Month: September 2024

One day after a solid 2Y auction stopped “on the screws”, moments ago the $70 billion 5Y auction did it again, when it also closed on the screws, or right where the When Issued said it should, prompting questions whether we have ever had two consecutive “screw” auctions in a row.

Today’s sale of $70 billion in 5 year paper priced at a high yield of 3.519%, right on top of the When Issued, and following 4 tails in the previous 5 auctions. This was also the lowest yield for the 5Y tenor since April 2023.

The bid to cover dropped to 2.38 from 2.41, and was also right in line with the six-auction average or 2.38; in fact as shown in the chart below 2.40 is where the average Bid to Cover has stopped on pretty much all auctions in the past decade.

The internals were also average, with Indirects awarded 70.31%, down from 70.54% in August but above the 68.0% recent average.

Overall, this was mediocre auction, one which helped push yields to session highs with the 10Y back up to 3.78% at last check.

China is not done stimulating.

One day after the PBOC shocked markets with a monetary bazooka that included multiple rate cuts, house market supports and most notably, a remarkable RMB800 billion pledge to prop up the country’s flailing stock market (the Chinese Put has moved out of the “National Team” basement)…

… China was at it again, and on Tuesday, lowered the interest rate charged on its one-year policy loans by the most on record, expanding on its sweeping program to revive confidence in the world’s second-largest economy (which already appears to be fading).

The PBOC cut the rate of the medium-term lending facility to 2% from 2.3%; the 30-basis-point cut was the biggest since the bank began using the monetary tool to guide market interest rates in 2016.

The expected move followed central bank Governor Pan Gongsheng’s announcement the previous day of a broad stimulus package that amounted to an adrenaline shot for an economy on the cusp of a deflationary spiral.

“The cut is part of the package,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, quoted by Bloomberg. “The market is keeping a close eye on the strength, frequency and synergy of measures to follow as China strives to achieve this year’s around 5% growth goal.”

The latest stimulus frenzy helped rally the yuan past the 7 per dollar milestone for the first time in 16 months. Chinese stocks extended their gains, with the onshore benchmark CSI 300 Index on track to wipe out all of its losses for 2024. The yield on China’s 10-year bonds fell 1 basis point to 2.05%, after reaching a record low of 2.00% the day before.

The cut to the MLF rate is a prelude to more significant measures such as a promised reduction in the rate on seven-day reverse repurchase notes, which the PBOC increasingly favors as the main policy lever. The rate on those instruments will be lowered by 20 basis points to 1.5% “soon,” Pan said Tuesday.

In reflection of the new framework, the PBOC drained a net 291 billion yuan ($41.4 billion) via the MLF, the biggest drainage since December 2021. The outstanding MLF loans are widely expected to be gradually replaced by other tools, including cash injections through reserve requirement ratio cuts, as the PBOC seeks to influence market borrowing costs more effectively.

“The MLF may be downgraded to become a tool to adjust the marginal borrowing costs of banks,” said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. “The MLF rate in the future could change following movements in market rates.”

One day earlier, the central bank chief revealed a plan to unleash 1 trillion yuan in long-term liquidity with a 50-basis-point reduction of the RRR, which determines the amount of cash lenders must keep in reserve. Along with other new funding tools, the measures more than compensated for the effect of the net withdrawal on market liquidity.

“Looking ahead, there is room for further replacement of MLF liquidity with RRR cut-induced liquidity given heavy MLF maturity in the coming months,” said OCBC strategist Frances Cheung. The rate cut on the one-year lending Wednesday “renders the facility more aligned with the funding costs” in the interbank market, she added.

So after this barrage of monetary easing by China, what does the market think? In short: “we’ve been here before.“

While China has repeatedly engaged in monetary stimulation in the past, what analysts say needs to happen for this rally to be sustainable and more than just a tactical bounce, is a boost of consumer demand, i.e., fiscal stimulus, i.e., a flood of new debt to give China’s middle class some extra take home money.

Overnight China the focus again enjoying another day in the sun albeit with headline price action softer than the move we saw yesterday. Elsewhere however Asian markets outside of China and futures are pointing lower.

As Goldman’s Lauren Rose writes, “after a wave of coordinated policy measures were announced in China yesterday the euphoria of price action did not quite match up to flows. Regionally the desk saw both LOs and HFs chase the move although noting that whilst market turnover remains strong today, the cadence of tickets has dropped off and now more passive in style. However in Europe and the US follow through was much more limited. Here in Europe there was an initial wave of both LO and HF demand for China proxies (Luxury and Miners), this dropped off into the afternoon session despite EU Miners basket closing up ~ 3 s.d. and Luxury and China Exposure baskets closing in more than 2 s.d. moves. Outside of single stocks the bulk of more constructive flow was in the options space with call buying evident. In the US flow was concentrated in ETFs where the desk saw buying in China levered products but whilst the cover bid was evident, LOs used the rally to trim.”

