Support for sex worker rights crosses all sorts of demographic lines, according to a new poll from the group Data for Progress. The group found that 52 percent of American adults support decriminalizing prostitution, with replies equally split between “strongly support” and “somewhat support.” Just 35 percent were opposed, with 13 percent unsure.
For the survey, conducted last November and released last week, pollsters asked people if they would support or oppose “decriminalizing sex work as New Zealand did in 2003.” They explained that “this would remove criminal penalties for adults to sell and pay for consensual sex while also maintaining laws that criminalize violence.”
Among younger voters, enthusiasm for decriminalization was even stronger than in the general population. Sixty-five percent of 18- to 29-year-olds were in favor, with just 26 percent opposed. And 66 percent of 30- to 44-year-olds were in favor, with just 23 percent opposed.
Support among older groups alone was still substantial: 45 percent of 45- to 54-year-old respondents favored decriminalization, as did 43 percent of 55- to 64-year-olds and 42 percent of the 65-and-older crowd. The oldest cohort was the only one to feature stronger opposition to decriminalization than support, with 51 percent either somewhat or strongly opposed to the idea.
Support for decriminalization crossed not just age cohorts but also party lines. Support was highest among Democrats, with 64 percent in favor. But 55 percent of independents were also on board, along with 37 percent of Republicans.
A mere 22 percent of Democratic respondents were against decriminalization, as were 25 percent of independents and 54 percent of Republicans.
Support for decriminalization also crossed the urban/suburban/rural divide:
62 percent of urban Democrats, 66 percent of suburban Democrats, and 60 percent of rural Democrats said they support decriminalization.
49 percent of urban independents, 66 percent of suburban independents, and 49 percent of rural independents were supportive.
46 percent of urban Republicans, 35 percent of suburban Republicans, and 35 percent of rural Republicans agreed.
Suburban Democrats were the most likely of all demographic groups to express strong support, while suburban Republicans were the most likely to strongly oppose the idea. Urban independents and suburban Democrats were the least likely to express strong opposition.
A later question on the Data for Progress poll dealt specifically with policing prostitution. “Vice policing units often enforce laws against consensual sex work,” the pollster would tell respondents. “One strategy they use is undercover stings and raids, in which plainclothes officers pose as potential customers, solicit sex workers and then arrest them.” Respondents were then asked if they were for or against “defunding vice policing dedicated to criminalizing sex work.”
“Overall, support for this policy was statistically the same as support for decriminalization,” notes the Data for Progress report. “About 49 percent of voters support ending vice policing of sex work, compared to 35 percent who oppose it.”
Again, support was highest among Democrats—59 percent were either somewhat or strongly supportive—but still substantial among other political groups. Forty percent of Republicans and 38 percent of independents wanted to stop vice cops from doing sex stings. And with decent numbers of all groups undecided, only 24 percent of Democrats, 46 percent of Republicans, and 39 percent of independents were outright opposed.
Suburban Democrats were the most likely to say yes to defunding sex cops (66 percent were in favor), but majorities of urban and rural Democrats agreed. And support was also relatively high among suburban independents (49 percent), urban Republicans (45 percent), and rural Republicans (42 percent).
Only three cohorts saw less than 40 percent of respondents opposed to vice stings, with support lowest among urban independents. Urban independents were also the most unwilling to stop the stings, at 53 percent.
Broken down by age, older millennials and younger Gen Xers were again the most supportive of sex worker rights on this question. A full 59 percent of 30- to 44-year-old respondents supported ending stings on sex workers. The youngest cohort trailed just behind, at 56 percent.
The 65-and-older cohort was also into the idea, with almost a majority—49 percent—saying they would end vice policing of consensual sex.
FOLLOWUP
Impeachment’s run comes to an end. Surprising no one, the Republican-led Senate voted yesterday to acquit President Donald Trump of both of the impeachment charges against him. The only person to vote against party lines was Mitt Romney (R–Utah), who voted for impeachment.
“The president did in fact pressure a foreign government to corrupt our election process,” Romney explained to McKay Coppins of The Atlantic. “And really, corrupting an election process in a democratic republic is about as abusive and egregious an act against the Constitution—and one’s oath—that I can imagine. It’s what autocrats do.”
ELECTION 2020
Buttigieg appears to have eked out a win in Iowa:
Updated Iowa caucus results in state delegate equivalents with 92% of precincts reporting via @CNN:
Salvadorans deported from America are being killed once they return home, according to a new report from Human Rights Watch. The group found that at least 138 people deported from the U.S. to El Salvador in recent years were killed, most less than a year after their return and some within a few days. “The organization also confirmed at least 70 cases of sexual assault or other violence following their arrival in the country,” reports the AP.
Decriminalizing psychedelic mushrooms may get onto the ballot in D.C.:
Break: The D.C. Board of Elections has accepted a ballot initiative to legalize the use of psychedelic mushrooms and plants. Next up, proponents have to get petitions and collect 50k signatures from voters to actually get it on the November ballot.
Tesla Shares Plunge Again As Company Says It Will Shutter China Stores Due To Coronavirus
Following yesterday’s record 17% drop, Tesla shares are down again in pre-market trading on Thursday after the company announced it is temporarily closing stores in mainland China as of February 2. Tesla shares dropped another 5% in early trading Thursday morning ostensibly on a combination of the China news, and what probably is just a badly needed reality check after a 72-hour parabolic binge due to a short squeeze, gamma-hedging frenzy and increasing numbers of hysteric retail traders.
The company announced in an online post to its employees that it temporarily closed its stores beginning last Sunday. The move follows suit with the rest of China, which has ground to a standstill to try and control the coronavirus, which has (according to the Chinese government) killed more than 500 people. That number is in dispute.
CNBC translated a note that was sent to Tesla China employees on WeChat regarding the closures. It stated:
“From today on, Tesla stores are all closed throughout China. But I will answer questions online, around the clock. Online orders are still welcome. We suggest all of you stay home, and take good care of your health.”
Tao Lin, a Tesla VP in China, also helped along the company’s 17% decline on Wednesday when he announced on Weibo that cars scheduled for delivery in early February would be delayed due to the spread of the virus. Shanghai has ordered local businesses not to resume work before February 10, which means that Tesla’s production factory is also shut down.
