Month: October 2022

Authored by Katabella Roberts via The Epoch Times,

Widespread protests continued across Iran for a 45th consecutive day on Sunday, despite warnings from security officials that they would use tougher measures to crack down on demonstrators.

Protests over the weekend continued despite a warning from the commander-in-chief of the Islamic Revolutionary Guards Corps (IRGC), Maj Gen Hossein Salami, on Saturday that he would use unprecedented force in an effort to quell them.

“Today is the end of the riots. Do not go to the streets anymore!” Salami reportedly said.

 “We are telling our youth, the minority of you who have been deceived, stop the evil acts. This ominous sedition will bring no happy ending to you. Do not ruin your future!”

Elsewhere, Iranian President Ebrahim Raisi was reported as saying by state media: “Security is the red line of the Islamic Republic, and we will not allow the enemy to implement in any way its plans to undermine this valuable national asset.”

Yet demonstrators, increasingly angered by the authorities’ attempts to suppress their protests against the Islamist government, ignored the warnings and took to the streets over the weekend.

Demonstrations across the country were initially sparked by the death of 22-year-old Mahsa Amini, a young woman who died in Tehran on Sept. 16 while in the custody of Iran’s “morality police” after she was arrested over her “inappropriate attire. Police have said she suffered a heart attack while in custody.

Over time, the demonstrations have evolved into calls from Iranians for more freedom and demands to overthrow the Islamic regime and Supreme Leader Ayatollah Ali Khamenei, posing the most serious challenge to the country’s clerical leaders in years.

Exile Iranians of the National Council of Resistance of Iran gather in front of the embassy of Iran in Berlin, Germany, on Sept. 20, 2022, after the death of an Iranian woman held by the country’s morality police. (Michael Sohn/AP Photo)

Authorities ‘Kidnapping Students, Particularly Girls’

Video footage posted on social media showed violent confrontations between students and riot police at universities amid reports of raids on student dormitories that have seen students taken away in buses to state detention or banned from campus indefinitely.

In one video, students at the Islamic Azad University-North branch can be seen throwing rocks at IRGC forces and plainclothes agents. Another video posted to Twitter shows security forces using teargas and gunfire to stop students from demonstrating.

The Epoch Times has not been able to verify the video footage.

Maryam Rajavi, the President-elect of the NCRI for the period to transfer sovereignty to the people of Iran, wrote on Twitter on Sunday that IRGC forces have been using pellet guns and live ammunition to crack down on demonstrations at universities while simultaneously “kidnapping students, particularly girls.”

This, she said, shows the “regime’s desperation in face of Iran protests.”

According to the Human Rights Activists News Agency (HRANA), 283 protesters, including 44 children, have been killed so far since protests broke out across the country. Another 14,052 individuals have been arrested, according to HRANA’s latest update.

Iranian authorities have accused the United States, Israel, Britain, and Saudi Arabia of being behind the anti-government protests that are destabilizing the country, claims leaders of those nations have denied.

In September, the Biden administration announced sanctions on Iran’s morality police “for abuse and violence against Iranian women and the violation of the rights of peaceful Iranian protesters.”

On Friday morning, SpotGamma warned traders to be on the lookout for a “sucker punch” rally over-stimulated by 0DTE flow, and markets were given a full-on “uppercut”.

Heavy 0DTE volume was once again showcased, with the largest volume strike being 100k 10/28 3900 calls. This is incredible given that the SPX opened at 3810! This 0DTE flow is pure leverage which serves to ramp the market higher.

Additionally, as anticipated, we also saw IV get crushed, particularly ultra-short-dated (read: put-fuel for a rally). This very short dated IV crush was supplemented by the idea that the Fed is going to soften its stance on Wednesday. As shown below that short dated IV is quite low now relative to Wednesdays elevated levels.

SPX Vol term structure

All of which Friday saw the options complex higher slide higher, which is something we generally read as an options market acceptance of higher equity prices.

Of course, the elephant in the room is Wednesdays FOMC, which holds the fate of equities, and which Nomura’s Charlie McElligott warns the irony of the central bank “step-down” meme seen around the globe (RBA, BoC, ECB) in recent weeks – which has explosively rallied “financial assets” (both Risk-Assets and Sovy Bonds) – is that for the Fed, downshifting in say Dec from 75bps to 50bps and beyond actually allows them to extend-out the hikes longer…

…and in-fact, avoid the potentially of slamming breaks too hard, which would then elicit the Rate cuts which the STIRS market continues to hold onto for back half next year.

All of which can be seen in the chart below as despite the equity exuberance, STIRS are shifting notably hawkishly…

So said another way, “stepping-down” is, perversely, the Fed’s way of seeking-out an alternate path to actually avoid Rate CUTS next year from a “hard landing” accident…and instead, keeping Rates “high for longer”….hardly “rage bullish”.

