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Methodology: Zillow Observed Rent Index (ZORI)

The Zillow Observed Rent Index (ZORI) measures changes in asking rents over time, controlling for changes in the quality of the available rental stock.



Beginning in May 2020 with publication of April 2020 data, Zillow is releasing a new measure of rental appreciation. The Zillow Observed Rent Index (ZORI) measures changes in asking rents over time, controlling for changes in the quality of the available rental stock in ways that other measures of rental prices cannot. 

What's available to rent at any given time can change rapidly, and measures of median or average prices across time may not reflect actual market-based movements in rent prices, but instead simply reflect the fact that certain unit types are available at different times. ZORI solves this challenge by calculating price differences for the same rental unit over time, then aggregating those differences across all properties repeatedly listed for rent on Zillow.  

Underlying the index is Zillow's industry-leading database of rental properties. To ensure we are capturing the rental market as a whole, and not just those rentals posted to Zillow, we created weights for the index based on the latest data from the U.S. Census Bureau.  Units that appear more frequently in the Zillow data hold less weight, and those that appear less frequently are more heavily weighted. 

Information on the age of a given rental building and the number of units it contains is obtained from the annual American Community Survey (ACS). Data on age of buildings — the decade the structure was built — goes back to1940; homes built prior to 1940 are grouped together. The number of units in the structure is simplified to three categories: single-unit (detached and attached), 2-4 units and 5+ units.

ZORI is currently calculated at the national, metropolitan, county, city and zip levels for all regions where sufficient data is available.

Calculating Weights

To better reflect the entire rental market, weights are assigned measuring the prevalence of units being rented that are built in decade d; are of structure type u; and are rented out in year t as reflected by the census and Zillow's own data. Therefore there are weights for every structure type, decade built, and year rented triple. Let i denote a unique structure type, decade built and year rented triple, then the weight for units of that type is:

Where Si(c) is the share of census units built in decade d, of structure type u, rented in year t; and Si(z) is the share of  Zillow listings in that same rented triple i.

For example, if the Census Bureau indicates that 30% of rented units in a given metro in 2018 were in 2-4 unit buildings built in the 1980s, but only 15% of our repeated rent pairs in that metro match that profile, the weight assigned to those rental pairs would be 2

Calculating the Index

The repeated transaction methodology used to calculate the index has a long history beginning in the 1960s. The index is calculated with the price change for all units with more than one recorded sale by regressing changes in rent prices on the change in time between two transactions. The coefficients from this regression form the basis for month-on-month changes reflected in the index values. This strategy was introduced in 1963 by Martin Bailey, Richard Muth, and Hugh Nourse, and further developed by Karl Case and Robert Shiller in the late 1980s. The model is most similar to the approach described by Ambrose, Coulson and Yoshida, 2015, but with one major difference. 

In Ambrose et al. the index is calculated using a three-step procedure. In the first step, we regress the log difference in prices for a unit i whose first transaction occurred at time s, and whose second transaction occurred in time t, on a matrix Xit .Those matrix values are −1 if the first sale in the pair took place at time period t, 1 if the second sale in the pair took place at time period t, and 0 otherwise.  That is:

Since we are using log prices,  represents percentage differences in prices from the base year. If we stop here and create the index using this we are essentially recreating the index from Bailey and coauthors. However, in Ambrose et al. the authors perform a second and third stage where they regress the squared residuals from the first step on (t-s), collect the fitted values from that regression, and use the inverse of the square residuals as the weights in a weighted least squares regression that mirrors the OLS regression from the first stage. This procedure down weights transaction pairs that are very far apart, and puts more weight on transactions that occur more closely together.

While the inverse time weighting is an important theoretical contribution, we found that in practice it had little-to-no effect on the behavior of the series. Instead, we chose to put more weight on observations that are underrepresented in the Zillow sample, and less weight on those that are overrepresented. Therefore we adjust our second-stage regression to regress the squared residuals from (1) on the weights described in the previous section. The predicted values from this second stage are then used in a weighted least squares regression version of (1). The index values are created from the coefficients from the third and final stage of the procedure. 

Smoothing and Dollar-Denominating the Index

Once the index is computed, it is smoothed using a three-month simple moving average. A seasonally adjusted series is available and calculated using a proprietary algorithm that is more robust to outlier events such as the 2020 pandemic.   Prior to publication, both the raw and smoothed indices are checked against a set of heuristics based on statistics of the time series to flag potential data quality issues so they can be investigated and fixed, or a determination can be made not to publish the series.

To make the index more interpretable, we attach a dollar value to the latest data point in the series and use the index's month-to-month changes to chain the dollar value back in time. The dollar amount is calculated by taking the mean of the middle 30% (the 35-to-65 percentile) of the asking rent for observations from the most recent month. Using the mean of the middle quintile instead of a straight median better captures small changes in the market, while also reducing noise. To correct for bias in list rents, we use the same weights described above to make the dollar-denominated amount representative of the market of available homes. 


  • J. Bailey, R. F. Muth and H. O. Nourse, "A Regression Method for Real Estate Price Index Construction," Journal of the American Statistical Association, vol. 58, pp. 933-942, 1963.
  • E. Case and R. J. Shiller, "The Efficiency of the Market for Single Family Homes," American Economic Review, vol. 79, pp. 125-137, 1989.
  • W. Ambrose, N. E. Coulson and J. Yoshida, "The Repeat Rent Index," Review of Economics and Statistics, vol. 91, no. 5, pp. 939-950.

