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Futures Tread Water As Critical EU Summit Begins

Futures Tread Water As Critical EU Summit Begins



Futures Tread Water As Critical EU Summit Begins Tyler Durden Fri, 07/17/2020 - 07:47

S&P futures were flat in a especially low-volume session, rebounding from losses late yesterday after Netflix surprised investors with a dismal subscriber outlook, while European shares fluctuated ahead of a critical EU summit in which leaders met in Brussels to try and hammer through a 750 billion euro post-pandemic recovery fund. 10Y yields continued their slide, dropping to 0.60%,as the dollar weakened.

The Nasdaq Composite has managed to go two months without posting back-to-back declines, but that may be under threat as investors question the resiliency of tech’s searing rally following Netflix's deplorable guidance.

European and world equity markets were heading for their third weekly gain in a row, but they were the smallest yet and Friday’s go-slow involved all the main asset classes from commodities to bonds according to Reuters. London’s FTSE, Paris, Milan and Madrid had all sagged into the red in early trading and though the euro ticked up, Italian and Spanish bond yields were struggling to stay anchored to their recent lows. An eventual green light to the €750 billion plan should finally lead to joint European debt, but investors are seeing their broader list of uncertainties and questions growing again.

"Presumably, as is the way of Europe, they will agree to come back from more talks followed by a compromise and a watered down deal," SocGen FX strateigst Kit Juckes said of the EU discussions. “The positive though is that we are getting a recovery fund.”

Europe's Stoxx Europe 600 Index erased gains of as much as 0.3% led by declines in travel, banking and oil sectors, after Germany’s chancellor said that big differences remain in today’s EU recovery fund talks. Dutch Prime Minister Mark Rutte, one of the main resisters to the recovery fund including mass grants, also said that he was “not optimistic” that agreement would be reached on Friday as he arrived for the meeting.  The Netherlands wants countries receiving EU support from the fund to agree to reforms in their labor markets and pension systems, and is leading a group of several smaller EU nations calling for stricter conditions.

Among individual movers, Novartis -1%, Shell and Total decline more than 1.5% as oil retreats. Automakers were the biggest gainers, with Daimler rising 4.1% after 2Q earnings were ahead of expectations.

Earlier in the session, in Asia Japan’s Nikkei slid 0.3% on concerns about rising virus infections in Tokyo. The Topix declined 0.3%, with Yoshimura Food Holdings and Teac falling the most. Chinese shares were steady after a more than 4% slide on Thursday, with investors assessing moves by policy makers to tame signs of exuberance. China’s CSI300 index climbed 0.25%, though that was after a near 5% slump on Thursday. The Shanghai Composite Index rose 0.1%, with Xinjiang Xuefeng Sci-Tech Group and Xinjiang Youhao Group posting the biggest advances. South Korea's Kospi Index and India's S&P BSE Sensex Index rose while the Jakarta Composite fell.

Adding to the recent rise in U.S.-Sino tensions, Washington had said it was considering banning members of the Chinese Communist Party traveling to the United States. The party totals more than 90 million people.

Meanwhile questions remain: will the COVID-19 pandemic force economies into lockdown again? The United States reported at least 75,000 new COVID-19 cases on Thursday, a daily record. Spain and Australia reported their steepest daily jumps in more than two months, while cases continued to soar in India and Brazil.

Investors are also counting on more stimulus. As well as Europe’s recovery fund, the U.S. Congress is set to begin debating a new aid package next week, as several states in the country’s south and west implement fresh lockdown measures to curb the virus. While retail sales for June released on Thursday beat market expectations, real-time measures of retail foot traffic and employee working hours and shifts have flatlined after steady growth since April.

"We now see higher risk of a market correction, considering the improvement in hard economic data we have seen over the past couple of months is likely to halt," said Tomo Kinoshita, global market strategist at Invesco in Tokyo.

In rates, it was a muted session with Treasury yields lower across the curve after all but 30-year drifted to weekly lows on light futures volume during Asia session and European morning. Curve flatter with long-end yields lower by ~1.7bp into early U.S. session. 10-year yields lower by ~2bps just below 0.60%, extending the weekly decline despite gains for U.S. equities during first week of 2Q results reporting, to more than 4bp; 2s10s and 5s30s curves each flatter by ~1bp; U.K. 10-year lags U.S. by 3bp, German 10- year by ~1bp. Futures volumes were around 70% of 20-day average levels as of 7am ET.

In currencies, the Bloomberg Dollar Spot Index headed for a third week of declines as Treasuries advanced for a second week. The euro gained on the day despite a slide in European stocks after Germany said big differences remain in EU recovery fund talks. The pound steadied yet headed for the biggest weekly drop among G-10 currencies, weighed down by weak economic data that fueled expectations of another interest-rate cut by the Bank of England. The yen was up fractionally at 107.13 per dollar and Sweden’s high-flying crown was up again.

