Overview: Asia Pacific stocks rallied on the heels of the surge in US equities. China’s CSI 300 led the large bourses higher with a 1% advance. Europe’s Stoxx 600 is matching yesterday’s gain of a little more than 0.6%, while US futures are a touch softer. European yields are 9-13 bp lower, with the peripheral premiums shrinking. The US 10-year yield, which tumbled 14 bp yesterday is little changed now near 3.60%. The dollar is broadly lower. The strongest of the G10 currencies is the Japanese yen, where the drop in US rates is the driver. The weakest is the Canadian dollar, the only major not to be appreciating against the greenback today. Barring the Turkish lira, South African rand, and a couple of currencies from central Europe, the dollar is trading heavily against emerging market currencies. The strongest is the South Koran won (~1.1%) despite an unexpectedly large drop in exports and a deteriorating trade balance. Gold likes the combination of lower interest rates and a weaker dollar. It has moved within striking distance of the mid-November high near $1786.50. January WTI is consolidating mostly above $80 today, while US natgas edges higher after falling 4.2% yesterday. Europe’s natgas benchmark is continuing to surge. It is up 7.5% today after an 8.1% rally yesterday and 5.5% on Tuesday. Optimism in China helped lift iron ore by 2.2%, while March copper is edging higher for the third straight session of gains. Lastly, March wheat is giving back nearly half of yesterday’s 1.8% gain.
Outgoing Vice Premier Sun gave the strongest signal to date of shifting Covid policy, saying that it has entered a new stage. The move to quieter and more targeted restrictions has been underway for a few weeks. The claim that Covid in China is less virulent still has to be seen. A new push to encourage vaccinations, especially among the elderly will help. As we have noted, Taiwan's experience since the opening up six months ago, if repeated in China would be catastrophic. Also, reports suggest Hong Kong's hospitals have had to turn away non-emergency procedures due to the Covid cases overwhelming capacity. In addition, we underscore the difference between declaratory policy (what is announced) and operational policy (what is done). Separately, the Caixin manufacturing PMI was improved slightly to 49.4 from 49.2. Still, it is the fourth month below 50. The "official" measure is at 48.0, which is the second month in contraction.
Japan's Q3 capex jumped to 9.8% from a year ago, twice the increase reported for Q2, and well above the 6.2% forecasts. This suggests Q3 GDP, which unexpectedly contracted by 1.2% may be revised higher. Corporate profits also surged un Q3, jumping 18.3% year-over-year, edging up the 17.6% pace seen in Q2, on the back of an 8.3% increase in sales (up from 7.2%). Still, the economy disappoints. The final November manufacturing PMI was revised to 49.0 from 49.4, and 50.7 in October. It matches the low from November 2020.
Australia's manufacturing PMI was revised to 51.3 from the 51.5 preliminary estimate and 52.7 in October. When compared with most other major countries, it manufacturing PMI appears to be holding up well. Still, it is the lowest since June 2020. Separately, Australia reported that private capex unexpectedly fell in Q3 by 0.6%. Economists had projected a 1.5% gain (median forecast in Bloomberg's survey). Third quarter GDP figures are due next week, shortly after the central bank meeting.
The focus was not on South Korea's Q3 GDP, which expanded as expected by 0.3%, but on the poor trade figures, seen a broader indicator. Its exports fell 14% from a year ago. This was largest slump in two-and-a-half years. It was driven by two elements. First, exports to China were off by a little more than a quarter from a year ago. Second, exports of semiconductor chips fell by almost 30%. Imports, which are someone else's exports, slowed from 9.9% to 2.7%. The net result was a $7 bln trade deficit in November. In November 2021, the trade surplus was almost $3 bln. The deterioration of South Korea's trade balance might be thought to explain the won's weakness this year, but not its 8% rally last month, which halved the decline of the first 10 months of the year.