Ultimately this indicates a lack of conviction that this move higher can be sustained, according to the Goldman trader, who notes that “for this to be seen as an inflection point would need the reassurance likely of demand side stimulus and some stabilization in the data for September (after very weak August datapoints).”
 
Whilst the story in China is very specific, the lack of appetite to engage does feel emblematic of the sentiment across global equities right now. The macro focus has shifted from inflation to growth and yesterday’s US data was not helpful in this regards with a miss on Consumer Confidence and Richmond Fed factory index where composition was weaker (particularly in regards to employment and shipments). As the Goldman trader further notes, when looking at the micro, the 4% rally in Nvidia on pretty benign newsflow (report that CEO Jensen is no longer selling stock) is an example of the sensitivity to chasing moves in larger caps or at least missing out on performance there. However, “overall appetite to chase seems very low and positioning and sentiment on the whole does not match with markets around ATHs.” Rowe concludes that it is “hard to see this changing in the next month with another two sets of labor market reports, the next Fed meeting and the US election, alongside a weak period of seasonality in regards to earnings downgrades.”

Meanwhile, China will hope that its barrage of monetary stimulus will be enough. It won’t, and as we said yesterday, after an initial euphoric period of 1-2 months, expect the selling to resume…

The half-life of this intervention will be 2-3 months, then markets will realize China is not stimulating demand. Then we see new decade lows, then China goes all in with $2TN+ fiscal bazooka https://t.co/hmCFY1dV7I

— zerohedge (@zerohedge) September 24, 2024

… at which point Beijing  – kicking and screaming – will have no choice but to finally unleash the stimulus bazooka, something which Bloomberg reports could come as soon as “the next few days” even though the administration is reticent to endorse any kind of stimulus that involves direct cash payments to the population (that, too, will change), at which point gold and crypto will scream to fresh all time highs.

Authored by John & Nisha Whitehead via The Rutherford Institute,

“The greatest tyrannies are always perpetrated in the name of the noblest causes.”

– Thomas Paine

The government wants your money.

It will beg, steal or borrow if necessary, but it wants your money any way it can get it.

The government’s schemes to swindle, cheat, scam, and generally defraud taxpayers of their hard-earned dollars have run the gamut from wasteful pork barrel legislation, cronyism and graft to asset forfeiture, costly stimulus packages, and a national security complex that continues to undermine our freedoms while failing to making us any safer.

Americans have also been made to pay through the nose for the government’s endless wars, subsidization of foreign nations, military empire, welfare state, roads to nowhere, bloated workforce, secret agencies, fusion centers, private prisons, biometric databases, invasive technologies, arsenal of weapons, and every other budgetary line item that is contributing to the fast-growing wealth of the corporate elite at the expense of those who are barely making ends meet—that is, we the taxpayers.

This is what comes of those $1.2 trillion spending bills: someone’s got to foot the bill.

Because the government’s voracious appetite for money, power and control has grown out of control, its agents have devised other means of funding its excesses and adding to its largesse through taxes disguised as fines, taxes disguised as fees, and taxes disguised as tolls, tickets and penalties.

No matter how much money the government pulls in, it’s never enough (case in point: the endless stopgap funding deals and constant ratcheting up of the debt ceiling), so the government has to keep introducing new plans to empower its agents to seize Americans’ bank accounts.

Make way for the digital dollar.

Whether it’s the central bank digital currency favored by President Biden, or the cryptocurrency being hawked by former President Trump, the end result will still be a form of digital money that makes it easier to track, control and punish the citizenry.

For instance, weeks before the Biden Administration made headlines with its support for a government-issued digital currency, the FBI and the Justice Department quietly moved ahead with plans for a cryptocurrency enforcement team (translation: digital money cops), a virtual asset exploitation unit tasked with investigating crypto crimes and seizing virtual assets, and a crypto czar to oversee it all.

No surprises here, of course.

This is how the government operates: by giving us tools to make our lives “easier” while, in the process, making it easier for the government to crack down.

Indeed, this shift to a digital currency is a global trend.

More than 100 other countries are considering introducing their own digital currencies.

China has already adopted a government-issued digital currency, which not only allows it to surveil and seize people’s financial transactions, but can also work in tandem with its social credit score system to punish individuals for moral lapses and social transgressions (and reward them for adhering to government-sanctioned behavior). As China expert Akram Keram wrote for The Washington Post, “With digital yuan, the CCP [Chinese Communist Party] will have direct control over and access to the financial lives of individuals, without the need to strong-arm intermediary financial entities. In a digital-yuan-consumed society, the government easily could suspend the digital wallets of dissidents and human rights activists.”

Where China goes, the United States eventually follows.

Inevitably, a digital currency will become part of our economy and a central part of the government’s surveillance efforts.

Combine that with ESG (Environmental, Social and Governance) initiatives that are tantamount to social media credit scores for corporations, and you will find that we’re traveling the same road as China towards digital authoritarianism. As journalist Jon Brookin warns: “Digital currency issued by a central bank can be used as a tool for government surveillance of citizens and control over their financial transactions.”

