Connect with us


Risk Appetites Survive China Keeping Zero Covid Policy

Overview: Chinese officials denied plans to end the zero-Covid policy and after a brief wobble, risk assets have traded better. Asia Pacific equities rallied,…



Overview: Chinese officials denied plans to end the zero-Covid policy and after a brief wobble, risk assets have traded better. Asia Pacific equities rallied, led by Hong Kong and mainland stocks that trade in Hong Kong. Europe’s Stoxx 600 opened lower but recovered and is around 0.5% higher after the 1.8% gain before the weekend. US futures are firm. Benchmark 10-year yields are mostly 2-4 bp softer in Europe and the US. The dollar is mixed. The dollar-bloc, which led the advance before the weekend, is nursing small losses, while sterling and the Swedish krona are up 0.5-0.6%. Emerging market currencies are mostly firmer, led by a 1.3% rally in the South Korean won. The Chinese yuan is giving back around a third of its pre-weekend gains and is the weakest in the emerging market space with a little more than a 0.5% pullback. On the back of a weaker dollar and lower rates, gold rallied 3.2% at the end of last week, its biggest single day advance this year. It is consolidating at the upper end of the pre-weekend range that extended to $1682. Oil prices rallied to their best level since late August at the end of last week and remain firm today. The initial pullback saw December WTI approach the 200-day moving average (~$90.15) and recovered and made new session highs in late European morning turnover. Cold weather in the US Northwest has lifted natgas prices. After a 7.1% gain before the weekend, it has tacked on another 8.4% today. In contrast, Europe’s benchmark is off 2.8% and is lower for the third consecutive session. Iron ore edged up after a 5.2% gain ahead of the weekend. It is the fifth advance in a row. December copper’s pre-weekend 7.56% rally has been pared. It is off 1.5% today. December wheat is giving back its 0.85% gain from the end of last week.

Asia Pacific

Market participants want to believe Beijing is about to jettison the zero-Covid policy. They seem to think that given the harm it is doing to the economy means it cannot be sustained. Yet this is projecting our values onto Xi and his faction that dominates China's Communist Party, and that may not be fair. The risk-on rally ahead of the weekend was more based on hope than actual developments. Modest tweaks are already taking place but not a wholesale change. Some of those adjustments include the acceptance of the BioNTech vaccine for foreigners in China, possibly ending punishments for airlines that bring Covid-stricken passengers, and perhaps adding more international flights. Some reports suggest that inbound travelers' quarantine may be reduced to 7-8 days from 10. Perhaps because of the totalitarian nature of the PRC regime, observers may not appreciate the tension between the central government and regional governments (similar, but different from the tension in the US between the federal government and state governments). Beijing has been critical of the excessive implementation of its zero-Covid policy. Zhengzhou officials apologized over the weekend for the stringent approach. Hohhot, in Inner Mongolia, banned the use of locks, latches, and bolts in sealing hotspots. Still, the Haizhu district in Guangzhou, in Guangdong, has ordered people to avoid leaving their homes for three days as of November 5.

China's October trade surplus edged up ($85.15 bln vs. $84.74 bln), but the key takeaway is that imports and exports fell on a year-over-year basis for the first time since the outbreak of the pandemic. Exports, which the median forecast in Bloomberg's survey called for a 4.5% increase fell by 0.3%. In September, they had risen 5.7% from a year ago. Part of the decline seems to be a post-Covid change in consumption patterns and the shift from goods. Household appliance, furniture, and lighting equipment exports suffered. And shipments to the US, EU, Taiwan, and Hong Kong fell. There were two bright spots to note. First, auto shipments rose 60% year-over-year to 352k. Second, exports of ASEAN countries for by double digits for the sixth consecutive month. Imports fell by 0.7%. Economists in Bloomberg's survey looked for flat report after a 0.3% increase in the year through September. Oil imports reached a five-year high, but gas imports tumble. Iron ore imports fell. Separately, China reported October reserves rose more than expected. The $23.5 bln increase was only the third increase this year. The dollar value of reserves (~$3.052 trillion) are almost $200 bln less than at the end of last year.