In commodities trading, oil prices were little changed with Brent down 0.25% at $43.26 per barrel and U.S. crude down 0.15% at $40.87.  The two benchmark crudes had fallen 1% on Thursday too after the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed to trim their record supply cuts of 9.7 million barrels per day (bpd) by 2 million bpd, starting in August.

Looking at the day ahead now, as well as the aforementioned European Council meeting, we’ll get US housing starts and building permits for June, and the preliminary University of Michigan’s consumer sentiment index for July. Central bank speakers include BoE Governor Bailey, ECB Vice President de Guindos, and Executive Board member Schnabel, while earnings releases to watch out for include BlackRock, Danaher and Honeywell International.

Market Snapshot

  • S&P 500 futures up 0.2% to 3,201.75
  • STOXX Europe 600 down 0.07% to 371.86
  • MXAP up 0.3% to 164.36
  • MXAPJ up 0.7% to 540.35
  • Nikkei down 0.3% to 22,696.42
  • Topix down 0.3% to 1,573.85
  • Hang Seng Index up 0.5% to 25,089.17
  • Shanghai Composite up 0.1% to 3,214.13
  • Sensex up 0.6% to 36,694.16
  • Australia S&P/ASX 200 up 0.4% to 6,033.63
  • Kospi up 0.8% to 2,201.19
  • German 10Y yield fell 0.3 bps to -0.468%
  • Euro up 0.2% to $1.1404
  • Italian 10Y yield fell 1.4 bps to 1.06%
  • Spanish 10Y yield unchanged at 0.402%
  • Brent futures down 0.8% to $43.01/bbl
  • Gold spot up 0.3% to $1,801.84
  • U.S. Dollar Index down 0.2% to 96.18

Top Overnight News from Bloomberg

  • ECB policy makers didn’t agree on whether they expect to use the full amount of their 1.35 trillion-euro ($1.5 trillion) pandemic emergency purchase program when they met Thursday, despite President Christine Lagarde subsequently saying that’s likely, according to people familiar with the discussions
  • U.K. Prime Minister Boris Johnson is set to announce more than 3 billion pounds ($3.8 billion) of extra funding to help prepare the U.K. National Health Service for the risk of a second peak in coronavirus cases
  • Florida and Texas reported record numbers of virus deaths. Brazil surpassed 2 million cases as the virus spreads in the country’s poorer, remote areas. Dr. Anthony Fauci said many states reopened too quickly and called for “a time out” yet said he expects results for a clinical trial on monoclonal antibodies by late summer or early fall
  • Nearly two-thirds of health-care industry leaders anticipate the coronavirus pandemic will continue into the second half of 2021 or longer as hopes for a vaccine this year dwindle
  • U.S. central bankers still have some time to ponder how to best update their public guidance on the likely future path of interest rates and whether they need to deploy a yield-curve control strategy, New York Fed President John Williams said
  • Oil held losses in Asia after a U.S. jobs report cast doubt on the strength of the demand recovery in the world’s largest economy
  • A copper-supply crunch that’s sent prices soaring as producers scale back operations on coronavirus restrictions could still worsen, according to Rio Tinto Group, one of the world’s top miners

Asian equity markets were somewhat mixed as efforts to recoup some of the prior day’s losses heading into the weekend were fettered by the record increases in coronavirus numbers in US and abroad which continued to fuel second wave fears. ASX 200 (+0.3%) traded indecisively with notable weakness seen in tech names after similar underperformance of the sector stateside and after Victoria state suffered a record increase of coronavirus cases which surged by 428 vs. Prev. 317, while Rio Tinto shares failed to sustain the opening momentum that had been spurred by stronger quarterly production and shipment updates. Nonetheless, downside for the Australian benchmark is only marginal as the index just about kept afloat of the 6000 level and the Nikkei 225 (-0.3%) swung between gains and losses as sentiment navigated through a wavy currency. Hang Seng (+0.5%) and Shanghai Comp. (+0.1%) both initially outperformed after nursing the pain from recent heavy selling that resulted to losses in the mainland of about 5% yesterday, which China downplayed as a normal market adjustment, while a firm liquidity effort by the PBoC also contributed to the early improved tone in which it provided a total weekly net injection of CNY 330bln. However, the optimism in for Chinese bourses gradually faded amid the lingering doubts regarding the economic recovery. Finally, 10yr JGBs were higher alongside the indecision in the region and with the BoJ also present in the market for over JPY 1.2tln of JGBs heavily concentrated in 1yr-10yr maturities.

