Month: April 2024

Authored by Liliana Zylstra via The College Fix,

Female college athletes are “crying out for justice,” safety, and privacy in a lawsuit challenging the National Collegiate Athletic Association’s transgender policies, their attorney told The College Fix in an exclusive interview.

Attorney William Bock III said the 16 plaintiffs, all current or former collegiate athletes, are challenging the NCAA and the University of Georgia for violating Title IX’s provisions for equal opportunity in sports by allowing males to compete in the women’s category.

The lawsuit also alleges female athletes’ right to bodily privacy under the 14th Amendment was violated.

According to the suit, the NCAA authorized “naked men possessing full male genitalia to disrobe in front of non- consenting college women and creating situations in which unwilling female college athletes unwittingly or reluctantly expose their naked or partially clad bodies to males.”

Bock told The Fix in a recent phone interview that many athletes sent letters sharing their concerns about these policies to the NCAA, but they were ignored.

“They’re crying out for justice and the NCAA won’t even talk to them,” he said.

“It isn’t even willing to respect their concerns enough to give them an audience. So it became clear that the only thing that would have a chance of changing their policy is filing a lawsuit.”

Bock told The Fix, “The NCAA is so committed to radical gender ideology that they have completely lost concern for women’s rights.”

“It’s very clear that the NCAA violated the law,” he said.

Bock formerly worked as general counsel for the U.S. Anti-Doping Agency and served as the lead attorney for USADA in the case against professional cyclist Lance Armstrong.

“The advantage that Lance Armstrong got through doping pales in comparison to the advantage that male athletes have when competing against females in collegiate sports,” he said.

“The NCAA suggests that one can reduce or eliminate the performance gap [between men and women] by suppressing testosterone and that’s ludicrous from a matter of science,” Bock told The Fix.

Bock also served on the NCAA Committee on Infractions for several years. However, he quit earlier this year after expressing concerns about transgender athletes like former University of Pennsylvania swimmer William “Lia” Thomas, a male who identifies as female who won an NCAA Division I championship on the women’s team in 2022.

Safety is among female athletes’ biggest concerns, Bock said. “The NCAA is not in many instances even telling women that they’re competing against a male. And that’s dangerous … in a contact sport where you can get a concussion.”

Female athletes speak out

Two of the plaintiffs also spoke with The Fix in a phone interview about their concerns for safety, fairness, and the overall future of women’s sports.

Ainsley Erzen (pictured right), a soccer and track athlete at the University of Arkansas, said, “We want the stories that people are seeing now to be the last ones. We don’t want the generations in the future to deal with that.”

Erzen said she and her fellow athletes are fighting so women will have the opportunities to set records, win championships and earn college scholarships.

“What kind of message are we sending to women — but especially to young girls — when we tell them that their safety doesn’t matter, their rights don’t matter, their opportunities don’t matter, their futures don’t matter?” she told The Fix.

Kaitlynn Wheeler (pictured left), a former swimmer for the University of Kentucky, said the protection of women’s sports is a ”common-sense issue.”

Wheeler told The Fix speaking up is important “because the overwhelming majority of people are on our side.”

“This lawsuit is really not about hurting anyone. It’s about helping the women who have been hurt and preventing it from happening in the future. It’s about ensuring fair, equal, and safe competition and I think that just about everyone should want that,” she said.

An NCAA spokesperson declined to comment on the lawsuit in response to a request from The Fix.

“College sports are the premier stage for women’s sports in America, and while the NCAA does not comment on pending litigation, the Association and its members will continue to promote Title IX, make unprecedented investments in women’s sports and ensure fair competition in all NCAA championships,” the association said in an emailed statement.

Others involved in the lawsuit include Riley Gaines, a former 12-time All-American swimmer at the University of Kentucky and current advocate for women’s sports. The Independent Council on Women’s Sports is supporting the athletes’ case.

Ahead of Wednesday’s Quarterly Refunding Announcement by the Treasury and the latest FOMC announcement, as well as today’s Treasury Borrowing Estimate report, a firely but nerdy clash – with potentially huge consequences – has broken out within the rates market between those who expect the Treasury to surprise to the downside with its upcoming Sources and Uses forecast (like us, for example, as discussed in “How Janet Yellen Will Unleash Another Market Meltup Next Monday“), and a splinter group which expects far greater borrowing estimates to be unveiled by Janet Yellen 6 months before the election (and in doing so sending yields soaring, stocks tanking, and generally tanking the Biden admin at the worst possible moment).

We won’t go over the specifics of the former, since we already did that in great detail last Friday; we will instead focus on the recent view that today’s Borrowing Estimate statement (due at 3pm ET) may come as a shock surprise to the upside according to some, who expect a Q3 borrowing estimate as high as $1.2 trillion.

For that, we give the mic to Nomura’s Charlie McElligott who writes that  number of client conversations over the past week or so had highlighted the magnitude of the US government tax receipts collected into / around Tax day, “which rationally on account of rising wages and enormous capital gains –tied inflows, and have powered the TGA to its highest levels in two years at the current $941B, nearly ~ +$190B over the Treasury’s targeted EOQ balance of $750B”, as we first noted first two weeks ago.

Treasury cash soars by $173BN on April 15 to $897BN, as taxes come in; this is the highest in two years and gives TSY $150BN in stimmy dry powder (less Bill issuance, less RRP drain). pic.twitter.com/tqa7vFE90w

— zerohedge (@zerohedge) April 16, 2024

Here McElligott recaps what we said last week and explains that “the potential was that this “slack” in the TGA from the high tax receipts could then allow the Treasury to announcement a REDUCED FINANCING ESTIMATE TODAY for the new quarter to be announced with the extra funds already in the Treasury kitty, which could then act as a “dovish surprise” in a world where the entirety of the investment universe has been fixated on the exponential fiscal deficit spending trajectory which sits at the core of the enormous ongoing funding requirements and UST issuance “structural bear case” alongside the Fed cut repricing on “sticky inflation” being behind the recent selloff…so a smaller financing estimate, in-turn, could then act as a potentially bullish UST catalyst on locally lower issuance.”

So with the extra tax monies pushing the TGA balances to two year high levels, and reducing the immediate borrowing needs of the Treasury, this potential for UST “reduced supply relief” when the latest borrowing estimates are announced today, was also layering in conjunction with Treasury’s prior guidance on the “mix” of the issuance,  which explicitly stated their expectations that the just concluded prior Feb-Apr period would be the final quarter of increased Coupon issuance (and it most likely “will” be… at least until after the elections, but more on that later).