As such, digital currency provides the government and its corporate partners with a mode of commerce that can easily be monitored, tracked, tabulated, mined for data, hacked, hijacked and confiscated when convenient.

This push for a digital currency dovetails with the government’s war on cash, which it has been subtly waging for some time now. Much like the war on drugs and the war on terror, this so-called “war on cash” has been sold to the public as a means of fighting terrorists, drug dealers, tax evaders and even COVID-19 germs.

In recent years, just the mere possession of significant amounts of cash could implicate you in suspicious activity and label you a criminal. The rationale (by police) is that cash is the currency for illegal transactions given that it’s harder to track, can be used to pay illegal immigrants, and denies the government its share of the “take,” so doing away with paper money will help law enforcement fight crime and help the government realize more revenue.

According to economist Steve Forbes, “The real reason for this war on cash—start with the big bills and then work your way down—is an ugly power grab by Big Government. People will have less privacy: Electronic commerce makes it easier for Big Brother to see what we’re doing, thereby making it simpler to bar activities it doesn’t like, such as purchasing salt, sugar, big bottles of soda and Big Macs.”

This is how a cashless society—easily monitored, controlled, manipulated, weaponized and locked down—plays right into the hands of the government (and its corporate partners).

Despite what we know about the government and its history of corruption, bumbling, fumbling and data breaches, not to mention how easily technology can be used against us, the shift to a cashless society is really not a hard sell for a society increasingly dependent on technology for the most mundane aspects of life.

In much the same way that Americans have opted into government surveillance through the convenience of GPS devices and cell phones, digital cash—the means of paying with one’s debit card, credit card or cell phone—is becoming the de facto commerce of the American police state.

At one time, it was estimated that smart phones would replace cash and credit cards altogether by 2020. Since then, growing numbers of businesses have adopted no-cash policies, including certain airlines, hotels, rental car companies, restaurants and retail stores. In Sweden, even the homeless and churches accept digital cash.

Making the case for a digital wallet, journalist Lisa Rabasca Roepe argues that there’s no longer a need for cash. “More and more retailers and grocery stores are embracing Apple Pay, Google Wallet, Samsung Pay, and Android Pay,” notes Roepe. “PayPal’s app is now accepted at many chain stores including Barnes & Noble, Foot Locker, Home Depot, and Office Depot. Walmart and CVS have both developed their own payment apps while their competitors Target and RiteAid are working on their own apps.”

So what’s really going on here?

Despite all of the advantages that go along with living in a digital age—namely, convenience—it’s hard to imagine how a cashless world navigated by way of a digital wallet doesn’t signal the beginning of the end for what little privacy we have left and leave us vulnerable to the likes of government thieves, data hackers and an all-knowing, all-seeing Orwellian corpo-governmental state.

• First, when I say privacy, I’m not just referring to the things that you don’t want people to know about, those little things you do behind closed doors that are neither illegal nor harmful but embarrassing or intimate. I am also referring to the things that are deeply personal and which no one need know about, certainly not the government and its constabulary of busybodies, nannies, Peeping Toms, jail wardens and petty bureaucrats.

• Second, we’re already witnessing how easy it will be for government agents to manipulate digital wallets for their own gain in order to track your movements, monitor your activities and communications, and ultimately shut you down. For example, civil asset forfeiture schemes are becoming even more profitable for police agencies thanks to ERAD (Electronic Recovery and Access to Data) devices supplied by the Department of Homeland Security that allow police to not only determine the balance of any magnetic-stripe card (i.e., debit, credit and gift cards) but also freeze and seize any funds on pre-paid money cards. In fact, the Eighth Circuit Court of Appeals ruled that it does not violate the Fourth Amendment for police to scan or swipe your credit card. Expect those numbers to skyrocket once digital money cops show up in full force.

• Third, a government-issued digital currency will give the government the ultimate control of the economy and complete access to the citizenry’s pocketbook. While the government might tout the ease with which it can deposit stimulus funds into the citizenry’s accounts, such a system could also introduce what economists refer to as “negative interest rates.” Instead of being limited by a zero bound threshold on interest rates, the government could impose negative rates on digital accounts in order to control economic growth. “If the cash is electronic, the government can just erase 2 percent of your money every year,” said David Yermack, a finance professor at New York University.

• Fourth, a digital currency will open Americans—and their bank accounts—up to even greater financial vulnerabilities from hackers and government agents alike.

• Fifth, digital authoritarianism will redefine what it means to be free in almost every aspect of our lives. Again, we must look to China to understand what awaits us. As Human Rights Watch analyst Maya Wang explains: “Chinese authorities use technology to control the population all over the country in subtler but still powerful ways. The central bank is adopting digital currency, which will allow Beijing to surveil—and control—people’s financial transactions. China is building so-called safe cities, which integrate data from intrusive surveillance systems to predict and prevent everything from fires to natural disasters and political dissent. The government believes that these intrusions, together with administrative actions, such as denying blacklisted people access to services, will nudge people toward ‘positive behaviors,’ including greater compliance with government policies and healthy habits such as exercising.”