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SaaS platform klikit saves restaurant kitchens from “tablet hell”

The proliferation of delivery services give customers many options, but means chaos for busy restaurants that need to manage orders across multiple apps…



The proliferation of delivery services give customers many options, but means chaos for busy restaurants that need to manage orders across multiple apps and channels. Many kitchens handle this by juggling several devices at a time, one for each app. Klikit wants to save Southeast Asian food businesses from “tablet hell” by aggregating order information from all apps into one platform. Based in Singapore, the startup just exited stealth mode with $2 million in pre-seed funding.

The round was co-led by Global Founders Capital and Wavemaker Partners, with participation from Gentree Fund, AfterWork Ventures, Reshape Ventures, Nordstar, Pentas Ventures, Moving Capital, Gojek co-founder Kevin Aluwi, NasDaily’s Nuseir Yassin, YouTuber Lazar Beam and Radish Fiction founder Seung-yoon Lee. Strategic angel investors include executives from Gojek, YouTube and Flash Coffee.

Since launching seven months ago, klikit’s SaaS platform, klikit Cloud, has been used to service more than $2.8 million in orders across 150 brands in the Philippines, Malaysia, Indonesia, Singapore, Taiwan and Australia.

Users currently include Bistro Group (the Philippine franchisee of TGI Fridays, Hard Rock Cafe and Buffalo Wild Winds, Flash Coffee and ghost kitchen startups MadEats and Just Kitchen.

Klikit was founded in 2021 by Christopher Withers, who has a lot of experience in the on-demand space—he was previously vice president of marketplaces at GoJek, chief strategy officer at Bangladesh ride-hailing platform Pathao and launched UberEats in the Asia Pacific.

During the pandemic, while at GoJek, Withers moved home to Australia to work remotely. He also owned and operated a ghost kitchen.

Withers told TechCrunch he’s always been fascinated by the food delivery space.

“I started my ghost kitchen because I have always wanted to truly experience the difficulties of running a restaurant firsthand, rather than sit hypothesizing on the sidelines or from behind my laptop as I built out many of these super app marketplaces,” he said.

During that time, Withers was overwhelmed by the number and cost of platforms, devices, software, ads and social media he had to juggle. As a result he wanted to find more effective ways to manage them and launch new brands.

Withers explains that existing F&B software aren’t suited for many delivery restaurants and cloud kitchens, and less than 2% of merchants in Asia have integrated their delivery orders with legacy point-of-sale systems. This leaves kitchens and staff managing orders across different apps and devices, which is not only time-consuming but also results in missed orders, errors, confusion and general chaos.

“Many operators refer to this as ‘tablet hell’ and some of our clients had as many as 20+ devices—taking up an entire pantry closet’s worth of real estate—for a single kitchen location!” Withers said.

klikit’s team

Klikit differentiates from legacy POS systems, which were created for single-brand companies, by enabling restaurants and ghost kitchens to manage multiple food brands across locations and channels on a single device. Features include updating menus across delivery apps, which klikit is able to do quickly because it has official API agreements with apps like GrabFood, foodpanda, GoFood and UberEats. It gives on-demand access to historical data analytics (in contrast, many F&B software systems restrict data to time-limited viewings), including daily sales, product mixes and channel breakdown.

Since many restaurants in Southeast Asia often process delivery orders through social media like WhatsApp, SMS or audio messages, klikit also enables these orders to be added to its order dashboard so they are included in its analytics.

If one of klikit’s clients has spare capacity and equipment, they can sign-up for access to its virtual brand partnerships with creators and consumer brands. Klikit is now working with creators who have a combined following of 38 million in the Philippines and Australia to launch two “creator drops” in late 2022. Withers says klikit connected with top YouTubers because they have the clout to compete against fast food giants, marketing-wise.

Klikit’s closest competitors include Deliverect and NextBite, but Withers says he believes a regional startup like klikit will succeed because it can cement API partnerships with major delivery apps.

The startup’s new funding was used during stealth mode to hire 30 people in six countries. It will also use the capital for regional expansion and adding more features by building its engineering team.

In a statement, Wavemaker Partners managing partner Paul Santos said, “We see klikit solving widely unaddressed problems for restaurateurs everywhere, while also creating unique solutions for creators and brands to earn revenue and engage with fans in entirely new ways. Their vision strategically brings together the converging and only growing trends in food delivery and the creator economy.”

SaaS platform klikit saves restaurant kitchens from “tablet hell” by Catherine Shu originally published on TechCrunch

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Leading Edge: Odd Burger (TSXV:ODD)

Certain companies are destined to usher their industries into the future through…
The post Leading Edge: Odd Burger (TSXV:ODD) appeared first on The…



Certain companies are destined to usher their industries into the future through innovation and the continual improvement of their customers’ lives.

The Market Herald Canada’s Leading Edge introduces you to those companies with a focus on how business is evolving toward the interests of society.

Next up: Odd Burger (ODD).


Odd Burger is one of the world’s first vegan fast-food chains and the world’s first to be publicly traded.

It was founded by COO Vasiliki McInnes and CEO James McInnes to offer fast food that is environmentally sustainable, free of animal harm and priced comparably to major fast-food chains.

James first entered the market in 2014 with a grassroots vegan organization delivering organic fruit and vegetables from local farmers to your door. Vasiliki came on board the following year when the couple introduced their vegan meal kits to widespread customer acclaim.

In 2016, Odd Burger debuted its plant-based Big Mac homage, the Famous Burger, at Ribfest in London, Ontario, where it sold out and garnered considerable media attention throughout North America. This attention led to the launch of a food truck, which enabled the brand to build word-of-mouth in a growing number of Ontario communities.

In 2017, the company opened its doors as Canada’s first vegan fast-food restaurant. It then added a manufacturing facility in London in 2018, where research and development are constantly taking place to expand its over 30 plant-based products.

