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US Open – Superb Tech Earnings, Congress Impasse, Profit taking on dollar bets, Oil rebounds, Gold mania

US Open – Superb Tech Earnings, Congress Impasse, Profit taking on dollar bets, Oil rebounds, Gold mania

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US stocks got a nice boost after Big-Tech delivered superb earnings results after the close.  Amazon crushed analyst expectations with a record profit. Facebook delivered impressive revenue results and noted July is looking strong despite growing boycotts.  Apple saw the pandemic help demand for several of its goods.  Alphabet had the weakest of results, but still came out ahead of analyst forecasts. 

This morning the mood was mixed with a plethora of earnings results.  Exxon had its worst quarterly loss in modern history, while Chevron’s results were the worst in three decades.  Merck had a strong earnings beat and raised their guidance. 

It seems the tech rally is not going away anytime soon and that could spell trouble for small-cap stocks.  The White House and Congress need to break their impasse with the virus relief bill or this will continue to drag down the recovery this quarter. 

FX

After a brutal trading week, the dollar is finishing on a positive as investors close out some very successful bearish bets.  After a big-tech delivered knockout results, risk appetite is being weighed down as Republicans and Democrats remain ‘far apart’ on stimulus talks. 

The dollar might stabilize today, but the fundamentals still strongly suggest it will remain a punching bag in the short-term.  Real yields continue to fall deeper into negative territory, Europe seems like they will have a better second half, and the Fed is likely going to telegraph more moves in September. 

Oil

Crude prices are rebounding after making a three-week low as global oil demand continues to struggle and as OPEC+ begins to ease production cuts.  WTI crude prices continue to hang around the $40 level since the consensus remains that the worst of the economic downturn is behind both the Americans and Europeans.  The global economic recovery is teetering but a persistently weaker dollar and the ability for OPEC+ to remain nimble regarding production cuts have provided a strong layer of support for oil prices. 

Important Chinese manufacturing data showed their recovery is still intact, however concerns remain that the data is plateauing.  The crude demand outlook will be dictated by the spread of the virus and in the short-term, it seems the US is getting a handle of the virus and that after a painful few more weeks, new cases, hospitalizations will all be trending lower.   

Oil prices seem poised for further consolidation, with WTI crude trading between the $38.50 and $42.50 region for the next week. 

Gold

Gold mania continues and after tentatively clearing the $2000 level, traders are starting to doubt whether a profit-taking pullback is in the cards.  Safe-haven demand remains strong as Congress and the White House continue to struggle to break the impasse on extending emergency unemployment benefits.  Gold will continue to shine bright as real yields continue to fall deeper into negative territory, virus surges will keep economic recoveries limited, and the stimulus trade will not go away until the labor market bounces strongly back.   

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Dismantle The Censorship-Industrial Complex: The Westminster Declaration

Dismantle The Censorship-Industrial Complex: The Westminster Declaration

Via westminsterdeclaration.org (emphasis ours),

The Westminster…

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2 hours ago

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October 20, 2023

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Dismantle The Censorship-Industrial Complex: The Westminster Declaration

Via westminsterdeclaration.org (emphasis ours),

The Westminster Declaration

We write as journalists, artists, authors, activists, technologists, and academics to warn of increasing international censorship that threatens to erode centuries-old democratic norms.

Coming from the left, right, and centre, we are united by our commitment to universal human rights and freedom of speech, and we are all deeply concerned about attempts to label protected speech as ‘misinformation,’ ‘disinformation,’ and other ill-defined terms.

This abuse of these terms has resulted in the censorship of ordinary people, journalists, and dissidents in countries all over the world.

Such interference with the right to free speech suppresses valid discussion about matters of urgent public interest, and undermines the foundational principles of representative democracy.

Across the globe, government actors, social media companies, universities, and NGOs are increasingly working to monitor citizens and rob them of their voices. These large-scale coordinated efforts are sometimes referred to as the ‘Censorship-Industrial Complex.’