This, of course, led us to ask why Tesla doesn’t just set up another quarantine tent for production like they did in Fremont?
Tesla has 24 stores in mainland China and its Chinese operations have been a large catalyst for hype around the stock over the last several months, since the company’s Shanghai plant was completed.
As for the stock, we wouldn’t be surprised to see the reality check continue. Even one of Tesla’s most ardent supporters, Adam Jonas at Morgan Stanley, issued a note Thursday morning with an underweight rating and a $360 price target – now about 50% downside – saying it is “too soon” to declare a winner in the global EV market.
He noted the astounding volume with which Tesla has traded. Jonas says that “Tesla traded over 48 million shares on Wednesday (over 25% of shares outstanding) for a value traded of approximately $36bn. For comparison, Apple, a company with roughly 10x the market cap of Tesla traded approximately $9.5bn of value yesterday. Tesla traded nearly 4x the value of the world’s most valuable public company.”
Tesla stock price (blue) vs. Morgan Stanley price target (red)
And he also was cautious about calling Tesla the winner in the EV space, given its new entrants: “Moreover, with US and global EV penetration at approximately 2% we believe it may be too early to declare the ultimate winner in the global EV market. At a minimum, there may be substantial risk to modeling the growth and market share of a market at such a low level of maturity today.”
He concluded by noting that even the bulls he was speaking sound like they are starting to change their tone:
“We continue to engage with investors in high volume on Tesla, but noted a slight change in feedback where even some bulls on the name we have spoken with have expressed a degree of uncertainty, and in some cases, concern around the recent price action..”
Another Massively Oversubscribed Term Repo Confirms Persisting Liquidity Woes
Two days after dealers unexpectedly flooded the first reduced term-repo (from $35BN previously to $30BN) offered by the Fed, the liquidity shortage in the repo market – which was supposed to be temporary and few if any strategists said would continue beyond year-end – persists, and today the Fed announced that in its latest 2-week term repo (maturing Feb 20), it was $57.25BN in submissions ($35.75BN in TSYs, $21.5BN in MBS) for a maximum $30BN in available reserves.
This means that for the second time in three days, the term repo operation saw a massive oversubscription, which at 1.9x was the 4th highest ever since the Fed restarted term-repos in late September, and just shy of the 2.0x submitted-to-accepted ratio recorded on Monday.
As we concluded on Monday, “the massive demand for term repo today means that the liquidity crisis that continues to percolate just below the surface of the market and has clogged up the critical plumbing within the US financial system, is getting worse, not better, and today’s massive oversubscription indicates that one or more entities continues to face a dire shortage of reserves, i.e., cash.”
We hope that eventually someone at the Fed will address this ongoing issue which was supposed to be resolved over a month ago.
2019 US Productivity Rises Most In A Decade, Real Wages Jump Most Since 2015
After disappointingly contracting by 0.2% in Q3 2019, US Productivity was expected to expand by 1.6% QoQ in Q4, but while it did bounce back, the preliminary US productivity rose only 1.4% QoQ. This enabled a 1.8% YoY gain in productivity for 2019…
Source: Bloomberg
This is the biggest annual gain in productivity since 2009…
Source: Bloomberg
Unit labor costs were also up at a 1.4% rate following a 2.5% pace in the previous three months. The report showed inflation-adjusted hourly compensation averaged a 1.9% pace in 2019, the biggest gain since 2015.
Subdued productivity has been a long-running topic of debate among economists. In an October 2019 speech, Federal Reserve Chairman Jerome Powell pointed out several possible reasons, including that the productivity slowdown may be overstated due to mismeasurement.
Earlier this week, former Fed Chair Janet Yellen said slow productivity growth is a “huge concern.”
Will we wonder, what were we thinking? and marvel anew at the madness of crowds?
When we look back on this moment from the vantage of history, what will we think? Will we think how obvious it was that the coronavirus deaths in China were in the tens of thousands rather than the hundreds claimed by authorities?
Will we think how obvious it was that the virus would spread around the globe, wreaking havoc on the global economy and social order, even as the authorities claimed only a handful of cases had arisen outside China?
Will we be amazed at the delusional confidence that the U.S. economy would be untouched by the virus as stock markets quickly soared to new all-time highs while the world’s largest economy ground to a halt in a desperate attempt to close the barn door after the horses had already escaped?
Will we look back at the patently false data being promoted by authorities and wonder why the majority accepted it all as credible?
Will we re-examine all the smartphone videos posted on the web by average people and wonder why all the lies were given more credibility than actual videos?
Will we recall how content that didn’t parrot the approved narrative that everything was under control and the global impact would be near-zero was suppressed, banned, de-platformed or marginalized? Will we wonder at the complacency of all those who accepted this orchestrated suppression with such obedient passivity?
Will we look back at the claim that only twelve people in the entire U.S. had the virus, despite all the direct flights from Wuhan and the tens of thousands of people who’d traveled from China to the U.S. in January, and marvel at our credulity?
Will we look back at the wreckage left in the wake of the coordinated campaign to suppress the facts and lay the responsibility for all the carnage on the authorities who devoted more energy to hiding the realities of the pandemic than to preparing us for the impact?
Will we ponder the incredible grip of mass delusion on the human mind when we recall the confidence that the U.S. economy was invulnerable to the virus and the implosion of China, and the blithe quasi-religious faith that central banks would never let global stock markets decline even 2%?
Will we wonder how the mainstream could watch the Chinese economy shutting down and still remain absolutely confident that the global economy would be untouched as the spot of bother was sure to evaporate in a week or two and all would be restored to pre-virus euphoria?
Will we wonder what were we thinking? and marvel anew at the madness of crowds? Will we wonder why we embraced the delusion so readily, and relive the moment when the gate to reality creaked open? Will we relive our realization that we’d embraced an absurd fantasy floating on a tissue of lies, or will we bury that painful moment of truth?
OPEC+ Committee Fails To Agree On Proposed Production Cuts
Oil futures remain in a bear market following the collapse in oil demand from China amid two-thirds of its economy shutdown following the coronavirus outbreak.
Crude rallied Wednesday on inventory builds, mostly on the hope that the OPEC+ meeting would lead to cuts. However, any gains that were seen are being quickly erased as of Thursday morning.
