Month: January 2024

Oil prices were lower this morning, amid broad derisking after weak macro data and no immediate escalation in the Middle East.

API

• Crude -2.5mm (-800k exp)

• Cushing -2.0mm

• Gasoline +600k (+1.4mm exp)

• Distillates -2.1mm (-800k exp)

DOE

• Crude +1.23mm (-800k exp)

• Cushing -1.97mm

• Gasoline +1.16mm (+1.4mm exp)

• Distillates -2.54mm (-800k exp)

The official data showed a crude build (opposite to API’s draw and expectations). Cushing stocks decline for the 4th straight week, and Distillates stocks tumbled…

Source: Bloomberg

The Biden admin added to the SPR (+892k barrels) for the 10th straight week…

Source: Bloomberg

Stocks at the Cushing Hub fell once again, now at their lowest for this time of year since 2008…

Source: Bloomberg

US Crude production rebounded from the storm shut-ins…

Source: Bloomberg

WTI has extended its losses on the crude build…

However, despite today’s down day, oil is set for its first positive month since September.

Authored by Steve Watson via Modernity.news,

Michael Cassidy, a Christian veteran who decapitated a Satanic shrine on display in the Iowa State Capitol building, has been charged with a ‘hate crime’.

Yes, really.

If you object to literal Satanic displays in public buildings you are now hateful.

Back in December, Cassidy, beheaded the caped figure placed in the building by The Satanic Temple, and threw the goat skull that was serving as its head in a bin.

Nothing much to see here, just a Satanic Baphomet horned goat skull in a cape and a blood red pentagram on display in the Iowa State Capitol. Pretty much par for the course in government buildings at Christmas now, right? pic.twitter.com/JovVZTtswW

— m o d e r n i t y (@ModernityNews) December 12, 2023

Cassidy was quoted as stating that he took the action to “awaken Christians to the anti-Christian acts promoted by our government.”

Instead of simply charging him with misdemeanor damage to property or vandalism, the Des Moines Register reports that Polk County prosecutors charged the veteran with felony third-degree criminal mischief, arguing that the act was “in violation of individual rights” under Iowa’s hate crime statue.

A statement from the Polk County Attorney’s Office claimed that “Evidence shows the defendant made statements to law enforcement and the public indicating he destroyed the property because of the victim’s religion.”

Cassidy is raising money for his legal defense on his GiveSendGo page, which notes “Out of the millions of Christians in this nation, Cassidy was the first to act in bravery and conviction. He was not willing to see God reviled, especially in a building where lawmakers are supposed to honor Jesus Christ as King and look to his law for wisdom as they legislate with justice and righteousness.”

*  *  *

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If 2024 is anything like 2020 then the political tensions leading up to this year’s presidential election will surely only intensify as the calendar inches closer to November. However, 2024 has a lot to live up to compared to the utter chaos that unfolded in 2020. While this year is unlikely to rival the scale of the chaos that unfolded in 2020, one Pennsylvania man may have lit the fuse needed to heighten hostilities between the right and left by providing the Biden administration with the fodder it needs to ramp up it’s vilification of Trump supporters ahead of election day.

Following the publication of a 14 minute, 35 second YouTube video in which he aired his grievances against the Biden administration and federal government en masse, Justin Mohn was arrested by Fort Indian Town Gap Police in central Pennsylvania. Mohn took to YouTube to broadcast his political manifesto titled Mohn’s Militia – Call To Arms For American Patriots. The video was laden with incendiary rhetoric beckoning violence against the federal government, with fervent criticism of the leftist agenda he deemed was ruining the country. However, that was not the basis of the charges he was arrested for. Instead, Mohn was arrested in connection of the death of his father, Michael, after he began his YouTube broadcast by showcasing the severed head of his father following his decapitation.

According to Mohn, his 68 year-old father Michael had worked for the federal government for 20 years and in that time came to embody the corruption his manifesto deemed was ruining the nation. Mohn opened his video by stating  “This is the head of Mike Mohn, a federal employee of over 20 years and my father. He is now in hell for eternity as a traitor to his country.” before bringing his father’s severed head wrapped in plastic into the frame. Mohn would go on to characterize the policies of the Biden Administration as acts of treason in their own right, highlighting the country’s struggling economy, uncontrolled spending, insurmountable national debt, and failed immigration policy ushering in a “fifth column army of illegal immigrants invading the country”, among other examples as facets of a concerted effort to destroy the United States from within.

The video was hosted on Mohn’s YouTube channel which only had little more than a couple dozen subscribers before the manifesto was published. Due to the obscure nature of Mohn’s channel, his video remained up for 6 hours, amassing nearly 4,800 views before the staff at YouTube which is so regularly engaged in censorship finally took it down. Furthermore, YouTube staff took the escalated measure of terminating Mohn’s account, despite the on-going criminal investigation against him.

While not much of notoriety had appears on Mohn’s YouTube channel before his last video, he had previously authored two books which are listed on Amazon.com. While the first book is innocuously titled Poems I Wrote While Stoned, his other work gives more of an inkling into his political leanings. The second of his published works is titled America’s Coming Bloody Revolution, foreshadowing the bloodshed that took place at his father’s $390,000 home in Middleton Township, Pennsylvania that Mohn was still presumably living in.

The murder of Michael Mohn was characterized by his son as just that — an act of bloodshed intended to spark a political revolution. Justin Mohn characterized his father as “a traitor to this country” before opining that his soul was now destined for the innermost layers of hell which were reserved for those guilty of betrayal using language illustrative of Dante’s Inferno.

Middletown Township Chief of Police Joseph Bartorilla confirmed a suspect in the death of Michael Mohn was arrested on Tuesday evening, hours before the YouTube video of his son showcasing his father’s head video was finally taken offline. Law enforcement did not identify Justin Mohn as the suspect. However, they did confirm that the video was evidence used to make the arrest.

In the wake of a tipping point in which the facade of the Biden administration has come crumbling down faster than the sections of the southern border wall breached by illegal immigrants whose influx has caused a crisis that even staunch democrats can’t ignore, the political establishment is grasping for anything they can find to deflect attention away from its failures. Warhawks on Capitol Hill have latched onto an attack killing 3 US servicemen in Jordan in an effort to call for an attack on Iran to steer the spotlight away from the border. However, given the political momentum each of those crises gives to their opposition heading into the 2024 Presidential Election, permanent Washington is desperate for a story they can use to distract from their ineptitude by shifting back to the often used narrative that the gravest danger to the country isn’t 4 more years of Joe Biden but the return of Donald Trump. In the past, characterizing supporters of Trump as unhinged white supremacists and right-wing domestic terrorists has served that purpose. While public sentiment supporting that claim has waned, Mohn’s deranged political manifesto will surely be used to rekindle that fear mongering.

As highlighted in our preview, and as the Treasury itself noted in its last refunding announcement, moments ago the latest Treasury Quarterly Refunding announcement confirmed that it is indeed boosting the size of its quarterly issuance of long-term debt for a third straight time –  rising to $121 billion, just as consensus expected – and said that it “does not anticipate needing to make any further increases in nominal coupon or FRN auction sizes, beyond those being announced today, for at least the next several quarters.”

Specifically, the Treasury Department it will sell $121 billion of bonds at its quarterly refunding auctions next week, which span 3-, 10- and 30-year Treasuries, which is in line with what most analysts had expected, and echoed the cadence of increases unveiled at the last refunding, in November. The breakdown of next week’s refunding auctions is as follows:

• $54 billion of 3-year notes on Feb. 6, up from $52BN in Jan
• $42 billion of 10-year notes on Feb. 7, up from $37BN in Jan
• $25 billion of 30-year bonds on Feb. 8, up from $21BN in Jan

Treasury plans to increase the auction sizes of the 2- and 5-year by $3 billion per month, the 3-year by $2 billion per month, and the 7-year by $1 billion per month.  As a result, the auction sizes of the 2-, 3-, 5-, and 7-year will increase by $9 billion, $6 billion, $9 billion, and $3 billion, respectively, by the end of April 2024. Treasury plans to also increase both the new issue and the reopening auction size of the 10-year note by $2 billion and the 30-year bond by $1 billion.  Treasury plans to maintain the 20-year bond new issue and reopening auction size.