Top Asian News

  • Reliance Said to Plow Billions From Stake Sales Into Debt Funds
  • China’s Manic Traders Test the Communist Party’s Grip on Markets
  • Hong Kong Gives Nod to Asia’s Biggest Healthcare Listing in 2020

European equites (Eurostoxx 50 -0.2%) have staged a relatively mixed performance thus far with price action broadly contained as participants await updates from the EU Council summit in Brussels. On which, the bar for expectations has been tempered somewhat by comments on arrival from the likes of Dutch PM Rutte who assigns a less than 50% chance of a breakthrough by Sunday, whilst German Chancellor Merkel has cautioned that large differences remains and negotiations will be very tough. The DAX (+0.1%) is faring slightly better than its peers amid support for the auto sector after Daimler’s (+4.8%) prelim Q2 release revealed a smaller decline in EBIT than feared with the Co. also looking to make circa EUR 2bln in cost savings. Furthermore for the index, reports note that Deutsche Boerse could propose new rules that would enable a quick expulsion of companies from the DAX if firms file for insolvency. If adopted, Wirecard (-7.2%) could leave the index in August. Elsewhere, the bulk of the corporate updates this morning have come from Scandinavia with earnings from the likes of Ericsson (+10.4%), Saab (+2.8%), Volvo (+1.1%), Danske Bank (+1.1%), Assa Abloy (-2.8%) and Electrolux (-5.8%) to name but a few. From a broader sectoral standpoint, asides from autos, the tech sector is faring better than peers amid upside in chip names such as Infineon (+2.7%) and STMicroelectronics (+3.1%). To the downside, losers include banks, travel & leisure and insurance names.

Top European News

  • Ericsson Jumps After Profit Boost From Network Upgrades
  • ECB Officials Didn’t Agree on If They’ll Use Full Bond Plan
  • U.K.’s Debt Chief Prefers Going Green Over Borrowing for Century

In FX, the single currency is attempting extend gains above 1.1400 vs the Dollar again having posted a lower high from Wednesday’s circa 1.1450 peak amidst post-ECB reports about divergence among GC members on the PEPP that President Lagarde assumes will be used in full. However, the latest retreat seems more to do with apprehension ahead of the EU leaders meeting to try and resolve differences over the Recovery Fund and Budget, as participants continue to play down prospects of reaching an agreement by the end of the 2-day Summit.

  • USD – The Greenback is mixed against G10 counterparts beyond the Euro, and the restraint is highlighted by the confined 96.331-083 DXY range compared to yesterday’s 96.404-95.890 extremes on the back of fluctuating risk sentiment and largely upbeat US data dampened by the ongoing increase in COVID-19 infections and fatalities across Sun Belt states in particular. Ahead, housing data and preliminary Michigan sentiment, but the Buck remains driven by the overall tone and equity performance alongside moves in rival currencies.
  • AUD/NZD/CHF - All benefiting from the aforementioned US Dollar retrenchment, with the Aussie back within striking distance of 0.7000, Kiwi revisiting 0.6550 and Franc holding off sub-0.9450 lows, even though Victoria suffered another record high tally of coronavirus cases and the PBoC bucked the recent trend with a 7.0000+ midpoint Usd/CNY fix overnight (albeit with the onshore Yuan closing back above the psychological level and CNH currently around 6.9970). Conversely, the Nzd will have taken note of a strong rebound in the manufacturing PMI from contraction to expansion following re-opening from lockdown and the Chf has pared some underperformance vs the Eur after sliding to multi-week lows near 1.0800 on Thursday.
  • GBP/JPY/CAD - Sterling is still grappling with a bearish combination of technical and fundamental factors as Cable loses grip of 1.2600 and returns to the midst of a cluster of hourly MAs ahead of Fib support (at 1.2520), while Eur/Gbp remains elevated close to 0.9100. Elsewhere, the Yen is meandering between 107.36-11 and Loonie even more contained either side of 1.3575 against the backdrop of idling crude prices and subdued risk appetite in the run up to Canadian wholesale trade.

In commodities, WTI & Brent remain subdued this morning with Brent Sep’20 future having given up the USD 43/bbl handle to a low of USD 42.88/bbl as we stand while WTI Aug’20 has tested touted support at USD 40.35/bbl at worst. Overall, performance for the complex is somewhat tentative with European bourses currently trading with little conviction as we await the press statement from the first of the weekends European Council Summit meeting (time TBC); for crude explicitly, the only scheduled event is the weekly Baker Hughes rig count. In terms of spot gold, the precious metal is modestly firmer and has recaptured the USD 1800/oz mark, but only just, as the USD continues to drift lower in this period of tentative trade. Elsewhere, Rio Tinto posted a 1.5% increase in iron ore shipments in their Q2 update as well as commenting that demand out of China for iron ore is rising; although, as most updates have, cautioned that the possibility of second COVID-19 wave could be a headwind.