Now as readers may recall from the Oct / Nov ’23 QRA shocker, it was the Yellen’s “issuance twist” (discussed here) which dramatically reduced Coupon issuance versus prior expectations, and instead concentrated the issuance mix into Bills and blowing-out prior TBAC convention (going to Bills as a whopping 60% of the issuance mix, from prior 15-20%), taking advantage of the insatiable demand from MMF in the current “Cash as an yield asset” world we are living-in, which, in-turn, McElligott reminds us also marked the end of the Fall ’23 term-premium shock, and helped ALL assets rally in furious fashion thereafter (in conjunction with the softening inflation data at the time too, of course!), as it kicked-off such a massive “impulse easing” in financial conditions

So fast-forwarding to today when contrary to our expectations for a lower than expected print, a theory has emerged according to which the Treasury will unveil a far greater than expected funding shortfall. McElligott explains:

John Comiskey—the super-bright and well-followed Mortgage Tech engineer who meticulously follows and models the money flows of the US government / Treasury / Federal Reserve on the side (effectively as a “forensic accountant”) — yesterday on his public Substack released his projected Treasury borrowing estimates for the quarter ahead…and he sees an extremely different path ahead for the QRA than the hypothetical one I’d noted above, instead with large projected UPWARD REVISIONS to Treasury borrowing estimates in the quarters ahead.

Comiskey’s predictions for today’s financing estimates are rather jarring, versus the recent trend in Street expectations having potentially moderated on the tax receipts / TGA logic:

Versus the prior est of ~ $200B borrowing this new Q2 which some saw the potential scope to shift meaningfully lower for the upcoming quarter (i.e. ~$125B-$150B), Comiskey’s model is predicting an UPWARD REVISION of +$75-$100B to the refunding need, totalling a borrowing est this upcoming Q btwn $275B and $300B

Why?  Because his modeled flows show that either the Treasury overestimated tax receipts or underestimated their spending…which, either way, will be reflected in today’s expected LARGER BORROWING estimate

More jarring is his Q3 estimate at an optically shocking ~ $1.2T, which is largely a function of calendar anomalies on maturing debt and first of month expenditures…but would catch the Street wildly flat-footed on the potential headline of a simply enormous number and the UST supply implications going-forward

CRITICALLY, however, he is taking  the previously mentioned prior guidance from the Treasury at face value, and expects that they will NOT announce further increases in Coupon issuance…so the the mix will remain massively concentrated in Bills

Needless to say, if the estimate is accurate, this could be a “potentially massive swing” in expectations versus where both McElligott – and our own – views converge, and where a lot of Street chatter, had been moving (as a reference, McElligott cautions that Comiskey “incorrectly” predicted larger TGA end of qtr level increases in his last two QRA projections).

So with that out of the way – which is just that, an upside bogey which some may be looking toward as a worst case, hawkish outcome – a far more realistic forecast, and one which has traditionally been spot in historically, comes from Deutsche Bank’s Steven Zeng (full note “Treasury refunding preview: Buybacks ready for prime time” available to pro subscribers) in which we find that the DB strategist expects the debt funding need numbers to show a large increase from Q2 to Q3 ($162bn and $749bn, respectively). The increase from Q2 to Q3 is widely expected and priced in; what is missing is the abovementioned hyperoblic upward revision to Q2, and certainly no gigantic $1.2 trillion debt funding need for Q3. 

Cutting to the chase, and why one can ignore hyperbolic forecasts for soaring Q3 borrowing needs, with the Treasury having stated at the last refunding that it anticipates no further auction size increases after this month, there should be minimal cause for surprise. As a result, DB expects steady nominal and FRN auction sizes for the May-July period, with near-term fluctuations in government fiscal flows being addressed through bill issuance.

Taking a closer look, DB expects the Treasury to revise its April – June borrowing estimate to just $162bn, or $40bn lower than announced in January, and also expects the Treasury to announce July – September borrowing of $749bn, keeping the end-of-September cash balance unchanged at $750bn.

As DB explains, net fiscal flows in recent quarters have remained on (somewhat) solid footing, owing to higher wage income and a strong labor market. The Treasury’s cash balance at the end of March was $25bn higher than projected, while its actual January – March borrowing was $12bn less than announced. These factors lead DB to expect a modest improvement for the April – June quarter relative to the January announcement.

And while the July – September estimate is expected to show a large increase from the prior quarter, the number is less worrisome than it appears. The increase is first and foremost driven by the resumption of a more normal seasonal pattern in fiscal flows in Q3. Additionally, the Treasury is unlikely to assume a slowing of the Fed’s balance sheet runoff before an official FOMC announcement (even if that announcement could happen as soon as Wednesday). This leads to a larger estimate than if the Fed were to slow QT before Q3 as is widely expected.

One other factor to consider is a calendar quirk with June 30th falling on the weekend this year, which causes an estimated $95bn of June coupon settlement to be shifted into Q3, which further inflates the Q3 borrowing amount.

Finally, on the topic of QT, DB’s baseline expectation is that a taper would start in June, thus further easing funding needs, and resulting in fewer T-bills being issued during Q3 than the Treasury borrowing estimate suggests.

Putting it all together, and cognizant that the estimates can swing materially, it is safe to say that borrowing estimates in the ranges of $120bn to $240bn for Q2, and $650bn to $850bn for Q3 would not surprise us. The indicative table below lays out the most likely announcement by the Treasury at 3pm today.

One final point: the new borrowing estimates could begin to include the estimated buybacks for the quarter. The initial purchase sizes are small, and as such, they should not impact the Treasury’s coupon issuance. As the program matures and purchase sizes grow larger, they could eventually be factored into the Treasury’s overall issuance strategy.

* * *

Of course, all of the above refers only to the immediate future, which is as much financially-driven as it is politically: after all, what servile Treasury would pull the rug from below its own president 6 months before the election, sending yields surging (let’s be real: if borrowing needs come in higher, the Treasury can just revise them after the fact instead of guiding higher and sparking a bond selloff) and forcing the Fed to sound even more hawkish on Wednesday. But with that in mind, and considering Trump’s arrival in the White House at the end of the year will spark total market chaos, keep in mind that the long term trajectory US debt issuance is very ugly…

… and getting uglier by the day, and that while yields may drop today and even in the next few days/weeks as the Treasury “manages expectations” like the best corporation, the endgame is all too clear.

More in the full DB note available to pro subs.

Authored by Metal Miner’s Stuart Barnes via OilPrice.com,

• The ban could lead to a split between the LME and CME markets, with the CME at a premium and the LME at a discount.

• Traders are buying up Russian warrants and taking them off the market, making the metal ineligible for Western consumers.

• China is likely buying large volumes of Russian aluminum at a sharp discount to the LME price.

