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Monday Blues

Overview:  The US dollar is bid against most currencies today, encouraged not just by good news in the US and poor news out of China, where Covid is flaring…

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Overview:  The US dollar is bid against most currencies today, encouraged not just by good news in the US and poor news out of China, where Covid is flaring up and new social restrictions are fared, while Macau has been lockdown for a week. The energy crisis in Europe is fanning fears of a recession before the ECB lift rates above zero. Japanese markets bucked the global move and advanced, which it often does after the government wins an upper house election. The Hang Seng, where many Chinese tech companies are listed fell nearly 2.8% to lead the losses. Europe’s Stoxx 600 is snapping a three-day advance and is off almost 0.5% near midday. The S&P 500 futures are off about 0.6%, while the NASDAQ futures warn that the four-day rally is at risk. It is off around 0.75%. The US 10-year yield is a little softer at 3.06%, while European benchmarks are 2-5 bp lower and peripheral premiums are edging wider. Gold is near last week’s low (~$1732). The next chart support may be nearer $1720. August WTI met sellers around $105. A break of the $10150 area could signal a test on last week’s lows by $95. US natgas has recouped the pre-weekend loss of about 4.2%. A heatwave is spreading across much of the west and Midwest. Europe’s benchmark is 1% lower but appears to be consolidating after rising 15.3% last week. Iron ore is off 2.7% after falling 1.5% last week. September copper has fallen for the past five weeks and is off another 1.8% today. September wheat rallied more than 10% in the past two session and is extending its gains another 1.7% today. 

Asia Pacific

Japan's governing alliance increased its majority in the upper house of the Diet. Of the 125 seats that were at stake, the LDP and Komeito Party took 76 seats. They had 69 of these seats previously. Voter turnout was slightly higher than the last upper house election three years ago (~51.6% v 48.8%). Prime Minister Kishida, a protege of Abe, will stick with the traditional LDP policy thrust of easy monetary and fiscal policy. Kishida's contribution is recognizing the importance of distributional issues. He will also push ahead with a more activist defense policy, and military spending will rise. LDP leaders have long advocated changing the pacifist constitution but also moved cautiously. The rise of China is giving more impetus to it now. 

China's inflation report over the weekend had a little bit of everything. The CPI accelerated to 2.5% in June from 2.1% in May. It was slightly above the median forecast in Reuters and Dow Jones surveys. Month-over-month, China's CPI was flat after having fallen by 0.2% previously. Food and energy are the main drivers; without them, China's CPI was 1% year-over-year. Gasoline and vehicle fuel prices were up nearly 33% over the past year. Food prices rose 2.9% (from 2.1%), and the risk is on the upside as pork prices are rebounding. On the other hand, producer price inflation slowed to 6.1% from 6.4% in May. It was the eighth consecutive monthly deceleration and is at its slowest pace in 15 months. 

China's inflation news was overshadowed by other developments. Alibaba and Tencent were hit with regulatory fines. Bondholders in Evergrande's onshore entity (Hengda Real Estate) rejected a proposal for another extension of its debt payment. Also, a flare up of Covid has led to a weeklong shut down of Macau and Shanghai reported the most cases since late May. The CSI 300 snapped a five-week 11.5% rally last week with 0.85% loss. It fell by about 1.65% today, its largest loss in almost two months. Separately, after the mainland markets closed, China reported stronger than expected June lending figures. Aggregate financing jumped to CNY5.17 trillion in June, up from CNY2.79 trillion in May. The record was set in January (~CNY6.18 trillion)

The dollar rose to new 22-year highs against the Japanese yen, slightly above JPY137.25. Initial support now is in the JPY136.50-JPY136.70 area. It had been consolidating this month after reaching JPY137.00 on June 29. The yen's weakness is in line with the euro and sterling today, where the cross rates are little changed. The Australian dollar gained around 1.1% over the past two sessions but is giving a chunk of it back today (~-0.7%). The roughly A$420 mln expiring option at $0.6825 may be back in play. The Aussie is holding just inside the pre-weekend range when a low of almost $0.6790 was recorded. It looks to be finding support in the European morning but needs to resurface above $0.6725 to stabilize the tone. The greenback edged higher against the Chinese yuan, but for the fourth-consecutive session it remained within the range set on July 5 (~CNY6.6845-CNY6.7235). Today's dollar fix was tight to expectations (CNY6.6960 vs. CNY6.6965).

