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Futures Tick Higher Ahead Of Key PCE Print

Futures Tick Higher Ahead Of Key PCE Print

US stock futures edged higher after Thursday’s slump as investors weighed strong job data and…



Futures Tick Higher Ahead Of Key PCE Print

US stock futures edged higher after Thursday’s slump as investors weighed strong job data and prospects of further policy tightening to cool inflation ahead of today's closely watched core PCE print which may reverse the negative sentiment (especially if it comes at 4.5% Y/Y or lower) and send stocks sharply higher (see here for more). Contracts on the Nasdaq 100 and the S&P 500 gained 0.3% by 7:30 am ET one day after the S&P 500 cash index plunged 1.5% on Thursday and was set for a third consecutive weekly loss, the longest losing streak since September. The index is also on pace for its second-worst December on record, while the Nasdaq 100 is on course for its steepest slump in the month since 2002.

In premarket trading Friday, Tesla Inc. shares rose after Elon Musk said he isn’t planning to sell any more shares for two years. Meme stock AMC Entertainment slid after the movie theater chain operator proposed converting preferred equity units into common shares. Meanwhile, avocado supplier Mission Produce reported fiscal fourth-quarter revenue and adjusted earnings per share that missed the average analyst estimates and predicted lower pricing in the first quarter.

Sentiment on Wall Street took a hit Thursday as jobless claims came in lower than expected, signaling the Federal Reserve has more work to do on inflation, while earnings disappointments sparked fears among investors of a recession. Technically, the set up isn’t looking good, according to Bloomberg intelligence strategist Gina Martin Adams, with a descent in equities that began at the start of 2022 looking set to persist into early 2023. “Momentum and breadth remain weak and industry cues hint at a prolonged struggle,” she wrote in a note.

With stocks sliding, global equity funds saw record weekly outflows of almost $42 billion in the week to Dec. 21, which were largely driven by US stock funds shedding $37 billion of assets, according to EPFR Global data. The outflows were mostly due to seasonal redemptions from US ETFs, Citigroup strategists said. And as a catastrophic year for stocks draws to a close, investors have also had a warning from strategists that they should brace for more pain heading into 2023.

“I think it’s going to be a very difficult year,” said James Athey, investment director at Abrdn. “The fact of the matter is that there’s been a significant monetary tightening we haven’t seen in a long time,” he said. “The effect of that on a global economy which is drowning in debt is highly likely to be deleterious.”

“Markets are in a state of flux at the moment, we have quite high inflation and interest rates that don’t quite seem able to catch up,” Richard Harris, chief executive officer at Port Shelter Investment Management, said in an interview on Bloomberg TV.  “You have to be careful with equities, but they are still a better bet than bonds at the moment.”

Notable headlines overnight: 

  • Joe Biden said it will take time to get inflation back to normal levels, according to Yahoo News.
  • Tesla CEO Musk said he will not sell any more Tesla stock for at least 18-24 months; waiting to see the extent of a recession before share buybacks, via Twitter Space. Musk said the economy will be in a "serious recession" in 2023, and demand will be lower.

Investors are now awaiting the PCE deflator, a key inflation measure tracked by the Fed. Analysts polled by Bloomberg expect a year-on-year 5.5% headline print, slowing from October’s 6%.

In Europe, the Stoxx 600 was on the rise, led by real estate, basic resources and retail stocks, and was headed for the first weekly gain in three as risk appetite returned before the Christmas holiday.

Earlier in the session, Asian stocks fell, on track for a second-straight weekly loss on concerns about aggressive US interest-rate hikes and the spread of the coronavirus in China. The MSCI Asia Pacific Index fell as much as 1.2%, with technology and energy stocks falling the most and dragging down South Korean and Taiwanese benchmarks. Trading was thin in much of the region ahead of year-end holidays.  US economic growth in the third quarter was firmer than previously estimated, pushing a pause in the Federal Reserve’s policy tightening further out of reach. Investors are also wary that the core PCE deflator — a key US inflation measure — due later Friday may add to reasons for tighter policy. Meantime, a weaker sales outlook by memory maker Micron weighed on the chip sector. Friday’s decline put the MSCI Asia gauge on track for a 0.6% loss this week. While some strategists are optimistic that the year ahead could bring a rally after this year’s double-digit drop, the first half of 2023 looks riddled with challenges to profits as the global economy slows down and China’s path to reopening remains uncertain

“The Grinch selloff is firmly in place after Micron delivered a gloomy outlook and as better-than-expected US economic data supported the Fed’s case for more ongoing rate increases,” Edward Moya, a senior market analyst at Oanda, wrote in a note. “Global coordinated central bank tightening has yet to fully impact most of the economic readings for the major economies and that should have investors nervous over earnings downgrades and credit risks.” Key measures of Hong Kong and mainland stocks fell as the market digested China’s rising infection numbers and a sharp slowdown in economic activity.