US Event Calendar

  • 8:30am: Housing Starts, est. 1.19m, prior 974,000; Building Permits, est. 1.29m, prior 1.22m
  • 10am: U. of Mich. Sentiment, est. 79, prior 78.1; Current Conditions, est. 86.8, prior 87.1; Expectations, est. 74, prior 72.3
  • 12:30pm: Former Fed Chairs Yellen and Bernanke Testify to Congress

DB's Jim Reid concludes the overnight wrap

xRisk assets fell back yesterday as weak economic data combined with rising numbers of coronavirus cases dampened investor sentiment. By the end of the session, the S&P 500 had fallen back by -0.34% as technology stocks led the decline with the NASDAQ closing down by a larger -0.73%. European indices traded lower as well following a quiet ECB meeting but ahead of the recovery fund summit today. The STOXX 600 was down -0.47%. In terms of the individual moves, there was a large pullback in the ‘normalisation’ travel trade that we saw on Wednesday. Cruiseliners reversed the previous day’s gains as Norwegian Cruise Line (-15.62%), Carnival (-9.73%), and Royal Caribbean Cruises (-7.57%) were the 3 worst performers in the US index, while the 4th and 6th worst performers were American Airlines (-7.37%) and United Airlines (-5.17%). In Europe, similarly the Travel and Leisure sector led the index lower, falling -2.08% after leading the way the day before. Otherwise, Morgan Stanley (+2.49%) had a strong performance after the bank reported adjusted EPS of $2.04 (vs. $1.14 estimated), though Twitter fell -1.11% after the hack of a number of high-profile accounts the previous evening. NFLX fell over -8% in after-market trading in a rare hiccup for the mega-cap growth stocks after reporting they expected 2.5m new subscribers vs. the 5m that analysts expected. The company announced “growth is slowing as consumers get through the initial shock of Covid and social restrictions.”

Talking of tech, yesterday’s CoTD looked at the remarkable rise of Tesla (up +315% since March) which is now over a third of the combined market cap of the combined US, EU and Japanese auto indices. Since March, Tesla has added just over 8 Fords or 27 Renaults. A bit like Sweden’s virus response this divided opinion in my mailbox with many saying Tesla’s valuation is crazy but some highlighting the potential for their battery operations to be scalable and one response suggesting Elon Musk was a genius. See here for a bonus chart that wasn’t in the original mail on global auto market share. Email if you want to be added to the direct mailing list of Chart of the Day.

In the absence of any fresh overnight triggers, Asian markets are trading a little mixed this morning with the Nikkei (-0.34%), Shanghai Comp (-0.51%) and Asx (-0.12%) down while the Hang Seng (+0.61%) and Kospi (+0.65%) are up. In Fx, the US dollar index is down -0.10%. Meanwhile, futures on the S&P 500 are up +0.27%.

A key piece of data that dampened the mood yesterday was the US initial weekly jobless claims for the week through July 11, which came in at a higher-than expected 1.3m. Although this was the 15th consecutive weekly decline in the numbers, they were down by just -10k on the previous week, which is the smallest decline since the peak was reached back in late March, raising fears that gains in the labour market have stalled as cases numbers have risen across the country. Though the other US data released yesterday struck a more positive tone (more on which below), these were all more backward-looking numbers, that didn’t take into account the latest virus upsurge across numerous states.

Speaking of the coronavirus, yesterday the main headline came from the UK’s National Cyber Security Centre, which said that Russian cyber actors were targeting organisations involved in developing a coronavirus vaccine in the UK, the US and Canada. Their website said that the group known as APT29 that was exploiting organisations, “almost certainly operate as part of Russian intelligence services”. Russia has denied the accusations however.

Meanwhile, in terms of the latest on case numbers, Florida reported a further 4.6% increase yesterday, above the previous 7-day average of 4.4%, along with a record 156 daily deaths. Arizona continued to see a slight slowing in cases, with a 2.5% increase vs. the 2.8% weekly average. The positivity rate remains very elevated at 24.5% though. California had just over 9400 new cases, which is above the recent 7-day average of 8900, while fatalities have ticked up in the state with 118 new deaths in the last 24 hours vs. a 94 7-day average. Texas also saw a 5.5% jump in new cases as against the 7 day average of +3.7% while reported fatalities came in at a record 169 in the last 24 hours as against the 7 day average of 88 per day. Overall US cases rose by 2.5% with nearly 64,000 per day over the past week, which is twice as much as the first peak seen in early April. Amidst rising case numbers in the state, the Republican National Committee said that they would be scaling back the Republican National Convention, which is due to be held in the state next month. Arkansas and Colorado were added to the ever growing list of states requiring masks in public spaces. Texas Governor Abbott warned attendants at the Texas Republican Convention yesterday that the recent outbreak may leave him with few options outside of shutting down the second most populous U.S. state. This comes as Pennsylvania rolled back their own reopening yesterday, shuttering nightclubs and lowering occupancy across bars and restaurants. Overnight, Brazil has surpassed the 2m mark of confirmed cases with confirmed fatalities at 76,688. As ever see our table in the pdf of this report.

Meanwhile, Australia’s most populous state, New South Wales, has tightened restrictions for gatherings and venues, including clubs and cafes as the state fears undetected cases of community transmission could spread rapidly. All restaurants, clubs and cafes will be limited to bookings of a maximum 10 people and restricted to one person per four-square-meters. Meanwhile, Victoria reported a fresh record of new cases at 428 in the past 24 hours. Tokyo’s Governor also said that today’s new cases are expected to be at the same level as yesterday (286) without giving specific figures. Elsewhere India has become the third country to cross the 1m confirmed cases mark.

