Futures Surge Amid Speculation China Set To Ease Covid Zero; Dollar Tumbles
US equity futures started off the new month with a bang, set to surge after Monday’s less than spooky declines, as investors awaited Wednesday's Fed decision (where JPM sees one outcome pushing stocks 10% higher... and another sending them crashing 8%), while sentiment got a big boost from speculation that Chinese policymakers are making preparations to gradually exit the stringent Covid Zero policy.
At 7:30am, contracts on the S&P 500 rose 1.0% while those on the Nasdaq 100 gained 1.1% on the first day of November, a month that has seen the underlying benchmarks end in the green on average for the past three decades. Dow Jones futures climbed 0.6% after the underlying gauge wrapped up its best month since 1976. Treasuries were poised for their biggest jump in a week as 10Y yields dropped to 3.94%, alongside real rates and the dollar as hawkish Fed hike wagers are trimmed ahead of this week’s policy outcome; the yen, euro and cable surged.
Chinese stocks listed in the US surged in New York premarket trading, their gains fueled by speculation that Beijing is preparing to phase out Covid Zero policies, even as the country’s Foreign Ministry said it was unaware of such a plan. The KraneShares CSI China Internet Fund, an exchange-traded fund holding more than 40 Chinese stocks, soared 7.7%. Also in the premarket, Tesla shares rose as much as 2.1% following a Reuters report that the EV maker plans to start mass production of its Cybertruck at the end of 2023. Here are other notable premarket movers:
Abiomed shares soared 51% in US premarket trading to $379.55 after Johnson & Johnson agreed to buy all its outstanding shares for an upfront payment of $380 per share in cash plus a CVR consideration of up to $35 if certain clinical and commercial milestones are achieved
GameStop shares rise as much as 5.6% in US premarket trading, with a meme-stock revival set to extend into a second day as other stocks popular with retail traders also rally. The video-game retailer also launched an NFT marketplace. Among other meme stocks AMC Entertainment (AMC US) +1.4%, Bed Bath & Beyond (BBBY US) +3.5%, Lucid (LCID US) +2.1%
Carvana shares jump as much as 15% in US premarket trading after JPMorgan upgraded the online used-car platform to neutral from underweight, with analysts saying that risks appear to be “better understood” and liquidity is “manageable.”
Macau casino stocks rise in US premarket trading amid speculation that China is planning to gradually exit its Covid Zero policies, even as the country’s Foreign Ministry said it was unaware of any government committee that’s assessing ways to carry out the plan. Melco Resorts (MLCO US) +7.5%, Las Vegas Sands (LVS US) +4.1%, Wynn Resorts (WYNN US) +3.3% and MGM Resorts (MGM US) +2.3%
Stryker delivered a strong top-line that bodes well for the medtech group’s outlook, but questions remain on when that will translate into a stronger earnings performance, analysts say. Stryker shares fell 5% in postmarket trading after the update.
All eyes will be on the Fed on Wednesday, when it’s widely expected to raise rates by 75 basis points for a fourth time but the question is how Powell will guide for December and his views on the terminal rate. His comments will also be key in understanding the trajectory of tightening in the US, where the policy is already having an impact on company earnings.
“What is important is the path Chair Powell lays out for next year. The Fed probably doesn’t want the market to start pricing in rate cuts, and this is what the market tends to do,” said Stephen Innes, managing partner at SPI Asset Management. “It’s an open invitation to buy stocks in case we do get a Fed pivot or inflation starts abating and we get a huge asymmetrical move to the top side.”
Strategists are expecting the US central bank to end tightening in the near term. Indicators including the inversion of the yield curve between 10-year and three-month Treasuries “all support a Fed pivot sooner rather than later,” according to Morgan Stanley’s Michael Wilson. Also, JPMorgan’s Marko Kolanovic is seeing signs boosting optimism that the global tightening cycle could end by early 2023, which of course is also market consensus.
“If the Fed does give us some indication that there is light at the end of the tunnel, we are very close if not already past peak dollar,” Mark Matthews, head of Asia research at Julius Baer said on Bloomberg TV. “Then all the currencies which have declined like the euro will rebound.”
Meanwhile, economists surveyed by Bloomberg said Fed officials will maintain their resolutely hawkish stance this week, laying the groundwork for interest rates reaching 5% by March 2023, moves that seem likely to lead to a US and global recession. Nomura Holdings Inc. quantitative strategist Yoshitaka Suda said derivatives cues imply the pace of the ongoing rebound in the S&P 500 benchmark is likely to dwindle after the Fed’s decision. The comparatively low volatility ahead of the meeting shows that the options market is “increasingly optimistic” about the event, he said. A shift in options hedging by traders could also weigh on the market, he added.
European equity benchmarks rose over 1% as bond yields retreated lower. CAC 40 outperfoms while the DAX lags peers a bit. Mining shares led gains as most base metals trade in the green. European luxury stocks jumped, tracking an earlier rally in Chinese markets on speculation that the country’s policymakers are looking at gradually unwinding its stringent Covid Zero policy. LVMH rose as much as 3.9%. Shares in tech investor Naspers and its unit Prosus also surged, following Tencent higher as Chinese tech stocks rose after unverified social media posts circulated online that a committee was being formed to assess scenarios on how to exit Covid Zero. A Chinese Foreign Ministry spokesman said he’s unaware of a committee. Here are the biggest European movers:
Oil advanced and BP Plc climbed after announcing a further $2.5 billion buyback. Here are Europe's biggest movers:
Ocado Group surged as much as 40% in a brisk short covering rally sparked by news the UK online grocer has entered a partnership to develop Lotte’s online business in South Korea.