Short of returning to a pre-technological, Luddite age, there’s really no way to pull this horse back now that it’s left the gate. To our detriment, we have virtually no control over who accesses our private information, how it is stored, or how it is used. And in terms of our bargaining power over digital privacy rights, we have been reduced to a pitiful, unenviable position in which we can only hope and trust that those in power will treat our information with respect.

At a minimum, before any kind of digital currency is adopted, we need stricter laws on data privacy and an Electronic Bill of Rights that protects “we the people” from predatory surveillance and data-mining business practices by the government and its corporate partners.

As I make clear in my book Battlefield America: The War on the American People and in its fictional counterpart The Erik Blair Diaries, the ramifications of any government having this much unregulated, unaccountable power to target, track, round up and detain its citizens is beyond chilling.

Shares of auto names were under pressure to start the day on Wednesday after Morgan Stanley’s Adam Jonas cut a majority of the sector in a broad note explaining new risks in a note out overnight.

Jonas downgraded names like GM, Ford, Rivian, Magna International, and Phinia, while upgrading dealers like AutoNation. 

“The China capacity ‘butterfly’ has emerged and is flapping its wings,” Jonas wrote. “China produces 9 million more cars than it buys, upsetting the competitive balance in the West. We are cutting estimates on China, price/mix, and lost share. There are better ways to play rate cuts. We upgrade dealers and downgrade F, GM, RIVN, MGA, and PHIN.”

Jonas opened his note saying: “We are downgrading our view of the U.S. auto industry to In-Line from Attractive. At a high level, our downgrade is driven by a combination of international, domestic, and strategic factors that we believe may not be fully appreciated by investors.”

“U.S. inventories are on an upward slope, while vehicle affordability (with near-record high average transaction prices and >$720 monthly payments) remains out of reach for many households. Credit losses and delinquencies continue to trend upward for less-than-prime consumers,” he continued.

“China’s two-decade-long growth engine has not stalled—it has reversed, with China profits flipping to losses and the country producing nearly 9 million units more than it sells locally, a figure equal to 15% of non-China global volume. Even if these units don’t end up directly on U.S. shores, the ‘fungibility’ of lost share and profit by key U.S. players adds pressure here at home.”

Jonas mentioned affordability concerns in the U.S. market, claiming it is highly stretched, with inventory levels now back to pre-COVID norms. Japanese, Korean, and electric vehicle (EV) brands are capturing market share, squeezing out others. U.S. manufacturers bear the brunt of the pressure with falling prices, weaker product mix, rising costs, and shrinking market share, he said.

Meanwhile, Auto Asset-Backed Securities (ABS) data shows a growing proportion of consumers are staying delinquent for longer, with higher severity rates. Although subprime defaults are lower in 2023 compared to 2022, prime defaults have increased.  

He wrote that in 2023, China accounted for 29% of global auto sales, 32% of production, and over 40% of global auto capacity (with China operating at around 50% capacity utilization). Although tariffs may offer temporary relief, long-term pressures, including potential retaliatory actions, loom. Chinese-made EVs are expanding in export markets, offering superior affordability, variety, and increasingly competitive quality, eroding the market share of Western legacy automakers both internationally and domestically.  

Jonas also cited capital discipline and regulatory risks in his note. He says the consolidation and M&A activity expected in the sector has not materialized as anticipated. Additionally, regulatory compliance risk, especially in terms of meeting stringent CO2 emissions standards, adds new pressure.

He added that OEMs are cutting back on EV programs but could face future financial penalties and enforcement actions. Recently added EV capacity is costly and may struggle with uncertain demand. While stock buybacks have been successful this year (GM has been the best-performing OEM YTD), we anticipate that this trend may not last. Consolidation, if it happens, will likely require further deterioration in industry fundamentals.  

The capital intensity required to compete in Advanced Driver Assistance Systems (ADAS) and Autonomous Vehicles (AV) is often overlooked, Jonas says. As the AI and data themes gain traction in the automotive sector, automakers will need to invest tens of billions in proprietary AI models. We question the financial capability of many traditional automakers to make these investments.  

Interestingly, he also said the temporary bounce from rate cuts would soon disappear, writing that history shows that any outperformance typically lasts only for about six months, with underperformance following in the subsequent six months. Investors must consider whether rates are falling for the right reasons, given that the auto industry remains highly cyclical, particularly when potential economic outcomes appear skewed to the downside.  

The full note is available to Pro Subscribers in the usual place…

Oil pries are lower overnight, despite API reporting an across the board inventory draw, as traders weigh up whether China’s new stimulus measures will translate to higher energy demand in the world’s biggest oil importer.