Japan's Nikkei 225 posted its worst week since June on fears that the Bank of Japan has begun to exit its easy-money policy.  On Friday, Japanese stocks declined as resilient US economic data renewed investor worries that the Federal Reserve will continue raising interest rates aggressively. The Topix fell 0.5% to close at 1,897.94, while the Nikkei declined 1% to 26,235.25. Toyota Motor Corp. contributed the most to the Topix decline, decreasing 1.2%. Out of 2,162 stocks in the index, 677 rose and 1,384 fell, while 101 were unchanged. US Third-Quarter GDP Revised Higher to 3.2% on Firmer Spending “How long the Fed maintains its hawkish stance will depend on inflation,” said Tatsushi Maeno, a senior strategist at Okasan Asset Management. “There may be a mood of restrained buying ahead of the US PCE data this evening,” which could provide the next clue on the Fed’s moves

In Fx, the Bloomberg Dollar Spot Index weakened for first time in three days. The dollar pulled back against a basket of currencies and was headed for a weekly decline, having risen for the two previous weeks. The yen firmed, bringing this week’s gains to almost 3%, thanks to the Bank of Japan’s sudden hawkish policy pivot announced on Tuesday.

In rates, Treasury yields grind higher, following similar price action in bunds where ECB hike premium has edged up over early London session on no immediate catalyst. US session focus includes a busy data slate which includes PCE deflator and University of Michigan sentiment. Early 2pm New York close for cash Treasuries, recommended by SIFMA. US 10-year yields around 3.71%, cheaper by 3bp vs. Thursday close and trading broadly inline with bunds and gilts. 2-year TSY yields are steady at 4.27% while 10-year yields gain 1.1bps to 3.69%. In Thursday’s trading session yields rose after stronger-than expected US economic data with 2-year tenor gaining 5bps while 10-year finished up 2bps. Spreads pare portion of Thursday’s flattening move with Treasury 2s10s, 5s30s curves steeper by 1.4bp and 1.2bp on the day.

In commodities, crude oil is firmer with WTI & Brent up by roughly $2.0/bbl, with WTI needing another USD 1.00/bbl of upside to test Thursday’s WTD peak of USD 79.90/bbl; early on Friday Russia said it could cut oil output by 5-7% early next year as a response to the Western price caps, according to RIA citing Deputy PM Novak;  Spot gold/silver are incrementally firmer given the Dollar continues to languish, though the yellow metal remains capped by USD 1800/oz and as such is well within recent ranges.

Looking at today's busy calendar slate, we get Personal income and spending as well as the Fed's favorite inflation metric, core PCE; we also get Durable Capital goods and new orders as well as the UMichigan sentiment indicator and new home sales.

Market Snapshot

  • S&P 500 futures little changed at 3,848.50
  • MXAP down 1.0% to 155.37
  • MXAPJ down 1.1% to 503.74
  • Nikkei down 1.0% to 26,235.25
  • Topix down 0.5% to 1,897.94
  • Hang Seng Index down 0.4% to 19,593.06
  • Shanghai Composite down 0.3% to 3,045.87
  • Sensex down 1.6% to 59,868.93
  • Australia S&P/ASX 200 down 0.6% to 7,107.69
  • Kospi down 1.8% to 2,313.69
  • STOXX Europe 600 up 0.3% to 428.34
  • German 10Y yield little changed at 2.40%
  • Euro little changed at $1.0600
  • Brent Futures up 1.8% to $82.45/bbl
  • Gold spot up 0.2% to $1,796.18
  • U.S. Dollar Index little changed at 104.37

