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Global Stocks Hit All Time High On Stimulus Optimism Ahead Of Fed Meeting

Global Stocks Hit All Time High On Stimulus Optimism Ahead Of Fed Meeting
Tyler Durden
Wed, 12/16/2020 – 07:40

Another overnight session, and – predictably – futures are higher in keeping with the most glaringly obvious market trend since…



Global Stocks Hit All Time High On Stimulus Optimism Ahead Of Fed Meeting Tyler Durden Wed, 12/16/2020 - 07:40

Another overnight session, and - predictably - futures are higher in keeping with the most glaringly obvious market trend since 2016 of stocks surging during overnight US trading (while trading flat in regular trading hours)...

... alongside world stocks which rose to a fresh record high on Wednesday ahead of today's Fed meeting - the last for 2020 - on optimism a fiscal deal is imminent after congressional leaders from both parties met for several hours yesterday and afterwards reported that they are making progress with Mitch McConnell said nobody is leaving Washington for a break until a deal is completed, which should happen "soon."  The dollar reached its lowest in more than two and a half years, on the prospect of effective coronavirus vaccines; the 10-year Treasury yield was at 0.9262% and gold gained.

Futures were higher across the board with trader confidence building on the back of stronger European PMI data, the vaccine rollout and the prospect for more U.S. stimulus. E-minis were up 10 points, or 0.3%, at 7am, briefly rising above 3,700 and just shy of all time highs. Dow E-minis were up 93 points, or 0.31%. Nasdaq 100 E-minis were up 31 points, or 0.23%.

The MSCI world stock index rose 0.4% to a new all time high of 636.64. The index has climbed 15% since the beginning of November, propelled by trillions of dollars worth of global stimulus.

Europe's Stoxx 600 Index rose 1%, notching a third day of gains, and Germany's DAX outperformed. Bulls got a boost after negotiations continued over a post-Brexit trade deal between the U.K. and the European Union with signs of cautious optimism from both sides that agreement can be reached.  European stocks also got a boost after PMI economic data came in far better than expected and the European Central Bank decided on Tuesday to let euro zone banks start paying dividends again if they have enough capital. The December Composite PMI for the euro area came in at 49.8, just below the level that points to an expansion in the economy.

The reading, well ahead of economist expectations for 45.7, was boosted by German manufacturing and French services. The news was sufficient to push the euro above $1.22 for the first time since April 2018 while eurozone bond yields edged up.

Earlier in the session, the MSCI index of Asia Pacific shares ex-Japan followed Wall Street’s latest rise to end 0.9% higher. The region is also at record highs and up 3.8% so far in December putting it track for its best yearly performance since 2017. Equity markets in Taiwan, Indonesia and Vietnam climbed more than 1% as investors awaited the outcome of the Federal Reserve’s policy meeting. Materials and communication services were the top performers in Asia. Shares of Apple suppliers also gained on bets of robust demand for iPhone 12 models after Nikkei reported the firm is boosting production. Stocks in China underperformed the broader Asian gauge. MSCI became the third index provider to delete some Chinese stocks blacklisted by the Trump administration from its benchmarks. SMIC, the nation’s largest chipmaker, slid 5.5% to its lowest in more than two months after news emerged about the surprise resignation of a top executive. The Kospi also underperformed the MSCI Asia Pacific Index, which rose 0.8% following a two-day drop. South Korean authorities are reviewing the possibility of raising social distancing to level 3, the strongest measure.

Besides new covid relief, optimism over a $1.4 trillion U.S. spending package increased after House of Representatives Speaker Nancy Pelosi invited other congressional leaders to meet late on Tuesday to put together a deal to be enacted this week.

“The odds are that this deal is more than the $500 billion the Republicans proposed and likely less than the $900 billion of the joint Republican/Democrat committee proposal,” said Sebastien Galy, macro strategist at Nordea Asset Management. “It is rightfully welcomed by the markets, but the size of the fiscal package is the issue.”

Additionally, progress on rolling out vaccines continued after Moderna’s COVID-19 vaccine appeared set for regulatory authorization this week. The United States also expanded its rollout of the newly approved vaccine developed by Pfizer Inc. and BioNTech.

"Investors are starting to buy in to the vaccine rollout,” said Maarten Geerdink, head of European equities at NN Investment Partners. “With further approvals expected shortly and the European recovery fund being approved, investors are willing to look beyond the current spike of cases and heightened lock down and are focusing and positioning for next year."

Euphoric markets will also look to the Fed at 2pm ET today to see whether it hints at an extension of its stimulus program and it thinks the economy will suffer a double-dip recession or is on the cusp of a vaccine-inspired boom, which will be viewed as positive news. The FOMC is expected to discuss the conditions under which it would alter the scope of its asset purchase program and possibly provide fresh guidance on its asset purchases, now $120 billion a month, tying how long the buying will continue to substantial progress in meeting its goals of full employment and 2% inflation.

"We are not expecting a lot of fireworks from the Fed today – they have already engineered very easy monetary conditions and the tone of their messaging has been persistently dovish,” said Marija Vertimane, senior strategist at State Street Global Markets. “This is unlikely to change ... in this meeting."

DB economists wrote that they expect the FOMC to maintain the current pace and composition of asset purchases, but the most important innovation for this meeting is likely to be an enhancement to the QE guidance by adopting qualitative outcome-based language. This will be a tough balancing act given the desires from some to maintain the flexibility to adjust purchases as the outlook evolves, so they expect the Fed will be less explicit with its QE guidance than its policy rate guidance, and think the Fed will adopt language along the lines of increasing "its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace…until substantial progress has been made toward the Committee's goal of maximum employment, and inflation is on track to reach 2% on a sustained basis." Watch out for the latest Summary of Economic Projections too, there may be upgrades to the growth and unemployment forecasts. However, with a persistent shortfall in core inflation and uncertainty over the virus and the fiscal outlook, the median assessment of the federal funds rate should be unchanged through 2023.