By now, anyone in the metals market will know that the U.S. and UK recently banned the consumption of Russian aluminum, copper, and nickel produced from April 13 onward. While metal already on the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME) are still available for consumption, no metal delivered after this date is acceptable. This holds true whether buyers purchase the metal directly or have it physically delivered to the exchange to settle a contract.

The Metals Market Continues to React to the Russian Ban

Russia produces about 6% of global nickel, 5% of aluminum, and 4% of copper. That said, the biggest impact is arguably for nickel. This is because Russia is the world’s second-largest refined class 1 nickel producer after China, and class 1 nickel is currently the only type deliverable on the LME. Russian Aluminum also dominates the LME’s warehouse system, making up some 90% of available metal. Indeed, many in the metals industry consider Russia’s position to be a fundamental weakness that the LME has been unable to redress.

Consumers, on the other hand, seem more concerned about what comes next for the metals market. Does banning Russian metals, which average about half of the LME’s inventory but almost none of the CME’s, mean that the two markets will split? Will an arbitrage open up with the CME at a premium and the LME at a discount, thus reflecting the less accessible nature of such a significant portion of the LME’s inventory?

So far, there is no evidence of this. Still, we are only a week into the new regime. Over the last six months, there has been a mass removal of non-Russian aluminum brands from the LME.

Traders Shift Focus to Russian Warrants Amid Ban Fallout

For some time, Indian metal comprised some 50% of inventory levels, but it was diligently sought out and removed by traders. After the Russian ban, those same traders switched to a wholly different game: buying up Russian warrants, taking them off the market, and then delivering them back.

This makes the metal ineligible for Western consumers, and the buyers receive kickbacks on the warehouse rent in the expectation that the metal will sit there indefinitely. That is, the metal will remain there until someone finds a way to economically get it to a market that is not participating in the ban, such as China or India.

China Remains a Massive Consumer of Russian Metal

Other metals market insiders continue to speculate on other issues. Specifically, they want to know whether the predominance of Russian metal in Europe and Asia will depress the physical delivery premiums in those locations or inflate the U.S. Mid-West delivery premium to reflect the greater desirability of the CME’s inventory.

There is already a stark divergence in premiums, with Europe at twice the level and the U.S. at some three times the level of Japan’s Asian Main Japanese Port price. This reflects the overall tightness of the regions relative to one another.  

While Japan does not import Russian aluminum, consumption by its neighbors still depresses the regional price. For instance, China is almost certainly buying the large volumes of Russian aluminum it consumes at a sharp discount to the LME, much as the region buys Russian oil at a sharp discount to global oil prices.

For the time being, Russian metal will likely suffer a discount from the LME/CME price for physical trades. Apart from the unwarranted/re-warrant game underway this month, only those countries not recognizing the U.S./UK ban will accept Russian metal. And, let’s face it, currently applies to most of the world.

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

Results from early testing show that pasteurization killed highly pathogenic avian influenza in milk, the U.S. Food and Drug Administration (FDA) says.

Results from “an initial limited set of geographically targeted samples” show that “pasteurization is effective in inactivating” the influenza, commonly known as the bird flu, the FDA said in an April 26 update.

The FDA gathered samples from grocery stores with confirmed cases of the flu in cattle. The agency has said that one in five tested positive for avian influenza, but stressed that polymerase chain reaction (PCR) testing can return positive due to residual fragments.

“This additional testing did not detect any live, infectious virus. These results reaffirm our assessment that the commercial milk supply is safe,” the regulatory agency stated.

Testing of samples of powdered infant formula sold at stores also returned negative.

Many infectious disease experts and government officials have said they believe the pasteurization process will inactivate the virus, also known as avian influenza.

“I’m not worried about the milk itself,” said Samuel Alcaine, an associate professor of food science at Cornell University. “It does indicate that the virus is more widespread among dairies than we had previously thought.”

The FDA, which has refused to say how many milk samples tested positive, the sources of the samples that tested positive, and what other products were tested outside milk and formula, is in the process of conducting additional testing. That testing could find milk with live virus intact, agency officials acknowledged.

“The FDA is further assessing retail samples from its study of 297 samples of retail dairy products from 38 states,” it said. “All samples with a PCR positive result are going through egg inoculation tests, a gold-standard for determining if infectious virus is present. These important efforts are ongoing, and we are committed to sharing additional testing results as soon as possible. Subsequent results will help us to further review our assessment that pasteurization is effective against this virus and the commercial milk supply is safe.”

The bird flu has traditionally spread in birds. Cases of H5N1 in cattle began being confirmed in the United States earlier this year. The virus has since been detected in herds in nine states. A herd in Colorado tested positive on April 25, the U.S. Department of Agriculture said.

One person in Texas has had a confirmed case this year and survived the infection.

Worldwide, 28 cases of H5N1 have been reported to the World Health Organization since the beginning of 2021, including the recent case in Texas and a case in the United States in 2022. Some of the patients survived, while others died.

Authorities say that cow-to-cow transmission has occurred. Major questions that remain unanswered include the method of that transmission and whether cows have spread the virus back to birds.

The White House has said that it is monitoring the avian flu situation, launching an “immediate response team” to ensure the safety of the nation’s food supply, monitor trends to mitigate risk and prevent the virus’ spread.

Starting on Monday, the U.S. Department of Agriculture will require dairy cows to test negative for bird flu before they are moved across state lines.

In addition to Colorado, infections among cattle have been confirmed in Texas, Kansas, Michigan, Ohio, Idaho, New Mexico, North Carolina, and South Dakota.

In Indiana, officials are considering potential restrictions, such as testing within the state, even though there are no confirmed cases, according to Bret Marsh, the state veterinarian.

“We’re taking a look here at the state level to see what we may need to do,” he said on a conference call.

Reuters contributed to this report.

As DB’s Jim Reid notes, with just two days left in a rollercoaster April for markets – and FX – last week actually saw the best week for the S&P 500 (+2.67%) and NASDAQ (+4.23%) since November, following several weeks of declines, as earnings gave markets a boost even if the US inflation data was on net worrying. And while the month is almost over, the new week is just starting and as Reid notes, it’s shaping up an exceptionally busy week of important events.

The FOMC on Wednesday is the obvious highlight of the week, but we also have payrolls on Friday to look forward to. DB expect a more hawkish-leaning Fed this week. While our economists expect the Committee will maintain an easing bias, they do expect the statement and press conference to echo Chair Powell’s view that firmer inflation prints suggest it will take longer to gain confidence about disinflation. The press conference will be fascinating to see the nuances in Powell’s responses as he justifies a likely unchanged easing bias, even if the rhetoric is more hawkish, in the face of rising inflation.