However, equities are holding near this 3905 strike of the monthly Put Spread Collar which trades later today, where the Dealer is short 14k of said 3905 Puts, which meant a lot of $Delta bot on the Friday melt-up to said strike…BUT for today, if the market remains below strike (as we are again currently), the option will bleed from a 52 Delta to 100 Delta – leading to an incremental  ~$2.6B of Delta to sell

But As McElligott notes, as we’ve seen in other short-squeezes and bear-mkt rallies this year, perhaps the largest reason we could keep rallying in Stocks this week is a somewhat counter-intuitve psychological / behavioral catalyst which is paired with exceedingly illiquid markets, meaning investors risk being “trapped in their under-positioning” into year-end, with less Dealer balance-sheet as they begin to protect PNL:

The idea is that as we have seen big “upside reversals” on seemingly “hawkish / bad news” days of late (e.g. the last CPI upside surprise day), is that IF you don’t begin to cover shorts and / or or buy-the-dip and “net up” exposure again into an actual “hawkish” Fed catalyst….then you are almost certainly going to be covering or “netting-up” exposures up another +6% to +10% from here on a (God-forbid) “DOVISH” Fed message

This is what could surprise – and hurt – the most this week, which could see us overshoot into that 4000 + SPX level which goes beyond the current “Valuation” rationalization of 17x’s $230 = 3910

However, the Nomura strategist warns to be careful what you wish for…

Frighteningly, EVERYBODY who is an Equities “bear” has now “built-in” my recent observation regarding the market’s recent reflexive “FCI easing” surge (US Dollar and Real Yields cratering lower, Credit Spreads tighter, Equities Vol and Skew smashed) as their justification for expecting a move LOWER in Stocks this week, following the recent central bank “step-down” trend—where Chair Powell and the Fed are forced to “push-back” on the recent easing in FCI, and instead, slam the door on premature pivot talk, as inflation / labor / wages continues to run hot

This gained further steam over the weekend with WSJ’ Timiraos tweet storming like crazy—and even appearing on “Face the Nation” Sunday—hammering a similar message: that financial conditions have actually EASED further both since last hike…but into stronger inflation, labor and wage data, and all as the US consumer holds excess household savings to continue and “cushion” against higher rates / higher inflation—“For the Fed, a more resilient private sector means that when it comes to rate hikes, the peak or “terminal” policy rate may be higher than expected”

Accordingly, the “right” outcome this week would be Fed / Powell HAMMERING a hawkish message to reverse this recent “impulse easing” in FCI, stocks trade lower and bonds selloff again, as there is no basis for “pivot / step-down” relief until the data softens meaningfully… because a reacceleration in “wealth creation” and “animal spirits” within US markets and economy would be extremely counter-productive to the “demand-side” inflation-killing needs of the FOMC.

It happened in June/July and Powell curb-stomped it…

Will it happened again?

Authored by Mike Shedlock via MishTalk.com,

The US thinks it can block microchip technology from China. It won’t and blowbacks are everywhere…

Turning the Screws 

• Financial Times: How the US chip export controls have turned the screws on China

• The Conversation: Clampdown on chip exports is the most consequential US move against China yet

• The Atlantic: Why Biden’s Block on Chips to China Is a Big Deal

How Companies Are Dealing with US Restrictions on Chip Exports to China

Please consider How Companies Are Dealing with US Restrictions on Chip Exports to China

The U.S. Commerce Department announced a series of new trade restrictions earlier this month that banned the export of some computer processing chips to China.

The restrictions affect not only U.S. businesses selling to China, but also any company whose products contain American chip technology. The U.S. government action has many companies considering how to move forward under the new rules.

Numerous American technology companies doing major business with China are facing possible severe damage to their profits. Other companies that manufacture technology products in China are having to withdraw U.S. employees because the ban also bars “U.S. persons” from supporting technology covered by the ban.

James Lewis is a senior vice president and director of the Strategic Technologies Program at the Center for Strategic and International Studies in Washington D.C. He told VOA the new restrictions seem to be “reshaping the market.”

“The Koreans, the Taiwanese and some American companies are really nervous about it,” Lewis said. “I mean, everyone’s asking, ‘What can I still sell to China?’ And in some cases, the answer is ‘nothing,'” he added.

In Britain’s Financial Times newspaper, U.S. national editor and columnist Edward Luce wrote that “Joe Biden this month launched a full-blown economic war on China.”

So far, chip companies have reacted carefully to the ban. While recognizing the government’s concerns, they have noted they were not given a chance to discuss the policy with U.S. officials before it was announced.

Call Them the Biden-Trump Tariffs Now

The Wall Street Journal comments Call Them the Biden-Trump Tariffs Now

President Biden has rolled back some of Donald Trump’s destructive tariffs, but not enough, and they’re still doing economic harm. New analyses of Mr. Trump’s Section 232 steel and aluminum tariffs show how consumers and manufacturers are still paying for the border taxes that benefit only a few companies.