Separately in Israel, where cases have also risen sharply, Channel 12 reported that senior ministers were in favour of returning to a full lockdown at weekends. Also Germany announced that they were imposing some travel rules on citizens moving within the country as summer vacation gets underway. Primarily the rules require those coming from a ‘hotspot’ show proof of recent negative testing and those coming from risk areas abroad quarantine at home for 14-days.

Here in the UK, Bloomberg has reported overnight that PM Johnson is set to announce more than GBP 3bn of extra funding to help prepare the National Health Service for the risk of a second peak in coronavirus cases. Meanwhile the PM will announce today plans to ramp up antigen testing for the virus to 500,000 a day by the end of October to boost its test and trace program in preparation for the testing capacity needed for the winter. PM’s office said late yesterday that, “Tomorrow, he will set out a broad package of measures to protect against both a possible second wave, and to ease winter pressures and keep the public safe.”

The other main news yesterday came from the ECB, where President Lagarde struck a decidedly cautious note on the recovery, and said that “ample monetary stimulus remains necessary to support the economic recovery and to safeguard medium-term price stability”. Though monetary policy was left unchanged, Lagarde notably pushed back against the idea that the ECB wouldn’t use the full €1.35tn PEPP envelope, saying that the ECB’s baseline was that they would use it in full barring positive data surprises. This isn’t just for market stability, but also as a way to ease the monetary policy stance. For more, see our Europe economists’ views here. Sovereign bonds rallied across the continent in response to the press conference, and 10yr yields on French (-1.7bps), Italian (-1.4bps) and Spanish (-2.1bps) debt all fell to their lowest levels in 4 months.

We also heard from some Fed governors yesterday who shared President Lagarde’s sentiment, painting a wary picture of the economy. First we heard from New York Federal Reserve Bank President Williams, who acknowledged that the efforts of the central bank “over the next few years…needs to be making sure that we can get back to a really strong, robust economy with sustainable, strong sustainable growth and inflation at our 2% goal." While also saying that it was not the time to even think of ‘exit strategies”, as the economy is still in a very uncertain situation. This was also the opinion of Federal Reserve Bank of Atlanta President Bostic, who noted that the lack of clarity on fiscal policy may be affecting sentiment in the region as case numbers increase across the country, citing business leaders and consumers in the region. He noted that, “Real-time data that we are getting today is really suggesting there may be a leveling off in terms of level of business activity, in terms of the amount of jobs that are being returned to the economy.” Lastly, Federal Reserve Bank of Chicago President Evans said he saw the U.S. recovering its previous peak in output “in middle or late 2022”, and that he is “looking at the end of this year for the unemployment rate to be 9-9.5%.” On the popular topic of YCC, Evans acknowledged that there was a potential use for it, but that he was undecided and that he is a big advocate of forward guidance and strategies that convince the public that the Fed can fulfill its dual mandate. Overall central bankers continue to provide a lukewarm reading of the economy, but a willingness to continue supporting it in whatever ways it can.

Today all attention will shift to the special European Council summit, with EU leaders gathering this morning in Brussels to discuss the proposed recovery fund along with the EU’s long-term budget. As a reminder from yesterday, our view here at DB is that although an agreement is still possible this weekend, it would now be a positive surprise, and there’s no indication so far of the differences of opinion between the member states having been bridged yet. The meeting gets started at 10:00 Brussels time, though is scheduled to continue into Saturday, so its likely the final news of what’s happened will only be known over the weekend.

Here in the UK, gilt yields fell to another record low yesterday, with 10yr yields down a further -2.7bps to 0.14%. It comes amidst increasing speculation that the Bank of England might be forced into further rate cuts, potentially even into negative territory. Meanwhile yesterday’s labour market release from the ONS said that early indicators for June suggested that the number of employees on payrolls were down around -650k compared with March, although the unemployment rate for the 3 months to May remained at 3.9% as many of the people out of work were not looking for work, and hence weren’t counted as unemployed. That said, the total number of weekly hours worked fell to 877k in the three months to May, their lowest level since 1997, while more up-to-date data on vacancies showed them falling to 333k in the three months to June, which is below their lowest level after the financial crisis.

Finally on the US, the more backward-looking data for June was more positive than the weekly jobless claims, with retail sales increasing by +7.5% (vs. +5.0% expected), and May’s growth being revised higher. Furthermore, the continuing claims for the week through July 4 (the week before the initial claims) fell to 17.338m (vs. 17.5m expected), and the insured unemployment rate fell to 11.9%. As in Europe, 10yr Treasury yields ended the session down -1.3bps at 0.617%.