Geopolitics also remained in focus as Iranian President Masoud Pezeshkian said that Israeli attacks in Lebanon “cannot go unanswered.”

“Though oil rebounded last week, we do not see the current price as accurately reflecting a wider Middle East war scenario. Many market participants have seemingly written off a threat to regional oil supplies,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a note.

“While we are not forecasting a closure of the Strait of Hormuz, we do think that direct Iranian involvement would raise the prospect of a repeat of the 2019 scenario when the IRGC (Islamic Revolutionary Guard Corps) and allies targeted tankers and critical energy infrastructure in the region,” she wrote.

 

API

• Crude -4.34mm (-800k exp)

• Cushing -26k

• Gasoline -3.44mm (-500k exp)

• Distillates -1.12mm (-1.2mm exp)

DOE

• Crude -4.47mm (-800k exp)

• Cushing +116k – first build in seven weeks

• Gasoline -1.54mm (-500k exp)

• Distillates -2.23mm (-1.2mm exp)

The official DOE data confirmed sizable inventory draws for crude and products but saw a small build in stocks at the Cushing Hub (its first build in seven weeks)…

Source: Bloomberg

Total crude stocks are at their lowest since March 2022…

Source: Bloomberg

The Biden admin added a large 1.287mm barrels to the SPR last week…

Source: Bloomberg

US Crude production was flat, just off record highs…

Source: Bloomberg

WTI is pushing slightly lower after the data…

Source: Bloomberg

Crude remains down this quarter on the dour outlook in Asia’s largest economy and the prospect of higher supply from OPEC and its allies. The producer group on Tuesday doubled down on its outlier view that global oil demand will keep growing to the middle of the century.

“The market remains at risk of a supply glut if OPEC+ proceeds with plans to return some of its sidelined production,” Rabobank analysts Joe DeLaura and Florence Schmit said in a report. “Geopolitical issues in the Middle East still support upward price risk in the long term.”

Authored by Steve Watson via Modernity.news,

A spokesman for the Kamala Harris campaign repeatedly refused to answer the simple question “are Americans better off than four years ago?”

It is the same question Harris couldn’t provide a coherent response to during the debate.

During a CNN interview, Ian Sams was persistently asked to provide an answer, and skirted around the question the entire time.

Host Pamela Brown noted “the bottom line here, when you look at a metric like grocery prices, they’re up still 20 percent compared to four years ago.”

She continued, “And Harris was asked recently on the debate stage whether she thinks Americans are better off now than four years ago, and she didn’t directly answer that question. So I will ask you, does she think Americans are better off now or not?”

Sams immediately attempted to pivot the topic to blaming “the mess that we inherited when President Trump left office” and Trump’s “total mismanagement of COVID” for the poor state the economy is in.

He then went straight to the one talking point Harris’ people all go to, the idea that she will “take on corporate price gouging.”

“I’m just going to follow up on the question again,” Brown interjected, prompting Sams to state “she’s going to keep talking about her plans to bring down those grocery costs, while Donald Trump is going to explode them.”

The point is she isn’t providing ANY substance.

“I will ask the question again. Are Americans — does she think Americans are better off now than four years ago?” Brown asked for the third time.

Sams again danced around it with a word salad, insinuating that the host was focusing on “a retrospective question.”

CNN: Kamala was asked at the debate if Americans are better off now than 4 years ago, and she refused to answer. So, are they?

HARRIS INTERN @IanSams: *incoherent word salad*

CNN: You didn’t answer the question.

SAMS: She has a plan to bring costs down.

CNN: But they went up… pic.twitter.com/msNaQuA9pd

— Trump War Room (@TrumpWarRoom) September 23, 2024

Brown then noted that in a new New York Times”/Siena College poll “45 percent of voters say Trump’s policies would actually help people like them, versus just 37 percent for Harris,” adding “That’s looking at the future, not just the past here. What do you say to that, Ian?”

Sams then dismissed the polling, saying “The polls are going to kind of shift around a little bit.”

CNN: This credible New York Times/Sienna poll — 45% of voters say Trump’s policies would help people like them versus just 37% for Kamala. What do you say to that?

HARRIS SPOX @IanSams: *copes and seethes* pic.twitter.com/uBqxE5rrv6

— Trump War Room (@TrumpWarRoom) September 23, 2024

This is the same Kamala lackey who earlier this month said the campaign doesn’t have time to think about why the economy is the way it is right now with high inflation and poor job numbers when asked why Harris hasn’t fixed it during her three and a half years in office.

They cannot answer a straight question.

