoods, wreaking exponentially more havoc than a novel coronavirus ever could.

In the United States, 15 Days to Slow The Spread quickly became 30 Days To Slow The Spread. Somewhere along the way, the end date for “the measures” was removed from the equation entirely.

3 years later, there still isn’t an end date…

Anthony Fauci appeared on MSNBC Thursday morning and declared that Americans would need annual Covid boosters to compliment their Flu shots.

So much of the Covid hysteria era was driven by pseudoscience and outright nonsense, and yet, very few if any world leaders took it upon themselves to restore sanity in their domains. Now, unsurprisingly, so many elected officials who were complicit in this multi-billion person human tragedy won’t dare to reflect upon it.

In a 1775 letter from John Adams to his wife, Abigail, the American Founding Father wrote:

“Liberty once lost is lost forever. When the People once surrender their share in the Legislature, and their Right of defending the Limitations upon the Government, and of resisting every Encroachment upon them, they can never regain it.”

Covid hysteria and the 3 year anniversary of 15 Days To Slow The Spread serves as the beginning period of a permanent scar resulting from government power grabs and federal overreach.

While life is back to normal in most of the country, the Overton window of acceptable policy has slid even further in the direction of push-button tyranny. Hopefully, much of the world has awakened to the reality that most of the people in charge aren’t actually doing what’s best for their respective populations.

Tyler Durden Tue, 03/21/2023 - 18:05

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From the bed sheets to the TV remote, a microbiologist reveals the shocking truth about dirt and germs in hotel rooms

The filthy secrets of hotel rooms and why you might want to pack disinfectant on your next trip.




Relaxing in filth? Pexels/Cottonbro studio

For most of us, staying in a hotel room is either something of a necessity – think business travel – or something to look forward to as part of a holiday or wider excursion.

But what if I told you there’s a large chance your hotel room, despite how it might appear to the naked eye, isn’t that clean. And even if it’s an expensive room, that doesn’t necessarily mean it’s any less dirty.

Indeed, whoever has stayed in your room prior to you will have deposited bacteria, fungi and viruses all over the furniture, carpets, curtains and surfaces. What remains of these germ deposits depends on how efficiently your room is cleaned by hotel staff. And let’s face it, what is considered clean by a hotel might be different to what you consider clean.

Typically, assessment of hotel room cleanliness is based on sight and smell observations –- not on the invisible microbiology of the space, which is where the infection risks reside. So let’s take a deep dive into the world of germs, bugs and viruses to find out what might be lurking where.

It starts at the lift

Before you even enter your room, think of the hotel lift buttons as germ hotspots. They are being pressed all the time by many different people, which can transfer microorganisms onto the button surface, as well back onto the presser’s fingers.

Communal door handles can be similar in terms of germ presence unless sanitised regularly. Wash your hands or use a hand sanitiser after using a handle before you next touch your face or eat or drink.

The most common infections people pick up from hotel rooms are tummy bugs – diarrhoea and vomiting – along with respiratory viruses, such as colds and pneumonia, as well as COVID-19, of course.

Hotel door opening.
Welcome to germ paradise. Pexels/Pixabay

Toilets and bathrooms tend to be cleaned more thoroughly than the rest of a hotel room and are often the least bacteriologically colonised environments.

Though if the drinking glass in the bathroom is not disposable, wash it before use (body wash or shampoo are effective dishwashers), as you can never be sure if they’ve been cleaned properly. Bathroom door handles may also be colonised by pathogens from unwashed hands or dirty washcloths.

Beware the remote

The bed, sheets and pillows can also be home to some unwanted visitors. A 2020 study found that after a pre-symptomatic COVID-19 patient occupied a hotel room there was significant viral contamination of many surfaces, with levels being particularly high within the sheets, pillow case and quilt cover.

While sheets and pillowcases may be more likely to be changed between occupants, bedspreads may not, meaning these fabrics may become invisible reservoirs for pathogens – as much as a toilet seat. Though in some cases sheets aren’t always changed between guests, so it may be better to just bring your own.

Less thought about is what lives on the hotel room desk, bedside table, telephone, kettle, coffee machine, light switch or TV remote – as these surfaces aren’t always sanitised between occupancies.

TV remote lying on pink bedding.
Handle with care: the TV remote is often one of the dirtiest items in a hotel room. Pexels/Karolina grabowska

Viruses such as the norovirus can live in an infectious form for days on hard surfaces, as can COVID-19 – and the typical time interval between room changeovers is often less than 12 hours.

Soft fabric furnishings such as cushions, chairs, curtains and blinds are also difficult to clean and may not be sanitised other than to remove stains between guests, so washing your hands after touching them might be a good idea.

Uninvited guests

If all those germs and dirty surfaces aren’t enough to contend with, there are also bedbugs to think about. These bloodsucking insects are experts at secreting themselves into narrow, small spaces, remaining dormant without feeding for months.

Small spaces include the cracks and crevices of luggage, mattresses and bedding. Bed bugs are widespread throughout Europe, Africa, the US and Asia – and are often found in hotels. And just because a room looks and smells clean, doesn’t mean there may not be bed bugs lurking.

Woman making bed in hoteroom.
Get those cushions off the bed straightaway. Pexels/Cottonbro studio

Fortunately, bed bug bites are unlikely to give you a transmissible disease, but the bite areas can become inflamed and infected. For the detection of bedbugs, reddish skin bites and blood spots on sheets are signs of an active infestation (use an antiseptic cream on the bites).

Other signs can be found on your mattress, behind the headboard and inside drawers and the wardrobe: brown spots could be remains of faeces, bed bug skins are brownish-silvery looking and live bed bugs are brown coloured and typically one to seven millimetres in length.

Inform the hotel if you think there are bed bugs in your room. And to avoid taking them with you when you checkout, carefully clean your luggage and clothes before opening them at home.

As higher-status hotels tend to have more frequent room usage, a more expensive room at a five-star hotel does not necessarily mean greater cleanliness, as room cleaning costs reduce profit margins. So wherever you’re staying, take with you a pack of antiseptic wipes and use them on the hard surfaces in your hotel room.

Also, wash or sanitise your hands often – especially before you eat or drink anything. And take slippers or thick socks with you so you can avoid walking barefoot on hotel carpets – known to be another dirt hotspot. And after all that, enjoy your stay.

Primrose Freestone does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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