This complex often operates through direct government policies. Authorities in India[1] and Turkey[2] have seized the power to remove political content from social media. The legislature in Germany[3] and the Supreme Court in Brazil[4] are criminalising political speech. In other countries, measures such as Ireland’s ‘Hate Speech’ Bill[5], Scotland’s Hate Crime Act[6], the UK’s Online Safety Bill[7], and Australia’s ‘Misinformation’ Bill[8] threaten to severely restrict expression and create a chilling effect.

But the Censorship Industrial Complex operates through more subtle methods. These include visibility filtering, labelling, and manipulation of search engine results. Through deplatforming and flagging, social media censors have already silenced lawful opinions on topics of national and geopolitical importance. They have done so with the full support of ‘disinformation experts’ and ‘fact-checkers’ in the mainstream media, who have abandoned the journalistic values of debate and intellectual inquiry.

As the Twitter Files revealed, tech companies often perform censorial ‘content moderation’ in coordination with government agencies and civil society. Soon, the European Union’s Digital Services Act will formalise this relationship by giving platform data to ‘vetted researchers’ from NGOs and academia, relegating our speech rights to the discretion of these unelected and unaccountable entities.

Some politicians and NGOs[9] are even aiming to target end-to-end encrypted messaging apps like WhatsApp, Signal, and Telegram.[10] If end-to-end encryption is broken, we will have no remaining avenues for authentic private conversations in the digital sphere.

Although foreign disinformation between states is a real issue, agencies designed to combat these threats, such as the Cybersecurity and Infrastructure Security Agency in the United States, are increasingly being turned inward against the public. Under the guise of preventing harm and protecting truth, speech is being treated as a permitted activity rather than an inalienable right.

We recognize that words can sometimes cause offence, but we reject the idea that hurt feelings and discomfort, even if acute, are grounds for censorship. Open discourse is the central pillar of a free society, and is essential for holding governments accountable, empowering vulnerable groups, and reducing the risk of tyranny.

Speech protections are not just for views we agree with; we must strenuously protect speech for the views that we most strongly oppose. Only in the public square can these views be heard and properly challenged.

What's more, time and time again, unpopular opinions and ideas have eventually become conventional wisdom. By labelling certain political or scientific positions as 'misinformation' or 'malinformation,' our societies risk getting stuck in false paradigms that will rob humanity of hard-earned knowledge and obliterate the possibility of gaining new knowledge. Free speech is our best defence against disinformation.

The attack on speech is not just about distorted rules and regulations – it is a crisis of humanity itself. Every equality and justice campaign in history has relied on an open forum to voice dissent. In countless examples, including the abolition of slavery and the civil rights movement, social progress has depended on freedom of expression.

We do not want our children to grow up in a world where they live in fear of speaking their minds. We want them to grow up in a world where their ideas can be expressed, explored and debated openly – a world that the founders of our democracies envisioned when they enshrined free speech into our laws and constitutions.

The US First Amendment is a strong example of how the right to freedom of speech, of the press, and of conscience can be firmly protected under the law. One need not agree with the U.S. on every issue to acknowledge that this is a vital 'first liberty' from which all other liberties follow. It is only through free speech that we can denounce violations of our rights and fight for new freedoms.

There also exists a clear and robust international protection for free speech. The Universal Declaration of Human Rights (UDHR)[11] was drafted in 1948 in response to atrocities committed during World War II. Article 19 of the UDHR states, 'Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.' While there may be a need for governments to regulate some aspects of social media, such as age limits, these regulations should never infringe on the human right to freedom of expression. 

As is made clear by Article 19, the corollary of the right to free speech is the right to information. In a democracy, no one has a monopoly over what is considered to be true. Rather, truth must be discovered through dialogue and debate – and we cannot discover truth without allowing for the possibility of error. 

Censorship in the name of 'preserving democracy' inverts what should be a bottom-up system of representation into a top-down system of ideological control. This censorship is ultimately counter-productive: it sows mistrust, encourages radicalization, and de-legitimizes the democratic process. 

In the course of human history, attacks on free speech have been a precursor to attacks on all other liberties. Regimes that eroded free speech have always inevitably weakened and damaged other core democratic structures. In the same fashion, the elites that push for censorship today are also undermining democracy. What has changed though, is the broad scale and technological tools through which censorship can be enacted. 