In rates, Treasuries were lower led by long end amid a risk on mood ahead of November retail sales data and FOMC statement that may include new guidance on QE. With Brexit developments lifting pound to highest since 2018 vs dollar, rising gilt yields reinforce the move in Treasuries. Yields were cheaper by ~2bp at long end with 10-year higher by ~1bp at 0.92%. Bunds declined after the beat in French PMIs, despite Services remaining sub-50. German curve trades cheaper and steeper, with long end yields ~3.2bps higher. Gilts follow Germany’s bear steepening; treasuries are quieter ahead of today’s FOMC meeting. Peripheral spreads continue to tighten. 10y BTP/Bund narrows to 111bps, GGB/Bund near 113bps.

In FX, the dollar fell to its lowest since April 2018 against a basket of currencies and to a month-and-half low of 103.30 against the Japanese yen. Derek Halpenny, MUFG’s head of research, said that “underlines high expectations that the Fed will today deliver a message of continued loose monetary policy for a considerable period to come”. The euro rose above $1.22 for the first time since April 2018 and euro zone bond yields edged up, after data showed better-than-expected business activity in the bloc this month.  The pound rose to 12-day highs against the dollar and a one-week high against the euro. It gained after European Commission President Ursula von der Leyen said there was progress on a Brexit trade deal and the next few days would be critical.

In commodities, gold prices rose as high as 0.4% to $1,860.20 an ounce. Gold has risen over 22% so far this year amid unprecedented government stimulus globally. Brent crude slipped 3 cents to $50.73 a barrel and U.S. crude fell 1 cent to $47.61. They were undercut by a surprise gain in crude oil inventories in the United States and persistent investor worries about demand for fuel being squeezed amid tighter lockdowns in Europe.

Looking at the day ahead now, and the aforementioned Federal Reserve meeting and Chair Powell’s subsequent press conference will likely be the highlight. Otherwise, data highlights include the remainder of the flash PMIs for December from around the world, and the US November retail sales and December NAHB housing market index. Over in Europe, central bank speakers include the ECB’s de Guindos, Schnabel and Hernandez de Cos.

Market Snapshot

  • S&P 500 futures up 0.2% to 3,703.25
  • STOXX Europe 600 up 0.9% to 396.24
  • German 10Y yield rose 2.7 bps to -0.584%
  • Euro up 0.4% to $1.2200
  • Italian 10Y yield fell 2.1 bps to 0.409%
  • Spanish 10Y yield rose 1.4 bps to -0.003%
  • MXAP up 0.8% to 195.72
  • MXAPJ up 0.9% to 646.35
  • Nikkei up 0.3% to 26,757.40
  • Topix up 0.3% to 1,786.83
  • Hang Seng Index up 1% to 26,460.29
  • Shanghai Composite down 0.01% to 3,366.98
  • Sensex up 0.9% to 46,684.08
  • Australia S&P/ASX 200 up 0.7% to 6,679.23
  • Kospi up 0.5% to 2,771.79
  • Brent futures up 0.4% to $50.96/bbl
  • Gold spot up 0.6% to $1,863.83
  • U.S. Dollar Index down 0.3% to 90.19

Top Overnight News from Bloomberg

  • Euro-area services came close to stabilizing in the first half of December -- a trend likely to be short-lived after most German stores were ordered to close for the rest of the year
  • German manufacturing powered ahead in December, with global demand helping factories post a better-than-forecast performance. IHS Markit’s monthly index unexpectedly jumped to 58.6, the highest level in almost three years, from 57.8
  • Germany recorded the biggest increase in Covid-19 deaths since the pandemic began as Chancellor Angela Merkel hinted that a hard shutdown that takes effect Wednesday will remain in force beyond January
  • House Speaker Nancy Pelosi’s two rounds of meetings with bipartisan congressional leaders made progress towards a deal on Covid-19 relief and funding the government into 2021, according to Senate Majority Leader Mitch McConnell and House Minority Leader Kevin McCarthy

A quick look at global markets courtesy of Newsquawk:

Asian equity markets traded higher as the region received a tailwind from Wall Street where all major indices were lifted amid stimulus hopes after House Speaker Pelosi invited fellow congressional leaders for a meeting to discuss government funding and COVID-19 relief, while Senate Majority Leader McConnell suggested that they would not leave Washington without a package no matter how long it takes. ASX 200 (+0.7%) outperformed for most of the session led by tech, mining names and financials which helped push the ongoing tensions with China to the backseat for now, although dozens of ships carrying Australian coal remain blocked from unloading at Chinese ports and Trade Minister Birmingham is to request formal consultations with China at the WTO regarding Australian barley. Nikkei 225 (+0.3%) was also positive but pared the majority of its initial gains amid recent currency inflows, as well as disappointing data in which trade figures underwhelmed including a surprise contraction in exports for its 24th consecutive month of declines and PMI data also remained in contraction territory. Hang Seng (+1.0%) and Shanghai Comp. (U/C) were somewhat varied with the mainland the laggard as ongoing US-China tensions continued to take its toll with MSCI announcing to delete the securities of 7 Chinese companies due to the US blacklisting and which follows similar action by FTSE Russell, S&P Dow Jones Indices and Nasdaq. Finally, 10yr JGBs were lacklustre with demand contained by gains across stocks and with the BoJ to begin its 2-day policy meeting tomorrow, although downside was also stemmed by the BoJ’s presence in the market today for nearly JPY 1.5tln of JGBs with up to 10yr maturities and the central bank also announced to purchase USD 6bln directly from the MoF for the first time ever for smoother execution of its operations.

