Month: February 2023

Showdown Over Student Loan Forgiveness Hits Supreme Court Tomorrow


Biden talking about student loan forgiveness

Challenge to Biden’s student debt plan hits Supreme Court tomorrow. On Tuesday, the Supreme Court will hear two lawsuits challenging President Joe Biden’s plan to erase a huge chunk of student loan debt.

Biden’s debt forgiveness plan, announced last August, applies to anyone with an income under $125,000 and allows for the cancellation of up to $10,000 in student loan debt for all borrowers and up to $20,000 for those with Pell Grants. Biden justified this giant flex of executive power by citing COVID-19.

Specifically, the Biden administration argues that the Higher Education Relief Opportunities for Students (HEROES) Act of 2003—which “permits the Secretary of Education to waive or modify Federal student financial assistance program requirements to help students and their families or academic institutions affected by a war, other military operation, or national emergency”—could be invoked in the summer of 2022 because of the coronavirus pandemic. (Never mind that Biden also said around the same time that the pandemic was “over.”)

“The HEROES Act was designed to let the executive branch ameliorate the student loan situations of service members fighting the war on terror,” wrote Reason‘s Eric Boehm last summer. But Biden twisted that to accomplish something Democrats have long wanted to do but have been unable to accomplish through the proper legislative channels.

The administration’s move quickly provoked a spate of lawsuits, which have since been winding their way through the federal court system. As part of this process, a federal appeals court issued a temporary injunction against the debt forgiveness.

The Supreme Court has agreed to hear two of the challenges. One suit was filed by the attorneys general of six states (Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina), who argue “that the debt-relief plan will harm state revenues and agencies that hold student loans,” reports Inside Higher Ed. The other suit was brought by two Texans who “challenged the debt-relief plan because they wouldn’t benefit from all the provisions and didn’t have the chance to comment on the proposal.”

More from Inside Higher Ed:

The plaintiffs argue in the lawsuits that the Higher Education Relief Opportunities for Students Act of 2003 does not authorize the debt-relief plan—an argument that one federal judge has already agreed with….The Biden administration has said the law clearly authorizes the program and that relief is necessary to ensure those affected by the pandemic aren’t in a worse position financially once student loan payments resume. Payments are currently paused through the end of June, or 60 days after the lawsuits are resolved, whichever comes first.

The plaintiffs also want the justices to apply the major-questions doctrine to the case, which says in part that agencies need clear congressional authorization when carrying out policies that have economic and political significance. The court recently used the doctrine to strike down the Environmental Protection Agency’s Clean Power Plan last year.

Conservative legal experts and the plaintiffs say in filings that the lawsuits are ideal for the major-questions doctrine because of the scale of the debt-relief program and what it would mean for executive power.

“What we have to remember is that the court certainly knows its decision here is never just going to be confined to this one instance,” said Jack Fitzhenry, senior legal policy analyst at the conservative think tank the Heritage Foundation. “As large and important as the question of student loan cancellation is, the kind of law that they set for what future presidents can do and what future secretaries can do—that’s going to have enormous impacts on how policy preferences are pursued by this administration and future administration.”

The Supreme Court arguments will also examine the question of standing. Last October, the U.S. District Court for the Eastern District of Missouri ruled that the six states challenging Biden’s loan plan did not have standing to do so. In November, however, a three-judge panel of the U.S. Court of Appeals for the Eighth Circuit unanimously concluded that at least some of the states did.

That same month, another federal court—this one hearing the challenge by the two Texas residents—ruled Biden’s plan unconstitutional. “In this country, we are not ruled by an all-powerful executive with a pen and a phone,” U.S. District Judge Mark T. Pittman wrote in his decision. “Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government.”

And a few days later, the U.S. Court of Appeals for the Eighth Circuit granted an emergency motion for a nationwide injunction on implementing the student loan plan. Which brings us to tomorrow’s showdown in the Supreme Court.

George Mason University law professor Ilya Somin has more on the question of standing here and more on the broader issues at stake here. “The administration’s ultra-broad interpretation of the HEROES Act runs afoul of the Supreme Court’s recent rulings on the ‘major questions’ doctrine,” writes Somin. He adds that “Biden’s loan-forgiveness plan is not the first time a president has tried to leverage emergency powers to raid the federal treasury for purposes denied by Congress. In 2019, Trump used a dubious emergency declaration to try to divert funds to build his border wall, despite the fact Congress had repeatedly refused to authorize any such expenditure.”

“As with Trump, the use of emergency powers here is a pretext for achieving an unrelated policy objective rejected by Congress,” Somin adds.

FREE MINDS

Texas prosecutors can’t criminally charge people who aid access to out of state abortions. A federal court says Texas prosecutors can’t seek criminal charges against groups that help women fund and travel to out-of-state abortions. The preliminary decision, from U.S. District Judge Robert Pitman, comes as part of a lawsuit filed by several groups that help Texas women terminate their pregnancies. The groups are seeking to block enforcement of state abortion laws enacted in 1961.

Pittman said on Friday that the laws “were rendered unconstitutional by the U.S. Supreme Court’s 1973 ruling in Roe v. Wade” and “were not revived when the Supreme Court overturned Roe last June,” reports Yahoo News:

Pitman’s order, which is preliminary, will remain in place while abortion funding groups, including Fund Texas Choice, The North Texas Equal Access Fund and The Lilith Fund for Reproductive Equity, move forward with a lawsuit seeking to block enforcement of the laws.

The order applies only to five individual local prosecutors who are named as defendants in the case, though the groups have said they will seek to expand their case to include a class of all local prosecutors in the state. Pitman said that he could issue an order applying to a broader group of prosecutors in the future, after they have had a chance to appear in court.

The lawsuit does not concern a 2021 Texas law that banned abortion at six weeks pregnancy as well as “aiding and abetting” an abortion. That law does not authorize the state to seek criminal penalties but rather relies on civil lawsuits brought by private citizens as a means of enforcement.

The Volokh Conspiracy has more on Pittman’s ruling.

FREE MARKETS

Food trucks banned in 96 percent of North Carolina city. Food truck owners in Jacksonville, North Carolina, are challenging the city’s strict rules about where food trucks can operate:

Joe and Amanda Broda of Joeve’s Pizza moved to Jacksonville in 2018, where Joe is originally from. The Brodas got their business license through the city of Jacksonville but soon found out that only 4% of the city is available for food trucks to operate….

[P]roperty owners cannot host a food truck if the property falls within 250 feet of property containing another food truck, restaurant or residential housing.

Joe said they actually had the police called on them one night when they were set up at a local business, because despite their having permission from the property owner, it was illegal.

The Broda’s are challenging the city’s food truck rules with the help of the nonprofit law firm Institute for Justice (IJ). They are joined by several other food truck owners.

“The city’s stifling economic protectionism violates the North Carolina Constitution,” argues IJ. “People have a fundamental right to use their private property in safe and reasonable ways free from arbitrary, irrational and protectionist government regulations, such as by inviting someone to earn an honest living on that property by selling safe and quality seafood or cheesesteaks from a food truck. They also have a right to equal treatment under the law, meaning the city can’t prohibit food trucks in areas where it allows similar restaurants unless it has a good and legitimate reason for singling food trucks out.”

The city has filed a motion to dismiss the suit.

QUICK HITS

• “The U.S. Energy Department has concluded that the Covid pandemic most likely arose from a laboratory leak,” reports The Wall Street Journal.

• The Food and Drug Administration has approved an at-home combination flu and COVID-19 test.

• Biden’s plans to break up big tech companies are faltering. “Halfway through his term, the movement’s losses have outpaced its wins, key figures are stepping down and Republican control of the House has taken bills that could break up tech giants off the table,” says The Washington Post.

• Comic book images that “are not the product of human authorship” cannot be copyrighted, says the U.S. Copyright Office.

• A nuclear physicist suffering from severe bipolar disorder killed himself in an Alexandria, Virginia, jail after staff discontinued his medications. Now his 16-year-old daughter is suing.

• The A.I. chatbot ChatGPT “is credited with authoring or co-authoring at least 200 books on Amazon’s storefront,” reports Engadget.

The post Showdown Over Student Loan Forgiveness Hits Supreme Court Tomorrow appeared first on Reason.com.

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Why Big Tech will lose its Supreme Court case on section 230

The Supreme Court’s oral argument in Gonzalez v. Google left most observers in a muddle over the likely outcome.  In three hours of questioning, the Justices defied partisan stereotypes and asked excellent questions, but mostly just raised doubts about how they intended to resolve the case. I had the same problem while listening to the argument in for a Cyberlaw Podcast episode (No. 445) that will be mostly devoted to Gonzalez.

But after going back to look at each Justice’s questions separately, I conclude that we do in fact have a pretty good idea how the case will turn out: Gonzalez will lose, and so will Google, whose effort to win a broad victory is likely to be killed – and most enthusiastically by the Court’s left-leaning Justices.