Instead, like for the Japanese yen, the direction of US interest rates is key. After setting a five-day high yesterday a little shy of JPY140, the dollar reversed to about JPY137.65. Today, it was sold to about JPY135.85, its lowest level since August 23. The greenback has steadied in Europe and initial resistance is seen in the JPY137.00-50 area. The JPY135 area may offer some support ahead of the 200-day moving average near JPY134.40. After stalling near $0.6800 since mid-November, the Australian dollar powered up to $0.6840 earlier today. This is its best level since mid-September. It is trading a bit heavier in Europe. Support is seen around $0.6780, and as long as $0.6750 holds, the bull move looks intact. The next upside target is by $0.6870 then $0.6925. The greenback extended its slide against the Chinese yuan. Recall the dollar peaked on Monday near CNY7.24 amid claims from some quarter that officials were quietly devaluing it. Earlier today, the greenback dipped below CNY7.05, a two-week low. It gapped lower but has not recovered to nearly CNY7.09. Yesterday's low was close to CNY7.07. The PBOC set the dollar's reference rate at CNY7.1225, close to the median projection in Bloomberg's survey of CNY7.1234
The final manufacturing PMI reading followed a consistent pattern among the Big 4 in the eurozone. The improvement reported in the preliminary reports was pared but still showed slower contraction in activity than the previous month. Germany's stands at 46.2, down from the initial estimate of 46.7 and better than October's 45.1. The French reading is 48.3, down from 49.1 of the flash report but improved from 47.2 previously. Italy's manufacturing PMI improved from 46.5 to 48.4, which was a little better than expected. Spain's manufacturing PMI rose to 45.7 from 44.7 and was not quite as good as expected. The aggregate reading stands at 47.1, which is lower than the preliminary estimate of 47.3 but not as poor as October's 46.4. Still, it is the fifth month below the 50 boom/bust level.
Separately, unemployment in the eurozone unexpectedly slipped to 6.5% in October from 6.6%. Perhaps underappreciated, it is the lowest since monetary union. On the other hand, German retail sales were exceptionally poor, falling 2.8% in October. The median forecast in Bloomberg's survey was for a 0.5% decline. The eurozone's aggregate figures will be published next week. Recall that yesterday France reported a 2.8% drop in consumer spending in October. Economists had forecast a 1% decline.
The UK's manufacturing PMI initially was reported unchanged at 46.2, but the final reading today lifted it to 46.5. It is the fourth month below 50. It is difficult to get excited about it. By most accounts, the UK has already entered a recession. Meanwhile, Nationwide house price index fell 1.4%, more than expected. It is the third consecutive month of falling prices and the most in two-and-a-half years.
The euro posted a key downside reversal on Monday after approaching $1.05. It reached a five-day low yesterday after $1.0290 before surging yesterday in North America to $1.0430 and closing above the previous day's high. The bullish price action saw follow-through buying today to almost $1.0465. New buying was seen in late Asia/early Europe on the brief dip below $1.04. Ahead of the US jobs data, the market may be hesitant about challenging $1.05 but a move above there would likely spur stop-loss buying and the next target is the $1.0600-20 area. Sterling has risen to a new three-month high near $1.2155 to kiss the 200-day moving average. It has not been below $1.2050 today. However, the intraday momentum indicator is overextended with the latest gains in the European morning. The $1.21 area may offer initial support and then $1.2070.
Leave the price action aside for the moment, Fed Chairman Powell broke no new ground yesterday. He reiterated what he has said before and what the market has known. First, if officials knew in September what they know now, the projected terminal rate would have been a little higher. The market is already there. The median dot in September was for the peak to be near 4.6%. The market has been within an eighth of a point of 5% since mid-October. Some observers have talked about Powell killing the so-called Fed put, but in a non-crisis situation, when systemic risk is not prominent, as is the case now, the Fed seems to still be following the market. Second, since at least early November, the market has accepted that the Fed would hike 50 bp at the last meeting of the year. This is not a new position for the Fed either. The median dot in September anticipated 125 bp increase in Q4 and in November, the Fed delivered a 75 bp down payment. Third, Powell's reference to the headline and core PCE deflators, which will be reported today, of 6% and 5% respectively matches precisely the median forecast in Bloomberg's survey. Fourth, if Powell's goal was to push back against market expectations of a cut in Q4 23, as some observers claim, he failed. In fact, the yield of the December 2023 Fed funds futures contract is 29.5 bp lower than the September 2023 contract, the most in nearly two weeks. The element that seemed somewhat new was Powell stating his own view that the decline in the labor force participation rate can be mostly explained by pandemic era retirement (2 mln of the 3.5 mln shortfall). That seems reasonable, except for the fact that the participation rate never fully recovered from the Great Financial Crisis.