*  *  *

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US futures are weaker but off overnight lows, as euphoria over China’s latest monetary bazooka stimulus fizzles with Asian shares paring gains into the close (traders now await the far more important fiscal bazooka) and as attention turns to the deteriorating US economy. As of 8:00am, S&P futures are down 0.1% after the index finished with its 41st record closing high on Tuesday, while Nasdaq futures drop 0.2% with weakness in Semis as US-listed Chinese tech stocks fell in premarket trading. Bond yields are mixed, and the USD has a slight bid as the yen trades just off a 3-week low. Commodities are mostly lower as it appears there is muted follow-through to China’s stimulus-induced buying. Today’s macro focus is on New Home Sales, Fed speakers scheduled Kugler at 4pm followed by Chair Powell tomorrow (slated to make pre-recorded opening remarks at the 10th annual US Treasury Market Conference Thursday at 9:20am with a text release expected) and the 2Y and 5Y bond auctions.

In premarket trading,Chinese stocks listed in the US were set to decline following a stimulus-driven rally. General Motors shares fell in premarket trading as did KB Home. Here are some of the biggest US movers today:

• General Motors shares fall 3.6% after Morgan Stanley analyst Adam Jonas cut the car maker to underweight from equal-weight. Jonas made several rating changes in his auto coverage, including downgrading Ford, Rivian, Magna International, and Phinia, and upgrading the dealers including AutoNation.
• HP Enterprise shares rise as much as 2.5% after the IT firm was upgraded to overweight from equal-weight at Barclays amid signs of a recovery in enterprise servers.
• KB Home shares drop 6.4% after the homebuilder reported earnings per share and net orders for the third quarter that fell short of the average analyst estimate.
• Stitch Fix shares fall as much as 20% after the online retailer’s forecasts for 2025 net revenue and adjusted Ebitda from continuing operations fell short of the average analyst estimates.
• DoorDash was raised to overweight from sector weight at KeyBanc Capital Markets, which sees the delivery company “gaining ground in its core and emerging verticals.”

Traders are seeking fresh catalysts with growth concerns lingering after last week’s half-point Federal Reserve interest-rate cut. Wednesday’s policy moves from China failed to ripple beyond Asian markets and investors are looking to a speech by Fed Chair Jerome Powell and price-growth data at the end of the week.

“We’ve been here before with China,” said Guy Miller, chief market strategist at Zurich Insurance Co. “Really potent fiscal as well as monetary policy is needed to change the direction of travel. So far that direction of travel has not changed.”

Meanwhile, China’s stocks rallied for a sixth day after the central bank lowered the interest rate charged on its one-year policy loans by the most on record. That followed its wide-ranging stimulus package announced the day before. Iron ore climbed and gold hit another record earlier in the session.

Meanwhile, Europe’s Stoxx 600 index paused a two-day rally, with German software developer SAP SE dropping 4% on news that it and other companies are being probed by the US. Healthcare and personal-care subindexes were the best performers, while the automotive and tech subgroups lag. Stoxx 600 was little changed, slipping 0.1% to 519.25. Here are the biggest movers Wednesday:

• Valmet gains 11%, the most since June, after the Finnish pulp and energy equipment manufacturer said it got an order valued at over EU1b from Arauco for a complete pulp mill in Brazil
• Air France-KLM shares rise as much as 8.4%, the most since December, after JPMorgan double-upgrades the stock to overweight, predicting a pick-up in earnings momentum
• Rentokil stock rises as much as 5.1% as the pest controller says Brian Baldwin, head of research at activist Trian Fund Management, will join the board as a non-executive director
• Helvetia gains as much as 4.5%, to its highest since 2020, after J.P. Morgan initiated coverage with a recommendation of overweight, citing unappreciated future earnings potential
• Orion gains as much as 5.2% after Jefferies upgrades to buy and sets a Street-high target, based on a higher peak sales estimate for key drug Nubeqa, with peak sales seen as high as €1.3b
• CCC soars as much as 10% after the Polish footwear retailer’s final 2Q earnings surpassed the preliminary figures, and its strong 3Q trading update was seen as a positive signal for 2024
• SAP declines as much as 4.3% after federal court records showed the software maker is among companies being investigated by the US for potentially conspiring to overcharge government agencies.
• Truecaller shares fall as much as 9.4%, the most in a year, after KPCB Holdings Inc. and Peak XV Partners offered 15 million shares at an 8.4% discount versus Tuesday’s close
• Immofinanz shares fall as much as 15% and to their lowest since December after an unidentified holder offered 3.4 million shares in the Austrian real estate company; shares are down 4% YTD
• Melexis shares drop as much as 57% to hit a seven week low after Kepler Cheuvreux downgraded the semiconductor integrated circuit maker and slashed earnings estimates
• AXA shares drop as much as 2.2%, the most since early August, after CIC Market Solutions cut its recommendation on the insurance group to neutral from buy, seeing limited upside for the stock
• Rightmove shares drop as much as 1.6% after the UK online property portal rejected a third takeover proposal from REA Group, saying the £6.1b bid continues to undervalue the business

Europe’s darkening economic outlook has fueled bets the ECB will cut rates again next month, while economists at HSBC Holdings Plc predict policy makers will start cutting interest rates at every meeting between October and April. “The worry has been that all the economic data is looking quite shaky,” said Anwiti Bahuguna, global asset allocation CIO at Northern Trust  Asset Management, where the region’s stocks have been cut to market weight from overweight. “At the beginning of the year we did think we would see a nice uptick but it started to slow down way more than any of us anticipated,” she told Bloomberg TV.