First, a bit about the case. Gonzalez seeks to hold Google liable because the terror group ISIS was able to post videos on YouTube, and YouTube recommended or at least kept serving those videos to susceptible people. This contributed, the complaint alleges, to a terror attack in Paris that killed Gonzalez’s daughter. Google’s defense is that section 230 makes it immune from liability as a “publisher” of third-party content, and that organizing, presenting, and even recommending content is the kind of thing publishers do.

I should say up front that I am completely out of sympathy with Google’s position. I was around when section 230 was adopted; it was part of the Communications Decency Act, which was designed to protect children from indecent content on the internet. The tech companies, which were far from being Big Tech at the time, hated the decency part of the bill but couldn’t beat it. Instead, they tried to turn the decency lemon into lemonade by asking for relief from a recent defamation ruling that online services who excluded certain content were the equivalent of publishers under defamation law and thus liable for any defamatory third-party content they distributed. Services like AOL and Compuserve pointed out the irony that they were being punished for their effort to build family-friendly online communities—the opposite of what Congress wanted. “If you want us to exclude indecent content,” they argued to Congress, “you have to immunize us from publisher liability when we do that.” That was and is a compelling argument, but only for undoing publisher liability under defamation law. To my mind, that’s exactly what Congress did when it said, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

But that’s not how the courts have read section 230. Seduced by a transformative technology and by aggressive, effective advocacy, the courts read this language to immunize online providers for doing anything that publishers can be said to do. This immunity goes far beyond defamation, as the Gonzalez case shows. There, Google said it should be immune because deciding what content to show or even recommend to users is the kind of thing a publisher does. Of course, carried to its logical extreme, this means that what are now some of the richest companies in the world cannot be held liable even if they deliberately serve how-to-kill-yourself videos to the depressed, body-shaming videos to the anorexic, and ISIS videos to extremists.

So, why not just correct the error, narrow the statutory interpretation to its original purpose, and let Congress actually debate and enact any other protections Big Tech needs? Because, we’re told, these companies have built their massively profitable businesses on top of the immunity they sold to the courts. To change now, after twenty-six years of investment, would be disruptive – perhaps even catastrophic. That in a nutshell is the dilemma on whose horns the Court twisted for three hours.

It is generally considered professional folly for appellate lawyers to predict the outcome of a case based on the oral argument. In fact, this is only sometimes true. Judges, and Justices even more so, usually want feedback from counsel on the outcome they’re considering. It’s hard to get that feedback without telling counsel what they have in mind. That said, some judges believe in hiding the ball, and some just like to ask tough questions. And in complex cases, sometimes the Justices’ initial inclinations yield to advocacy in conference or in drafts circulated by other Justices.

That latter fate could be in store for the Gonzalez case. So there’s a good chance I’ll end up guessing wrong about the outcome.  But considering how muddled the argument seemed, I was surprised how much can be learned by going back through each Justice’s questions to see what each of them thinks the case is about. It turns out that most of them were very clear about what rules of decision they were contemplating.

Justice Gorsuch.  Let’s start with Justice Gorsuch. I believe we know what his opinion will say. He laid his theory out for every advocate. He will again indulge his bent for finding the answer in the text of the statute. Briefly, he noted that Congress defined the entities eligible for immunity to include providers of software to “filter, screen, allow or disallow content” and to “pick, choose, analyze, or digest content,” Bingo, he seemed to say, there’s your textualist solution to the case: Congress told us what publishers do and thus what should be immune. No one, with the possible exception of Justice Kavanaugh, found this particularly compelling, mainly because it’s an extraordinarily broad immunity, protecting even platforms that boost content for the worst of motives – to harm competitors, say, or to denigrate particular political candidates or ethnic groups. (The notion has serious technical flaws as well, but I’ll pass over them here.)

Justice Kavanaugh. Justice Gorsuch’s embrace of broad immunity suggests that he sees this case through a business conservative’s eyes: The less liability the state imposes on business, the better. In this, he was joined most clearly by Justice Kavanaugh, who reverted several times to the risk of economic disruption if a narrower reading of section 230 were adopted.

Chief Justice Roberts. If you’re looking for a third business conservative on this Court, Chief Justice Roberts is the most likely candidate.  And he clearly resonates to Big Tech’s concerns about unleashing torrents of litigation; he’s reluctant to impose liability for content selection where the criteria for selection are generally applicable (e.g., the site just gives the user what she asks for). But he also recognizes that it’s the platform that has the power to select what the user sees, and he wonders why the platform shouldn’t be responsible for how it uses that power.

The Chief Justice’s qualms about a sweeping immunity, however, are muted. They are expressed much more directly by the Justices on the left.

Justice Sotomayor. Justice Sotomayor returns time and again to the idea that the power to select and recommend can be abused – by encouraging discrimination on racial or ethnic grounds, for example. Her hypotheticals include “an Internet provider who was in cahoots with ISIS” to encourage terrorism and a dating app “that won’t match black people to white people.” She’s not willing to narrow the immunity back to what Congress probably intended in 1996 (spoiler: none of the Justices is), but she bluntly tells the Solicitor General’s lawyer what she wants: “Let’s assume we’re looking for a line because it’s clear from our questions we are, okay?” She wants an immunity for what could be called “good” selection criteria – those that are neutral, unbiased, or general-purpose – but not for “bad” criteria.

Justice Jackson. If anyone supports the idea of returning to the 1996 intent, it’s Justice Jackson, who tells Google’s lawyer that “you’re saying the protection extends to Internet platforms that are promoting offensive material…. exactly the opposite of what Congress was trying  to do in the statute.” At another point, she signals clearly that she disagrees with the Google position that any selection criteria it chooses to use are immune from suit. In another colloquy, she downplays the risk of business disruption as just a “parade of horribles.” Not all of her questions sound this theme, but there are enough to conclude that she’s close to Justice Sotomayor in her skepticism about the sweeping immunity Big Tech wants.

Justice Kagan. Justice Kagan also sees that section 230 doesn’t really fit the modern internet. The Court’s job, she seems to say, is “to figure out how … this statute which was a pre-algorithm statute applies in a post-algorithm world.” She thinks the plaintiff’s reading could “send us down the road such that 230 really can’t mean anything at all.” She’s daunted by the difficulty of refashion the statute to avoid over-immunizing Big Tech:

I don’t have to accept all Ms. Blatt’s “the sky is falling” stuff to accept something about, boy, there is a lot of uncertainty about going  the way you would have us go, in part, just because of the difficulty of drawing lines in  this area and just because of the fact that, once we go with you, all of a sudden we’re finding that Google isn’t protected. And maybe Congress should want that system, but isn’t that something for Congress to do, not the Court?

At the same time, she sees, the immunity Google wants would allow Google to knowingly boost a false and defamatory video and to refuse to take it down. She asks, “Should 230 really be taken to go that far?” I’m guessing that she thinks the answer is “no” and that she, like Justice Sotomayor, is just looking for a line that gets her there.  For purposes of the count, let’s put her in the middle with the Chief Justice.

So far, the Justice-by-Justice breakdown for giving Google the sweeping immunity it wants is a 2-2-2 split between the left and right with the Chief Justice and Justice Kagan in the middle. That sounds familiar. But it’s about to get weird. That’s because the three remaining Justices are at least as much social as business conservatives. And Big Tech has a long track record of contempt for social conservatives.

Justice Thomas. You’d think that Justice Thomas, who’s been grumbling about section 230 for this reason for years, would have been an easy vote against Google. He clearly has doubts about Google’s sweeping claim of immunity for any selection criteria. At the same time, his questions show some sympathy for protecting Google’s selection criteria, as long as they’re generic and neutral. I still think he’ll be a vote to limit the immunity, assuming someone finds a dividing line between good selection criteria and bad.

Justice Alito. Justice Alito is the only Justice to show a hint of conservative resentment at the rise of Big Tech censorship in recent years. He notes that Google could label and preferentially distribute what it considers “responsible” news sources and he questions why such curation should be immune from liability: “That’s not YouTube’s speech?” he asks. “The fact that YouTube put those at the top, so those are the ones I’m most  likely to look at, that’s not YouTube’s speech?” He also raises the specter of deliberate distribution of bad content: “So suppose the competitor of a restaurant posts a video saying that this rival restaurant suffers from all sorts of health problems, it—it creates a fake video showing rats running around in the kitchen, it says that the chef has some highly communicable disease and so forth, and YouTube knows that this is defamatory, knows it’s—it’s completely false, and yet refuses to take it down. They could not be civilly liable for that? ,,, You really think that Congress meant to go that far?”

And, in another sign that Big Tech may have overplayed its claim of an imminent internet apocalypse, his last sardonic question is “Would … Google collapse and the Internet be destroyed if YouTube and, therefore, Google were potentially liable for posting and refusing to take down videos that it knows are defamatory and false?”