We believe that free speech is essential for ensuring our safety from state abuses of power – abuses that have historically posed a far greater threat than the words of lone individuals or even organised groups. For the sake of human welfare and flourishing, we make the following 3 calls to action.

  • We call on governments and international organisations to fulfill their responsibilities to the people and to uphold Article 19 of the UDHR. 

  • We call on tech corporations to undertake to protect the digital public square as defined in Article 19 of the UDHR and refrain from politically motivated censorship, the censorship of dissenting voices, and censorship of political opinion.

  • And finally, we call on the general public to join us in the fight to preserve the people's democratic rights. Legislative changes are not enough. We must also build an atmosphere of free speech from the ground up by rejecting the climate of intolerance that encourages self-censorship and that creates unnecessary personal strife for many. Instead of fear and dogmatism, we must embrace inquiry and debate.

We stand for your right to ask questions. Heated arguments, even those that may cause distress, are far better than no arguments at all. 

Censorship robs us of the richness of life itself. Free speech is the foundation for creating a life of meaning and a thriving humanity - through art, poetry, drama, story, philosophy, song, and more. 

This declaration was the result of an initial meeting of free speech champions from around the world who met in Westminster, London, at the end of June 2023. As signatories of this statement, we have fundamental political and ideological disagreements. However, it is only by coming together that we will defeat the encroaching forces of censorship so that we can maintain our ability to openly debate and challenge one another. It is in the spirit of difference and debate that we sign the Westminster Declaration.

Signatories

  • Matt Taibbi, Journalist, US

  • Michael Shellenberger, Public, US

  • Jonathan Haidt, Social Psychologist, NYU, US

  • John McWhorter, Linguist, Columbia, Author, US

  • Steven Pinker, Psychologist, Harvard, US

  • Julian Assange, Editor, Founder of Wikileaks, Australia

  • Tim Robbins, Actor, Filmmaker, US

  • Nadine Strossen, Professor of Law, NYLS, US

  • Glenn Loury, Economist, USA

  • Richard Dawkins, Biologist, UK

  • John Cleese, Comedian, Acrobat, UK

  • Slavoj Žižek, Philosopher, Author, Slovenia

  • Jeffrey Sachs, Columbia University, US

  • Oliver Stone, Filmmaker, US

  • Edward Snowden, Whistleblower, US

  • Greg Lukianoff, President and CEO Foundation for Individual Rights and Expression, USA

  • Stella Assange, Campaigner, UK

  • Glenn Greenwald, Journalist, US

  • Claire Fox, Founder of the Academy of Ideas, UK

  • Dr. Jordan B. Peterson, Psychologist, Author, Canada

  • Bari Weiss, Journalist, USA

  • Peter Hitchens, Author, Journalist, UK

  • Niall Ferguson, Historian, Stanford, UK

  • Matt Ridley, Journalist, Author, UK

  • Melissa Chen, Journalist, Spectator, Singapore/US

  • Yanis Varoufakis, Economist, Greece

  • Peter Boghossian, Philosopher, Founding Faculty Fellow, University of Austin, US