Earlier in the session, Asian stocks were little changed after jumping earlier in the day, as a policy-driven rally in China started to lose momentum after skepticism kicked in. The MSCI Asia Pacific Index edged up only 0.1% after gaining as much as 1%. TSMC, BHG Group and Tencent were among the biggest boosts. The gauge was still set to gain for a fifth day and reached its highest level since Feb 2022. Benchmarks in Sri Lanka, mainland China and Taiwan rose the most, while other markets took a breather after gains in the previous session.

Investors are cautiously optimistic that the policy barrage announced Tuesday has put a floor under China’s stock slump, with expectations that more fiscal support will follow. The CSI 300 Index rose 1.5% at close after climbing as much as 3.4% on the day. The gauge remained 0.9% lower for the year. A slowdown in the world’s second-largest economy had been a major overhang for Asian stocks, and a meaningful recovery as a result of the policy support may help drive gains across the region.

“We believe the concerted effort should put a floor to market sentiment in the near term,” James Wang, head of China strategy at UBS Investment Bank Research, wrote in a note. “While the immediate measures would benefit A-share companies, we believe the regulator’s desire to improve company governance would benefit all MSCI China companies.”

In FX, the Bloomberg Dollar Spot Index rises 0.2% having reversed course after falling earlier to the lowest since January. The yen is the worst-performing major currency, falling 0.7% against the greenback. The Swiss franc is not far behind. The Swedish krona falls 0.3% after the Riksbank cut borrowing costs by a quarter point and raised the possibility of a bigger move in coming months.

In rates, treasuries edge lower, with yields higher by 2bp-3bp vs Tuesday’s close, following similar price action in core European rates during London morning. US 10-year yields around 3.76% are ~3bp cheaper on the day, keeping pace with bunds and gilts; 5s30s spread is flatter by around 1bp as 5-year sector underperforms ahead of the auction. An auction of new 5-year notes during US afternoon follows good demand for Tuesday’s 2-year note sale.  The $70b 5-year note auction at 1pm New York time, second of this week’s three coupon sales, has WI yield near 3.51%, about 14bp richer than last month’s, which tailed by 0.3bp

In commodities, oil prices are down ~0.3%, with WTI trading around $71 a barrel.

Looking at today’s US economic data calendar, we get Mortgage applications (up 11.0%, vs 14.2% last week) and August new home sales at 10am. Fed speakers scheduled include Kugler at 4pm; Chair Powell is slated to make pre-recorded opening remarks at the 10th annual US Treasury Market Conference Thursday at 9:20am with a text release expected

Market Snapshot

S&P 500 futures down 0.2% to 5,782.00
Brent Futures down 0.1% to $75.07/bbl
Gold spot up 0.0% to $2,657.41
US Dollar Index little changed at 100.41

Top Overnight News

• China doubled down on stimulus measures with the PBOC cutting its one-year interest rate by 30 bps, the most on record. Stocks extended gains and the offshore yuan strengthened past 7 per dollar for the first time since May 2023. BBG
• China test fires ICBM into the Pacific, its first such launch since the summer of 2021 and a show of force ahead of a Xi-Biden phone call expected in the coming weeks. FT  
• GIR on PBOC’s Easing: PBOC Governor Pan hinted at follow-through to lending and deposit rates, as well as the likelihood of another RRR cut in Q4. More important than the measures themselves is the signal that domestic weakness has become uncomfortable for top policymakers (which in turn suggests underlying activity could be missing the 5% growth target by significantly more than the official 4.7% yoy GDP growth figure implies). The key question now is whether policymakers will add meaningful fiscal support to the mix; government borrowing has picked up substantially since midyear, but spending has not. GIR
• Iran’s President Masoud Pezeshkian said plans are underway to discuss a nuclear deal following a “positive” meeting with Emmanuel Macron. He earlier warned that Israeli attacks on Lebanon “cannot go unanswered.” BBG
• Eurozone wage growth is easing according to a new ECB study, news that could pave the way for continued monetary easing. RTRS
• White House is taking a hands-off approach to the East/Gulf Coast dock worker labor talks w/just days to go before a potential strike. RTRS
• US House Foreign Affairs Committee recommended contempt of Congress charges against Secretary of State Blinken, for failing to appear at a hearing regarding the Biden administration’s handling of the 2021 withdrawal from Afghanistan.
• Swaps traders raised their wagers to about 75 bps of Fed easing by year-end — implying a half-point move at one of the two remaining meetings. Positioning figures show a sharp increase in open interest in two-year note futures and a marked uptick in bets in December futures linked to the SOFR. BBG
• AI is better at pricing currencies than humans, according to ING, which is using such a model for the time-consuming task. Bain predicted the global market for AI-related products will near $1 trillion by 2027. BBG
• Berkshire sold another 21.6M shares of BAC for ~$860MM, dropping its stake to ~814MM/10.5% (Berkshire may stop selling at ~700M shares). Barron’s