Besides supplying franchised restaurants, the facility offers packaged products to select clients under the Preposterous brand through an exclusive food service distribution partnership with Sysco. Preposterous manufactures 13 proteins and 8 sauces and dressings – all of which are available in Odd Burger restaurants – using minimally processed ingredients, including chickpeas, wheat, oats and beans.

Odd Burger’s meals are best described as healthier fast food. They’re free of cholesterol and growth hormones and contain more fibre and less saturated fat than animal-based competitors, though there are similarities in terms of calorie and sodium content.

“It’s part of being in the category; it’s gotta taste good,” James commented, referring to Odd Burger’s commitment to flavour and indulgence without the guilt commonly associated with a trip to the drive-thru.

The company’s patties are prepared with wheat gluten, chickpeas, onion and flax, while its breakfast options use tofu instead of egg. Its ‘bac-un’ is made with tempeh, a type of fermented soybean. Its ice cream and shakes are prepared with coconut milk. Each recipe is also developed in-house, which should facilitate the company’s ambitious expansion plans.

The Famous Burger, flanked by The Crispy ChickUn (right) and The Sticky ChickUn (left).

To date, Odd Burger has 92 locations operational or under an area development agreement. This includes 7 locations presently operational, all in Ontario, and 50 locations projected to be operational or actively under development across Canada in 2023.

The company’s mission is to disrupt the fast-food industry by offering delicious food that is both better for you and the planet compared to the existing marketplace. It is fulfilling that mission through a differentiated growth strategy based on automation technology, vertical integration and locally sourced ingredients underpinned by vegan values and community involvement.


According to Meticulous Market Research, the plant-based food market is expected to be worth US$74.2 billion by 2027, growing at a CAGR of 11.9 per cent from 2020.

Annual global sales of plant-based meat alternatives have grown on average 8 per cent per year since 2010, with projections forecasting that 25 years from now, 20 per cent of meat will be clean or plant-based (National Research Council of Canada, 2019).

According to Research & Markets, the global fast-food market is expected toreach US$931.7 billion by 2027, rising at a CAGR of 4.6 per cent from 2020 to 2027.

Additionally, a 2018 study by Dalhousie University showed that almost 10 per cent of Canadians identify as vegans and vegetarians, with a 2020 VegFAQs study finding that vegans in Canada doubled between 2018-2020.

These figures begin to capture the size of Odd Burger’s addressable market and its considerable investment potential if it can achieve scale in an efficient, cost-conscious fashion. Luckily for investors, current and prospective, the company has a detailed view of its path forward.

Technology is the main catalyst for Odd Burger’s growth strategy. Restaurant kitchens, for one, are largely automated, with cooking occurring based on pre-set timers. This approach encourages consistency and freshness while minimizing waste to keep prices low. Restaurants are also set up to maximize orders and streamline wait times through an exclusively cashless self-checkout system.

Most impressive of all, Odd Burger will soon outfit locations with proprietary automation technology, which will allow for reduced food prep times and greater meal customization. The design phase is now complete, with prototyping underway.

Source: Odd Burger.

With productivity optimized, management made sure to design a compact store under 1,200 sq. feet, which enables a pandemic-proof takeout and delivery model and widens the opportunity set of potential franchisees.

Interested entrepreneurs must have liquid cash of at least C$150,000 and a net worth of C$300,000 to qualify, with each restaurant ranging between C$500,000-C$800,000 all-in depending on location and size.

With its sights set on vertical integration, the company currently manufactures 65 per cent of all food sold in its restaurants, with that number set to increase substantially over the next few years. In July, it announced the purchase of 5.5 acres in London, Ontario, for a new 50,000 sq. ft. facility with a potential expansion of up to 150,000 sq. ft. Construction is estimated to take 1-2 years after permit approval.

The extra production capacity will supply hundreds of future restaurants and allow for the launch of a retail line in grocery stores as well.

From a management perspective, Odd Burger’s entrance into the plant-based food category is backed by founder ownership of 52 per cent and board members with expertise fit to catalyze growth. Board member Ted Sehl, for example, was Director of Finance atMcDonald’s Restaurants of Canada for 11 years, while Michael Fricker, currently CFO atReunion Foods and Qvella Corporation previously served as CFO at Bento Sushi, North America’s second-largest sushi brand with over 900 franchised locations.

Surrounding Odd Burger’s technological savvy and aligned management team is its commitment to organizations that share its love for animals or otherwise put social consciousness into practice to benefit the world. Donations in 2020 and 2021 include The Save Movement, Black Lives Matter Canada, Dara Farm Sanctuary, and Food Not Bombs, with more names soon to follow.

With a robust plan to gain market share underway, we’ll now take a closer look at the company’s financial health and what it reveals about investment prospects moving forward.


Let’s narrow down the picture of who Odd Burger is trying to reach.

According to the company’s in-house review of the plant-based food industry (August 2022), plant-based meat commanded a 1.4-per-cent share of the total U.S. meat market in 2021, with sales of US$1.4 billion. However, the category grew by 74 per cent between 2018 and 2021 and nearly tripled in size during the period compared to the conventional meat market.

According to the National Research Council of Canada, our own market for plant-based proteins is projected to grow at 14 per cent per year by 2024. This represents up to a third of Canada’s overall protein market, which may seem high until we consider that 40 per cent of Canadians practice flexitarian eating habits driven by population growth, health benefits and environmental stewardship. This makes Canada an ideal population for Odd Burger to introduce itself to the world and establish a presence before pursuing U.S. expansion.

The first Odd Burger in Calgary, Alberta. Source: Odd Burger.