By my count, that leaves the Court roughly divided 2-2-4 on whether to give Google a sweeping immunity, with two business conservatives all in for Google (Gorsuch, Kavanaugh), two Justices waffling (Roberts, Kagan), and what might be called a “populistish” grouping of Sotomayor, Jackson, Alito, and (probably) Thomas,

Justice Barrett.  Is Justice Barrett a fifth vote for that unlikely left-right alignment? Most likely.  Like several of the other Justices, she was puzzled and put off by some of the idiosyncratic arguments made by the lawyer for Gonzalez. She also showed considerable interest that I don’t understand in making sure section 230 protects ordinary users for their likes and retweets. But when Google’s lawyer rose to speak, Justice Barrett rolled out a barrage of objections like those we heard from the other four immunity skeptics: Do you really, she asked, expect us to immunize a platform that deliberately boosts defamation, terrorism, or racism?

So there it is, by my seat-of-the-pants count—somewhere between five and seven votes to cut back the broad immunity that a generation of Big Tech lawyers built in the lower courts.

And what about the folly of predicting outcomes from argument?  Well, it’s hard to deny that I’m running a pretty high risk of ending up with egg on my face.

There is a real possibility that the Court will dump the case without ruling on Google’s immunity. The lawyer for Gonzalez did himself no favors by shifting positions on his way to oral argument. He ended up claiming that thumbnail extracts of videos were really Google’s content, not third-party content, and that simply serving users more videos like the last one they watched was a “recommendation” and thus Google’s own speech. The Justice’s struggled just to understand his argument, and they may be tempted to dump the case for that reason, ruling that immunity is unnecessary because Google faces no underlying liability for aiding and abetting ISIS (the question presented in a companion case argued the day after Gonzalez).

But dumping the case without a decision is not a neutral act. It leaves in place a raft of immunity-maximizing cases from the lower courts—precedents that at least seven Justices find troubling. That law won’t go away on its own, so I’m guessing they’ll feel dutybound to offer some corrective guidance on the scope of 230.

If they do, I bet that six or seven Justices will decisively reject the maximalist immunity sought by Google. They may have trouble tying that rejection to the text of the law (as do the immunity maximalists), and whatever limits they impose on section 230 (e.g., immunity only for “reasonable” or “neutral” content selection) could turn out to be unpersuasive or unstable. But that just means that Big Tech, which won its current legal protection by nuking liability from orbit will have to win some of its protection back by engaging in house-to-house legal combat.

If so, the popcorn’s on me.

The post Why Big Tech will lose its Supreme Court case on section 230 appeared first on Reason.com.

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Yields Yet To Fully Reflect Living In An Inflationary World

Yields Yet To Fully Reflect Living In An Inflationary World

Authored by Simon White, Bloomberg macro strategist,

Longer-term bond yields continue to reflect an environment where inflation eventually comes back to target, and are not adequately pricing the likelihood it remains elevated and unstable.

PCE deflator data for the US is released today and we will find out how intact the current disinflationary trend is.

The trend looks set to end sooner than expected, with global inflationary forces picking back up as China recovers, reinforcing already sticky domestic inflation. If bond holders start to demand more premium to reflect a higher-inflationary world, yields will rise.

The San Francisco Fed splits up core PCE into a cyclical and acyclical component. The cyclical component is made up of those parts of the PCE that correlate well with the economy, i.e. that the Fed has more influence over with monetary policy, and acyclical is what’s left, i.e. is more globally driven.

Acyclical inflation really boils down to China, with its PPI closely matching it.

Easing in China finally looks to be getting through, with money growth and credit data showing that China is on the cusp of a cyclical upturn. The rise in yields in China shows that this upturn should lead to higher PPI in China, which should boost globally-driven inflation in the US.

Core PCE’s fall has thus far been driven by the fall in globally-driven inflation. Cyclical, aka domestically-driven, inflation is still near its highs, but even if it starts to fall as the lags from monetary policy kick in, it is likely to come when globally-driven inflation is rising again, ending the US’s trend in disinflation.

Adding to troubles, cyclical inflation itself is poised to remain sticky. One of the largest drivers of inflation’s rise was the fastest jump in profit margins seen in decades as firms took advantage of the unique circumstances of the pandemic. Even though margins have come off their highs, they’re likely to remain elevated.

One remarkable feature of the current cycle has been how relatively contained longer-term bond yields have been despite the highest inflation for decades. Term premium has remained well behaved, as the market has not, yet, demanded an extra premium for inflation risks.

But term premium implied by forecasters is already much more elevated than market-implied term premium. Given the inflationary backdrop, there is as yet an unpriced risk bond holders could soon start to demand a higher premium, taking yields higher.

Tyler Durden
Mon, 02/27/2023 – 08:46

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US Durable Goods Orders Plunged Most Since COVID Lockdowns In January

US Durable Goods Orders Plunged Most Since COVID Lockdowns In January

After a shockingly large upside surprise surge (+5.6% MoM)  in December, analysts expected preliminary January durable goods orders to tumble (-4.0% MoM). The actual print came in worse with a 4.5% MoM drop – the biggest drop since April 2020.

Source: Bloomberg

But, everything else was super strong…

Core Durable Goods (ex-Transports) jumped 0.7% MoM (+0.1% exp) – biggest jump since March 2022 (but YoY Core is up just 1.6%)…

Source: Bloomberg

Additionally, the value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, increased 0.8% last month after a downwardly revised 0.3% decline in December, Commerce Department figures showed Monday.

The big swing factor was no Boeing orders as non-defense aircraft new orders tumbled 54.6% MoM…

We see the same picture with capital goods (non-defense) orders: Total (incl aircraft) -15.3%, Ex aircraft +0.8%

Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, jumped 1.1%.

So, all in all, this is ‘good’ news for the economy and thus ‘bad’ news for The Fed.

 

Tyler Durden
Mon, 02/27/2023 – 08:37

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Large Russian Plane Destroyed At Belarus Airstrip, Say Opposition Saboteurs

Large Russian Plane Destroyed At Belarus Airstrip, Say Opposition Saboteurs

Ukrainian media reports began claiming Sunday that a large explosion rocked Machulishchy airbase in Minsk Oblast in Belarus, with reports saying a Russian aircraft had been damaged. Eyewitness accounts suggested two explosions in the Sunday morning hours. 

“According to preliminary reports, the traffic police stopped the cars in several places around the airbase and checked the trunks and ID of the drivers,” Ukrainska Pravda reported, also citing the presence of emergency vehicles on the scene. But now there appears further confirmation in AFP that a Russian military airplane was likely destroyed at the airfield.

Belarus’s air base at Machulishchy. source: Belarusian opposition figure Franak Viacorka/Twitter

Secret operatives reportedly used drones to carry out the attack, before sneaking back across the border and out of Belarus. Reuters is also as of Monday morning reporting the news.

Belarus’ anti-Lukashenko opposition is now claiming that it was a successful sabotage operation which targeted Russian aircraft. The information has been revealed by officials working under exiled Belarusian opposition leader Svetlana Tikhanovskaya:

“Partisans… confirmed a successful special operation to blow up a rare Russian plane at the airfield in Machulishchy near Minsk,” tweeted Franak Viacorka, a close adviser of opposition figurehead Svetlana Tikhanovskaya.

“This is the most successful diversion since the beginning of 2022,” he added.

The two Belarusians who carried out the operation had used drones, he said, adding that they had already left the country and were safe.

Tikhanovskaya herself also weighed in, saying, “I am proud of all Belarusians who continue to resist the Russian hybrid occupation of Belarus & fight for the freedom of Ukraine.” She’s long carried out her opposition activity in exile from Lithuania and earlier Poland, having also recently been tried in absentia by Lukashenko’s court system.

She further claimed the aircraft was worth 330 million euros, with other opposition media sources identifying that it was an A-50 surveillance plane.

Beriev A-50U Mainstay. (Russian MoD)

The Russian A-50U “Mainstay” is indeed a very large, expensive surveillance aircraft in operation by the Russian air force, as The Drive details: 

The target here is very important, regardless. The A-50s are very low-density, high-demand assets and are one of Russia’s major advantages over Ukraine in terms of the air war. The A-50 provides general wide-area aerial surveillance and airborne command and control capabilities. Beyond this, and arguably most importantly, they provide the critical ‘look-down’ radar surveillance capability for Russia’s air operations.

“As such, not only can they generate an ‘air picture’ deep into Ukraine, but this also includes detecting low-flying aircraft which far-off ground-based radars cannot see,” the report continues. “This is the currently primary operating regime for Ukrainian aircraft anywhere near Russia’s ‘overlay’ of complex anti-air capabilities that extends deep into Ukrainian-controlled territory.”

Ukraine along with its Western backers have long accused Belarus of aiding and abetting the Kremlin’s war efforts by allowing its territory to be used as a staging ground for Russian planes, drones, and troops. For this reason, major Russian assets parked in Belarus would indeed be likely targets of Ukrainian and Belarusian exiled opposition sabotage attacks. The A-50 in particular is considered a rare aircraft within the Russian arsenal, given its size and expense.