Shares of European online retailers and food delivery firms rally on Tuesday after heavy selling this year, as yields on 10-year US Treasuries and German bunds slide. Delivery Hero rises as much as 15%.
Scor shares gain as much as 6.3% as Mediobanca upgraded the reinsurer to outperform in a reshuffling of its sector preferences.
ALKB- Abello fell as much as 7% after Danske Bank analyst Thomas Bowers cut the recommendation to hold from buy.
Fresenius Medical Care falls as much as 5.5% after Warburg downgraded the stock to sell from hold, citing increased uncertainties regarding the supply chain and macro factors despite 3Q figures slightly above estimates.
Rentokil shares drop as much as 4.5% after the company posted 3Q growth in line with expectations. Morgan Stanley noted that the firm’s maintained outlook implies more subdued progress on margins in 2H.
Asian stocks advanced ahead of a key US Federal Reserve rate decision, as Chinese shares staged a strong rebound on speculation of a potential reopening. The MSCI Asia Pacific Index jumped as much as 2.4%, the most in more than two weeks, as Chinese and Hong Kong gauges roared back from multi-year lows on speculation that policymakers are making preparations to gradually exit the stringent Covid Zero policy. The Hang Seng Index climbed more than 5%, with internet giants Meituan and Tencent Holdings the biggest contributors to the advance.
Unverified social media posts circulated online on Tuesday showed a committee was being formed to assess scenarios on how to exit Covid Zero. A Covid-induced economic slowdown in China has been one of the biggest overhangs for the region’s markets. “Obviously some people are betting big on China’s reopening,” said Willer Chen, an analyst at Forsyth Barr Asia. “At this level, it’s probably better to trade every rumor than ridiculing its authenticity.” Meanwhile, the Federal Reserve looks set to raise interest rates by 75 basis points on Wednesday amid its most-aggressive tightening campaign in four decades. Investors will be watching for any signs that hikes may slow in the future. Asian equities fell 2% in October, capping a third-straight monthly decline, amid headwinds including China’s slowdown and global monetary tightening. The MSCI Asian benchmark is hovering near the lowest level since April 2020.
Japanese stocks rose as the yen’s weakness was seen providing earnings benefits for the nation’s exporters. The Topix rose 0.5% to close at 1,938.50, while the Nikkei advanced 0.3% to 27,678.92. Keyence Corp. contributed the most to the Topix gain, increasing 3.4%. Out of 2,166 stocks in the index, 1,011 rose and 1,044 fell, while 111 were unchanged. “Japanese stocks are holding firm as the market sees a positive impact of the yen’s depreciation reflected in the recent earnings,” said Tetsuo Seshimo, portfolio manager at Saison Asset Management
Australian government bond yields reversed earlier gains and the nation’s stocks rallied to a seven-week high after the central bank raised interest rates by a quarter point as expected and signaled further tightening to come as it combats escalating inflation. Australia's S&P/ASX 200 index rose 1.7% to close at 6,976.90, the highest since Sept. 13, Mining and bank shares boosted the benchmark most, with all 11 sectors advancing. In New Zealand, the S&P/NZX 50 index fell 0.2% to 11,316.64
India’s key stocks posted its 11th advance in thirteen sessions, inching closer to record levels on robust earnings and resumption of foreign flows. The S&P BSE Sensex rose 0.6% to close at 61,121.35 in Mumbai, its highest since Jan. 17. The NSE Nifty 50 Index advanced 0.7%. The gauges rose more than 5% each in October and are trading close to their peak levels seen a year ago. All but one of the 19 sector sub-gauges compiled by BSE Ltd. advanced, led by power companies and utilities. Software exporter Infosys Ltd. provided the biggest boost to the Sensex, which is now close to trading at 14-day RSI of 70, a signal to some traders that the security is overbought. Foreigners bought $186 million of Indian equities in the month through Oct. 28 after net withdrawals of $1.6 billion in September. Corporate earnings for the September quarter have been mostly impressive. Of 32 Nifty companies which have so far reported, 21 have either met or exceeded average analyst estimates, while nine have missed. Agrochemicals maker UPL Ltd.’s quarterly numbers trailed the estimates on Tuesday, while three Nifty companies beat the consensus.
In rates bunds, Treasuries and gilts all rallied across the curve. US yields are richer by 6bp to 10bp across the curve with gains led by intermediates, tightening the 2s5s30s fly by 4.5bp on the day; 10-year yields near lows of the day around 3.95%, outperforming bunds and gilts by 1.5bp and 3bp in the sector. The advance began during Asia session after RBA raised rates 25bp and lowered GDP forecasts. Gilts rally added support, with the UK government focusing on raising taxes to restore stability to public finances. In swaps market, Fed-dated OIS rates ease lower ahead of Wednesday’s policy decision.