In addition to the PCE deflators, the personal income, and especially the consumption data will be used to adjust Q4 GDP estimate. While income is expected to have edged up by 0.4%, the same as in September, consumption is seen accelerating to 0.8% from 0.6%. That would be the most since June. The preliminary manufacturing PMI fell to 47.6 from 50.4, the first break of 50 since June 2020. It is subject to revision today. The November manufacturing is expected to confirm this break. New orders are expected to have remained below 50, which is consistent with other reports showing a drying up of the pipeline. Price paid are expected to have remained below 50 as well. October construction spending rose by 0.2% in September and likely gave it back in October. Weekly initial jobless claims are overshadowed by tomorrow's national employment report. November auto sales will trickle in today, and after jumping to 14.90 mln vehicles (SAAR) from 13.49 mln in September, economists are projecting a 14.60 mln pace. Last November, the US sold 12.86 mln vehicles (SAAR).
Canada and Mexico see their November manufacturing PMI. They are not typically market-movers. Canada also reports employment data tomorrow. After a surge in October, slower job growth is expected. The Bank of Canada meets next week, and the market favors a 25 bp hike, though has about a 1-in-3 chance of a 50 bp move. Mexico reports IMEF activity surveys and October worker remittances. The remittances continue to more than cover the trade shortfall. They are expected to be around $5.1 bln in October. The average this year is around $4.8 bln. The average for the Jan-Sept period last year was about $4.15 bln.
After pushing above CAD1.36 on Tuesday, the US dollar fell to about CAD1.3410 yesterday. A little follow-selling pushed it a little below CAD1.3400 earlier today. Still the bout of Canadian dollar underperformance does not look over. It often underperforms in a weaker US dollar environment. Initial resistance is seen near CAD1.3450 and then CAD1.35. The greenback had fallen to almost MXN19.04 on Tuesday and bounced to nearly MXN19.46 yesterday before reversing lower. The MXN19.20 area offers initial support.
“Remember that you must behave as at a banquet. Is anything brought round to you? Put out your hand and take a moderate share. Does it pass by you? Do not stop it. Is it not yet come? Do not yearn in desire toward it, but wait till it reaches you. So with regard to children, wife, office, riches; and you will some time or other be worthy to feast with the gods. And if you do not so much as take the things which are set before you, but are able even to forego them, then you will not only be worthy to feast with the gods, but to rule with them also. For, by thus doing, Diogenes and Heraclitus, and others like them, deservedly became divine, and were so recognized.”
Fortune cookies are entertaining because they come with a vague statement that can often be interpreted positively. But they are usually not to be taken seriously. This is why I find myself annoyed when I read “fortune cookies” on Twitter that provide vapid advice claiming to make inherently difficult things easy to accomplish.
Since we are approaching the end of the year when many people start thinking about New Year’s resolutions, I thought that I would provide eight (hopefully) higher quality “fortune cookies” of my own that took many years to figure out.
Almost nothing worthwhile can be achieved without considerable effort. If you want something, be prepared to work very hard to get it.
If you hate your job, find a different one or switch to a different career. If you are still young, “retirement” is almost certainly a mistake. Find something that you are good at and enjoy doing and then commit to it wholeheartedly.
Commit to reading 25 pages per day. That is over 9,000 pages per year and will put you at the very top in terms of attainment of wisdom, provided that you read with purpose. While difficult at first, it will get easier in time. Eventually, it will be very difficult to not read on a daily basis. Such days will feel incomplete.
Avoid hatred at all costs. Hatred leads to disaster and harms the person doing the hating more than the target of hatred. Instead of falling into hatred, disassociate from toxic people, especially in cases of lies and deception.
Be kind to others, especially those who through no fault of their own have been dealt a bad hand. But never allow someone to take advantage of your kindness. Provide a helping hand, not a handout, and never facilitate dysfunctional behavior. Cut people out of your life who are only interested in money.
Avoid envy. The people you see on social media who appear to have “perfect lives” almost certainly do not. Many are secretly miserable and hide behind beautiful fictions posted on social media to fool themselves as well as others.
Do not confuse frugality with cheapness. Default to generosity when it makes sense. Being cheap when it comes to health and well-being is stupid, and the same is true for intellectual pursuits. Books distill thousands of hours of the author’s time for the cost of a restaurant meal or less. Never budget for books.