To keep cash flows consistent as it rolls out new restaurants and rides the plant-based wave, the company benefits from three sources of revenue:

Franchise revenue, which includes a C$35,000 franchise fee, an annual royalty of 5 per cent of gross sales, plus an annual advertising fund contribution of 2.5 per centCorporate restaurant revenue, which is comprised of direct-to-consumer salesPreposterous revenue, which includes food sales to franchised restaurants as well as external restaurants and institutions

When it comes to actual performance, Odd Burger reported all-time record quarterly revenue of C$787,585 in Q3 FY2022 (fiscal year ends September 30th), which is up 205 per cent YoY and up 23 per cent QoQ. Revenue is also up 175 per cent YoY for the nine months ended June 30, 2022.

Gross margin for the same nine-month period increased by C$372,383 YoY, while it rose to C$277,904 in Q3 FY2022 versus C$(17,996) in Q3 FY2021. The company attributes the improvement to restaurant expansion and increased efficiencies at Preposterous Foods.

This focus on growth without waste, driven by its lean business model tailored to the UberEats and Door Dash generation, allowed the company to post its lowest quarterly loss since going public. The figure improved 73 per cent from Q3 FY2021 and 6 per cent QoQ to C$(938,552).

While a negative number may make certain investors uneasy, Odd Burger benefits from numerous factors that lend credence to its improving performance. These include:

Prudence with debt, which is covered 1.53x by total assetsModestly sized restaurants, which counteract generationally high Canadian real estate pricesMinimal staffing needs to minimize ongoing costsAn approachable brand, in line with a global shift in environmental consciousness, that is already taking hold in its space given the almost 100 locations under contract

Another major key underlying Odd Burger’s path to profitability is the planning enabled by having firm area representative agreements in place. It has signed such agreements for Ontario, Alberta and B.C. to bring on 76 franchises over the next seven to eight years.

Representatives are under contract to open a minimum number of restaurants per year, offering Odd Burger predictable growth targets to control spending and manufacturing capacity and investors a reliable means to construct valuation models to substantiate an allocation.

The agreements also establish financial incentives for representatives to sell franchises in prospective locations, maintain brand standards and provide ongoing support to franchisees.

To end, we’ll delineate a few central drivers of the company’s future success.

On the horizon

Odd Burger plans to finance operating costs over the next year with cash on hand, equity and debt issuance, and the sale of certain corporate locations to franchisees. It expects to raise gross proceeds of C$3 million from these transactions.

As the company grows, this upfront spending should become available at more favourable rates, paving the way for its efficiency-first approach to accelerate the reaching of scale.

It believes near-term growth will come primarily from onboarding more franchisees as Preposterous customers, leading to increased recurring revenue to fund initiatives toward fully-fledged vertical integration.

Odd Burger’s path to profitability and self-sufficiency is then a question of brand loyalty. In other words, while fast-food and plant-based appetites are growing exponentially, as we have seen, and the company operates in a streamlined fashion with its heart on its sleeve, will these two facts merge into durable competitive advantages that generate long-term shareholder value?

Source: Odd Burger.

While there are no crystal balls to consult for a definitive answer, Odd Burger finds itself on the right side of history with a business plan clearly set up for success.

The company has already received interest from hundreds of potential U.S. franchisees, prompting it to form a Delaware corporation to operate its U.S. franchise division. It has also finalized a U.S. franchise agreement and disclosure document and placed boots on the ground to scout for a flagship Manhattan location.

It intends to sell franchises in an initial 25 states, including Colorado, Arizona and Nevada, with more to follow upon completion of regulatory filings. Similar to Canada, the company is developing area representative and area development programs to accelerate U.S. growth as predictably as possible.

As for its Preposterous manufacturing subsidiary, Odd Burger plans to leverage its partnership with Sysco to potentially onboard some of the distributor’s 600,000 global food service customers and 330 global distribution centers. This strategy has the potential to minimize seasonal fluctuations in restaurant revenue, as well as facilitate regular reinvestment in business innovation without shareholder dilution.

In the near term, investors should pay close attention to quarterly results as new restaurants become operational. Positive signals to look out for include improving margins and inventory turnover, the closing gap between operating capital and operating costs, and an increasing sense of brand ubiquity, whether at the grocery store or out on the town, all of which should produce a margin of safety as Odd Burger vies to become the household name in vegan fast-food.

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Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And “Tighter For Longer” Fed

Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And "Tighter For Longer" Fed

Two days ago, when stocks were melting up even as oil was…



Futures Slide As OPEC+ Cut Sparks Gas Inflation Fears And "Tighter For Longer" Fed

Two days ago, when stocks were melting up even as oil was storming higher and threatened to rerate inflation expectations sharply higher, we mused that algos were clearly ignoring this potentially ominously convergence.

And while yesterday we saw the first cracks developing in the meltup narrative as oil extended gains following OPEC's stark slap on the face of the dementia patient in the White House, it was only today that the "oil is about to push inflation sharply higher" discussion entered the broader financial sphere, with JPM writing this morning that "OPEC+ presents inflation risk", Bloomberg echoing JPM that "OPEC+ alliance’s plan to cut oil supply stoked inflation fears and as traders awaited labor-market data to gauge the risk of recession" and Saxo Bank also jumping on the bandwagon, warning that OPEC+ supply cut will worsen global inflation which "raises the risk of inflation staying higher for longer” and “sends the wrong signal to the US Federal Reserve... It could send a signal that they have to keep on their foot on the brake for longer.”

And sure enough, with oil rising above its 50DMA for the first time since Aug 30, futures have slumped overnight as oil kept its gains, with S&P and Nasdaq 100 futures both sliding 0.5% as of 730am, while Europe’s Stoxx 600 erased an advance and traded near session lows. US crude futures held on to weekly gains of about 11% after the oil cartel said it would cut daily output by 2 million barrels. Treasuries were steady, the 10Y trading around 3.77%, with the 2Y rate hovering about the 4.15% level.