The dollar is little changed in relatively quiet turnover against the Japanese yen. Session highs were recorded near JPY147.60 in late Asia/early European turnover, but sellers quickly emerged to send the greenback to session lows around JPY146.65. The pre-weekend low was closer to JPY146.55. Key support is seen around JPY145. It has not traded below there since October 7. After rallying about two cents before the weekend, the Australian dollar initially pulled back from $0.6470 to almost $0.6400, where it found good bids and returned to unchanged levels in the European morning. Intraday momentum indicators are stretched. Last week's high near $0.6490 may provide the near-term cap. The greenback fell 1.6% against the Chinese yuan before the weekend amid speculation that the zero-Covid policy would end. Denials over the weekend saw the US dollar recover from CNY7.1850 at the pre-weekend close to CNY7.2505 today. It is trading quietly now around CNY7.2280. The PBOC set the dollar's reference rates slightly stronger than expected for the first time in more than nine weeks. The dollar was fixed at CNY7.2292 compared with the median in Bloomberg's survey for CNY7.2287. 


Many euro bears emphasize not just the aggressiveness of US hikes but also the unwinding of its balance sheet, which stands in contrast with the ECB. Yet, unlike the Fed's balance sheet, the ECB's was grown with loans as well as bond purchases. The rules changed at last month's ECB meeting, and banks have a greater incentive to repay the loans sooner. German and French banks are seen as the most likely candidates for early repayment next month, with amounts of 300-400 bln euros thrown around. Italian banks were among the largest borrowers, and some borrowed funds look to have been reinvested in Italian government bonds. Hence, repayment may reduce the demand for BTPs at the same time that the ECB is not buying as much as they were under QE but reinvesting maturing proceeds with an eye on rate divergence.

Italy's new government has proposed a budget deficit of 4.5% of GDP, somewhat larger than the Draghi government projected (3.4%). However, it still shows progress toward the 3% target, which the EU suspended for next year. That suggests Prime Minister Meloni may have an extended honeymoon and that the real challenge will come next year when the 2024 budget is to show a 3% deficit (or less). More immediately, tensions may raise with the EU over Rome's refusal to allow 100s of migrants rescued at seat to disembark in Italy. Italy is the first port of call, and the technical rules are for the first EU country that the migrant is bears the responsibility, but this clearly puts the burden on border countries whose finances are not as strong.

After a softer start, which saw the euro ease to slightly through $0.9900 after settling at almost $0.9960 at the end of last week, the single currency briefly poked above $1.0000, for the first time in eight sessions. While a new session high is possible, we suspect North American operators may be reluctant to extend the gains much, especially given the stretched intraday momentum indicators and the Thursday's US CPI figures. That said, above $1.0010 there seems to be little on the charts ahead of the late October high, slightly shy of $1.01. A close below $0.9950 would lend credence to this less than constructive near-term outlook. Sterling finished last week on a firm note near $1.1380. It reached $1.1470 in the European morning after it briefly slipped through $1.13 in last Asian turnover. With today's advance, sterling has met the (61.8%) retracement of the pullback from the $1.1650 area high in late October. The intraday momentum studies are stretched, and if the high is not in place for the day, it may have come close.


The key takeaway from the US October jobs numbers was that the labor market is still too strong for the Federal Reserve. Since the September dot plot (Summary of Economic Projections) saw 125 bp rate hikes in Q4, a 50 bp hike in December was the base case. The market had thought the odds of another 75 bp hike were greater, but after the employment data and the FOMC meeting, the market has about a 1-in-4 chance of a three-quarters-point hike next month. Businesses reported a gain of 261k jobs, and revisions were worth another 29k jobs. This is the least number of jobs created in nearly two years but was more substantial than expected and well above the 2018-2019 average. However, the household survey saw a decline of 328k jobs, and the unemployment rate rose by 0.2% to 3.7%. To reconcile the two does not mean to ignore one. The Solomonic solution is to split the difference: the labor market is slowing slowly and has not yet reached a point that will take the Fed off its tightening course.