In FX, Bloomberg Dollar Spot index falls 0.6%, snapping three days of gains as traders positioned for the Federal Reserve to potentially turn less hawkish at this week’s policy meeting. DKK and EUR were the weakest performers in G-10 FX, NZD and NOK outperform. The Fed is expected to raise rates by 75 basis points this week and some analysts are beginning to believe that the most aggressive interest-rate hiking cycle in decades by global central banks is nearing an end “Markets may be attempting to front-run the Fed on bets they may not give an outsized rate hike at the meeting this week, which is buoying other currencies against the dollar,” said Mingze Wu, a foreign-exchange trader at StoneX Group in Singapore. The Australian dollar gained against the greenback after the RBA hiked rates by 25bps. “While the market may interpret this as the central bank potentially signaling a pause in rate hikes, we think this would be wrong as the RBA is simply reinforcing its gradual approach of raising rates by 25bp rate hikes at its next few meetings,” says David Forrester, FX strategist at Credit Agricole CIB.
In commodities, Crude benchmarks are firmer intraday but off best levels, deriving support in tandem with broader risk sentiment on the China COVID rumours and associated USD pullback. WTI Dec and Brent Jan futures are around USD 87.00/bbl (85.92-88.24 range) and USD 93.50/bbl (92.33-94.74) respectively. WTI trades within Monday’s range, adding 1.7% to trade near $88-handle. Brent rises 1.6% to top $94. Spot gold is bolstered by the USD's retreat and has surpassed the 10-DMA but met resistance thereafter around USD 1650/oz amid the constructive risk tone. Base metals are firmer across the board on the China reports, with LME copper briefly extending past USD 7.6k/T for instance.
Bitcoin is firmer but in contained ranges above the USD 20k mark, while more pronounced upside is seen in the likes of ETH and Dogecoin.
Looking to the day ahead, data releases from the US include the ISM manufacturing reading for October and the JOLTS job openings for September. Otherwise, there’s the October manufacturing PMIs from around the world. Earnings releases include Eli Lilly, Pfizer and Uber. Finally in the political sphere, general elections will be taking place in Denmark and Israel.
S&P 500 futures up 0.8% to 3,915.25
MXAP up 2.1% to 139.01
MXAPJ up 2.5% to 444.55
Nikkei up 0.3% to 27,678.92
Topix up 0.5% to 1,938.50
Hang Seng Index up 5.2% to 15,455.27
Shanghai Composite up 2.6% to 2,969.20
Sensex up 0.5% to 61,024.40
Australia S&P/ASX 200 up 1.7% to 6,976.86
Kospi up 1.8% to 2,335.22
STOXX Europe 600 up 1.3% to 417.58
German 10Y yield down 3.3% to 2.07%
Euro up 0.5% to $0.9926
Brent Futures down 0.8% to $94.10/bbl
Gold spot up 0.9% to $1,648.12
U.S. Dollar Index down 0.54% to 110.93
Top Overnight News from Bloomberg
Crispin Odey has closed his flagship hedge fund and two others to new clients, hoping to keep assets at a manageable level following a record year.
Chinese stocks roared back from a rout and the yuan strengthened as speculation mounted that policymakers are making preparations to gradually exit the stringent Covid Zero policy that’s been the biggest bugbear for investors.
UK house prices fell the most since the start of the pandemic in October as political and market turmoil sent shock waves through the property market.
Any bargain hunters hoping to snap up Credit Suisse Group AG now that the lender’s revamp has pushed its stock down yet again may find themselves getting short shrift in Zurich.
A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mostly higher as the region shrugged off the losses on Wall St and with Chinese Caixin PMI data not as bad as feared, although some cautiousness remained ahead of the looming risk events. ASX 200 finished positive with all sectors in the green after the RBA rate decision whereby it stuck to a 25bps rate increase instead of reverting to a more aggressive pace. Nikkei 225 eked modest gains amid a slew of earnings releases which were the catalyst for the biggest movers. Hang Seng and Shanghai Comp were both positive with notable outperformance in Hong Kong amid a tech-led surge and bargain buying after its brief retreat beneath the 15,000 level, while Caixin Manufacturing PMI data printed better than forecast despite remaining at a contraction.
Top Asian News
Bloomberg suggests that the gains in Chinese stocks are due to an unverified social media post that circulated online overnight that a committee was being formed to assess scenarios on how to exit COVID Zero; subsequently, China's Foreign Ministry says they are not aware of the situation.
Zhengzhou in C.China's Henan said on Tue that the city will lift the temporary control for COVID-19 low-risk regions and gradually resume normal life "after over 10-day fight against the virus", according to Global Times.
RBA hiked the Cash Rate Target by 25bps to 2.85%, as expected. RBA said the board remains resolute in determination to return inflation to the target and expects to increase interest rates further over the period ahead, as well as reiterated that the size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. RBA also noted that the central forecast for GDP growth has been revised down a little with growth of around 3% expected this year and 1.5% in 2023 and 2024, while inflation is now forecast to peak at around 8% later this year and the central forecast is for CPI inflation to be around 4.75% over 2023 and a little above 3% over 2024.
RBA Governor Lowe says the board has judged it appropriate to raise rates at a lower magnitude, will return to larger rate hikes if deemed necessary, will hold rate if the situation requires it.
Hong Kong Exchange is to to cut trading tariff on cash market to boost market efficiency, effective 1st Jan 2023.