In pre-market trading, Credit Suisse jumped as much as 5.2% after JPMorgan upgraded to neutral from underweight, saying it sees $15bn as a minimum value for the lender, in-line with the estimated value of the Swiss legal entity. Shares were 2% higher by 13:20pm CET in Zurich, after Bloomberg News reported that the lender is trying to bring in an outside investor to inject money into a spinoff of its advisory and investment banking businesses, citing people with knowledge of the deliberations. Other banks did not do as well, and slumped in premarket trading Thursday, putting them on track to fall for a second straight day. Twitter shares fell as much as 1.1% to $50.75, trading nearly 7% below Elon Musk’s offer price of $54.20 as investors await progress in the revived deal. Here are the other notable premarket movers:

  • Pinterest (PINS US) shares jump as much as 5.8% in US premarket trading after Goldman Sachs upgraded the social networking site to buy from neutral on improving user growth and better engagement trends, even as the backdrop for digital advertising remains uncertain.
  • Biohaven Ltd. (BHVN US) shares rise 9.7% in US premarket trading, set to extend a 75% gain over the past two days as regular trading in the newly constituted drug developer began following an unusual deal with Pfizer Inc.
  • SurgePays (SURG US) shares soar as much as 11% in premarket trading after the company gave an update on subscriber numbers for its subsidiary SurgePhone Wireless.
  • Flutter (FLTR LN) gained 3.3% in premarket trading as it was initiated at outperform at Exane as the best-placed online gambling name, while Entain also at outperform and DraftKings started at underperform.
  • Richardson Electronics (RELL US) rose 8.2% in extended trading after reporting year-over-year growth in net sales and earnings per share for the fiscal first quarter.

While higher energy prices could stoke inflation, some have speculated that this will also divert discretionary income from core items thus pushing core inflation lower and hit company earnings -- potentially encouraging the Federal Reserve to slow monetary tightening.

While such expectations fueled equity gains this week, several money managers are cautioning that the economic path to a less aggressive Fed could be painful: “If you want to preempt the Fed, you are playing a very high-stakes game,” said Kenneth Broux, a strategist at Societe Generale SA. “The Fed do not want financial conditions to loosen; they don’t want equity markets to take off and get too comfortable.”

That said, investors are wary of placing large-scale equity bets as they await a report on US initial jobless claims later Thursday and the official nonfarm payrolls data Friday. A Bloomberg survey shows the US economy will have added 260,000 jobs last month; a higher-than-anticipated number may spook markets.

In Europe, the Stoxx 50 dropped -0.3% to session lows. Stoxx 600 outperforms peers, adding 0.2%, FTSE MIB lags, dropping 0.5%. Energy and insurance underperform while real estate and travel lead gains. Here are all the notable European movers:

  • Imperial Brands shares rise as much as 4.7% after the tobacco company said it will buy back up to £1b worth of stock. The move was welcomed by analysts, with RBC calling it a “big deal” and Citigroup saying the announcement was earlier than expected.
  • Home24 SE gains as much as 126% to EU7.53 after XXXLutz offered to buy all outstanding shares in the German online furniture retailer for EU7.50 apiece. The bid is generous and the deal is straightforward from a regulatory perspective, according to Tradition.
  • Credit Suisse jumps as much as 5.2% after JPMorgan upgraded to neutral from underweight, saying it sees $15b as a minimum value for the lender, in-line with the estimated value of the Swiss legal entity.
  • CMC Markets climbs as much as 6.5% after the online trading firm said it sees first- half net operating income up 21% y/y, with market volatility in August and September boosting the results. Numis upgraded the stock to add from hold following the report.
  • Shell drops as much as 5% as analysts say the oil and gas major’s trading update looks “weak” and may mean that FY consensus proves too ambitious.
  • Kloeckner falls as much as 12% as the company faces a “high likelihood” of an imminent profit warning, Bankhaus Metzler says, double-downgrading the stock to sell from buy.
  • Swiss Re is among the weakest members of the Stoxx 600 insurance index on Thursday, declining as much as 4.0%, as Morgan Stanley lowers its price target ahead of third-quarter earnings.
  • Accor drops as much as 2.5% after the hotel chain owner was downgraded to underweight from equal-weight at Barclays, which sees short-term risks as bigger for the company compared with peers and feels investors are looking more at potential negative factors heading into FY23 than 2022 upgrades.

Earlier in the session, Asian stocks rose for a third day as hardware technology stocks in South Korea and Japan advanced on views they may have reached a bottom. The MSCI Asia Pacific Index climbed as much as 0.9%, lifted by TSMC, SoftBank and Sony. The benchmark trimmed gains later in the day, but remains on track to advance for the week, following a seven-week losing streak that was the longest since 2015.Korea’s Kospi Index was the region’s best-performing major benchmark, jumping about 1%. The advance was helped by chipmakers extending their gains amid Morgan Stanley’s bullish view on the sector. Hong Kong stocks retreated after Wednesday’s catch-up rally.

Trading volume in the region was light as mainland China remains closed for the Golden Week holiday. The MSCI’s Asian benchmark has rebounded this week from its lowest in more than two years. The move tracked a nascent revival in global equities on bets that the Federal Reserve may turn less aggressive in its tightening. In a potential harbinger of shifting market views, Morgan Stanley strategists upgraded emerging-market and Asia ex-Japan stocks to overweight from equal-weight.   Investors are also optimistic that monetary policies in China and Japan, which have bucked the global wave of tightening to remain loose, could provide further support to the nations’ equities.  “While the rest of the world is tightening, Japan and China are still easing, especially China where we are going to see more easing policies going forward,” Chi Lo, senior investment strategist for Asia Pacific at BNP Paribas Asset Management, said in an interview with Bloomberg TV. “That makes us more positive on EM Asia.”