Europe

Greece's central bank governor is on to something. In a weekend interview, Stournaras recognized that the need for a new tool to combat fragmentation grows out of the absence of EU reforms, with an incomplete economic and monetary union. Indeed, the current debate over the "Transmission Protection Mechanism" seems to offer more proof that the common EU bonds during the pandemic were the game-changer that some argued. They could ultimately prove to be scaffolding for a new fiscal framework, but they could also prove to be a Potemkin exercise.

There seems to be two other talking points today in addition to next week's ECB meeting. First, the contest to replace Johnson as UK Prime Minister has intensified with nearly a dozen candidates declaring. The timetable for the leadership context is expected to be announced later today. The ostensible goal it to get it down to two candidates before Parliament's summer recess in ten days. Second, is the energy crisis in Europe. A key pipeline (Nord Stream) for Russian gas to Europe is down for regular maintenance for ten days starting today. This is on top of the 30-day stoppage orders by Russian courts last week of a key conduit at a Black Sea port for Kazakhstan oil. Separately, but related, power prices in German surged today to the highest level in four months as weak winds made for weak power generation. Canada's announcement that it would return a turbine for the Nord Stream pipeline, a source of tension with Moscow, helped ease natural gas prices. The heatwave in parts of Europe, including Germany and Italy is boosting the demand for electricity. Some rationing is being reported.

After recording new 20-year lows near $1.0070 ahead of the weekend, the euro recovered and traded to almost $1.02. It has come back offered today and fell to almost $1.01. The risk of a recession, while such fears in the US may have eased a little after the composite PMI was revised higher and the jobs report before the weekend was stronger than expected. Initial resistance is now seen near $1.0140. Many have their sights set on parity. Sterling is also trading heavily within the pre-weekend range (~$1.1920-$1.2055). A two-year low was recorded last week near $1.1875. A close above $1.20 would be constructive.

America

The US quarterly refunding kicks off today with the sale of $43 bln three-year notes. Tomorrow, Treasury will sell $33 bln 10-year notes, followed by $19 bln of 30-year bonds on Wednesday. Under its balance sheet roll-off operations, the Federal Reserve will allow $30 bln of Treasuries to drop off this month and next before increasing to $60 bln starting in September. Some estimate that the Fed may buy $5-$6 bln of the three-year note.

A late-June poll by CivicScience cited by Bloomberg found that 35% of Americans thought the US was already in recession, and another 36% thought it would be by the end of the year. An Economist/YouGov poll in the middle of June found that 56% believe the US is in a recession and another 22% are unsure. That left 22% who did not think a recession had begun. Partisanship is an important consideration. The poll found that 70% of those identified as Republicans believed the US has entered a recession compared with 45% of Democrats.

Although Canada's employment report before the weekend was disappointing, the market continues to expect the Bank of Canada to deliver a 75 bp hike when it meets on Wednesday. Canada job growth in the past two months is negligible, but what is happening is that part-time jobs are being replaced with fulltime positions. The former has fallen by 135k while the latter increased by 131k. The swaps market has 75 bp fully discounted for this week and is nearly evenly divided between 50 bp and 75 bp for the next meeting on September 7.

The two-day recovery in the Canadian dollar is being challenged today amid the risk-off mood. The US dollar's pullback found support ahead of the weekend and earlier today near the 20-day moving average (~CAD1.2940) and the (61.8%) retracement of the leg up that began on July 4 near CAD1.2840. Between tomorrow and Wednesday, there are options for $1.7 bln at CAD1.30. Last week's CAD1.3085 was the highest the greenback has been since November 2020. The US dollar is bid against the Mexican peso and briefly edged above the pre-weekend high near MXN20.5880. Last week's high was near MXN20.7860, its highest level in almost four months. Initial support is seen around MXN20.45.

 

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International

Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

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It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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Government

Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

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

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Government

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

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

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

The…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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