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Week Ahead – Fed minutes and inflation in focus

A busy week in store Another fascinating week in the markets and there’s little reason to think there isn’t plenty more to come in the final months of the year. Russian President Vladimir Putin calmed investor nerves this week, reassuring everyone…

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A busy week in store

Another fascinating week in the markets and there’s little reason to think there isn’t plenty more to come in the final months of the year. Russian President Vladimir Putin calmed investor nerves this week, reassuring everyone that the country stands ready to stabilise the energy market just as the situation was getting out of control. Of course, that would be far easier if the controversial Nord Stream 2 pipeline’s approval was accelerated. Over to you, Germany.

The debt ceiling threat has been pushed back to December, alleviating mild concerns that lawmakers on both sides may not blink until it’s too late. All eyes remain on Washington though, as we wait to see whether President Biden will renominate Fed Chair Jerome Powell, just as the central bank prepares to taper its pandemic asset purchase program in November following a good enough September jobs report.

Evergrande may have taken a step back from the headlines but the company’s problems are far from over. Missed debt payments won’t be tolerated for much longer and investors will increasingly demand answers. We’re already seeing contagion as other developers miss payments and the situation will get far worse if something doesn’t change very soon.

Fed minutes and inflation data eyed on Wednesday

How much longer does CBRT Governor Sahap Kavcioglu have?

Japanese Prime Minister Fumio Kishida sets election date


Country

US

A weak payrolls report will not derail the Fed, and now markets can fully expect a formal taper announcement at the November 3rd FOMC meeting.  Congress has also punted on making any hard decisions over the debt ceiling, infrastructure, and spending, so the focus on Wall Street will primarily fall on inflation.  The September inflation report is expected to show pricing pressures remain elevated, but any hotter-than-expected readings could unnerve some investors. 

Many traders are closely watching to see what President Biden does regarding renominating Fed Chair Powell.  A decision could happen on or before October 13th, when Randal K. Quarles, Vice Chair for Supervision term expires.  What has complicated Powell’s potential renomination has been the Fed trading scandal that impacted two presidents of Fed reserve banks and Fed Vice Chair Richard Clarida.

The upcoming week is filled with economic data releases and Fed speak.  Many investors will pay close attention to the more dovish members, Evans and Brainard, to see if they are changing their tune about inflation being transitory.   On Monday, Fed’s Evans gives introductory remarks at an award ceremony.  On Tuesday, the NFIB Small Business Optimism report is expected to show some weakness, JOLTS job openings could remain near the 10.9 million level, and Fed’s Bostic will speak on inflation at the Peterson Institute. 

Wednesday is the most important day of the week as Wall Street will closely follow the September US inflation report, the release of FOMC minutes, and what Fed’s Brainard says at the Fed Listen Event.  Thursday contains the release of the weekly jobless claim, September PPI and is filled with Fed speak from Bostic, Logan, Barkin and Harker.  Friday is the second most important day of the week as traders will follow the release of September retail sales, which should show the consumer is weakening.  The Empire manufacturing report, the first regional index for October, is expected to show manufacturing activity slowed, but the primary focus for some might be the comments about supply chain issues.  Fed’s Williams will also participate in a monetary policy panel.  

EU 

A quiet week ahead for the EU, with data releases primarily made up of tier two and three releases. The only exception being the ZEW economic sentiment figures on Tuesday. 

UK

A scattering of economic data throughout the week to come, starting with NIESR GDP estimate on Monday, labour market figures on Tuesday and the official monthly GDP data on Wednesday. Tier two and three releases will also be released throughout the week.

Markets continue to price in three rate hikes by the end of next year, with the first potentially by this December.

Emerging Markets

Russia

Russia has positioned itself right at the centre of the energy crisis, with President Vladimir Putin claiming they’re ready to stabilise the market. It seems what will help with this is the approval of the politically divisive Nord Stream 2 pipeline which will enable more supplies. How fortunate. No data of note next week.

South Africa

Another quiet week on the data side, with business confidence index on Monday, manufacturing production index on Tuesday and retail sales on Wednesday. 

Turkey

Rumours surfaced today that President Erdogan is losing patience with CBRT Governor Sahap Kavcioglu, just seven months after taking charge at the central bank. It would appear the Governor is on borrowed time if both his boss and the markets have lost faith in him. 

With the lira trading at record lows, crossing your fingers and hoping inflation falls as you cut rates is unlikely to end well. Especially if you’re seemingly doing it to appease a President that is reportedly frustrated at it taking so long for the loosening process to begin. We may be about to see the fourth Governor sacking in a little over two and a half years.

Asia Pacific

China

China has another short week ahead, with Friday being a holiday. The data calendar is light with the highlight being inflation on Thursday which is expected to rise by 0.90% YoY. 

China’s energy shortages are grabbing the headlines with the government instructing state energy companies to secure supplies at any cost. That will keep energy prices supported, but any signs that the situation is worsening may again lead to selling on the main indexes. 

President Xi makes a speech on Taiwan this weekend, and depending on the contents, could see some volatility in regional markets on Monday.

Evergrande has slipped from the headlines this past week, but with another China developer defaulting on a foreign debt this week, markets are not far away from sparking another sell-off in Mainland and Hong Kong equity markets.