Top Asian News

  • Cathay Still Mired in Covid Trouble With Traffic Down 99%
  • Steak Dinner Party Could Worsen Woes for Japan’s Suga
  • Australia to Challenge China at the WTO as Tensions Escalate
  • Thai Restaurants Gain New Michelin Stars Amid Slump in Travel

European majors kicked off the mid-week session by taking their cue from the modest gains seen in APAC, but thereafter sentiment was lifted following a string of Flash PMI beats across the Eurozone, in turn providing stocks with tailwinds (Euro Stoxx 50 +1.0%), but that being said, some of the PMI metrics could prove to be stale given the re-imposition of lockdown measures - namely in Germany which take effect today through to Jan 10th. Further adding to the risk-on narrative, the positive noise out of the US regarding stimulus has also underpinned broader sentiment, whilst State-side futures also eke mild gains: ES +0.2%, NQ +0.3% and RTY +0.5%. Back to Europe, sectors are all in positive territory but do not portray a specific risk bias amid some idiosyncratic factors. Banks are among the laggards despite the high-yield environment following the ECB's decision for banks to refrain from or limit dividends until September 2021 with dividends to remain below 15% of cumulated 2019-20 profits and not higher than 20bps of CET1 ratio. Analysts at Goldman Sachs suggest "the ECB delivered beyond our expectations – an introduction of a hard deadline, set for 30 September, will trigger a near automatic 'repeal' of current measures, and a return to a 'normal supervisory cycle'". Elsewhere, the Auto sector is leading the gains, with Volkswagen (+4.0%) the driving force for the sector as its CEO is looking to upgrade their Wolfsburg HQ with the latest electric vehicle technology to compete with Tesla’s Berlin facility and aiming to reduce the production time per car to 10-hours vs the current projected 20+ hours, according to sources. Meanwhile, Continental (+4.7%) resides at the top of the DAX (+1.6%) as it targets an adj. EBIT margin of 8-11% in the medium term and organic annual growth of 5-8% and intends to undertake planned spin-off of Vitesco tech as scheduled in 2021. Finally, the Travel & Leisure sectors also remains supported by vaccine hopes as testing is underway in the UK and US, whilst EU could have its first vaccinations before year-end.

Top European News

  • Nokia to Sacrifice Network Margins to Improve 5G Technology
  • Merkel Hints at Lockdown Extension as Deaths Surge to Record
  • England Keeps Looser Holiday Covid Rules Even as Cases Surge
  • Altice Raises Take-Private Bid to Appease Hedge Fund Rebels

In FX, the Dollar may yet get a fillip from US data, Markit’s flash PMIs and/or the Fed, but for now there is little or no let-up in the negative forces bearing down on the Greenback, both internal and external. On the one hand, risk sentiment is being buoyed by more apparent determination in Washington to deliver fiscal stimulus, while the Brexit saga is showing signs of reaching a positive conclusion assuming the still contentious fishing rights issue can be resolved, and preliminary Eurozone PMIs have lifted some of gloom surrounding the ongoing spread of COVID-19. On top of all that, the Buck could be prone to selling for portfolio rebalancing and perhaps more pronounced given recent record peaks in benchmark equity indices, not to mention the fact that December 31 aligns with the end of Q4 and 2020 as well. Looking at the index, 90.000 is just about holding for now as the DXY hovers within a 90.126-544 band awaiting the busy pm agenda that culminates in the FOMC and chair Powell’s final post-meeting presser of the year – for a full preview of the event check out the Newsquawk Research Suite.

  • EUR/GBP/NZD - As noted from the outset, all probing round numbers and significant or psychological marks against their US counterpart, with the Euro extending its y-t-d high through 1.2200 in the process on the back of flash French, German and pan PMIs that beat consensus across the board. Meanwhile, the Pound has inched closer to its current 1.3539 best for the year following latest UK-EU reports on trade negotiations suggesting that 2 out of the 3 most contentious issues may now have been resolved, leaving London and Brussels (or perhaps Paris to be precise) still searching for a compromise on fisheries. Note, relatively weak UK inflation data and somewhat disappointing PMIs (outside of manufacturing) have been largely ignored. Elsewhere, the Kiwi has reclaimed 0.7100+ status ahead of NZ Q3 GDP with assistance from a decent half year Economic and Fiscal update overnight, an upward revision to ASB’s milk price forecast and marginally better than expected current account metrics.
  • JPY/CHF/AUD - All benefiting at the US Dollar’s expense more than specifics or independent impulses as the Yen eyes support protecting 103.00 from early November having breached 103.50 with a bit more resolve, while is above 0.8850 and still beyond 1.0800 against the Euro pre-SNB and Aussie comfortably over 0.7550, though unable to keep pace with its Antipodean peer as Aud/Nzd pulls back below 1.0650.
  • CAD/NOK/SEK - Downbeat/dovish comments from BoC Governor Macklem clearly weighing on the Loonie as it retreats from a fleeting foray through 1.2700 towards 1.2750 in advance of Canadian CPI in contrast to the Norwegian Krona that is deriving enough support from firm oil prices to match the Euro and even the Swedish Crown in face of similar remarks from Riksbank’s Jansson – see 10.15GMT and 9.49GMT posts on the Headline Feed for details. Indeed, Eur/Nok and Eur/Sek are sub-10.6000 and 10.2000 respectively.
  • EM - Broad gains vs the Usd, but the Try is actually outperforming through 7.8000 in wake of CBRT commentary underlining a tightening bias until inflation returns to target, efforts to gradually strengthen reserves and maintaining swap operations to support the Turkish banking system. Conversely, the Rub is lagging further behind after failing to build momentum alongside Brent and meeting solid resistance at 73.0000.

In commodities, WTI and Brent front-month futures eke mild gains in early European hours following a side-ways APAC session, with the complex deriving mild impetus from the overall sentiment bolstered via constructive (albeit stale) EZ PMI metrics. Prices last night were little reactive to the surprise build in private inventories (+1.97mln bbls vs exp. -1.90mln), with eyes on the DoE's later today following last week's substantial and surprise build of some 15.189mln bbls (vs. exp -1.424mln). WTI Jan 21 resides north of USD 47.75/;bbl (vs low 47.38/bbl) with Brent Feb 21 probing USD 51/bbl to the upside (vs low 50.48/bbl) having had seen a fleeting move above the level to a high of 51.19/bbl. Elsewhere, spot gold and silver remain elevated on the reflationary prospect emanating from positive noise regarding State-side stimulus, with the softer Buck also providing metals with a boost ahead of the FOMC decision. Spot gold extends gains above USD 1850/oz after finding support at the level overnight, whilst spot silver breached 25/oz to the upside (vs low 24.44/oz). LME copper meanwhile sees a firm session thus far on the back of overall sentiment and Greenback softness.