European bourses are firmer across the board with commodity stocks leading the way on the overnight China COVID rumours, Euro Stoxx 50 +1.40%. Sectors are all in the green and show clear outperformance in Basic Resources while some of the more defensively inclined sectors lag, but remain positive overall. Stateside, futures are similarly supported though magnitudes a touch more contained ES +0.8%; NQ outperforms as global yields pullback post-RBA with key data and more Central Bank action looming.
Top European News
ECB President Lagarde said they have not reached the destination on rates yet and reiterated that the ECB is committed to doing whatever it takes to get inflation back to the 2% target, while she added that inflation is too high throughout the eurozone and the possibility of a recession has increased.
Europe is set for mild weather in November, via Bloomberg citing forecasters.
Sunak, Hunt Say ‘Inevitable’ All Britons Will Pay More Tax
Credit Suisse Top Wealth Executive Sommerhalder Leaving Firm
Ex-Deutsche Trader Asks Top Court to Quash Spoofing Conviction
Sasol Convertible Bond Books Are Covered, Terms Show
Ocado Deal With South Korea’s Lotte Shopping Boosts Shares
USD pressured as risk rebounds and yields retreat, with new month and pre-FOMC positioning also potentially impacting; DXY sub-111.00 to a 110.80 low.
USD/JPY slumps amid fresh remarks from Finance Minister Suzuki, approaching a test of the 147.00 mark vs earlier 148.80 best.
Antipodeans benefit from the USD but NZD outpaces its AUD peer following the RBA sticking with a 25bp hike and Governor Lowe thereafter keeping their options open.
Both EUR and GBP benefitting from the USD's dip with Cable reclaiming 1.15 after an upward revision to Manufacturing PMI while EUR/USD remains just shy of hefty OpEx at 0.9950.
Petro-FX benefits from benchmark pricing with Norwegian data adding impetus for the Scandi's while the CAD awaits its own PMI release.
Both core and periphery benchmarks are bid amid a broad pullback in yields post-RBA and as participants await upcoming Central Bank announcements and key data readings.
Gilts are the current outperformer and have topped 103.00 amid the latest reporting around the upcoming Autumn statement.
Specifically for the complex, today sees the commencement of the BoE's QT with the first operation focused on the short-end.
Both Bunds and USTs are similarly supported in tandem with a busy afternoon and week-ahead docket stateside, USTs peaking at 111.15 thus far.
UK DMO reschedules the 0.35% 2025 Gilt to November 23rd (prev. November 16th).
Crude benchmarks are firmer intraday but off best levels, deriving support in tandem with broader risk sentiment on the China COVID rumours and associated USD pullback.
Specifically, WTI Dec and Brent Jan futures are around USD 87.00/bbl (85.92-88.24 range) and USD 93.50/bbl (92.33-94.74) respectively.
Russia Deputy PM Novak says Russia and Iran discussed an oil swap and gas supply, according to TASS.
Iranian Oil Minister says "our relations with Russia are closer than ever, and the level of cooperation will increase day by day", according to Al Jazeera.
Libya's NOC chief says oil output at 1.2mln BPD (vs 1.163mln BPD reported in September due to power issues).
Spot gold is bolstered by the USD's retreat and has surpassed the 10-DMA but met resistance thereafter around USD 1650/oz amid the constructive risk tone.
Base metals are firmer across the board on the China reports, with LME copper briefly extending past USD 7.6k/T for instance.
US Event Calendar
09:45: Oct. S&P Global US Manufacturing PM, est. 49.9, prior 49.9
10:00: Sept. JOLTs Job Openings, est. 9.75m, prior 10.1m
10:00: Oct. ISM Manufacturing, est. 50.0, prior 50.9
Oct. ISM Employment, prior 48.7
Oct. ISM New Orders, prior 47.1
Oct. ISM Prices Paid, est. 53.0, prior 51.7
10:00: Sept. Construction Spending MoM, est. -0.6%, prior -0.7%
DB's Jim Reid concludes the overnight wrap
Morning again from NY. I've had to fly back for an important event after only landing back to London from NY on Friday. I had a load of emails and work to do on the plane but was told that their Wi-Fi wasn't working. I hadn't downloaded any films or research so after briefly working out what on earth I could do for 7 hours without any entertainment or work, I plumped for starting to write a surprise Xmas song for my family on the recording software on my iPad (note: with headphones). I now have two verses, a chorus, drums, some sleigh bells, Xmas strings and some heavy sampled guitar riffs. It's either quite good or awful. I'm not sure which yet. I'll aim to give it to them on December 1st. If you're unlucky I'll offer up a link to it then. You can see my short surprise Halloween song on my Bloomberg header page. It's not for the faint hearted.
December is now only a month away as today welcomes in November. Since it’s the start of the month, Henry will be shortly releasing our usual performance review. October proved to be a much better month for financial assets after the disastrous performance over Q3, aided by hopes of a pivot from central banks, a stabilisation in Europe’s energy situation, as well as an end to the UK market turmoil. But we shouldn’t get ahead of ourselves, as the S&P 500’s +8.1% gain over the month in total return terms means it’s only partially recovered from its -9.2% loss in September, let alone its -23.9% loss over the first nine months of the year as a whole. There’s also some other interesting milestones, with gold having lost ground for a 7th consecutive month for the first time since 1869. The full report will be in your inboxes shortly.