This forced the OPEC+ technical committee to meet in Vienna, Austria, for a third day this week, to discuss the importance of slashing oil output by at least 500,000 barrels per day (bpd), reported Reuters.
The Joint Technical Committee (JTC) is an advising body of OPEC and Russia, known as OPEC+.
As of Thursday, there’s no firm decision by the technical committee to cut oil production. This is because Russia has opposed to cuts and said it would be willing to agree on an extension of current cuts.
Ransquawk reports that the meeting has officially ended without a planned resolution of production cuts.
The technical committee meeting comes ahead of a planned OPEC+ conference on March 5-6.
OPEC+ has already agreed in December to remove 1.7 million bpd from markets in response to a slowing global economy. Now the deadly virus outbreak has created a “shock” in the global economy as China’s economy grinds to a halt. The country is the largest importer of crude in the world, suggesting that demand has collapsed, and oil prices will plunge deeper if supply isn’t curbed.
Russian Energy Minister Alexander Novak said on Tuesday that he wasn’t sure if it was time to tighten output further.
BP CFO Brian Gilvary warned Tuesday that the virus outbreak has reduced 2020 global demand growth by 300,000-500,000 bpd, or about 0.5%.
Energy to industrial metal futures contracts have plunged in the last several weeks, as commodity traders sell first and ask questions later.
“The magnitude of the demand shock that we’re seeing is on par with 2008 to 2009” financial crisis, Jeffrey Currie, global head of commodities at Goldman Sachs Group Inc., said in a Bloomberg television interview. During that slump, prices fell from above $140 a barrel down into the $30s.
Commodity supply chains in China and across the world have already been disrupted. China told Chile on Wednesday to defer cargoes of copper. Crude oil and liquefied natural gas to China slumped this week to near zero.
The virus outbreak in China has led to the creeping economic paralysis that risks a hard landing. Industrial activity has collapsed, and the proposed opening of factories early next week is being pushed out even further. This would certainly create supply chain shocks that will be felt around the world.
Have you ever considered the data trail you leave as you swipe a card or make electronic payments for transactions over the course of your day? Australian officials have considered it, and they apparently think that trail of digital breadcrumbs is just an awesome step on the road to a surveillance state. The country is a Senate vote away from banning the use of cash for transactions of AU$10,000 and above.
It’s all part of the international push by tax and regulatory officials to minimize the use of cash as part of the effort to monitor the public—and it’s coming soon to a lawbook near you.
Australia’s federal government isn’t coy about the motivation for the bill restricting the use of cash. The 2017 Black Economy Taskforce Final Report, an inquiry into “activities which take place outside the tax and regulatory systems,” including both legal (but off-the-books) and illegal transactions, argued:
For our purposes, an economy less reliant on cash could help counter the black economy. Electronic payments leave a footprint that cash transactions do not. That is why the latter are so attractive to criminals and those operating in the black economy. Not only is cash anonymous, but it can be used without leaving an obvious audit trail. In contrast, the more we move people into the digital payment world, the more visible, traceable and reportable their transactions can be. Digital payment can also be linked to identity, both individuals and businesses, which cash cannot.
In response to howls of outrage about the implications of the move for people’s personal and financial privacy, the Reserve Bank of Australia (the country’s central bank) insists that the pending law isn’t about exerting control over the population through money. But the central bank’s officials admit that they are “supportive of policy measures to combat the black economy.” They also voice concern about the use of banknotes, fretting that only around one-quarter of them are used for buying and selling, with two-thirds or so held as a store of wealth, and others used for off-the-books activities.
Passed after much debate by the Australian Parliament’s lower house, the bill is now held up in the Senate, where lawmakers are being bombarded by taxpayer advocates and small businesses with demands that they scuttle the measure.
The debate echoes similar discussions around the world, with the sides clearly drawn. Government officials and their allies in academia and finance openly argue that restricting or eliminating coins and currency will make it easier to monitor private activities and impose policy decisions.
Peter Bofinger, a former member of the German federal government’s Council of Economic Experts, argues that “coins and banknotes are actually an anachronism” and impede the power of central banks.
“The big problem with paper currency is that a large part of it is used to facilitate tax evasion and a huge spectrum of criminal activities,” insists Harvard University’s Kenneth S. Rogoff, former chief economist of the International Monetary Fund and author of The Curse of Cash. “The government’s right to tax, regulate and enforce laws trumps individual privacy considerations.”
That casual across-the-board dismissal of privacy along with the enthusiasm for monitoring and controlling people’s activities is an indicator that the war on cash is part of the larger push for state surveillance of all sorts of activities.
Sure enough, before the current move to cap cash transactions, Australia’s government was already moving to monitor its population. For several years now, telecommunications companies have been required to store the metadata of Australians’ mobile and online communications. The law “covers data on who called or texted whom and for how long, as well as location, volume of data exchanged, device information and email IP data. It also makes it much easier for authorities to access the records,” notes the BBC.
In 2018, in the name of national security, the country adopted a controversial law that lets law enforcement and intelligence agencies force access to encrypted communications.
The Australian government has also taken to investigating journalists who reveal inconvenient information. One raid last year on the Australian Broadcasting corporation came in response to an embarrassing report that the country’s soldiers had killed civilians in Afghanistan. Another, on NewsCorp reporter Annika Smethurst, ironically resulted from her story that authorities planned to vastly expand domestic surveillance.
“Under the plan, emails, bank records and text messages of Australians could be secretly accessed by digital spies without a trace, provided the Defence and Home Affairs ministers approved,” Smethurst wrote in the article that the powers-that-be found so offensive.
So, limits on the use of cash should be seen in the context of a larger move toward tracking and monitoring people’s daily work, activities, and communications. The bill being considered by Parliament specifically states that it is intended to “protect the integrity of the taxation law and other Commonwealth laws by ensuring that entities cannot avoid scrutiny.”
All of this should sound very familiar to Americans who recently saw two warring political parties join hands in Congress to extend the domestic surveillance powers of the Patriot Act and to expand the snooping authority of the Department of Homeland Security. Just like their counterparts down under, American lawmakers are dedicated to ensuring that entities cannot avoid scrutiny.
