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Will Powell have any more Luck Pushing against Negative Rate Expectations in the US?

Will Powell have any more Luck Pushing against Negative Rate Expectations in the US?

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Overview: Another late sell-off in US shares, this one perhaps related to the sobering assessment by the leading medical adviser for the Trump Administration about the risks of opening too early, failed to deter investors in the Asia Pacific region. Although Japanese shares slipped, most other markets rose. India led the way (~2%) after a fiscal stimulus program was announced. European shares, though, are heavier, led by consumer discretionary and financial sectors. US shares are steady to firmer. After a slow start, European bonds have rallied and yields are 2-3 bp lower, with Italy's benchmark off about 6 bp to 1.82%. Bond markets are mostly quiet, but the Reserve Bank of New Zealand's increase in bond purchases and indication that negative rates are possible saw the benchmark yield fall around 12 bp and took the currency about 1% lower. The 10-year US Treasury is a little softer at 66 bp. Outside of the Kiwi, most of the major currencies are mostly firmer, led by the Norwegian krone and Canadian dollar. Emerging market currencies are mixed, with eastern and central European currencies a little heavier. Gold continues to hover are $1700 and July crude continues its broadly sideways drift.  

Asia Pacific

India announced a package of INR20 trillion or 10% of GDP. The details are not yet clear, but it does appear that officials have combined several previous commitments and central bank measures. The fresh initiatives, though, still appear substantial and are estimated around INR8-INR12 trillion (~4%-6% of GDP).  

The Reserve Bank of New Zealand doubled its bond-buying efforts to NZD60 bln.  It left its cash rate target at 25 bp but suggested that negative rates are possible. Thus far, no country with a current account deficit has adopted negative interest rates. New Zealand's current account deficit was about 3.3% of GDP in 2019.  

The US dollar jumped to a little more than JPY107.75 to start the week after testing the JPY106 area while Japanese markets were closed in the first half of last week for the Golden Week holidays. Yesterday and today, the dollar has pared Monday's gains and now is testing JPY107.00 where a nearly $900 mln option is set to expire. The dollar is third of a yen range today, and the upside looks to be blocked with the help of a $1.1 bln expiring option at JPY107.40. The Australian dollar fell nearly 1% over the past two sessions, but it found support near the 20-day moving average (~$0.6425), which it has not closed below in over a month. There is an option for A$1 bln at $0.6500 that expires today. The greenback is firm against the Chinese yuan as it holds in the upper end of the CNY7.05-CNY7.10 range that has largely contained it in recent weeks.  

Europe

The two main economic reports from Europe were not as dismal as expected. The eurozone reported industrial output in March fell 11.3%. The median forecast in the Bloomberg survey was more than a 12% slump. The UK economy contracted 2% in Q1 with the median estimates looking for a 2.6% decline in output. The monthly GDP estimate showed a 5.8% decline in March alone. The Bank of England is expected to increase its bond purchases as early as next month. The ECB is also likely to increase is Pandemic Emergency Purchase Program (PEPP) as well, but the timing is less clear.  

On the fiscal front, the UK has extended its furlough program until the end of October and will not taper it until at least July. Italy'scabinet approved the 55 bln euro stimulus package. Nearly 30% is for its employee furlough program. More than 10% is earmarked for what appears to be grants to small businesses. And nearly another 10% is for self-employed and seasonal workers.  

The euro traded in a cent-range yesterday (~$1.0785-$1.0885) and today is in a little more than a quarter-cent range above $1.0830. The consolidation looks set to continue. Sterling fell to around $1.2255 yesterday, its lowest level in over a month. A marginal new low was made in Asia, before sterling was bid in Europe to toy with the $1.2300 area. There is potential toward back toward $$1.2340-$1.2350.  

America

There are three events in the US today to note. First, the US reports April producer prices. The deflationary shock is well recognized, and the collapse of oil price will send the headline PPI into negative territory. However, the core rate, which excludes food and energy, is likely to fare considerable better. The median forecast in the Bloomberg survey is for a 0.1% decline on the month for a 0.8% year-over-year gain. In yesterday's April CPI, gasoline prices fell by over 20% while food prices rose 1.5%. Second, the EIA will make its weekly energy inventory report. API estimated that oil stocks increased by about 7.6 mln barrels, but at Cushing, they might have fallen by more than two million barrels. This would be the first decline in 10 weeks. Third, Federal Reserve Chairman Powell speaks at the Peterson Institute (9:00 am ET). He is expected to push back against ideas a negative funds rate. Despite the efforts of several regional presidents to play down this scenario, the fed funds futures strip starting next March imply slightly negative rates. Another common theme of Fed speakers have been that more support may be needed for the economy. This is seen as a balance sheet issue and fiscal policy.    

After raising $100 bln in cash management bill sales, the Treasury sold $32 bln 10-year notes at a lower yield than the previous auction (70 bp vs 78 bp), with a higher bid-to-cover (2.69 vs 2.63), and more taken up by indirect bidders that include asset managers, hedge funds, and foreign central banks (66.1% vs 59.2%). More is coming. It is not just today's $20 bln 30-year bond sale to round out the quarterly refunding and another $75 bln of cash management bills, but another large spending bill has begun its circuitous route to become law. The initial estimate of the House bill is about $3 trillion and that is on the day that the US reported a record $737.9 bln deficit for the month of April.  Around a third of the bill is for states and local governments. There are also funds for another $1200 payment adults, which is means-tested, and money for elections and the postal service. The deduction for state and local taxes is also brought back. Of course, as the Senate Majority Leader noted it is aspirational. It must be negotiated with the Senate, and especially Trump Administration. However, the House took first-mover advantage and forces the GOP to be less "Rooseveltian" with the election now less than six months away. 


The US dollar settled last week near CAD1.3925. It recovered 0.5% on Monday and again on Tuesday but has run out of steam near CAD1.4085. Support is seen in the CAD1.3980-CAD1.4000 area today. Similarly, the greenback finished last week around MXN23.65 and gained 1% on Monday and 2% yesterday to reach MXN24.40. It is trading softer now around MXN24.10. Dollar losses may be limited in North America today ahead of the Banxico rate decision tomorrow. Although a 50 bp cut is widely expected, there is scope for 75 bp move. More political problems for Brazil's President Bolsonaro weigh on the real, which fell to new record lows yesterday (the US dollar rose above BRL5.89). Today, Brazil reports March retail sales and its economic activity index. The only question is how fast of a contraction is being experienced.  




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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.

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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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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…

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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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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…

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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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