Japanese equities gained for a fourth day as investors awaited domestic corporate earnings coming out later this month.  The Topix rose 0.5% to 1,922.47 as of the market close in Tokyo, while the Nikkei 225 advanced 0.7% to 27,311.30. Sony Group contributed the most to the Topix’s gain, increasing 1.7%. Out of 2,168 stocks in the index, 1,564 rose and 490 fell, while 114 were unchanged. “There is relatively little concern about corporate earnings for Japanese stocks with the economy restarting and the yen weakening,” said Shogo Maekawa, a strategist at JPMorgan Asset Management.

In FX, the Bloomberg Dollar Spot Index consolidated within the recent day’s ranges, while Britain’s pound slipped 0.4% and gilt yields rose after Fitch Ratings lowered its outlook on the nation to negative. The greenback advanced against most of its G-10 peers. The euro steadied just below $0.99. Euro hedging costs are on the rise again as traders position ahead of Friday’s payrolls print and next week’s US inflation report. Commodity currencies were the worst performers along with the pound. Australian and New Zealand dollars gave up an Asia-session advance. The yen traded in a narrow range.

In rates, Treasuries were slightly cheaper across the curve after paring declines led by gilts in London trading after a Bank of England survey found expectations for higher prices. Focal points of US session include several Fed speakers and potential for risk-reduction ahead of Friday’s September jobs report Friday. US yields cheaper by less than 2bp across the curve in bear- flattening move, 10-year by 2bp vs 17bp for UK 10-year, the downside leader in developed market sovereign bonds.  German and Italian bond curves flattened modestly as yields on shorter-dated notes rose, while those further out fell.

In commodities, West Texas Intermediate futures traded near $88 a barrel, while Brent crude held near $93.30. The output-cut plan drew a warning from the White House about negative effects on the global economy. Goldman Sachs Group Inc. increased its fourth-quarter price target for Brent to $110 a barrel.

To the day ahead now, and data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the weekly initial jobless claims from the US. Meanwhile from central banks, we’ll get the ECB’s account of their September meeting, as well as remarks from the Fed’s Evans, Cook, Kashkari, Waller and Mester, and the BoE’s Haskel.

Market Snapshot

  • S&P 500 futures down 0.3% to 3,783.50
  • STOXX Europe 600 up 0.3% to 400.25
  • MXAP up 0.4% to 145.05
  • MXAPJ up 0.3% to 471.37
  • Nikkei up 0.7% to 27,311.30
  • Topix up 0.5% to 1,922.47
  • Hang Seng Index down 0.4% to 18,012.15
  • Shanghai Composite down 0.6% to 3,024.39
  • Sensex up 0.6% to 58,403.02
  • Australia S&P/ASX 200 little changed at 6,817.52
  • Kospi up 1.0% to 2,237.86
  • German 10Y yield little changed at 2.05%
  • Euro little changed at $0.9886
  • Brent Futures up 0.3% to $93.62/bbl
  • Gold spot up 0.0% to $1,716.69
  • U.S. Dollar Index little changed at 111.24

Top Overnight News from Bloomberg

  • UK bond markets face a potential “cliff edge” when the Bank of England exits the market at the end of next week, leaving traders to navigate a turbulent backdrop without the support of a buyer of last resort
  • Millions more Britons will be dragged into higher rates of income tax over the next three years, costing twice as much as Prime Minister Liz Truss’s personal tax cuts, according to calculations by the Institute for Fiscal Studies
  • Britain’s construction industry turned more pessimistic in September after rising interest rates and the risk of recession held back new orders
  • The European Union plans to examine whether Germany’s massive plan to shelter companies and households from surging energy costs respects the bloc’s rules on public subsidies, EU Commissioner Thierry Breton said
  • German factory orders dropped in August after the previous month was revised to show an increase, hinting at a lack of momentum as the economy stands on the brink of a recession
  • Societe Generale SA cut its exposure to counterparties on trades in China by about $80 million in the past few weeks as global banks seek to guard against any potential fallout from rising geopolitical risks in the world’s second-largest economy

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded mixed as the region partially shrugged off the lacklustre lead from the US where the major indices snapped a firm two-day rally and finished the somewhat choppy session with mild losses amid higher yields and as Fed rhetoric essentially pushed back against a policy pivot. ASX 200 lacked direction amid underperformance in the Real Estate and the Consumer sectors, although the downside was also limited by strength in energy after oil prices were lifted by the OPEC+ output cut. Nikkei 225 was positive with notable gains in exporter names and with Rakuten leading the advances as Mizuho looks to acquire a 20% stake in Rakuten Securities for USD 555mln. Hang Seng was lacklustre and took a breather after the prior day’s more than 5% jump with the mood also not helped after Hong Kong PMI slipped into contraction territory for the first time in 6 months.

Top Asian News

  • Haikou city in China's Hainan imposed a COVID lockdown for Thursday, according to Bloomberg.
  • Malaysia PM May Propose Parliament Dissolution, Bernama Reports
  • Why Polio, Once Nearly Eradicated, Is Rebounding: QuickTake
  • Legoland Korea’s Default Flags Risks for Nation’s Developers
  • Paris Club Seeks China Collaboration in Sri Lanka Debt Talks
  • Yen Rout Is Over on Peak US Rate Hike Bets, Says Top Forecaster

European bourses are under modest pressure as sentiment broadly takes a slight turn for the worst amid limited newsflow as participants look to Friday's NFP. Currently, European benchmarks are lower by 0.1-0.3% while US futures are posting slightly larger losses of circa 0.7 ahead of Fed speak.

