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New Record Cases in Sydney Casts a Pall over Australia

Overview: The combination of the dovish ECB’s forward guidance and the unexpected rise in weekly US jobless claims to a two-month high sent bond yields tumbling.  The US 10-year pulled back from 1.30%, and benchmark yields in the eurozone fell to new…



Overview: The combination of the dovish ECB's forward guidance and the unexpected rise in weekly US jobless claims to a two-month high sent bond yields tumbling.  The US 10-year pulled back from 1.30%, and benchmark yields in the eurozone fell to new 3-4 month lows. The $16 bln 10-year TIPS auctioned yesterday resulted in a record low yield of a little more than -1.0%.  The bond market is quieter today, with the US 10-year yield little changed at 1.29% and European bond yields mostly 1-3 basis points higher.  Equities were mixed in the Asia Pacific region.   China's crackdown on Didi may be scaring investors.  Chinese, Hong Kong, and Taiwanese markets fell, while South Korea, Australia, and Indian markets advanced.  European shares are higher for the fourth consecutive session, lifting the Dow Jones Stoxx 600 to around 0.2% from record levels.  US futures are firm.  The dollar is firm against most of the major currencies.  On the week, the Canadian dollar is the strongest of the majors, up about 0.35%. The Swedish krona is the only other major currency to have gained against the greenback this week.  Emerging market currencies are mixed.  South Africa's central bank did not hike rates yesterday, and the rand was the weakest emerging market currency yesterday and retained that distinction today.  The JP Morgan Emerging Market Currency Index is slightly softer for the second consecutive session.  The dollar is falling for the fourth consecutive session against the Russian rouble as the central bank announces as expected that is hiking rates 100 bp to 6.50%.  Gold is consolidating between $1800 and $1810, but it needs to get back above $1812 if it is going to extend its recovery for the fifth week.  Crude oil is softer after three strong advances that recouped most of Monday's sharp losses.  September WTI stalled near $72 and is little changed on the week.  Canadian wildfires are raising concerns about lumber supply, and the September futures contract rallied 10% yesterday on top of 7.7% on Wednesday.  Copper is up for the fourth consecutive session, and the CRB Index is up about 1.8% this week, coming into today.  

Asia Pacific

New record virus cases in Sydney cast a pall over Australia.  The preliminary PMI's weakness gives a sense of the economic impact.  Manufacturing slowed to 56.8 from 58.6, but it was services that are bearing the brunt.  The service PMI fell to 44.2 from 56.8.  This was sufficient to drive the composite below the 50 boom/bust level to 45.2 from 56.7.  This is the lowest since last May.  The poor report will fuel ideas that the RBA will provide more support through increased bond purchases at its meeting in early August.  

Don't expect much from the weekend meeting between the US Deputy Secretary of State Sherman and the Chinese Foreign Minister Wang.  It is the highest-level meeting since March and apparently almost was aborted when China offered to have Sherman meet one of Wang's deputies.  The underlying purpose seems to lay the groundwork for a possible Biden/Xi meeting at the October G20 meeting that has long been anticipated.  Although the Biden administration has made it clear that it is not ready to renew regular high-level talks, it does not mean that there is no communication between the two rivals.  While China is a poor actor on the world stage, Biden is using the confrontation with Beijing to further its domestic agenda and shape its efforts to reassert America's leadership.   

The US dollar was tested at JPY109 at the start of the week and is now near JPY110.50, a seven-day high, and could close above the 20-day moving average (JPY110.40) for the first time in two weeks.  Tokyo markets were closed yesterday and today.  The preliminary July PMI will be reported as the markets re-open on Monday.  The composite PMI stood at 48.9 in June.  Nearby resistance is in the JPY110.70-JPY110.80 area.  The Australian dollar approached resistance near $0.7400 and was turned back.  A A$460 mln option at $0.7380 expires today.  Without closing above $0.7400 today, the Aussie will extend its loss for the fourth consecutive week and six of the past seven.  The dollar edged higher against the Chinese yuan for the second consecutive session. The upticks were minor, and the greenback is set to finish the week less than 0.1% lower but sufficient to snap a seven-week advance. The PBOC set the dollar's reference rate at CNY6.4650, near the median projection picked up by the Bloomberg survey of CNY6.4655. Note that floods in the Henan region, which is an important transportation and logistics hub, maybe a disruptive economic force, are slowing activity and boosting prices. Stay tuned.   