India

The RBI has left policy rates unchanged, saying that it remains accommodative. That has been despite inflation far outstripping policy settings leading to a stagflationary environment. The Indian Rupee has been under pressure for the past week. INR has immediately sold off after the RBI decision and may test 75.00, even 75.40.

Stagflationary fears could increase with the release of Industrial Production and WPI  on Tuesday and Friday.

With energy prices remaining elevated, particularly coal and natural gas, the pressure will come on India’s current account as a massive net importer of energy. That might explain why the fizz has gone out of India’s stock market over the past week. 

Australia & New Zealand

Data-wise, New Zealand releases Electronic Retail Spending on Monday, while Australia releases Consumer Confidence and Employment on Thursday which usually generates some intra-day volatility.

The RBNZ raised policy rates as expected but  NZD/USD remains acutely vulnerable to the delta-variant which is now spreading outside Auckland to adjacent provinces. A deterioration over the weekend could see NZD/USD marked sharply lower on Monday’s open.

Japan

New Prime Minister Kishida has set a 31st October election and has promised cash payments to citizens affected by the virus and also a new supplementary budget (read fiscal goodie bag) after the election. Japan has a heavy data schedule including PPI, Reuters Tankan, Machinery Orders and Industrial Production. The overall tone is closely tied to US markets right now, so the data will only be useful for intra-session volatility.

Japan equities are maintaining a high correlation to Wall Street this week. Fiscal stimulus announcements are also providing support. USD/JPY has risen to near 112.00 as the US Dollar prices in the Fed taper and US yield remain firm. 


Key Economic Events

Saturday, Oct. 9

Czech Republic elections: Prime Minister Babis expected to win a second term.

German Chancellor Merkel starts her delayed three-day visit to Israel.

Danish Prime Minister Frederiksen begins three-day visit to India  

North Korea marks the anniversary of its ruling Workers’ Party of Korea.

Economic Data/Events

China aggregate financing, money supply, new yuan loans

Sunday, Oct. 10

Taiwan President Ing-wen gives annual address  

Economic Data/Events

New Zealand home sales

China FDI

Monday, Oct. 11

US and Canada Bond markets will be closed for the Columbus Day holiday and Canada’s Thanksgiving Day.

IMF/World Bank annual meetings begin

Fed’s Evans speaks at the Lawrence R. Klein Award virtual ceremony.

Czech politics in focus: Babis to begin coalition negotiations.  

Economic Data/Events

Italy industrial production

Japan machine tool orders

Turkey current account

UK industrial production

South Africa business confidence

Czech Republic CPI

Norway CPI

Denmark CPI

Russia current account

Tuesday, Oct. 12

IMF releases World Economic Outlook and Global Financial Stability Report.

Atlanta Fed President Bostic speaks on inflation to the Peterson Institute for International Economics in Washington.

The Singapore Defense Technology Summit

The EU-Ukraine summit 

The G-20 trade ministers meet in Sorrento, Italy.

Google Cloud Next conference

Economic Data/Events

Australia NAB business conditions, consumer confidence

Germany ZEW survey expectations

India trade, industrial production, CPI

Japan PPI

Mexico international reserves, industrial production

New Zealand ANZ Truckometer Heavy, net migration, card spending

Russia trade

South Africa manufacturing production

Turkey industrial production

UK jobless claims, unemployment

Wednesday, Oct. 13

IMF Managing Director Georgieva and COP26 President Sharma speak during the IMF and World Bank annual meetings.

The G-20 finance ministers and central bank governors meet in Washington.

The Russian Energy Week conference begins

Federal Reserve Vice Chair Randal Quarles’s term expires.

President Biden could decide on renominating Fed Chair Powell

Economic Data/Events

US FOMC minutes, CPI

JP Morgan reports third quarter earnings

Australia Westpac consumer confidence

New Zealand food prices, ANZ activity outlook

China trade, medium-term lending facilities

Japan machinery orders, M2 money stock

Eurozone industrial production

Germany CPI

South Africa retail sales

Russia CPI

UK industrial, manufacturing production, trade

Thursday, Oct. 14

Reserve Bank of Australia Deputy Governor Debelle speaks at two-day CFA Australian Investment Conference

FDA meeting over Moderna and Pfizer booster Covid shots

Japan’s new Prime Minister Fumio Kishida to dissolve parliament ahead of expected October 31st national general election

Economic Data/Events

US initial jobless claims, PPI

India wholesale prices

China PPI, CPI

Australia unemployment, consumer inflation expectations

Singapore GDP

Japan industrial production

Mexico central bank minutes

Spain CPI

Russia gold, forex reserves

Poland current account

U.K. RICS house prices

EIA Crude Oil Inventory Report

Earnings Reports from TSMC, Bank of America, Morgan Stanley, and Citigroup

Friday, Oct. 15

Economic Data/Events

US business inventories, Sept Advance Retail Sales M/M: -0.3%e v +0.7% prior, Oct Empire Manufacturing: 25.0e v 34.3 prior, Oct Prelim University of Michigan consumer sentiment: 73.5e v 72.8 prior

Canada existing home sales

Eurozone new car registrations

New Zealand manufacturing index

Thailand forward contracts, foreign reserves

France CPI

Italy trade, CPI

Poland CPI

Sovereign Rating Updates

– United Kingdom (Moody’s)

– France (DBRS)

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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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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.

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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. 

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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.

More Travel:

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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