Top European News

  • Fitch affirmed the UK at AA-; Outlook revised to Negative from Stable, while it stated that the fiscal package announced as part of the new UK government's growth plan could lead to a significant increase in deficits over the medium-term, according to Reuters.
  • The UK Treasury is set to impose GBP 21bln of additional income taxes despite the "tax-cutting mini-budget", according to a study by the Institute for Fiscal Studies. (Times)
  • BoE Monthly Decision Maker Panel data - September 2022; looking ahead, DMP members expected CPI inflation to be 9.5% one-year ahead, up from 8.4% in the August survey, and 4.8% in three years’ time.
  • BoE's Cunliffe says the FPC will publish its next financial policy statement and record on October 12th, liquidity conditions in the run up to the BoE gilt intervention were "very poor", MPC will make a full assessment of recent developments at its November 3rd meeting.
  • UK government has proposed easing the fee cap for illiquid assets in pensions, according to a rule consultation publication by the government.
  • Swedish Economy Shrinks More Than Estimated on Weak Industry
  • UK Tech M&A Spree Pauses as Buyers Pull Out Amid Chaotic Markets


  • USD benefits from the mentioned risk tone, with the DXY extending to a 111.35 peak to the modest detriment of peers.
  • However, EUR is relatively resilient and holding around 0.99 vs the USD as we await the ECB Minutes account for near-term guidance.
  • Cable faded sub-1.1400 and reversed through 1.1300 again amid the USD's move and prior to a letter exchange from the BoE to Treasury re. the Gilt Intervention.
  • Antipodeans under pressure given the USD move and associated action in metals, while the Yuan initially lent a helping hand but this has since dissipated.
  • Given the broader tone, the traditional havens are holding near unchanged levels though yield dynamics are a hinderance.

Fixed Income

  • Gilts are once again the standout laggard following rating agency action and the BoE DMP showing inflation pressures were already elevated MM before the fiscal update.
  • As such, the UK yield has extended back above 4.10%; in the US, yields are also bid though to a much lesser extent before Fed speak and Friday's jobs.
  • Back to Europe, Bunds are pressured though only modestly so vs UK counterparts awaiting the ECB's September account


  • Crude benchmarks are modestly firmer at present, extending marginally above yesterday’s best levels with fresh newsflow limited as participants digest yesterday’s OPEC+ action.
  • WTI and Brent are towards the mid-point of circa. USD 1/bbl ranges, though Brent Dec’22 briefly surpassed the 200-DMA at USD 94.11/bbl before moving back below the figure.
  • Acting Kuwaiti Oil Minister said the OPEC+ decision to cut output will have positive ramifications for oil markets, while they understand consumers' concerns about prices increasing but added that the main motive in OPEC+ is balancing supply and demand, according to Reuters.
  • US National Security official stated the US sanctions policy on Venezuela remains unchanged and there are no plans to change the sanctions policy without constructive steps from Maduro, according to Reuters.
  • Norway's Budget proposes changing the temporary tax rules for the petroleum sector, entails that the uplift is reduced to 12.40% (prev. 17.69%), via Reuters.
  • Saudi sets the November Arab Light OSP to N.W Europe at Ice Brent +USD 0.90/bbl; to the US at ASCI +USD 6.35/bbl, via Reuters citing a document; to Asia at Oman/Dubai +USD 5.85 (Unch.), via Reuters sources.


  • North Korea launched two short-range ballistic missiles which were fired from Pyongyang and landed outside of Japan's exclusive economic zone, according to the South Korean military cited by Yonhap. Furthermore, North Korea said that its missile launches are counteraction measures against the US and South Korean military drills.
  • North Korean jets and bombers have been seen flying in an exercise, according to Yonhap; South Korean jets take off in response, via Reuters.
  • US State Department condemned North Korea's ballistic missile launch and said North Korea's missile launches pose a threat to regional neighbours and the international community, while it added that the US remains committed to a diplomatic approach to North Korea and called on North Korea to engage in dialogue, according to Reuters.
  • The EU has approved the 8th round of Russian sanctions; as expected.

US Event Calendar

  • 08:30: Sept. Continuing Claims, est. 1.35m, prior 1.35m
  • 08:30: Oct. Initial Jobless Claims, est. 204,000, prior 193,000

Central bank Speakers

  • 08:50: Fed’s Mester Makes Opening Remarks
  • 09:15: Fed’s Kashkari Takes Part in Moderated Q&A
  • 13:00: Fed’s Evans Takes Part in Moderated Q&A
  • 13:00: Fed’s Cook Speaks on the Economic Outlook
  • 13:00: Fed’s Kashkari Discusses Cyber Risk and Financial Stability
  • 17:00: Fed’s Waller Discusses the Economic Outlook
  • 18:30: Fed’s Mester Discusses the Economic Outlook

DB's Henry Allen concludes the overnight wrap

After an astonishing rally at the beginning of Q4, markets reversed course yesterday as investors became much more sceptical that we’ll actually get a dovish pivot from central banks after all. The idea of a pivot has been a prominent theme over recent days, particularly after the financial turmoil during the last couple of weeks, thus sparking the biggest 2-day rally in the S&P 500 since April 2020 as the week began. But over the last 24 hours, solid US data releases have created a pushback against that narrative, since they were seen as giving the Fed more space to keep hiking rates over the coming months. And if markets had any further doubt about the Fed’s intentions, San Francisco Fed President Daly explicitly said yesterday that she didn’t expect there to be rate cuts next year, in direct contrast to futures that are still pricing in rate cuts from Q2. Indeed for a sense of just how volatile the reaction has been, 10yr bund yields were up by +16.3bps yesterday, which is their largest daily rise since March 2020 during the initial wave of the pandemic.