US Event Calendar

  • 8:30am: Retail Sales Advance MoM, est. -0.3%, prior 0.3%;
    • 8:30am: Retail Sales Ex Auto MoM, est. 0.1%, prior 0.2%
    • 8:30am: Retail Sales Control Group, est. 0.15%, prior 0.1%
  • 9:45am: Markit US Manufacturing PMI, est. 55.8, prior 56.7; Markit US Services PMI, est. 55.9, prior 58.4; Markit US Composite PMI, prior 58.6
  • 10am: Business Inventories, est. 0.6%, prior 0.7%
  • 10am: NAHB Housing Market Index, est. 88, prior 90
  • 2pm: FOMC Rate Decision

DB's Jim Reid concludes the overnight wrap

xYesterday saw risk assets recover from their Monday losses on the back of mounting hopes of deals in both the US stimulus negotiations as well as the EU-UK trade negotiations. By the close, the S&P 500 was up +1.29%, snapping a run of 4 successive losses, whilst the rotation out of safer assets saw the dollar index weaken a further -0.26% to hit a fresh 2-year low. The moves were part of a broad-based advance for equities, with more than 80% of the S&P 500 moving higher for the first time in over a month, and nearly every sector rising on the day, with cyclicals such as Energy (+1.92%), Materials (+1.88%) and Banks (+1.82%) among the main winners. It was a similar story in Europe, though they didn’t rebound by as much having missed out on the selloff after the previous day’s close, and the STOXX 600 ended the session up +0.25%.

Before we discuss the stimulus talks however, today’s focus will be on the final Fed meeting of 2020, along with Chair Powell’s subsequent press conference. In their preview (link here), our US economists write that they expect the FOMC to maintain the current pace and composition of asset purchases, but the most important innovation for this meeting is likely to be an enhancement to the QE guidance by adopting qualitative outcome-based language. This will be a tough balancing act given the desires from some to maintain the flexibility to adjust purchases as the outlook evolves, so they expect the Fed will be less explicit with its QE guidance than its policy rate guidance, and think the Fed will adopt language along the lines of increasing "its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace…until substantial progress has been made toward the Committee's goal of maximum employment, and inflation is on track to reach 2% on a sustained basis.” Watch out for the latest Summary of Economic Projections too, where our economists expect there to be upgrades to the growth and unemployment forecasts. However, with a persistent shortfall in core inflation and uncertainty over the virus and the fiscal outlook, the median assessment of the federal funds rate should be unchanged through 2023.

On that fiscal policy uncertainty, the stimulus talks progressed further yesterday following a meeting between Congressional leaders from both parties and Treasury Secretary Mnuchin after the New York close. House Speaker Pelosi, House Minority Leader McCarthy, Senate Majority Leader McConnell and Minority Leader Schumer were all relatively optimistic following the discussions, and McConnell indicated that he believes Congress would not go on recess for the holidays without a deal, saying he thinks there is “an agreement that we’re not going to leave here without the omni(bus bill) and a Covid package.” That came as another important political milestone was reached yesterday, since for the first time Senate Majority Leader Mitch McConnell acknowledged Joe Biden as President-elect following his formal victory in the Electoral College on Monday.

Against this backdrop, Treasury yields rose and the curve steepened further, with 10yr yields up +1.5bps to 0.908%, as the 2s10s steepened +1.3bps. The reflation trade also gathered steam, with 10yr US breakevens closing at 1.92%, their highest level since April 2019. Other core sovereign bonds similarly saw a rise in yields, with those on 10yr bunds up +0.9bps, but the bigger story in Europe was the relentless march lower of southern European yields, with those on 10yr Italian debt falling -2.2bps to an all-time low of 0.52%, as those on Spanish 10yr debt similarly fell -2.1bps to their own all-time low of -0.02%. That sent the Italian spread over bunds to its tightest level in over 4 years, at 1.13%, while the Spanish spread over bunds closed at 0.60%, which was its lowest closing level in over a decade.

As well as the Fed, today’s other main highlight will be the flash PMIs for December, which will offer one of the initial indications of how the global economy has fared into the end of the year. Overnight, we’ve already had the numbers out from Japan and Australia which gave mixed messages as in Australia, both the manufacturing (56.0 vs. 55.8 last month) and services (57.4 vs. 55.1) readings accelerated, whereas Japan saw a slight deceleration in its services PMI to 47.2 (vs. 47.8 last month). All eyes will be on the European numbers out later this morning, though the consensus for the Euro Area’s composite PMI is only pointing to a slight uptick to 45.7 (vs. 45.3 last month).

Elsewhere in Asia markets have followed Wall Street’s lead overnight with the Nikkei (+0.17%), Hang Seng (+0.82%), Shanghai Comp (+0.18%) and Kospi (+0.44%) all moving higher. In the US, S&P 500 futures (-0.05%) are trading broadly flat however. In other overnight news, Australia has decided to challenge China at the WTO over China’s imposition of tariffs on its barley exports. The move follows a recent deterioration in relations between the two countries, with various trade restrictions coming into place this year.

Onto the coronavirus, and there was more positive news on vaccine authorisations yesterday, with the US FDA reporting that the Moderna vaccine was safe and effective. That comes ahead of a meeting tomorrow in which they’ll discuss whether to give it an Emergency Use Authorization, as they’ve already done for the Pfizer/BioNtech vaccine. There was some other good news out of the US, as the FDA cleared the first over-the-counter test for Covid-19 that can be taken at home and acquired without a prescription. While initially limited, this sort of test can help open up parts of the economy while the vaccine is being distributed. Over in Europe as well, regulators brought forward their meeting in which they’ll review the Pfizer/BioNTech vaccine to Monday, rather than waiting until December 29 as originally planned. That follows criticism that Europe has lagged the approvals seen elsewhere such as in the US and the UK.