We have suggested that three developments will get the Fed to stop: First, a dramatic slowing of the labor market, which is not happening. Second, a precipitous decline in inflation. The October CPI figures on Thursday will show that price pressures remain elevated. The third is a challenge to financial stability. While there are liquidity concerns, it has not yet reached a point that will disrupt the Fed's balance sheet unwind.

If US jobs data were mixed, Canada's report was unambiguously strong. Full-time positions jumped by nearly 120k, well above expectations. Average hourly wages rose by 5.6%, accelerating from 5.2% in September. It is the fifth month above 5%. The index of hours worked jumped by 0.7%, the largest since June. This may prompt economists to revise higher Q4 GDP forecasts, which had been near flat. The employment data were strong enough to encourage the market to begin taking seriously the possibility of another 50 bp rate hike next month. Separately, with the 2% tax on buybacks announced last week starting in 2024, next year could see a flurry of activity. Estimates suggest that over the past 12 months, there have been around C$70 bln in share buybacks.

Ahead of the weekend, the Canadian dollar rallied amid the risk-on mood spurred by speculation of the end of China's Covid-zero policy and on the strength of the employment report. The US dollar settled below CAD1.35 for the first time since September 22. This is potentially the neckline of a larger head and shoulders pattern that projects toward CAD1.30. The US dollar bounced to CAD1.3555 in the initial reaction of China's denial of a change its Covid stance. Support was found near CAD1.3465 in the Europe. The lower Bollinger Band is slightly lower. There is little chart support ahead of CAD1.3400. Consolidation may be the most likely scenario in North America today. Meanwhile, the US dollar is approaching the year's low against the Mexican peso, set in late May near MXN19.4135. The greenback saw about MXN19.4590 before the weekend and is consolidating in the lower end of the pre-weekend range. The initial bounce carried the US dollar to almost MXN19.58. The highlight of the week is the October CPI figures on Wednesday and what is expected to be a 75 bp hike from Banxico on Thursday. Brazil reports retail sales (Wednesday) and IPCA inflation (Thursday). Inflation peak in April around 12.1% and is expected to have fallen for the fourth consecutive month to slightly below 6.4% last month. Key dollar support is seen near BRL5.00. 


Read More

Continue Reading


US Sent Billions in Funding to China, Russia For Cat Experiments, Wuhan Lab Research: Ernst

US Sent Billions in Funding to China, Russia For Cat Experiments, Wuhan Lab Research: Ernst

Authored by Mark Tapscott via The Epoch Times…



US Sent Billions in Funding to China, Russia For Cat Experiments, Wuhan Lab Research: Ernst

Authored by Mark Tapscott via The Epoch Times (emphasis ours),

Hundreds of millions of U.S. tax dollars went to recipients in China and Russia in recent years without being properly tracked by the federal government, including a grant that enabled a state-run Russian lab to test cats on treadmills, according to Sen. Joni Ernst (R-Iowa).

Sen. Joni Ernst (R-Iowa) speaks at a Senate Republican news conference in the U.S. Capitol on March 9, 2022. (Anna Moneymaker/Getty Images)

Ernst and her staff investigators, working with auditors at the Government Accountability Office (GAO) and the Congressional Research Service, as well as two nonprofit Washington watchdogs—Open The Books (OTB) and the White Coat Waste Project (WCWP)—discovered dozens of other grants that weren’t counted on the federal government’s internet database.

While the total value of the uncounted grants found by the Ernst team is $1.3 billion, that amount is just the tip of the iceberg, the GAO reported.

Among the newly discovered grants is $4.2 million to China’s infamous Wuhan Institute of Virology (WIV) “to conduct dangerous experiments on bat coronaviruses and transgenic mice,” according to a May 31 Ernst statement provided to The Epoch Times.

The $4.2 million exposed by Ernst is in addition to previously reported funding to the WIV for extensive gain-of-function research by Chinese scientists, much of it funded in whole or part prior to the COVID-19 pandemic by National Institutes for Health (NIH) grants channeled through the EcoHealth Alliance medical research nonprofit.