Below is official footage of the behemoth surveillance plane in action…

If this was indeed a successful sabotage operation to take out such a large, valuable Russian asset, it’s very likely the saboteurs had help from a NATO country’s intelligence agency, perhaps with US, UK, or Polish involvement. This also given the difficulty of what would have been required to pull off such an attack on a sensitive military facility and get away with it.

Tyler Durden
Mon, 02/27/2023 – 08:20

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Futures Rebound After Worst Week Of 2023

Futures Rebound After Worst Week Of 2023

US index futures jumped after suffering their worst weekly drop of 2023, as traders looked for fresh opportunities to buy stocks while assessing the outlook for growth. S&P 500 futures rose 0.5%, rising just shy of 4,000 by 7:45 a.m. ET after the underlying benchmark fell 1.1% in the last trading session. Nasdaq 100 futures rose by about 0.6% after the tech-heavy gauge tumbled 1.7% at the end of last week. European and Asian stocks also rose; the Bloomberg Dollar Spot Index turned red after retreating from the day’s highs, lifting most Group-of-10 currencies. Treasuries edged lower, mirroring moves in global bond markets. Gold was little changed, oil fell and bitcoin resumed losses after gains overnight

In premarket trading, cancer drugmaker Seagen soared after the Wall Street Journal reported that Pfizer is in early-stage talks to acquire the cancer therapy developer worth around $30BN. Pfizer shares slipped. Here are some other notable premarket movers:

  • Best Buy (BBY) shares drop 1.8% after Telsey downgraded the electronics retailer, saying the company’s business is likely to experience a further decline in the near term.
  • Fisker (FSR) climbs 7.8% after the carmaker  posted 4Q results and forecast 8% to 12% annual gross margin and potentially positive Ebitda for 2023.
  • FuboTV (FUBO) rises 8.2% after posting 4Q revenue that beat the average analyst estimate.
  • Focus Financial Partners (FOCS) shares are halted after the company agreed to be acquired by affiliates of CD&R for $53 per share.
  • Enphase Energy Inc. (ENPH) shares are up 1.9% after Janney Montgomery upgraded the company to buy, citing attractive valuation.
  • Li-Cycle shares (LICY) rise 8% after the firm announced that one of its US subsidiaries had been granted a $375 million loan offer from the Biden administration.
  • Lucira Health (LHDX) shares surge 240% after the FDA issued an emergency use authorization for the company’s Covid-19 and flu test.
  • Payoneer Global (PAYO) gains 5% after Jefferies initiated coverage with a buy recommendation, saying the payments firm suffered from a “complexity discount.”
  • Pulmonx Corp. (LUNG) rises 3.8% as Wells Fargo upgrades to overweight, saying the company’s fourth-quarter results “represent a turning point for the company.”
  • Range Resources (RRC) shares slump 7.5% after Pioneer Natural Resources said it was not “contemplating a significant business combination or other acquisition transaction” in a statement Friday evening.
  • Seagen (SGEN) shares soar 14% after the Wall Street Journal reported that Pfizer is in early-stage talks to acquire the cancer therapy developer.
  • Tegna (TGNA) shares slump 22% after the Federal Communications Commission shelved Standard General’s proposed $5.4 billion buyout of the broadcaster.
  • Union Pacific (UNP) shares climb 10% after the rail freight company said it was looking for a new CEO following pressure from a hedge fund.
  • Universal Insurance Holdings (UVE) rises 1.8% after Piper Sandler upgraded the insurer to overweight, anticipating strong earnings in 2023 on higher prices and potential tort reform via a bill that seeks to reduce unnecessary litigation
  • XPeng (XPEV) shares gain 5% after the Chinese electric-vehicle maker is included in the Hang Seng China Enterprises Index

The S&P 500 has fallen over the past three weeks amid concerns that renewed price pressures will prompt more (and bigger) rate hikes from the US central bank. An unexpected acceleration in the personal consumption expenditures price index boosted expectations for policy tightening, while solid income and spending growth data further allayed fears of an imminent recession. Traders await durable goods data due later on Monday.

Monday’s advance may signal traders are looking “towards the end of the potential bearish correction brought by last week’s decreased appetite for riskier assets, after investors digested the prospect of longer hawkish monetary stances from central banks,” said Pierre Veyret, a technical analyst at ActivTrades.

Others – such as MS permabear Mike Wilson – remained bearish: Wilson said March will see stronger bear-market headwinds for stocks in a note on Monday. Fresh earnings downgrades will weigh on markets, with the S&P 500 potentially sliding as much as 24% to 3,000 points. Wilson also said that those treading into this market risk falling into a “bull trap”, a view echoed by Torsten Slok, chief economist at Apollo Global Management.

“A generation of investors has since 2008 been taught that they should buy on dips, but today is different because of high inflation, and credit markets and equity markets are underestimating the Fed’s commitment to getting inflation down to 2%,” Slok wrote in a note.

Stock markets that had mostly shrugged off forecasts for higher interest rates are finally giving way to a swift repricing of yields. Traders are now pricing US rates to peak at 5.4% this year, compared with about 5% just a month ago, as an acceleration in the Federal Reserve’s preferred inflation gauge dashes hopes for an imminent pause in policy tightening.

Meanwhile, JPMorgan strategists led by Mislav Matejka said last year’s strong outperformance in cheaper, so-called value stocks over growth peers is likely to reverse soon as the economic recovery slows. The next move for investors in the following month or two might be to go “outright underweight value versus growth,” they wrote in a note. Ironically, that comes as JPM initiated coverage of two big US online real estate firms, Zillow Group at overweight and Redfin at neutral, as it forecasts a recovery in the property market.

European stocks also rose as investors are tempted by lower prices following the largest weekly selloff since December. The Stoxx 600 is up 1.2% with tech, retail and consumer products the best-performing sectors. The bounce ignores the surge in German benchmark yields which hit 2.58%, the highest since 2011, on bets the European Central Bank will extend its tightening cycle beyond this year. Here are some of the biggest movers on Monday:

  • Shell rises as much as 2.4% after Goldman Sachs upgrades the oil and gas company to buy from neutral, following a strong earnings season for oil majors
  • Associated British Foods shares rise as much as 2.7% after the food processing and retailing company said it sees total sales for the first half more than 20% ahead of last year
  • Michelin gains as much as 3.1% after Goldman Sachs upgraded the French tiremaker to buy from neutral, noting “underappreciated tailwinds” including lower raw material and logistics costs
  • Hennes & Mauritz shares jump as much as 4.2% after Bank of America upgraded the clothing retailer to buy from underperform, citing prospects for a profit recovery this year
  • Bunzl shares gain as much as 4.2%, hitting the highest intraday since August, after the distribution group’s results were marginally better than expected across the board, showing business model resilience
  • Haleon shares rise as much as 1% after Bloomberg News reported the consumer health business, spun out of GSK last year, is exploring a divestiture of its ChapStick lip balm brand
  • PostNL shares tumble as much as 12%, the most since October, after the Dutch delivery firm’s new FY23 Ebit guidance came in 43% below consensus
  • Dechra Pharmaceuticals tumbles as much as 18% after the British animal health-care company posted a profit decline in the first half and forecast FY guidance that disappointed

Earlier in the session, Asian stocks declined as traders worry about the prospect of further interest rate increases by the Federal Reserve after an unexpected acceleration of US inflation. Investors were also cautious ahead of a key political meeting in China.  The MSCI Asia Pacific Index dropped as much as 0.8%, led by technology and materials shares. Australia and South Korea were among the worst-performing markets, while Japan bucked the region’s trend following a pledge from the Bank of Japan governor nominee to maintain ultra-loose monetary policy. Chinese and Hong Kong benchmarks edged lower as investors eyed the National People’s Congress meeting starting this weekend. They are showing a preference for onshore stocks over Hong Kong peers amid expectations that more pro-growth policies will be announced.

A strong rally in Asian stocks has hit a wall this month amid renewed worries of US policy tightening and a lack of positive catalysts for Chinese shares. A hotter-than-expected set of data in the Fed’s preferred inflation gauge Friday spurred a hawkish recalibration of expectations for rate hikes, pressuring risk assets. Asian emerging markets will “certainly not be immune” from “spillover risks” of the rebound in US inflation, said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank. Prospects of tighter policy for a longer period “will hold feet to fire for valuations.”

Japanese equities closed mixed, as investors mulled the unexpected acceleration of US inflation data that suggested potential further interest rate hikes by the Federal Reserve. The Topix rose 0.2% to close at 1,992.78, while the Nikkei declined 0.1% to 27,423.96. The yen strengthened about 0.1% after tumbling 1.3% Friday to 136.48 per dollar. Fanuc contributed the most to the Topix gain, increasing 2.9% after it was upgraded at Nomura. Out of 2,160 stocks in the index, 1,478 rose and 591 fell, while 91 were unchanged. “Japanese equities were mainly influenced by the higher than expected US PCE data, and the rising US interest rates would make the environment tougher for growth stocks,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities. “However, compared to US stocks, Japanese stocks are still supported by a weaker yen and this is likely to continue for some time.”