To the day ahead now, and as well as the aforementioned European Council meeting, we’ll get the final Euro Area inflation reading for June, US housing starts and building permits for June, and the preliminary University of Michigan’s consumer sentiment index for July. Central bank speakers include BoE Governor Bailey, ECB Vice President de Guindos, and Executive Board member Schnabel, while earnings releases to watch out for include BlackRock, Danaher and Honeywell International.

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Royal Caribbean Keeps One Covid Change Passengers May Not Like

Royal Caribbean cruise line has decided that one policy change made during the pandemic era will stay in place.



Royal Caribbean cruise line has decided that one policy change made during the pandemic era will stay in place.

The covid pandemic forced the cruise industry to make a lot of changes -- some superficial and others that altered long-term policies. 

Some of these changes, like making muster drills mostly virtual, delighted customers. Others, like improving air filtration, happened behind the scenes, benefiting cruise passengers even if they weren't aware that anything had happened.

Royal Caribbean International (RCL) - Get Royal Caribbean Group Report, Carnival Cruise Line (CCL) - Get Carnival Corporation Report, and Norwegian Cruise Line (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report all moved largely in lockstep during the pandemic. In July 2021, when all three cruise lines returned to service from U.S. ports, they had to deal with oversight from the Centers for Disease Control and Prevention.

Those rules mandated that all passengers age 12 and older had to be vaccinated, and all passengers had to provide negative covid tests. Mask rules varied a bit, but for much of the past year and a few months since the cruise lines were able to start sailing again, masks were required in a number of areas, including cruise terminals.

Now, the CDC has basically stopped regulating the cruise industry. It offers guidance but it no longer tracks covid on cruise ships, and most rules have gone away. 

And while Royal Caribbean, Carnival, and Norwegian have seen operations largely return to normal, not every pandemic-era change has gone away.

Image source: Dukas/Universal Images Group via Getty Images

Royal Caribbean Keeps a Change Passengers May Not Like

Royal Caribbean cruises have largely returned to the exact experiences they were before covid. Vaccinated passengers still have to provide proof they got their shots and unvaccinated cruisers must still show negative tests, but once you board, the experience has mostly returned to normal.

Royal Caribbean has decided, however, that it's not going roll back one change, which was first reported by Royal Caribbean Blog. The cruise line discussed the matter in an email to travel agents Sept. 27.

"As we continue to shape the future of cruising, a few experiences may look a bit different to some of your clients. With this, we will no longer be accepting prebookings for onboard entertainment. All guests who would like to attend our entertainment onboard must book these at the Box Office or on the App once onboard," the email said.

Some customers may be angry about this because it creates a sort of rush to book theater shows, Aqua Theater performances, the comedy club, and other onboard entertainment as customers board. 

This could mean people book a cruise and end up unable to see a show they really wanted to see.

In reality, many people don't show up for their reservations, so not getting one generally means that you can line up on a standby basis and still get in.

Royal Caribbean Has Turned a Covid Corner

Royal Caribbean, like Carnival and Norwegian, has struggled to get back to its precovid levels of business. The company has returned its entire fleet to service and has slowly built back to sailing its ships at full capacity. 

Chief Executive Jason Liberty outlined some financial information on the company during its second-quarter-earnings call.

"Another major milestone for the group this past quarter was that our business turned operating cash flow and Ebitda positive," he said. 

"...This achievement further strengthened our liquidity position and positions us well to continue methodically and proactively improving the balance sheet and refinancing near-term maturities as we seek to return to 2019 metrics and beyond swiftly."

Liberty made clear that he expected the company to fully recover.

"This outperformance in Q2 versus our expectations was driven by continued strength in our onboard revenue and accelerating load factors, which hit nearly 90% in June and delivered 82% for the quarter," he said. 

"This combination led us to achieving higher total revenue per guest versus 2019 levels."


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Spread & Containment

How bonds work and why everyone is talking about them right now: a finance expert explains

Investor confidence in the UK is at a low, and the bond market has reacted dramatically.



The Bank of England is buying bonds again. Just as it was about to start selling the debt it had accumulated as part of its last effort to support the economy during the COVID-19 pandemic, the central bank has been forced to announce a new scheme to shore up investor confidence.

The bank’s £65 billion short-term spree aims to address the slump in bond prices caused by investors rushing to sell after the government’s recent mini-budget. This led to a surge in bond yields that hiked borrowing costs for the government and spread to pensions, housing and the general economy. So far, it has had a limited initial impact on the markets.

We asked an expert in finance to explain what’s going on in bond markets.

What is a bond and what is the difference between bond prices and yields?

A bond is essentially a tradeable IOU. It’s a loan that investors make to issuers such as companies or governments (UK government bonds are often called gilts). A bond has a price at which it can be sold and a yield, which is an annual amount the investor receives for holding the bond, a bit like interest on a savings account, and is expressed as a percentage of the current price.

When the price of a bond falls, it signals less demand for the bond because fewer investors want to own it. At the same time, the yield rises, which represents a higher cost of borrowing for companies or governments that issued the bond because this is what they have to pay to investors.