As for Treasury Inflation-Protected Securities, or TIPS, the department said it will maintain the February 30-year maturity sale at $9 billion and then increase the April 5-year maturity TIPS to $23 billion. It also said it will boost the March reopening of the 10-year maturity to $16 billion. Turning to floating-rate notes, the Treasury plans to increase the February and March reopening auction size of the 2-year FRN by $2 billion to $28BN and the April new issue auction size by $2 billion.

All other nominal coupon-bearing debt was increased by the same cadence as in November, except for the 20-year bond, which was kept steady.

The full summary is below:

More importantly, the department said that unlike three months ago when it predicted more coupon size increased, “based on current projected borrowing needs, Treasury does not anticipate needing to make any further increases in nominal coupon or floating-rate note auction sizes, beyond those being announced today, for at least the next several quarters.” Of course, with the Biden fiscal stimulus firehose on full blast ahead of the November elections, we expect this number to be revised materially higher in one quarter.

Relief from further boosts to auction sizes for longer-term securities may help support demand for Treasuries. Investors for several months now have been particularly sensitive to news on the overall supply of federal debt, at a time when the Federal Reserve has been steadily shrinking its own holdings of US securities.

The Treasury also said Wednesday that it will announce the start-date for its new buyback program in the May refunding announcement, after conducting some small-value operations in April. That program is designed to help the department with its cash management and to improve liquidity for non-benchmark debt. Here is the relevant section:

In preparation for the implementation of a regular buyback program later this year, Treasury anticipates conducting several small-value buyback operations in April with a limited population of securities to test processes and infrastructure. Details about these small-value buybacks will be released at a later date.  Treasury intends to announce the date of the first regular buyback operation at the May refunding.

Turning to the all-important Bills, which the Treasury used to fund much of the budget deficit in late 2023 when it funded deficit spending using the Revere Repo drain (whose proceeds were used to fund Bill issuance), the Treasury said it “expects to maintain bill auction sizes at current levels into late-March,” with modest reductions by then into early April, during the tax-filing season.

The Treasury anticipates that this will result in a $300-350 billion net increase to Bill supply over the next two months. By late-March or early-April, Treasury anticipates modestly reducing short-dated bill auction sizes going into the tax filing season.  These reductions will likely lead to a $100-150 billion net reduction to privately-held supply during the month of April, which is also when the Reverse Repo is expected to be mostly drained.

Before Wednesday’s announcement, most dealers assumed that the Treasury would cut back issuance of bills — which mature in a year or less — if the department found itself in the quarters ahead with reduced borrowing needs. That’s after debt managers relied heavily on bills in recent months, with their share of total debt exceeding the 15% to 20% range the Treasury Borrowing Advisory Committee, a panel of market participants, has long recommended.

A less cheerful perspective came from the Treasury Borrowing Advisory Committee which said it may need to weigh incremental coupon boosts, noting that it was comfortable recommending auction size increase for just the current quarter, despite what will be a sustained higher T-bill share in coming quarters.

The committee said in a letter to Treasury Secretary Janet Yellen it recognizes it may be appropriate over time to consider incremental increases in coupon issuance depending on how the current uncertainty regarding borrowing needs evolves.

• Good discussion among members as to the many factors that are likely to impact borrowing needs relative to expectations, which include evolution of Fed monetary policy — including SOMA portfolio redemptions and investments — changes in the fiscal outlook as it relates to economic growth and tax receipts
• TBAC said dealers reflected the increased market focus on the dynamics in the very front end, both as reserves move from an abundant to an ample regime, and as Fed officials began discussing the tapering of Quantitative Tightening, or QT
  • Some market participants expected a taper to start this spring and conclude in the fall of 2024 as economic weakness would drive rate cuts this year
  • However, some participants expect QT to persist until an ample level of reserves is reached, even in the presence of rate cuts
• Committee said similarly distributed views on “natural plateauing of the RRP,” with most expecting a run down to zero, but some looking for a sustained low level of reserves there, in the $200 billion to $300 billion range. “Both of these factors were thought by the Committee to be important components of support for T-bills in 2024,” they wrote
• TBAC reviewed the drivers of investor preference for the Treasury futures versus cash market, often referred to as “the basis”
  • Agreement among members that leveraged funds’ futures open interest was largely driven by intermediating Treasury purchases for the asset manager community
  • Committee largely felt that the dynamics driving the basis trade could be better understood and appreciated the opportunity to address that with this charge
  • The charge found that there could be metrics worth monitoring, specifically, with the advent of required repo clearing, there will be an opportunity to gather better data on exposures and leverage
  • In essence, Treasury futures open interest is more a function of asset manager view on credit valuations than their view on Treasury valuations themselves

Finally, while price action remained broadly steady, the Treasury curve has pushed to fresh wides of the day after Treasury announced increases to all nominal auction sizes except 20-year.  The increases across tenors were broadly inline with bank expectations. On the day 2s10s, 5s30s spreads steeper by 2bp and 3.5bp, remain near wides of the day in the aftermath of the refunding announcement; 10-year yields ease slightly lower, remain richer by 3bp on the day.

In short, unlike the last two QRAs, the first of which sparked a powerful bond selloff and the second, a rally, this one may have been Goldilocks, and was largely in line with expectations.

Farmers in France, Germany, the Netherlands, Poland, Belgium, Romania, and other countries across Europe are protesting radical leftist governments by obstructing major transport networks with tractors. This widespread populist movement is sweeping Europe at a time when over-regulation, taxes, and the climate change agenda threaten the livelihoods of not just farmers but working-class people and comes several months before the European election cycle kicks off in June. 

Some countries hit hardest by protests have been Germany, Italy, Belgium, and France. Protests are expected to spread to Spain and Portugal. 

On Tuesday, France’s new prime minister, Gabriel Attal, promised farmers emergency funds and stricter trade controls on foreign products to guarantee fair competition. 

However, that might not have been enough, as the farmer’s union in France was unimpressed by concessions offered by the French government. They encouraged their members to continue the fight. 

“I’m so proud of you,” Serge Bousquet-Cassagne, head of Lot-et-Garonne department’s farmer’s association, told protesters in the south of Paris. 

Bousquet-Cassagne said: 

“You are fighting this battle because if we don’t fight we die.” 

Meanwhile, Interior Minister Gérald Darmanin told local TV station France 2 that police were preparing to defend strategic areas of larger cities. 

“They can’t attack police, they can’t enter Rungis, they can’t enter the Paris airports or the center of Paris,” said Darmanin, adding, “But let me tell you again that if they try, we will be there.”

According to Armstrong Economics:

Farmers throughout the world have been protesting the increasing regulations on agriculture. The media is barely covering the story, and when they do mention it, they say that the farmers are protesting due to Russia blocking supplies from Ukraine. This is simply untrue. The farmers are protesting against over-regulation, taxes, and the climate change agenda that is making it increasingly difficult for them to make a successful living.

EU farmers’ complaints are very basic:

• Out-of-control energy prices (thank whoever blew up the Nord Stream).

• Disastours carbon-cutting targets.

• Overall inflation.

• Bureaucracy from radicals in Brussels.

• Ukrainian grain imports. 

The demonstrations, which could soon consume Europe, come ahead of the June European Parliament elections. 

Here are scenes on the ground as protests spread across Europe:

NEW – Farmers encircled Paris, blocking highways to France’s capital.pic.twitter.com/1GHk6PqKgx

— Disclose.tv (@disclosetv) January 31, 2024

🚨Meanwhile in Germany🇩🇪, Farmers start attempting to drive through police cordons…..

All over Europe

Are you realising the significance of this? #FarmersProtest pic.twitter.com/JRSKH5GVVJ

— AntiCensorship (@truthscant) January 31, 2024

#Farmers from all over the country continue to converge on #Paris in their fight against the Climate Scam & Climate Communism.