However, widespread vaccinations are still some time away and there was further talk of more stringent measures across a number of countries to deal with rising cases in the meantime. In New York City, Mayor de Blasio said that some kind of shutdown would be needed in the weeks ahead, though the decision would be up to Governor Cuomo. In the UK, pressure has been increasing to rethink the 5-day Christmas easing of restrictions, with the BBC reporting that further talks would take place between the four nations today, though they also said that the easing was still likely to go ahead. Over in Denmark, it was announced that their local lockdowns would be extended to the rest of the country, while in Sweden, which continues to be one of the most heavily scrutinized countries on their handling of the pandemic, reports said they were considering postponing all non-essential healthcare services until the end of January. This comes after Swedish Radio reported that regional hospitals nearly throughout the country are struggling with staff shortages. Overnight, a health ministry official in South Korea said they were also considering raising social distancing to the highest level 3.

Onto Brexit, and yesterday sterling was the top-performing G10 currency for the second day running as optimism continued to rise that a deal might be reached in the coming days. We didn’t get any concrete news out from the negotiations, but sentiment was supported by a tweet from the political editor of BBC Newsnight who said “Big buzz in the last hour among Tory MPs that the UK is heading towards a Brexit deal with the EU. Eurosceptics being reassured they will be happy.” Sterling strengthened further in response, and ended the session up +1.02% against the dollar, and gilts underperformed once again thanks to lower expectations that the Bank of England would need to ease monetary policy.

Wrapping up with yesterday’s data, US industrial production rose by +0.4% in November (vs. +0.3% expected), while capacity utilisation rose to 73.3% (vs. 73.0% expected). Meanwhile the Empire State manufacturing survey fell to 4.9 (vs. 6.3 expected). Over in the UK, the unemployment rate rose to 4.9% (vs. 5.1% expected) in the 3 months to October, while the number of redundancies over the same period rose to 370k, which was above its GFC peak of 311k.

To the day ahead now, and the aforementioned Federal Reserve meeting and Chair Powell’s subsequent press conference will likely be the highlight. Otherwise, data highlights include the remainder of the flash PMIs for December from around the world, the UK CPI reading for November, and the US November retail sales and December NAHB housing market index. Over in Europe, central bank speakers include the ECB’s de Guindos, Schnabel and Hernandez de Cos.

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‘The Official Truth’: The End Of Free Speech That Will End America

‘The Official Truth’: The End Of Free Speech That Will End America

Authored by J.B.Shurk via The Gatestone Institute,

If legacy news corporations…



'The Official Truth': The End Of Free Speech That Will End America

Authored by J.B.Shurk via The Gatestone Institute,

If legacy news corporations fail to report that large majorities of the American public now view their journalistic product as straight-up propaganda, does that make it any less true?

According to a survey by Rasmussen Reports, 59% of likely voters in the United States view the corporate news media as "truly the enemy of the people." This is a majority view, held regardless of race: "58% of whites, 51% of black voters, and 68% of other minorities" — all agree that the mainstream media has become their "enemy."

This scorching indictment of the Fourth Estate piggybacks similar polling from Harvard-Harris showing that Americans hold almost diametrically opposing viewpoints from those that news corporations predominantly broadcast as the official "truth."

Drawing attention to the divergence between the public's perceived reality and the news media's prevailing "narratives," independent journalist Glenn Greenwald dissected the Harvard-Harris poll to highlight just how differently some of the most important issues of the last few years have been understood. While corporate news fixated on purported Trump-Russia collusion since 2016, majorities of Americans now see this story "as a hoax and a fraud."

While the news media hid behind the Intelligence Community's claims that Hunter Biden's potentially incriminating laptop (allegedly containing evidence of his family's influence-peddling) was a product of "Russian disinformation" and consequently enforced an information blackout on the explosive story during the final weeks of the 2020 presidential election, strong majorities of Americans currently believe the laptop's contents are "real." In other words, Americans have correctly concluded that journalists and spies advanced a "fraud" on voters as part of an effort to censor a damaging story and "help Biden win." Nevertheless, The New York Times and The Washington Post have yet to return the Pulitzer Prizes they received for reporting totally discredited "fake news."

Similarly, majorities of Americans suspect that President Joe Biden has used the powers of his various offices to profit from influence-peddling schemes and that the FBI has intentionally refrained from investigating any possible Biden crimes. Huge majorities of Americans, in fact, seem not at all surprised to learn that the FBI has been caught abusing its own powers to influence elections, and are strongly convinced that "sweeping reform" is needed. Likewise, large majorities of Americans have "serious doubts about Biden's mental fitness to be president" and suspect that others behind the scenes are "puppeteers" running the nation.

Few, if any, of these poll results have been widely reported. In a seemingly-authoritarian disconnect with the American people, corporate news media continue to ignore the public's majority opinion and instead "relentlessly advocate" those viewpoints that Americans "reject." When journalists fail to investigate facts and deliberately distort stories so that they fit snugly within preconceived worldviews, reporters act as propagandists.

Constitutional law scholar Jonathan Turley recently asked, "Do we have a de facto state media?" In answering his own question, he notes that the news blackout surrounding congressional investigations into Biden family members who have allegedly received more than ten million dollars in suspicious payments from foreign entities "fits the past standards used to denounce Russian propaganda patterns and practices." After Republican members of Congress traced funds to nine Biden family members "from corrupt figures in Romania, China, and other countries," Turley writes, "The New Republic quickly ran a story headlined 'Republicans Finally Admit They Have No Incriminating Evidence on Joe Biden.'"

Excoriating the news media's penchant for mindlessly embracing stories that hurt former President Donald Trump while simultaneously ignoring stories that might damage President Biden, Turley concludes:

"Under the current approach to journalism, it is the New York Times that receives a Pulitzer for a now debunked Russian collusion story rather than the New York Post for a now proven Hunter Biden laptop story."