A study by Harbor Aluminum for the Beer Institute finds that the 10% tariff on imported aluminum cost U.S. beverage manufacturers $1.7 billion from March 2018 through August 2022. About 93% of the $1.7 billion has been pocketed by domestic aluminum producers and smelters in the U.S. and Canada. Only $120 million has gone to the U.S. government.

While Biden relaxed some tariffs on China, the chip export ban is a sharp escalation in an economic war with China. 

According to the Financial Times, China accounts for 33 per cent of sales at Applied Materials, 27 per cent at Intel and 31 per cent at Lam Research.

President Biden unequivocally blocked China’s access to high-end computer chips but how long can that last?

Blowbacks Everywhere

It does not matter at all whether Putin sells energy for dollars, euros, or yen.

What matters is where reserves are held.

Currencies are usually fungible. But the US has weaponized reserves. China concerned too.

This will backfire on the US IMO https://t.co/vHfeY0cl1x

— Mike “Mish” Shedlock (@MishGEA) October 28, 2022

Blowbacks everywhere. Biden escalated Trump’s China policy to include chips.

It’s nuts to believe we can prevent China from getting technology. They will get stronger eventually from this

WSJ has interesting article on prisoner swap blowbacks-Free Link:https://t.co/AOD7ezAh4u

— Mike “Mish” Shedlock (@MishGEA) October 28, 2022

Inside the Secret Prisoner Swap That Splintered the U.S. and China

Detention of a Chinese executive to stand trial in the U.S. provoked a standoff between global rivals and opened an acrimonious new era. 

The US arrest of Meng Wanzhou, chief financial officer of China’s Huawei Technologies Co. was based on an irrelevant 6-year old power-point. She was arrested in Canada in 2018.

That’s quite the story. Bolton did this on his own accord and got Canada tangled up in it too. 

It’s a long but interesting read. Here is a free link: Inside the Secret Prisoner Swap That Splintered the U.S. and China

Inflationary Headwinds

De-globalization and decarbonization are both very inflationary. 

Both parties seem OK with the former. Decarbonization by the US and EU Left greatly adds to the mess. 

No Man’s Land 

Weaponizing currency reserves and diplomats on top of this is madness. But that’s where we are.

For further discussion, please see What Does China Do With a Dollar That’s No Longer Risk Free? Buy Gold?

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Elon Musk says that a claim by the NY Times that he plans to fire Twitter employees before Nov. 1 to avoid paying stock grants is “false.”

On Oct. 29, the Times – citing “four people with knowledge of the matter” – reported that Musk had planned to start laying people off as soon as Saturday, depriving them of scheduled stock grants.

“Such grants typically represent a significant portion of employees’ pay. By laying off workers before that date, Mr. Musk may avoid paying the grants, though he is supposed to pay the employees cash in place of their stock under the terms of the merger agreement,” wrote the Times.

Breathlessly believing the Times was ProPublica deputy managing editor Eric Umansky, who tweeted “@elonmusk is making sure to fire people at Twitter before part of their year-end compensation *kicks in on Tuesday.*“

To which Musk replied: “This is false.“

This is false

— Elon Musk (@elonmusk) October 30, 2022

That said, the Times also reported that top executives may not receive golden parachutes.

Mr. Musk also appears unlikely to pay the golden parachutes that the fired top executives of Twitter were set to receive. Under the merger agreement, those executives — including Parag Agrawal, the chief executive — had been set to receive compensation of $20 million to $60 million if they were fired. But Mr. Musk terminated the executives “for cause,” meaning he did it because he alleged he had justification, which may void that agreement, two people with knowledge of the matter said. –NYT

And on Sunday, Musk tweeted what he claims is evidence which was ‘hidden from the court’ – which appears to be a conversation about “fraudulent metrics.”

can a closed deal be unclosed? https://t.co/CPyupqDD3i

— zerohedge (@zerohedge) October 31, 2022

As the Epoch Times further notes;

Musk officially acquired the social media platform on Thursday following months of legal back-and-forth between himself and Twitter executives over his $44 billion acquisition.

The businessman marked the occasion by sharing a video of himself on Twitter walking into Twitter headquarters while carrying a sink, tweeting, “let that sink in.”

He has also changed his Twitter bio to read “Chief Twit,” with a location tag stating “Twitter HQ.”

According to a Reuters report, Musk also fired Twitter Chief Executive Officer, Parag Agrawal, and Chief Financial Officer Ned Segal, as well as legal affairs and policy chief Vijaya Gadde after sealing the deal, having accused them of misleading him and Twitter investors over the number of automated bots on the platform.