Looking at the details of those releases, it was evident that markets are still treating good news as bad news at the minute, since they sold off even as data pointed to a more resilient performance from the US economy than had been thought. For example, the ISM services index came in above expectations at 56.7 (vs. 56.0 expected), and the employment component moved up to a 6-month high of 53.0. So that’s a noticeably different picture to the manufacturing print on Monday, when there was a surprise contraction in the employment component. Furthermore, there was another sign of labour market strength from the ADP’s report of private payrolls, which came in at +208k in September (vs. +200k expected), and the previous month’s reading was also revised upwards. We’ll see if that picture is echoed in the US jobs report tomorrow, but there was a clear reaction to the ISM print in markets, as investors moved to upgrade the amount of Fed hikes they were expecting whilst the equity selloff accelerated.

Those expectations of a more hawkish Fed were given significant support by comments from Fed officials themselves. The most obvious came from San Francisco Fed President Daly, who was asked about the fact that futures were pricing in rate cuts, and said “I don’t see that happening at all”. In fact when it came to rates, she not only said that they were raising them into restrictive territory, but that they would be “holding it there” until inflation fell. Atlanta Fed President Bostic struck a similar tone, emphasising rate cuts in 2023 were not likely and that “I am not advocating a quick turn toward accommodation. On the contrary.” He said he wanted fed funds rates between 4% and 4.5% by the end of this year, “and then hold at that level and see how the economy and prices react.”

That backdrop led to a sizeable cross-asset selloff yesterday on both sides of the Atlantic. The effects on the rates side were particularly prominent, with 10yr US Treasury yields bouncing back +12.0bps to 3.75%. And that move was entirely driven by real yields, which rose +15.1bps as investors moved to price in a more hawkish Fed over the months ahead. You could see that taking place in Fed funds futures too, with the rate priced in for December 2023 up by +8.9bps to 4.19%, thus partially reversing the -22.2bps move lower over the previous two sessions. This morning, 10yr yields are only down -1.0 bps, so far from unwinding those moves.

The hawkish tones also proved bad news for equities, with the S&P 500 taking a breather following its blistering start to the week, retreating -0.20% after being as low as -1.80% in the New York morning. European equities did not enjoy the benefits of a New York afternoon rally, leading to a transatlantic divergence, and the STOXX 600 was down -1.02% on a broad-based decline. The energy sector outperformed in both the S&P 500 and STOXX 600 following a rally in crude oil which saw both Brent crude (+2.81%) and WTI (+2.53%) oil prices hit a 3-week high. That followed a decision from the OPEC+ group, who cut output by 2 million barrels per day. Those gains have continued in overnight trading as well, with Brent Crude now at $93.48/bbl.

In Europe, the performance of sovereign bonds echoed that for US Treasuries, as yields on 10yr bunds (+16.3bps), OATs (+17.6bps) and BTPs (+29.0bps) all saw their largest daily increases since March 2020. As in the US, that reflected growing scepticism about a dovish pivot from the ECB, but another factor not helping matters was the rebound in energy prices, with natural gas futures up +7.25% on the day to close at €174 per megawatt-hour, alongside the oil rebound mentioned above. That’s been reflected in inflation expectations too, with the 10yr German breakeven up another +8.0bps yesterday to 2.15%, after having closed beneath 2% on Monday for the first time since Russia’s invasion of Ukraine began.

Here in the UK, we also saw several key assets lose ground once again following their rally over the last week. For instance, sterling ended a run of 6 consecutive daily gains against the US Dollar to close -1.31% lower, closing back at $1.13. And that wasn’t simply a story of dollar strength, as the pound weakened against every other G10 currency as well. Gilts were another asset to struggle, with real yields in particular seeing significant daily rises of at least +30bps across most of the yield curve, including a +33.0bps rise for the 10yr real yield, and a +36.7bps rise for the 30yr real yield. That came as the Bank of England said they didn’t buy any gilts under their emergency operation for a second day running. In the meantime, there were fresh signs that the turmoil after the fiscal announcement was impacting the mortgage market, with Moneyfacts saying that the average 2yr fixed-rate mortgage had risen to 6.07%, which is the highest since November 2008. Last night that was then followed up by the news that Fitch had downgraded the UK’s outlook from stable to negative.

Overnight in Asia there’s been a mixed performance from the major equity indices. Both the Nikkei (+0.94%) and the Kospi (+1.25%) have recorded solid advances, which continues their run of having risen every day this week. In addition, futures in the US and Europe are both pointing higher, with those on the S&P 500 up +0.49%. However, the Hang Seng is down -0.43% and Australia’s S&P/ASX 200 is down -0.05%, whilst markets in mainland China remain closed for a holiday. The dollar index has also lost ground overnight, falling -0.25%, which comes in spite of those hawkish comments from Fed officials pushing back against rate cuts next year.

Looking at yesterday’s other data, the final services and composite PMIs mostly echoed the data from the flash readings. The composite PMI for the Euro Area was revised down a tenth to 48.1, and the US composite PMI was revised up two-tenths to 49.5. There was a bigger rise in the UK however, where the composite PMI was revised up seven-tenths to 49.1.

To the day ahead now, and data releases include German factory orders for August, the German and UK construction PMIs for September, Euro Area retail sales for August, and the weekly initial jobless claims from the US. Meanwhile from central banks, we’ll get the ECB’s account of their September meeting, as well as remarks from the Fed’s Evans, Cook, Kashkari, Waller and Mester, and the BoE’s Haskel.

Tyler Durden Thu, 10/06/2022 - 08:02

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