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Still No Follow-Through Dollar Buying After Last Week’s Surge

Overview: The dollar was threatening to break higher
at the end of last week, and the euro and sterling closed below key supports. However,
so far this…

Published

6 months ago

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Overview: The dollar was threatening to break higher at the end of last week, and the euro and sterling closed below key supports. However, so far this week, the greenback is consolidating and has not seen follow-through buying. The key data this week, US consumption and jobs, and the eurozone's CPI still lay ahead. The Antipodeans and Norwegian krone enjoy a firmer today. A 0.8% contraction in Sweden's Q2 GDP was not as deep as had been feared, but enough to keep the Swedish krona on the defensive. The G10 currencies are mostly trading in narrow ranges. Emerging market currencies are mixed. The South African rand and Hungarian forint lead the advancers. There is some speculation that Hungary may cut its base rate today.

Stocks in the Asia Pacific extended yesterday's rally, led by Hong Kong and China. Europe's Stoxx 600 is up about 0.5% after gaining 0.9% yesterday. US index futures are narrowly mixed. Bond yields are mostly lower. Benchmark 10-years yields are 2-4 bp lower in Europe, with the exception of UK Gilts, where the yield is slightly firmer after yesterday's holiday. The 10-year US Treasury yield is off one basis point to about 4.19%. The two-year yield has slipped slightly below 5.0%. Note that yesterday, the sold $222 bln in bills and notes and comes back for another $96 bln today (bills and notes). Softer yields help support gold prices. Recall that the yellow metal bottomed last week near $1885 and reached $1926 yesterday. It is firm now near yesterday's highs. October WTI bottomed last week near $77.60 and reached almost $80.90 yesterday. It is holding just below there so far today, testing the 20-day moving average (~$80.75). Talk that OPEC+ may extend production cuts, ostensibly in reaction to anticipated weaker demand from China seems to be neutralizing what appears to be increased Iranian supply.

Asia Pacific

At the Jackson Hole symposium last week, Bank of Japan Ueda justified the current monetary stance, saying that the central bank's assessment of the underlying rate of inflation is below 2%. Japan's five- and 10-year breakeven rates (the difference between the yield of the conventional and inflation-linked securities is below 120 bp. Meanwhile, Japan's July jobs data was disappointing. The unemployment rate, reported earlier today, jumped to 2.7% from 2.5%. rising further from the cyclical low of 2.4% seen in January. Note that at the end of 2019 it was at 2.2%. The number of employed people fell by 100k and the unemployed rose by 110k. Hiring slowed in retail and business services. The job-to-applicant ratio slipped to 1.29 from 1.30. This is the low since last July. Lastly, we note the weak demand for Japan's two-year note that was sold today. To be sure, it was well over-subscribed but lowest since 2010 (3.20 vs 3.95 last). The average yield was a little more than one basis point. 

Many are arguing China's problems stem from its Communist ideology. This seems too simplistic. After all, under Mao, there was an extensive social safety net, dubbed "Mao's iron rice bowl". This is to say that Xi's shunning of efforts to bolster consumption is not derived from Marxist-Leninist precepts but Xi's own idiosyncratic thought, which as we have noted shared with some political right views the US and Europe that sees welfare spurring laziness. There is a genre of literature claiming the Chinese system was terminal before the pandemic, but it seems policy choices since Covid have exacerbated the challenges. Meanwhile, Chinese officials argue the US is in decline, and point to the serial financial crises, illustrating its instability. The conventional wisdom in both countries seems to be that the other is in some kind of systemic decline. Moreover, there is nothing that the various bilateral talks or even a Biden-Xi meeting on the sidelines of next month's G20 meeting can address. Yet, it seems that such an assessment risk misjudging the other's reaction function and may violate a basic precept of under-estimating an adversary. 

The dollar rose to a marginal new high for the year against the shortly after European markets closed yesterday, reaching nearly JPY146.75 but has remained below it today. Indeed, the greenback is consolidating in a narrow range so far today (~JPY146.30-JPY146.55). Options for slightly more than $1 bln at JPY147 expire today. The market is probing for the official pain threshold and are pressing gingerly, with an eye on the 10-year JGB yield. The Australian dollar held above $0.6400 yesterday. While it was unable to surpass the pre-weekend high near $0.6440, it did so today, rising to about $0.6455. However, it was greeted with new selling that knocked it back to $0.6435. Still, the intraday momentum indicators are constructive suggesting another attempt at the highs is likely. Nearby resistance is seen in the $0.6465-75 area. The greenback remains firm against the Chinese yuan but is consolidating below CNY7.30. Of course, Chinese officials could do more if they wanted, as they have plenty of reserves and policy tools. Yet, the focus seems misplaced. The yuan is weak but not extremely so. Rather, according to the OECD's model of purchasing power parity, it is the yen (and euro) that are historically undervalued by more than 50%. Surely, they too could do more if desired. The PBOC fixed the dollar at CNY7.1851 today. The average estimate in Bloomberg's survey was for CNY7.2764 (range of projections was CNY7.1860-CNY7.2918). Press reports suggest the large banks are considering another cut in deposit rate as soon as later this week.