The New York Times, citing anonymous sources, said that the top executives allegedly fired by Musk had been set to receive compensation of $20 million to $60 million if their positions were terminated but that they will no longer receive the payouts because Musk instead terminated them “for cause,” which the publication said meant that he “alleged he had justification, which may void that agreement.”

The Epoch Times has contacted Twitter for comment.

Musk has stressed that he believes Twitter, which has repeatedly come under fire for censoring some minority and politically conservative viewpoints, should be a platform that allows a wide range of beliefs to be debated in a healthy manner.

On Friday, the billionaire businessman revealed plans to lift bans on accounts that were suspended for “minor and dubious reasons” but did not say when exactly the accounts would be reinstated.

Into Monday mid-morning Brazil’s president Jair Bolsonaro still hasn’t conceded defeat to his leftist rival Luiz Inácio Lula da Silva. The results were announced fairly quickly after polls closed Monday evening. 

After 100% of votes were reported counted, Lula barely passed the the required 50% mark, coming it at 50.9% to Bolsonaro’s 49.10%. At 60.3 million votes to the incumbent’s 58.2 million, this was a difference of just over 2 million votes.

“This country needs peace and unity,” Lula said in a victory speech in Sao Paulo. He said the challenge set before the country is “immense” while vowing “democracy is back” – in reference to Bolsonaro’s detractors often dubbing him a ‘far right dictator’.

As The Guardian observes, pressure is growing for Bolsonaro to officially concede, given that already, “A stream of world leaders have stepped forward to recognize Lula’s stunning political comeback, including the US president, Joe Biden, the UK prime minister, Rishi Sunak, the Russian leader, Vladimir Putin, and China’s Communist party chief, Xi Jinping.”

The upset marks the first time in Brazilian history that a serving president has been voted out of office. Bolsonaro will serve until Lula takes over on January 1, 2023.

France24 notes that there’s currently a climate of trepidation as it’s unclear whether Bolsonaro will concede, and after there’s been instances of political violence among rival supporters during the campaign: 

Lula supporters erupted into joy and celebration across the country, but not without trepidation. Since the first round of the elections on October 2, when Bolsonaro largely beat the polls and came out with an unexpectedly strong showing of 43 percent against Lula’s 48 percent, many feared that the incumbent could potentially claim a second straight mandate.

All eyes are also on Bolsonaro’s official social media accounts, which have been quiet for the past 24 hours. President Bolsonaro’s last tweet came shortly before midnight on the eve of the election. He quoted from the Bible, the book of Ephesians, which says “Put on the whole armor of God, that you may be able to stand against the wiles of the devil…”

“As of 9 a.m. local time Monday (8 a.m. E.S.T.), 13 hours after the race was called, Mr. Bolsonaro and his three politician sons, who are prolific users of social media, had not commented publicly since election results were announced.” https://t.co/9rAQD1Zuel

— Steve Lookner (@lookner) October 31, 2022

Bolsonaro has recently expressed concern over the potential for the country’s voting machines to be manipulated or tampered with, something that his political opponents have dismissed as “Trump-style” election denial rhetoric. 

As DB’s Jim Reid writes this morning, “the most unoriginal intro I can use this morning given today’s date is to speculate as to whether the Fed will offers tricks or treats this week.”

Indeed a week with the latest FOMC and payrolls is unlikely to be dull and could “spook” the market, especially after a 10-day period that was mostly made of up dovish pivot talks. However this momentum stalled a bit after runaway European inflation on Friday tempered some of the enthusiasm for the trade. So all to play for. We also have a BoE meeting (Thursday) that although less pivotal than it could have been a few weeks back is still something that can influence global markets. The biggest events are on deck next week: remember that the following week sees US mid-terms (Tuesday) and CPI (Thursday). So quite a run of big events coming up as we hit the last day of the month.

Other key data releases include the ISM indices in the US (tomorrow and Thursday). Industrial activity and labor market indicators will be also released in Europe. Corporate earnings will feature Saudi Aramco, BP, Pfizer, Starbucks, Toyota and Qualcomm after last week’s disappointing results from Big Tech firms.

Among the main events over the weekend, Russia announced that it is exiting from the internationally brokered arrangement that allowed grain ships to leave Ukrainian Black Sea ports, in response to what it called a major Ukrainian drone attack near the port of Sevastopol in Crimea. The abrupt move by Russia has caused international outcry as the decision undermines efforts to ease a global food crisis. Moscow has requested a meeting with the UN’s security council today to discuss the issue. Grain markets have reacted to this development with Chicago wheat futures rising +5.47% to $8.75 a bushel after hitting a high of $8.93 a bushel in early trade. Additionally, Corn (+2.2%) and soybeans (+0.75%) have also moved higher. So one to watch. Moving on to political news, Brazilian left wing leader Lula narrowly defeated the far-right incumbent Bolsonaro in an extremely tight election to become the next president with 50.9% of votes against 49.1% for Bolsonaro. Lula will be sworn in on 1 January 2023.