In terms of the jobs report on Friday, our US economists see payrolls gaining +240k in April (consensus +250k), down from +303k in March. The consensus expects the unemployment rate and the hourly earnings growth rate to stay at 3.8% and +0.3% MoM, respectively, although DB expects the former to tick up a tenth. Overall the market sees a solid report.

Other key data in the US includes consumer confidence tomorrow, the manufacturing ISM, JOLTS, and ADP on Wednesday, and the services ISM on Friday. We also see the latest US Treasury quarterly refunding announcement on Wednesday, after the borrowing estimate is due today. This was a big pivot point for global markets back in August (negative) and October (positive) but since then a commitment not to increase auction sizes has reduced its importance.

Finally in the US, earnings season maintains its peak pace as 174 report in the S&P versus 180 last week with Amazon (Tuesday) and Apple (Thursday) the obvious highlights. Meanwhile, 66 Stoxx 600 companies will report this week.

In Europe, preliminary CPI reports for Germany and Spain today, and the Eurozone tomorrow will have a lot of significance for the June ECB meeting and whether we will see the first cut. Our European economists preview the release here. For the Eurozone, they expect the headline HICP to fall one-tenth to 2.31% yoy, its lowest value since August 2021 and see core inflation slowing further to 2.45% yoy, 0.50pp lower than in March 2024. Staying in Europe the latest GDP data for Germany, France, Italy and the Eurozone are due tomorrow. In Asia, various China PMIs (tomorrow) will be a big focus and in Japan, several key economic indicators are also due, including industrial production and labour market data tomorrow.

Day-by-day calendar of events:

Monday April 29

• Data : US April Dallas Fed manufacturing activity, Germany April CPI, Eurozone April services, industrial and economic confidence
• Earnings : PetroChina, China Construction Bank, BYD, NXP Semiconductors, Domino’s Pizza, Paramount Global
• Auctions : US Treasury borrowing estimates

Tuesday April 30

• Data : US Q1 employment cost index, February FHFA house price index, April MNI Chicago PMI, Dallas Fed services activity, Conference Board consumer confidence, UK March net consumer credit, mortgage approvals, M4, April Lloyds business barometer, China April official PMIs, Caixin manufacturing PMI, Japan March retail sales, job-to-applicant ratio, jobless rate, industrial production, housing starts, Italy Q1 GDP, March hourly wages, April CPI, Germany Q1 GDP, April unemployment claims rate, France Q1 GDP, March PPI, consumer spending, April CPI, Eurozone Q1 GDP, April CPI, Canada February GDP, New Zealand Q1 jobs report , Denmark March unemployment rate
• Central banks : BoE’s APF report
• Earnings : Amazon, Eli Lilly & Co, Samsung, Coca-Cola, AMD, McDonald’s, Stryker, Starbucks, Mondelez, Mercedes-Benz Group, Volkswagen, PayPal, adidas, Diamondback Energy, Restaurant Brands, Pinterest, Vonovia, Covestro, Caesars Entertainment

Wednesday May 1

• Data : US March JOLTS report, construction spending, April total vehicle sales, ISM index, ADP report, Canada April manufacturing PMI
• Central banks : Fed’s decision
• Earnings : Mastercard, Qualcomm, Pfizer, KKR, GSK, Marriott, Estee Lauder, DoorDash, Corteva, Haleon, Devon Energy, Barrick Gold, eBay, Albemarle, Etsy
• Auctions : US quarterly refunding announcement

Thursday May 2

• Data : US Q1 unit labor costs, nonfarm productivity, March trade balance, factory orders, initial jobless claims, Japan April monetary base, consumer confidence index, Italy March PPI, April manufacturing PMI, new car registrations, budget balance, Canada March international merchandise trade, Switzerland April CPI
• Central banks : BoJ minutes of the March meeting
• Earnings : Apple, Novo Nordisk, Shell, Linde, ConocoPhillips, Booking, Cigna, Regeneron, Apollo, Pioneer, Universal Music Group, Block, Ares, Moderna, Blue Owl, Vestas, AP Moller – Maersk, Orsted, ArcelorMittal, Live Nation Entertainment, DraftKings
• Other : UK local elections, OECD economic outlook

Friday May 3

• Data : US April jobs report, ISM services, UK April official reserves changes, Italy March unemployment rate, France March industrial production, budget balance, Eurozone March unemployment rate, Canada April services PMI, Norway April unemployment rate
• Earnings : Hershey, Daimler Truck, Cheniere Energy

* * *

Looking at just the US, Goldman writes that the key economic data releases this week are the Employment Cost Index on Tuesday, ISM manufacturing and JOLTS job openings on Wednesday, and the employment report on Friday. The May FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM. Treasury will release its Q2 financing estimates on Monday and the Quarterly Refunding Statement on Wednesday.

Monday, April 29

• 10:30 AM Dallas Fed manufacturing activity, April (consensus -11.3, last -14.4)

Tuesday, April 30

• 08:30 AM Employment cost index, Q1 (GS +0.9%, consensus +1.0%, last +0.9%): We estimate the employment cost index rose by 0.9% in Q1 (qoq sa), which would lower the year-on-year rate by two tenths to 4.0% (nsa yoy). Our forecast reflects deceleration in the Atlanta Fed wage tracker and in average hourly earnings of production and nonsupervisory workers. We also expect a slower pace of ECI growth among unionized workers, following the 1.7% spike in Q4 (SA by GS, not annualized). On the positive side, we assume ECI benefit growth picks back up to 0.9% (vs. 0.7% in Q4), reflecting expanded benefit offerings at the start of the year.
• 09:00 AM FHFA house price index, February (consensus +0.1%, last -0.1%)
• 09:00 AM S&P Case-Shiller 20-city home price index, February (GS +0.07%, consensus +0.10%, last +0.14%)
• 09:45 AM Chicago PMI, April (GS 46.4, consensus 45.0, last 41.4): We estimate that the Chicago PMI rose by 5pt to 46.4 in April, reflecting the rebound in global manufacturing activity.
• 10:00 AM Conference Board consumer confidence, April (GS 104.3, consensus 104.0, last 104.7