Europe

The highlight of the week is Thursday's preliminary EMU August CPI. The median forecast in Bloomberg's survey is for a 0.4% month-over-month increase, which is consistent with the year-over-year rate slipping to 5.1% from 5.3%. The core rate is expected to ease to 5.3% from 5.5%. Still, the ECB is looking at the same thing many market participants are and that is outsized 1.2% rise last September and the 1.5% gain in October 2022. As these drop out of the 12-month comparison, inflation is likely to fall sharply on a year-over-year basis. Today's high frequency data included consumer confidence surveys in Germany and France. Germany softened and France was unchanged. Also, Spain reported slightly better July retail sales. They accelerated to 7.7% year-over-year from 6.9%.

The market has all but given up on the idea that the Bank of England could hike rates by 50 bp next month. There is around a 6% chance discounted by the swaps market but before the BOE meets on September 21, the employment/wage data (September 12) and CPI (September 20). The UK still enjoys a premium on 10-year rates. It peaked a little above 70 bp in June, which was the largest since 2009. The premium has been trending lower and briefly traded below 20 bp last week, the smallest since early May. It is now near 25 bp. 

The euro settled above $1.08 and back above the 200-day moving average that is a little above $1.0805. The high recorded as the Fed's Powell spoke at Jackson Hole was slightly higher than $1.0840 and it held below it today. The euro looks set to challenge $1.08 again in North America. Yesterday's low was slightly below $1.0790 and the pre-weekend low as about $1.0765. Sterling, too, managed to close above key support ($1.26), which it closed below at the end of last week. It rose to about $1.2635 today, stalling in front of the pre-weekend high (~$1.2655). Overcoming resistance in the $1.2650-75 area may be the key to a better technical tone.

America

Fed Chair Powell talked a bit about house prices and rents in his Jackson Hole speech. He seemed to recognize the recent data points to recovery of prices and rents. S&P CoreLogic Case Shiller 20-city price index has risen every month this year after falling eight months in 2022. The FHFA house price index has not fallen since last August. In the first five months of the year, the FHFA index has risen at an annualized pace of about 7%. In the last five months of 2022, the FHFA index was flat. 

This week, US labor market is in focus with nonfarm payrolls at the end of the week. The median forecast in Bloomberg's survey is for 170k increase, having crept up a little with the newest forecasts. Today's see the JOLTS report and job openings are expected to have continued to trend lower. Job openings have fallen every month this year but April. Job openings at the end of last year was about 11.23 mln. In June, openings fallen to 9.58 mln, the lowest since April 2022. The 1.65 mln decline in the first half dovetails well with the BLS nonfarm payroll gain in H1 of 1.62 mln.

Mexico's trade balance deteriorated in July. The $881 mln deficit was the largest in three months but considerably smaller than the $1.8 bln median forecast in Bloomberg's survey. There are some strong seasonal patterns in Mexico's trade figures. In all but two years in the past 20, the trade balance weakens in July. Imports and exports fell. Today's data includes the IGAE indicator of economic activity. It is sometimes used as a proxy for month's GDP. It is expected to rise by 0.5% in June after a 0.03 decline in May. The IGEA will be overshadowed by the final read of Q2 GDP. Revisions point to the possibility that the 0.9% quarter-over-quarter gain is tweaked higher.

The US dollar was mired in a roughly CAD1.3570-CAD1.3610 yesterday, holding inside the pre-weekend range. The high set at the end of last week was near CAD1.3640. On the downside, a break of CAD1.3560 is needed to denote anything important technically, and there are options for nearly $1.2 bln that expire there tomorrow. The dollar dipped below MXN16.70 yesterday but turned better bid in the North American afternoon and settled at new session highs scored late near MXN16.7920. A small hammer candlestick may have been formed. Follow-through dollar buying today has so far been limited to MXN16.8020. Nearby resistance is seen in the MXN16.87-90 area. It probably takes a move above MXN17.00 to shake out some of the new peso longs. 


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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…

Published

17 hours ago

on

March 9, 2024

By

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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Another beloved brewery files Chapter 11 bankruptcy

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

Published

23 hours ago

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March 9, 2024

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

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

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

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

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

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

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

Overall beer sales have fallen.

Image source: Shutterstock

Covid is not the only reason for brewery bankruptcies

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

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

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

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

Another brewery files Chapter 11 bankruptcy

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

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

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

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

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

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

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

 

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Revving up tourism: Formula One and other big events look set to drive growth in the hospitality industry

With big events drawing a growing share of of tourism dollars, F1 offers a potential glimpse of the travel industry’s future.