The NIH has awarded seven grants totaling more than $4.1 million to EcoHealth to study various aspects of SARS, MERS, and other coronavirus diseases.

Buying Chinese Puppy Parts

As part of another U.S.-funded grant, hearts and other organs from 425 dogs in China were purchased for medical research.

These countryside dogs in China are part of the farmer’s household; they were mainly used for guarding. Their diet includes boiled rice, discarded raw food animal tissues, and whatever dogs can forage. These dogs were sold for food,” an NIH study uncovered by the Ernst researchers reads.

Other previously unreported grants exposed by the Ernst team include $1.6 million to Chinese companies from the federal government’s National School Lunch Program and $4.7 million for health insurance from a Russian company that was sanctioned by the United States in 2022 as a result of the invasion of Ukraine.

“It’s gravely concerning that Washington’s reckless spending has reached the point where nobody really knows where all tax dollars are going,” Ernst separately told The Epoch Times. “But I have the receipts, and I’m shining a light on this, so bureaucrats can no longer cover up their tracks, and taxpayers can know exactly what their hard-earned dollars are funding.”

The problem is that federal officials don’t rigorously track sub-awards made by initial grant recipients, according to the Iowa Republican. Such sub-awards are covered by a multitude of federal regulations that stipulate many conditions to ensure that the tax dollars are appropriately spent.

The GAO said in an April report that “limitations in sub-award data is a government-wide issue and not unique to U.S. funding to entities in China.”

GAO is currently examining the state of federal government-wide sub-award data as part of a separate review,” the report reads.

Peter Daszak, right, the president of the EcoHealth Alliance, is seen in Wuhan, China, on Feb. 3, 2021. (Hector Retamal/AFP via Getty Images)

The Eco-Health sub-awards to WIV illustrate the problem.

“Despite being required by law to make these receipts available to the public on the website, EcoHealth tried to cover its tracks by intentionally not disclosing the amounts of taxpayer money being paid to WIV, which went unnoticed for years,” Ernst said in the statement.

“I was able to determine that more than $490 million of taxpayer money was paid to organizations in China [in] the last five years. That’s ten times more than GAO’s estimate! Over $870 million was paid to entities in Russia during the same period!

Together that adds up to more than $1.3 billion paid to our adversaries. But again, these numbers still do not represent the total dollar amounts paid to institutions in China or Russia since those numbers are not tracked and the information that is being collected is incomplete.”

Adam Andrzejewski, founder and chairman of OTB, told The Epoch Times, “When following the money at the state and local level, the real corruption exists in the subcontractor payments. At the federal level, the existing system doesn’t even track many of those recipients.

“Without better reporting, agencies and appropriators don’t truly understand how tax dollars were used. We now know that taxpayer dollars are traded further downstream than originally realized with third- and fourth-tier recipients. These transactions need scrutiny. Requiring recipients to account for where and how they actually spend each dollar creates a record far better than agencies are capable of generating.”

Read more here...

Tyler Durden Fri, 06/02/2023 - 19:40

Read More

Continue Reading

Spread & Containment

COVID-19 Testing Resumes In Beijing, Shandong, As Reinfection Cases Surge

COVID-19 Testing Resumes In Beijing, Shandong, As Reinfection Cases Surge

Authored by Alex Wu via The Epoch Times,

China has resumed COVID-19…



COVID-19 Testing Resumes In Beijing, Shandong, As Reinfection Cases Surge

Authored by Alex Wu via The Epoch Times,

China has resumed COVID-19 PCR testing in Beijing and Shandong Province amid rising re-infections, while the regime’s top health advisers have warned of a new wave of mass infections.

Since May 29, mainland netizens have posted on Chinese social media platforms that PCR test kiosks in Beijing are quietly back in business.

Mainland media “City Interactive,” a subsidiary of Zhejiang “City Express,” reported on May 30 that one of the PCR testing booths that netizens posted about was in Beijing’s Xicheng District, where the central government and the Beijing municipal government are located.

The staff of that testing kiosk said that the PCR test there has never stopped, reported “City Interactive”, without being clear how long it had been open.