Top Overnight News from Bloomberg

  • Oil Pushes Higher as Russia May Cut Output in Response to Cap
  • Jan. 6 Panel Releases Report Blasting Trump for Capitol Assault
  • Tencent Rant, Sea Pay Freeze Hint at Deepening Gaming Crisis
  • Sea Dives After Pay Freeze, Bonus Cuts Suggest Tougher 2023
  • Biogen’s ALS Drug Raises Stakes in War Over Fast Drug Approvals
  • Trump Asked About Using Troops on Protesters, Esper Told Panel
  • Bankman-Fried’s $250 Million Bail Doesn’t Mean He Has Money
  • US Stocks Snap Two Days of Gains; Dollar Rises: Markets Wrap
  • Tech Bulls Face Worst December in 20 Years as Fed Anxiety Grows
  • Well-Timed Shorts See Value Investor Notching 40% Gains for 2022
  • Storm Upends Holiday Travel, Triggers White House Warning

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded mostly lower but drifted off worst levels following a similar session stateside.  ASX 200 saw all of its sectors in the red with losses led by Tech, Energy and gold miners. Nikkei 225 was dragged lower by its industrial sector, whilst Japanese Core CPI in November rose at the fastest annual pace since 1981. Hang Seng and Shanghai Comp were mixed in which the former succumbed to the regional losses and the latter briefly moved into the green, whilst the PBoC injected a net CNY 704bln in the week via OMO - the largest weekly cash in nearly two months, according to Reuters calculations.

Top Asian News

  • China reported zero new COVID deaths in the mainland on Dec 22nd vs zero a day earlier, according to Reuters.
  • PBoC injected CNY 2bln via 7-day reverse repos with the rate maintained at 2.00%; injects CNY 203bln via 14-day reverse repos with the rate maintained at 2.15%; daily net injection CNY 164bln.
  • PBoC injected a net CNY 704bln in the week via OMO; the largest weekly cash in nearly two months, according to Reuters calculations.
  • Japanese PM Kishida could conduct a cabinet reshuffle as early as January 10th, according to ANN.
  • Japanese government official said the next wave of food inflation is likely to come in February 2023; effects of government subsidies to cushion energy bills will likely start affecting CPI from February 2023, according to Reuters.
  • BoJ October meeting minutes (two meetings ago): One member said the effects of BoJ's easing may be heightening as a moderate increase in inflation expectations push down real interest rates.
  • China reportedly estimates the COVID surge is affecting 37mln people per day, via Bloomberg.
  • Indian Health Minister says in the next week, planning to make COVID-19 negative test report compulsory for passengers from nations with a high case load.

European bourses are marginally firmer, Euro Stoxx 50 +0.2%, with the Stoxx 600 on track to end the week with upside of circa. 0.6%. Sectors are, after a mixed open, mostly in the green though Utilities and Travel & Leisure remain incrementally softer.
Stateside, futures are similarly supported, ES +0.3%, though we await US monthly PCE metrics for another factor into the Fed's deliberations. TSMC (TSM/2330 TT) is said to be in talks with suppliers over its first European plant, according to FT sources; Senior executives are heading to Germany early next year for discussions.

Top European News

  • Janus Henderson’s New CEO To Expand In Latin America, Asia
  • Meet the Improbable Stars of Turkey’s Year of Inflation Infamy
  • Russia Says It May Cut Daily Oil Output by 700,000 Barrels
  • Japan Begins Defense Upgrade With 26% Spending Increase for 2023
  • Russia’s Novak: Decisions on Turkey Gas Hub May Be Taken in 2023
  • Poland Sues EU Over Mounting Fine in Rule-of-Law Dispute


  • Senior Chinese Diplomat Wang Yi spoke to US Secretary of State Blinken and said US must stop supressing China's development and should not challenge China's red lines, according to Reuters.
  • Chinese Foreign Ministry announced sanctions on Yu Maochun and Todd Stein as countermeasures to US’ sanction on two Chinese officials, citing human rights issues in Xizang (Tibet), according to Global Times.
  • N. Korea has fired what could be a ballistic missile, via Japanese Coast Guard; Yonhap reports this as being a ballistic missile; landed outside of Japan's EEZ.