I Support the Farmers#France #FarmersProtest pic.twitter.com/Wec5Lt9mKB

— WorldNews (@RichKidsClips) January 31, 2024

God bless those farmers. #FarmersProtest pic.twitter.com/Be9k2rV5jX

— Anti Lockdown Alliance(GLOBAL) (@Demo2020cracy) January 29, 2024

This is so cool. It’s almost like a video game.#FarmersProtest pic.twitter.com/uK33HDbTp3

— Peyman Askari (@PeymanAskari451) January 30, 2024

🇫🇷 Visuals of #FarmersProtest in #France pic.twitter.com/2EPAwhQpI6

— saileashkumar (@saileash) January 31, 2024

⚠️ The farmers’ uprising in Germany continues throughout the country.#FarmersProtest #Farmers #Deutschland #protest pic.twitter.com/C7e8Qf8MVK

— Tulublin (@tulublin) January 31, 2024

Small farmers are upset that WEF elites such as Bill Gates, linked to the World Economic Forum, aim to reset the global food supply chain, a move that could render small-scale farming obsolete. 

Farmers protests are spreading across the World. #FarmersProtest#Farmers #FarmersProtests
pic.twitter.com/Z5lB6fgH2L

— Emma Peel (@madelynrogers) January 27, 2024

And discontent is quickly spreading across the West. As we noted earlier this week: “Mess In The West: ‘Army Of God’ Convoy Heads To US Border While EU Farmers Block Cities.”

Unrest in the West is a symptom that leftist politicians are completely out of touch with the common man. Quickly, queue the next crisis. Is that the eruption of war or another virus? 

Authored by Mark Tapscott via The Epoch Times,

All 18 Republican members of the House Committee on Homeland Security (HCHS) voted on Jan. 31 after more than 14 hours of often impassioned debate to refer two articles of impeachment against Homeland Security Secretary Alejandro Mayorkas to the full House for a final vote as the panel’s 15 Democrats unanimously opposed the measure.

Speaker of the House Mike Johnson (R-La.) has said he expects the impeachment measure to be voted on by the House of Representatives “as soon as possible.”

Before that can happen, however, the House Rules Committee, led by Chairman Tom Cole (R-Okla.), must adopt a rule for how the articles will be considered for that vote, including whether to allow amendments from the floor.

When the measure does reach the House floor for a final vote, there are 14 Democrats who may face a tough decision on how they will vote regarding Mr. Mayorkas’ future. That is because each of the 14 voted in favor of H. Res. 957 on Jan. 17. That resolution was approved by the full House on a 225-187 vote, with 21 members not voting. Twelve of the 21 not voting were Democrats and nine were Republicans.

The resolution put the House on record in denouncing “the Biden administration’s open-borders policies … condemn[ing] the national security and public safety crisis that President Joe Biden, ‘Border Czar’ Vice President Kamala Harris, Secretary of the Department of Homeland Security Alejandro Mayorkas, and other Biden administration officials have created along the southwest border; and urg[ing] President Biden to end his administration’s open-borders policies.”

The 14 Democrats include Colin Allred of Texas, Yadira Caraveo of Colorado, Angie Craig of Minnesota, Michael Cuellar of Texas, Don Davis of North Carolina, Jared Golden of Maine, Vicente Gonzalez of Texas,  Greg Landsman of Ohio, Susie Lee of Nevada, Jared Moskowitz of Florida, Wiley Nickel of North Carolina, Mary Peltola of Alaska, Marie Perez of Washington, and Eli Sorenson of Illinois.

Article I of the measure accuses Mr. Mayorkas of a “willful and systemic refusal to comply with the law,” and claims that, “In large part because of his unlawful conduct, millions of aliens have illegally entered the United States on an annual basis with many unlawfully remaining in the United States.

“His refusal to obey the law is not only an offense against the separation of powers in the Constitution of the United States, it also threatens our national security and has had a dire impact on communities across the country.”

Among more than a dozen examples of that refusal, the article declares that Mr. Mayorkas chose not to “comply with the detention mandate set forth in section 235(b)(2)(A) of the Immigration and Nationality Act, requiring that all applicants for admission who are ‘not clearly and beyond a doubt entitled to be admitted … shall be detained for a [removal] proceeding …’

“Instead of complying with this requirement, Alejandro N. Mayorkas implemented a catch and release scheme, whereby such aliens are unlawfully released, even without effective mechanisms to ensure appearances before the immigration courts for removal proceedings or to ensure removal in the case of aliens ordered removed.”

Article II accuses Mr. Mayorkas of breaching the public trust by his having “knowingly made false statements, and knowingly obstructed lawful oversight of the Department of Homeland Security [hereinafter referred to as ‘DHS’], principally to obfuscate the results of his willful and systemic refusal to comply with the law.”

Among 10 alleged examples, the article argues that Mr. Mayorkas “delayed or denied access of DHS Office of Inspector General [herein-after referred to as ‘OIG’] to DHS records and information, hampering OIG’s ability to effectively perform its vital investigations, audits, inspections, and other reviews of agency programs and operations to satisfy the OIG’s obligations.”

There are 72 statutory OIGs working in Cabinet-level federal departments and independent agencies investigating allegations of waste, fraud, and abuse. The OIG system was established by Congress in 1978, and while the president appoints these officials, they answer first to Congress.

Throughout the day’s debate, Democrats claimed Mr. Mayorkas lacks needed resources to do his job, including sufficient space to hold all of the millions of illegal immigrants detained by the U.S. Customs and Border Patrol (CBP).

Secretary of the Department of Homeland Security Alejandro Mayorkas testifies before the House Homeland Security Committee in Washington on Nov. 15, 2023. (Madalina Vasiliu/The Epoch Times)

But Rep. Marjorie Taylor Greene, in an impassioned response, pointed to the homeland secretary’s budget requests and decisions to close detention centers.

“Secretary Mayorkas has requested less detention space. In fiscal year 2022, $2.7 billion for 54,000 beds, including 2,500 for family units, and in fiscal year 2021, $3.1 billion for 60,000 beds, including 5,000 for family units, and for fiscal year 2023, he requested $1.4 billion for 25,000 beds, and for fiscal year 2024, Secretary Mayorkas reduced it again, down to $1.3 billion for 25,000 beds,” Ms. Greene told the hearing.

The Georgia Republican also quoted from Department of Homeland Security (DHS) budget requests that said “a reduction in detention capacity space would not reduce the … ability to apprehend and remove non-citizens that present a threat to national security, border security and public safety.”

She further noted that Mr. Mayorkas closed existing DHS detention facilities in Florida, Louisiana, and North Carolina “while paroling en masse millions of illegal aliens into our country.”

Rep. Marjorie Taylor Greene (R-Ga.) speaks at a House Committee on Homeland Security hearing in Washington on Jan. 18, 2024. (NTD)

Rep. August Pfluger (R-Texas), responding to the Democrats’ claim of insufficient resources for DHS, reminded the hearing that Mr. Mayorkas has said the border is secure and has never asked Congress for additional resources.

Rep. Josh Brecheen (R-Okla.) told The Epoch Times during the debate that, “James Madison wrote back in 1789, ‘If an unworthy man be continued in office by an unworthy president, the House of Representatives can at any time impeach him.’ So, the House of Representatives is well within its authority to impeach Secretary Mayorkas for his dereliction of duty. This impeachment is not about policy differences or politics. It is about the rule of law. Nobody is above congressional statute or our Constitution. Secretary Mayorkas has violated at least eight federal laws. We have no choice but to impeach him.”

Amendments to delete each of the two articles were offered by Rep. Sheila Jackson-Lee (D-Texas) and Rep. Lou Correa (D-Calif.), and both were rejected on voice votes after lengthy debate.

Rep. Dan Goldman (D-N.Y.) in Washington on Jan. 27, 2023. (Anna Moneymaker/Getty Images)

During the debate on Mr. Correa’s amendment, Rep. Dan Goldman (R-N.Y.), who spoke more frequently than any of his Democratic colleagues during the long hearing, decried the Republicans’ argument that Mr. Mayorkas has obstructed congressional oversight and ignored subpoenas.

