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Markets Catch Collective Breath

Overview:  The capital markets were stabilizing today after dramatic moves yesterday. Equity markets are recovering, and the dollar is paring yesterday’s gains.  Most equity markets in the Asia Pacific region rose, though Taiwan, South Korea, and Australi

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Overview:  The capital markets were stabilizing today after dramatic moves yesterday. Equity markets are recovering, and the dollar is paring yesterday's gains.  Most equity markets in the Asia Pacific region rose, though Taiwan, South Korea, and Australia were notable exceptions.  Europe's Dow Jones Stoxx 600 is posting a small gain, which, if retained, would be the fifth gain in seven sessions.  US shares are higher after snapping a four-day advance yesterday.  Benchmark 10-year yields are mostly firmer 3-4 bp among the Antipodeans, and 1-3 bp in Europe, where political anxiety is seeing Italian bonds underperform.  The 10-year Treasury yield is hovering around 1.15%.  The dollar is trading lower against the major currencies, led by sterling, the Australian dollar, and the Norwegian krone (0.4%-0.6%), while the yen, Swiss franc, and euro are posting minor upticks (less than 0.15%).  Emerging market currencies are also mostly firmer against the greenback, and the JP Morgan Emerging Market Currency Index is higher for the first time in four sessions.  Gold is snapping a four-day drop, its longest in a couple of months.  After falling to around $1817.50 yesterday, it is trading back above $1860 in Europe.  Oil prices are firm, and the February WTI contract is pushing above $53 a barrel, a new 10-month high.   

Asia Pacific

Japan reported a larger than expected November current account surplus of JPY1.878 trillion after a JPY2.144 surplus in October.  About half of the miss can be accounted for by trade surplus, which did not narrow as much as projected.  The trade surplus (on a BoP basis) was JPY616.1 bln, down from JPY971.1 bln in October, but more than the JPY474 bln economists projected.  Exports rose by 4.3%, accelerating from 2.5% in October.  Imports, however, were softer at 0.3%, down from 3.0%.  

With the balance of payments data, Japan reports portfolio flows.  It showed that trust banks, dominated by Government Pension Investment Fund, shifted from stocks to bonds. Of the JPY5.1 trillion invested in foreign bonds in November, the US government, including local and agency bonds, accounted for JPY3.7 trillion.  The US purchases were more than 10-times larger than October's purchases.  Japanese investors were also notable buyers of European bonds and reduced the buying of Canadian and Australian bonds.  In Europe,  Japanese investors bought the most UK Gilts since 2014 (~JPY288 bln) and bought French and Italian bonds after holdings were pared in October.   They were small sellers of Dutch bonds for the second month in a row.  

China manages the dollar-yuan rate, but it also tracks the yuan against a basket of (24) currencies (CFETS).  Against the basket, the yuan is at its highest level since last March.  Recall that at the end of last year, Chinese officials announced that the dollar's share in the basket would be trimmed to 21.59% from 22.40%, while the euro's share would increase to 17.40% from 16.34%.  Separately, reports suggest Chinese authorities have instructed financial institutions to limit efforts to secure offshore financing (overseas entities fx deposits and interbank borrowing) 

The dollar has been confined to about a quarter of a yen range above JPY104.10.  The dollar is slightly heavier for the first time in five sessions.  There is an option for $1.2 bln at JPY104 that expires today.  Resistance is seen in the JPY104.30-JPY104.40 area.   The Australian dollar is firm but within yesterday's range (~$0.7665-$0.7770).  It reached $0.7740 in the European morning but appears to have stalled.  Initial support is now seen near $0.7700.  The dollar's reference rate was set at CNY6.4823, which was a little higher than expected.  The dollar is trading near CNY6.46 after finishing last week near CNY6.4745.  