Americans now evidently view the major sources for their news and information as part of a larger political machine pushing particular points of view, unconstrained by any ethical obligation to report facts objectively or dispassionately seek truth. That Americans now see the news media in their country as serving a similar role as Pravda did for the Soviet Union's Communist Party is a significant departure from the country's historic embrace of free speech and traditional fondness for a skeptical, adversarial press.

Rather than taking a step back to consider the implications such a shift in public perception will have for America's future stability, some officials appear even more committed to expanding government control over what can be said and debated online. After the Department of Homeland Security (DHS), in the wake of public backlash over First Amendment concerns, halted its efforts to construct an official "disinformation governance board" last year, the question remained whether other government attempts to silence or shape online information would rear their head. The wait for that answer did not take long.

The government apparently took the public's censorship concerns so seriously that it quietly moved on from the collapse of its plans for a "disinformation governance board" within the DHS and proceeded within the space of a month to create a new "disinformation" office known as the Foreign Malign Influence Center, which now operates from within the Office of the Director of National Intelligence. Although ostensibly geared toward countering information warfare arising from "foreign" threats, one of its principal objectives is to monitor and control "public opinion and behaviors."

As independent journalist Matt Taibbi concludes of the government's resurrected Ministry of Truth:

"It's the basic rhetorical trick of the censorship age: raise a fuss about a foreign threat, using it as a battering ram to get everyone from Congress to the tech companies to submit to increased regulation and surveillance. Then, slowly, adjust your aim to domestic targets."

If it were not jarring enough to learn that the Office of the Director of National Intelligence has picked up the government's speech police baton right where the DHS set it down, there is ample evidence to suggest that officials are eager to go much further in the near future. Democrat Senator Michael Bennet has already proposed a bill that would create a Federal Digital Platform Commission with "the authority to promulgate rules, impose civil penalties, hold hearings, conduct investigations, and support research."

Filled with "disinformation" specialists empowered to create "enforceable behavioral codes" for online communication — and generously paid for by the Biden Administration with taxpayers' money — the special commission would also "designate 'systemically important digital platforms' subject to extra oversight, reporting, and regulation" requirements. Effectively, a small number of unelected commissioners would have de facto power to monitor and police online communication.

Should any particular website or platform run afoul of the government's First Amendment Star Chamber, it would immediately place itself within the commission's crosshairs for greater oversight, regulation, and punishment.

Will this new creation become an American KGB, Stasi or CCP — empowered to target half the population for disagreeing with current government policies, promoting "wrongthink," or merely going to church? Will a small secretive body decide which Americans are actually "domestic terrorists" in the making? US Attorney General Merrick Garland has gone after traditional Catholics who attend Latin mass, but why would government suspicions end with the Latin language? When small commissions exist to decide which Americans are the "enemy," there is no telling who will be designated as a "threat" and punished next.

It is not difficult to see the dangers that lie ahead. Now that the government has fully inserted itself into the news and information industry, the criminalization of free speech is a very real threat. This has always been a chief complaint against international institutions such as the World Economic Forum that spend a great deal of time, power, and money promoting the thoughts and opinions of an insular cabal of global leaders, while showing negligible respect for the personal rights and liberties of the billions of ordinary citizens they claim to represent.

WEF Chairman Klaus Schwab has gone so far as to hire hundreds of thousands of "information warriors" whose mission is to "control the Internet" by "policing social media," eliminating dissent, disrupting the public square, and "covertly seed[ing] support" for the WEF's "Great Reset." If Schwab's online army were not execrable enough, advocates for free speech must also gird themselves for the repercussions of Elon Musk's appointment of Linda Yaccarino, reportedly a "neo-liberal wokeist" with strong WEF affiliations, as the new CEO of Twitter.

Throughout much of the West, unfortunately, free speech has been only weakly protected when those with power find its defense inconvenient or messages a nuisance. It is therefore of little surprise to learn that French authorities are now prosecuting government protesters for "flipping-off" President Emmanuel Macron. It does not seem particularly astonishing that a German man has been sentenced to three years in prison for engaging in "pro-Russian" political speech regarding the war in Ukraine. It also no longer appears shocking to read that UK Technology and Science Secretary Michelle Donelan reportedly seeks to imprison social media executives who fail to censor online speech that the government might subjectively adjudge "harmful." Sadly, as Ireland continues to find new ways to punish citizens for expressing certain points of view, its movement toward criminalizing not just speech but also "hateful" thoughts should have been predictable.

From an American's perspective, these overseas encroachments against free speech — especially within the borders of closely-allied lands — have seemed sinister yet entirely foreign. Now, however, what was once observed from some distance has made its way home; it feels as if a faraway communist enemy has finally stormed America's beaches and come ashore in force.

Not a day seems to go by without some new battlefront opening up in the war on free speech and free thought. The Richard Stengel of the Council on Foreign Relations has been increasingly vocal about the importance of journalists and think tanks to act as "primary provocateurs" and "propagandists" who "have to" manipulate the American population and shape the public's perception of world events. Senator Rand Paul has alleged that the DHS uses at least 12 separate programs to "track what Americans say online," as well as to engage in social media censorship.

As part of its efforts to silence dissenting arguments, the Biden administration is pursuing a policy that would make it unlawful to use data and datasets that reflect accurate information yet lead to "discriminatory outcomes" for "protected classes." In other words, if the data is perceived to be "racist," it must be expunged. At the same time, the Department of Justice has indicted four radical black leftists for having somehow "weaponized" their free speech rights in support of Russian "disinformation." So, objective datasets can be deemed "discriminatory" against minorities, while actual discrimination against minorities' free speech is excused when that speech contradicts official government policy.