  • Michael Shermer, Science Writer, US

  • Alan Sokal, Professor of Mathematics, UCL, UK

  • Sunetra Gupta, Professor of Theoretical Epidemiology, Oxford, UK

  • Jay Bhattacharya, Professor, Stanford, US

  • Martin Kulldorf, Professor of Medicine (on leave), Harvard, US

  • Aaron Kheiriaty, Psychiatrist, Author, USA

  • Chris Hedges, Journalist, Author, USA

  • Lee Fang, Independent Journalist, US

  • Alex Gutentag, Journalist, US

  • Iain McGilchrist, Psychiatrist, Philosopher, UK

  • Ayaan Hirsi Ali, Human Rights Activist, Author, Netherlands

  • Konstantin Kisin, Author, UK

  • Leighton Woodhouse, Public, US

  • Andrew Lowenthal, liber-net, Australia

  • Aaron Mate, Journalist, USA

  • Izabella Kaminska, Journalist, The Blind Spot, UK

  • Nina Power, Writer, UK

  • Kmele Foster, Journalist, Media Entrepreneur, USA

  • Toby Young, Journalist, Free Speech Union, UK

  • Winston Marshall, Journalist, The Spectator, UK

  • Jacob Siegel, Tablet, US/Israel

  • Ulrike Guerot, Founder of European Democracy Lab, Germany

  • Heather E. Heying, Evolutionary Biologist, USA

  • Bret Weinstein, Evolutionary Biologist, USA

  • Martina Pastorelli, Independent Journalist, Italy

  • Leandro Narloch, Independent Journalist, Brazil

  • Ana Henkel, Independent Journalist, Brazil

  • Mia Ashton, Journalist, Canada

  • Micha Narberhaus, The Protopia Lab, Spain/Germany

  • Alex Sheridan, Free Speech Ireland

  • Ben Scallan, Gript Media, Ireland

  • Thomas Fazi, Independent Journalist, Italy

  • Jean F. Queralt, Technologist, Founder @ The IO Foundation, Malaysia/Spain

  • Phil Shaw, Campaigner, Operation People, New Zealand

  • Jeremy Hildreth, Independent, UK

  • Craig Snider, Independent, US

  • Eve Kay, TV Producer, UK

  • Helen Joyce, Journalist, UK

  • Dietrich Brüggemann, Filmmaker, Germany

  • Adam B. Coleman, Founder of Wrong Speak Publishing, US

  • Helen Pluckrose, Author, US

  • Michael Nayna, Filmmaker, Australia

  • Paul Rossi, Educator, Vertex Partnership Academics, US

  • Juan Carlos Girauta, Politician, Spain

  • Andrew Neish, KC, UK

  • Steven Berkoff, Actor, Playright, UK

  • Patrick Hughes, Artist, UK

  • Adam Creighton, Journalist, Australia

  • Julia Hartley-Brewer, Journalist, UK

  • Robert Cibis, Filmmaker, Germany

  • Piers Robinson, Organization for Propaganda Studies, UK

  • Dirk Pohlmann, Journalist, Germany

  • Mathias Bröckers, Author, Journalist, Germany

  • Kira Phillips, Documentary Filmmaker, UK

  • Diane Atkinson, Historian, Biographer, UK

  • Eric Kaufmann, Professor of Politics, Birkbeck, University of Buckingham, Canada

  • Laura Dodsworth, Journalist and Author, UK

  • Nellie Bowles, Journalist, USA

  • Andrew Tettenborn, Professor of Law, Swansea University,  UK

  • Julius Grower, Fellow, St. Hugh’s College, UK

  • Nick Dixon, Comedian, UK

  • Dominic Frisby, Comedian, UK

  • James Orr, Associate Professor, University of Cambridge, UK

  • Brendan O’Neill, Journalist, UK

  • Jan Jekielek, Journalist, US

  • Andrew Roberts, Historian, UK

  • Robert Tombs, Historian, UK

  • Ben Schwarz, Journalist, USA

  • Xavier Azalbert, Investigative Scientific Journalist, France

  • Doug Stokes, International Relations Professor, University of Exeter, UK

  • James Allan, Professor of Law, University of Queensland, UK

  • David McGrogan, Professor of Law, Northumbria University, UK

  • Jacob Mchangama, Author, Denmark

  • Nigel Biggar, Chairman, Free Speech Union, UK

  • David Goodhart, Journalist, Author, UK

  • Catherine Austin Fitts, The Solari Report, Netherlands

  • Matt Goodwin, Politics Professor, University of Kent, UK

  • Alan Miller, Together Association, UK

  • Catherine Liu, Cultural Theorist, Author, USA

  • Stefan Millius, Journalist, Switzerland

  • Philip Hamburger, Professor of Law, Columbia, USA

  • Rueben Kirkham, Co-Director, Free Speech Union of Australia, Australia

  • Jeffrey Tucker, Author, USA

  • Sarah Gon, Director, Free Speech Union, South Africa

  • Dara Macdonald, Co-Director, Free Speech Union, Australia

  • Jonathan Ayling, Chief Executive, Free Speech Union, New Zealand

  • David Zweig, Journalist, Author, USA

  • Juan Soto Ivars, Author, Spain

  • Colin Wright, Evolutionary Biologist, USA

  • Gad Saad, Professor, Evolutionary Behavioral Scientist, Author, Canada

  • Robert W. Malone, MD, MS, USA

  • Jill Glasspool-Malone, PhD., USA

  • Jordi Pigem, Philosopher, Author, Spain

  • Holly Lawford-Smith, Associate Professor in Political Philosophy, University of Melbourne, Australia