Europe

Italy's politics is the main talking point in Europe today.  Prime Minister Conte is expected to present new plans for EU funds to the cabinet later today.  Former Prime Minister Renzi's small party has two ministers in the coalition government.  He has threatened to withdraw them as an expression of dissatisfaction with Conte's efforts.  Ostensibly, this could topple the government. However, there are a few alternatives, including a new government from the existing parliament.  Much work needs to be done, including giving formal approval to the EU budget and Recovery Fund.  The new reforms of the legislative branch, which includes a reduction by about a third of the seats, would be implemented.  The delegation of parliamentary tasks of the smaller size has not been fully worked out. This would add to the uncertainty and paralysis amid an economic and public health crisis. 

The pandemic continues to ravage Europe, and the social restrictions and lockdowns will have strong economic knock-on effects.  A contraction in Q4 20 and Q1 21 is likely.  Today, Merkel warned that Germany may need another 10 weeks of lockdown.  Note that the CDU leadership contest begins at the end of the week, and the winner is likely to be the party's candidate to succeed Merkel as Chancellor. 

The euro is trading sideways in yesterday's trough when the single currency traded to almost $1.2130 after finishing last week near $1.2220.   There is an option for around 880 mln euro at $1.22 that expires today.  Note that the five-day moving average is slipping below the 20-day average for the first time in two months.  Our next downside target is near $1.2065.  Sterling is performing better today, but it stalled just above $1.36, where a key retracement of the recent decline is found.  The intraday technicals warn the session high may be in place.  If it is not, the next hurdle is seen around $1.3635.  Initial support is seen by $1.3525-$1.3550.  

America

The political ramifications of last week's events in Washington continue to ripple across the country.  The House has approved an article of impeachment while invoking the 25th amendment to remove the President seems like a non-starter.  Nor will Trump resign.  Meanwhile, many companies have either frozen their political contributions or specifically targeting the members that continued to reject the election results.   This seems unprecedented.  

On Thursday, Biden is expected to lay out his fiscal intentions.  It is likely that the Heroes Act ($3.4 trillion) that the House of Representatives approved last May but was blocked in the Senate will be the basis of the inspiration with the bipartisan deal reached at the end of last year, being a down payment.  

Meanwhile, although tapering the Fed's purchases are far from imminent, a range of opinions have been heard from Fed officials in recent days.  Evans, Harkin, Kaplan, and Bostic seem to be open to it later this year if the economy shows a strong rebound in H2.  Clarida and Mester played down the prospects.  Given Clarida's role, his view may be more reflective of the Fed's leadership.  Look for more insight today as no few than six Fed officials speak today, including George and Rosengren, on the economic outlook.  

The economic diaries of the US, Canada, and Mexico are light today.  The US JOLTS report is on tap, and Mexico reports weekly reserve figures.  Neither typically moves markets.  The greenback rose to CAD1.2835 yesterday but has not traded above CAD1.28 today.  Initial support is seen near CAD1.2730 and then CAD1.2700.  A move above CAD1.2830 targets CAD1.2885, possibly on the way toward CAD1.2960.  The US dollar settled above MXN20.00 for the last three sessions.  It is straddling the area in the European morning amid the broader consolidation.  We like the US dollar higher in the near-term and look for a retest on the MXN20.25 area and see risk closer to MXN20.50.  



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Survey Shows Declining Concerns Among Americans About COVID-19

Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…

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Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.

(SARMDY/Shutterstock)

What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will  catch the disease and require hospitalization.

"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.

According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.

What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.

"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.

More via the Epoch Times;

The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.

Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.

“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.

COVID-19 No Longer an Emergency

The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.

The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.

“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.

The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.

Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.

The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.

According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.

Tyler Durden Sun, 03/10/2024 - 22:45

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Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While “Waiting” For Deporation, Asylum

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several…

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The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several months we've pointed out that there has  been zero job creation for native-born workers since the summer of 2018...

... and that since Joe Biden was sworn into office, most of the post-pandemic job gains the administration continuously brags about have gone foreign-born (read immigrants, mostly illegal ones) workers.