“We have been doing nucleic acid testing in Xicheng District, but I’m not sure about other districts in Beijing,” a staff member said.

The staff member said the laboratory she works for is mainly responsible for nucleic acid testing within Xicheng District. Currently, there are more than ten testing points outdoors, and one person is on duty for each booth from 9:00 am to 5:00 pm.

Residents get swabbed during mass COVID-19 testing in the Chaoyang District in Beijing on June 14, 2022. (Andy Wong/AP Photo)

A testing kiosk in Chaoyang District, Beijing’s central business district, has been operating since March, reported “City Interactive.” The testing booth staff said it is in the health center near Jinsong Middle Street.

Ms. Wang, a Beijing resident, told The Epoch Times on May 28 that some people have taken the PRC test while others have chosen not to.

She said many people around her, including her child, have already re-infected twice.

“This time, the symptoms seem to include a high fever and then sore throat, very painful,” she said.

“Most people are just resting at home now. Seeing a doctor is very expensive, and now many medicines are paid for by ourselves.”

Gao Yu, a former senior media person in Beijing, confirmed what Wang said. She told The Epoch Times that the relatives around her have been re-infected two or three times, and most are just resting it off at home.

Shandong Resumes Testing

PCR testing booths in Qingdao City, Shandong Province, have also reopened.

A “Peninsula Metropolis Daily” report included a screenshot of an online notice posted by the Laoshan District Health Bureau in Qingdao, which announced that from May 29, the district will conduct COVID-19 PCR testing for “all people who are willing.”

It also listed the working hours of the testing sites, from 7:00 am to 4:00 pm, seven days a week.

Another mainland Chinese media, “Xinmin Evening News,” reported on May 31 that the staff in the district bureau confirmed that the testing has resumed and is for free.

Next Wave

Zhong Nanshan, China’s top respiratory disease specialist, predicted on May 22 that a new wave of COVID-19 infections in China will likely peak in late June when weekly cases could reach 65 million. Then, one Omicron-infected patient will be able to infect more than 30 people,  Zhong said, adding that the infection is difficult to prevent.

A security personnel in a protective suit keeps watch as medical workers attend to patients at the fever department of Tongji Hospital, a major facility for COVID-19 patients in Wuhan, Hubei Province, China, Jan. 1, 2023. (Staff/Reuters)

Chinese citizens across the country have said on social media that infections have been swelling since March.

Zhong also said there had been a small peak in infections at the end of April and early May.

Most COVID-19 infections in mainland China are currently caused by the XBB series mutant strains of Omicron. Among the locally transmitted cases, the percentage of XBB series variants increased to 83.6 percent in early May from 0.2 percent in February.

Zhang Wenhong, China’s top virologist and director of China’s National Center for Infectious Diseases, also warned in late April at a conference that COVID-19 infections would reoccur after six months when immunity gained from prior infections has worn out.

Tyler Durden Fri, 06/02/2023 - 11:20

Read More

Continue Reading


Florida ‘freakishness’: why the sunshine state might have lost its appeal

Florida’s image as a safe sun and theme park destination may be threatened by recent political divisions and gun crime.




Florida's Clearwater Beach. Viaval Tours/Shutterstock

Florida is known worldwide for its beaches, resorts and theme parks, but has recently made headlines for a different reason. The state has been rocked by political controversies, bitter debates and fatal shootings at odds with its previously laid back holiday destination image.

In his 1947 book, Inside USA, writer John Gunther described Florida’s “freakishness in everything from architecture to social behaviour unmatched in any American state”. If Gunther had been writing today, he might be just as judgemental.

Florida’s recent political turmoil can be attributed to some highly contentious policies. The state has witnessed heated debates and legislative battles on issues including abortion, gun control, education, LGBTQ+ rights and voting rights.

Florida has been derided as “the worst state” in which to live, one of the worst in which to be unemployed or a student, and not a good place to die.

Even Donald Trump, who moved to his Florida Mar-a-Lago home during his presidency, has called it “among the worst states” to live in or retire to. This was an attack on Florida governor Ron DeSantis, who is also running for the Republican presidential nomination.