  • Dollar wanes after GDP and IJC boost as the focus switches to PCE amidst a partial recovery in risk appetite, DXY roams from 104.160 to 104.510.
  • Kiwi claws back losses vs Aussie and Buck as AUD/NZD retreats through 1.0650, NZD/USD breaches 200 DMA and AUD/USD scales 100 DMA with a slight lag.
  • Pound, Euro and Loonie take advantage of softer Greenback, but Yen hampered by high yields, Cable firmer on 1.2000 handle, EUR/USD resilient around 1.0600, USD/CAD probing 1.3600 and USD/JPY hovering above 132.50.
  • PBoC sets USD/CNY mid-point at 6.9810 vs exp. 6.9885 (prev. 6.9713)

Fixed Income

  • Debt remains in virtual freefall, with Bunds extending losses sub-135.00, Gilts towards 100.00 and the T-note rooted within a 113-09+/15+ range
  • Curves re-steepen marginally as the spotlight turns to US PCE data as the last potential macro market mover before the Xmas break


  • Crude benchmarks are firmer on the session with magnitudes more pronounced than across other asset classes; currently, WTI & Brent Fed’23 are firmer by just shy of USD 2.0/bbl, with WTI needing another USD 1.00/bbl of upside to test Thursday’s WTD peak of USD 79.90/bbl.
  • Spot gold/silver are incrementally firmer given the Dollar continues to languish, though the yellow metal remains capped by USD 1800/oz and as such is well within recent ranges.
  • Russia could cut oil output by 5-7% early next year as a response to the Western price caps, according to RIA citing Deputy PM Novak; Russia may cut oil output by 500-700k BPD, according to Tass citing Deputy PM Novak
  • Colorado Interstate Gas Co. declared force majeure at CIG Wamsutter compressor station, according to Reuters.
  • Phillips 66 (PSX) Wood River, Illinois (380k BPD) refinery reports a unit upset.

US Event Calendar

  • 08:30: Nov. Durable Goods Orders, est. -1.0%, prior 1.1%; -Less Transportation, est. 0%, prior 0.5%
    • Cap Goods Orders Nondef Ex Air, est. 0%, prior 0.6%
    • Cap Goods Ship Nondef Ex Air, est. -0.3%, prior 1.5%
  • 08:30: Nov. Personal Income, est. 0.3%, prior 0.7%
    • Personal Spending, est. 0.2%, prior 0.8%
    • Real Personal Spending, est. 0.1%, prior 0.5%
  • 08:30: Nov. PCE Deflator MoM, est. 0.1%, prior 0.3%
    • PCE Deflator YoY, est. 5.5%, prior 6.0%
    • PCE Core Deflator MoM, est. 0.2%, prior 0.2%
    • PCE Core Deflator YoY, est. 4.6%, prior 5.0%
  • 10:00: Dec. U. of Mich. Sentiment, est. 59.1, prior 59.1
  • U. of Mich. Current Conditions, est. 60.3, prior 60.2
    • U. of Mich. Expectations, est. 58.5, prior 58.4
    • U. of Mich. 1 Yr Inflation, est. 4.6%, prior 4.6%; 5-10 Yr Inflation, est. 3.0%, prior 3.0%
  • 10:00: Nov. New Home Sales, est. 600,000, prior 632,000
    • Nov. New Home Sales MoM, est. -5.1%, prior 7.5%
Tyler Durden Fri, 12/23/2022 - 08:03

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New IRS Report Provides Fascinating Glimpse Into Your “Fair Share”

New IRS Report Provides Fascinating Glimpse Into Your "Fair Share"

Authored by Simon Black via,

Every year the IRS publishes…



New IRS Report Provides Fascinating Glimpse Into Your "Fair Share"

Authored by Simon Black via,

Every year the IRS publishes a detailed report on the taxes it collects. And the statistics are REALLY interesting.

A few weeks ago the agency released its most recent report. So this is the most objective, up-to-date information that exists about taxes in America.

This is important, because, these days, it’s common to hear progressive politicians and woke mobsters calling for higher income earners and wealthier Americans to pay their “fair share” of taxes.

But this report, directly from the US agency whose job it is to tax Americans, shows the truth:

The top 1% of US taxpayers paid 48% of total US income taxes.

And that’s just at the federal level, not even counting how much of the the local and state taxes the wealthy paid.

Further, the top 10% paid nearly 72% of total income taxes.