“You say we have obstruction of Congress. What obstruction, what subpoenas are you talking about? He has testified more than any other cabinet secretary in the Biden administration. He has cooperated far beyond what any single department did in the Trump administration … You do not specify a single subpoena or a single example of how Secretary Mayorkas has obstructed,” Mr. Goldman said.

Looming over the proceeding, according to Democrats on the panel, was former President Donald Trump. Late in the evening, for example, as the debate continued on Mr. Correa’s amendment, Rep. Dina Titus (D-Nev.) accused Republicans of hypocrisy because they have not condemned Mr. Trump’s many alleged crimes.

Similarly, Rep. Donald Payne (D-N.J.) suggested the explanation for the massive amounts of fentanyl coming across the border into the United States during Mr. Mayorkas’ tenure is a result of Americans demanding the drug that has killed more than 100,000 men, women, and children, many as a result of taking medicine they did not know was laced with the deadly substance. Mr. Payne’s comment drew a sharp rebuke from Rep. Anthony D’Esposito (R-N.Y.), who called it “the most ridiculous thing I’ve heard all day.”

When Rep. Eric Swalwell (D-Calif.) offered an amendment that described in great detail his opinion that the impeachment effort by Republicans was solely intended to help President Trump’s campaign to win a second term in the White House in November. “It’s about Donald Trump still doesn’t accept Joe Biden as president and this impeachment is the continuation of the insurrection of January 6.”

Committee Chairman Mark Green (R-Tenn.) then ruled the Swalwell amendment out of order, a motion was made to table it, and the chairman’s ruling was upheld on yet another straight party-line vote, 18-15.

The same process was repeated with the same result when Mr. Swalwell introduced a second similar amendment. And it was repeated a third time with the same result when Rep. Robert Garcia (D-Calif.) introduced yet another similar amendment.

As the midnight hour approached, tempers and patience began growing shorter, particularly after Rep. Robert Menendez (D-N.J.) screamed at Republicans for what he called their allegiance to “the orange Jesus, as you call him,” an apparent reference to Mr. Trump.

As the debate continued late in the evening, Ms. Jackson-Lee conceded that “Secretary Mayorkas is going to be impeached by this committee tonight, anybody who can count can see that.” But the debate continued on late into the night.

Today at 830am, the Treasury will publish its laters Quarterly Refunding Announcement in which it is expected to follow through with its guidance from the last QRA for a “final round of increases” to its coupon auction sizes. Analysts expect a similar size of auction increases as announced in November:

2yr and 5yr notes by USD 3bln per month, 3yr notes by USD 2bln per month, and the 7yr notes by USD 1bln per

• month.
• New issue and reopening auctions for 10yr notes by USD 2bln and the 30yr bond by USD 1bln.
• To maintain the 20yr bond new issue and reopening auction sizes unchanged.

That would result in $121bln of new coupon supply for next week’s new issue 3yr (54bln), 10yr (42bln), and 30yr (25bln) auctions.

The Treasury released its quarterly financing estimates on Monday, where it said it expects to borrow $760bln in net
marketable debt for January-March period, which was around $100bln less than analyst estimates and down $55bln from its own October 2023 estimate, “largely due to projections of higher net fiscal flows and a higher beginning of quarter cash balance”, assuming an end-of-March cash balance of USD 750 billion. It also said it expects to borrow USD 202bln in the April-June period, which was also beneath analyst estimates.

Participants will be looking within the QRA to assess whether the low-sided financing estimates are a function of lower bill issuance, which is most likely, or a result of lower coupon auction sizes than currently thought, which is less likely given the Treasury’s preference to avoid surprises in its coupon auctions.

There will also be focus on the Q2 buyback schedule that the Treasury is due to outline this week. Analysts are split between a commencement in February or May. The Treasury is expected to clarify its pricing methodology, frequency of purchases each quarter for each bucket, and scheduling details.

As Bloomberg’s Simon White notes, all eyes will be on how much Bill issuance the Treasury expects to ram down the Fed’s throat. As White writes, a steeper yield curve and higher term premium this year, along with a slightly lower borrowing estimate for the first quarter, suggest the Treasury will increase longer-term debt auction sizes, but not excessively, and will lower bill issuance in its refunding announcement today. Yields in that case are unlikely to react significantly.
 
The more important part of refunding announcements is longer-term debt-auction sizes, while the adjustment mechanism is bill-auction sizes. Typically the Treasury won’t want to deviate too much from what the market is expecting in terms of bond-auction sizes as that can trigger market volatility. The larger-than-expected auction sizes in the August announcement were the initial catalyst for the rise in yields through September and October.
 
Therefore it is likely the lower borrowing estimate will be absorbed by decreasing bill issuance, while bond issuance is likely to rise from the last quarter, but roughly in line with expectations. It’s the prudent thing to do, given the yield curve has been bear steepening, and the increase in yields this year has been driven by a rising term premium. That’s the market’s way of saying to the Treasury, “I’m starting to feel emotional, so don’t do anything triggering.”

Bill issuance has been through the roof, taking them to over 21% of Treasury debt outstanding. Some reduction is due for several reasons, not least as it circumscribes Fed independence.

A fall in bill issuance, along with the retirement of the Bank Term Funding Program in March, will put pressure on reserves and thus liquidity and funding. That has implications for quantitative tightening, but the Treasury announcement is unlikely to have an impact on what the Fed may or may not say on the topic at its meeting later today. More reserve pressure, though, increases the chance of a rate cut in March, at the margin.

Analysts expected the ADP employment report to show a slowdown in job additions from last month’s rebound (driven entirely by Services as Manufacturing jobs declined), and it did. ADP reported the addition of just 107k jobs (and the prior month was revised down to +158k from +164k). This is the second lowest monthly increase in jobs since Jan 2021’s drop in jobs…

Source: Bloomberg

Information Services was the only group to see job losses last month…

On a non-seasonally-adjusted basis, manufacturing employment continues to trend lower…

ADP seems optimistic though…

“Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay,” said Nela Richardson Chief Economist, ADP.

“Wages adjusted for inflation have improved over the past six months, and the economy looks like it’s headed toward a soft landing in the U.S. and globally.”

Wage growth is slowing, especially for job-changers… with the differential to job-stayers at its lowest on record…

Source: Bloomberg

Finally, we note that ADP’s data has under-estimated BLS’s for 3 of the past 4 months…

Source: Bloomberg

So – can The Fed really cut rates (or even hint at imminent rate-cuts) with this kind of labor market?

US equity futures slumped after earnings from tech giants GOOGL, MSFT and AMD fell short of Wall Street’s lofty expectations and as investors prepared for the first interest-rate decision of the year from the Fed (full preview here).
As of 7:45am ET, contracts on the Nasdaq 100 slid 1.1%, while those on the S&P 500 retreated 0.5% with Microsoft, Alphabet and Advanced Micro Devices all sliding in premarket after their updates failed to match the market hype around tech megacaps and artificial intelligence that has helped drive the recent record-setting rally in US stocks. The balance of MegaCaps are also lower as we await the Fed. Bond yields are modestly lower as part of a bull steepening; the US dollar is stronger despite consensus expecting more dovish signaling from Powell, and commodities are mixed. JPM asks if with Russell futs positive, will we see the pain trade (+Value/-Growth with MegaCap underperformance) come to fruition near-term? The macro data focus is on ADP, ECI (Fed’s preferred measure of wage inflation), Chicago PMIs, Trsy Refunding Announcement, and then Fed meeting later today.