When it comes to the last 24 hours in markets, investors have been in something of a holding pattern ahead of the Fed’s decision tomorrow, but previous hopes about an imminent central bank pivot have continued to fade. The latest catalyst was another upside inflation surprise from the Euro Area, albeit one flagged from some of the regional reports on Friday. Once again, the inflation report was bad news from whichever angle you wanted to look at it, with the headline CPI reading for October rising to +10.7% according to the flash reading, which was not only above the +10.3% expected (which may have been a bit stale after Friday), but also easily the highest inflation since the formation of the single currency. So that’s further bad news for the ECB, and points away from some of the more dovish signals they sent at last week’s press conference.
Even as headline inflation hit a new record, what’s concerning for policymakers is that the details suggest it’s increasingly impossible to just pin this on the energy shock, even if that has been the single biggest driver. In fact, CPI excluding energy hit a record +6.9%, and overall core CPI also hit a record +5.0%. In addition, the rises have been broad-based across the 19 countries that make up the single currency, and October marked the first month yet that inflation has been above 7% in every single Euro Area country at once. We did hear from a couple of the more dovish members of the ECB’s Governing Council yesterday, including Italy’s Visco, who warned that a worse-than-expected deterioration in the economic outlook “shouldn’t be underestimated”, and said that there were “no clear signs” that inflation expectations were becoming unanchored.
That backdrop prompted a decent selloff across European sovereign bonds, with yields on 10yr bunds (+4.1bps), OATs (+6.3bps) and BTPs (+12.7bps) all moving higher on the day. That came as inflation breakevens in France hit their highest level since May, with the 10yr breakeven up +1.1bps on the day to 2.79%.
Those moves higher in inflation expectations were given further support by the latest moves in European natural gas prices, which continued to tick higher from their recent lows last week, gaining another +9.90% yesterday to hit €123 per megawatt-hour. That pattern was echoed more broadly, with UK natural gas futures up +22.04% after the Met Office released their latest 3-month weather outlook for the UK. Although the forecast said that their base case (60%) was that the coming season would be around average in terms of temperature, there was a larger chance than usual that it would be a cold season (25%), and a smaller than usual chance of a mild season (15%).
Over in the US, there was a similar unwinding in the pivot trade yesterday as investors looked forward to the Fed’s decision tomorrow. For instance, the peak terminal rate priced in for the May 2023 meeting rose by +7.1bps yesterday to 4.96%, which is the highest it’s been since the WSJ’s Nick Timiraos released his article on October 21 discussing the potential for a slower pace of rate hikes from December. And in turn, expectations of a more aggressive pace of rate hikes meant that Treasuries lost ground too yesterday. 10yr yields were nearly 10bps higher intraday, before rallying hard late on in what looked like month-end driven buying flows to finish the day just +3.6bps higher at 4.05%. Speaking of Timiraos though, a reminder that as we mentioned in yesterday's edition, he wrote a further article on Sunday pointing out that cash-rich consumers with larger savings buffers could mean that interest rates need to move higher than anticipated given spending is less sensitive. So if you value him as an indicator of the Fed’s thinking, that certainly pointed in a more hawkish direction as well.
With the pivot trade unwinding, equities put in a weaker performance and the S&P 500 (-0.75%) moved off from its six-week high that it reached on Friday. It was a broad-based decline, but the more cyclical sectors and interest-sensitive tech stocks suffered in particular, with the FANG+ index (-1.81%) nearly reaching its recent low from mid-October. Over in Europe the main indices put in a somewhat better performance, with the STOXX 600 up +0.35%, but that in part reflected the fact that they hadn’t been open during the late US rally on Friday.
Overnight in Asia however, the major equity indices have put in a much stronger performance, with the Hang Seng (+3.43%) leading the way, followed by the CSI 300 (+2.00%), the KOSPI (+1.42%), the Shanghai Comp (+1.22%), and the Nikkei (+0.15%). That’s come amidst sizeable advances for tech stocks, with the Hang Seng tech index up by an even larger +4.71%. In the meantime, Australian equities have also rallied following the RBA’s decision to raise their cash rate target by 25bps to 2.85%, in line with expectations. Their statement said that the Board “expects to increase interest rates further over the period ahead.” They also upgraded their inflation forecasts relative to last month, now saying they expected CPI inflation to be around 4.75% over 2023, having previously said they saw it “a little above” 4%. Looking forward, US equity futures are pointing higher as well, with those on the S&P 500 up +0.43%.
In terms of yesterday’s other data, Euro Area GDP grew a bit faster than expected in Q3, with the preliminary flash estimate showing growth of +0.2% (vs. +0.1% expected). Otherwise, German retail sales unexpectedly grew by +0.9% in September (vs. -0.5% expected), and UK mortgage approvals fell by less than expected in September to 66.8k (vs. 63.7k expected).
To the day ahead now, and data releases from the US include the ISM manufacturing reading for October and the JOLTS job openings for September. Otherwise, there’s the October manufacturing PMIs from around the world. Earnings releases include Eli Lilly, Pfizer and Uber. Finally in the political sphere, general elections will be taking place in Denmark and Israel.
From repurposed cruise ships like MS Satosh, to the blockchain governed Liberland and Satoshi Island, crypto fans are trying to create utopian new communities built around new rules.
We cant blame Elon Musk for dreaming of moving to Mars the human race has always been curious about finding a better life somewhere else.