Meanwhile, the bottom 40% of US income tax filers paid no net income tax at all. And the next group, those making between $30-$50,000 per year, paid an effective rate of just 1.9%.

(Again, this is not some wild conspiracy theory; these numbers are directly from IRS data.)

But the fact that 10% of the taxpayers foot nearly three-fourths of the tax bill still isn’t enough for the progressive mob. They want even more.

The guy who shakes hands with thin air, for example, recently announced that he wants to introduce a new law that would create a minimum tax of 25% on the highest income earners.

But the government’s own statistics show that the highest income earners in America— those earning more than $10 million annually— paid an average tax rate of 25.5%. That’s higher than Mr. Biden’s 25% minimum.

So he is essentially proposing an unnecessary solution in search of a problem.

I bring this up because whenever you hear the leftist Bolsheviks in government and media talking about “fair share”, they always leave out what exactly the “fair share” is.

The top 1% already pay nearly half the taxes. Exactly how much more will be enough?

Should the top 1% pay 60% of all taxes? 80%? At what point will it be enough?

They never say. They’ll never commit to a number. They just keep expanding their thinking scope.

Elizabeth Warren, for example, quite famously stopped talking about the “top 1%” and started whining about the “top 5%”. And then the “top 10%”.

She has already decided that the top 5% of wealthy households should not be eligible for student loan forgiveness or Medicare.

And when she talks about “accountable capitalism” on her website, Warren calls out the top 10% for having too much wealth, compared to the rest of households.

Soon enough it will be the “top 25%” who are the real problem…

Honestly this whole way of thinking reminds me of Anthony “the Science” Fauci’s pandemic logic on lockdowns and mask mandates.

You probably remember how reporters always asked “the Science” when life could go back to normal… and he always replied that it was a function of vaccine uptake, i.e. whenever enough Americans were vaccinated.

But then he kept moving the goal posts. 50%. 60%. 70%. It was never enough. And there was never a concrete answer.

This same logic applies to what the “experts” believe is the “fair share” of taxes which the top whatever percent should pay.

They’ll never actually say what the fair share is. But my guess is that they won’t stop until 100% of taxes are paid by the top 10% … and the other 100% of taxes are paid by the other 90%.

Tyler Durden Wed, 03/29/2023 - 11:25

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Financial Stress Continues to Recede

Overview: Financial stress continues to recede. The Topix bank index is up for the second consecutive session and the Stoxx 600 bank index is recovering…



Overview: Financial stress continues to recede. The Topix bank index is up for the second consecutive session and the Stoxx 600 bank index is recovering for the third session. The AT1 ETF is trying to snap a four-day decline. The KBW US bank index rose for the third consecutive session yesterday. More broadly equity markets are rallying. The advance in the Asia Pacific was led by tech companies following Alibaba's re-organization announcement. The Hang Seng rose by over 2% and the index of mainland shares rose by 2.2%. Europe's Stoxx 600 is up nearly 1% and US index futures are up almost the same. Benchmark 10-year yields are mostly 1-3 bp softer in Europe and the US.

The dollar is mixed. The Swiss franc is leading the advancers (~+0.3%) while euro, sterling and the Canadian dollar are posting small gains. The Japanese yen is the weakest of the majors (~-0.6%). The antipodeans and Scandis are also softer. A larger than expected decline in Australia's monthly CPI underscores the likelihood that central bank joins the Bank of Canada in pausing monetary policy when it meets next week. Most emerging market currencies are also firmer today, and the JP Morgan Emerging Market Currency Index is higher for the third consecutive session. Gold is softer within yesterday's $1949-$1975 range. The unexpectedly large drop in US oil inventories (~6 mln barrels according to report of API's estimate, which if confirmed by the EIA later today would be the largest drawdown in four months) is helping May WTI extend its gains above $74 a barrel. Recall that it had fallen below $65 at the start of last week.