In the financial realm, the use of cash assists people in evading such scrutiny—to the extent that German economist Lars Feld, rebutting his colleague Bofinger who was quoted above, calls it “printed freedom.” He’s certainly not the only one of his countrymen to feel that way; the use of physical banknotes remains extremely popular in Germany, largely because of its privacy-preserving power for people with harsh memories of life under totalitarian regimes.
“There is a hesitance to get rid of cash and there is a general suspicion among the German population that getting rid of cash is in some way, getting rid of a part of your freedom,” according to Professor Dorothea Schäfer of the German Institute for Economic Research.
That sort of freedom is exactly what the pending law in Australia, and advocates of similar moves around the world, have in their crosshairs. This isn’t a fight over taxes or law enforcement or money so much as it’s a fight between the surveillance state and those who want to remain free.
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via IFTTT
Have you ever considered the data trail you leave as you swipe a card or make electronic payments for transactions over the course of your day? Australian officials have considered it, and they apparently think that trail of digital breadcrumbs is just an awesome step on the road to a surveillance state. The country is a Senate vote away from banning the use of cash for transactions of AU$10,000 and above.
It’s all part of the international push by tax and regulatory officials to minimize the use of cash as part of the effort to monitor the public—and it’s coming soon to a lawbook near you.
Australia’s federal government isn’t coy about the motivation for the bill restricting the use of cash. The 2017 Black Economy Taskforce Final Report, an inquiry into “activities which take place outside the tax and regulatory systems,” including both legal (but off-the-books) and illegal transactions, argued:
For our purposes, an economy less reliant on cash could help counter the black economy. Electronic payments leave a footprint that cash transactions do not. That is why the latter are so attractive to criminals and those operating in the black economy. Not only is cash anonymous, but it can be used without leaving an obvious audit trail. In contrast, the more we move people into the digital payment world, the more visible, traceable and reportable their transactions can be. Digital payment can also be linked to identity, both individuals and businesses, which cash cannot.
In response to howls of outrage about the implications of the move for people’s personal and financial privacy, the Reserve Bank of Australia (the country’s central bank) insists that the pending law isn’t about exerting control over the population through money. But the central bank’s officials admit that they are “supportive of policy measures to combat the black economy.” They also voice concern about the use of banknotes, fretting that only around one-quarter of them are used for buying and selling, with two-thirds or so held as a store of wealth, and others used for off-the-books activities.
Passed after much debate by the Australian Parliament’s lower house, the bill is now held up in the Senate, where lawmakers are being bombarded by taxpayer advocates and small businesses with demands that they scuttle the measure.
The debate echoes similar discussions around the world, with the sides clearly drawn. Government officials and their allies in academia and finance openly argue that restricting or eliminating coins and currency will make it easier to monitor private activities and impose policy decisions.
Peter Bofinger, a former member of the German federal government’s Council of Economic Experts, argues that “coins and banknotes are actually an anachronism” and impede the power of central banks.
“The big problem with paper currency is that a large part of it is used to facilitate tax evasion and a huge spectrum of criminal activities,” insists Harvard University’s Kenneth S. Rogoff, former chief economist of the International Monetary Fund and author of The Curse of Cash. “The government’s right to tax, regulate and enforce laws trumps individual privacy considerations.”
That casual across-the-board dismissal of privacy along with the enthusiasm for monitoring and controlling people’s activities is an indicator that the war on cash is part of the larger push for state surveillance of all sorts of activities.
Sure enough, before the current move to cap cash transactions, Australia’s government was already moving to monitor its population. For several years now, telecommunications companies have been required to store the metadata of Australians’ mobile and online communications. The law “covers data on who called or texted whom and for how long, as well as location, volume of data exchanged, device information and email IP data. It also makes it much easier for authorities to access the records,” notes the BBC.
In 2018, in the name of national security, the country adopted a controversial law that lets law enforcement and intelligence agencies force access to encrypted communications.
The Australian government has also taken to investigating journalists who reveal inconvenient information. One raid last year on the Australian Broadcasting corporation came in response to an embarrassing report that the country’s soldiers had killed civilians in Afghanistan. Another, on NewsCorp reporter Annika Smethurst, ironically resulted from her story that authorities planned to vastly expand domestic surveillance.
“Under the plan, emails, bank records and text messages of Australians could be secretly accessed by digital spies without a trace, provided the Defence and Home Affairs ministers approved,” Smethurst wrote in the article that the powers-that-be found so offensive.
So, limits on the use of cash should be seen in the context of a larger move toward tracking and monitoring people’s daily work, activities, and communications. The bill being considered by Parliament specifically states that it is intended to “protect the integrity of the taxation law and other Commonwealth laws by ensuring that entities cannot avoid scrutiny.”
All of this should sound very familiar to Americans who recently saw two warring political parties join hands in Congress to extend the domestic surveillance powers of the Patriot Act and to expand the snooping authority of the Department of Homeland Security. Just like their counterparts down under, American lawmakers are dedicated to ensuring that entities cannot avoid scrutiny.
In the financial realm, the use of cash assists people in evading such scrutiny—to the extent that German economist Lars Feld, rebutting his colleague Bofinger who was quoted above, calls it “printed freedom.” He’s certainly not the only one of his countrymen to feel that way; the use of physical banknotes remains extremely popular in Germany, largely because of its privacy-preserving power for people with harsh memories of life under totalitarian regimes.
“There is a hesitance to get rid of cash and there is a general suspicion among the German population that getting rid of cash is in some way, getting rid of a part of your freedom,” according to Professor Dorothea Schäfer of the German Institute for Economic Research.
That sort of freedom is exactly what the pending law in Australia, and advocates of similar moves around the world, have in their crosshairs. This isn’t a fight over taxes or law enforcement or money so much as it’s a fight between the surveillance state and those who want to remain free.
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via IFTTT
Futures Hit All Time High On Trade, Virus Optimism
And just like that, US equity futures hit an all time high of 3,357.75 overnight on a combination of trade and virus optimism.
Contracts on all main US equity indexes pointed to record highs and a fourth day of gains after China said it will lower levies on $75 billion of U.S. goods next week, likely satisfying part of the interim trade deal. And not just the US: stock markets across the world gained on Thursday, with MSCI’s world equity index rising 0.5%, boosted by the unexpected announcement by China to cut tariffs on some U.S. goods by as much as half (even as Beijing plans to invoke the emergency clause in the Tariff 1 deal to limit its purchases of US goods), amid renewed “coronavirus is contained” optimism (even as China reports numbers that look increasingly manipulated) as investors press their bets that the global economy would avoid long-term damage from the coronavirus (even as Goldman cuts Q1 GDP growth by 2% and Fitch says if the epidemic is not contained into Q2, China’s GDP growth in Q1 could be closer to 3%).