But not everyone in crypto is looking up to the stars to find new worlds; others stay on earth and attempt to build a new micronation, or a crypto community, here. There are dozens of projects in development and a few actually operational including Liberland, Satoshi Island and Puertopia/Sol attracting interest from the blockchain world.
While many head out to sea to build their new communities, another option is to find land left over after conflicts. This is not as crazy as it sounds, and in the shifting territorial landscape after the breakup of the Yugoslavian empire, small pockets of land have turned up. Vt Jedlika, a Czech economist and Libertarian, founded Liberland on April 13, 2015 on Thomas Jeffersons birthday on a small track of terra nullius (unclaimed land) on the banks of the Danube between Croatia and Serbia. At seven square kilometers, it is larger than Vatican City and Monaco and similar in size to Gibraltar.
The tiny nation is not yet habited despite boasting 785,000 citizens, all of whom currently reside abroad.
Jedlika wanted to form a new nation with low taxes and greater freedoms, and he found the land literally by Googling the term terra nullius.
We had a need to start a new country in order to defend the personal and economic freedoms of certain groups of people that really enjoy freedom and want to live in a free society, says Jedlika.
Liberland is a pristine piece of land; its a beautiful place with sandy beaches, and I think its actually one of the most beautiful places on the Danube. People can actually come there for recreation, and people are coming camping there as we speak even though its winter right now.
Of course, there are some major challenges, including geopolitical challenges that we have to overcome.
Liberland is in phase one and preparing the groundwork for future recognition and urban development. So, nothing has yet been built, although you can sign up for residency online. The would-be country has signed memorandums of understanding with Ghana, Malawi and Haiti, and while official recognition has not been achieved, Jedlika is convinced it is only a matter of time.
The crypto angle
The government has selected the Polkadot ecosystem to develop the countrys governance and will rely on DAOs to run everything transparently.
We will be running everything at the speed of light. Everything, including Congress, the land registry, the courts system and budgeting, will be registered on the blockchain. This will allow for all decisions to be transparent and to happen at speed. We are also planning for citizens to run the nodes on their IT infrastructure on their computers at home and to make money while supporting Liberland.
There will be two houses of parliament in Liberland. The first is more meritocratic where citizens who hold the official Merit token, pay voluntary taxes and contribute to Liberland can vote on decisions in the country. The other house is the Senate and will be populated with people who helped build Liberland and will have more of an oversight role, including Jedlika moving into a steward position if he is voted out of his current position.
Voting will be frequent, every three months, to ensure that the citizens can actually influence decision-making rather than in traditional four-year election cycles. The code is in place and is scheduled to be launched on the eighth anniversary of the foundation of the state, April 13, 2023. In time, there will be a maximum of 14,000 active voters at any given time.
Liberland is being put together in the Arctic Village next door in Serbia, which is largely neutral to Liberland, while it seeks to improve its still uncomfortable relationship with Croatia.
Verdis next door
A neighboring strip of land was also claimed by a passionate founder this time, by 14-year-old Daniel Jackson in 2019, who wishes to establish Verdis. Jackson was born and raised in Australia to English parents, and the now 18-year-old does not see his age as an impediment.
A group of people and I decided to create Verdis in order to help make a difference in the world, especially around reconciliation of ethnic groups, neutrality zone, a new government structure, and a way to hopefully help boost tourism and economy in Slavonia and Vojvodina as an extra benefit for neighboring Croatia and Serbia, says Jackson.
Verdis is roughly 0.451 square kilometers, making it slightly larger than Vatican City.
In some ways, I did see inspiration from Liberland, but we still have different goals and aspirations. I think that with enough effort and hard work, Verdis is feasible, especially with our right to the land under international law.
Around 27 people are currently involved in Verdis government. The nation is in the process of having its passports recognized by the Chief Immigration Officer of Eswatini (formerly Swaziland).
According to Jackon, most of Verdis citizens plan to move to Verdis in the future, starting with houseboats along the Danube.
We believe Verdis will survive, as long as it is actively worked on, and works to keep its voice loud in its search for international recognition, says the young acting president.
Satoshi Island was founded in 2021 by acquiring an entire island in the South Pacific Ocean. Aimed at digital professionals and based 100% on cryptocurrencies, the island looks to attract tech professionals looking to work alongside like-minded people.
The vision behind Satoshi Island was born out of a feeling of wishing that industry-based events and conferences would last longer. Online is fine but even better is to have a year-round venue where crypto enthusiasts and professionals could live, work and visit.
Unlike some of the other projects, Satoshi Island is simply about celebrating crypto, and the island venue was simply to give it a sense of freedom and community.
The Satoshi Island project has no political agenda, separatist or ideological ideas, a spokesperson tells Magazine. Whereas some people might think that the vision stems from wanting to escape due to being disenfranchised with the rest of the world, this couldnt be further from the truth. The only goal is to create a place for people in the industry to congregate and have the ability to utilize blockchain technology to the fullest. The island could be most likely compared to a private retreat or golf course where only members can visit.
Starting with a blank slate allowed them to look at the master planning of the island with fresh ideas. All the systems (where possible) will be blockchain-based and sustainable, with everything 100% powered by renewable energy generated on the island. Modular development is also an important aspect of the island. This type of architecture allows them to build in ways that significantly reduce the time, disturbance and impact on the nature and landscape.
The rep tells us that families with children seem to be attracted to the idea, often with the female being the main proponent.