Asia Pacific

The US dollar is knocking on the upper end of its band against the Hong Kong dollar, raising the prospect of intervention by the Hong Kong Monetary Authority. It appears to be driven by the wide rate differential between Hong Kong and dollar rates (~3.20% vs. ~4.85%). Although the HKMA tracks the Fed's rate increases, the key is not official rates but bank rates, and the large banks have not fully passed the increase. Reports suggest some of the global banks operating locally have raised rates a fraction of what HKMA has delivered. The root of the problem is not a weakness but a strength. Hong Kong has seen an inflow of portfolio and speculative capital seeking opportunities to benefit from the mainland's re-opening.  Of course, from time-to-time some speculators short the Hong Kong dollar on ideas that the peg will break. It is an inexpensive wager. In fact, it is the carry trade. One is paid well to be long the US dollar. Pressure will remain until this consideration changes. Eventually, the one-country two-currencies will eventually end, but it does not mean it will today or tomorrow. As recently as last month, the HKMA demonstrated its commitment to the peg by intervening. Pressure on the peg has been experienced since last May and in this bout, the HKMA has spent around HKD280 defending it (~$35 bln).

The US and Japan struck a deal on critical minerals, but the key issue is whether it will be sufficient to satisfy the American congress that the executive agreement is sufficient to benefit from the tax- credits embodied in the Inflation Reduction Act. The Biden administration is negotiating a similar agreement with the EU. The problem is that some lawmakers, including Senator Manchin, have pushed back that it violates the legislature's intent on the restrictions of the tax credit. Manchin previously threatened legislation that would force the issue. The US Trade Representative Office can strike a deal for a specific sector without approval of Congress, but that specific sector deal (critical minerals) cannot then meet the threshold of a free-trade agreement to secure the tax incentives. 

The Japanese yen is the weakest of the major currencies today, dragged lower by the nearly 20 bp rise in US 10-year yields this week and the end of the fiscal year related flows. Some dollar buying may have been related to the expirations of a $615 mln option today at JPY131.75. The greenback tested the JPY130.40 support we identified yesterday and rebounded to briefly trade above JPY132.00 today, a five-day high.  However, the session high may be in place and support now is seen in the JPY131.30-50 band. Softer than expected Australian monthly CPI (6.8% vs. 7.4% in January and 7.2% median forecast in Bloomberg's survey) reinforced ideas that the central bank will pause its rate hike cycle next week. The Australian dollar settled near session highs above $0.6700 in North America yesterday and made a margin new high before being sold. It reached a low slightly ahead of $0.6660 in early European turnover. The immediate selling pressure looks exhausted and a bounce toward $0.6680-90 looks likely. On the downside, note that there are options for A$680 mln that expire today at $0.6650. In line with the developments in the Asia Pacific session today, the US dollar is firmer against the Chinese yuan. However, it held below the high seen on Monday (~CNY6.8935). The dollar's reference rate was set at CNY6.8771, a bit lower than the median projection in Bloomberg's forecast (~CNY6.8788). The sharp decline in the overnight repo to its lowest since early January reflect the liquidity provisions by the central bank into the quarter-end.


Reports suggest regulators are finding that one roughly 5 mln euro trade on Deutsche Bank's credit-default swaps last Friday, was the likely trigger of the debacle. The bank's market cap fell by1.6 bln euros and billions more off the bank share indices. Then there is the US Treasury market, where the measure of volatility (MOVE) has softened slightly from last week when it rose to the highest level since the Great Financial Crisis. While the wide intraday ranges of the US two-year note have been noted, less appreciated are the large swings in the German two-year yield. Before today, last session with less than a 10 bp range was March 8. In the dozen sessions since, the yield has an average daily range of around 27 bp. The rapid changes and opaque liquidity in some markets leading to dramatic moves challenges the price discovery process. The speed of movement seems to have accelerated, and reports that Silicon Valley Bank lost $40 bln of deposits in a single day.

Italy's Meloni government will tap into a 21 bln euro reserve in the budget to give a three-month extension of help to low-income families cope with higher energy bills but eliminate it for others. It is projected to cost almost 5 billion euros. The energy subsidies have cost about 90 mln euros. Most Italian families are likely to see higher energy bills, though gas will still have a lower VAT. Meloni also intends to adjust corporate taxes to better target them and cost less. Separately, the government is reportedly considering reducing or eliminating the VAT on basic food staples. Meanwhile, the EU is delaying a 19 bln euro distribution to Italy from the pandemic recovery fund. The aid is conditional on meeting certain goals. The EU is extending its assessment phase to review a progress on a couple projects, licensing of port activities, and district heating. These are tied to the disbursement for the end of last year. The EU acknowledged there has been "significant" progress. Italy has received about a third of the 192 bln euros earmarked for it. Despite the volatile swings in the yields, Italy's two-year premium over Germany is within a few basis points of the Q1 average (~46 bp). The same is true of the 10-year differential, which has averaged about 187 bp this year. 

