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Week Ahead – Election Time!

Week Ahead – Election Time!

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The week we’ve all been waiting for

What a week we have in store. The US jobs report is typically the headline act the first week of the month but next week it won’t even make the top three. Covid-19 is wreaking havoc once again, the Fed, BoE and RBA will look to reassure and, of course, the US election will be front and centre.

US election adds to market uncertainty

Brexit silence is bliss

Time for OPEC+ to act?


Country

US Politics

Election Day is finally upon us.  A stunning total of early ballots are in and all early signs are pointing to a blue wave.  Democrats voted early, while many Republicans appear to be planning to vote on Election Day.  Some political pundits argue that President Trump could surprise everyone like he did in 2016, but it seems very unlikely.  Most public opinion polls have attempted to account for a significant portion of President Trump’s base and the number of undecided voters is considerably smaller.  

For many traders, the Senate Race is almost just as important as the presidency.  If Biden is victorious and Democrats win the Senate, he will be able to easily deliver higher taxes, tougher regulation, massive infrastructure spending and launch his clean energy initiatives.  A Biden presidency with Republicans keeping the Senate would derail sweeping changes and deliver a lot less stimulus to the economy.  If President Trump pulls off a big upset, the next stimulus package will be much smaller than the currently discussed $1.88 trillion package, but tax cuts and a lax stance on regulation should support risky assets.  

US

This FOMC rate decision could mirror the ECB rate decision that telegraphed further action in December.  The Fed will not cut rates and it is unlikely that they will increase their asset purchases just yet.  What could be on the table is the continued discussion of keeping rates lower for longer and adopting yield curve control.  The Fed will have to address the deterioration to the economic outlook due to the virus spread and the inability of Congress to deliver much needed fiscal support.  The Fed will keep nagging Congress to deliver aid and likely have to settle on increasing purchases at the December meeting.  

Lost in the madness of election week and central bank rate decisions is earnings results from many important pharmaceutical companies.  Updates from AstraZeneca, Bristol-Myers Squibb, and Regeneron could provide further insight into how certain critical COVID-19 treatment and vaccine trials are performing and when to expect updates. 

EU

The EU is slowly going into lockdown, with France fully in and Germany currently opting for a lighter version. But the trend is clear and it seems only a matter of time until more countries follow. The ECB acknowledged this on Thursday as it laid the groundwork for more easing in December, warning that Q3 may have been better than anticipated but Q4 will be worse and risks remain tilted to the downside.

The move is understandable given it will have new projections, know whether there’s a Brexit deal or not and who the next President of the US will be, not to mention just how much damage the second wave is wreaking on the economy. More bond buying is a given, the scale is to be determined.

Brexit

Silence is bliss. Not only because we’ve had four years of this fight being carried out in public, much to the annoyance of everyone who’s listened, but because it almost certainly means the hard work is now going on that will lead to compromises and a deal being reached. The bravado is over. The serious negotiations have started that will enable a deal to be reached that both sides can declare a success to their respective voters. 

Mid-November is now being talked about as the point at which a deal needs to be reached in order for it to be ratified before the end of the year and for the first time in four years, it’s a deadline I have faith in. The reason is simple, it’s now a target for both sides to agree to the details of their new partnership, rather than for one side to buckle. The narrative is important to both parties and it is now in place for a deadline to finally be achieved. 

UK

The government is resisting going into a national lockdown as much as possible, despite others in Europe starting to do just that. It’s eerily reminiscent of earlier this year. Despite the resistance, more and more regions are seeing their tiers increase and it seems inevitable that at least most, if not all, of the country will be in tier three before we know it.

All the more reason why the BoE will be forced to ease monetary policy again before the end of the year. Bond buying will likely remain the preferred option, with the last top up running dry at the end of the year, but negative rates remain on the table, for some reason.

Still, the meeting next week could be when they pull the trigger, coming alongside new economic projections. The road ahead is clear for all to see, more restrictions and a double dip recession. The argument for waiting, similar to the ECB, is Brexit and the time to assess Covid damage, which may be enough to keep them on hold another month. 

Turkey

The Turkish central bank is facing a crisis of confidence, as the lira suffered another torrid week, following the CBRT’s decision not to raise rates last week. The central bank claimed that financial conditions had tightened sufficiently but those in the markets clearly disagree, with the talk once again being centred around political influence in their decision making.

President Erdogan has been very clear in his opinion on the link between interest rates and inflation and it doesn’t exactly align with the consensus view. With the lira in freefall, the central bank will need to act. An emergency rate hike may be on the cards prior to the next meeting on 19 November.

China

China PMI released tomorrow (Saturday), Caixin on Monday. Underperformance risks Asia markets sell-off Monday morning. Pan-Asia PMI’s also released. Expected to outperform. 

Ant Financial starts trading on Nov 5th. If it doesn’t immediately rally then Chinese stocks could suffer.