Following yesterday’s blistering move higher in US stocks, as both the S&P and Nasdaq reached record highs after jobs and service sector indicators suggested the economy could continue to grow this year even as consumer spending slows, propelling the Dow almost 500 points higher also following an unconfirmed report that a cure for the coronavirus is in the works (even as the WHO denied all such speculation), momentum from Wall Street spilled from Asia into European markets, gathering pace as investors assessed prospects for help to the global economy in the form of government stimulus and looser policy from central banks.
Europe’s Stoxx STOXX 600 index gained 0.4% to a record high, amid a handful of strong earnings reports helping, even as a 2.1% decline in German factory orders in December – the fastest pace in more than a decade – undermined recent data suggesting that manufacturing is slowly recovering.
Indexes in Frankfurt, Paris and London all made solid gains, rising between 0.3% and 0.7%. Italy’s biggest bank UniCredit rose 5% after it posted a lower-than-expected fourth-quarter net loss. ArcelorMittal SA jumped the most since 2016 after expressing optimism on the outlook for steel demand this year, and Societe Generale SA rose after pledging to boost shareholder returns.
Earlier in the session, Asian stocks pushed higher, not only on US momentum, but also after China said it would halve tariffs on some U.S. goods, which traders interpreted as potentially improving negotiating conditions for a second phase of a trade accord after the two countries signed off on an interim deal last month. In reality it just means China is desperate to obtain goods cheaper, and also means that Beijing will most likely be unable to satisfy the terms of the Phase 1 deal as there is now way its slowing economy and collapsing supply chains will be able to buy up to $200BN in US goods over the coming year. In any case, the announcement, which came after China’s central bank eased policy last weekend, helped MSCI’s broadest index of Asia-Pacific shares outside Japan jump 1.6% as bluechip Chinese shares gained 1.9%.
Before China’s announcement, markets were already beginning to emerge from safe-haven assets and bet on the virus being a short-term shock, paradoxically even while the human toll continues to grow.
As we reported last night, another 73 people on the Chinese mainland died on Wednesday from the virus, the highest daily increase so far, bringing the total death toll to 563, the country’s health authority said on Thursday. Statistics from China indicate that about 2% of people infected with the new virus have died, suggesting it may be deadlier than seasonal flu but less deadly than SARS, another reason that investors remain relatively calm. Of course, Coronavirus is now vastly more widespread than SARS ever was and it is still spreading at an exponential pace, but the algos were far less concerned about this.
“The market is looking through the near-term disruption to activity and seeing potential for quite a sharp rebound later this year on the back of even looser policy,” said Tim Drayson, head of economics at Legal & General Investment Management.
“Companies are going to continue to struggle in the short term” with disruptions and forgone business due to the virus, said Joe Zidle, chief investment strategist at Blackstone Group Inc. But China’s moves in recent days to reopen markets and inject stimulus “gave global investors a degree of confidence that the Chinese policy makers had at least taken the worst-case scenario off the table,” he said, despite zero evidence to suggest that the pandemic is even remotely close to being contained.
In FX, investors also pursued risk-on bets as China’s onshore yuan climbed 0.2% to its strongest level since Jan. 23 after the tariff cuts were announced. The Australian dollar also gained. The safe-haven Japanese yen slipped to a two-week low against the dollar. Other major currencies were largely quiet. The euro stood flat at $1.0996 while the dollar against a basket of six major currencies slipped a fraction to 98.262. The pound dropped in London morning hours as Brexit worries continued to weigh in low-volatility markets.
Rates were mixed: after initially bond yields rose, with 10-year U.S. Treasury yields climbing to 1.68% from a five-month low touched on Friday, the yield has since dropped back to 1.64%. Euro zone bond yields told a similar story, with German bund yields initially climbing to their highest in almost two weeks before fading.
“The coronavirus is continuing to spread so we need to remain cautious. But markets now appear to think that there will be a quick economic recovery after a short-term slump,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.
In commodities, oil futures rose for a second day amid what Reuters dubbed “investor optimism over unconfirmed reports of possible advances in combating the coronavirus outbreak in China, which could cause fuel demand to rebound in the world’s biggest oil importer.” Brent rose by 66 cents, or 1.2%, to $55.97 a barrel having risen 2.4% in the last session. Despite the move, it is still down about 15% so far this year.
Of note, OPEC+ reportedly recommend an output cut of 600k BPD, according to OPEC delegates, but the meeting broke without resolution. This follows earlier source reports that the JTC could today agree on the need for a deeper oil reduction of at least 500k bpd, according to sources. Russian Energy Minister Novak said Russia is not yet ready to announce its position on the OPEC+ action related to the coronavirus outbreak, notes that time is needed to assess the impact, added that it is premature to talk about decisions.
Copper, after suffering the longest decline on record, showed some signs of stabilization although it remained depressed overall. Shanghai copper extended its rebound into the third day, rising 1.4% from 33-month low hit earlier this week.
To the day ahead now, we’ll get Q4’s unit labour costs and nonfarm productivity, as well as weekly initial jobless claims. From central banks, ECB President Lagarde will be appearing before the European Parliament’s Economic and Monetary Affairs Committee, while the ECB will also be releasing their Economic Bulletin. Elsewhere, we’ll hear from the ECB’s Villeroy and Dallas Fed President Kaplan. Finally, earnings releases to watch out for today include Twitter, L’Oréal and Philip Morris International. Finally, EU trade chief Phil Hogan will be in the US today to meet with the US officials including Trade Representative Robert Lighthizer. The trip comes as the US and EU are seeking a trade agreement, so expect some headlines on that front.
