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Macro Overview for the Week Ahead

Investors will focus on three types of events next week. First, the flash July PMI reports will be released. The preliminary estimates do a fairly good…



Investors will focus on three types of events next week. First, the flash July PMI reports will be released. The preliminary estimates do a fairly good job anticipating the final readings and typically steal their thunder. The tighter financial conditions and the cost-of-living squeeze translate into weaker economic momentum.  

The US and eurozone June composite PMI had nearly converged at 52.3 and 52.0, respectively. The UK's composite PMI was at 53.7 and Japan's at 53.0. In Bloomberg's surveys, the median forecast sees a 45% chance the eurozone and UK are entering a recession in the next 12 months at 45%, and the US is slightly lower at 33%. Canada and Japan are at 25%.  

Survey data might not capture the market's imagination like inflation updates. Japan, Canada, and the UK report June CPI. Japan remains the outlier. It has taken the biggest energy and food shock in a generation to lift Japan's core CPI (which excludes fresh food) to its 2% target. Japan's May CPI was up 0.8% over the past 12 months, excluding food and energy. Even if the core rate moves to 1%, it is unreasonable to expect the Bank of Japan to alter its monetary policy. BOJ Governor Kuroda insists that inflation is not sustainable unless wages rise and May's cash earnings are weaker than expected (1.0% year-over-year vs. 1.5% median forecast in Bloomberg's survey). The April series was revised to 1.3% from 1.7%. In turn, household spending was weaker than expected as well. Japan's industrial production in May collapsed by a dramatic 7.5% (month-over-month) as reverberations from China's lockdowns appeared to have taken a serious toll.  

Another jump in Canada's CPI could help push market sentiment toward expecting another 75 bp hike at the Bank of Canada's next meeting on September 7. The swaps market has a 72% chance of a 75 bp hike discounted. Price pressures still appear to be accelerating in Canada. In three of the four months through May, consumer prices rose by more than 1%. The Bank of Canada has three core measures. They averaged 4.7% in May, up from 3.3% in December 2021. In contrast, the US core rate slowed for the third consecutive month in June. US average hourly earnings in June also decelerated for the third month. Canada's hourly rate for permanent workers accelerated to 5.6%, doubling December's 2.7% pace, jumping by more than C$1.0 for the second consecutive month. Before the pandemic (at least since 1998), this did not happen even once, let alone twice. 

Canada also reports May retail sales. Canadian consumers have been shopping. In the first four months of the year, retail sales have averaged a monthly increase of 1.2%. This is a nominal measure, and the rise of prices exaggerates the real growth (volume), but it is notable that the average increase in the Jan-Apr period last year was also 1.2%. That said, some yellow flags in the April report are worth bearing in mind when reviewing the new data. The interest rate-sensitive sectors--autos and building materials (housing activity) were hit the hardest. General merchandise stores increased sales by slightly more than 4%, while gasoline stations saw a 3% increase (5.4% in volume terms; prices temporarily dipped).

The UK's inflation is running the fastest in the G7 at 9.1% in May (matched by the US in June). If the month-over-month rise is more than 0.5%, the year-over-year pace will increase. It might not matter much. The Bank of England had already warned that inflation will likely rise to 11% as the gas cap is lifted again. On the other hand, the UK will report June retail sales on July 22. It is reported in volume terms and has been simply horrible. They have fallen in six of the past seven months. In fact, April's 0.2% increase was the first since the 0.1% rise in June 2021.  

The BOE has persuaded the market that, like the Federal Reserve, it is willing to risk a recession if necessary to bring inflation back to its target. After four quarter-point moves this year (and a 15 bp hike last December), the market has nearly fully priced in a 50 bp move at the August 4 MPC meeting and favors another half-point hike at the following two meetings (September 15 and November 11). Many Tory candidates to succeed Johnson as Prime Minister want to cut taxes. At stake is the pace of fiscal consolidation. The budget deficit peaked at 12.3% of GDP in 2020 and fell to 7.4% last year. The Office of Budget Responsibility projected it to fall to 3.9% this year and 1.9% next. That said, there probably are upside risks to estimate, given its assumption that the economy will expand by 3.8% this year.

That brings us to the third set of events that will draw investor attention. The Bank of Japan and the European Central Bank meetings. The Bank of Japan is the easier of the two. There is no reason to expect a change in monetary policy. The BOJ will update its forecasts, and the risk is an upward revision of inflation and a small reduction in the growth projections. The earlier forecast had core CPI, which excludes fresh food prices, at 1.9% this year and 1.1% in the following two years. This year's projection will probably be lifted slightly above 2%. The next two years may be increased marginally. Only an inflation forecast close to or above 2% in 2023 or 2024 would be material.  