The ECB did not disappoint.  It had to bring its forward guidance in alignment with its new 2% symmetrical inflation target.  ECB President Lagarde seemed more resolute.  Rates will not be hiked while inflation is below 2%. Next week, the risk is that headline CPI moves above 2%.  Lagarde, like the Fed's leadership, sees the current price pressures as temporary. The staff forecasts take on more significance.  It sees CPI at 1.4% in 2023.  While the Fed now targets the average rate of inflation, which means that it will encourage somewhat higher than average to offset the past undershoot.  Lagarde explained that in the eurozone, an overshoot is incidental, not deliberate.  The ECB was buying bonds before the pandemic struck and will do so after the economic emergency passes and the PEPP envelope closes (now March 2022).  

In broad strokes, the ECB is buying around 80 bln euros a month in bonds under PEPP and about 20 bln euros under the previously launched asset purchase program.  This latter facility has limits (issuer limit, capital key) that make it less than an ideal flexible tool.  Yet, it is precisely these limits that made it acceptable to  Germany's constitutional court.  At the same time, the ECB re-committed itself to buying bonds under this facility until just before it raises interest rates.  Finally, some reservations expressed by the German, Belgian, and Dutch central bankers are not very surprising. The unanimity of the new inflation target still masked underlying differences, and the hawkish contingent could be a little larger than those that expressed reservations now.  The Bank of England and the Federal Reserve seem to be entering a phase where dissents may be expressed as well.

The preliminary July PMI showed a divergence between Germany and France.  German readings were stronger than expected, and the composite PMI rose to a new high of 62.5 (from 60.1).  The French reports were softer than expected, and the composite slipped to a still firm 56.8 from 57.4.  For the region as a whole, the preliminary manufacturing eased to 62.6 from 63.4.  The preliminary services PMI rose to 60.4 from 58.3, which was stronger than expected.  The result was that the composite stands at 60.6 compared with 59.5 in June.  Next week, the eurozone reports the initial estimate for July CPI and Q2 GDP.   The CPI is expected to push above 2%, while the regional economy is expected to have expanded by 1.5% in the quarter.  

The UK reported stronger than expected June retail sales but a bit softer of a flash PMI.  Retail sales rose by 0.5%.  The median projection in the Bloomberg survey was for a small decline.  Excluding gasoline, retail sales edged up by 0.3%.  May's slide was pared slightly (-1.3% vs. -1.4% at the headline level).  The PMI shows a strong economy that slowed slightly.  The manufacturing PMI stands at 60.4, down from 63.9.  The service PMI moderated to 57.8 from 62.4.  The composite slowed to 57.7 from 62.2. 

The euro set the week's high as the ECB's initial headlines with the wires near $1.1830 but quickly came back off.  It is in about a quarter-cent range so far today, mostly below $1.1785.  Support has been found near $1.1750 this week, but it may not be solid.  There is an option for 920 mln euros at $1.1725 that will be cut today.  The euro has managed to close higher only twice in the past two weeks and in only two weeks since the end of May.  This looks like the first week since the end of last October that the euro settles below $1.18.  Sterling recorded five-month lows on July 20 near $1.3570.  Its bounce stalled yesterday around $1.3790 (the 20-day moving average is slightly below $1.3800). The roughly GBP455 mln option at $1.3775 may expire today with little fanfare.   A close below the $1.3705-$1.3715 would likely keep sterling under pressure at the start of next week.  


There appears to have been some progress on the bipartisan infrastructure initiative in the United States, but to appease some Republicans may alienate some Democrats.  The key to the compromise was to delay Medicare regulation approved by the Trump administration that would eliminate the drug companies give to benefit managers under Medicare Part D.  The goal was to reduce out-of-pocket costs.  However, the Congressional Budget Office estimates that it will boost Medicare spending by the government by $177 bln in the 2020-2029 period. If this forms the basis of the deal in the Senate, the progressive-wing of Democrats in the House could resist.

The US sees the preliminary PMI today, and expectations are for it to be little changed at elevated levels.  The US reports its first estimate of Q2 GDP next week.  The median forecast in the Bloomberg survey calls for an 8.3% annualized expansion after 6.4% in Q1.  Canada reports May retail sales today, and a 3.0% loss is anticipated after a 5.7% drop in April.  Nevertheless, subsequent data suggest the Canadian economy has emerged from the soft patch. The economic highlight next week is the June CPI and May GDP figures.   Mexico's May retail sales are on tap today, and a modest gain of 0.5% is expected after a 0.4% decline in April.  Mexico reports its Q2 GDP next week.  Economists look for around 1.6% quarter-over-quarter expansion, twice the Q1 pace.  