After slipping lower in most of the Asia Pacific session, the euro caught a bid late that carried into the European session and lifted it to session highs near $1.0855. The session low was set slightly below $1.0820 and there are nearly 1.6 bln euros in option expirations today between two strikes ($1.0780 and $1.0800). Recall that on two separate occasions last week, the euro be repulsed from intraday moves above $1.09. A retest today seems unlikely, but the price actions suggest underlying demand. Sterling has also recovered from the slippage seen early in Asia that saw it test initial support near $1.2300. Yesterday, it took out last week's high by a few hundredths of a cent, did so again today rising to slightly above $1.2350. However, here too, the intraday momentum indicators look stretched, cautioning North American participants from looking for strong follow-through buying.


What remains striking is the divergence between the market and the Federal Reserve. On rates they are one way. Fed Chair Powell was unequivocal last week. A pause had been considered, but no one was talking about a rate cut this year. The market is pricing in a 4.72% average effective Fed funds rate in July. On the outlook for the economy this year, they are the other way. The median Fed forecast was for the economy to grow by 0.4% this year. The median forecast in Bloomberg's survey anticipated more than twice the growth and projects 1.0% growth this year. As of the end of last week, the Atlanta Fed sees the US expanding by 3.2% this quarter (it will be updated Friday). The median in Bloomberg's survey is half as much. 

The US goods deficit in February was a little more than expected and some of the imports appeared to have gone into wholesale inventories, which unexpectedly rose (0.2% vs. -0.1% median forecast in Bloomberg's survey). Retail inventories jumped 0.8%, well above the 0.2% expected and biggest increase since last August. Given the strength of February retail sales (0.5% for the measure that excludes autos, gasoline, food services and building materials, after a 2.3% rise in January), the increase in retail inventories was likely desired. FHFA houses prices unexpectedly rose in January (first time in three months, leaving them flat over the period). S&P CoreLogic Case-Shiller's measure continued to slump. It has not risen since last June. The Conference Board's measure of consumer confidence rose due to the expectations component. This contrasts with the University of Michigan's preliminary estimate that showed the first decline in four months. Moreover, when its final reading is announced at the end of the week, the risk seems to be on the downside, according to the Bloomberg survey. Meanwhile, surveys have shown that the service sector has been faring better than the manufacturing sector. However, the decline in the Richman Fed's business conditions, while its manufacturing survey improved, coupled with the sharp decline in the Dallas Fed's service activity index may be warning of weakness going into Q2.

The US dollar flirted with CAD1.38 at the end of last week is pushing through CAD1.36 today to reach its lowest level since before the banking stress was seen earlier this month. The five-day moving average has crossed below the 20-day moving average for the first time since mid-February. Canada's budget announced late yesterday boosts the deficit via new green initiatives and health spending, while raising taxes, including a new tax on dividend income for banks and insurance companies from Canadian companies. The market appears to be still digesting the implications. Today's range has thus far been too narrow to read much into it. The greenback has traded between roughly CAD1.3590 and CAD1.3615. On the other hand, the Mexican peso has continued to rebound from the risk-off drop that saw the US dollar surge above MXN19.23 (March 20). The dollar is weaker for fifth consecutive session and seventh of the last nine. It finished last week near MXN18.4450 and fell to about MXN18.1230 today, its lowest level since March 9. However, the intraday momentum indicators are stretched, and the greenback looks poised to recover back into the MXN18.20-25 area. Banxico meets tomorrow and is widely expected to hike its overnight target rate by a quarter-of-a-point to 11.25%.



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The ONS has published its final COVID infection survey – here’s why it’s been such a valuable resource

The ONS’ Coronavirus Infection Survey has ceased after three years. Two experts explain why it was a uniquely useful source of data.



March 24 marked the publication of the final bulletin of the Office for National Statistics’ (ONS) Coronavirus Infection Survey after nearly three years of tracking COVID infections in the UK. The first bulletin was published on May 14 2020 and we’ve seen new releases almost every week since.

The survey was based primarily on data from many thousands of people in randomly selected households across the UK who agreed to take regular COVID tests. The ONS used the results to estimate how many people were infected with the virus in any given week.