Australian stocks declined; the S&P/ASX 200 index fell 1.1% to close at 7,224.80, dragged by losses in mining shares. The materials sub-gauge dropped the most since Oct. 28, continuing a four-day losing streak, after iron ore slumped.  In New Zealand, the S&P/NZX 50 index fell 0.9% to 11,793.33

In FX, the Bloomberg Dollar Spot Index was steady and the greenback traded mixed against its Group-of-10 peers. Sweden’s krona and the pound were the best performers while the New Zealand and Australian dollars were the worst.

  • The euro was steady at $1.0550. Bund yields followed Treasury yields higher after an early drop. the 10-year yield rose to the highest since 2011 as traders are betting the ECB will extend its tightening cycle beyond this year, pushing back expectations for a peak in interest rates into 2024 for the first time. Focus is on speeches by policymakers
  • The pound rose 0.2% against the dollar, snapping a three-day decline, to trade around 1.1966 amid speculation of an imminent deal on the Northern Ireland protocol. Gilts yields rose as bets on BOE rates pricing turned higher.
  • The yen steadied near a two-month low as currency traders weighed remarks from BOJ governor nominee Kazuo Ueda at his second parliamentary hearing. Ueda said monetary easing should continue in support of the economy’s recovery, a comment that suggests he won’t seek an immediate change in policy if he is approved to helm the central bank
  • The New Zealand dollar underperformed its G-10 peers. RBNZ chief economist Paul Conway said inflation is “far too high,” labor market is “incredibly tight”.
  • The Australian dollar also tacked lower. RBA chief Philip Lowe’s expectation of further interest-rate rises prompted economists and money markets to narrow the odds of a recession

In rates, Treasury yields reversed a drop to inch up, led by the front end following a wider drop across German bonds, as traders wagered that the European Central Bank will extend its rate-hiking cycle further into 2024. US yields were cheaper by up to 1.7bp in front-end of the curve with 2s10s flatter by almost 1bp; 10-year yields around 3.95%, less than 1bp cheaper vs. Friday session close with Germany 10-year lagging by 3bp vs. Treasuries.  Bund futures are lower as traders push back bets on when ECB rates will peak until 2024 for the first time. German 10-year yields are up 4bps.

In commodities, oil fell as concerns that the Fed will keep on raising rates eclipsed the latest disruption to supplies in Europe and optimism over a demand recovery in China; WTI hovered around $76.30. Spot gold is flat at around $1,810.

Bitcoin is modestly firmer on the session, +1.0%, but off initial best levels and well below 24k. RBI Governor Das said at the G20 that there is now wide recognition of major risk with crypto.

Looking at today’s calendar, we get the February Dallas Fed manufacturing activity, January durable goods orders, and pending home sales; elsewhere we also get Japan January retail sales, industrial production, Italy February manufacturing confidence, economic sentiment and consumer confidence index, Eurozone February services, industrial and economic confidence, January M3, Canada Q4 current account balance. Fed speaker slate includes Jefferson at 10:30am; Goolsbee, Kashkari, Waller, Logan, Bostic and Bowman are scheduled later this week. On the earnings front, Occidental Petroleum, Workday, and Zoom report.

Market Snapshot

  • S&P 500 futures up 0.5% to 3,994.25
  • STOXX Europe 600 up 1.0% to 462.49
  • MXAP down 0.5% to 157.92
  • MXAPJ down 0.8% to 511.47
  • Nikkei down 0.1% to 27,423.96
  • Topix up 0.2% to 1,992.78
  • Hang Seng Index down 0.3% to 19,943.51
  • Shanghai Composite down 0.3% to 3,258.03
  • Sensex down 0.4% to 59,220.58
  • Australia S&P/ASX 200 down 1.1% to 7,224.81
  • Kospi down 0.9% to 2,402.64
  • German 10Y yield little changed at 2.56%
  • Euro little changed at $1.0555
  • Brent Futures up 0.4% to $83.48/bbl
  • Gold spot down 0.1% to $1,809.86
  • U.S. Dollar Index little changed at 105.15

Top Overnight News from Bloomberg

  • Three quarters of the 1,500 UK business leaders polled by BCG’s Centre for Growth believe the economy will shrink in 2023 but only 20% plan to shed staff, fewer than the 29% who plan to increase headcount: BBG
  • Rishi Sunak and Ursula von der Leyen will meet in the UK in the early afternoon on Monday for final talks ahead of an expected announcement of a post-Brexit settlement for Northern Ireland: BBG
  • The ECB is very likely to go ahead with its intention to raise interest rates by a half-point when it meets next month, President Christine Lagarde told India’s Economic Times: BBG
  • Bloomberg’s aggregate index of eight early indicators suggests China’s economy rebounded in February after the long holiday, although it points to an uneven recovery with strong consumption following the scrapping of Covid rules but lagging industrial activity: BBG
  • Macron announced he will visit China in April and hopes to encourage Beijing to pressure Moscow into reaching a settlement of the Ukraine war. SCMP
  • New home sales by floor area in 16 selected Chinese cities rose 31.9% month-on-month in February, compared with a fall of 34.3% in January, according to China Index Academy, one of the country’s largest independent real estate research firms. RTRS   
  • American companies, including McDonald’s, Starbucks, Ralph Lauren, Tapestry, and others, are expanding in China in anticipation of a consumer-led rebound in the economy as the post-reopening recovery continues. WSJ
  • China Renaissance confirmed Chairman Bao Fan has been assisting in a Chinese probe since he disappeared abruptly earlier this month. The investigation is being run by authorities, and Renaissance will “cooperate and assist with any lawful request.” It was reported last week that Cong Lin, the firm’s former president, has been involved in a probe since September. BBG
  • BOJ policy – incoming governor Kazuo Ueda says it’s premature to discuss normalization as “big improvements” must be achieved in the country’s inflation trajectory before changes can happen (Ueda says the benefits of monetary easing exceed the costs). RTRS
  • Russia has halted supplies of oil to Poland via the Druzhba pipeline, a move that comes one day after Poland sent its first Leopard tanks to Ukraine. RTRS
  • US insurance regulators on Monday will meet to consider boosting capital charges on complex corporate loan instruments that some in the industry warn are creating excessive risk. The issue pits insurers backed by large private equity firms such as Blackstone, Apollo Global and KKR — who are increasingly investing in the loans — against traditional life insurers such as MetLife and Prudential Financial, who warn of growing risks. FT
  • Pfizer is in early-stage talks to acquire biotech Seagen, valued at about $30 billion, and its pioneering targeted cancer therapies. WSJ
  • Hedge fund Soroban Capital Partners is pushing Union Pacific Corp.  to replace Chief Executive Lance Fritz, arguing the railroad has underperformed on his watch, according to people familiar with the matter. WSJ

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded cautiously heading into month-end and a slew of upcoming releases including Chinese PMI data, with headwinds also from the US where firmer-than-expected Core PCE data spurred hawkish terminal rate bets. ASX 200 was negative as participants digested a deluge of earnings and with the mining industry leading the retreat seen across nearly all sectors aside from energy which benefitted from a jump in Woodside Energy’s profits. Nikkei 225 price action was contained by a lack of pertinent macro drivers and with BoJ Governor nominee Ueda’s largely reiterated prior comments at the upper house confirmation hearing. Hang Seng and Shanghai Comp. were choppy with initial pressure amid geopolitical frictions after the G20 finance ministers meeting failed to agree on a communique due to opposition from Russia and China, while National Security Adviser Sullivan also warned there will be a real cost if China provides military assistance to Russia for the Ukraine war. However, Chinese stocks gradually recovered from the early weakness and briefly turned positive with sentiment helped by a continued liquidity injection and after China drafted guidelines to regulate financial support in the housing rental market, although the gains proved to be short-lived.

Top Asian News

  • China drafted guidelines to regulate financial support in the housing rental market and began to solicit public opinion, according to China.org.cn.
  • Macau dropped COVID-19 mask mandates for most locations aside from public transportation, hospitals and some other areas, according to Reuters.
  • BoJ Governor Kuroda commented that he is resolved to keep ultra-loose policy and that the BoJ expects core consumer inflation to slow beyond 2% in both fiscal 2023 and 2024, according to Reuters.
  • BoJ Governor nominee Ueda says CPI growth will slow below 2% in fiscal 2023 and that it takes time for CPI to meet the 2% target stably and sustainably, while he added that the BoJ’s current monetary easing is appropriate and that it is appropriate to continue monetary easing from now on as well. Adds, changing the 2% inflation target into a 1% target would strengthen the JPY in the short-term, weaken it long-term. Overshooting commitment is aimed at exerting powerful announcement effects on policy, need to be mindful of risk of inflation overshooting too much. Targeting shorter-dated JGBs than current 10yr yield is one idea if BoJ were to tweak YCC in the future, but there are many other options. Does not think Japan has reached the reversal rate, in which financial transmission channels are hurt so much that the demerits of easing exceed benefits.