The US dollar is trading quietly within yesterday's narrow range against the Canadian dollar (~CAD1.2530-CAD1.2595).  It finished last week slightly below CAD1.2615.  The momentum indicators have turned lower, but a break of CAD1.2500 is needed to boost confidence that a high is in place.  The greenback peaked in the middle of the week near MXN20.25 and has been slipping since it was recorded.  It is trading at a three-day low in the European morning (below MXN20.09).  Support is seen in the band from MXN19.98-MXN20.02.  However, provided it stays above the MXN19.90, the greenback will secure its third consecutive weekly advance.  


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Potential COVID-19 Treatment Found in Llama Antibodies

The need to uncover effective COVID-19 treatments remains imperative, as case counts remain steady eighteen months into the pandemic. Recent findings point to unique antibodies produced by llamas—nanobodies—as a promising treatment. The small, stable,…



A significant milestone in the COVID-19 pandemic was crossed this week. The number of deaths in the United States due to COVID-19—more than 675,000—has surpassed the number of deaths that occurred during the 1918 flu pandemic. In addition, there are still roughly 150,000 new cases every day. Eighteen months into the pandemic, the need for effective treatments against COVID-19 remains as great as ever.

One possible treatment, neutralizing single domain antibodies (nanobodies), has significant potential. The unique antibody produced by llamas is small, stable, and could possibly be administered as a nasal spray—an important characteristic as the antibody treatments currently in use require administration by infusion in the hospital. Now, new research shows that nanobodies can effectively target the SARS-CoV-2 virus.

The team from the Rosalind Franklin Institute found that short chains of the molecules, which can be produced in large quantities, showed “potent therapeutic efficacy in the Syrian hamster model of COVID-19 and separately, effective prophylaxis.”

This work is published in Nature Communications in the paper, “A potent SARS-CoV-2 neutralizing nanobody shows therapeutic efficacy in the Syrian golden hamster model of COVID-19.

The nanobodies, which bind tightly to the SARS-CoV-2 virus, neutralizing it in cell culture, could provide a cheaper and easier to use alternative to human antibodies taken from patients who have recovered from COVID-19.

“Nanobodies have a number of advantages over human antibodies,” said Ray Owens, PhD, head of protein production at the Rosalind Franklin Institute. “They are cheaper to produce and can be delivered directly to the airways through a nebulizer or nasal spray, so can be self-administered at home rather than needing an injection. This could have benefits in terms of ease of use by patients but it also gets the treatment directly to the site of infection in the respiratory tract.”

Credit: Rosalind Franklin Institute

The research team was able to generate the nanobodies by injecting a portion of the SARS-CoV-2 spike protein into a llama called Fifi, who is part of the antibody production facility at the University of Reading. They were able to purify four nanobodies capable of binding to SARS-CoV-2. Four nanobodies (C5, H3, C1, F2) engineered as homotrimers had pmolar affinity for the receptor-binding domain (RBD) of the SARS-CoV-2 spike protein. Crystal structures showed that C5 and H3 overlap the ACE2 epitope, while C1 and F2 bind to a different epitope.

Regarding their effectiveness against variants, the C1, H3, and C5 nanobodies all neutralized the Victoria strain, and the highly transmissible Alpha (B.1.1.7 first identified in Kent, U.K.) strain. In addition, C1 neutralizes the Beta (B.1.35, first identified in South Africa).

When one of the nanobody chains was administered to hamsters infected with SARS-CoV-2, the animals showed a marked reduction in disease, losing far less weight after seven days than those who remained untreated. Hamsters that received the nanobody treatment also had a lower viral load in their lungs and airways after seven days than untreated animals.

“Because we can see every atom of the nanobody bound to the spike, we understand what makes these agents so special,” said James Naismith, PhD, director of the Rosalind Franklin Institute. If successful and approved, nanobodies could provide an important treatment around the world as they are easier to produce than human antibodies and don’t need to be stored in cold storage facilities, added Naismith.

“Having medications that can treat the virus,” noted Naismith, “is still going to be very important, particularly as not all of the world is being vaccinated at the same speed and there remains a risk of new variants capable of bypassing vaccine immunity emerging.”

The researchers also hope the nanobody technology they have developed could form a so-called “platform technology” that can be rapidly adapted to fight other diseases.

The post Potential COVID-19 Treatment Found in Llama Antibodies appeared first on GEN - Genetic Engineering and Biotechnology News.