Wednesday, May 1

• 08:15 AM ADP employment change, April (GS +185k, consensus +180k, last +184k): We estimate a 185k rise in ADP payroll employment in April, reflecting a solid underlying pace of job growth and a possible boost from residual seasonality: the ADP measure has picked up in April relative to Q1 in four of the last six years excluding 2020.
• 09:45 AM S&P Global US manufacturing PMI, April final (consensus 49.9, last 49.9)
• 10:00 AM Construction spending, March (GS +0.8%, consensus +0.3%, last -0.3%)
• 10:00 AM JOLTS job openings, March (GS 8,650k, consensus 8,680k, last 8,756k): We estimate that JOLTS job openings fell by 0.1mn to 8.65mn in March, reflecting the pullback in online job postings.
• 10:00 AM ISM manufacturing index, April (GS 50.8, consensus 50.1, last 50.3): We estimate the ISM manufacturing index rose by 0.5pt to 50.8 in April, reflecting the rebound in global manufacturing activity. Our manufacturing tracker rose 1.5pt to 49.9.
• 02:00 PM FOMC statement, April 30-May 1 meeting: As discussed in our FOMC preview, the upside inflation surprise over the last three months has delayed the first cut and narrowed the path for the FOMC to cut at all this year. We have not changed our big picture inflation view because the surprises look idiosyncratic, the categories that are still hot reflect lagged catch-up rather than current cost pressures, and the key pillars of the disinflation narrative remain intact. We expect the next few inflation reports to be softer and have therefore stuck with our forecast of cuts in July and November, but even moderate upside surprises could delay cuts further.
• 05:00 PM Lightweight motor vehicle sales, April (GS 15.8mn, consensus 15.7mn, last 15.5mn)

Thursday, May 2

• 08:30 AM Trade balance, March (GS -$69.0bn, consensus -$69.2bn, last -$68.9bn)
• 08:30 AM Nonfarm productivity, Q1 preliminary (GS +0.8%, consensus +0.8%, last +3.2%); Unit labor costs, Q1 preliminary (GS +3.5%, consensus +3.3%, last +0.4%): We expect nonfarm productivity growth of +0.8% (qoq saar) in the Q1 preliminary reading. We expect unit labor costs—compensation per hour divided by output per hour—to grow 3.5% in the Q1 preliminary reading, which would increase the year-over-year rate to +4.2%.
• 08:30 AM Initial jobless claims, week ended April 27 (GS 215k, consensus 210k, last 207k): Continuing jobless claims, week ended April 20 (consensus 1,798k, last 1,781k)
• 10:00 AM Factory orders, March (GS +1.6%, consensus +1.6%, last +1.4%); Durable goods orders, March final (consensus +2.6%, last +2.6%); Durable goods orders ex-transportation, March final (last +0.2%); Core capital goods orders, March final (last +0.2%);Core capital goods shipments, March final (last +0.2%)

Friday, May 3

• 08:30 AM Nonfarm payroll employment, April (GS +275k, consensus +250k, last +303k); Private payroll employment, April (GS +225k, consensus +198k, last +232k); Average hourly earnings (mom), April (GS +0.20%, consensus +0.3%, last +0.3%); Average hourly earnings (yoy), April (GS +3.95%, consensus +4.0%, last +4.1%); Unemployment rate, April (GS 3.8%, consensus 3.8%, last 3.8%); Labor force participation rate, April (GS 62.7%, consensus 62.7%, last 62.7%): We estimate nonfarm payrolls rose by 275k in April (mom sa), reflecting a favorable evolution in the April seasonal factors and a continued boost from above-normal immigration. Big Data measures were mixed but generally indicate a solid or strong pace of job gains, and our layoff tracker continues to indicate that the pace of layoffs is low. We estimate that the unemployment rate edged down but was unchanged on a rounded basis at 3.8%, reflecting a rise in household employment and flat-to-up labor force participation (at 62.7%). Foreign-born unemployment normalized in March, falling sharply by 261k (SA by GS) and limiting the scope for further declines in April. We estimate average hourly earnings rose 0.20% (mom sa), which would lower the year-on-year rate from 4.14% to 3.95%. Our forecast reflects waning wage pressures and a nearly 10bp drag from calendar effects (mom sa).
• 09:45 AM S&P Global US services PMI, April final (consensus 50.9, last 50.9)
• 10:00 AM ISM services index, April (GS 52.1, consensus 52.0, last 51.4): We estimate that the ISM services index rose 0.7pt to 52.1 in April. Our non-manufacturing survey tracker edged up 0.3pt to 52.1.
• 07:45 PM Chicago Fed President Goolsbee (FOMC non-voter) speaks: Chicago Fed President Austan Goolsbee will participate in a panel discussion at the Hoover Institution. A Q&A is expected. On April 19, Goolsbee said, “Right now, it makes sense to wait and get more clarity before moving [rates].” He added, “So far in 2024, that progress on inflation has stalled. You never want to make too much of one month’s data, especially inflation, which is a noisy series, but after three months of this, it can’t be dismissed.”
• 08:15 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak in a panel discussion at the Hoover Institution. Speech text and a Q&A are expected. On April 18, Williams said, “I definitely don’t feel urgency to cut interest rates…I think interest rates will need to be lower at some point, but the timing of that is driven by the economy.” He added, “We have a strong economy… which means that the rates we have haven’t caused the economy to slow too much.”

Source: DB, Goldman

Authored by Mike Shedlock via MishTalk.com,

Biden and Yellen support a global minimum tax on corporations. And a new wealth tax scheme is now in the works…

Watch Out for a Global Wealth Tax

The Wall Street Journal says Watch Out for a Global Wealth Tax

In our new socialist age, the demand to tax and redistribute income is insatiable. The latest brainstorm arrives in a proposal by four countries in the G-20 group of nations to impose a 2% wealth tax on the world’s billionaires.

“The tax could be designed as a minimum levy equivalent to 2% of the wealth of the super-rich,” write economic ministers of Germany, Spain, Brazil and South Africa in the Guardian. They say the levy would raise about $250 billion a year from some 3,000 billionaires and “would boost social justice and increase trust in the effectiveness of fiscal redistribution.” The countries plan to float this at the next G-20 meeting in June.

Presumably, the plan is to have the G-20 endorse the idea, including President Biden and Treasury Secretary Janet Yellen. Then negotiate a global tax deal that would wait until Democrats control all of the U.S. government to approve it, even if that takes many years.

That’s more or less what Ms. Yellen has done with her global minimum tax on corporations, and the four ministers are candid in saying this is their model. The wealth tax “is a necessary third pillar that complements the negotiations on the taxation of the digital economy and on a minimum corporate tax of 15% for multinationals,” the ministers write.

Ms. Yellen went along with the first two pillars, though as we’ve written they subject American companies to foreign tax raids of the kind the U.S. government has long opposed. An architect of the wealth tax idea is French socialist Gabriel Zucman, who was also behind Ms. Yellen’s global minimum tax. Once a global wealth tax is in place, you can be sure that billionaires won’t be the last target.