As noted above, the biggest premarket movers were the tech giants as Microsoft, Alphabet and chipmaker Advanced Micro Devices all fell short of the bonanza required to satisfy. Microsoft’s revenue growth was the strongest since 2022 and AI products helped with that, but there were hopes for even more given the run in its shares in recent weeks that took its market value over $3 trillion. Alphabet, meanwhile, was hit by a miss in its core Google search advertising business, and AMD’s lackluster outlook overshadowed its AI chip prospects. All three are lower in premarket trading. In other individual stock moves, Paramount Global soared 21% after Bloomberg reported that media mogul Byron Allen made a $14.3 billion offer for the company. Tesla fell as much as 3.4% after Elon Musk’s $55 billion pay package at the electric automaker was struck down by a Delaware judge. Here are all the notable premarket movers:

• Advanced Micro Devices slips 5% after the chipmaker gave a revenue forecast that was weaker than expected.
• Alphabet falls 5.6% reporting fourth-quarter revenue from its core search advertising business that fell short of analysts’ estimates.
• Boston Scientific jumps 3% after the company reported adjusted earnings per share for the fourth quarter that beat the average analyst estimate.
• Mondelez falls 4% after the maker of Oreo cookies issued weaker-than-expected guidance for full-year organic net revenue growth.
• Paramount Global soars 17% after Bloomberg reported that media mogul Byron Allen has made a $14.3 billion offer to buy all of the outstanding shares of the company.
• Rockwell Automation slides 7.9% after reporting first-quarter sales and adjusted earnings per share that trailed the average analyst estimates.
• SoFi Technologies slips 3% as Morgan Stanley issued a downgrade, flagging near-term revenue headwinds.
• Starbucks gains 3% as management maintained confidence in the company’s 2024 profit goal, predicting that greater efficiency, new stores and a core of loyal customers will offset a dip in revenue growth.
• Stryker climbs 5% after the medical-device manufacturer forecast for 2024 that beat the average analyst estimate.
• Tesla shares fall 2.6% after top boss Elon Musk’s $55 billion pay package at the electric automaker was struck down by a Delaware judge.

Attention now turns later to the Fed, with the Federal Open Market Committee poised to keep rates unchanged but indicated no more tightening bias (see our preview here). The rate decision and accompanying statement will be released at 2 p.m. in Washington, with Chair Jerome Powell holding a press conference 30 minutes later. Traders see a roughly 40% chance the central bank will lower rates for the first time in March, but most Fed officials have said it’s too soon to speculate on such a pivot. While Powell may say that recent declines in inflation are encouraging, he may still show little urgency to ease, given resilience in the labor market and growth in the economy.

“Even if it’s not our scenario, we expect the Fed to keep the door open for a possible rate cut in March, without sending a firm and definitive signal,” said Alexandre Hezez, chief investment officer at Group Richelieu in Paris. A proposed redline statement from Barclays is shown below.

While we have more US megacap earnings after the close today and tomorrow, it’s a busy day of earnings in Europe too: Novo Nordisk A/S became only the second European company to reach a market value of $500 billion after it said sales and profit will surge again this year thanks to its blockbuster obesity shot Wegovy. Shares in Hennes & Mauritz AB plunged as much as 11% after the retailer missed profit estimates and its chief executive officer stepped down. Europe’s Stoxx 600 index edged higher with the insurance and real estate sectors rising most, while retailers fall after fast fashion giant H&M reported poor 4Q results. Here are the biggest European movers:

• Novo Nordisk climbs as much as 4.1%, taking the Danish drugmaker’s market value to $500 billion for the first time after announcing fresh guidance for 2024 and strong 4Q results
• Beijer Ref gains as much as 11% after the Swedish industrial ventilation firm reported 4Q earnings that Jefferies say were solid, with upbeat outlook commentary the key positive
• Wartsila rises as much as 7.2% to hit its highest level in four-and-a-half years after the company, which serves the marine and energy markets, said it expects demand to improve in 2024
• SEB shares jump as much as 7.9%, the most since October, after the French appliances maker forecast a full-year operating result of more than 15%, compared the previous 10% prediction
• Borregaard climbs as much as 9.4% to highest since June after Norwegian supplier of specialized biochemicals posted fourth-quarter Ebitda that Carnegie said showed strong results
• KPN climbs after raising FY free cash flow guidance and beating analyst estimates on the metric for 4Q. Service revenue growth was seen as steady, hinting at a healthy Dutch market
• Hennes & Mauritz drops as much as 10% after the clothing retailer reported 4Q operating profit that missed estimates; Bernstein says results showed weakness across the board
• Novartis shares fall as much as 5.3%, most since March 2022, after the Swiss pharma giant’s sales came in lower than analysts’ expectations, with key drugs missing estimates
• Raiffeisen Bank bank drops as much as 8.4% after fourth quarter net income missed expectations as the lender continued to reduce the volume of customer loans in Russia
• Vodafone shares drop as much as 4.1%, the most in two months, after its talks with Iliad to merge Italian operations fell through. Vodafone said it’s still in discussions with other bidders

Earlier in the session, in Asia, Japanese bond yields rose as a summary of the Bank of Japan’s meeting signaled it’s getting closer to raising its interest rate for the first time since 2007. Japanese stocks also gained, as signs that the BOJ may move to end negative rates boosted optimism over lenders’ profitability. Stocks in China and Hong Kong extended losses after data showed another month of contraction in China’s factory activity. Mainland shares wiped out all the gains spurred by hopes of stronger support measures by the authorities.

On the monetary policy front in Europe, data out Wednesday showed cooling price pressures in France, adding to optimism that the ECB may begin trimming rates as soon as April. The 10-year yield on German debt dropped as much as eight basis points, while the euro weakened. Meanwhile, the dollar strengthened against most of its Group-of-10 peers, while Treasury yields were slightly richer on the day, with futures off highs reached after steep gains for Australian bonds on domestic inflation data and gains for bunds during London morning on retail sales data. US session features ADP employment, quarterly refunding announcement and Fed rate decision. US yields remain within 1bp-2bp of Tuesday’s closing levels, off session lows; 10-year around 4.03% after briefly dropping below 4% during London morning; bunds outperform by 2.5bp in the 10-year sector, gilts by 1.5bp. Dollar issuance slate light so far; just one deal priced Tuesday, and muted activity is expected Wednesday ahead of Fed rate announcement; dealers are calling for around $150b of new supply in February. At 8:30am US Treasury is slated to announce sizes of note and bond auctions during the February-to-April quarter.

In FX, the Bloomberg Dollar Spot Index rose 0.1%, reversing three sessions of losses, as traders braced for the Federal Reserve to avoid signaling an imminent rate cut; Treasury yields fell 1-2bps across the curve.

• USD/JPY traded 0.1% higher at 147.78 after dropping 0.3% to 147.19; A summary of the BOJ’s meeting signaled the central bank is moving closer to raising rates.
• AUD/USD fell as much as 0.7% to 0.6559, the lowest level in a week, as Australian inflation eased more than expecting boosting bets on a pivot to rate cuts.
• EUR/USD dropped as much as 0.4% to 1.0806 before paring losses after French inflation dropped to its lowest level since before Russia invaded Ukraine; German unemployment unexpectedly decreased in January pointing to labor market resilience.

In commodities, oil headed for its first monthly gain since September as an escalation of attacks on ships in the Red Sea spurred a diversion of tanker traffic and raised fears about a wider conflict in the Middle East. On Wednesday, WTI fell 1.3% to trade near $76.80. Gold was flat, trading around $2,037.

To the day ahead now, and the main highlights will be the Federal Reserve’s policy decision and Chair Powell’s subsequent press conference, along with the quarterly refunding announcement from the US Treasury. On the data side, we’ll get the flash CPI releases for January from Germany and France, and in the US, there’s the ADP’s report of private payrolls for January and the Q4 Employment Cost Index. Finally, earnings releases include Boeing and Mastercard.