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China Syndrome? Is Evergrande A Symptom Of Deeper Malaise

China Syndrome? Is Evergrande A Symptom Of Deeper Malaise

Authored by Bill Blain via,

“If that’s true, we are very close to the China Syndrome ”

Evergrande’s imminent default is rocking markets – but few believe…



China Syndrome? Is Evergrande A Symptom Of Deeper Malaise

Authored by Bill Blain via,

“If that’s true, we are very close to the China Syndrome ”

Evergrande’s imminent default is rocking markets – but few believe the collapse of a Chinese property developer could trigger a global financial crisis. What if Evergrande is just a symptom of a deeper malaise within the Chinese economy and its political/business structures? Maybe there is more at stake than we realise? What if Emperor Xi decides he needs a distraction?

Amid this week's market turbulence, and the overnight headlines, Evergrande dominates thinking this morning. The early headlines say the risk is “easing”. Don’t be fooled. S&P are on the wires saying it’s on the brink of default and is unlikely to get govt support. It’s Asia’s largest junk-bond issuer. Anyone for the last few choc-ices then?

The market view on the coming Evergrande “event” is mixed. Some analysts are dismissing it as an internal “China event”, others reckon there may be some systemic risk but one Government can easily address. There is some speculation about “lessons” to be learnt… There are even China supporters who reckon its proof of robust China capitalism – the right to fail is a positive!

I’ve got a darker perspective.

The massive shifts we’ve seen in China’s political/business public persona over the past few years have been variously ascribed: a reaction to Trump’s protectionism, China taking its place as a leading nation, Xi flexing his military muscle, and now a clampdown on divisive wealthy businesses to promote common prosperity.

What if Evergrande is just a symptom of something much deeper?

That that last 30-years of runaway Chinese growth has resulted in a deepening internal crisis, one that we barely perceive in the west? What if the excesses that have spawned Evergrande and the illusion every Chinese can afford luxury flats and a western standard of living is about to implode? Crashing oriental minor chords!

The looming Chinese property debacle will be fascinating, but it many respects will be similar and yet very different to the multiple market unwinds we’ve seen in the west. How it plays out will have all kinds of implications for growth, speculation and how global investors perceive China in the future. Folk are variously describing it as China’s Lehman Brothers, or the next “Minsky Moment” when speculation ends with a sharp jab of reality to the kidneys.

I’m thinking back to a story I read a few years ago about the Shanghai Auto-fair pre-pandemic. Evergrande New Electric Vehicles had the largest stand and was showing off 11 different EVs. Not one of these were actually available to buy – they were all models of as-yet unproduced cars. The company was valued at billions and yet never sold a single vehicle. This morning, it’s just another worthless business Evergrande is trying to flog. (See this story on Bloomberg TV: China’s Zombie EV Makers.)

The market is asking itself a host of questions about Evergrande’s collapse: How bad will its tsunami of Chinese contagion deluge global markets? When it’s going to happen? What knock-on effects will cascade through markets?

Perhaps the most important question is: Who will be exposed “swimming naked” when the Evergrande tide goes out? Who will be left with the biggest losses? As the company is definitely bust, these losses rather depend on just how China’s authorities respond.

Step back and think about it a moment – try putting these in context:

  • Fundamentally all business is about identifying a consumer need and filling it.

  • Fundamentally, greedy businessmen tend to get carried away because the political-financial system enables them.

  • Fundamentally, it’s just another burst bubble and who cleans up the mess.

  • In Evergrande’s case a thousand flowers of capitalism with Chinese characteristics grew into an unsustainable business – fundamentally no different from debt-fuelled sub-prime mortgages, or CDOs cubed, in the West.

The big difference this time is its China! China has done things… differently. The path China pursued in its recovery and growth since 1980 has not been without… consequences.

Thus far we’ve praised China for its spectacular growth and the creation of valuable companies under the red banner of Chinese capitalism. It is going to be “interesting” to see how the subsequent mess is cleared out. Questions about Moral Hazard are going to be shockingly simple – Government has made it abundantly clear that any wrongdoing by company executives will be punished in the harshest possible way.

More importantly, Chinese politics and business works on a very different playing field to the west. Forget the rule of law or the T&C’s of Evergrande bonds. It easy to dismiss and characterise the way Chinese business works as institutionalised systemic corruption – but it’s a system Ancient Roman Emperors would recognise as a patron/client relationship. Emperor Xi’s clients and his princelings will continue to benefit from his patronage in return for their support at his court, and will be protected in a meltdown. The system Xi presides over will have little motivation to intervene to protect western investors who find themselves caught in the Evergrande fiasco.