The BOJ saw the economy expanding 2.9% this year and slowing to 1.9% next and 1.1% in 2024. The World Bank and the OECD see Japanese growth this year at 1.7%. The median forecast in Bloomberg's survey also is for 1.7% growth. While the BOJ's forecast for next year is only slightly firmer than other official projections, the World Bank is particularly pessimistic, forecasting 1.3% growth next year and 0.6%in 2024. 

The ECB meeting is far more interesting than the BOJ meeting. The ECB has signaled its intention to raise for the first time. ECB President Lagarde has indicated a 25 bp hike but with price pressures still rising and the euro declining, which boosts inflation, the swaps market is pricing in about a 16% chance that the ECB lifts the rate by 50 bp. The market has nearly 90 bp of tightening discounted by the end of Q3 (July and September meetings) and another 70 bp in Q4.  

In addition to the rate hike, investors are looking for concrete details of the new Transmission Protection Mechanism.   The TPM would be a tool the central bank could use to ensure that its monetary policy is not redistricted by unwarranted widening of interest rate differentials. An existing tool, Open Market Transactions, had the same purpose, but the conditionality was so onerous that it has not been used. Yet, it also contained a feature to neutralize (or sterilize) the impact on the ECB's balance sheet so as not to confuse it with QE. The TPM seems different, and it seems as if it might be triggered by the ECB rather than the peripheral country, though it is not clear. At the same time, the Italian political crisis shows non-economic considerations that could produce an undersirable divergence of interest rates.  

The need for the TPM, at least in part, grows out of the fact that nearly a quarter of a century after the launch of EMU, it remains incomplete. It also offers a prima facie case that the common bonds issued by the EU during the Covid pandemic were not the game changer many argued at the time. Just as Draghi led the ECB into the vacuum left by political and fiscal authorities to prevent the demise of EMU, so too is Lagarde leading the ECB to ensure that its monetary policy is properly transmitted despite the very real divergence in underlying conditions.  

In addition to the rate hike and details about the Transmission Protection Mechanism, there is a third piece of the ECB puzzle. While the expansion of central bank balance sheets was driven by bond purchases, every central bank has its own idiosyncratic elements. For example, the ECB did not only buy bonds but its extended long-term loans at attractive interest rates. About a quarter of the ECB's almost 8.8 trillion-euro balance sheet is composed of such loans (Targeted Long-Term Refinancing Operations) granted during the Covid pandemic. The first repayments are due in September and extend through the end of 2024.  

In June, the ECB raised the TLTRO rate to its deposit rate (-0.50%), and banks repaid almost 75 bln euros early, less than many had projected. The interest rate on the loans is determined by the average deposit rate over the three-year life of the loans. Therefore, these loans are still very attractive in a rising interest rate environment. Moreover, as banks return funds to shareholders through dividends and share buybacks, what amounts to be a subsidy for banks is being re-examined. According to press reports, for example, last year, 15% of the pre-tax profits of Germany's large bank (Deutsche Bank) came from the nearly 500 mln euros earned from TLTROs.   

Outside of emergencies, in its actions, the ECB has revealed its preference for announcing policy changes at quarterly meetings with fresh staff forecasts in hand. However, this week's meeting is an exception. Nevertheless, the new EC forecasts may have pointed in the direction of where the ECB may move. It shaved its forecast for growth this year (2.6% from 2.7%) and cut next year's projection by more (1.4% vs. 2.3%). Its inflation forecast was also raised by 7.6% this year (from 6.1%) and 4% next year (from 2.7%).

Ahead of the ECB meeting next week and the Federal Reserve the following week, there is no compelling reason to expect the market (equities, financials, commodities) to calm down. However, the price action itself may warn of a new market phase. September  WTI recovered from around $88.25 (a four-month low). Euro buying emerged below parity. The S&P 500 and NASDAQ gapped higher ahead of the weekend and were left open. The Fed's two leading hawks, St. Louis Fed President Bullard and Governor Waller, both seemed to push against speculation of a 100 bp hike. The market trimmed the odds (from 60% after the CPI report) to less than 20% ahead of the weekend. The year-end rate rose three basis points last week to slightly more than 3.50%. It peaked a month ago 20 bp higher.  


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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…



Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),




Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…



Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.


A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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