US election results cloud Asia picture next week. Asia stocks and currencies have been resilient on the back of strong China performance. Poor data as above could threaten a sudden correction if the US election result is also messy.

Hong Kong

All eyes will be on the Ant Financial IPO. Bullishness on IPO should mollify any risk based selling ahead of the US election.

USD/HKD remains at the bottom of its trading band with heavy buying from the HKMA. The demand for HKD is due to the Ant Financial IPO this week.

No important data but a Biden win should be positive for HK equities.Highly leveraged retail buyers of Ant Financial IPO could exit rapidly if prices do not rise on the day, Hang Seng negative.

India

Manufacturing and services PMI’s expected to strengthen into expansionary territory this week. The domestic economy remains in a deep recession due to Covid-19.

Indian Rupee continues to weaken after appalling GDP data. Rampant Covid-19 continues to crush economic activity and India’s potential recovery.  Weak BoP, monetary and fiscal positions with stagflation potentially India’s biggest headache. Continues to be Asia’s weakest link along with Indonesia.

An uncertain US election will add downward pressure on the INR.

New Zealand 

No significant data. NZD/USD threatened by dollar-bloc risk reduction and uncertain US election results risk next week. Strongly bearing NZD/USD. NZD/USD threatened support at 0.6600, suggesting further losses to 0.6500 soon. Ramp up in the risk environment next week could extend the NZD/USD fall to 0.6400.

Australia 

Australia PMI’s and Balance of Trade expected to show further strong recoveries, boosted by domestic activity and China iron ore exports. China/Australia trade conflicts have died from the headlines.

RBA rate decision on Tuesday 3rd, 50/50 on another cut to 0.10% from 0.25%, or more QE. RBA is extremely dovish and if not Tuesday, the next meeting will be live. Bearish AUD, bullish Australian stocks.

AUD vulnerable to any China PMI underperformance tomorrow and Monday. AUD underperforms as global investors unwind dollar-bloc risk into the US election. Uncertain results in the US are strongly negative. 

AUD/USD is threatening major support at 0.7000 with 0.6800 the next target, possibly extending to 0.6600 on a risk meltdown next week.

Japan

Japan PMI’s and Household Spending are expected to show the domestic economy remains weak. Policy vacuum from new government with BoJ holding this week in typical possum in headlights style.

USD/JPY volatile and will be bounced around on the risk environment of the US election. Yen should outperform as a haven currency leading to downward pressure on USD/JPY. USD/JPY is threatening support at 104.00, and could quickly collapse to 102.00, possibly 101.00 if the risk environment internationally intensifies into Wednesday Asian time. 


Markets

Oil

Oil saw some profit taking after falling back to its lowest level since late May, as Europe increasingly adopts new lockdowns and hits the demand outlook for crude. With WTI back around $35 and Brent coming close to $37, OPEC+ is going to start getting a little anxious. The next JMMC meeting is in a couple of weeks time; should the group hold out that long, I expect the January increase will be pushed back in order to support prices and rebalance the market.

Until then, barring any more verbal intervention, crude prices could broadly remain under pressure, with $40 providing a ceiling for any Brent rallies. The Saudi Energy Minister has previously warned against shorting the market, suggesting that it will be a painful exercise. Traders aren’t deterred just yet but it may provide some support to the market and stop it falling as far as it otherwise would. $35 will be an interesting psychological test for Brent.

Gold

The dollar is firmly back in favour as traders seek out safety at the expense of riskier assets. It still feels strange to put gold in that category but the evidence is there for all to see. The dollar has surged in recent days, although it is seeing some profit taking today, while gold has tumbled out of the lower end of its range and is testing its late summer lows, around $1,850.

A break below here could be a psychological blow for the yellow metal but I don’t think it will be devastating. The next couple of years should be very kind to gold so any big drops are always going to pique the interest of traders. The next test will come around $1,800, should $1,850 fall, which I expect it probably will.  


Key Economic Events

Saturday, Oct. 31

-ECB Executive Board member Fabio Panetta participates in the online conference “Festival dell’ottimismo 2020.”

-Brexit trade-deal talks between the UK and EU continue.

Economic Data

China Oct Manufacturing PMI: 51.3eyed v 51.5 prior

Sunday, Nov. 1

– The US and Canada return to standard time, moving clocks back one hour at 2:00 a.m. ET.

Monday, Nov. 2

– ECB Governing Council member Olli Rehn speaks at a webinar on the central bank’s strategy review.

Economic Data

US Markit manufacturing PMI, ISM Oct Manufacturing PMI: 55.6 eyed v 55.4 prior, construction spending

Canada Markit manufacturing PMI

New Zealand building permits

Australia AiG performance of manufacturing index, Melbourne Institute inflation, building approvals, ANZ job advertisements

Markit PMI India, Turkey, Czech, Poland, Euro-area, UK

Japan Jibun Bank PMI, vehicle sales

China Caixin PMI manufacturing

Hong Kong retail sales

Manufacturing PMI: South Africa, Hungary

Tuesday, November 3rd

– Election Day for the US.  The presidential election race is widely expected to be won by Democrat Joe Biden.  Senate races appear to be much tighter and are expected to shift the power balance to the Democrats.  