Where Xi will have to take notice is outside the rich, wealthy princeling cadre which increasingly owns and runs China. There will be massive implications for wealth/inequality among the Chinese people from a property collapse. With a third of Chinese GDP dependent on the property sector, (and about 4 million jobs at Evergrande), the collapse of one of the biggest players, and the likelihood others will follow is much more than just a systemic risk.

Property is a key metric in the aspirations to wealth of the rising Chinese middle classes. The same smaller Chinese investors and savers will likely prove the largest losers from the property investment schemes they were sucked into. These real losses will rise if hidden bank exposures trigger a domestic banking crisis – which apparently isn’t likely (meaning it is..). There are reports of investor protests in key China cities – putting pressure on the govt to act to mitigate personal losses.

Xi’s clampdown on big tech is painted as the Party’s programme to engineer a more socially-equal economy. He has pinned the blame for rising inequality on “corrupt” business practices and has his cadre’s waving books on Xi thought, mouthing slogans about “common prosperity” and “frugality”. These are going to look increasingly hollow if the middle classes bear the coming Evergrande pain, and the Party Princelings continue to prosper.

The really big risk in China is not that Evergrande is going to default – it’s much bigger. If the Party is seen to fail in its promise to deliver wealth, jobs and prosperity for the masses – then that is very serious. China’s host of failed EV companies, an economy still reliant on exporting other nations tech, and a massively overvalued property sector (that the masses still equate with prosperity) all suggest a much less solid economy than the Party promotes.

If the illusion of a strong economy is unravelling – who knows what happens next, but in Ancient Rome the answer would be simple… Blame someone else, and invade..

This could get very “interesting…” and not in a good way.

Tyler Durden Wed, 09/22/2021 - 08:45

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White House Reporters Have Launched ‘Formal Objection’ About Biden Refusing To Answer Questions

White House Reporters Have Launched ‘Formal Objection’ About Biden Refusing To Answer Questions

Authored by Steve Watson via Summit News,

CBS News reported Tuesday that the press pool of White House reporters have launched a formal objection



White House Reporters Have Launched 'Formal Objection' About Biden Refusing To Answer Questions

Authored by Steve Watson via Summit News,

CBS News reported Tuesday that the press pool of White House reporters have launched a formal objection over the fact that Joe Biden refuses to answer any questions, with reporters routinely being yelled down and physically pushed away by Biden’s handlers.

The revelation came after an embarrassing scene in the Oval Office with British Prime Minister Boris Johnson answering questions, but Biden not being allowed to by aides.


Johnson took the three questions from British reporters

CBS reporter Ed O’Keefe said that “Johnson took 3 questions. White House aides shouted down U.S. attempts to ask questions. I asked Biden about southern border and we couldn’t decipher what he said.”

CBS radio correspondent Steve Portnoy later reported that “The entire editorial component of the US pool went immediately into Jen Psaki’s office to register a formal complaint that no American reporters were recognized for questions in the president’s Oval Office.”

Portnoy, also president of the White House Correspondents Association, added that the complaint also extended to the fact “that wranglers loudly shouted over the president as he seemed to give an answer to Ed O’Keefe’s question about the situation at the Southern Border. Biden’s answer could not be heard over the shouting.”

“Psaki was unaware that the incident has occurred and suggested that she was not  in a position to offer an immediate solution,” Portnoy continued, adding “Your pooler requested a press conference. Psaki suggested the president takes questions several times a week.”

In addition, National Review notes that after Biden’s UN speech yesterday, French reporter Kethevane Gorjestani “was asked by a very startled Australian reporter whether WH wranglers were always so strict about ushering the pool out without questions.”

The pathetic display is a continuation of the way Biden’s handlers have been acting since even before he took office, shooing away reporters, giving Biden strict instructions on who he can take questions from, and even muting his mic when he goes off script.

A week ago, Republican Senator James Risch demanded to know who is in charge of controlling when the President is allowed to be heard, noting during a Senate hearing that “This is a puppeteer act, if you would, and we need to know who’s in charge and who is making the decisions.”

“Somebody in the White House has authority to press the button and stop the president, cut off the president’s speaking ability and sound. Who is that person?” Risch asked.

Tweeting out the video, leftists insisted the claims were ‘bizarre,’ ‘ridiculous’ and ‘absurd’:

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Tyler Durden Wed, 09/22/2021 - 10:15

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