In the days since the government’s mini-budget, yields on 10-year Treasury bonds – which are issued by the UK government – increased from approximately 3.5% to 4.52% – the highest since the 2007-2008 global financial crisis. The expectation of continued increases prompted the recent intervention by the Bank of England.

UK government 10-year bond yields

United Kingdom 10-year bond yield. / Tradingview

What causes bond yields to move?

To understand this, it is important to bear in mind that, while people often talk about the interest rate, there are actually a number of rates. This includes the rate at which the central bank lends to commercial banks (the base rate), the rate that banks lend to each other (the interbank rate), the rate that the government borrows at (Treasury yields) and the rate at which households and firms borrow (commercial loans and mortgages).

When the Bank of England changes the base rate, this cascades through all these rates. As such, the Bank of England carefully considers the state of the economy – that is, growth and inflation – when deciding on the base rate.

When an economy is growing, interest rates and bond yields tend to rise. The occurs for several reasons. Investors sell bonds to buy riskier assets with better returns. Firms and households also look to borrow more money in a growing economy, for example, to invest in new machinery or to move home. More demand for borrowing means lenders can charge higher interest on their loans.

Higher inflation often accompanies economic growth because of the increase in demand for goods and services. This tightens supply and causes prices to rise (including wages for labour). The Bank of England, which is mandated by the government to try to keep inflation as close to 2% as possible, will respond to higher inflation by raising base rates, which, as noted, feeds through to the different rates.

Investors will often anticipate the increase in base rates and look to act before it goes up by selling Treasury bonds and buying alternative, higher return, assets. This causes bond yields to rise further. As a result, the Treasury bond yield is often seen as a predictor of future Bank of England base rate changes.

So, if yields are rising, does this mean that investors are expecting future economic growth in the UK?

No, not at the moment. When the government raises money by issuing bonds, it does so over a range of time periods (called maturities), from one day to 30 years. When an economy is expected to grow, the yield on longer-term bonds will be higher than the yield on shorter-term bonds.

This relationship between yields across different maturities is referred to as the term structure or yield curve. An upward sloping yield curve implies a growing economy. At the moment, the UK yield curve is flat, or even downward-sloping across some maturities. My research shows that a falling yield curve is a good predictor of a coming recession.

Yield curve for UK government bonds

Line graph showing downward-sloping yield curve for UK gilts
UK gilts 40-year yield curve. *The curve on the day of the previous MPC meeting is provided as reference point. Bloomberg Finance L.P., Tradeweb and Bank of England calculations

It’s important to remember that these different yields act as a benchmark for commercial lending rates of equivalent lengths. The approximate jump to 4.5% in 2-year and 5-year yields has been reflected in mortgage rates, which is why some lenders have pulled available mortgage deals recently while they reassess the lending rates charged to households.

Read more: Is the UK in a recession? How central banks decide and why it's so hard to call it

But if the UK economy is not expected to perform well, why have bond yields been rising after the chancellor’s mini-budget announcement?

The rising bond yields we are seeing relate to an additional factor: the amount of government debt. The mini-budget introduced tax cuts and increased spending and investors know the government will need to increase borrowing to meet these commitments. Some estimates put potential government borrowing at £190 billion due to this plan.

An increase in the amount a homeowner borrows versus the value of their home (called the loan-to-value) causes the mortgage rate charged to the borrower to rise. Similarly, an increase in the amount of bonds that the government will be looking to sell (the amount it wants to borrow) will push down the price of existing bonds, increasing yields. More importantly, more debt without growth raises the risk level of the UK economy.

Anticipating this, investors triggered a large-scale bond sell-off after the government’s mini-budget announcement. This contributed to the fall in the value of the pound as investors selling UK Treasury bonds bought US bonds instead, essentially swapping pounds for dollars.

So will the Bank of England’s plan work?

The intervention will have a short-term positive impact, which started as soon as it was announced. But the bank is really only buying time. Any ultimate success depends on the government restoring investor confidence in its economic plans.

Unfortunately, rising yields and borrowing costs for the UK economy is the price we are now paying for the government’s recent fiscal announcement.

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

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Yom Kippur is coming soon – what does Judaism actually say about forgiveness?

Many religions value forgiveness, but the details of their teachings differ. A psychologist of religion explains how Christian and Jewish attitudes co…




Two women embrace before a Yom Kippur service held outdoors during the COVID-19 pandemic in Los Angeles. Al Seib/Los Angeles Times via Getty Images

The Jewish High Holidays are fast approaching: Rosh Hashana and Yom Kippur. While the first really commemorates the creation of the world, Jews view both holidays as a chance to reflect on our shortcomings, make amends and seek forgiveness, both from other people and from the Almighty.