These might be “fortune cookies”, but they could actually make a positive impact even though none are necessarily easy to implement. I can say that all of these concepts have helped me despite taking years or, in some cases decades, to really figure out.
Consoles and Competitionby Ben Thompson, December 12, 2022. This article provides over forty years of history of the video game industry before analyzing the FTC’s attempt to block Microsoft’s acquisition of Activision. As someone who is not familiar with the intricacies of this case, I found the lengthy discussion of the industry’s history very valuable since it provides necessary context. “For the record, I do believe this acquisition demands careful overview, and it’s completely appropriate to insist that Microsoft continue to deliver Activision titles to other platforms, even if it wouldn’t make economic sense to do anything but. It’s increasingly difficult, though, to grasp any sort of coherent theory to the FTC’s antitrust decisions beyond ‘big tech bad’.”(Stratechery)
Sea Change by Howard Marks, December 13, 2022. In this memo, Howard Marks points out that forty years of declining interest rates represented a major tailwind for investors. He likens falling interest rates to a moving walkway in an airport. Just as moving walkways make life easier for weary travelers, falling interest rates act as an assist for investors. However, this secular decline in interest rates appears to be at an end which represents a sea change in the investment landscape. Investors need to be aware that the strategies that worked well over the past forty years may not lead to outperformance in the future. (Oaktree Capital)
The California Effect by Mr. Money Mustache, December 10, 2022. The cost of living is famously high in the San Francisco Bay Area where Mr. Money Mustache recently spent a few days observing the attitudes of people with very different approaches to spending money. The reality is that even in the most expensive regions, spending excessively is always a choice, not an inevitable mandate. “San Francisco professionals live in a place where 25-year-old tech workers enjoy $200,000 starting salaries, yet still have credit card debt and car loans, and they think that is normal.” (Mr. Money Mustache)
The College Essay Is Dead by Stephen Marche, December 6, 2022. Will artificial intelligence kill the college essay? Anyone who has played with ChatGPT, a new AI tool that recently opened to the public, might be asking the question which this article explores. I admit to being a little baffled about the handwringing. After all, when I was in college three decades ago, we took exams using technology no more advanced than blue books and a pen or pencil. AI might help students cheat on work done outside the classroom, but you cannot fake your way through an exam where there is no technology other than paper and a writing implement. (The Atlantic)
Ideas That Changed My Life by Morgan Housel, December 7, 2022. Among other topics, Morgan Housel makes an excellent case for reading. Otherwise, your personal experiences will excessively influence your perception of how the world works. “Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. People believe what they’ve seen happen exponentially more than what they read about has happened to other people, if they read about other people at all. We’re all biased to our own personal history.”(Collaborative Fund)
Thankfully, Life Is Full of Problems by Lawrence Yeo, December 7, 2022. I was reminded of Viktor Frankl when I read this article. Frankl held that people gain a sense of purpose not through a tensionless state but by struggling and striving toward a personally meaningful goal. Lawrence Yeo makes a similar case. What we must do is to “upgrade” from dealing with meaningless problems to a focus on addressing “heavyweight” problems. (More to That)
The Gift of Timeby Nick Maggiulli, December 13, 2022. Almost everyone thinks about money in terms of goods or services it can buy. But money is really the gift of time: “Because everything I write isn’t really about money, it’s about time. Time with your loved ones. Time to enjoy yourself. Time to live the life you want. In the end, all of your money will be converted back to time anyways. If not now, then later. And if not by you, then by someone else. Possibly after you’re gone.”(Of Dollars and Data)
Be Wary of Imitating High-Status People Who Can Afford to Countersignal by Rob Henderson, December 11, 2022. This article argues that we should avoid emulating people who have achieved status far above ours, and instead look to those who are just somewhat ahead of us. People with very high status can afford to exhibit unusual behavior. For example, a famous author doesn’t need to use Twitter personally to surface his writing because his fans will do this for him. That’s not the case for most authors seeking wider distribution of their work. (Rob Henderson’s Newsletter)