Market Snapshot
S&P 500 futures up 0.2% to 3,343.25
MXAP up 1.8% to 170.63
MXAPJ up 1.6% to 551.41
Nikkei up 2.4% to 23,873.59
Topix up 2.1% to 1,736.98
Hang Seng Index up 2.6% to 27,493.70
Shanghai Composite up 1.7% to 2,866.51
Sensex up 0.4% to 41,322.51
Australia S&P/ASX 200 up 1.1% to 7,049.20
Kospi up 2.9% to 2,227.94
STOXX Europe 600 up 0.2% to 424.64
German 10Y yield rose 1.4 bps to -0.345%
Euro up 0.05% to $1.1005
Brent Futures up 0.7% to $55.64/bbl
Italian 10Y yield rose 1.3 bps to 0.798%
Spanish 10Y yield rose 1.9 bps to 0.319%
Brent futures up 0.1% to $55.36/bbl
Gold spot up 0.5% to $1,563.29
U.S. Dollar Index down 0.05% to 98.25
Top Overnight News from Bloomberg
Health officials raced to develop treatments and improve testing for the new coronavirus that has claimed 563 lives in China, though the World Health Organization cautioned a vaccine is a long way off
The U.K. will pursue an “early trade deal” with Australia as Prime Minister Boris Johnson seeks to deliver on his promise of a boost to the country’s fortunes after it leaves the European Union
Chancellor of the Exchequer Sajid Javid’s ambition to lift U.K. economic growth toward itspost-war average of almost 3% a year is “quite unrealistic.” warned the National Institute of Economic and Social Research
The Bank of Japan shouldn’t hesitate to bolster monetary easing if price momentum faces greater risks, board member Takako Masai says in a speech to local business leaders in Nara, Japan
Pete Buttigieg was clinging to a narrow lead over Bernie Sanders in the Iowa caucuses as the state’s Democratic Party continued to struggle Wednesday with releasing long-delayed results. The former South Bend, Indiana, mayor had 26.5% of state delegate equivalents, barely besting the Vermont senator’s 25.6%, with 92% of more than 1,700 precincts reporting results
The U.S. Senate voted to acquit President Donald Trump on charges he abused his power and obstructed Congress, ending a historic, bitterly partisan fight and leaving the final judgment on his actions up to voters in November
A 2.1% decline in German factory orders in December — the fastest pace in more than a decade — undermined recent data suggesting that manufacturing is slowly recovering; Germany January construction PMI separately rose to 54.9 from 53.8 in December
EU Trade Commissioner Phil Hogan will be in Washington on Thursday for the second time in less than a month, as the 27- nation bloc seeks to revive a transatlantic commercial truce
India’s central bank left interest rates unchanged for a second straight meeting, while keeping the door open for more easing to support the economy when inflation eases
Asia-Pac equity markets got a lift on the tailwinds from Wall St. where S&P 500 and Nasdaq posted record closes with sentiment underpinned by US data and hopes of a coronavirus treatment in the works despite the World Health Organization denying any breakthrough. ASX 200 (+1.1%) was led higher by outperformance in energy amid a rebound in crude prices and strength in the largest weighted financials sector to reclaim the 7000 level, while Nikkei 225 (+2.4%) received an additional boost from favourable currency flows, as well as a deluge of earnings including Toyota. Elsewhere, Hang Seng (+2.6%) and Shanghai Comp. (+1.7%) conformed to the heightened global risk appetite after unverified reports that a Chinese university research team found an “effective” drug to treat people with Coronavirus and as several mainland pharmaceutical stocks hit limit up, with gains later exacerbated after China announced to cut tariffs by as much as 50% on USD 75bln of US goods effective February 14th. Finally, 10yr JGBs were subdued in which prices declined below 152.50 amid the lack of demand for safe havens and after reports of China’s move to reduce tariffs on US goods which nullified the slightly improved 30yr JGB auction results.
Top Asian News
Singapore to Exempt Listed Local Developers From Home-Sale Rule
India’s ECB-Like Move to Inject Cash Stokes Short-Term Bonds
Philippines Central Bank Cuts Key Rate Amid Coronavirus Risk
European equity markets have waned off highs [Eurostoxx 50 +0.4%] seen since the cash open as sentiment turned more cautious in early EU trade. This follows on from a solid APAC lead where investors cheered China’s surprise rollback in USD 75bln worth of US goods in the hope of a reciprocal move by the US to help ease some of the burden arising from the coronavirus outbreak. Nonetheless, major bouses are still in positive territory although the FTSE 100 (+0.1%) modestly lags its peers amid losses in some of its large-cap stocks including some miners amid a decline in base metal prices. Sectors are largely mixed with no clear reflection of the current risk sentiment – financial names modestly outperform amid a higher-yield environment. In terms of individual movers, triple-listed ArcelorMittal (+9.3%) rose post-earnings topping EBITDA expectations whilst also reporting a decent YY increase in iron-ore shipments and noting that the supportive inventory environment leads to expectations of growth in steel consumptions. Total (+1.6%) shares rose in light of its Q4 adj. net income topping estimates, an increase in FY dividend, a USD 2bln share buyback programme and a target of over USD 5bln in cumulative savings this year – albeit shares could be underpinned by price action in the energy complex. On the flip side, Royal Mail (-8.3%) shares slumped to the foot of the Stoxx 600 post-earnings amid the assessment of a challenging outlook. Other earnings-related movers include Unicredit (+5.8%), Publicis (+4.5%), Nordea Bank (+4.8%), Sanofi (+2.4%), Dassault Systemes (-3.1%), ICA Gruppen (-7.1%), and Assa Abloy (-3.1%). Elsewhere, NMC Health (+5.6%) sees a day of reprieve after sources noted that the Co’s founder would be returning with an “active position” and separate source reports that Private Equity firms, including Apollo, circled the Co. in the past. Finally, Deutsche Bank (+6.0%) shares extended on its gains after Capital Group Companies disclosed a 3.1% stake in the Co.
Top European News
Swiss Risk Repeat of History as Trump Sets Sights on Europe
Lagarde Says ECB Running Out of Room to Fight Global Threats
Stock Values in Johannesburg Are So Low They’re Tough to Resist
Surprise Drop in German Factory Orders Shows Slump Isn’t Over
In FX, the Buck remains bolstered by firm US Treasury yields, albeit off best levels in relatively rangebound trade, as the index consolidates above 98.000, but fails to derive enough momentum independently or indirectly to extend gains beyond the next upside chart objective ahead of 98.500 (98.402 Fib). However, the Dollar may glean more bullish impetus if today’s domestic data in the form of Challenger lay-offs, initial claims and Q4 labour costs or productivity is upbeat awaiting Friday’s NFP release.