Meanwhile, the DHS has been exposed for paying tens of millions of dollars to third-party "anti-terrorism" programs that have not so coincidentally equated Christians, Republicans, and philosophical conservatives to Germany's Nazi Party. Similarly, California Governor Gavin Newsom has set up a Soviet-style "snitch line" that encourages neighbors to report on each other's public or private displays of "hate."

Finally, ABC News proudly admits that it has censored parts of Robert F. Kennedy Jr.'s interviews because some of his answers include "false claims about the COVID-19 vaccines." Essentially, the corporate news media have deemed Kennedy's viewpoints unworthy of being transmitted and heard, even though the 2024 presidential candidate is running a strong second behind Joe Biden in the Democrat primary, with around 20% support from the electorate.

Taken all together, it is clear that not only has the war on free speech come to America, but also that it is clobbering Americans in a relentless campaign of "shock and awe." And why not? In a litigation battle presently being waged over the federal government's extensive censorship programs, the Biden administration has defended its inherent authority to control Americans' thoughts as an instrumental component of "government infrastructure." What Americans think and believe is openly referred to as part of the nation's "cognitive infrastructure" — as if the Matrix movies were simply reflecting real life.

Today, America's mainstream news corporations are already viewed as processing plants that manufacture political propaganda. That is an unbelievably searing indictment of a once-vibrant free press in the United States. It is also, unfortunately, only the first heavy shoe to drop in the war against free speech. Many Chinese-Americans who survived the Cultural Revolution look around the country today and see similarities everywhere. During that totalitarian "reign of terror," everything a person did was monitored, including what was said while asleep.

In an America now plagued with the stench of official "snitch lines," censorship of certain presidential candidates, widespread online surveillance, a resurrected "disinformation governance board," and increasingly frequent criminal prosecutions targeting Americans who exercise their free speech, the question is not whether what we inaudibly think or say in our sleep will someday be used against us, but rather how soon that day will come unless we stop it. After all, with smartphones, smart TVs, "smart" appliances, video-recording doorbells, and the rise of artificial intelligence, somebody, somewhere is always listening.

Tyler Durden Sun, 05/28/2023 - 23:00

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Never Short a Dull Market; AI is Sexy, But Everyone Hates Oil

There’s an old adage of Wall Street, which says: "never short a dull market." And while AI is getting all the press these days, the oil market is about…



There's an old adage of Wall Street, which says: "never short a dull market." And while AI is getting all the press these days, the oil market is about as dull as it gets. This, of course, brings the energy sector to the top of my contrarian alert list.

This is not to say that I'm buying oil-related assets with both hands. It just means that, at this point, it makes more sense to look at energy as a value asset, as it is oversold and ripe for a move up whenever the right set of variables required to deliver such a move line up just right.

In the current world, the variables could line up just right as early as today.

There are No Oil Bulls Left

Nobody loves oil.

The level of bearishness expressed by futures traders is at least equal to where it was during the pandemic, and after the Silicon Valley Bank (SIVB) collapse. The International Energy Agency (IEA), forecasts that, of the expected $2.8 trillion in energy investments for 2023, roughly $1.7 trillion will be allocated to low carbon energy sources, including nuclear, solar, and other potential sources. Only $1.1 trillion will be invested in fossil fuels.

And according to the Financial Times, auctioneers in Texas are trying to unload two brand new fracking rigs, which together cost $70 million, for a starting combined bid of just below $17 million.

Supply is the Primary Influence on Oil Prices

Meanwhile, oil companies are quietly merging with competitors, and exploration outside the United States is continuing aggressively, with new discoveries being frequently announced. 

Simultaneously, the U.S. active rig count is slowly falling, led by natural gas. The price of gasoline is steadily rising, as the market begins to price in future supply reductions. Just in my neck of the woods, regular unleaded is up some $0.32 in the last week alone.

That doesn't sound like an industry that's planning on fading away. It sounds like an industry that's hunkering down and waiting for better times and preparing to squeeze supply in order to boost prices.

Charting the Oil Sector

The price chart for West Texas Intermediate Crude, the U.S. benchmark (WTIC), shows the depressed price picture which has led investors to walk away. And, until proven otherwise, there are plenty of sellers at the $75-$80 price area, where a sizeable Volume by Price bar highlights the point of resistance.

At first glance, there little difference in the general price behavior for Brent Crude, the European benchmark. (BRENT) where there is a resistance band defined by VBP bars between $80 and $90. A closer look reveals an uptick in Accumulation Distribution (ADI) and the semblance of some nibbling in On Balance Volume (OBV). It's subtle, but it's there.

The oil stocks are far from a bull trend. The Energy Select Sector SPDR ETF (XLE) is trading below its 200-day moving average, facing resistance put from $78 to $90 (VBP bars).

So why bother? Simply stated, OPEC has an upcoming meeting on June 3-4. The cartel is not happy about the prices and the way things are evolving. The Saudi oil minister recently warned bearish speculators to "watch out." And my gut is doing flips when I think about oil, as I see gasoline prices creep up when I drive to work.

But mostly, it's because there are no oil bulls left. This is what we saw in the technology sector a few months ago before its current rally. In early 2023, the tech sector was pronounced dead. The stories were all about the technology sector shuddering as the economy slowed. How about this one, from March 2023, which breathlessly announced a 5.2% decrease in semiconductor sales on a month to month basis and an 18.5% year to year drop?

Yet, as validated by the recent AI-fueled rally, the bad news first marked a bottom, while preceding a significant move up in tech shares.

Never short a dull market.

I've recently recommended several energy sector picks. You can have a look at them with a free trial to my service. In addition, I've posted a Special Report on the oil market which you can gain access to here.

Bond and Mortgage Roller Coaster Reverses Course

Expect negative news about the effect of rising mortgage rates on the homebuilder industry. That's because, as the chart below illustrates, there is a tight and very close correlation between rising bond yields, mortgage rates, and the homebuilder stocks (SPHB).