How Neuroscience Confirms the Most Ancient Myths About Music by Ted Gioia, December 12, 2022. Music has a tremendous capacity to influence our lives as listeners, often putting us into flow states conducive to productivity. For example, I often listen to The Dave Brubeck Quartet’s performance at Carnegie Hall in 1963 when I want to get serious work done. For musicians, performing can induce an even deeper flow state, as Ted Gioia describes: “In the midst of an intense performance, the music seemed to be playing itself.” This article on music and neuroscience is part of a book being published in installments on Substack. (The Honest Broker)
Tom Gayner Discusses the Evolution of Markel, December 14, 2022. 56 minutes. This is a wide-ranging interview covering topics including Berkshire Hathaway’s recent investment in Markel, the growth of Markel Ventures in the context of the company’s overall capital allocation strategy, the use of leverage, and how investing during the pandemic was more challenging than the financial crisis. (Boyar Value Group)
The Essays of Warren Buffett, January 20, 2022. 1 hour, 58 minutes. According to Lawrence Cunningham’s newsletter, which you can sign up for here, the sixth edition of his compilation of Warren Buffett’s shareholder letters will be released early next year. I have the first and second editions and highly recommend the book. While all of the letters are available on Berkshire’s website, the compilation is organized by topic and adds significant value. In this podcast, David Senra provides his enthusiastic commentary about what he took away from this book. (Founder’s Podcast)
Master of Precision: Henry Leland Founder of Cadillac, May 31, 2020. 1 hour, 10 minutes. I think Steve Jobs and Henry Leland had much in common in terms of insisting on high quality and viewing their role as craftsmen, paying obsessive attention to details. “There always was and there always will be conflict between Good and Good Enough. In opening up a new business one can count on meeting resistance to a high standard of workmanship. It is easy to get cooperation for mediocre work, but one must sweat blood for a chance to produce a superior product. —Henry Leland”(Founders Podcast)
DoorDash: Looking for Profitable Routes, December 14, 2022. “DoorDash was founded in 2013 by four Stanford students, who saw an opportunity to make it easier for people to get the food they love delivered to them. Today, DoorDash’s three-sided marketplace serves as one of the largest local delivery companies in the world, serving millions of customers and partnering with hundreds of thousands of restaurants across 27 countries, run rating at over $50 billion of gross merchandise value.” (Business Breakdowns)
This is a brief thread on the importance of reading. It isbased on The Use of Letters, a journal entry I wrote early last year. Why would anyone voluntarily limit their understanding of the world to just their own direct experiences?
Checking quotes frequently is counterproductive. There is too much noise in quotes when checked on a daily basis and doing so is likely to make most investors miserable.
Frederick Ferdinand Schafer (August 16, 1839 – July 18, 1927) was a German-born American painter. He was born in Braunschweig, Germany and he emigrated to the United States in 1876, at age 37.
Schafer’s paintings, which mostly depict landscape scenes in California and other western states, are dated between 1873 and 1911. There are many scenes of Yosemite National Park included in a catalog of his paintings. As the weather turns colder, I thought that this scene of an unknown location captures the season quite well.
Here is a description of this painting by Jerome H. Saltzer, Professor of Computer Science Emeritus at the Massachusetts Institute of Technology:
“This painting might be described as luminist in style. Paintings such as this one may be the basis for the suggestion that Schafer’s later work was lighter, but the shortage of dated paintings makes it difficult to confirm that suggestion.”
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The U.S. Food and Drug Administration’s key science advisory panel, the Vaccines and Related Biological Products Advisory Committee, met on Jan. 26, 2023, to chart a path forward for COVID-19 vaccine policy. During the all-day meeting, the 21-member committee discussed an array of weighty issues including the efficacy of existing vaccines, the composition of future vaccine strains and the need to match them to the circulating variants of SARS-CoV-2, the possibility of moving to an annual-shot model, the potential seasonality of the virus and much more.
But the key question at hand, and the only formal question that was voted on, following a proposal from the FDA earlier in the week, had to do with how to simplify the path to getting people vaccinated.
The question put before the committee for a vote was whether to move to one COVID-19 vaccine consisting of a single composition for all people – whether currently vaccinated or not – and away from the current model that includes one formulation given as a primary series and a separate formulation administered as a booster. Importantly, approved formulations could come from any number of vaccine manufacturers, not just those that have currently authorized vaccines.