NZD/GBP/AUD – In contrast to other G10 currencies that are largely meandering vs the Greenback, Cable has drifted back below 1.3000 again and the Kiwi has retreated further below the 0.6500 handle amidst Waitangi holiday-thinned volumes and more underperformance against the Aussie. Indeed, Aud/Nzd is holding ‘comfortably’ above 1.0400 even though Aud/Usd has slipped back under 0.6750 where hefty option expiry interest resides (1.3 bn) in wake of sub-forecast trade and retail sales overnight. Back to Sterling, Wednesday’s EU MiFID revelations are still reverberating, while the UK Trade Department announces to implement a most favoured country tariff system post-Brexit transition on January 1 next year.
EUR/JPY/CAD/CHF/NOK/SEK – All on a more even keel vs their US counterpart, as the Euro pivots 1.1100 amidst conflicting vibes via significantly worse than expected German factory and VDMA engineering orders in contrast to an upbeat ECB President Lagarde and monthly bulletin echoing signs of economic stabilisation. Meanwhile, broadly, but less pronounced risk-on sentiment continues to hamper the Yen and Franc just shy of 110.00 and 0.9750 respectively, though the Loonie is not really benefiting within tight 1.3275-88 confines in the run up to tomorrow’s Canadian jobs data. Elsewhere, the Scandi Kronas have both waned after yesterday’s decent recovery gains, with Eur/Nok back up near 10.1500 and Eur/Sek close to 10.5600 against the backdrop of sagging crude and a drop in Swedish house prices.
EM – Although many regional currencies are down vs the Dollar, reports about China cutting US import tariffs by up to 50% on February 14 have kept the Yuan afloat, while the Real could get a boost from the BCB signalling that last night’s 25 bp rate cut may be the last in the current cycle. Conversely, the Rand has been undermined by a deterioration in SA business sentiment on top of the aforementioned general Greenback bid.
In commodities, WTI and Brent front-month futures have given up a bulk of their overnight gains as risk aversion crept into the markets in early EU trade. Furthermore, OPEC’s JTC has extended its meeting to three days from the originally scheduled two. Sources noted that the technical committee could agree on a total reduction of at least 500k BPD – in fitting with some of the prior sources which noted the JTC would be assessing several scenarios that have cut options between 500-900k BPD. Later, a delegate noted of an agreement of 600k BPD cut but disagreement on whether to hold an emergency meeting. Russian Energy Minister Novak played down the reports and noted that Russia is not yet ready to announce its position on the OPEC+ action and that it is premature to talk about decisions. Russia has been historically adamant to commit to deeper cuts as Russia’s economy is more resilient to lower oil prices. WTI and Brent reside just above USD 51/bbl and USD USD 55/bbl respectively, having retreated from current intraday highs of USD 52.15/bbl and ~USD 56.50/bbl. Elsewhere, spot gold has been supported by the aforementioned shift in sentiment, with the yellow metal decoupling itself from a rising USD and residing just above its 21 DMA at ~USD 1563/oz (vs. low ~USD 1552/oz). Elsewhere, copper prices conformed to the abated risk appetite, with prices now back below USD 2.6/lb vs. an overnight high of USD 2.6144/lb. Finally, Dalian iron ore closed the session higher by almost 1% following three consecutive sessions of losses as China’s surprise tariff rollback announcement underpinned prices.
US Event Calendar
7:30am: Challenger Job Cuts YoY, prior -25.2%
8:30am: Nonfarm Productivity, est. 1.6%, prior -0.2%; Unit Labor Costs, est. 1.25%, prior 2.5%
8:30am: Initial Jobless Claims, est. 215,000, prior 216,000; Continuing Claims, est. 1.72m, prior 1.7m
9:45am: Bloomberg Consumer Comfort, prior 67.3
DB’s Jim Reid concludes the overnight wrap
Whether it’s the worst of the coronavirus fears being behind us, US politics or solid economic data, the risk-on mood in markets appears to be showing little sign of running out of steam yet. The reality is that it’s probably a combination of all of these factors and with the diary fairly thin on important events today the likely next hurdle for markets to jump is the US employment report tomorrow.
We’ll have a full preview of that in tomorrow’s EMR but in the meantime a quick update on markets. Last night the S&P 500 closed up +1.13% to make a new all-time high and thus more than wipe out the coronavirus driven move lower last month. As it stands the week-to-date return for the index is +3.39% which is the best first three days to start a week since November 28, 2018. In contrast to previous sessions though it was energy stocks that were actually the main driver, supported by the resurgent oil price, with WTI (+2.30%) and Brent crude (+2.45%) both moving higher on hopes of resilient economic demand and it’s worth noting that both are up a similar amount this morning. This drove a rotation into energy stocks, while the tech sector lagged, however the NASDAQ did still edge up +0.43% to a new high also. Similarly, in Europe the STOXX 600 rallied +1.23% and equity vol fell on both sides of the Atlantic with the VIX down 0.9pts to 15.15 and VSTOXX down 0.9pts to 13.60.
It was another decent day for credit too with EUR and USD HY spreads -6bps and -9bps tighter, respectively. Metals also got another lift, most notably copper up another +1.28%. So that makes two days of gains following 13 consecutive daily declines. As to be expected, bond markets have struggled with this risk on spell. Indeed 10y Treasury yields were up +4.8bps yesterday (and +2.2bps this morning) and are up +16.1bps this week while the 2s10s curve has steepened back above 20bps and up about 5bps from the recent lows. In Europe yields were up anywhere from 1-5bps.
The news overnight that China is to halve tariffs rates on $75bn of imports from the US beginning on February 14 has seen markets in Asia push on further this morning. That being said it shouldn’t be surprising news as this comes after both nations had agreed in Phase 1 negotiations that they would reduce tariffs on each other’s goods as part of the deal. The Nikkei (+2.72%), Kospi (+2.82%) and Hang Seng (+2.78%) in particular have seen the biggest moves with the Shanghai Comp up +1.18%. The onshore Chinese yuan is also up +0.18% to 6.962 while the Japanese yen is down -0.12%. Elsewhere, futures on the S&P 500 are up +0.59%.