The Biden Administration is run by liberal internationalists who are happy to cede more power to multilateral institutions. President Biden is also campaigning on a wealth tax of his own that would impose the highest tax rates on Americans since before the Reagan tax reform. For this crowd, taxing American billionaires to redistribute income around the world is all too imaginable.

I used to dismiss ideas like this. Not anymore.

Letting the G-20 set US tax rates would be unconstitutional, but since when does Biden give a damn?

Besides, if Democrats get control of the Senate, House and White House they may try to pack the courts.

President Biden and Treasury Secretary Janet Yellen embrace a massive wealth tax redistribution scheme including taxes on unrealized gains in their Fiscal Year 2025 proposal.

Advancing Equity Through Tax Reform

Please consider Fiscal Year 2025 Revenue Proposals on Racial Wealth Inequality

The revenue proposals in the Administration’s Fiscal Year 2025 Budget (U.S. Treasury, 2024) would raise revenues, help ensure the wealthy and large corporations pay their fair share, expand tax credits for working families, and improve tax administration and compliance.

Research has demonstrated that wealth gaps are one of the primary “mechanisms for
perpetuating racial economic inequality”.

The millions of African Americans who left the southern United States to escape Jim Crow laws faced formal and informal employment, educational, and housing discrimination in destination cities in the North and West, including discriminatory “redlining” policies that started in the 1930s. In addition to funneling Black households into neighborhoods with lower home values, research has illustrated the extent to which redlining introduced place-based policies that affected the employment, education, and health of residents in those neighborhoods, all of which are directly related to income and wealth accumulation.

Biden’s Wealth Tax Remedy

• A minimum tax of 25 percent on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth greater than $100 million.

• Requiring the wealthiest taxpayers to pay at least 25% of their total income in taxes will reduce economic disparities among Americans and raise needed revenue

• Inheritance Taxes: In 2019, thirty percent of White families received an inheritance compared to 10 percent of Black families and 7 percent of Hispanic families. The Administration’s Fiscal Year 2025 Budget would limit the duration of the GST [Generation Skipping Trust] tax exemption.

• The Budget would tax long-term capital gains and dividends at ordinary rates for taxpayers with more than $1 million in income, curtailing a tax expenditure the benefits of which accrue disproportionately to White families. It would also treat transfers of appreciated property as realization events and impose a minimum tax on the wealthiest families, while expanding tax credits that improve equity.

Biden Explanations

There’s still more if you dive into General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals

The explanations are 256 pages long. The following points do not represent all of the ways the administration is coming after you.

I have a 15-point synopsis at the end for those just wishing to see general ideas.

Here are some details.

• The child tax credit would be expanded through 2025, would permanently be made fully refundable, determined monthly, and paid out in advance. Reforms to the delivery of the credit would facilitate take-up. The earned income tax credit would also be expanded to cover more workers without children. The premium tax credit expansion first enacted in the American Rescue Plan Act of 2021 and extended in the Inflation Reduction Act of 2022 would be made permanent, making health insurance more affordable for millions of families.

• Raising the corporate income tax rate is an administratively simple way to raise revenue to pay for the Administration’s fiscal priorities.

• The proposal would increase the tax rate for C corporations from 21 percent to 28 percent. The effective global intangible low-taxed income (GILTI) rate would increase to 14 percent under the proposal.

• The proposal Revise the Global Minimum Tax Regime, Limit Inversions, and Make Related Reforms described later in this text would further increase the effective GILTI rate to 21 percent.

• A new 25- percent minimum income tax would be imposed on extremely wealthy taxpayers. For high income taxpayers, gaps in the law that allow some pass-through business owners to avoid Medicare taxes would be eliminated and Medicare tax rates would be increased. Additional loopholes, including the carried interest preference and the like-kind exchange real estate preference, would be eliminated for those with the highest incomes. Together these reforms would sharply curtail tax preferences that allow the wealthy to pay lower tax rates on their investment income and exacerbate income and wealth disparities, including by gender, geography, race, and ethnicity.

• The child tax credit would be expanded through 2025, would permanently be made fully refundable, determined monthly, and paid out in advance. Reforms to the delivery of the credit would facilitate take-up. The earned income tax credit would also be expanded to cover more workers without children.

• The proposal would increase the tax rate on corporate stock repurchases to 4 percent.

• The Secretary would be granted authority to promulgate any regulations necessary to carry out the purposes of the proposal, including (a) coordinating the application of the proposal with other interest deductibility rules, (b) defining interest and financial services entities, (c) permitting financial reporting groups to apply the proportionate share approach using the group’s net interest expense for U.S. tax purposes rather than net interest expense reported in the group’s financial statements, (d) providing for the treatment of pass-through entities, (e) providing adjustments to the application of the proposal to address differences in functional currency of members, (f) if a U.S. subgroup has multiple U.S. entities that are not all members of a single U.S. consolidated group for U.S. tax purposes, providing for the allocation of the U.S.

• The proposal would repeal: (a) the enhanced oil recovery credit for eligible costs attributable to a qualified enhanced oil recovery project; (b) the credit for oil and gas produced from marginal wells; (c) the expensing of intangible drilling costs; (d) the deduction for costs paid or incurred for any qualified tertiary injectant used as part of a tertiary recovery method; (e) the exception to passive loss limitations provided to working interests in oil and natural gas properties; (f) the use of percentage depletion with respect to oil and gas wells; (g) two year amortization of geological and geophysical expenditures by independent producers, instead allowing amortization over the seven-year period used by major integrated oil companies; (h) expensing of exploration and development costs; (i) percentage depletion for hard mineral fossil fuels; (j) capital gains treatment for royalties; (k) the exemption from the corporate income tax for publicly traded partnerships with qualifying income and gains from activities relating to fossil fuels; (l) the OSTLF and Superfund excise tax exemption for crude oil derived from bitumen and kerogenrich rock; and (m) accelerated amortization for air pollution control facilities.

• The eligibility of the petroleum taxes dedicated to the OSLTF and Superfund for drawback would be eliminated.

• An excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms. Any firm using computing resources, whether owned by the firm or leased from others, to mine digital assets would be subject to an excise tax equal to 30 percent of the costs of electricity used in digital asset mining.

• The proposal would expand the NIIT base to ensure that all pass-through business income of high-income taxpayers is subject to either the NIIT or SECA tax.

• The proposal would increase the additional Medicare tax rate by 1.2 percentage points for taxpayers with more than $400,000 of earnings. When combined with current-law tax rates, this would bring the marginal Medicare tax rate up to 5 percent for earnings above the threshold. The threshold would be indexed for inflation.

