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The Yen and Yuan Continue to Weaken

Overview: While the US dollar appears to be consolidating its recent gains, the Japanese yen and Chinese yuan remain under pressure. Officials seem more…



Overview: While the US dollar appears to be consolidating its recent gains, the Japanese yen and Chinese yuan remain under pressure. Officials seem more concerned about the pace of the move than the level it has reached. New and large fiscal initiatives that the new UK government has floated has failed to change sentiment toward sterling, which is the second weakest major currency today after the Japanese yen. The yen’s weakness did not prevent new losses in Japanese equities, and most equities in the Asia Pacific region fell, except China. Europe’s Stoxx 600 is lower, giving back yesterday’s 0.25% gain and more. US futures are steady to firm. Meanwhile, benchmark 10-year yields played catch-up in Asia, while they have come back softer in Europe and are 6-8 bp lower. The 10-year US Treasury is off nearly four basis points to 3.31%. Emerging market currencies are mixed. Central European currencies and the Mexican peso lead the advancers. The Polish zloty is bid ahead of what is expected to a be 25 bp rate hike later today. Gold held $1690 and is recovering to $1706 in the European morning. Yesterday’s high was almost $1727. October WTI is recovering after slipping to almost $85, a new six-month low earlier today. Record production is weighing on US natgas prices. It fell 5.1% before the weekend and 7.3% yesterday. Today, it is fractionally lower and at its lowest level in a month. Europe’s natgas benchmark is also trading heavily. Between yesterday and today, it is off 6%. Iron ore slipped lower for the second day after rising nearly 3.6% on Monday. December copper is paring yesterday’s 1.4% gain. December wheat is up 3.4% after a 0.75% gain yesterday. It rose 4.4% last week amid concerns about weather and war limiting new supply. 

Asia Pacific

Japanese official expressions of concern about the yen's slide escalated. Finance Minister Suzuki cautioned that it is not desirable for such rapid movements, while Cabinet Secretary Matsuno threatened "action" if one-sided moves continued. The market barely flinched at the news. The threat of intervention is not seen as particularly credible. Even if Japanese officials wanted to intervene, it seems clear that it would be alone and fighting not simply a weak yen but a strong dollar. The last time the Ministry of Finance ordered intervention to support the yen was in 1998. The dollar reached about JPY147.65 before then. This area is best seen as a target now and the dollar reached nearly JPY144.40 today. Separately, but not totally unrelated, the 10-year JGB approached the 0.25% cap. The BOJ announced it would increase its monthly set purchases to JPY550 bln from JPY500 bln. 

China reported a smaller than expected August trade surplus. The $79.4 bln surplus compares with July's $101.3 bln and forecasts (median Bloomberg survey) of $92.7 bln. Exports stalled. After rising 18% year-over-year in July, they slowed to 7.1% in August, a little more than half the projected pace. It is the weakest shipments since April. Imports slowed to 0.3% year-over-year from 2.3% in July and weaker than the 1.1% projection. Energy imports (oil, coal, and natural gas) fell. Exports volumes of cellphones home appliances and semiconductors fell by about a tenth in the Jan-Aug period. Auto exports remain strong but flattered by higher prices. The geographic mix was notable. Exports to the US fell 3.8% year-over-year, the first decline since May 2020. Exports to EU fared better and are up 11% from a year ago. Given the cost of energy, it is not surprising that the EU imported energy-intensive products, like aluminum. Still, the pace of growth was halved from July. Exports to Russia jumped 26.5%. Exports to Taiwan fell for the first time since January 2020 as Beijing punished Taiwan after US Pelosi's visit. Note that another group from the US Congress is visiting Taipei today. 