Published

2 days ago

on

March 8, 2024

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Sergio Perez of Oracle Red Bull Racing, right, and Charles Leclerc of the Scuderia Ferrari team compete in the Las Vegas Grand Prix on Nov. 19, 2023. Tayfun Coskun/Anadolu via Getty Images

In late 2023, I embarked on my first Formula One race experience, attending the first-ever Las Vegas Grand Prix. I had never been to an F1 race; my interest was sparked during the pandemic, largely through the Netflix series “Formula 1: Drive to Survive.”

But I wasn’t just attending as a fan. As the inaugural chair of the University of Florida’s department of tourism, hospitality and event management, I saw this as an opportunity. Big events and festivals represent a growing share of the tourism market – as an educator, I want to prepare future leaders to manage them.

And what better place to learn how to do that than in the stands of the Las Vegas Grand Prix?

A smiling professor is illuminated by bright lights in a nighttime photo taken at a Formula 1 event in Nevada.
The author at the Las Vegas Grand Prix. Katherine Fu

The future of tourism is in events and experiences

Tourism is fun, but it’s also big business: In the U.S. alone, it’s a US$2.6 trillion industry employing 15 million people. And with travelers increasingly planning their trips around events rather than places, both industry leaders and academics are paying attention.

Event tourism is also key to many cities’ economic development strategies – think Chicago and its annual Lollapalooza music festival, which has been hosted in Grant Park since 2005. In 2023, Lollapalooza generated an estimated $422 million for the local economy and drew record-breaking crowds to the city’s hotels.

That’s why when Formula One announced it would be making a 10-year commitment to host races in Las Vegas, the region’s tourism agency was eager to spread the news. The 2023 grand prix eventually generated $100 million in tax revenue, the head of that agency later announced.

Why Formula One?

Formula One offers a prime example of the economic importance of event tourism. In 2022, Formula One generated about $2.6 billion in total revenues, according to the latest full-year data from its parent company. That’s up 20% from 2021 and 27% from 2019, the last pre-COVID year. A record 5.7 million fans attended Formula One races in 2022, up 36% from 2019.

This surge in interest can be attributed to expanded broadcasting rights, sponsorship deals and a growing global fan base. And, of course, the in-person events make a lot of money – the cheapest tickets to the Las Vegas Grand Prix were $500.

Two brightly colored race cars are seen speeding down a track in a blur.
Turn 1 at the first Las Vegas Grand Prix. Rachel Fu, CC BY

That’s why I think of Formula One as more than just a pastime: It’s emblematic of a major shift in the tourism industry that offers substantial job opportunities. And it takes more than drivers and pit crews to make Formula One run – it takes a diverse range of professionals in fields such as event management, marketing, engineering and beyond.

This rapid industry growth indicates an opportune moment for universities to adapt their hospitality and business curricula and prepare students for careers in this profitable field.

How hospitality and business programs should prepare students

To align with the evolving landscape of mega-events like Formula One races, hospitality schools should, I believe, integrate specialized training in event management, luxury hospitality and international business. Courses focusing on large-scale event planning, VIP client management and cross-cultural communication are essential.

Another area for curriculum enhancement is sustainability and innovation in hospitality. Formula One, like many other companies, has increased its emphasis on environmental responsibility in recent years. While some critics have been skeptical of this push, I think it makes sense. After all, the event tourism industry both contributes to climate change and is threatened by it. So, programs may consider incorporating courses in sustainable event management, eco-friendly hospitality practices and innovations in sustainable event and tourism.

Additionally, business programs may consider emphasizing strategic marketing, brand management and digital media strategies for F1 and for the larger event-tourism space. As both continue to evolve, understanding how to leverage digital platforms, engage global audiences and create compelling brand narratives becomes increasingly important.

Beyond hospitality and business, other disciplines such as material sciences, engineering and data analytics can also integrate F1 into their curricula. Given the younger generation’s growing interest in motor sports, embedding F1 case studies and projects in these programs can enhance student engagement and provide practical applications of theoretical concepts.

Racing into the future: Formula One today and tomorrow

F1 has boosted its outreach to younger audiences in recent years and has also acted to strengthen its presence in the U.S., a market with major potential for the sport. The 2023 Las Vegas race was a strategic move in this direction. These decisions, along with the continued growth of the sport’s fan base and sponsorship deals, underscore F1’s economic significance and future potential.

Looking ahead in 2024, Formula One seems ripe for further expansion. New races, continued advancements in broadcasting technology and evolving sponsorship models are expected to drive revenue growth. And Season 6 of “Drive to Survive” will be released on Feb. 23, 2024. We already know that was effective marketing – after all, it inspired me to check out the Las Vegas Grand Prix.

I’m more sure than ever that big events like this will play a major role in the future of tourism – a message I’ll be imparting to my students. And in my free time, I’m planning to enhance my quality of life in 2024 by synchronizing my vacations with the F1 calendar. After all, nothing says “relaxing getaway” quite like the roar of engines and excitement of the racetrack.

Rachel J.C. Fu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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