Back to this coming week and with regards to the Fed, Reid confirms what most know, namely that a fourth successive 75bps has long been pretty much nailed on but the subsequent path of hikes is now up for grabs and will be the key focus from this week’s meeting. That said, it feels “inconceivable” to the DB strategist, given how spectacularly forward guidance has broken down across the global markets over the last 12 months, that Powell will try to guide too aggressively for December, especially with two payrolls (one this week) and two CPIs to come before they meet again. DB economists still believe that 75bps is likely in December (unlike Goldman which on Sunday said it expects 50bps in December), but that January could mark a downshift whilst still seeing upside risks to DB’s terminal rate expectation of 5% given the recent inflation data and evidence that r-star has risen. Even WSJ Timiraos tweeted at the weekend “Consumers have a big cushion of savings. Corporations have lowered their debt-service costs. For the Fed, a more resilient private sector means that when it comes to rate rises, the peak or “terminal” policy rate may be higher than expected.”

Household debt service costs as a share of income is historically low

One measure of private sector balance sheets shows they are healthier than on the eve of any U.S. recession since the 1950s, according to Goldman Sachs pic.twitter.com/JP43dlbsNP

— Nick Timiraos (@NickTimiraos) October 30, 2022

To be fair in his WSJ article that went viral 10 days ago he did mention that 2023 Fed forecasts could be upgraded. However the market mostly focused on the near-term downshift possibilities.

The downshift debate will still carry on right up to the meeting though with a few bits of important data for the Fed to throw into the mix prior to their final statement and subsequent tone in the press conference. The Chicago PMI (47.6 forecast vs. 45.7 previously) today will tweak estimates for tomorrow’s manufacturing ISM (est 50.0 vs. 50.9 last). The latter could drop below 50 for the first time since May 2020. The employment series of both will be important, especially in payrolls week. Last month the employment component of the Chicago PMI plunged 14.4 points to 40.2 – the largest month-over-month decline on record, while the equivalent in the manufacturing ISM fell by 5.5 points to 48.7 last month. Staying with jobs, tomorrow’s JOLTS is always a key indicator of the tightness of the labor market, albeit a month behind other releases. After the FOMC, the services ISM (DB at 55.3 vs. 56.7 last) could also tweak payrolls estimates. The employment component bounced from 50.2 to 53 last month but the flash services PMI indicates that the risks to the employment outlook are to the downside.

In terms of payrolls, consensus expects another major slowdown, with the headline print expected to shrink to +190k (vs. +263k previously) with private at +195k (vs. +288k previously). Consensus expects the unemployment rate to tick up to 3.6%. Average hourly earnings is expected by the street to dip from 5% to 4.7% (DB at 4.6%)

Back here in Europe, the BoE’s decision on Thursday will be in the spotlight after a tumultuous month since its latest rate hike on September 22. Most economists expect the central bank to hike by +75bps, taking the Bank Rate to 3%. Beyond Thursday’s meeting, the DB team sees a terminal rate of 4.5% amidst growing fiscal consolidation. Their expected sequence of hikes beyond Thursday has +50bps in December and February and +25bps in March and May. For the ECB Lagarde speaks twice (Thursday and Friday) and she can firm up or row back on the slightly more dovish meeting last week than expected. Will she be influenced by Friday’s shocking European inflation numbers that saw German inflation at 11.6% YoY against 10.9% expectations, Italy at 12.8% vs. 9.9% expected and France 7.1% vs. 6.5% expected? Italy’s PPI was at 53.0% YoY vs. 50.5% expected. It wasn’t just energy related and core estimates for the full EA reading will likely have been upgraded given Friday’s numbers. Chief Economist Lane speaks today as well.

Turning to earnings now, with 255 of S&P 500 members now reported and after Big Tech’s disappointing releases, this week’s busy line-up of results include key numbers from key oil & gas, healthcare and consumer firms. It’s been an interesting season so far as our equity strategists reviewed over the weekend here. They comment that the breadth and size of Q3 earnings beats are near historical averages but these are off estimates that have continued to be cut. The blended estimate for Q3 earnings (combining actuals plus consensus for those yet to report) as a result has barely ticked higher and is significantly below the typical upward trajectory at this stage of the earnings season. In addition, consensus estimates for Q4 have fallen over -2% since the beginning of this earnings season, much larger than the typical -1%, and follow cuts of -6% in the prior three months. 2023 estimates have fallen by -2% this earnings season bringing the cuts since April to -7%. 2023 EPS consensus is now at $234, still significantly higher than our team’s forecast of $195 which incorporates a recession forecast next year. The consensus forecast on the other hand looks to embody a soft landing.