  • Michele Santoro, Journalist, TV Host, Presenter, Italy

  • Dr. James Smith, Podcaster, Literature Scholar, RHUL, UK

  • Francis Foster, Comedian, UK

  • Coleman Hughes, Writer, Podcaster, USA

  • Marco Bassani, Political Theorist, Historian, Milan University, Italy

  • Isabella Loiodice, Professor of Comparative Public Law, University of Bari, Italy

  • Luca Ricolfi, Professor, Sociologist, Turin University, Italy

  • Marcello Foa, Journalist, Former President of Rai, Italy

  • Andrea Zhok, Philosopher, University of Milan, Italy

  • Paolo Cesaretti, Professor of Byzantine Civilization, University of Bergamo, Italy

  • Alberto Contri, Mass Media Expert, Italy

  • Carlo Lottieri, Philosopher, University of Verona, Italy

  • Alessandro Di Battista, Political Activist, Writer, Italy

  • Paola Mastrocola, Writer, Italy

  • Carlo Freccero, Television Author, Media Expert, Italy

  • Giorgio Bianchi, Independent Journalist, Italy

  • Nello Preterossi, Professor, University of Salerno, Scientific Director of the Italian Institute for Philosophical Studies, Italy

  • Efrat Fenigson, Journalist, Podcaster, Israel

  • Eli Vieira, Journalist, Genetic Biologist, Brazil

  • Stephen Moore, Author and Analyst, Canada

Footnotes

  1. Pahwa, Nitish. 'Twitter Blocked a Country.' Slate Magazine, 1 Apr. 2023, slate.com/technology/2023/04/twitter-blocked-pakistan-india-modi-musk-khalistan-gandhi.html.

  2. Stein, Perry. 'Twitter Says It Will Restrict Access to Some Tweets before Turkey's Election.' The Washington Post, 15 May 2023, www.washingtonpost.com/technology/2023/05/13/turkey-twitter-musk-erdogan/.

  3. Hänel, Lisa. 'Germany criminalizes denying war crimes, genocide.' Deutsche Welle, 25 Nov. 2022, https://www.dw.com/en/germany-criminalizes-denying-war-crimes-genocide/a-63834791

  4. Savarese, Mauricio, and Joshua Goodman. 'Crusading Judge Tests Boundaries of Free Speech in Brazil.' AP News, 26 Jan. 2023, apnews.com/article/jair-bolsonaro-brazil-government-af5987e833a681e6f056fe63789ca375.

  5. Nanu, Maighna. 'Irish People Could Be Jailed for “Hate Speech”, Critics of Proposed Law Warn.' The Telegraph, 17 June 2023, www.telegraph.co.uk/world-news/2023/06/1  7/irish-people-jailed-hate-speech-new-law/?WT.mc_id=tmgoff_psc_ppc_us_news_dsa_generalnews.

  6. The Economist Newspaper. (n.d.). Scotland’s new hate crime act will have a chilling effect on free speech. The Economist. https://www.economist.com/the-world-ahead/2021/11/08/scotlands-new-hate-crime-act-will-have-a-chilling-effect-on-free-speech

  7. Lomas, Natasha. 'Security Researchers Latest to Blast UK's Online Safety Bill as Encryption Risk.' TechCrunch, 5 July 2023, techcrunch.com/2023/07/05/uk-online-safety-bill-risks-e2ee/.

  8. Al-Nashar, Nabil. 'Millions of Dollars in Fines to Punish Online Misinformation under New Draft Bill.' ABC News, 25 June 2023, www.abc.net.au/news/2023-06-25/fines-to-punish-online-misinformation-under-new-draft-bill/102521500.

  9. 'Cryptochat.' Meedan, meedan.com/project/cryptochat. Accessed 8 July 2023.