And while the left might find this data almost as verboten as FBI crime statistics - as it directly supports the so-called "great replacement theory" we're not supposed to discuss - it also coincides with record numbers of illegal crossings into the United States under Biden.

In short, the Biden administration opened the floodgates, 10 million illegal immigrants poured into the country, and most of the post-pandemic "jobs recovery" went to foreign-born workers, of which illegal immigrants represent the largest chunk.

Asylum seekers from Venezuela await work permits on June 28, 2023 (via the Chicago Tribune)

'But Tyler, illegal immigrants can't possibly work in the United States whilst awaiting their asylum hearings,' one might hear from the peanut gallery. On the contrary: ever since Biden reversed a key aspect of Trump's labor policies, all illegal immigrants - even those awaiting deportation proceedings - have been given carte blanche to work while awaiting said proceedings for up to five years...

... something which even Elon Musk was shocked to learn.

Which leads us to another question: recall that the primary concern for the Biden admin for much of 2022 and 2023 was soaring prices, i.e., relentless inflation in general, and rising wages in particular, which in turn prompted even Goldman to admit two years ago that the diabolical wage-price spiral had been unleashed in the US (diabolical, because nothing absent a major economic shock, read recession or depression, can short-circuit it once it is in place).

Well, there is one other thing that can break the wage-price spiral loop: a flood of ultra-cheap illegal immigrant workers. But don't take our word for it: here is Fed Chair Jerome Powell himself during his February 60 Minutes interview:

PELLEY: Why was immigration important?

POWELL: Because, you know, immigrants come in, and they tend to work at a rate that is at or above that for non-immigrants. Immigrants who come to the country tend to be in the workforce at a slightly higher level than native Americans do. But that's largely because of the age difference. They tend to skew younger.

PELLEY: Why is immigration so important to the economy?

POWELL: Well, first of all, immigration policy is not the Fed's job. The immigration policy of the United States is really important and really much under discussion right now, and that's none of our business. We don't set immigration policy. We don't comment on it.

I will say, over time, though, the U.S. economy has benefited from immigration. And, frankly, just in the last, year a big part of the story of the labor market coming back into better balance is immigration returning to levels that were more typical of the pre-pandemic era.

PELLEY: The country needed the workers.

POWELL: It did. And so, that's what's been happening.

Translation: Immigrants work hard, and Americans are lazy. But much more importantly, since illegal immigrants will work for any pay, and since Biden's Department of Homeland Security, via its Citizenship and Immigration Services Agency, has made it so illegal immigrants can work in the US perfectly legally for up to 5 years (if not more), one can argue that the flood of illegals through the southern border has been the primary reason why inflation - or rather mostly wage inflation, that all too critical component of the wage-price spiral  - has moderated in in the past year, when the US labor market suddenly found itself flooded with millions of perfectly eligible workers, who just also happen to be illegal immigrants and thus have zero wage bargaining options.

None of this is to suggest that the relentless flood of immigrants into the US is not also driven by voting and census concerns - something Elon Musk has been pounding the table on in recent weeks, and has gone so far to call it "the biggest corruption of American democracy in the 21st century", but in retrospect, one can also argue that the only modest success the Biden admin has had in the past year - namely bringing inflation down from a torrid 9% annual rate to "only" 3% - has also been due to the millions of illegals he's imported into the country.

We would be remiss if we didn't also note that this so often carries catastrophic short-term consequences for the social fabric of the country (the Laken Riley fiasco being only the latest example), not to mention the far more dire long-term consequences for the future of the US - chief among them the trillions of dollars in debt the US will need to incur to pay for all those new illegal immigrants Democrat voters and low-paid workers. This is on top of the labor revolution that will kick in once AI leads to mass layoffs among high-paying, white-collar jobs, after which all those newly laid off native-born workers hoping to trade down to lower paying (if available) jobs will discover that hardened criminals from Honduras or Guatemala have already taken them, all thanks to Joe Biden.

Tyler Durden Sun, 03/10/2024 - 19:15

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