European bourses are firmer across the board, Euro Stoxx 50 +1.8%, after a cautious APAC handover following Friday’s selling pressure. Sectors are all in the green with Energy names at the top of the pile, given benchmark pricing and Shell’s upgrade at GS. Stateside, futures are currently posting more modest upside of around 0.5% with Fed’s Jefferson (voter) the session’s main event. Tesla’s (TSLA) German plant has hit a production level of 4,000 per week, three weeks ahead of schedule, according to Reuters.

Top European News

  • UK PM Sunak and European Commission President von der Leyen will meet at 12:00GMT/07:00EST in Windsor, according to BBC; if there is a deal, a press conference could be around 15:30GMT. Earlier, UK PM Sunak’s office said UK PM Sunak will meet with EU’s von der Leyen for talks on Northern Ireland Brexit deal late lunchtime on Monday and will hold a Cabinet meeting later on Monday. Furthermore, PM Sunak and von der Leyen will hold a news conference if a deal is reached, while Sunak will also address parliament if there is a deal.
  • UK ministers are unlikely to quit re. the Brexit deal, with the likes of Steve Baker and others liking what they are hearing but waiting to see the full text, according to Times’ Swinford; ERG say they would love to back the deal but if the DUP does not back the deal it cannot and won’t support it.
  • UK PM Sunak said they are giving it everything they’ve got regarding talks for a post-Brexit deal for Northern Ireland and he will try to resolve the concerns the DUP Party have regarding a new Brexit deal for Northern Ireland. It was later reported that PM Sunak said he won big concessions from the EU, according to The Sunday Times and The Times.
  • UK Deputy PM Raab said there is real progress on a trade deal and he is hopeful for good news on the Brexit deal within days, not weeks, and also noted that Northern Ireland’s DUP does not have a de-facto veto over the Brexit deal. In other news, Raab said he will resign if an allegation of bullying against him is upheld, according to Reuters.
  • ECB’s Lagarde said headline inflation is still unacceptably high and core CPI is at a record level, while she added that they want to bring inflation back to the 2% target and noted that rate decisions are to be data dependent.
  • Magnitude 5.7 earthquake that struck the Eastern Turkey region has been revised to 5.2, according to the EMSC.

FX

  • DXY retained a bid between Fib and psychological level within 105.360-070 range; though has erred towards the lower-end of these parameters going into the US session.
  • Sterling ‘outperforms’ after a dip through 200 DMA vs Buck on UK-EU NI trade deal optimism, with EUR/GBP within 10 pips of 0.8800 at worst.
  • Kiwi flags as NZ Q4 retail sales fall and Aussie feels more contagion from Yuan weakness; antipodeans near 0.6150 and 0.6710 respectively.
  • Euro pivots 1.0550 vs the Dollar and Yen pares back from sub-136.50 amidst Fib support nearby.
  • PBoC set USD/CNY mid-point at 6.9572 vs exp. 6.9586 (prev. 6.8942)

Commodities

  • WTI and Brent are a touch softer though have lifted off overnight USD 75.58/bbl and USD 82.38/bbl lows given the improvement in risk sentiment throughout the European morning.
  • Though, the benchmarks are shy of USD 76.82/bbl and USD 83.60/bbl peaks with numerous geopolitical updates factoring into the overall indecisive price action.
  • Russia halted supplies of oil to Poland via the Druzhba pipeline, according to PKN Orlen’s CEO. Subsequently, Russia’s Transneft says payment orders for oil shipments to Poland were not issued in the second half of February, no oil flows to Poland currently, via Tass; paperwork for oil supplies to Poland has not been completed.
  • Crude oil deliveries via the Druzhba pipeline to the Czech Republic are running as planned, according to Mero.
  • Spot gold is little changed with the yellow metal in a tight sub-10/oz range above the USD 1800/oz handle, taking its cue from the similarly cagey USD.
  • Base metals are, broadly speaking, firmer following overnight weakness but remain in proximity to the troughs from Friday’s session.

Fixed Income

  • Bonds remain in bear clutches after another failed recovery rally.
  • Bunds probe new cycle low at 133.61 (session high 134.36) have fallen just shy of key resistance area, associated 10yr at a YTD peak of 2.57%.
  • Gilts wane just two ticks below 101.00 and test bids/support into 100.00 and T-note hugs base of 111-07/16 range ahead of US data, Central Bank speakers and crunch UK-EU Brexit talks.

Geopolitics

  • Russia’s Kremlin, on China’s peace plan, says no conditions for peace ‘at the moment’ in Ukraine, according to AFP.
  • G20 Finance Ministers meeting concluded without a joint communique as China and Russia opposed the draft with the two countries said to be upset by the use of a G20 platform to discuss political matters, according to sources cited by Reuters. India’s chair statement noted that there was a discussion about the war in Ukraine and it reiterated the G20 position on deploring in the strongest terms aggression by Russia, as well as reiterated the G20 position demanding Russia’s complete and unconditional withdrawal from Ukrainian territory.
  • Russian President Putin said Russia has taken into account NATO’s nuclear potential and claimed that the west wants to liquidate Russia, according to TASS.
  • Russian Wagner Group boss Prigozhin said his fighters captured the village of Yahinde which is north of Bakhmut, according to Reuters.
  • US President Biden said on Friday that he is ruling out Ukraine’s request for F-16 aircraft for now but added they have to put Ukrainians in a position where they can make advances this spring and summer. Biden also said he doesn’t anticipate a major initiative on the part of China to provide weapons to Russia and that he hasn’t seen anything in the Chinese peace plan that would be beneficial for anyone but Russia, while he also suggested it is possible that Chinese President Xi did not know about the Chinese spy balloon, according to an ABC News interview.
  • US National Security Adviser Sullivan said China has made the final decision regarding providing aid to Russia and has not taken the possibility of providing lethal aid to Russia off the table, while he noted the consequences have been made clear to China and warned there will be a real cost if China provides military assistance to Russia for the Ukraine war, according to an interview with ABC News. There were also comments from Republican lawmaker McCaul that China is thinking of sending drones and other lethal weapons.
  • Belarus President Lukashenko will pay a state visit to China from February 28 to March 2. “The visit will serve as an opportunity for the two sides to further promote comprehensive cooperation”, according to Global Times.
  • Germany, France, and the UK are considering making concrete security guarantees to Ukraine as an incentive for Ukrainian President Zelensky to engage in peace talks with Russia, according to the WSJ.
  • German Defence Minister Pistorius commented regarding the Chinese peace plan and stated that they will judge China by its actions, not its words, according to Reuters.

US Event Calendar

  • 08:30: Jan. Durable Goods Orders, est. -4.0%, prior 5.6%
    • Jan. -Less Transportation, est. 0.1%, prior -0.2%
    • Jan. Cap Goods Ship Nondef Ex Air, est. 0%, prior -0.6%
    • Jan. Cap Goods Orders Nondef Ex Air, est. -0.1%, prior -0.1%
  • 10:00: Jan. Pending Home Sales (MoM), est. 1.0%, prior 2.5%
    • Jan. Pending Home Sales YoY, prior -34.3%
  • 10:30: Feb. Dallas Fed Manf. Activity, est. -9.2, prior -8.4

Central Bank Speakers

  • 10:30: Fed’s Jefferson Discusses Inflation and the Dual Mandate

DB’s Jim Reid concludes the overnight wrap

As we close out a tougher second month of the year than the first tomorrow night, Henry pointed out an interesting stat to me on Friday. January was the best January for the Global Bond Ag index this century whereas February so far is on course to be the worst February over the same period. The very strong financial market performance between mid-October and end-January was in our opinion based mostly around US terminal pricing being remarkably stable between 4.75-5.1%. In the previous 9-10 months it was constantly being repriced from around 1% to 5% causing chaos in the financial world.

On Friday, US terminal closed at 5.4%, catching up to DB’s street leading 5.6% forecast. Clearly this has been bubbling up since payrolls (Feb 3), the CPI revisions (Feb 10), CPI beat (Feb 14), retail sales beat (Feb 15), and even things like Manheim used prices spiking higher again in January and February. Last Friday’s core PCE was another important piece of evidence with the 0.6% mom print above expectations of 0.4%. Even though the concern was that it would beat, this added fuel to the fire and markets still struggled to deal with the ramifications with 2yr, 10yr and terminal up +11.6bps, +6.8bps and +5.3bps to 4.814%, 3.943% and 5.40% respectively. 2yr yields are the highest since July 2007 and terminal the highest this cycle.

For core US PCE, the 3m, 6m and 12m annualised numbers are now 4.8%, 5.1% and 4.7% and thus strongly hint at inflation stickiness. With this data it’s tough to rule out a return to 50bps hikes even if that’s not yet the base case. While that uncertainty is there, markets will stay on edge.