Just on the latest on the coronavirus, the number of cases and deaths as of this morning has been recorded at 28,018 and 563 respectively. That compares to 24,324 cases and 490 deaths yesterday. It’s worth noting that the improved sentiment yesterday followed a story from Sky News which suggested that testing on animals for a vaccine could start as soon as next week, ahead of possible human studies in the summer. That said, others played down hopes of progress, with an executive director of the World Health Organization’s Health Emergencies Program telling a press conference that “there are no proven, effective therapeutics” for the virus. Also remember that the expert on our DB Research-led conference call earlier this week said that any true vaccine was still months – or more likely years – from being produced at scale.
Staying on the topic, looking at the impact beyond Wuhan, our Asia economics team put out a note yesterday (link here) looking at the potential economic impact across the wider region. For China, they now expect full-year GDP growth will be +5.8% this year, 0.3ppts lower than previously forecast.
Moving on. As noted at the top the data also played a part in yesterday’s moves. Ahead of tomorrow’s jobs report in the US, the ADP’s report of private payrolls rose by +291k (vs. +157k expected) in its strongest month since May 2015. Nevertheless, the ADP report has been wide of the private payrolls figures lately, with December’s ADP report overestimating private payrolls by +60k, while November’s reading came in -122k beneath private payrolls. Elsewhere, the ISM non-manufacturing index rose to 55.5 in January (vs. 55.1 expected) and its highest level since August, though unlike with the ADP, the employment index actually fell to 53.1, the weakest since September. Finally from the US, the annual trade deficit narrowed to $617bbn, the first reduction in the annual trade deficit since 2013, though the monthly figure for December had a slightly larger deficit than expected, at $48.9bn (vs. $48.2bn expected).
Staying with the US, our economics team put out a note yesterday (link) updating their 2020 outlook – specifically when considering the Phase 1 trade deal, Coronavirus, and Boeing headwinds. They now estimate that growth in the first half will average 1.9% but activity should accelerate to 2.5% in the back half, leaving full year growth (Q4/Q4) at 2.2%. In addition our global economists see a hit to world real GDP in the current quarter as a result of the coronavirus of -2%pts for q/q growth at an annual rate. (or one fourth that for the four-quarter growth rate). For the year as a whole they expect growth to be reduced by only 0.2%, with some of that loss being made up in 2021. See the link here.
Over in Europe, the main data came from the PMI releases, where the UK in particular outperformed expectations following the country’s December election. The composite PMI rose to 53.3, up from the flash reading of 52.4 and the strongest reading since September 2018, while the services PMI was also up to 53.9 (vs. flash 52.9). Others also saw upward revisions, with the Euro Area composite PMI up to 51.3 (vs. flash 50.9), adding to signs that the economy has turned a corner, and Germany’s composite PMI was up to 51.2 (vs. flash 51.1). The question will be whether this positive momentum can be maintained if the coronavirus outbreak starts to affect the global economy.
In other news, the US impeachment saga came to an end yesterday as the Senate voted to acquit President Trump. The move was widely expected, as it would have required a two-thirds majority in the Republican-controlled chamber to convict the President. Republican Senator Mitt Romney voted to convict the president on one of the two charges, breaking ranks with his party.
To the day ahead now, and data releases include German factory orders for December, as well as the country’s construction PMI for January. From the US, we’ll get Q4’s unit labour costs and nonfarm productivity, as well as weekly initial jobless claims. From central banks, ECB President Lagarde will be appearing before the European Parliament’s Economic and Monetary Affairs Committee, while the ECB will also be releasing their Economic Bulletin. Elsewhere, we’ll hear from the ECB’s Villeroy and Dallas Fed President Kaplan. Finally, earnings releases to watch out for today include Twitter, L’Oréal and Philip Morris International. Finally, EU trade chief Phil Hogan will be in the US today to meet with the US officials including Trade Representative Robert Lighthizer. The trip comes as the US and EU are seeking a trade agreement, so expect some headlines on that front.
China To Slash Tariffs On Some U.S. Imports By 50%
While global equity futures continue to soar amid a return of the “coronavirus is contained” following reports that new drugs are in the pipeline to treat the deadly disease on Wednesday, China’s economy is expected to print sub-5% GDP in Q1. This has forced an increasingly desperate Beijing to unexpectedly announce on Thursday that it will slash tariff levied on 1,717 U.S. goods by up to 50%.
China’s finance ministry stated that on Feb. 14, additional tariffs levied on some goods will be reduced from 10% to 5%, and others lowered from 5% to 2.5%, reported Reuters. The finance ministry didn’t explicitly state the value of goods affected by tariff reductions.
In a separate statement, the ministry said tariff reductions would mostly be for products announced during the trade war. They said further tariff adjustments could depend on the bilateral economic and trade situation.
The ministry said soybean tariffs would be reduced from 30% to 27.5%. Tariffs on crude will be halved from 5% to 2.5% after Feb. 14.
“Any move to de-escalate is always good. Especially when the market is overwhelmed by the news about virus, good news about tariff is refreshing,” said Tommy Xie, head of Greater China research at OCBC Bank in Singapore.
“The announcement shows China’s commitment to implement the phase one trade deal despite the disruptions from the recent virus outbreak,” said Xie.
Hu Xijin, the editor from the China Global Times, tweeted Wednesday asking the U.S. to give China some slack in the phase one trade agreement. This could mean China’s expected $200 billion in U.S. purchases over the next two years might not happen.
China’s planned tariff reductions come as the coronavirus outbreak continues to broaden with more than 28,000 cases and 565 deaths globally. Much of the epidemic is centered in China.
Two-thirds of China’s economy is offline, which will produce an economic “shock” that will send GDP tumbling sub-5% in 1Q.
An economic “shock” in China will likely spill over into the rest of the world in the quarter. The reason: China’s economy has significantly increased in importance since the 2003 SARS epidemic because of the breathtaking growth of the Chinese economy over the past two decades.
Finally, those wondering why China would hint at major weakness by proactively pursuing such a move that puts it at a tactical disadvantage with the US, well that’s the $64 trillion question, and the answer appears to be viral.
How long before people realize that China proactively capitulating on tariffs is a sign of how serious the economic impact of this virus situation actually is?