Market Snapshot

• S&P 500 futures down 0.5% to 4,925.25
• MXAP up 0.2% to 165.91
• MXAPJ down 0.4% to 502.98
• Nikkei up 0.6% to 36,286.71
• Topix up 1.0% to 2,551.10
• Hang Seng Index down 1.4% to 15,485.07
• Shanghai Composite down 1.5% to 2,788.55
• Sensex up 0.8% to 71,701.22
• Australia S&P/ASX 200 up 1.1% to 7,680.72
• Kospi little changed at 2,497.09
• STOXX Europe 600 little changed at 486.07
• German 10Y yield little changed at 2.21%
• Euro little changed at $1.0835
• Brent Futures down 1.0% to $82.04/bbl
• Gold spot up 0.1% to $2,039.51
• U.S. Dollar Index little changed at 103.47

Top Overnight News

• Australia’s CPI for Q4 undershoots the Street consensus at +4.1% Y/Y (vs. the Street’s +4.3% forecast). RTRS
• China’s NBS PMIs are mixed for Jan, with manufacturing coming in at 49.2 (up from 49 in Dec, but below the Street’s 49.3 forecast) and non-manufacturing at 50.7 (up from 50.4 in Dec and above the Street’s 50.6 forecast). WSJ
• A BOJ rate hike is getting closer, according to the summary of opinions from last week’s meeting. One member said there’s a “golden opportunity” to end negative rates before a Fed and ECB pivot. The yen rose and JGBs edged lower. BBG
• France’s CPI cools by more than anticipated in Jan, coming in +3.1% Y/Y (down from +3.7% in Dec and below the Street’s +3.3% forecast). BBG
• Iran signaled it’s prepared to hit back against any US strike on its soil or assets abroad, as the White House readies a response to a drone attack that killed three American soldiers over the weekend. BBG
• Paramount soared about 15% premarket after Byron Allen was said to have offered $14.3 billion for all of the outstanding shares. His plan is to sell the film studio, real estate and some intellectual property, while keeping the TV channels including the Paramount+ streaming service. He’s said to have banks and other investors lined up. BBG
• January FOMC Preview: Keeping a March Cut on the Table (Mericle): FOMC will likely aim to keep a March cut on the table without sending a decisive signal by removing the outdated hiking bias from its statement and noting that future policy changes will depend on upcoming inflation and other data. We continue to expect the FOMC to deliver a first cut in March and 5 cuts in total in 2024. The main reason is that progress on inflation has already surpassed the threshold the FOMC has given. GIR
• GOOGL -4% .. Solid topline, miss on headline OI (search OI beat though) ….Total Revs $86.31 (+13% y/ cc) vs cons $85.34bn ..  Search $48.02bn (+13% y/y) vs cons $48.1bn … YouTube $9.2bn (+15.5% y/y) vs cons $9.2bn … Google Cloud $9.19bn vs cons $8.94bn. Total Op Income $23.68bn vs cons $23.8bn … Google Services OI $26.73bn vs cons $25.78bn … Google Cloud OI  $864mn vs cons $357mn. EPS $1.64 vs cons $1.59. Employees up small q/q to 182,502(+121 q/q). GS GBM
• Heading into January month-end, the Goldman desk’s model estimates $10 billion of US equities to sell from US pensions given the moves in equities and bonds over the month. Note, we saw one trigger event on Jan 10th in which $12bn of US equities were sold, bringing aggregate selling in January to -$22bn by month-end. GS GBM

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly subdued amid a deluge of earnings releases and key data releases at month-end. ASX 200 shrugged off early weakness and printed record highs as yields fell after softer-than-expected inflation. Nikkei 225 initially retreated following disappointing Industrial Production and Retail Sales data, while hawkish-leaning comments from the BoJ Summary of Opinions also provided a headwind for stocks. However, the index then gradually recovered all of its losses. KOSPI was subdued after results from Samsung Electronics which topped estimates but its profits declined. Hang Seng and Shanghai Comp underperformed following the latest Chinese PMI data in which Manufacturing PMI matched estimates and remained in contraction territory for a 4th consecutive month.

Top Asian News

• BoJ Summary of Opinions from the January meeting stated a member said that the BoJ must patiently maintain monetary easing under YCC, while the positive wage-inflation spiral must strengthen further and wage growth must exceed 2% to reach the price target. A member said the prerequisite for policy change including ending negative rates, appears to be falling into place given improvements in the economy and prices, while a member said they are now likely at a phase where they need to confirm through specific data the likelihood of achieving 2% inflation. Furthermore, a member said there is a strong chance they can judge that policy normalisation is possible once they can confirm the impact of the quake on the economy in the coming 1-2 months, while a member stated they must deepen the exit debate as the likelihood of achieving the price target has heightened and it was also stated that BoJ could be forced to sharply tighten monetary policy if its decision to end the negative rate comes too late.
• Chinese President Xi promised US President Biden that China wouldn’t interfere in the 2024 US presidential election, when they met last November, which China’s Foreign Minister reiterated to the US National Security Adviser over the weekend, according to CNN.
• IMF senior official said Chinese authorities need to give a consistent and clear set of messages to address property sector woes and need to separate viable from non-viable while protecting homebuyers, while the official added that going forward, they would prefer if there were more policy rate cuts than bank reserve cuts in China.
• China’s major state-owned banks seen selling dollars in onshore foreign exchange market on Wednesday, according to Reuters sources
• Joint Saudi-Kuwaiti statement: Acknowledges the close cooperation between the two sides in the field of energy, and acknowledges the successful efforts of the OPEC+ countries in enhancing the stability of global oil markets, according to Asharq News.
• Saudi Arabia’s decision on capacity was reportedly at least six months in the making based on uncertainty around the need for additional spare capacity, according to industry sources cited by Reuters.
• United Microelectronics Corporation (2303 TT) Q4 (TWD): Consolidated revenue 54.96bln (prev. 67.84bln Y/Y). Gross margin 32.4% (prev. 42.9% Y/Y). “We anticipate overall wafer demand will increase mildly, however, customers maintain a cautious approach”

European bourses are generally lower, with clear underperformance in the SMI, post-Novartis earnings. European sectors hold a positive tilt; Retail lags hampered by losses in H&M (-8.8%) post-earnings; Insurance tops the pile. US equity futures (ES -0.5%, NQ -1.3%, RTY +0.4%) is on a mixed footing; with clear underperformance in the tech-heavy NQ following after-hours earnings from MSFT (-1.5%), GOOG (-5.5%) and AMD (-6.6%), detailed below. Click here and here for the sessions European pre-market equity newsflow, including earnings from Novartis, Novo Nordisk, GSK & more.

Top European News

• The Times shadow MPC voted 8-1 in favour of keeping the base rate unchanged at 5.25% with the lone dissenter voting for a 25bps hike, while it said the BoE should avoid signalling to investors where it intends to shift monetary policy over the coming months.
• UK Chancellor Hunt has reportedly warned his cabinet that tax cuts in the Spring budget could be smaller than expected amid “major structural weaknesses” in the UK economy, according to The Times. Hunt reportedly said there is likely to be less headroom for tax cuts than in the Autumn statement.
• Hapag-Lloyd (HLAG GY) CEO says freight rates are rising in Q1 2024 vs Q4 2023; better profit prospects for current quarter; “We do not believe the Red Sea crisis will be over soon, will probably take months”