– Euro-area finance ministers meet to discuss Covid-19, the digital euro, and the banking union. Through Nov. 4.

– Bank of Sweden Governor Stefan Ingves delivers a speech online and participates in a panel discussion on the Riksbank’s response to the coronavirus crisis and monetary policy.

Economic Data

US factory orders, durable goods, Wards total vehicle sales

Mexico Markit PMI manufacturing

Turkey CPI

Australia rate decision: Expected to cut Cash Target Rate 15bps to 0.10%

Singapore purchasing managers index

Wednesday, November 4th

– President Xi Jinping will deliver the keynote address via video at China’s third International Import Expo in Shanghai.

– EIA Crude Oil Inventory Report

Economic Data

U.S. ADP employment change, trade balance

Brazil industrial production

Canada international merchandise trade

Australia retail sales

New Zealand ANZ commodity prices, unemployment

Japan monetary base

Services PMI: Euro-area, U.K.

Poland rate decision: Expected to keep Base Rate unchanged at 0.10%

Spain unemployment

Markit PMI: Hong Kong, Singapore, Mozambique

PMI: South Africa

Philippines trade

China Caixin services PMI

Thursday, November 5th

The FOMC is expected to pave the way for an increase with the pace of asset purchases at the December meeting.  Fed Chair Powell will reiterate the urgency for Congress to deliver fiscal support.   

Bank of England expected to keep rates steady, update forecasts for economic growth and inflation and possibly increase in bond purchases to provide more stimulus as unemployment rises.

– European Commission publishes updated economic forecasts.

– ECB Governing Council members Muller and Holzmann speak at an online conference organized by Austria’s central bank.

Economic Data

US initial jobless claims

Germany Sept Factory Orders M/M: 2.0%e v 4.5 prior

New Zealand ANZ business confidence

Australia trade

Japan Jibun Bank services PMI

Norway rate decision: Expected to keep Deposit Rates steady at 0.00%

Czech rate decision: Expected to keep Repurchase Rate steady at 0.25%

Hungary rate decision: No changed expected with the One-Week Deposit Rate

Singapore retail sales

Friday, November 6th

– Bank of Canada Governor Tiff Macklem and Deputy Governor Lawrence Schembri deliver opening remarks at a BOC event

The US hiring is expected to deliver 610,000 new jobs in October, down from the prior reading 661,000, and confirming the labor market recovery has stalled.

Economic Data

US unemployment, wholesale inventories

Canada unemployment

Australia AiG performance of services index

Japan cash earnings

New Zealand two-year inflation expectation

Industrial production: Germany, Spain

Foreign reserves: Switzerland, Hong Kong 

South Africa gross/net reserves

Sovereign Rating Updates

– Germany (Fitch)

– Greece (Moody’s) 

– Italy (Moody’s)

– Finland (DBRS)

 

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide…

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Glimpse Of Sanity: Dartmouth Returns Standardized Testing For Admission After Failed Experiment

In response to the virus pandemic and nationwide Black Lives Matter riots in the summer of 2020, some elite colleges and universities shredded testing requirements for admission. Several years later, the test-optional admission has yet to produce the promising results for racial and class-based equity that many woke academic institutions wished.

The failure of test-optional admission policies has forced Dartmouth College to reinstate standardized test scores for admission starting next year. This should never have been eliminated, as merit will always prevail. 

"Nearly four years later, having studied the role of testing in our admissions process as well as its value as a predictor of student success at Dartmouth, we are removing the extended pause and reactivating the standardized testing requirement for undergraduate admission, effective with the Class of 2029," Dartmouth wrote in a press release Monday morning. 

"For Dartmouth, the evidence supporting our reactivation of a required testing policy is clear. Our bottom line is simple: we believe a standardized testing requirement will improve—not detract from—our ability to bring the most promising and diverse students to our campus," the elite college said. 

Who would've thought eliminating standardized tests for admission because a fringe minority said they were instruments of racism and a biased system was ever a good idea? 

Also, it doesn't take a rocket scientist to figure this out. More from Dartmouth, who commissioned the research: 

They also found that test scores represent an especially valuable tool to identify high-achieving applicants from low and middle-income backgrounds; who are first-generation college-bound; as well as students from urban and rural backgrounds.

All the colleges and universities that quickly adopted test-optional admissions in 2020 experienced a surge in applications. Perhaps the push for test-optional was under the guise of woke equality but was nothing more than protecting the bottom line for these institutions. 

A glimpse of sanity returns to woke schools: Admit qualified kids. Next up is corporate America and all tiers of the US government. 

Tyler Durden Mon, 02/05/2024 - 17:20

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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…

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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….

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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. www.insilico.com 


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