• The proposal would increase the top marginal tax rate to 39.6 percent. The top marginal tax rate would apply to taxable income over $450,000 for married individuals filing a joint return and surviving spouses, $400,000 for unmarried individuals (other than surviving spouses and head of household filers), $425,000 for head of household filers, and $225,000 for married individuals filing a separate return. After 2024, the thresholds would be indexed for inflation using the CPI-U, which is used for all current thresholds in the tax rate tables.

• Under the proposal, the donor or deceased owner of an appreciated asset would realize a capital gain at the time of the transfer. The use of capital losses and carry-forwards from transfers at death would be allowed against capital gains and up to $3,000 of ordinary income on the decedent’s final income tax return, and the tax imposed on gains deemed realized at death would be deductible on the estate tax return of the decedent’s estate (if any). Gain on unrealized appreciation also would be recognized by a trust, partnership, or other noncorporate entity that is the owner of property if that property has not been the subject of a recognition event within the prior 90 years.

• Preferential treatment for unrealized gains disproportionately benefits high-wealth taxpayers and provides many high-wealth taxpayers with a lower effective tax rate than many low- and middle-income taxpayers. Preferential treatment for unrealized gains also exacerbates income and wealth disparities, including by gender, geography, race, and ethnicity. The proposal would impose a minimum tax of 25 percent on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth (that is, the difference obtained by subtracting liabilities from assets) greater than $100 million.

• The proposal would require a high-income taxpayer with an aggregate vested account balance under tax-favored retirement arrangements that exceeded $10 million as of the last day of the preceding calendar year to distribute a minimum of 50 percent of that excess.

• The provision would prohibit a rollover to a Roth IRA of an amount distributed from an account in an employer-sponsored eligible retirement plan that is not a designated Roth account (or of an amount distributed from an IRA other than a Roth IRA) for a high-income taxpayer.

• Increase the maximum credit per child to $3,600 for qualifying children under age 6 and to $3,000 for all other qualifying children. Increase the maximum age to qualify for the CTC from 16 to 17. The proposal would make the CTC fully refundable, regardless of earned income.

• The first-time homebuyer credit would be equal to ten percent of the purchase price of a home, up to a maximum credit of $10,000. For multiple individuals who purchase a home together, the maximum credit would be allocated proportionally to ownership interest in the purchased home or in a manner determined by the Secretary in published guidance. The credit allocated to a married individual filing a separate return would not exceed $5,000. The home must be in the United States.

• Upon disposition, any measured gain on an item of section 1250 property held for more than one year would be treated as ordinary income to the extent of the cumulative depreciation deductions taken after the effective date of the provision. Depreciation deductions taken on section 1250 property prior to the effective date would continue to be subject to current rules and recaptured as ordinary income only to the extent that such depreciation exceeds the cumulative allowances determined under the straight-line method. Any gain recognized on the disposition of section 1250 property in excess of recaptured depreciation would be treated as section 1231 gain. Any unrecaptured gain on section 1250 property would continue to be taxed to noncorporate taxpayers at a maximum 25 percent rate.

• In general, no Federal income tax is imposed concurrently on a policyholder with respect to the earnings credited under a life insurance or endowment contract. Furthermore, amounts received under a life insurance contract by reason of the death of the insured generally are excluded from the gross income of the recipient. The proposal would limit the tax benefits for private placement life insurance and annuity contracts.

• The proposal would expand the regulatory authority under which the Secretary may require taxpayers to furnish information relating to the verification and computation of the FTC [Foreign Tax Credit].

• A separate proposal would first raise the top ordinary rate to 39.6 percent (43.4 percent including the net investment income tax). An additional proposal would increase the net investment income tax rate by 1.2 percentage points above $400,000, bringing the marginal net investment income tax rate to 5 percent for investment income above the $400,000 threshold. Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.

Massive Wealth Distribution Scheme.

The administration went after anything and everything from wealth taxes, huge jumps in marginal rates, REIT, Roth IRA conversions, etc.

Here are the key changes, and I may have missed some.

Fifteen Key Points

1. The top marginal rate on long-term capital gains jumps to 44.6 percent.

2. Deductions for oil and gas companied eliminated.

3. 30 percent tax on electricity used in mining cryptos

4. Restrictions on conversions to Roth IRA

5. Forced acceleration of IRA withdrawals

6. Taxes on insurance policies

7. Expanded Child Tax Credits

8. Earned Income Tax Credits to include those with no kids.

9. Restrictions on trusts to avoid inheritance taxes

10. Corporate minimum taxes

11. Homebuyer tax credits

12. Minimum 25 percent tax on unrealized stock gains for wealthy individuals

13. Marginal Medicare tax rate upped to 5 percent

14. Tax rate for C corporations goes to 28 percent from 21 percent. The effective global intangible low-taxed income (GILTI) rate would increase to 14 percent.

15. If there is anything ambiguous, the Secretary of the Treasury gets to determine what the law is.

If you have any money or assets, Biden is coming after you. He is also going after oil and gas companies, corporations, and Bitcoin to fund massive wealth distribution schemes.

This is on grounds “Research has demonstrated that wealth gaps are one of the primary mechanisms for perpetuating racial economic inequality“.

Soon on the heels of President Biden last week signing into law a $61 billion aid package for Ukraine’s defense, President Volodymyr Zelensky on Sunday indicated that he’s working with Washington on a bilateral security agreement which would last ten years.

“We are already working on a specific text,” Zelensky said in his nightly video address. “Our goal is to make this agreement the strongest of all.”

“We are discussing the specific foundations of our security and cooperation. We are also working on fixing specific levels of support for this year and the next 10 years.”

He indicated it will likely include agreements on long-term support centering on military hardware and joint arms production, as well as continuing reconstruction aid. “The agreement should be truly exemplary and reflect the strength of American leadership,” Zelensky added.

But ultimately a key purpose in locking such a long-term deal in would be to keep it immune from potential interference by a future Trump administration.

Below is what The Wall Street Journal spelled out last year:

The goal is to make sure Ukraine will be strong enough in the future to deter Russia from attacking it again. More immediately, Ukraine’s Western allies hope to discourage the Kremlin from thinking it can wait out the Biden administration for a potentially more sympathetic successor in the White House. 

Western officials are looking for ways to lock in pledges of support and limit future governments’ abilities to backtrack, amid fears in European capitals that Donald Trump, if he recaptures the White House, would seek to scale back aid. Trump has a wide lead in early polling in the Republican presidential primary field, but soundly lost the 2020 election to President Biden and has been indicted in four criminal cases in state and federal courts. 

We and others have previously underscored that NATO and G7 countries are desperately trying to “Trump-proof” future aid to Ukraine and the effort to counter Russia.