In the survey’s first six months, we had results from 1.2 million samples taken from 280,000 people. Although the number of people participating each month declined over time, the survey has continued to be a highly valuable tool as we navigate the pandemic.

In particular, because the ONS bulletins were based on surveying a large, random sample of all UK residents, it offered the least biased surveillance system of COVID infections in the UK. We are not aware of any similar study anywhere else in the world. And, while estimating the prevalence of infections was the survey’s main output, it gave us a lot of other useful information about the virus too.

Unbiased surveillance

An important advantage of the ONS survey was its ability to detect COVID infections among many people who had no symptoms, or were not yet displaying symptoms.

Certainly other data sets existed (and some continue to exist) to give a sense of how many people were testing positive. For example, earlier in the pandemic, case numbers were reported at daily national press conferences. Figures continue to be published on the Department of Health and Social Care website.

But these totals have usually only encompassed people who tested because they had reason to suspect they may have been infected (for example because of symptoms or their work). We know many people had such minor symptoms that they had no reason to suspect they had COVID. Further, people who took a home test may or may not have reported the result.

Similarly, case counts from hospital admissions or emergency room attendances only captured a very small percentage of positive cases, even if many of these same people had severe healthcare needs.

Symptom-tracking applications such as the ZOE app or online surveys have been useful but tend to over-represent people who are most technologically competent, engaged and symptom-aware.

Testing wastewater samples to track COVID spread in a community has proved difficult to reliably link to infection numbers.

Read more: The tide of the COVID pandemic is going out – but that doesn't mean big waves still can't catch us

What else the survey told us

Aside from swab samples to test for COVID infections, the ONS survey collected blood samples from some participants to measure antibodies. This was a very useful aspect of the infection survey, providing insights into immunity against the virus in the population and individuals.

Beginning in June 2021, the ONS survey also published reports on the “characteristics of people testing positive”. Arguably these analyses were even more valuable than the simple infection rate estimates.

For example, the ONS data gave practical insights into changing risk factors from November 21 2021 to May 7 2022. In November 2021, living in a house with someone under 16 was a risk factor for testing positive but by the end of that period it seemed to be protective. Travel abroad was not an important risk factor in December 2021 but by April 2022 it was a major risk. Wearing a mask in December 2021 was protective against testing positive but by April 2022 there was no significant association.

We shouldn’t find this changing picture of risk factors particularly surprising when concurrently we had different variants emerging (during that period most notably omicron) and evolving population resistance that came with vaccination programmes and waves of natural infection.

Also, in any pandemic the value of non-pharmaceutical interventions such wearing masks and social distancing declines as the infection becomes endemic. At that point the infection rate is driven more by the rate at which immunity is lost.

A woman wearing a face mask receives a vaccine.
The survey gave us insights into the protection offered by vaccines and non-pharmaceutical interventions. Paul Maguire/Shutterstock

The ONS characteristics analyses also offered evidence about the protective effects of vaccination and prior infection. The bulletin from May 25 2022 showed that vaccination provided protection against infection but probably for not much more than 90 days, whereas a prior infection generally conferred protection for longer.

After May 2022, the focused shifted to reinfections. The analyses confirmed that even in people who had already been infected, vaccination protects against reinfection, but again probably only for about 90 days.

It’s important to note the ONS survey only measured infections and not severe disease. We know from other work that vaccination is much better at protecting against severe disease and death than against infection.

Read more: How will the COVID pandemic end?

A hugely valuable resource

The main shortcoming of the ONS survey was that its reports were always published one to three weeks later than other data sets due to the time needed to collect and test the samples and then model the results.

That said, the value of this infection survey has been enormous. The ONS survey improved understanding and management of the epidemic in the UK on multiple levels. But it’s probably appropriate now to bring it to an end in the fourth year of the pandemic, especially as participation rates have been falling over the past year.

Our one disappointment is that so few of the important findings from the ONS survey have been published in peer-reviewed literature, and so the survey has had less of an impact internationally than it deserves.

Paul Hunter consults for the World Health Organization. He receives funding from National Institute for Health Research, the World Health Organization and the European Regional Development Fund.

Julii Brainard receives funding from the NIHR Health Protection and Research Unit in Emergency Preparedness.

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