  10. Lomas, Natasha.'Security Researchers Latest to Blast UK's Online Safety Bill as Encryption Risk.' TechCrunch, 5 July 2023, techcrunch.com/2023/07/05/uk-online-safety-bill-risks-e2ee/.

  11. United Nations General Assembly. The Universal Declaration of Human Rights (UDHR). New York: United Nations General Assembly, 1948.

Tyler Durden Fri, 10/20/2023 - 06:30

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International

Lithium stocks fall due to supply surplus

Although, new figures predict that the increased demand for electric and hybrid-electric vehicles and increasing energy storage systems will popularise…

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October 20, 2023

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Although, new figures predict that the increased demand for electric and hybrid-electric vehicles and increasing energy storage systems will popularise lithium usage and push demand to $2.5 million per metric ton by 2023. In 2023, this figure is expected to hit $1 million per metric ton, a 1.25% increase if the demand trend continues.

Bank of America (BoA) analyst Steve Byrne slashed the price target of Albermarle to only $161 amid supply concerns. Although, supply may be limited considering many projects in the US and Australia are Greenfield mines as opposed to Brownfield exploration. Many of these projects involve small miners who face capital constraints that could lead to further delays to the supply chain.

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It is worth noting that Liontown Resources (LTR) was at $1.52 in March prior to the Albemarle interest. China’s spot price for lithium fell 70% this week from its peak of $23.850 per metric ton since last November. It may be that equity will be issued at the lower end of the range.

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The Dollar Continues to Press Against JPY150; Risk Off Ahead of the Weekend

Overview: True to the market’s penchant, it heard a
dovish Fed Chair Powell yesterday. He seemed to suggest that the bar to another
hike was high. This…

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October 20, 2023

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Overview: True to the market's penchant, it heard a dovish Fed Chair Powell yesterday. He seemed to suggest that the bar to another hike was high. This helped cap the 10-year yield just in front of 5.00% and allowed foreign currencies to recover against the dollar. The US two-year yield reversed lower after rising above 5.25%. It is now around 5.15%. Still, Powell appeared to cover similar ground as several other officials, including Fed governors in recent days. The dollar is trading with a firmer bias in Europe, and it drew ever nearer JPY150. Most of the non-restricted emerging market currencies, including the South African rand, central European currencies, and Mexican peso are softer. Gold is extending it surge for the fourth consecutive session and is above $1980 having settled last week a little below $1933. It is up nearly $150 an ounce since the Hamas attack. December WTI is also rising for the fourth consecutive session. It settled near $86.35 last week and approached $90 today. It is up roughly 10% over the past two weeks. 

Equities are lower, and given the geopolitical developments, risk-off moves ahead of the weekend are not surprising. Asia Pacific equities are a sea of red today and this week. South Korea and Australia indices lead today's move with more than 1% drawdowns, but on the week China's CSI 300's 4.2% drop is the region's largest loss. The Stoxx 600's nearly 1% drop today brings this week's decline to above 3%, the most since March. US indices are softer and have fallen for the past three sessions. European 10-year benchmark yields are narrowly mixed with most peripheral yields slightly softer and core rates a little firmer. Gilts remain under pressure with the 10-year yield up nearly three basis points to a new high for the week near 4.70%. The 10-year US Treasury yield is off 4.5 bp to about 4.95%. Itis up about 24 bp this week. The implied yield of the December 2024 Fed funds futures has risen by almost 12 bp this week.   

Asia Pacific

It was a mixed week for China. Growth in Q3 was a little better than expected even though the property sector remains distressed, and Country Garden is on precipice of default, having missed the final deadline of a coupon payment on a dollar bond. China surprised the international community striking a debt agreement with Sri Lanka before the Paris Club. It celebrated the 10th anniversary of the Belt Road Initiative, Although the US has been critical, and Europe has become more disenchanted, developing countries in Asia, Latam, and Africa are more may still be attracted. The media jumped all over US Treasury data showing that China sold $21.2 bln of US bonds, including Agency debt, in August. The $5.1 bln in divestment of US equities appears to be a record. Still, before filing this under de-dollarization, note that China's sales were largely offset by a movement into bills and short-term securities, not out of the dollar. Note too that in addition to the BRI, Xi's other global initiative, the Asian Infrastructure Investment Bank also makes dollar loans. Meanwhile, the US defense of Israel did not bolster Washington's standing among large parts of the so-called Global South, which China's says it champions. Lastly, that Chinese banks did not reduce the loan prime rates was not surprising after the PBOC left the one-year Medium-Term Lending Facility rate unchanged earlier this week at 2.50%.