Earnings

• Alphabet Inc (GOOGL) – Q4 2023 (USD): EPS 1.64 (exp. 1.59), Revenue 86.31bln (exp. 85.33bln). Google advertising revenue USD 65.52bln (exp. 65.8bln). YouTube ads revenue USD 9.20bln (exp. 9.16bln). Google Services revenue USD 76.31bln (exp. 75.97bln). Google Cloud revenue USD 9.19bln (exp. 8.95bln). Other Bets revenue USD 657mln (exp. 298.6mln). Co. is taking action to optimise global office space. Executive says Co. saw ad strength in retail, while CFO says search remained the biggest contributor to revenue growth and operating cost increase primarily reflected by growing R&D expenses. (Newswires) Shares -5.5% pre-market
• Advanced Micro Devices Inc (AMD) – Q4 2023 (USD): Adj. EPS 0.77 (exp. 0.77), Revenue 6.17bln (exp. 6.12bln). Data centre revenue USD 2.28bln (exp. 2.3bln).Gaming revenue USD 1.37bln (exp. 1.25bln). Client revenue USD 1.46bln (exp. 1.51bln). Embedded revenue USD 1.06bln (exp. 1.06bln). Sees Q1 rev. USD of approximately USD 5.4bln +/- USD 300mln (exp. 5.77bln). Sees Q1 adj. gross margin about 52% (exp. 51.8%). (Newswires) Shares -6.7% pre-market
• Microsoft Corp (MSFT) – Q2 2024 (USD): EPS 2.93 (exp. 2.78), Revenue 62.02bln (exp. 61.1bln). Cloud revenue 33.7bln (exp. 32.31bln). Revenue breakdown (USD): Intelligent Cloud revenue 25.88bln (exp. 25.29bln). Productivity and Business Processes revenue 19.25bln (exp. 19.03bln). More Personal Computing revenue 16.89bln (exp. 16.8bln). Other metrics: (USD) Capital expenditure 9.74bln. Operating income 27.03bln. Says 6 points of Azure revenue growth is attributable to AI, up from 3 points growth in the prior quarter, via co. exec in an interview. Office Commercial paid seats rose to 400mln from 382mln in Q3 23. CEO says now 53,000 Azure AI customers and one-third were new to Azure in the past 12 months, adds over half of Fortune 500 companies use Azure’s OpenAI AI services, seeing an increase in billion-dollar-plus Azure commitments. Q3 Guidance (via earnings call). Sees Q3 rev. USD 60bln-61bln (exp. 60.86bln) .Sees Productivity and Business Processes rev. 19.3bln-19.6bln (exp. 19.5bln).Sees Intelligent Cloud rev. 26.0bln-26.3bln (exp. 25.9bln). Sees More Personal Computing rev. 14.7bln-15.1bln (exp. 15.4bln). Sees Operating Expenses 15.8bln-15.9bln (exp. 16.5bln).Sees COGS 18.6bln-18.8bln (exp. 19.5bln)Shares -1.3% pre-market
• Novo Nordisk (NOVOB DC) – FY (DKK): Revenue 232.26bln (exp. 229.24bln), EPS 18.62 (exp. 18.32). New share buyback programme of up to DKK 20bln. The outlook reflects the gradual roll-out of Wegovy with capped volumes in international operations. Started increasing lower strength Wegovy within the US during January. Sees continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. Q4: Wegovy Sales 9.62bln (prev. 2.45bln). Revenue 65.86bln (exp. 62.27bln). EBIT 26.7bln (exp. 24.9bln). FY24 Guidance: Sales: 18-26% (exp. 23.3%). Capex 45bln. adj. FCF 64-74bln. Co. has around a 2.8% weighting in the Stoxx Europe 600 (the largest in the index). Shares +1.1% in European trade
• Novartis (NOVN SW) – Q4 (USD): Revenue 11.4bln (exp. 11.7bln), Core EPS 1.53 (exp. 1.67), Core Net Income 3.12bln (exp. 3.34bln), Operating Income 3.8bln. FY23 dividend 3.30/shr, +3.1% (exp. 3.60). Net sales growth was driven primarily by strong performance for Entresto +31%, Kesimpta +99%, Kisqali +75%, Pluvicto +261% & Semblix +179%. Expect sales growth of 5% per annum until 2028, core operating margin at circa. 40% by 2027. (Newswires) Co. has around a 2% weighting in the Stoxx Europe 600 & and around a 16% weight in the SMI. Shares -3.5% in European trade
• GSK (GSK LN) – FY (GBP): Sales 30.33bln (exp. 29.81bln), adj. EPS 1.55 (exp. 1.52), adj. Operating Profit 8.78bln (exp. 8.77bln), Dividend 0.58/shr (exp. 0.57/shr). FY (continued): Shingrix sales 3.4bln, +17% (exp. increase mid-teen %) Arexvy sales 1.2bln (exp. 0.9-1.0bln). Vaccine sales +25% (exp. around 20%). adj. Speciality Medicine sales +15% (exp. increase low double-digit). Q4: adj. EPS 0.289 (exp. 0.299). Revenue 8.05bln (exp. 7.29bln). FY24 Guidance Dividend 0.60/shr (exp. 0.61/shr). Adverse impact of lower COVID-19 sales seen at 1pp of growth in sales. Commentary/CEO: 2031 sales outlook increased to over 38bln (upgraded). 2021-2026 outlook increased to sales more than +7% CAGR and Adjusted operating profit more than +11% CAGR. 2028-2030 is expected to see stable operating margins; given the likely loss of exclusivity for Dolutegravir during the period within the EU & US. Planning for at least 12 major launches from 2025. Strong pipeline progress, with 4 major product approvals: Arexvy RSV vaccine; Apretude for HIV prevention; Ojjaara for myelofibrosis and Jemperli in 1L endometrial cancer. (Newswires) Shares -0.9% in European trade

FX

• The Dollar Index is marginally firmer but once again finds itself pivoting around the 103.50 mark as has been the case in recent sessions. For now it is contained within yesterday’s 103.31-82 range with impetus expected from the FOMC.
• The EUR is a touch softer vs. the USD as the single-currency digests a soft French CPI and hawkishly-viewed German State CPI; EUR/USD is holding onto a 1.08 handle but a breach would see the YTD low at 1.0769 come into view.
• JPY is the marginal outperformer vs. the USD; still contained within yesterday’s 147.10-92 range with techs highlighting 10DMA at 147.86 and 100DMA at 147.47.
• AUD is the laggard within the antipodes as soft CPI metrics drag the currency lower. AUD ventured to a low of 0.6560 and further Downside sees 23rd Jan low at 0.6551. NZD steady on a 0.61 handle in what has been dull trade for the pair in recent sessions.
• PBoC set USD/CNY mid-point at 7.1039 vs exp. 7.1727 (prev. 7.1055).

Fied Income

• USTs are currently bid and the yield curve is marginally steeper, benchmark up to a 112-02 high. The docket is dominated by Quarterly Refunding (Monday’s estimates point to a smaller increase than forecast) and thereafter the FOMC/Powell.
• Bunds were initially bullish and shrugged off a hawkish handover from JGBs after the BoJ SOO; however, the deluge of German State CPIs were hotter Y/Y than consensus for the mainland implies and spurred a hawkish move down to 135.19.
• Gilt price action has largely taken impetus from EGBs awaiting the BoE on Thursday.
• Italy opens books to sell 15-year EUR benchmark; guidance seen +13bps to BTPs; pricing today

Commodities

• Softer trade across crude amid the overall downbeat risk tone in the market and the firmer Dollar. Sentiment for the complex is weighed on by Chinese Manufacturing PMI remaining in contraction whilst bullish Private Inventories, geopolitics, and energy commentary this morning are largely overlooked.
• Contained trade in spot gold ahead of the FOMC policy decision; XAU sees its 21 DMA (USD 2,030.10/oz) and 50 DMA (2,029.83/oz) converge.
• Chinese PMIs weighed on base metals overnight as Manufacturing PMI remained in contraction territory for a fourth consecutive month.
• US Energy Inventory Data (bbls): Crude -2.5mln (exp. -0.2mln), Gasoline +0.6mln (exp. +1.5mln), Distillate -2.1mln (exp. -0.4mln), Cushing -2.0mln.
• US seeks to buy about 3mln bbls of US-produced sour crude for the SPR for a June delivery.

Geopolitics

• Iran’s envoy to the UN said any attack on Iran, its interests or its nationals outside of its borders will be met with a definitive response, according to IRNA.
• US military said it shot down an anti-ship cruise missile fired by Yemen Houthis into the Red Sea, according to Reuters.
• Houthis say they fired missiles at US warship Greifley, and say they will target US, UK warships in ‘self-defence’, according to Al Arabiya

US Event Calendar

• 07:00: Jan. MBA Mortgage Applications -7.2%, prior 3.7%
• 08:15: Jan. ADP Employment Change, est. 150,000, prior 164,000
• 08:30: 4Q Employment Cost Index, est. 1.0%, prior 1.1%
• 09:45: Jan. MNI Chicago PMI, est. 48.0, prior 46.9, revised 47.2
• 14:00: Jan. FOMC Rate Decision

DB’s Jim Reid concludes the overnight wrap

The main event over the last 24 hours occurred after the US closing bell as results from Microsoft and Alphabet last night soured risk sentiment. Both of the tech giants narrowly beat revenue and earnings estimates, but saw an underwhelming reaction in after-hours trading. Alphabet slid more than 5% amid lower-than-anticipated advertising revenues for Google. Microsoft declined by as much as 3% initially, arguably signalling some overextension of the recent strong rally, but largely reversed this decline after its outlook call later in the evening. Combined the two companies represent a near $5trn market cap, equating to 11.5% of the S&P 500 so very important for market direction alongside Apple, Amazon and Meta (a combined 13% of the S&P) who report tomorrow night. In addition last night, chipmaker AMD (market cap $278bn) fell as much as -6% after hours post a disappointing sales outlook.