Moreover, the rise above 3.75% on the U.S. Ten Year Note yield (TNX) has triggered headlines about mortgage rates climbing above 7%. What the news isn't reporting is that, once bond yields roll over, which they are likely to do at some point in the future when the economy shows more signs of slowing and the Fed finally admits that they must pause, is that mortgage rates will drop and demand for new homes will once again pick up. Thus, we will see the homebuilders pick up where they left off.

As things stood last week, SPHB seems to have made a short term bottom.

For now, expect a continuation of the backing and filling in the homebuilder stocks. But, if I'm right and bond yields reverse course, the homebuilders are likely to rally again.

For an in-depth comprehensive outlook on the homebuilder sector click here.

NYAD Holds Above 200-Day Moving Average. SPX Joins NDX in Breaking Out. Liquidity is Shrinking.

The New York Stock Exchange Advance Decline line (NYAD) tested its 200-day moving average on an intra-week basis but did not break below the key technical level. On the other hand, NYAD remained below its 50-day moving average, which is still an intermediate-term negative.

Moreover, with the major indexes (see below) breaking out to new highs, we remain in a technical divergence as the market's breadth is lagging the action in the indexes. This is of some concern, given the fade in the market's liquidity, as I point out below.

The Nasdaq 100 Index (NDX) extended its recent breakout, closing the week well above 14,200. The current move is unsustainable, so some sort of pullback and consolidation are likely over the next few days to weeks. Both ADI and OBV remain encouraging.

What's more bullish is that the S&P 500 (SPX) finally broke out above the 4100–4200 trading range on 5/24/23. On Balance Volume (OBV) is perking up while the Accumulation Distribution (ADI) indicator is very encouraging.

We may be seeing a shift from a short-covering rally to a fear-of-missing-out buyer's rally.

VIX Holds Steady

The CBOE Volatility Index (VIX) remained below 20, as it has since March 2023. This remains a positive for the markets, as it shows short sellers are staying away at the moment.

When the VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity is Getting Squeezed

The market's liquidity is now in a downtrend. The Eurodollar Index (XED) is now below 94.5, and looks weak. A move above 95 will be a bullish development. Usually, a stable or rising XED is very bullish for stocks.

To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I've made my NYAD-Complexity - Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe's exclusive stock, option and ETF recommendations, in your mailbox every week visit

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Costco Tells Americans the Truth About Inflation and Price Increases

The warehouse club has seen some troubling trends but it’s also trumpeting something positive that most retailers wouldn’t share.



Costco has been a refuge for customers during both the pandemic and during the period when supply chain and inflation issues have driven prices higher. In the worst days of the covid pandemic, the membership-based warehouse club not only had the key household items people needed, it also kept selling them at fair prices.

With inflation -- no matter what the reason for it -- Costco  (COST) - Get Free Report worked aggressively to keep prices down. During that period (and really always) CFO Richard Galanti talked about how his company leaned on vendors to provide better prices while sometimes also eating some of the increase rather than passing it onto customers.

DON'T MISS: Why You May Not Want to Fly Southwest Airlines

That wasn't an altruistic move. Costco plays the long game, and it focuses on doing whatever is needed to keep its members happy in order to keep them renewing their memberships.

It's a model that has worked spectacularly well, according to Galanti.

"In terms of renewal rates, at third quarter end, our US and Canada renewal rate was 92.6%, and our worldwide rate came in at 90.5%. These figures are the same all-time high renewal rates that were achieved in the second quarter, just 12 weeks ago here," he said during the company's third-quarter earnings call.

Galanti, however, did report some news that suggests that significant problems remain in the economy.

Costco has done an incredibly good job at holding onto members.

Image source: Xinhua/Ting Shen via Getty Images

Costco Does See Some Economic Weakness

When people worry about the economy, they sometimes trade down when it comes to retailers. Walmart executives (WMT) - Get Free Report, for example, have talked about seeing more customers that earn six figures shopping in their stores.

Costco has always had a diverse customer base, but one weakness in its business may be a warning sign for its rivals like Target (TGT) - Get Free Report, Best Buy (BBY) - Get Free Report, and Amazon (AMZN) - Get Free Report. Galanti broke down some of the numbers during the call.

"Traffic or shopping frequency remains pretty good, increasing 4.8% worldwide and 3.5% in the U.S. during the quarter," he shared.

People shopped more, but they were also spending less, according to the CFO.

"Our average daily transaction or ticket was down 4.2% worldwide and down 3.5% in the U.S., impacted, in large part, from weakness in bigger-ticket nonfood discretionary items," he shared.

Now, not buying a new TV, jewelry, or other big-ticket items could just be a sign that consumers are being cautious. But, if they're not buying those items at Costco (generally the lowest-cost option) that does not bode well for other retailers.

Galanti laid out the numbers as well as how they broke down between digital and warehouse.

"You saw in the release that e-commerce was a minus 10% sales decline on a comp basis," he said. "As I discussed on our second quarter call and in our monthly sales recordings, in Q3, big-ticket discretionary departments, notably majors, home furnishings, small electrics, jewelry, and hardware, were down about 20% in e-com and made up 55% of e-com sales. These same departments were down about 17% in warehouse, but they only make up 8% in warehouse sales."

Costco's CFO Also Had Good News For Shoppers

Galanti has been very open about sharing information about the prices Costco has seen from vendors. He has shared in the past, for example, that the chain does not pass on gas price increases as fast as they happen nor does it lower prices as quick as they sometimes fall.

In the most recent call, he shared some very good news on inflation (that also puts pressure on Target, Walmart, and Amazon to lower prices).

"A few comments on inflation. Inflation continues to abate somewhat. If you go back a year ago to the fourth quarter of '22 last summer, we had estimated that year-over-year inflation at the time was up 8%. And by Q1 and Q2, it was down to 6% and 7% and then 5% and 6%," he shared. "In this quarter, we're estimating the year-over-year inflation in the 3% to 4% range."

The CFO also explained that he sees prices dropping on some very key consumer staples.

"We continue to see improvements in many items, notably food items like nuts, eggs and meat, as well as items that include, as part of their components, commodities like steel and resins on the nonfood side," he added.


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