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Markets like their rate hikes rare

Wall Street up, US dollar down after Fed’s 0.75% hike Unless you were living on Mars, and even there they probably heard the news, the FOMC hiked the…

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Wall Street up, US dollar down after Fed’s 0.75% hike

Unless you were living on Mars, and even there they probably heard the news, the FOMC hiked the Fed Funds rate by 0.75% overnight to a target range of 1/50%-1.75%, as anticipated by the market. The Fed downgraded its US growth forecasts for 2022 and 2023 but remained adamant there would be no recession. I’m not so sure on this one given their track record over the last couple of years. The Fed’s dot plot was also moved higher with year-end rates expected to be 3.40% from 2.80% previously. That implies another 1.75% of hiking is still to come in 2022. The accompanying statement also inserted the words “strongly committed to returning inflation to its 2.0% objective.”

All nice and hawkish you say. Indeed, it was but the result was actually an intraday buy everything rally as sentiment rebounded. US bond yields recorded 20+ bps falls, stocks shot higher, while the US dollar fell and gold and cryptos rallied. The reason was that Fed Chairman Powell said that the overnight 75-basis-point hike was unusually large and that he didn’t expect such moves to be common. Hopes that the Fed would hike at a less angry pace over the rest of the year was enough for the downtrodden buy-the-dippers to flock back into the market. Markets like their large rate hikes to be rare and not well done.

That said, the buy everything rally was somewhat uneven. The rise in US stock markets overnight came nowhere near unwinding the five-day selloff preceding the FOMC meeting. US bond yields across the curve remain well north of 3.0% despite falling overnight. In the currency space, the rebound versus the US dollar was decidedly uneven. USD/JPY traded in a 200-point range overnight and finished 1.20% lower at 133.80, while AUD/USD leapt nearly 2.0% higher, with even a bombed-out sterling gaining 1.45%. But in the EM space, Asian currencies booked only modest gains and as the reality of a widening interest differential and a slowing US economy dawns, those gains are being reversed this morning. Bitcoin managed a dead-cat bounce of USD 20,000.00 but cryptos remain in the naughty corner, while gold remains in an induced coma.

Most interesting was EUR/USD which managed to close just 30 pips to 1.0445 overnight, an attempted rally towards 1.0500 being repelled with ease. There is drama in Europe anyway, with the general rise in government bond yields across the globe presenting itself in an undesirably way in Europe. While Northern Europe yields have moved higher, the southern Club Med countries, led by Italy, have seen outsized rises, with Italian BTPs climbing to 4.20%, sending alarms ringing. That led to an “ad hoc” meeting by the ECB council yesterday to address the “fragmentation” problem. The ECB said it would accelerate the development of an anti-fragmentation monetary tool and would tinker with rollovers of its stock of QE-don’t call it QE-bonds. We can read that as they will let Northern Europe holdings mature, while rolling over Club-Med holding, just don’t call it selective QE forever, ok?

Italian BTP yields duly fell back to 3.80%, but the rapidity of European bond market fragmentation, and the unusual urgency of the ECB to address it, have revealed the soft underbelly of Europe and the euro that has never gone away since its creation. The prospect of ECB intervention to bolster the Italian government balance sheet forever has rightly capped gains in the single currency. On top of that, reduced flows of natural gas from Russia have sent European gas prices spiralling, and with a war on its eastern frontier, creating a bullish case for the euro requires a fertile imagination.

In Asia today, we have also received a slew of data. The New Zealand dollar was another underperformer overnight, and today’s GDP shows that the bubble created by the Reserve Bank of New Zealand and the New Zealand government over the pandemic is deflating rapidly. GDP Growth QoQ for Q1 fell by 0.20% against an expected increase of 0.60%. The YoY Q1 print rose only 1.20%. The Reserve Bank, in particular, has left New Zealand with Norwegian prices and Nigerian wages and this data doesn’t even encompass catch-up RBNZ tightening and mortgage rate resets to come. Little wonder the NZD is setting the world on fire and New Zealand remains top of my list for a hard landing this year.

South Korean Export and Import prices rose 23.50% and 36.30% respectively in May YoY, a slight increase from April. That will keep the pressure up on the Bank of Korea to hike again in July, it’s just by how much. Japan’s Balance of Trade was negative again in May at -JPY 2,385 billion. Exports rose by 15.80%, but Imports leapt higher by 48.90%. Both numbers can be laid at the door of the weaker yen and the Bank of Japan meeting tomorrow will be the subject of intense focus. Markets are clamouring for the 10-year JGB 0.25% yield cap to be lifted. An unchanged BOJ likely sees the USD/JPY rally resume, but if they surprise and do adjust the corridor, we could see a very violent correction lower by USD/JPY.

The juice is back on the Reserve Bank of Australia today as well after mighty Australian employment data. Although the unemployment rate edged higher by 0.10% to 3.90%, full-time employment in May blew expectations out of the water, adding 69,400 jobs (-40k exp!). The participation rate rose to 66.70% while part-time employment lost only 9,000 jobs. With labour demand so robust, even as inflation continues to rise, the RBA may need to do more outsized rate hikes in the months ahead.