In terms of this week, for oil and gas, we will hear from Saudi Aramco and BP tomorrow, followed by ConocoPhillips, Cheniere, Enel and EOG on Thursday. In healthcare, results will be due from Eli Lilly, Pfizer (tomorrow), Novo Nordisk (Wednesday) and Moderna (Thursday), among others. After some strong performance from staples this week, earnings from Mondelez (tomorrow) and Starbucks (Thursday) will be in focus. Automakers outside the US will announce too, including Toyota (tomorrow), Ferrari (Wednesday) and BMW (Thursday). Tech firms reporting will include AMD, Sony and Uber tomorrow, Qualcomm and eBay on Wednesday and PayPal on Thursday. Other notable earnings releases will include Booking, Maersk (Wednesday) and Marriott (Thursday). See the full day by day week ahead at the end for all the key data and earnings releases.

Courtesy of DB, here is a day-by-day calendar of events

Monday October 31

• Data: US October MNI Chicago PMI, Dallas Fed manufacturing activity, China October manufacturing PMI, UK October Lloyds business barometer, September net consumer credit, mortgage approvals, M4, Japan October consumer confidence index, September housing starts, Italy and Eurozone Q3 GDP, Germany September retail sales, Eurozone October CPI
• Central banks: ECB’s Visco and Lane speak
• Earnings: Stryker, NXP Semiconductors

Tuesday November 1

• Data: US October ISM manufacturing index, total vehicle sales, September JOLTS report, construction spending, China Caixin October manufacturing PMI, Japan October vehicle sales, monetary base, UK October Nationwide house price index, GermanySeptember import price index, Italy October new car registrations, budget balance, Canada October manufacturing PMI
• Central banks: BoJ minutes of September meeting
• Earnings: Saudi Aramco, Eli Lilly, Pfizer, Toyota, BP, Advanced Micro Devices, Sony, Mondelez, Airbnb, Eaton, Uber, Marathon Petroleum, Devon Energy, KKR, Electronic Arts, Newmont

Wednesday November 2

• Data: US October ADP report, China October services PMI, Italy October manufacturing PMI, Germany September trade balance, October unemployment change, France September budget balance
• Central banks: Fed’s decision, ECB’s Villeroy, Nagel and Makhlouf speak
• Earnings: Novo Nordisk, Qualcomm, CVS, Estee Lauder, Booking, GSK, Suncor, Maersk, Ferrari, Albemarle, Apollo, eBay, Vestas, MGM Resorts, Etsy, Robinhood, Roku, Zillow

Thursday November 3

• Data: US October ISM services index, September trade balance, factory orders, Q3 unit labor costs, Q3 nonfarm productivity, initial jobless claims, UK October official reserves changes, Italy and Eurozone September unemployment rate, Canada September international merchandise trade, building permits
• Central banks: BoE’s decision, ECB’s Lagarde, Panetta, Nagel, Visco, Makhlouf and Elderson speak, BoE’s Mann speaks
• Earnings: ConocoPhillips, Amgen, Starbucks, PayPal, Petrobras, Cigna, Regeneron, EOG, BNP Paribas, ICE, BMW, Marriott, Moderna, Cheniere, Enel, Orsted, Block, Warner Bros Discovery, Barrick Gold, DoorDash, Expedia, BT, Peloton

Friday November 4

• Data: US October change in nonfarm payrolls, unemployment rate, labor force participation rate, average hourly earnings, China Q3 BoP current account, UK October construction PMI, new car registrations, Italy October services PMI, Germany September factory orders, France September manufacturing production, industrial production, 3Q private sector payrolls, Eurozone September PPI, Canada October unemployment rate, participation rate
• Central banks: Fed’s Collins speaks, ECB’s Lagarde and Guindos speak, BoE’s Pill speaks
• Earnings: Duke Energy, Dominion Energy, Intesa Sanpaolo, Telefonica, Societe Generale, Vonovia, DraftKings

Finally, looking at just the US, Goldman notes that the key economic data releases this week are the JOLTS job openings and ISM manufacturing reports on Tuesday, and the employment situation report on Friday. The November FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM.

Monday, October 31

• 09:45 AM Chicago PMI, October (GS 48.0, consensus 47.0, last 45.7): We estimate that the Chicago PMI rebounded 2.3pt to 48.0 in October, as the Chicago PMI has overshot to the downside relative to other business surveys (GS manufacturing survey tracker -1.5pt to 48.8 in October).
• 10:30 AM Dallas Fed manufacturing index, October (consensus -18.5, last -17.2)