Japan's September CPI softened a little and was largely signaled by the Tokyo's report a couple of weeks ago. Headline CPI eased to 3.0% from 3.2%. This is the lowest reading so far this year and matches the low since July 2022. The core rate, which excludes fresh food, fell to 2.8% from 3.1%. This is the rate that the BOJ targets at 2%. It peaked in January at 4.2%. The measure that excludes fresh food and energy eased to 4.2% from 4.3%, which was the peak seen first in May and then July and August. The low for the year as set in January at 3.2%. Both of these core rates were slightly firmer than expected. Some press reports suggest that at the BOJ meeting at the end of the month, the inflation forecast could be raised to 3.0% this fiscal year from 2.5% and next year's projection raise to a little above 2% from 1.9%. The forecast for FY25 may stay below 2% (set at 1.6% in July). Note that here are two byelections on Sunday and Prime Minister Kishida is set to deliver an important policy speech on Monday, which is expected to address fiscal policy.

The dollar reached JPY149.96 in North America yesterday according to Bloomberg. In effect, it came within 2/10000 of a cent shy of the equivalent of JPY150 (~0.006666). There are options for a little more than $1 bln struck at JPY150 that expire today and Bloomberg has today's high at JPY149.99. In the Powell-induced pullback, the dollar fell to new session lows but found new bids slightly below JPY149.70, where it found support today, as well. The Australian dollar recovered in North America from the dip in Asia and Europe below $0.6300, and Powell's comments goosed it up to almost $0.6360, where it ran out of steam. It stalled near a retracement of the two-day decline and in front of the 20-day moving average (~$0.6375). It returned to the $0.6300 area today and has mostly held below $0.6330. The greenback rose against the Chinese yuan for the fourth time this week and made a marginal new high today near CNY7.3185. It is the strongest the US dollar has been since September 11. The PBOC injected a record amount of liquidity (CNY828 bln, or ~$115 bln) through its reverse repo operations today apparently to facilitate next tax period and new government bond issuance. The PBOC set the dollar's reference rate at CNY7.1793, a new low for the week. The average projection in the Bloomberg survey was for CNY7.3074.

Europe

It was not a particularly good week for the UK. It announced that jobs were lost in September for the third consecutive month, though wage pressures eased slightly more than anticipated in the three months through August. Still, September CPI rose 0.5% and the year-over-year rate, and especially service prices were firmer than expected. Earlier today, a 0.9% decline in retail sales were announced, and a 1% drop when gasoline is excluded. The drop was more than twice the median forecasts in Bloomberg's survey. Many economists think the UK economy stagnated in Q3 and look for the same in Q4. The 10-year Gilt yield jumped 30 bp this week, the most in nearly four months and rose every day this week. Separately, the Labour took both previously held Conservative seats in yesterday's byelection. 

Germany lifted its objections to (France) using state subsidies to fund its nuclear power plants, which provide 70% of its electricity. However, in the grand horse-trading exercise, it may mean that Berlin will not compromise on its backing of re-imposing the Stability and Growth Pact, which will force many countries to tighten fiscal policy. Germany has an "escape clause” if it is in a recession. Meanwhile, US and European officials meet in Washington today. The US wants Europe to impose a 25% tariff on steel and 10% on aluminum from non-market economies (i.e., China). In exchange, Europe wants the so-called Trump-era tariffs to be permanently lifted. The US is trying to preserve the right to reimpose the duties on Europe in the future. Lastly, there is still hope that a US-EU agreement can be struck on critical minerals. 