In credit we downgraded our tactical bullishness in our “Credit: Rally ends soon” (Jan 30) note (link here) and suggested reducing exposure to dollar credit immediately. The biggest challenge though is when to officially run for the preverbal hills given we’ve had a long standing YE 23 target for HY of +860bps linked into our US recession call by year end. In the near-term we’re a little more relaxed on European credit. Indeed our credit team published a €HY update this morning looking at tight spreads in the face of growing fundamental vulnerabilities and the highest share of bonds rated B or worse in the last 10 years. However with supply unlikely to pick up materially, favourable technicals should keep spreads supported for now. Still, we think concerns about deteriorating credit metrics will eventually prevail and see €HY selling off in H2’23 alongside the US market when signs of a growth slowdown become even more tangible (see here for the full text).

Linked into this view, the recent US data probably makes us more confident of a hard landing given the boom-and-bust nature of this cycle that has been increasingly clear step-by-step over the last 2-3 years. This trend first emerged with the extraordinarily excessive covid stimulus, which in turn led to an enormous spike in the money supply, which brought structural inflation, and was always going to require an immense amount of tightening to control. An immaculate disinflation and soft landing from here would defy all historical precedent. Time will tell if we’re wrong and history needs to be rewritten but this feels a fairly straight forward US cycle to predict.

For this week, with the current sensitivities over prices, all eyes will be on the flash February European CPI releases (France Tues, Germany Weds, Italy and EA Thurs) and labour market data released throughout the week. The CPI numbers follow Friday’s upward revisions for the January report in the Euro Area, where core inflation was revised up a tenth to a new record of +5.3%. We also have the global PMIs (and US ISMs) with manufacturing on the first day of the month (Wednesday) and services (Friday).

ECB speakers will have plenty of opportunity to reflect on the data with at least 8 appearances already scheduled for next week. For a more backward-looking assessment, markets will also have the ECB’s account of the February meeting due Thursday to read through. Our own European economists upgraded their ECB call last week and now see two +50bps hikes in March/May followed by a final +25bps hike in June, which would imply a terminal of 3.75%, up from 3.25% previously (see full note here). Fed speakers are also prevalent as you’ll see in the day-by-day week ahead. There are six FOMC voters and there is a lot for them to chew over at the moment, especially after Friday’s PCE data.

Outside of the ISMs, US data will revolve around consumer and manufacturing activity. That will include the Conference Board’s consumer confidence index tomorrow, Chicago PMI (also tomorrow) and a host of regional central bank indices. Other notable indicators due include durable goods orders today and the advance goods trade balance tomorrow.

Asian equity markets are trading lower this morning with the KOSPI (-1.19%) leading losses across the region while the Hang Seng (-0.75%), the CSI, (-0.21%) the Shanghai Composite (-0.12%) and the Nikkei (-0.19%) all trading in the red. In overnight trading, US stock futures are fairly flat alongside US yields.

Earlier this morning, the government’s nominee for the Bank of Japan (BOJ) Governor, Kazuo Ueda in his speech to the parliament stressed the need to maintain the central bank’s ultra-loose policy to support the Japanese economy despite various market side-effects. Meanwhile, candidates for the BoJ deputy governor (Uchida and Himino) will appear for hearings in the Upper House tomorrow, following this week’s Lower House hearings.

Looking back on last week now, both equities and fixed income retreated as markets priced in further central bank hikes following mounting evidence that inflation was continuing to prove persistent. The selloff gathered pace on Friday, following the aforementioned US PCE inflation data surprising firmly to the upside, with headline PCE at +0.6% (vs +0.5% expected) month-on-month, and +4.7% (vs +4.3% expected) year-on-year. Further adding to the view that inflation is durable, core PCE inflation also came in above consensus, with the month-on-month print at +0.6% (vs +0.4% expected) whilst year-on-year came in at +4.7% (vs +4.3% expected).

This data led markets to swiftly priced in a more aggressive price of rate hikes from the Fed. In particular, there was growing speculation that the Fed might step up their hikes to 50bps again, with a +30.3bps move priced into the next meeting in March, up from +27.5bps at the start of the week. US terminal rate timing is starting to be evenly balanced between July (5.400%) and September (5.401%), rather than the July peak we’ve had for several weeks. It’s also at the highest level of the cycle. The pricing for the July meeting climbed up +11.8bps last week (+5.3bps on Friday), while the September meeting pricing rose +14.6bps last week (+6.9bps on Friday). Expectations also increased for rates remaining higher for longer, with the December meeting now implying a 5.28% rate. This was up +11.0bps on Friday and +21.6bps on the week – marking a fifth consecutive weekly increase.

Renewed expectations of additional hikes by central banks triggered a sell-off in both US and European equities on Friday. The S&P 500 fell back -1.05% on Friday, finishing off the week down -2.67% and marking its worst weekly performance so far this year. The Nasdaq similarly retreated, down -3.33% last week (-1.69% on Friday), its largest weekly down move since mid-December. European equities fell back too, with the STOXX 600 retreating -1.42% last week (-1.04% on Friday).

This sell-off was echoed across fixed income markets, with 10yr Treasury yields up +6.6bps on Friday and +12.8bps over the course of last week. 2yr Treasuries significantly underperformed, as yields rose +11.6bps on Friday and +19.7bps over the week, reaching their highest level since July 2007. It was a similar story in Europe, with the 2yr German yield up +11.7bps on Friday in their largest up move since December and hitting their highest level since October 2008. Over the course of the week, that left them up +15.3bps at 3.03%. In the meantime, 10yr bund yields rose +9.7bps last week (+5.9bps on Friday) to 2.54%, and the German 2s10s curve inverted to -50bps after it fell -5.6bps on Friday, which made up nearly the entirety of the -5.8bps flattening last week.

Finally, commodity markets fell back most of last week before a rally in oil on Friday (WTI +1.23% & Brent +1.16% Friday) left WTI crude down just -0.03% on the week at $76.32/bbl and Brent crude up +0.19% at $82.16/bbl. On the other hand, metals saw continued selling on Friday, with copper futures falling back -3.81% overall (-2.64% on Friday), and nickel down -4.93% last week (-3.33% on Friday). Looking at the market more broadly, the Bloomberg Industrial Metals Index fell back -3.17% over the course of last week (-2.44% on Friday). All this likely down to some concerns that the Chinese reopening isn’t quite as smooth and bouyant as hoped.

Tyler Durden
Mon, 02/27/2023 – 08:05

via ZeroHedge News https://ift.tt/V9fsNpR Tyler Durden

U.S. Energy Department Endorses Lab Leak Theory of COVID-19’s Origins


Masked

The U.S. Department of Energy has concluded that the most likely origin of COVID-19 is a lab leak.

The federal agency reviewed new intelligence, which prompted officials to revise their position that it’s unclear how the virus emerged. The White House and certain members of Congress also reviewed the intelligence, The Wall Street Journal reports.

The Energy Department’s conclusion is made with “low confidence,” according to The New York Times, which was quick to point out that “U.S. spy agencies remain divided over the origins of the virus.” The FBI previously concluded with “moderate confidence” that intelligence pointed to a lab leak origin; other agencies have been skeptical or undecided.

The shifting consensus on this issue should be a cautionary tale for all the would-be censors who thunderously objected to such talk. In the first year of the pandemic, the idea that COVID-19 might have emerged from a coronavirus research facility in Wuhan, China, was widely branded a racist conspiracy theory. Social media companies such as Facebook vigorously suppressed discussion of the lab leak thesis, partly because U.S. health officials and mainstream news outlets expressed absolute confidence that COVID-19 emerged as a result of zoonotic spillover.

In February 2020, when Sen. Tom Cotton (R–Ark.) said a lab leak was possible, The Washington Post attacked him for “repeating a coronavirus conspiracy theory that was already debunked.” The New York Times accused Cotton of spreading a “fringe” idea. CNN said the senator was “playing a dangerous game.” PolitiFact gave the lab leak theory a “pants on fire” rating, the most serious level of falsehood on the website’s trademarked “Truth-O-Meter.” NPR reported that scientists had debunked “the lab accident theory” and that therefore the case was closed.

CNN also chided lab leak believers for subscribing to a “theory that’s almost certainly not true,” and it criticized President Donald Trump for failing to heed the national intelligence community’s views on the matter. (For more examples of media misfires, see this thread from The Washington Free Beacon‘s Drew Holden.)

In hindsight, it’s astonishing how credulously—how gullibly—many journalists bought into obvious Chinese government spin. One of the very worst offenders was Apoorva Mandavilli, The New York Times‘ lead coronavirus reporter, who lamented in May 2021 that people would talk about a theory with “racist roots.”

 

Apoorva Mandavilli

What was racist about the lab leak theory was never well-explained. In fact, one could plausibly argue that the alternative explanation—that it came from a Chinese wet market—has far more racially problematic implications. After all, if wet markets are responsible for the pandemic, then the culprit is a culturally specific Chinese food custom. The lab leak theory, on the other hand, indicts an organization, the Chinese government, rather than a populace. And unlike the wet market theory, a possible lab origin also calls for scrutiny of U.S. agencies, which have funded coronavirus research on bats in Wuhan, China.

The truth is the truth, and investigators should pursue the origins of COVID-19 no matter where they lead. But if the goal is minimizing anti-Asian animus, there’s actually good reason to prefer the lab leak explanation.