Tuesday, November 1

• 09:45 AM S&P Global US manufacturing PMI, October final (consensus 49.9, last 49.9)
• 10:00 AM JOLTS job openings, September (GS 10,000k, consensus 9,625k, last 10,053k): We estimate that JOLTS job openings declined to 10,000k in September.
• 10:00 AM Construction spending, September (GS -0.3%, consensus -0.5%, last -0.7%): We estimate construction spending decreased 0.3% in September.
• 10:00 AM ISM manufacturing index, October (GS 49.9, consensus 50.0, last 50.9): We estimate that the ISM manufacturing index declined by 1pt to 49.9 in October, reflecting weak industrial trends abroad and convergence towards other manufacturing surveys (GS manufacturing survey tracker -1.5pt to 48.8 in October).
• 05:00 PM Lightweight motor vehicle sales, October (GS 14.6mn, consensus 14.3mn, last 13.49mn)

Wednesday, November 2

• 08:15 AM ADP employment report, October (GS +200k, consensus +180k, last +208k): We estimate a 200k rise in ADP payroll employment in October.
• 02:00 PM FOMC statement, November 1-2 meeting: We expect the FOMC to deliver a fourth 75bp hike at its November meeting this week, raising the target range for the fed funds rate to 3.75-4%. The focus will be on what comes next, and we expect Chair Powell to hint that the FOMC will likely slow the pace to 50bp in December. We expect the FOMC to eventually pair that slowdown with a somewhat higher projected peak funds rate in the December dot plot. Our forecast calls for hikes of 75bp in November, 50bp in December, 25bp in February, and 25bp in March with the funds rate range peaking at 4.75-5%.

Thursday, November 3

• 08:30 AM Trade balance, September (GS -$72.4bn, consensus -$72.0bn, last -$67.4bn): We estimate the trade deficit widened by $5bn to $72.4bn in September, reflecting declining goods exports and rising goods imports in the advanced goods report.
• 08:30 AM Nonfarm productivity, Q3 preliminary (GS +0.5%, consensus +0.5%, last -4.1%): Unit labor costs, Q3 preliminary (GS +4.7%, consensus +4.0%, last +10.2%): We estimate nonfarm productivity growth of +0.5% in Q3 (qoq saar) and unit labor cost—compensation per hour divided by output per hour—growth of +4.7%.
• 08:30 AM Initial jobless claims, week ended October 29 (GS 215k, consensus 220k, last 217k); Continuing jobless claims, week ended October 22 (consensus 1,450k, last 1,438k): We estimate initial jobless claims edged down to 215k in the week ended October 29.
• 09:45 AM S&P Global US services PMI, October final (consensus 46.6, last 46.6)
• 10:00 AM Factory orders, September (GS flat, consensus +0.3%, last flat); Durable goods orders, September final (consensus +0.4%, last +0.4%); Durable goods orders ex-transportation, September final (last -0.5%); Core capital goods orders, September final (last -0.7%); Core capital goods shipments, September final (last -0.5%): We estimate that factory orders were unchanged in September. Durable goods orders rose 0.4% in the September advance report but core capital goods orders declined 0.7%.
• 10:00 AM ISM services index, October (GS 55.7, consensus 55.1, last 56.7): We estimate that the ISM services index declined by 1pt to 55.7 in October, reflecting convergence towards other business surveys but a sentiment boost from rebounding stock markets. Our non-manufacturing survey tracker fell by 2.0pt to 51.2 in October.

Friday, November 4

• 08:30 AM Nonfarm payroll employment, October (GS +225k, consensus +190k, last +263k); Private payroll employment, October (GS +225k, consensus +195k, last +288k); Average hourly earnings (mom), October (GS +0.35%, consensus +0.3%, last +0.3%); Average hourly earnings (yoy), October (GS +4.7%, consensus +4.7%, last +5.0%); Unemployment rate, October (GS 3.5%, consensus 3.6%, last 3.5%); Labor force participation rate, October (GS 62.3%, consensus 62.4%, last 62.3%): We estimate nonfarm payrolls rose by 225k in October (mom sa), a slowdown from the +263k pace in September reflecting sequentially lower—but still very elevated—labor demand. Big Data indicators were mixed in the month, but jobless claims remained very low. We also note that job growth tends to pick up in October when the labor market is tight, as firms frontload fall and pre-holiday hiring. We estimate the unemployment rate was unchanged at 3.5%, reflecting a rise in household employment and flat-to-up labor force participation. We estimate a 0.35% increase in average hourly earnings (mom sa), reflecting positive calendar effects and a possible boost from autumn recruitment efforts.
• 10:00 AM Boston Fed President Collins (FOMC voter) speaks: Boston Fed President Susan Collins will discuss the economic and monetary policy outlook at an event hosted by the Brookings Institution. On October 12, Collins said, “We are focused and resolute and have the tools to bring inflation back down to the two-percent target…I am anticipating or expecting additional interest rate changes.”

Source: DB, Goldman, BofA

US natural gas prices catapulted into the stratosphere Monday morning after new two-week weather forecasts showed average temperatures across the country would begin to dive next week, driving up heating demand. 

NatGas for December delivery soared as much as 13% to $6.40 per million British thermal units in New York.