We are expecting the population to be a mix of people living and working on the island all year round, as well as people who live there half the year as they escape colder or hotter climates.
You can also take a holiday there. Take a look at the interesting Satoshi Island video here.
Puertopia, I mean, Sol
Puerto Rico was another hot spot for crypto bros. People such as Brock Pierce of EOS and Tether fame and Joel Comm of the Bad Crypto Podcast relocated to the U.S. territory where taxes are favorable and the crypto rich were welcomed, at least initially by locals enjoying income growth, especially in hospitality. There were grand plans to build a blockchain-powered city called Puertopia in the derelict remains of the Roosevelt Roads Naval Base in Ceiba, which would include a crypto-exclusive bank and showcase what a crypto future could look like. The New York Times reported that someone told it Puertopia translates to eternal boy playground (which sounds suspiciously like a joke directed at Pierce), so they changed the name to Sol. A backlash against crypto and the effects of crypto winter in 2022 has seen updates on the project dry up of late.
Kyle Chase of Master Ventures fame and crypto influencer attempted to set up a Libertarian crypto community and business incubator in his beloved Thailand. Magazine paid a visit in February last year and heard wild tales of unchecked merrymaking, crypto-influencers, police grillings, a reported $20,000-a-month burn rate and a collision between idealism and reality. After shifting locations a number of times, the concept has yet to be fully realized.
The project that was the Satoshi Cruise ship suffered an ignominious ending through red tape rather than political inference. Launched by three cryptocurrency advocates in 2020 when cruise ships were relatively cheap as a result of the pandemic, the ill-fated Satoshi Cruise Ship failed to ignite real interest in Libertarians interested in making it their home.
Attempts were made to sell off rooms, but limits on cooking and general living on a cruise ship did little to attract citizens, and then the enormous running costs and regulations around running and maintaining a ship (even down to permits and sewage) proved too much for the founders. It has now been converted back into a luxury cruising vessel.
Seasteading refers to the idea of building permanent homes on the sea, known as seasteads, in areas that are not under the jurisdiction of any government.
At present no one has actually created a seastead that has been officially recognized as a sovereign state. Different designs for seasteads have been proposed, such as modified cruise ships, repurposed oil rigs and specially constructed floating islands. It is fraught with legal difficulties, however, as a Bitcoiner couple who set up a floating home off the coast of Thailand discovered when the navy hauled them and charged them with violating Thai sovereignty.
The concept itself has been around for decades. The 2020 Netflix film Rose Island highlighted the attempt by Italian engineer Giorgio Rosa to build a sovereign island in the Adriatic Sea back in the 1960s, complete with a restaurant, bar, souvenir shop and post office. The short-lived experiment ended when Italian warships accosted the platform, removed the last inhabitants and then completely removed all evidence from the sea.
California-based nonprofit the Seasteading Institute was founded in 2008 by activist, software engineer and political economic theorist Patri Friedman, grandson of Nobel Prize-winning economist Milton Friedman.
Development director Carly Jackson tells Magazine she is currently aware of 12 seasteading projects in various stages of development (see the full list here), of which the leading ones are Arktide, Atlas Island, Atlantis Sea Colony and Freedom Haven.
The genesis of some of the projects is based on politics, including Atlas Island and Freedom Haven. Other projects, such as Arktide, a project that bought property in Puerto Rico as a base to build from, have incorporated blockchain from the very beginning.
I expect one or more of the active projects to launch platforms in the next year or so. It will probably take a few more years to have enough of a community to move out to international waters. Im not sure if that will make seasteading mainstream, but I hope it will be normalized for people to consider living on a floating city in a decade or so.
The Maldives Floating City
The Floating City is scheduled to begin construction this year and has 5,000 housing units linked by waterways and laid out in hexagonal segments. The city boasts that it is a climate change solution, but with each house priced at $250,000, it appears to want to attract investors or nomadic professionals looking for somewhere to lay their hats.
Oceanix Busan is planned to be located just one mile from the southeastern coast of South Korea. Initially, the project will consist of three triangular platforms, each capable of accommodating 12,000 people. The goal is for the project to expand into a hexagonal city of more than 20 platforms. The project (officially named Oceanix City) was presented by Bjarke Ingels Group and Samsung Group at the United Nations Roundtable of Sustainable Floating Cities in 2019, and it was agreed by the U.N. that it will be a prototype for sustainable floating cities. In addition to being a floating city, it will also serve as a testing ground for various sustainable living technologies.
The prototype of the floating city is due for completion this year and will comprise interconnected platforms that have a total surface area of 15.5 acres. Each modular piece of the city, which floats on water, is specifically designed for a particular purpose such as residential space, research facilities or accommodation.
Demand and output for cardboard boxes and other packaging material fell sharply in the fourth quarter of 2022, according to data released by the American Forest & Paper Association and Fibre Box Association on Friday.
It’s the latest indicator that consumer demand is eroding following the pandemic. Dwindling savings, inflation, rising interest rates and fears of a recession may all be swaying consumers to spend less.
Such pressures would show up in the humble box industry, which serves as an excellent barometer for the larger economy. Practically everything we consume and use spends some time in a box, ranging from online orders to food sent to grocery stores.
U.S. box shipments fell by 8.4% in the fourth quarter, according to the Fibre Box Association. KeyBanc’s Adam Josephson, who leads the bank’s analysis of the packaging industry, wrote in a Sunday note that this was “the most severe quarterly decline since the Great Financial Crisis (2Q09).”