The U.S. Centers for Disease Control and Prevention currently requires that the primary series of shots, or the first two doses of the vaccine that a patient receives, consist of the first generation of vaccine against the original strain of SARS-CoV-2, known as the “Wuhan” strain of the virus. These shots are given weeks apart, followed months later by a booster shot that was updated in August 2022 to contain a bivalent formulation of vaccine that targets both the original viral strain and newer subvariants of omicron.
The committee’s endorsement simplifies those recommendations. In a 21-to-0 vote, the advisory board recommended fully replacing, or “harmonizing,” the original formulation of the vaccine with a single shot that would consist of – at least for now – the current bivalent vaccine.
In doing so, it has signaled its belief that these new second-generation vaccines are an upgrade over their predecessors in protecting from infection and severe illness at this point in the pandemic.
Will the single shot remain a mixed-strain, or bivalent, vaccine?
For now, the single shot will be bivalent. But this may not always be the case.
There was a general agreement that the current bivalent shot is preferable to the original vaccine targeted at the Wuhan strain of the virus by itself. But committee members debated whether that original Wuhan vaccine strain should continue to be a part of updated vaccine formulations.
There is no current data comparing a monovalent, or single-strain, vaccine that targets omicron and its subvariants against the current bivalent shot. As a result, it’s unclear how a monovalent shot against recent omicron subvariants would perform in comparison to the bivalent version.
What is immune imprinting, and how does it apply here?
A main reason for the debate over monovalent versus bivalent – or, for that matter, trivalent or tetravalent – vaccines is a lack of understanding around how best to sharpen an immune response to a slightly altered threat. This has long been a debate surrounding annual influenza vaccination strategies, where studies have shown that the immune “memory” that forms in response to a prior vaccine can actively repress a robust immune response to the next.
While a significant portion of the discussion focused on the mRNA vaccine platform used by both Pfizer and Moderna, several committee members emphasized the need for new technologies that could provide broader immunological protection. Dr. Pamela McInnes, a now-retired longtime deputy director of the National Center for Advancing Translational Sciences, highlighted this point, saying, “I would make a plea for ongoing research on broader protection, maybe different platforms, maybe a different approach.”
By simplifying the vaccine schedule to include only a single vaccine formulation, the committee reasoned, it might be easier for competing vaccination platforms to break into the market. In other words, newer vaccine contenders would not have to rely on patients’ having already received their primary series before using their products. Companies seemed ready to take advantage of that future flexibility, with researchers from Pfizer, Moderna and Novavax all revealing their companies’ exploration of a hybrid COVID-19 and flu shot at various stages of clinical trials and testing.
Would the single shot resemble flu vaccine development?
Not necessarily. Currently, the influenza vaccine is decided by committee through the World Health Organization. Because of its seasonal nature, the strains to be included in each season’s flu vaccine strain for the Southern and Northern hemispheres, with their opposing winters, are selected independently. The Northern Hemisphere’s selection is made in February for the following winter based on a vast network of flu monitoring stations around the globe.
Although there was broad consensus among panelists that the shots against SARS-CoV-2 should be updated regularly to more closely match the most current circulating viral strain, there was less agreement on how frequent that would be.
For instance, rapidly mutating strains of the virus in both summer and winter surges might necessitate two updated shots a year instead of just one. As Dr. Eric Rubin, an infectious disease expert from the Harvard T.H. Chan School of Public Health, noted, “It’s hard to say that it’s going to be annual at this point.”
Matthew Woodruff receives funding from the National Institute of Health and the US Department of Defense to support his academic research.
Fukuoka, Japan—Researchers in Japan have uncovered the mechanism for how the measles virus can cause subacute sclerosing panencephalitis, or SSPE, a rare but fatal neurological disorder that can occur several years after a measles infection.
Fukuoka, Japan—Researchers in Japan have uncovered the mechanism for how the measles virus can cause subacute sclerosing panencephalitis, or SSPE, a rare but fatal neurological disorder that can occur several years after a measles infection.
Although the normal form of the measles virus cannot infect the nervous system, the team found that viruses that persist in the body can develop mutations in a key protein that controls how they infect cells. The mutated proteins can interact with its normal form, making it capable of infecting the brain. Their findings were reported in the journal Science Advances.