Yet trackers of so-called disinformation often labeled lab leak a racist conspiracy theory. Take the Global Disinformation Index (GDI), a British organization that has received funds from the U.S. State Department. Its purpose is to dissuade advertisers from working with news websites that spread incorrect ideas. In practice, GDI has functioned as a kind of blacklist for conservative, libertarian, and alternative news sites. It even flagged Reason as one of America’s “ten riskiest news outlets,” ostensibly because Reason does not provide “information regarding authorship” (we do), or possibly because we don’t explain our fact-checking and correction policies (we have such policies, and they are robust), or maybe because we provide a mostly unfiltered comments section.

Hans Bader, a former attorney for the Education Department, points out that a GDI report on ad-funded COVID-19 disinformation accused news sites of peddling anti-Chinese racism for accusing the Chinese government of covering up a lab leak. Another GDI report warned advertisers against working with sites that “traffic in theories that the Chinese government” should be blamed for the virus’s spread.

GDI and other “disinformation” trackers either have to start accusing the U.S. Energy Department of racism or admit that it never made much sense to proactively acquit a notoriously authoritarian, secretive, and untrustworthy foreign government.

Health officials and intelligence experts may not have enough information to conclusively determine COVID-19’s origins. But the push to not merely decry the lab leak theory but to actively prohibit discussion of it—as was the case on Facebook—has not aged well. Let people discuss and debate all variety of coronavirus topics, without fear of sanction.

The post U.S. Energy Department Endorses Lab Leak Theory of COVID-19's Origins appeared first on Reason.com.

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Can Public School Block Rentals by Church That Had Speaker Who Said She’d Stopped Being Lesbian?

From the San Diego Union Tribune (Kristen Taketa):

On the first Sunday of this month, the pastor of a Scripps Ranch church brought in a guest speaker who talks about how she came to believe being gay is wrong.

The venue was San Diego Unified’s Marshall Middle School, where the church has held its services for the better part of two decades.

The speaker was Patti Height of Out of Egypt Ministries, who told her audience she used to consider herself gay but now believes that was a “false identity.” According to her website, her work aims to help Christians minister to LGBTQ people, believing that being gay is incompatible with being Christian….

Scripps Ranch residents and Marshall Middle parents are among more than 600 people who have signed a petition calling for San Diego Unified to terminate its rental agreement with Canyon Springs, contending that the church is violating the district’s anti-discrimination policy by endorsing anti-LGBTQ speech. A Marshall Middle parent filed a complaint with the district, also asking the district to end its contract with the church.

Even though the church holds its events outside of school hours and the church is separate from Marshall Middle, some parents and activists argued that students could still be affected by the knowledge that their school had provided a forum for somebody who condemns homosexuality….

The petition appears to be here; but I don’t think the school can act on it by excluding such speech from events on its property, given the First Amendment.

As I understand it from talking to the reporter, the school district has a general rental policy under which groups can rent space. That makes it a so-called “limited public forum”; and in such a forum, the government may impose some reasonable viewpoint-neutral restrictions, but not viewpoint-based ones. An exclusion of speech that is critical of homosexuality, or that endorses sexual orientation change efforts, would be viewpoint-based, and thus unconstitutional. (Likewise, courts have concluded that exclusion of pro-gay-rights groups from limited public fora, including ones at schools, is likewise unconstitutionally viewpoint-based.)

Indeed, Lamb’s Chapel v. Center Moriches Union Free School Dist. (1992) expressly held that viewpoint discrimination was impermissible in a program that allowed groups to use public school space after hours. And it also expressly held that this rule applied to religious institutions and religious speech as well. Once the government opens up a space to groups generally, it can’t exclude them based on viewpoint. (Lamb’s Chapel described the forum as a “nonpublic forum” rather than a “limited public forum,” but the prohibition on viewpoint discrimination applies to both categories; and in more recent cases, the Court has characterized that kind of property as a limited public forum, see Good News Club v. Milford Central School (2001).)

It’s possible that the school district could just decide that it doesn’t want these sorts of controversies, and close the rental program altogether (though the rules as to that are a bit complicated). But so long as it allows such rentals, it can’t exclude anti-homosexuality views any more than pro-gay-rights views, anti-war views, anti-police views, or other views.

The post Can Public School Block Rentals by Church That Had Speaker Who Said She'd Stopped Being Lesbian? appeared first on Reason.com.

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Is This Tesla’s New $25,000 Subcompact Car?

Is This Tesla’s New $25,000 Subcompact Car?

A corporate video released by Tesla for the opening of its new engineering headquarters in California might have leaked design drawings of its upcoming new electric compact car, according to Electrek. 

In the video, we see the drawing shown above, and next to it there are two other design drawings that can be directly linked to existing Tesla vehicles:

Those drawings appear to be of a more compact vehicle from Tesla, which is leading some Tesla fans to believe it could be the $25,000 car that Musk talked about before.

An affordable Tesla was announced by Elon Musk back in 2020:

“Tesla will make a compelling $25,000 electric vehicle that is also fully autonomous.”

Tesla has been planning for a small hatchback in the future. Electrek pointed out the hatchback could be for Chinese markets.

Model Y was the last new model to be released in 2020. The Cybertruck is next, and deliveries might not begin until late 2023 or early 2024. 

Tesla has been extremely slow at delivering new models to the market, while other EV companies offer diverse lineups to attract buyers. 

Tyler Durden
Mon, 02/27/2023 – 07:45

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The Fed’s Biggest Fear Is “Complete Economic Collapse” – Peter Schiff Warns “You Ain’t Seen Nothing Yet”

The Fed’s Biggest Fear Is “Complete Economic Collapse” – Peter Schiff Warns “You Ain’t Seen Nothing Yet”

Via Greg Hunter’s USAWatchdog.com,

Money manager and economist Peter Schiff said in October the Federal Reserve “could NOT win the fight on inflation by raising interest rates.” 

As inflation just turned up anew, it looks like he was right—again. 

Schiff explains, “Based on the recent data we got… the inflation curve has bent back up.”

” The months of declining inflation are in the rearview mirror.  Now, we are going to see accelerating inflation… and I think before the year is over, we are going to take out that 9% inflation high last year in year over year CPI (Consumer price Index)…and what that is going to show is what the Fed has done thus far in its inflation fight is completely ineffective. 

If the Fed is serious about fighting inflation, and I do not believe it is, it’s going to have to fight a lot harder than it has.  Interest rates need to go up much higher than anybody thinks, but that alone is not going to do the trick.  We also have to see a big contraction in consumer credit and lending standards rising so consumers can’t keep spending…

Consumers are running up credit card debt.  That is inflationary.  That is an expansion of the supply of credit.”

It gets worse when the Fed has to save the economy again.  Schiff predicts,

“I think the Fed is going to have to throw in the towel on the inflation fight because it will be fighting something it fears more, which is a complete economic collapse…

The federal government may be legitimately forced to cut Medicare and Social Security instead of illegitimately cutting it through inflation….

We have this collapsing standard of living, but think about it as a tax.  This is what Americans are paying.  This is the price of big government. . . .

Higher prices are the price we pay for big government, and inflation is a tax.  Instead of raising our taxes, they are just printing money, and that devalues the money we have.”

What is the answer?  Schiff says, “We have to let the phony economy collapse so we can build a real economy on the rubble of this economic house of cards.”

There are going to be lots of losers in the coming collapse.  Schiff says,

“People are going to suffer the consequences of this experiment gone bad. . . . We know how this experiment is going to end. 

They are not doing anything that Zimbabwe didn’t try, or Argentina didn’t try or the Weimar Republic.  They didn’t reinvent inflation.  It’s the same old thing.”

As a result, Schiff predicts big losses in many stocks (but not all), bonds and bank deposits.  Schiff contends, “They can’t cover the deposits at the FDIC. ..”

“They have to acknowledge that the FDIC is bankrupt and people are going to lose money at a bank.  The losses are going to dwarf those in the Great Depression because we have a far more leveraged system now thanks to government intervention.”

Schiff says he also likes gold and silver as a core investment and thinks they both go way up in price in a world where the dollar is eaten up by inflation.

In closing, Schiff says, “We already have inflation.  So, prepare for the consequences of inflation.”

” It is going to raise prices, but it is also a massive transfer of wealth.  You have to position yourself to be a winner and not a loser. . . .Creditors are going to get wiped out.  People think they are playing it safe in a bond portfolio.  Look how bad bonds did last year.  It was the worst year in history, and you ain’t seen nothing yet.”

There is much more in the 47-minute interview.

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with money manager and economic expert Peter Schiff, founder of Euro Pacific Asset Management  2.25.23.

*  *  *

To Donate to USAWatchdog.com Click Here.

There is free information and articles at Peter Schiff’s website  EuroPac.com. You can also listen to Peter Schiff for free every week on The Peter Schiff Show.

Tyler Durden
Mon, 02/27/2023 – 07:20

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