U.S. box operating rates fell to 80.9%, the Fibre Box Association said, which was also a low last seen in the first quarter of 2009. This means nearly 20% of the U.S. capacity to produce boxes was stagnant last quarter. Supply of containerboard, which is used to make corrugated boxes, stood at 4.3 weeks, according to the American Forest & Paper Association. That’s down from last quarter, but still historically high.
The American Forest & Paper Association reported that another type of packaging material called boxboard had its lowest operating rate in its five-year record during 2022’s final quarter. Boxboard is typically thinner than cardboard and lacks air pockets.
Box bloodbath? Cardboard crisis?
Box demand normally sees modest upticks of 1% to 2% each year. But government stimulus and the shift from service to goods demand through 2020 and 2021 shocked box demand into some of its fastest growth in history. Prices rose as much as 55% through this time, Josephson said.
A hangover after a yearslong cardboard carnival would be in order — and this one looks nasty.
To Josephson, the end of 2022 in the packaging world had “echoes of the Great Financial Crisis everywhere one looks,” he wrote in the Sunday note. What’s more, significant capacity — that is, more facilities that produce packaging materials — is set to enter the market through the next several years. It’s a tricky time for more packaging production to open up, given the shaky outlook for demand and falling consumer spending.
"Inflationary pressures on the consumers have also added to the problem by reducing the consumers’ discretionary spending capabilities,” said Thomas Hassfurther, executive vice president of corrugated products at WestRock, in a Thursday call to investors. WestRock is the No. 2 largest packaging company in the U.S.
“In addition, consumer behavior changed very quickly as we exited the extreme COVID period, resulting in more of a preference towards travel, entertainment and experience versus that of tangible goods,” Hassfurther said. “Containerboard and box demand continues to be negatively impacted from the deterioration in U.S. and global economic conditions, rising interest rates and a cooler housing market.”
However, WestRock executives maintained that demand in 2023 still appeared “healthy” compared to pre-COVID times. On the Thursday call, they forecast shipments to be 6% higher in first-quarter 2023 compared to the same period in 2019, on a per-day basis.
A downturn after a wild upswing isn’t particularly shocking. What’s troublesome is that executives grew or made plans to grow in response to this unprecedented demand. An increase in supply will further drive down already-plummeting prices.
“[…] we set out to explore the effects of removing p16Ink4a+ senescent cells on the proliferative capacity and mass of β-cells […].”
Credit: 2023 Bahour et al.
“[…] we set out to explore the effects of removing p16Ink4a+ senescent cells on the proliferative capacity and mass of β-cells […].”
BUFFALO, NY- January 31, 2023 – A new research paper was published on the cover of Aging (listed as “Aging (Albany NY)” by Medline/PubMed and “Aging-US” by Web of Science) Volume 15, Issue 2, entitled, “Clearance of p16Ink4a-positive cells in a mouse transgenic model does not change β-cell mass and has limited effects on their proliferative capacity.”
Type 2 diabetes is partly characterized by decreased β-cell mass and function which have been linked to cellular senescence. Despite a low basal proliferative rate of adult β-cells, they can respond to growth stimuli, but this proliferative capacity decreases with age and correlates with increased expression of senescence effector, p16Ink4a.
In a new study, researchers Nadine Bahour, Lucia Bleichmar, Cristian Abarca, Emeline Wilmann, Stephanie Sanjines, and Cristina Aguayo-Mazzucato from the Joslin Diabetes Center at Harvard Medical School hypothesized that selective deletion of p16Ink4a-positive cells would enhance the proliferative capacity of the remaining β-cells due to the elimination of the local senescence-associated secretory phenotype (SASP).
“We aimed to investigate the effects of p16Ink4a-positive cell removal on the mass and proliferative capacity of remaining β-cells using INK-ATTAC mice as a transgenic model of senolysis.”
Clearance of p16Ink4a-positive subpopulation was tested in mice of different ages, males and females, and with two different insulin resistance models: high-fat diet (HFD) and insulin receptor antagonist (S961). Clearance of p16Ink4a-positive cells did not affect the overall β-cell mass. β-cell proliferative capacity negatively correlated with cellular senescence load and clearance of p16Ink4a positive cells in 1-year-old HFD mice improved β-cell function and increased proliferative capacity in a subset of animals. Single-cell sequencing revealed that the targeted p16Ink4a subpopulation of β-cells is non-proliferative and non-SASP producing whereas additional senescent subpopulations remained contributing to continued local SASP secretion.
“In conclusion, deletion of p16Ink4a cells did not negatively impact beta-cell mass and blood glucose under basal and HFD conditions and proliferation was restored in a subset of HFD mice opening further therapeutic targets in the treatment of diabetes.”
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Launched in 2009, Aging (Aging-US) publishes papers of general interest and biological significance in all fields of aging research and age-related diseases, including cancer—and now, with a special focus on COVID-19 vulnerability as an age-dependent syndrome. Topics in Aging go beyond traditional gerontology, including, but not limited to, cellular and molecular biology, human age-related diseases, pathology in model organisms, signal transduction pathways (e.g., p53, sirtuins, and PI-3K/AKT/mTOR, among others), and approaches to modulating these signaling pathways.
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