Taiwan should also hike rates in response to the FOMC’s move today. A hike of 0.25% is baked in and with the inflation backdrop benign in Taiwan, more than that would be a surprise. With USD/NTD remaining near 2022 highs, we can’t rule out the central bank’s surprising markets though, as Asian currencies in general today, have already started reversing their overnight gains.

We also have the Bank of England policy decision this afternoon. Soaring energy prices, robust labour demand, cost of living increases, and a central bank that raised the white flag on imported inflation some time ago, have torpedoed the British pound. The BOE has quietly gone about its business with a series of 0.25% hikes these past months and I don’t expect that to change today. A potential trade conflict with the EU over the unilateral rewriting of the Northern Ireland Protocol is another headwind the BOE doesn’t need, given the already poor growth outlook. It is another reason to not consider a 0.50% rate hike. That should mean that sterling’s overnight rally versus the US dollar will be temporary.

Given the potential Brexit conflict and trade repercussions between the United Kingdom and Europe right now, the prize for the irony of the week goes to ECB President Christine Lagarde and the London School of Economics. Ms Lagarde travelled from Europe to the United Kingdom yesterday to give a speech and receive an honorary degree from the London School of Economics.

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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…

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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.

(Shutterstock)

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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Uncategorized

February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Spread & Containment

Another beloved brewery files Chapter 11 bankruptcy

The beer industry has been devastated by covid, changing tastes, and maybe fallout from the Bud Light scandal.

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Before the covid pandemic, craft beer was having a moment. Most cities had multiple breweries and taprooms with some having so many that people put together the brewery version of a pub crawl.

It was a period where beer snobbery ruled the day and it was not uncommon to hear bar patrons discuss the makeup of the beer the beer they were drinking. This boom period always seemed destined for failure, or at least a retraction as many markets seemed to have more craft breweries than they could support.

Related: Fast-food chain closes more stores after Chapter 11 bankruptcy

The pandemic, however, hastened that downfall. Many of these local and regional craft breweries counted on in-person sales to drive their business. 

And while many had local and regional distribution, selling through a third party comes with much lower margins. Direct sales drove their business and the pandemic forced many breweries to shut down their taprooms during the period where social distancing rules were in effect.

During those months the breweries still had rent and employees to pay while little money was coming in. That led to a number of popular beermakers including San Francisco's nationally-known Anchor Brewing as well as many regional favorites including Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks, and Cleveland’s Terrestrial Brewing filing bankruptcy.

Some of these brands hope to survive, but others, including Anchor Brewing, fell into Chapter 7 liquidation. Now, another domino has fallen as a popular regional brewery has filed for Chapter 11 bankruptcy protection.

Overall beer sales have fallen.

Image source: Shutterstock

Covid is not the only reason for brewery bankruptcies

While covid deserves some of the blame for brewery failures, it's not the only reason why so many have filed for bankruptcy protection. Overall beer sales have fallen driven by younger people embracing non-alcoholic cocktails, and the rise in popularity of non-beer alcoholic offerings,

Beer sales have fallen to their lowest levels since 1999 and some industry analysts

"Sales declined by more than 5% in the first nine months of the year, dragged down not only by the backlash and boycotts against Anheuser-Busch-owned Bud Light but the changing habits of younger drinkers," according to data from Beer Marketer’s Insights published by the New York Post.

Bud Light parent Anheuser Busch InBev (BUD) faced massive boycotts after it partnered with transgender social media influencer Dylan Mulvaney. It was a very small partnership but it led to a right-wing backlash spurred on by Kid Rock, who posted a video on social media where he chastised the company before shooting up cases of Bud Light with an automatic weapon.

Another brewery files Chapter 11 bankruptcy

Gizmo Brew Works, which does business under the name Roth Brewing Company LLC, filed for Chapter 11 bankruptcy protection on March 8. In its filing, the company checked the box that indicates that its debts are less than $7.5 million and it chooses to proceed under Subchapter V of Chapter 11. 

"Both small business and subchapter V cases are treated differently than a traditional chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed," USCourts.gov explained. 

Roth Brewing/Gizmo Brew Works shared that it has 50-99 creditors and assets $100,000 and $500,000. The filing noted that the company does expect to have funds available for unsecured creditors. 

The popular brewery operates three taprooms and sells its beer to go at those locations.

"Join us at Gizmo Brew Works Craft Brewery and Taprooms located in Raleigh, Durham, and Chapel Hill, North Carolina. Find us for entertainment, live music, food trucks, beer specials, and most importantly, great-tasting craft beer by Gizmo Brew Works," the company shared on its website.

The company estimates that it has between $1 and $10 million in liabilities (a broad range as the bankruptcy form does not provide a space to be more specific).

Gizmo Brew Works/Roth Brewing did not share a reorganization or funding plan in its bankruptcy filing. An email request for comment sent through the company's contact page was not immediately returned.

 

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