What was once considered by many to be a purple state – one that could either be Republican or Democrat – is now fiercely Republican. In recent years, the divide between those of different political beliefs has become toxic.

Importance of international image

International tourism and trade is huge business for Florida. In 2022, more than 1.1 million people visited Florida from the UK, the second largest group of international visitors on an annual basis. The UK is also Florida’s eighth largest trade partner with bilateral trade reaching $5.8 billion (£4.6 billion) in 2022. So state leaders might worry about tarnishing its image abroad.

Business leaders are already fretting about a fall in international visitor numbers linked to COVID and negative media coverage of the state. Around US$50 million was invested in marketing the state to tourists in 2023, this is expected to rise dramatically in 2024. The state’s ability to attract workers to keep its tourism and other industries going is weakening, reports suggest.

Heather DiGiacomo, chief of staff at the Florida Department of Juvenile Justice, told Florida senators that applications for jobs at state-run agencies were down and staff retention was down too. “These turnover rates … impacts the number of well-trained staff available to mentor new staff and puts additional strain on current staff without longer shifts in detention.”

Republican governor Ron DeSantis, now a presidential candidate, has been at the centre of Florida’s significant political divisions. The Republican state legislature’s controversial partisan bills, such as the recent redrawing of the electoral map to benefit the Republican party, was signed into law despite intense opposition.

While his conservative policies on taxes, regulation and immigration have won strong support from conservatives, critics argue that he prioritises partisan politics over the needs of all Floridians. His outspoken handling of the COVID pandemic sparked controversy, with accusations of downplaying the severity of the virus and prioritising economic interests.

Florida’s restrictive abortion laws have also attracted national and international attention. In April 2023, the state passed the foetal heartbeat bill, which prohibits abortions once a foetal heartbeat is detected, typically at around six weeks gestation. This law has faced significant backlash from reproductive rights advocates, who argue that many individuals may not even be aware of their pregnancy at such an early stage.

School shootings and gun laws

The Marjory Stoneman Douglas High School Public Safety Act was passed into Florida state law after the tragic Parkland school shooting in 2018, in which 17 people were killed. But it was controversial because it did not place restrictions on gun ownership or introduce background checks before gun purchases, but allowed schools to employ armed “guardians”. Critics argued that it fell short of addressing the root causes of gun violence in Florida.

There were seven mass shootings in Florida in the first two months of 2023. Despite this, the state has just passed a law that will come into effect on July 1 that will allow anyone who can legally own a gun in Florida to carry one without the need for a permit.

Florida’s partisan divide has been exacerbated by the introduction and passage of several laws that discriminate against the LGBTQ+ community. These laws cover areas including adoption, education, and transgender rights.

This year a massive LGBTQ event in a Florida theme park, which typically attracts 150,000 people, is taking out extra security measures, after new “don’t say gay” state laws were introduced in 2022. These rules ban teachers from discussing topics including sexual orientation. More generally, travel advisory warnings have been issued on the risks of travel to the state for LGBTQ+, African American and Latino people. A recent federal ruling overturned municipal bans on conversion therapy.

Although the “don’t say gay” bill was originally only aimed at third grade students and under, the bill has since been extended by Florida’s Board of Education to apply to all school pupils.

DeSantis has also become embroiled in a long legal and political battle with the Walt Disney Company, a major state employer, over the “don’t say gay” legislation. Disney recently announced it was cancelling a US$1 billion office complex project in the state.

Bills that restrict transgender students’ participation in school sports teams consistent with their gender identity have also sparked heated debate.

Meanwhile, changes in voting laws brought in by the state, including stricter identification requirements and limitations on the drop boxes where voters can leave mail-in ballots, have been criticised for making it more difficult for some people to vote.

Florida’s recent political turmoil has thrust the state into the national, and global, spotlight. Its deeply partisan divide, controversial policies and gun laws have created a toxic political climate, which has the ability to significantly damage the sunshine state’s appeal.

Dafydd Townley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Read More

Continue Reading