Prices have come off the highs at the start of the US cash session, still up 10%, around $6.27. 

Bloomberg cited data from private forecaster Maxar Technologies that shows cold weather in the West will traverse the country into the Midwest next week. 

The two-week outlook for the US Lower 48 shows average temperatures will begin to sink Sunday and fall well below a 30-year mean through the second half of the month. By Nov. 15, average temperatures across the US could average in the mid-30s 

US Lower 48 heating degree days will rise well above a 30-year trend line, indicating heating demand via households and businesses will soar as colder temps swoop across the nation. 

“The gas rally underscores how sensitive traders are to potential cold blasts as below-normal stockpiles and booming exports stoke concern about whether supplies will be enough to meet demand in a deep freeze,” Bloomberg said. 

Eli Rubin, an analyst at EBW AnalyticsGroup, said the prospect of colder weather means traders are buying back into NatGas markets. Prices have slumped by more than 35% since August, with hedge funds trimming bullish bets to the lowest in two years — all because of warmer weather. NatGas appears to have found a near-term bottom as ‘Old Man Winter’ is set to make an entrance. 

As a reminder, soaring energy prices mean US households are about to pay 47% more for electricity than a year ago — making it very costly to heat homes.

Much of the Ukrainian capital of Kiev is without electricity or water, after the latest round of major Russian airstrikes on Monday. The Russian military announced ‘successful’ strikes on multiple of the country’s vital infrastructure facilities. 

“The Russian Armed Forces continued to launch strikes with high-precision long-range air and sea-based weapons against Ukrainian military and energy facilities,” the Defense Ministry said. “The goals of the strikes were successful. All assigned objects were hit.” Meanwhile, Ukrainian Prime Minister Denys Shmyhal confirmed direct hits on 18 sites – most of which were connected to the nation’s energy supply. These ramped up attacks have created a growing sense of panic with temperatures plunging and winter approaching.

“Missiles and drones hit 10 regions, where 18 sites were damaged, most of them energy-related,” Shmyhal stated on Telegram. “Hundreds of settlements in seven regions of Ukraine were cut off.” Facilities in Cherkasy and Kirovohrad also came under attack. Ukraine’s military said it intercepted projectiles over the Lviv region, which spared this western part of the country from damage.

The Washington Post noted there are “power outages continuing in the Kyiv, Zaporizhzhia, Dnipropetrovsk and Kharkiv regions,” and others. The Post listed some of the below regions impacted by large-scale power outages and water supply disruptions: 

• Kyiv region: Russian strikes damaged buildings, and rescuers are searching for victims, the regional police said. Attacks left 80 percent of the capital without water and are likely to cause sustained power outages, Mayor Vitali Klitschko said.
• Kharkiv: Two strikes hit critical infrastructure facilities in the eastern city, causing problems with the water supply and affecting the public transit network, the mayor said.
• Zaporizhzhia region: An infrastructure facility was struck by rockets, the local governor said, prompting warnings from officials in the southern region that energy supplies there could also be affected.
• Cherkasy region: Some of the region lost power after air attacks on infrastructure facilities, the military administrator said.

Ukrainian Foreign Minister Dmytro Kuleba condemned the attacks as more war crimes: “Another batch of Russian missiles hits Ukraine’s critical infrastructure. Instead of fighting on the battlefield, Russia fights civilians,” he tweeted.

Massive Russian strikes with over 50 missiles targeting energy infrastructure in Ukraine this morning. Power cuts across several regions. Video shows Dnipro Hydroelectric Plant in Zaporizhzhia oblast after being hit. pic.twitter.com/WscEdaIpKe

— marqs (@MarQs__) October 31, 2022

Additionally Kyiv mayor Vitali Klitschko announced on Telegram that these fresh strikes left 80% of residents in the capital without water and some 350,000 homes with no electricity. 

“Just in case, we ask you to stock up on water from the nearest pumps and points of sale,” he advised. The mayor’s office vowed that water supply to the effected parts of the city would be restored in three to four hours, with emergency utility crews working urgently on it.

Rescue teams in the capital are reportedly searching for possible casualties under the rubble of buildings destroyed or damaged from the new salvo of Russian strikes; however, at this point casualty numbers are unclear. 

The US ambassador said she and her staff had to take shelter in this latest attack on the capital:

Like millions of Ukrainians, our @USEmbassyKyiv team is once again taking shelter as Russia continues its callous and barbaric missile strikes on the people of Ukraine in an effort to leave the country cold and dark as we approach winter.

— Ambassador Bridget A. Brink (@USAmbKyiv) October 31, 2022

Already before Monday’s attacks, Ukrainian officials estimated that 40% of the nation’s electrical power systems had been severely damaged, and urged households to limit their usage, especially with non-essential large appliances. Ukrainians are further being warned to prepare for long-term power outages as a frigid winter is just around the corner.