Australia, where the central bank delivered its fourth consecutive 50 bp hike yesterday (bringing the cash rate target to 2.35%) reported that the economy expanded by 0.9% in Q2, which was in line with expectations. It has grown by 0.7% in Q1. The year-over-year pace accelerated to 3.6% from 3.3%. Its July trade figures are out first thing tomorrow and RBA Governor Lowe will provide more color on the outlook for monetary policy. Next week' s labor market report may be the next key data point for rate expectations. The futures market sees about an 80% chance that it hikes by 25 bp instead of 50 bp when it meets early next month.

The dollar settled last week at JPY140.20 and reached nearly JPY144.40 in the first part of the local session before consolidating. The market seems to be calling the Japanese officials’ bluff. Note that there has been a dramatic bout of short covering in the currency futures market. In April, the next speculative position reached 112k contracts (JPY12.5 mln per contract) and had fallen to about 25k by mid-August. It increased for the past three reporting periods to stand at roughly 41.5k contracts on August 30. Support now is seen in JPY142.70-JPY143.00 area. The RBA's rate hike did not prevent the Australian dollar's sell-off. A big, bearish outside day was recorded yesterday and follow-through selling today pushed the Aussie briefly below $0.6700. While this is the first technical target we suggested based on the head and shoulders pattern, it held the mid-July two-year low set closer to $0.6680. It bounced to almost $0.6735 and met new offers. Like the BOJ, the PBOC is resisting market forces that are taking the yuan lower. Today's reference rate was set at CNY6.9160 compared with the Bloomberg survey median of CNY6.9614. The gap is the largest since the Bloomberg survey began. Like the BOJ, the PBOC seems more concerned about the pace than the level. The greenback reached almost CNY6.98.


UK rates are jumping. Over the past 16 sessions, the 10-year yield has risen in all but two. The surge has lifted the yield from about 2.02% to 3.10% yesterday. Some of this increase was due to increased inflation expectations. The 10-year breakeven has risen from around 3.90% to about 4.30%. Part of the increase in the nominal 10-year yield reflect the anticipation of a higher overnight rate. Indeed, the terminal rate in the swaps market has risen from around 3.20% to over 4.5%. There is some thought that if PM Truss goes ahead with the freezing over current household energy rates, with the government borrowing funds to keep the power companies whole, then inflation may have peaked, but this seems a bit incomplete analysis. The BOE meets next week, and the swaps market continues to see the target rate doubling from 1.75% now to over 3.50% by year-end. The market is pricing in about a 65% chance of a 75 bp hike next week's meeting. Later today, BOE officials, including Governor Bailey are speaking before Parliament.

Meanwhile, in what is one of the most seemingly diversified cabinet in UK history, many seen it as among the most conservative governments. Still, ironically, it looks set to launch among the largest fiscal initiatives outside of the Great Financial Crisis and pandemic and could boost the UK's debt by 10%. Separately, we note reports suggesting that rather than an immediate confrontation with the EU over the Northern Ireland protocol, PM Truss may seek an extension of the current workaround.

After Germany reported a larger-than-expected drop in July factory orders, the fear was an outsized falling industrial output figures today. However, the 0.3% decline was half as large as the median forecast in Bloomberg's survey and revisions doubled the June increase to 0.8%. Separately, the Lufthansa pilot strike that was planned for today and tomorrow was called off as a new wage offer was made. The full details are not yet available, but the pilots were seeking a 5.5% pay increase retroactive to July 1 and an 8.2% increase next year. Separately, Italy reported a 1.3% jump in July retail sales, well above the 0.2% expected (median in Bloomberg's survey). The ECB meets tomorrow. The swaps market is pricing in about a 63% chance of a 75 bp hike.

The euro has mostly traded in a quarter-cent range on either side of $0.9900. The low was set in Asia, as the dollar peaked against the yen, and the euro's high was set in early European turnover. The single currency is consolidating within yesterday's range. While it still looks fragile, the proximity of the ECB meeting may be deterring interest today. Sterling failed to sustain the upside momentum that had lifted it to almost $1.1610 and it recorded session lows as Europe was closing yesterday below $1.15. Follow-through selling today took it to almost $1.1450, just above the 2.5-year lows set on Monday near $1.1440. Today's high, slightly below $1.1525 was seen in early Europe and is better offered ahead of the North American open.