With Powell's help, the euro rose to a five-day high near $1.0615 yesterday. Some of the buying may have been related to the nearly 900 mln euro options at $1.0550 and nearly 2 bln euros in options struck at $1.06 that expire today. There are almost nearly $2.5 bln in options at $1.0625 expiring today. Still, the euro failed to settle above $1.0600, which tarnished the otherwise firm performance. Last week's high was near $1.0640. A move above there would lift the technical tone, but so far today, the euro has held below $1.06. Support is seen in the $1.0555-60 area. Sterling's recovery from $1.2090 was impressive but new sellers emerged as it approached $1.2200. Yesterday was the first session since the US employment data on October 6 that sterling was unable to trade above $1.22. It retested yesterday's lows today after the disappointing retail sales report. It recovered by looks capped around $1.2140. Separately, note that S&P reviews Greece's debt later today and its BB+ rating. An upgrade to investment grade is possible. DBRS already did so last month. S&P is also due to review Italy's BBB rating today. We suspect the risk is of an outlook downgrade to negative from stable.

America

It was a mixed week for the US. The key economic data were stronger than expected. This included retail sales, industrial production, and business inventories. The Atlanta Fed's GDP tracker for Q3 GDP was lifted to 5.4% (from 5.1% in the previous week) and several money center banks revised up their forecasts as well. The median forecast in Bloomberg's survey sees 4% growth, when it is reported next week. The 10-year bond yield reached 4.99% yesterday. It settled at 4.61% last week. Almost half the increase seems to come from the change in expectations for overnight rates next year. The implied yield of the December 2024 Fed funds contract rose 16 bp this week before pulling back in response to Fed Chair Powell's comments. The other half of the increase in the 10-year note yield appears to reflect the term premium, which is "compensation" for risk that the yield rises over the life of the bond. It is the part that can be argued is tightening financial conditions beyond what the Fed has done. Yet, the rising rates did not prevent bank shares from advancing, even b Coming into today the index of large bank shares, perhaps helped by the earnings reports is up about 0.20% this week, which if sustained would be the first back-to-back weekly gains since July. An index of regional bank shares is up about 2.4% this week, the largest advance in seven weeks. On the other hand, the House of Representatives still has been unable to pick a speaker and the Beige Book picked up growing concerns about the economic outlook. 

Canada and Mexico report August retail sales today. The median forecast in Bloomberg's survey calls for a 0.1% decline, which would be the first since March. If true, it probably overstates the weakness of the Canadian economy. Still, the economy is nearly stagnant. The Q2 contraction of 0.2% at an annualized rate is expected to be followed by a 0.3%-0.4% expansion in Q3. The Bank of Canada meets next week, and the odds of a hike have been downgraded in the swaps market to less than 13% from more than 38% at the end of last week. Retail sales are expected to edge up by 0.1% in Mexico. They had risen by 0.2% in July. Mexico's retail sales rose at an annualized rate about 14% in Q2 after falling at a 4.0% annualized rate in Q1 23. On a quarterly basis, the Mexican economy expanded by 0.8% in Q1 and Q2 23. It is expected to slow to around 0.5% in Q3 and further in Q4.

The US dollar was consolidating its gains that took it to CAD1.3740 in Europe yesterday before Powell spoke. The greenback slumped to CAD1.3680 but quickly bounced before stalling near CAD1.3710. It is consolidating quietly inside yesterday's range. A close below CAD1.3680 would be constructive for the Canadian dollar. Still, the US dollar needs to fall back below CAD1.3600 to be anything of technical importance and, ideally, below last week's lows in the CAD1.3570-80 area. The US dollar reached almost MXN18.40 yesterday in Europe and fell to a session low near MXN18.16 after Powell's comments before stabilizing. The dollar is consolidating firmly near yesterday's highs. A break of the MXN18.4860 high seen earlier this month, could signal a move toward MXN18.80. Recall that in Q2, the peso fell in four weeks. Assuming it does not recover much today, the peso would have weakened for the sixth week in the past eight. At the risk of oversimplifying, it appears the risk-off has met the overweight positioning. Moreover, as the volatility is rising, and this also impacts the attractiveness of carry strategies. Three-month implied volatility has risen from below 9% in July to above 16% this month and is now around 15.25%. Lastly, Argentina holds presidential elections on Sunday, but a second round will likely be necessary (November 19). 

 

 

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