Prior to these results, tech mega caps had underperformed yesterday, with the Magnificent Seven down -0.61% from Monday’s all-time high, led by Apple (-1.92%). Following last night’s results, NASDAQ futures are trading -0.80% lower this morning, following on from a -0.76% decline yesterday, while S&P 500 futures are down -0.37% (after -0.06% yesterday). The late risk-off tone also saw 10yr Treasury yields fall by 2-3bps near end of the session, closing -4.2bps lower on the day. There has been another -2bps fall overnight leaving 10yr yields at 4.01%.

Before the earnings, markets were subdued ahead of the after bell activity and the Fed’s decision today. The main theme was investors dialling back the likely speed of rate cuts after another round of positive data. For instance, the US Conference Board’s consumer confidence reading hit a two-year high, the JOLTS release saw job openings unexpectedly rise, and the Euro Area managed to avoid a technical recession in Q4. So a lot of good news all round. But with the data still surprising on the upside, it’s led to growing questions about whether the Fed will actually be wise to cut rates as soon as March. Indeed, futures lowered the probability to 44% yesterday from 48% the day before (and this was as low as 37% intra-day yesterday). And looking further out, at the close they were pricing 132bps of cuts by the December meeting, the joint lowest since the December FOMC.

When it comes to the Fed, it’s widely expected they’ll leave rates unchanged today, so the big question instead is what they signal about the timing and speed of rate cuts moving forward. That’s something they’ve explicitly acknowledged, since their dot plot at the last meeting in December pencilled in 75bps of cuts this year, which triggered a significant market rally in response. In their preview (link here), our US economists expect the FOMC to leave behind its tightening bias, and think the post-meeting statement will likely drop the reference to “the extent of additional policy firming”. In terms the next meeting in March, they think Powell will leave the door open for a potential cut, but will not express urgency around cutting rates, thus keeping open the timing of any move.

Diving into more detail on the strong data, the Conference Board’s consumer confidence reading rose to 114.8 in January, which was the highest since December 2021. Moreover, the present situation component was up to 161.3, which is the highest reading since March 2020, so there were lots of positive signs in the report. Likewise on the labour market, the difference between those saying jobs were “plentiful” and those saying they were “hard to get” rose to a 9-month high of 35.7%. And that in turn was backed up by the JOLTS report for December, where job openings unexpectedly rose to 9.026m in December (vs. 8.75m expected), which offered fresh signs that labour demand was still robust.

Those releases led to growing confidence that the Fed would be keeping rates on hold until at least the May meeting. But the optimism was clear in Europe too, since the Q4 GDP release showed zero growth, rather than the -0.1% contraction expected. Significantly, that means the Euro Area avoided a technical recession, as the Q3 number had a -0.1% contraction, so a Q4 contraction would have meant the economy had contracted for two consecutive quarters. As with the Fed, that led investors to dial back the amount of ECB cuts priced in, and the chance of a cut by April went from being fully priced on Tuesday, to 92% by the close yesterday.

The Fed will now help set the agenda from here, but if that wasn’t enough, today will also bring the US Treasury’s Quarterly Refunding Announcement, which will see them announce their plans for which notes and bonds they intend to issue. That follows the borrowing estimates on Monday, which triggered a rally in Treasuries after they expected to borrow $760bn over Q1, which was down from its Q4 levels. These didn’t use to attract as much notice, but the QRA was seen as one of the triggers for the major bond selloff from the start of August, as well as the recovery that took place from November onwards, shortly after the 10yr Treasury yield had hit 5% intraday. So these have been associated with important turning points in recent months, although it’s fair to say there’ve also been other factors as well, not least the Federal Reserve’s outlook as well as the inflation data.

When it came to markets over the last 24 hours, US Treasuries saw a noticeable flattening as investors became less confident about the prospect of near-term cuts. That meant the 2yr yield was up +1.5bps to 4.335%, whereas the 10yr yield ended the day down -4.2bps at 4.03%, its lowest in two weeks, despite a brief spike in yields after the Conference Board and JOLTS data came out.

Over in Europe however, there was a sizeable rise in yields across the curve, with those on 10yr bunds (+3.3bps), OATs (+3.9bps) and BTPs (+6.5bps) moving higher. In Europe, we also started to get some of the flash CPI releases for January, with Spanish CPI unexpectedly rising +3.5% on the EU-harmonised measure (vs. +3.0% expected). Today we’ll also get the French and German numbers, ahead of the Euro Area-wide release tomorrow.

For equities, there was a pretty subdued performance. The STOXX 600 (+0.16%) eked out a fresh two-year high, but the S&P 500 retreated marginally (-0.06%) led by the declines for tech stocks. The Russell 2000 (-0.76%) ended a run of three consecutive gains. At the other end, financials led the day’s outperformers, with the S&P 500 banks index up +2.13%.

Asian equity markets are mostly struggling this morning with the Hang Seng (-1.34%) leading losses with the CSI (-0.65%) and the Shanghai Composite (-1 0%) also trading in the red after another month of contraction in China’s manufacturing activity (more below). The KOSPI (-0.30%) is also down after the index heavyweight Samsung Electronics reported a -34% drop in fourth quarter operating profit as consumer demand remained sluggish in many businesses.

Elsewhere, the Nikkei (+0.3%) has progressively moved higher from opening losses led by financials as the BOJ’s summary of opinions signalled an increasing probability of ending negative rates in the near future without providing a timetable.

However the Japanese yen failed to build on its initial uptick against the dollar after the release of retail sales and industrial production figures for December. Retail sales unexpectedly contracted -2.9% m/m in December (v/s +0.2% expected) as against a revised +1.1% gain in the preceding month while the factory output rebounded +1.8% y/y in December (v/s +2.5% expected), compared to November’s -0.9% drop. So a confusing picture in Japan overnight.

Elsewhere we got our first look at China’s official 2024 PMI data which showed that manufacturing activity shrank for the fourth consecutive month in January albeit the reading slightly improved to 49.2 versus 49.0 in December, highlighting that the sector remains under pressure amid a weak economic recovery. Meanwhile, the official non-manufacturing managers’ index continued to outperform as it edged up to 50.7 in January from 50.4 in December.

Elsewhere, Australia’s inflation in the fourth quarter rose +4.1% y/y (v/s +4.3% expected) and down from a +5.4% gain in the third quarter thus encouraging thoughts that the RBA’s next move will be a rate cut. For the quarter alone, CPI rose +0.6%, or half the pace of the September quarter. Following the release, yields on the policy-sensitive 3yr Australian government bonds dropped -10.0bps to trade at 3.61%.

Looking at yesterday’s other data, UK mortgage approvals were up to a six-month high of 50.5k in December (vs. 53.0k expected). Separately, the I MF also published their latest growth forecasts, and they now see the global economy expanding by +3.1% in 2024, which is up two-tenths from their October projection.

To the day ahead now, and the main highlights will be the Federal Reserve’s policy decision and Chair Powell’s subsequent press conference, along with the quarterly refunding announcement from the US Treasury. On the data side, we’ll get the flash CPI releases for January from Germany and France, and in the US, there’s the ADP’s report of private payrolls for January and the Q4 Employment Cost Index. Finally, earnings releases include Boeing and Mastercard.