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Week Ahead -The bond market selloff continues

The bond market selloff did not ease up heading into the long holiday weekend and traders will have to soon decide if they decide to sell in May and go…

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2 years ago

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The bond market selloff did not ease up heading into the long holiday weekend and traders will have to soon decide if they decide to sell in May and go away.  The upcoming week is filled with another round of earnings, major economic data out of China, a French debate, and a wrath of commentary from finance ministers and central bankers at the IMF/World Bank spring meetings.

US

After a long weekend, Wall Street is ready to dive back into earnings season.  The second week of earnings will provide a better picture of which companies are quickly passing on their higher costs.  This week we will learn more about how confident the airlines are with travel demand, how supply chain issues are impacting IBM, Tesla, and Procter & Gamble. 

Economic data releases for the week will focus on manufacturing activity, housing data, and the flash PMI readings for April.  The US economy is still on solid-footing, so expectations across a wide range of economic data is expected to moderate. 

Fed speak for the week contains appearances from Bullard, Evans, Daly, and Chair Powell. With the Fed firmly committed to an aggressive start with the tightening of monetary policy, traders will look for clues to see which members are growing concerned about economic growth and if that could lead to less aggressive Fed tightening bets for later in the year. 

EU 

A shortened week next week as a result of the long bank holiday weekend. The data mostly consists of tier two and three releases, with the only exceptions being the flash PMIs on Friday. Final CPI data will be of interest on Thursday but any shock and awe will likely have come from the flash readings. And with the ECB taking its time to wrap up bond-buying and start raising rates, it would take something quite substantial to rock the boat. We’ll hear from Christine Lagarde next Friday but if the press conference is anything to go by, it’s not one to look forward to.

The war in Ukraine remains front and centre though, with progress appearing to have stalled in negotiations. Commodity prices remain high as the West continues to explore further sanctions. Pressure will continue to ramp up to ban oil and gas as Russia commits further atrocities but it will continue to face resistance from Germany in particular due to the economic consequences at home of such a move.

UK

Another shortened week for the UK with retail sales and PMIs the highlights next Friday. BoE Governor Bailey will speak on Thursday which will be interesting given the latest inflation data. The cooling of the hawkish rhetoric may well be dropped shortly after it was adopted.


Fines to Johnson and Sunak may have created some political instability a couple of months ago but that’s not looking likely now.

Russia

The invasion of Ukraine remains the focus as far as Russia is concerned, with sanctions continuing to come from the West in response to the atrocities it’s committing. 

Central bank head Elvira Nabiulina speaks at the Duma on Thursday. They have started unwinding their rate hikes recently as the currency has stabilised. 

South Africa

CPI inflation data on Wednesday is the only notable release next week. It remains at the upper end of its 3-6% range as the SARB continues to raise rates to pull it lower. 

 

Turkey

The CBRT left interest rates at 14% on Thursday while blaming everything except its policy decisions for the surge in inflation to 61%. The monetary policy review continues. No major events or data next week. 

China

China releases a flurry of data in the coming week but markets will be watching the evolution of China’s Covid-19 situation as the Shanghai lockdowns drag on. That has held back equities this week and an escalation will be a strong headwind next week if it worsens.

With a slowing economy in mind, markets are also expecting stimulus measures to appear finally. A RRR cut could come as soon as Friday, or anytime next week. The next MLF matures tomorrow and we could see the 1-year rate trimmed. Failing that, China announces its 1 and 5-year Loan Prime Rate decisions on Wednesday and a 1-year cut could be a possibility. Any of these will provide a short-term boost to local equity markets.

On Monday, China releases GDP, industrial production, retail sales and industrial Capacity. All of this data has downside risks and soft data will weigh on local equities and potentially weaken the Yuan. USD/CNY and USD/CNH are approaching medium-term resistance levels, a move higher through 6.4000 will signal more Yuan losses ahead.

India

The Reserve Bank of India laid the groundwork for tightening monetary policy this week, but buoyant global stock markets and a weaker US dollar at the end of the week have sheltered equities and the INR from negative fallout. India is on holiday today and Friday of this week.

India releases WPI for food, fuel and manufacturing on Monday. All have upside risks that could see markets pricing in the RBI tightening policy sooner. Expect headwinds for local equities while the INR remains at the mercy of the US Dollar direction on international markets.

Instability in Pakistan following a change of government could have negative spillovers into India’s asset markets.

Australia 

Australia is on holiday on Monday and equities have been content to follow Wall Street’s direction, while the AUD has held stead will commodity prices and a slightly hawkish change in the language of the RBA. 