As for its first new weapons package in the wake of the $61 billion being authorized, the Biden administration has announced new arms packages totaling $7 billion. The US has vowed to rush the weapons to Kiev, given that by all indicators its forces are not doing well on the frontlines.

“We are still waiting for the supplies promised to Ukraine – we expect exactly the volume and content of supplies that can change the situation on the battlefield in the interests of Ukraine,” Zelensky had said over the weekend. “And it is important that every agreement we have reached is implemented – everything that will yield practical results on the battlefield and boost the morale of everyone on the frontline. In a conversation with Mr. Jeffries, I emphasized the need for Patriot systems, they are needed as soon as possible.”

Zelensky announces that Ukraine is working on a security agreement with the U.S. that will fix levels of support for the next 10 years. The $61 billion was just the beginning. The next two U.S. presidents won’t be able to switch it off. pic.twitter.com/q1RWCxf93m

— David Sacks (@DavidSacks) April 28, 2024

But all of this means the war will be prolonged, and this puts negotiations much further away on the horizon, despite what are now daily acknowledgements of Ukraine forces being beaten back. Currently the governments of Greece and Spain are being pressured by EU and NATO leadership to hand over what few Patriot systems they possess to Kiev. The rationale is that they don’t need them as urgently as Ukraine does.

By Vassilis Karamanis, Bloomberg Markets Live reporter and FX strategist

Unless Japanese authorities show their hand with conviction when it comes to intervening in the spot market, the yen is bound to stay under pressure over the medium-term.

The currency’s sharp rally this morning certainly looks like an intervention — it’s not often that we get a 500-pip move seemingly out of nowhere. But thin liquidity due to a public holiday in Japan that forced algorithmic trading to take over as trailing stops were triggered could be what’s driven the market. The fact that traders aren’t sure this is an official hand supporting the yen is telling. Masato Kanda, the nation’s top currency official, said no comment when asked about the moves.

The market has been testing Japanese authorities’ patience — or determination — when it comes to yen weakness for some time now. And it will keep on doing so for as long as intervention threats are seen as a clumsily-played bluff.

The yen kept breaching through one big level after the other on Friday against the dollar and everyone’s question was whether we would finally have official yen buying before a long weekend in Japan. The answer was an emphatic no.

Did price action Friday actually give Japanese authorities the green light to intervene in the spot market?

The yen fell by the most since October on an intraday basis, for a two standard-deviation move; one-week realized volatility touched a one-month high

It was down 3.5% on a ten-day basis; Kanda said that a 4% move over two weeks doesn’t reflect fundamentals and is unusual
Over one month, the dollar was up by around seven big figures against the Japanese currency; Kanda has said that a 10-yen move over such a time period is considered rapid.

So in nominal terms, we could argue it was justified that no intervention took place, given a simple rates-check during a Japan holiday could actually do the trick. But in real terms, no one would blame Japanese authorities if they went beyond their official guidelines to step in the spot market. It’s not just about the 350-pip day range that took place. It’s the starting point that also matters. Fresh 34-year lows were hit Thursday.

Traders could see lack of official yen buying as an attempt to find excuses in order to stay pat. After all, a weaker currency in theory accelerates inflationary dynamics that will eventually support the Bank of Japan as to signal a more-aggressive-than priced in tightening bias — which could really be a game changing moment for the currency, especially if at the same time the Federal Reserve will indeed be close to easing its own policy.

And as long as credibility comes to the question, the more confident traders will be to re-add dollar longs in case the Ministry of Finance does decide to intervene. There was some speculation during the weekend that Japan is waiting for the Fed meeting and the release of the next US jobs report due this week before deciding to press the button. To me, it doesn’t matter so much if this is credible thinking, but the mere fact traders are discussing it shows the ball is moving away from officials’ court.

It’s not easy going against a central bank. In poker terms, policymakers always start the game with a pair of aces. But the flop did no favors to them and their raise on the turn looks miscalculated. Maybe the upcoming river will see traders winning this hand despite Monday’s retreat for the dollar that at the time of writing has no official confirmation it was down to spot intervention.

Shares of Royal Philips on Euronext Amersterdam surged as much as 43% Monday, the most on record after a lower-than-expected settlement in the US linked to faulty Respironics ventilators for sleep apnea.

The Dutch medical equipment manufacturer recalled the therapy devices due to concerns that the noise-canceling foam inside them was disintegrating, which patients inhaled. 

Some Wall Street analysts predicted the company would have to spend as much as $4.5 billion to $10 billion to cover the medical monitoring class-action lawsuit and individual personal injury claims in the US. However, the company only had to set aside $1.1 billion. 

Barclays analysts wrote in a note that this earlier-than-expected settlement “removes an overhang many have worried would linger for years.” 

Faulty sleep therapy devices have weighed on Philips’s shares since April 2021, tumbling as much as 76% from 48 euros a share to $11.6 in October 2022. Despite today’s 43% surge, shares are still down 40% from the highs recorded in 2021. 

Today’s 43% jump is the largest daily percentage gain ever – beating out the 14.6% gain in 2002. 

The vicious upswing will likely squeeze bears. Data from S&P Global Market Intelligence shows shares out on loan, or an indication of short interest, represented about 4.9% of the company’s float as of Thursday. 

Here’s how Wall Street responded to the news (list courtesy of Bloomberg): 

Barclays (overweight)

• The $1.1b settlement compares with buyside expectations of $2b-$4b, with “worst case fears” of $10b, analyst Hassan Al- Wakeel writes in a note
• The earlier-than-expected settlement also “removes an overhang many have worried would linger for years”

Bernstein (market perform)

• The settlement amount is less than expected, while the timing is “sooner than thought,” analyst Lisa Bedell Clive writes in a note
• Bernstein had been working on the assumption that there was a 35% chance of a €3.8b personal injury settlement, and a 35% chance of a €766m medical monitoring lawsuit
• The settlement “removes another overhang on the stock”

Jefferies (underperform)

• The unexpected $1.1 billion settlement is “much milder than feared,” marking the “end of litigation uncertainty,” analyst Julien Dormois writes in a note
• The 1Q results beat expectations, though order growth fell again

Morgan Stanley (equal weight)

• The settlement figure is below expectations and should be well received, analyst Robert Davies writes in a note
• There’s scope for FY earnings estimates to be increased by low-single-digits
• Morgan Stanley sees questions being raised about the “softness” around the diagnostics & treatment performance, as well as the timeline around a resolution on the consent decree

Philips CEO Roy Jakobs joined Bloomberg TV after the settlement news. He said, “The settlement covers all the claims in the US, even the ones that would come in still over the next six months.”