The US reports the July trade balance, and later in the say, the Fed releases its Beige Book ahead of the September 20-21 FOMC meeting. Several Fed officials speak today as well:  Barkin, Mester, Brainard, and Barr. Powell speaks tomorrow. We suspect the takeaway is that the reaching what the Summary of Economic Projections (dot plot) regarded as neutral is not sufficient and there is a consensus that policy needs to be restrictive. The Fed funds futures are discounting a 70% chance of a 75 bp hike. The recent string of data has shown the resilience of the economy including the labor market. Note that the Atlanta Fed's GDPNow tracker will be updated later today for the first time since September 1, when it was Q3 was lifted to 2.6%.

The US goods balance drives the overall trade balance. The advance report on the goods balance showed the smallest deficit since last October. Despite the greenback's strength, monthly goods exports reached a record of $181.3 bln in June and slipped slightly in July ($180.98 bln). Yes, some companies said that the translation of foreign earnings back into dollars weighed on earnings, but in aggregate US earnings growth was strong as price increases more than covered rising input costs. Typically, the strong dollar, especially against the yen spurs protectionist noises form some parts of US industry. However, now, there is hardly anything. Imports declined for the fourth consecutive month in July. At $270 bln, they are off by about 8.3% since the March peak. The 10% decline in consumer goods imports in July was the largest drop in 30 years, which is not typically what one expects in a strong dollar environment. The soft imports are often a symptom of weaker domestic demand, but retailer ae struggling to manage inventories. In July, retail inventories rose 1.1% to a record of nearly $731 bln. Wholesale inventories edged up by 0.8%, to almost $903 bln. The overall July trade deficit is expected to fall toward $70 bln from $79.6 bln in June. In July 2021, the imbalance was $69.4 bln. The change in net exports, in real terms, may contribute to Q3 GDP.

Canada will report is July merchandise trade figures ninety minutes before the Bank of Canada's rate decision. As is widely recognized, Canada is experiencing a positive terms-of-trade shock. Canada was running a deficit before Covid and now is reporting the largest merchandise surplus since 2008. Since the start of 2020, the Canadian dollar is the strongest of the major currencies, falling only 1.25% against the dollar. The Japanese yen is on the other extreme, depreciating by almost 24% against the greenback. Canada's economic outperformance has seen its better days. Like in the US, the interest rate sensitive housing market is contracting. The August manufacturing PMI fell below 50 (48.7), its lowest since June 2020. The labor market improvement is stalling. It has lost full-time jobs in both June and July. The August report is due at the end of the week. The Bank of Canada's surprise 100 bp hike in July has kept the swaps market jumpy about a repeat. We have consistently suggested 75 bp was more likely now. That would lift the target rate to 3.25%. The swaps market sees the terminal rate close to 3.75%.

The US dollar continues to absorb offers around CAD1.3200. It has probed this area but has not closed above it. There are options there that expire tomorrow for about $540 mln. Initial support is seen around CAD1.3160. The two-year high was set in mid-July near CAD1.3225. The next key chart area above there is seen around CAD1.3300-40. The greenback remains in a broad sideways range against the Mexican peso. Trendline support is seen near MXN19.92, while the upper end is in the MXN20.26-MXN20.29 area. Mexico reports August CPI figures tomorrow. The central bank meets on September 29 and is expected to match the Fed's move. Chile surprised the markets yesterday by delivering a 100 bp hike instead of 75 bp. Its overnight target rate is now 10.75%. August CPI will be reported tomorrow. It is expected to rise to 13.8% from 13.1%. After rallying ahead of last weekend's referendum, which the government lost (and a cabinet reshuffle was announced), the peso is off almost 2% this week. 


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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…



To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….



Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 


About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. 

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Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.



Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 


This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

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With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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