Jews pray and fast on Yom Kippur to demonstrate their remorse and to focus on reconciliation. According to Jewish tradition, it is at the end of this solemn period that God seals his decision about each person’s fate for the coming year. Congregations recite a prayer called the “Unetanah Tokef,” which recalls God’s power to decide “who shall live and who shall die, who shall reach the ends of his days and who shall not” – an ancient text that Leonard Cohen popularized with his song “Who by Fire.”

Forgiveness and related concepts, such as compassion, are central virtues in many religions. What’s more, research has shown that it is psychologically beneficial.

But each religious tradition has its own particular views about forgiveness, as well, including Judaism. As a psychologist of religion, I have done research on these similarities and differences when it comes to forgiveness.

Person to person

Several specific attitudes about forgiveness are reflected in the liturgy of the Jewish High Holidays, so those who go to services are likely to be aware of them – even if they skip out for a snack.

In Jewish theology, only the victim has the right to forgive an offense against another person, and an offender should repent toward the victim before forgiveness can take place. Someone who has hurt another person must sincerely apologize three times. If the victim still withholds forgiveness, the offender is considered forgiven, and the victim now shares the blame.

The 10-day period known as the “Days of Awe” – Rosh Hashana, Yom Kippur and the days between – is a popular time for forgiveness. Observant Jews reach out to friends and family they have wronged over the past year so that they can enter Yom Kippur services with a clean conscience and hope they have done all they can to mitigate God’s judgment.

The teaching that only a victim can forgive someone implies that God cannot forgive offenses between people until the relevant people have forgiven each other. It also means that some offenses, such as the Holocaust, can never be forgiven, because those martyred are dead and unable to forgive.

Many people dressed in black and white stand in a courtyard between ancient walls.
Thousands of Jewish pilgrims attend penitential prayers at the Western Wall in Jerusalem ahead of the Jewish High Holiday of Rosh Hashana. Menahem Kahana/AFP via Getty Images

To forgive or not to forgive?

In psychological research, I have found that most Jewish and Christian participants endorse the views of forgiveness espoused by their religions.

As in Judaism, most Christian teachings encourage people to ask and give forgiveness for harms done to one another. But they tend to teach that more sins should be forgiven – and can be, by God, because Jesus’ death atoned vicariously for people’s sins.

Even in Christianity, not all offenses are forgivable. The New Testament describes blaspheming against the Holy Spirit as an unforgivable sin. And Catholicism teaches that there is a category called “mortal sins,” which cut off sinners from God’s grace unless they repent.

One of my research papers, consisting of three studies, shows that a majority of Jewish participants believe that some offenses are too severe to forgive; that it doesn’t make sense to ask someone other than the victim about forgiveness; and that forgiveness is not offered unconditionally, but after the offender has tried to make things right.

Take this specific example: In one of my research studies I asked Jewish and Christian participants if they thought a Jew should forgive a dying Nazi soldier who requested forgiveness for killing Jews. This scenario is described in “The Sunflower” by Simon Wiesenthal, a writer and Holocaust survivor famous for his efforts to prosecute German war criminals.

A color photograph of an older, balding man in a blue shirt and striped tie.
Simon Wiesenthal at the White House during the Reagan administration. Diana Walker/The Chronicle Collection via Getty Images

Jewish participants often didn’t think the question made sense: How could someone else – someone living – forgive the murder of another person? The Christian participants, on the other hand, who were all Protestants, usually said to forgive. They agreed more often with statements like “Mr. Wiesenthal should have forgiven the SS soldier” and “Mr. Wiesenthal would have done the virtuous thing if he forgave the soldier.”

It’s not just about the Holocaust. We also asked about a more everyday scenario – imagining that a student plagiarized a paper that participants’ friends had written, and then asked the participants for forgiveness – and saw similar results.

Jewish people have a wide variety of opinions on these topics, though, as they do in all things. “Two Jews, three opinions!” as the old saying goes. In other studies with my co-researchers, we showed that Holocaust survivors, as well as Jewish American college students born well after the Holocaust, vary widely in how tolerant they are of German people and products. Some are perfectly fine with traveling to Germany and having German friends, and others are unwilling to even listen to Beethoven.

In these studies, the key variable that seems to distinguish Jewish people who are OK with Germans and Germany from those who are not is to what extent they associate all Germans with Nazism. Among the Holocaust survivors, for example, survivors who had been born in Germany – and would have known German people before the war – were more tolerant than those whose first, perhaps only, exposure to Germans had been in the camps.

Forgiveness is good for you – or is it?

American society – where about 7 in 10 people identify as Christian – generally views forgiveness as a positive virtue. What’s more, research has found there are emotional and physical benefits to letting go of grudges.

But does this mean forgiveness is always the answer? To me, it’s an open question.

For example, future research could explore whether forgiveness is always psychologically beneficial, or only when it aligns with the would-be forgiver’s religious views.

If you are observing Yom Kippur, remember that – as with every topic – Judaism has a wide and, well, forgiving view of what is acceptable when it comes to forgiveness.

Adam B. Cohen 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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