Australia releases Retail Sales on Thursday and PMIs on Friday. Both have downside risks that could weigh on local markets. Conversely, higher numbers would increase the tightening pressure on the RBA.

The federal election was announced for May this week, but as yet, the probable change of government is being discounted by local markets.

New Zealand

New Zealand is closed on Monday. The NZD is ending the week under pressure as the RBNZ hiked rates by 0.50%, but left its terminal guidance unchanged. Services PMI on Tuesday and inflation on Thursday have upside risks and could spark more selling of NZD as the RBNZ gets perceived as being ever further behind the inflation curve.

A sagging property market and rampant cost of living increases are increasing political pressure on the government in New Zealand, limiting gains by equities and the NZD. 

Japan

USD/JPY remains very near recent highs as the US/Japan rate differential remains elevated. Further moves higher by US yields next week could push USD/JPY to near 128.00. Equities are tracking US markets for now.

The only data this week is inflation on Tuesday which should contain no upside shocks, much like the past 25 years.

Singapore

The MAS has tightened monetary policy by recentering the NEER band and increasing the appreciation slope. That has led SGD into the end of the week. Singapore releases non-oil exports on Monday and weak numbers will raise fears that the MAS is hiking into a slowing economy, a negative for local equity markets.

Markets

Energy

Oil prices are a little higher on Thursday after rallying strongly the previous two days. The flirtation below $100 didn’t last long as the slight lifting of restrictions in China partly removed one key downside risk for prices. With the IEA reserve release priced in, that leaves the risks heavily tilted to the upside as OPEC remains committed to its key ally and unable to hit the quotas its been set anyway.

That could leave Brent prices ranging between $100 and $120 for now, with WTI more like $95-115. There’s no shortage of risks to that though and this remains an incredibly headline-driven market. The prospect of Finland and Sweden joining the NATO alliance is unlikely to ease tensions between Russia and the West which could further spill over into the oil market. 

Gold

It would appear gold isn’t going to extend its winning run to seven days ahead of the long weekend. It’s trading a little lower on Thursday after running into some resistance around $1,980. The yellow metal continues to show momentum which may suggest a run at $2,000 is on the cards. At a time of such aggressive tightening, it’s unclear whether it’s a fear of inflation, the economy or risk that’s driving the move, perhaps all of the above. But there’s no shortage of demand at the moment.

Bitcoin

An encouraging rebound in bitcoin on Wednesday was short-lived, with the cryptocurrency once again in the red on Thursday. It appears to have struggled around the midpoint of Monday’s sell-off which could be viewed as a bearish signal. I’m not sure I’ll read too much into that but it’s certainly lost all breakout momentum in recent weeks. It continues to trade more broadly in its 2022 recovery channel and recent price action suggests it could be heading for another move towards the lows. That’s around 10% from the current price and a break below here could be a very bearish development.

Monday, April 18

Economic Data/Events:

  • China quarterly GDP and March Industrial production, retail sales and other key indicators
  • Easter Monday: UK and most of European financial markets are closed
  • IMF/World Bank spring meeting begins
  • Fed’s Bullard speaks
  • Spain Trade
  • Canada existing home sales, housing starts
  • India wholesale prices

Tuesday, April 19

Economic Data/Events:

  • US housing starts
  • G-20 finance ministers, central bankers meet at IMF/World Bank spring meetings
  • Fed’s Evans speaks
  • IMF releases World Economic outlook
  • Japan industrial production
  • Mexico international reserves

Wednesday, April 20

Economic Data/Events:

  • US existing home sales
  • Fed’s Beige Book is released
  • Fed’s Daly and Evans speak at separate events
  • French presidential debate
  • Canada CPI
  • South Africa CPI
  • Japan Trade
  • Italy Trade
  • China loan prime rates
  • Eurozone new car registrations, industrial production
  • EIA crude oil inventory report

Thursday, April 21

Economic Data/Events:

  • US initial jobless claims, Leading index
  • Eurozone CPI
  • New Zealand CPI
  • Fed Chair Powell and ECB’s Lagarde speak at event hosted by IMF
  • Eurozone consumer confidence

Friday, April 22

Economic Data/Events:

  • US Flash PMI readings
  • European Flash PMIs: Eurozone, France, Germany, U.K.
  • UK PM Johnson to visit India
  • BOE’s Bailey to speak on IMF panel
  • Japan CPI
  • Canada retail sales

Sovereign Rating Updates:

– United Kingdom (S&P)

– United Kingdom (Moody’s)

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International

Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

Published

3 hours ago

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March 10, 2024

By

It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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Government

Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

Published

17 hours ago

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March 9, 2024

By

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Government

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

Published

17 hours ago

on

March 9, 2024

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

“The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

“By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

“This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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