If you are of a certain age, you may have gotten the measles as a child. Many born after the 1970s have never gotten it thanks to vaccines. The condition is caused by the virus of the same name, which is one of the most contagious pathogens to this day. The World Health Organization estimates that nearly nine million people worldwide were infected with measles in 2021, with the number of deaths reaching 128,000.
“Despite its availability, the recent COVID-19 pandemic has set back vaccinations, especially in the Global South,” explains Yuta Shirogane, Assistant Professor at Kyushu University’s Faculty of Medical Sciences. “SSPE is a rare but fatal condition caused by the measles virus. However, the normal measles virus does not have the ability to propagate in the brain, and thus it is unclear how it causes encephalitis.”
A virus infects cells through a series of proteins that protrude from its surface. Usually, one protein will first facilitate the virus to attach to a cell’s surface, then another surface protein will cause a reaction that lets the virus into the cell, leading to an infection. Therefore, what a virus can or cannot infect can depend heavily on the type of cell.
“Usually, the measles virus only infects your immune and epithelial cells, causing the fever and rash,” continues Shirogane. “Therefore, in patients with SSPE, the measles virus must have remained in their body and mutated, then gained the ability to infect nerve cells. RNA viruses like measles mutate and evolve at very high rates, but the mechanism of how it evolved to infect neurons has been a mystery.”
The key player in allowing the measles virus to infect a cell is a protein called fusion protein, or F protein. In the team’s previous studies, they showed that certain mutations in the F protein puts it in a ‘hyperfusongenic’ state, allowing it to fuse onto neural synapses and infect the brain.
In their latest study, the team analyzed the genome of the measles virus from SSPE patients and found that various mutations had accumulated in their F protein. Interestingly, certain mutations would increase infection activity while others actually decreased it.
“This was surprising to see, but we found an explanation. When the virus infects a neuron, it infects it through ‘en bloc transmission,’ where multiple copies of the viral genome enter the cell,” continues Shirogane. “In this case, the genome encoding the mutant F protein is transmitted simultaneously with the genome of the normal F protein, and both proteins are likely to coexist in the infected cell.”
Based on this hypothesis, the team analyzed the fusion activity of mutant F proteins when normal F proteins were present. Their results showed that fusion activity of a mutant F protein is suppressed due to interference from the normal F proteins, but that interference is overcome by the accumulation of mutations in the F protein.
In another case, the team found that a different set of mutations in the F protein results in a completely opposite result: a reduction in fusion activity. However, to their surprise, this mutation can actually cooperate with normal F proteins to increase fusion activity. Thus, even mutant F proteins that appear to be unable to infect neurons can still infect the brain.
“It is almost counter to the ‘survival of the fittest’ model for viral propagation. In fact, this phenomenon where mutations interfere and/or cooperate with each other is called ‘Sociovirology.’ It’s still a new concept, but viruses have been observed to interact with each other like a group. It’s an exciting prospect” explains Shirogane.
The team hopes that their results will help develop therapeutics for SSPE, as well as elucidate the evolutionary mechanisms common to viruses that have similar infection mechanisms to measles such as novel coronaviruses and herpesviruses.
“There are many mysteries in the mechanisms by which viruses cause diseases. Since I was a medical student, I was interested in how the measles virus caused SSPE. I am happy that we were able to elucidate the mechanism of this disease,” concludes Shirogane.
For more information about this research, see “Collective fusion activity determines neurotropism of an en bloc transmitted enveloped virus” Yuta Shirogane, Hidetaka Harada, Yuichi Hirai, Ryuichi Takemoto, Tateki Suzuki, Takao Hashiguchi, Yusuke Yanagi, https://doi.org/10.1126/sciadv.adf3731
About Kyushu University
Kyushu University is one of Japan’s leading research-oriented institutes of higher education since its founding in 1911. Home to around 19,000 students and 8,000 faculty and staff, Kyushu U’s world-class research centers cover a wide range of study areas and research fields, from the humanities and arts to engineering and medical sciences. Its multiple campuses—including the largest in Japan—are located around Fukuoka City, a coastal metropolis on the southwestern Japanese island of Kyushu that is frequently ranked among the world’s most livable cities and historically known as a gateway to Asia.
Method of Research
Subject of Research
Collective Fusion Activity Determines Neurotropism of an en Bloc Transmitted Enveloped Virus