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly positive as Chinese markets continued to rally following the stimulus boost. ASX 200 was rangebound with strength in mining and materials offsetting the underperformance in financials and tech, while the latest monthly CPI data from Australia matched estimates and slowed to a 3-year low although core inflation remained above the 2%-3% target. Nikkei 225 swung between gains and losses and traded both sides of the 38,000 level with little fresh catalysts, while Services PPI data was firmer than expected but slowed from the prior month’s revised print. Hang Seng and Shanghai Comp rallied amid ongoing optimism following the stimulus announcements, while the PBoC also conducted an MLF operation with the rate cut by 30bps to 2.00% which it had flagged during Tuesday’s press briefing.

Top Asian news

• PBoC conducted a CNY 300bln 1-year MLF operation with the rate lowered to 2.00% from 2.30%.
• US hopes to discuss fentanyl with China at the APEC Summit in November.

European bourses, Stoxx 600 (-0.2%) are almost entirely in the red (ex-SMI), with indices taking a breather/giving back some of the hefty gains seen in the prior session. European sectors are mixed vs initially holding a negative bias at the open. Healthcare tops the index alongside Travel & Leisure; the latter benefiting from gains in Air France (+7%) following a double broker upgrade at JP Morgan. Tech lags, hampered by losses in SAP (-3.5%) amid a US probe. US Equity Futures (ES -0.2%, NQ -0.3%, RTY -0.1%) are modestly lower across the board, with slight underperformance in the NQ following on from the gains seen in the prior session.

Top European news

• ECB’s Villeroy says cannot allow France’s situation regarding deficit to last; must deal with debt problem as spread widens. Not realistic for France to bring deficit down below 3% level within a three-year timeframe.
• BoE’s Greene says it is appropriate to take a gradual approach to removing restrictiveness. Greene outlines three cases in the economy and subsequent risks. In the first case, the global shocks that drove up inflation continue to fade, and the persistence of inflationary pressures dissipates with a less restrictive stance of monetary policy than in other cases. In the second, a period of economic slack is required to bring inflation sustainably to target in the medium-term. In the third, structural changes in the economy that impact wage- and price-setting require monetary policy to remain tighter for longer. Says, like many others on the MPC, she does not fit squarely in any of these cases. However, at the moment, she places the greatest probability on being in the second case. Wage growth has also fallen but remains above what our suite of models can explain. Says that a lot of the latest decline in UK services inflation is in the more volatile components; cannot get the ticker tape out yet. Remains concerned about wage pass-through to inflation. May be seeing some impact from UK economic policy uncertainty, causing business to stay on the sidelines.
• Riksbank cuts its Rate by 25bps as expected to 3.25% (prev. 3.50%); policy rate may also be cut at two remaining meetings this year, with a 50bps cut possible at one of those meetings; rate expected to be cut at a clearly faster pace than before.
• HSBC now see the ECB cutting rates at every meeting, starting from October, according to Bloomberg

FX

• USD is firmer and attempting to recoup some lost ground vs. peers after the selling pressure seen in the wake of Tuesday’s US Consumer Confidence data. DXY has climbed above the 100.50 level and is towards session highs.
• EUR is flat vs. the USD and continuing to eye a test of 1.12 after yesterday’s Consumer Confidence-led dollar weakness. EUR/USD has been as high as 1.1198 today. If 1.12 is breached, the YTD high rests just above at 1.1201.
• Cable has pulled back a touch after its recent run of gains which saw the pair trade on a 1.34 handle for the first time since March 2022. Comments from BoE’s Greene this morning have underlined the cautious stance being taken by the MPC relative to some of its peers within the G10 space; commentary which sparked little move in the GBP.
• JPY is on the backfoot vs. the USD and the laggard across the majors, trimming yesterday’s gains vs. the greenback. Fresh fundamentals have been lacking for Japan ahead of the LDP leadership race on Friday. For now, the pair is contained within its recent 140-145 trading band.
• AUD a touch softer vs. the USD following soft inflation metrics overnight which put Y/Y CPI within the RBA’s target band on a headline basis (core remains above the top end). AUD/USD Printed another YTD high overnight, breaching the 0.69 mark for the first time since Feb 2023.
• SEK saw some fleeting weakness vs. the EUR following the Riksbank’s decision to cut rates by 25bps (as expected) whilst signalling that the policy rate could be cut at two remaining meetings this year. Furthermore, the statement noted that a 50bps cut is possible at one of those two meetings.

Fixed Income

• USTs are flat/very slightly lower ahead of 5yr supply later today. Treasuries saw very modest pressure following a poor Gilt auction; a move more pronounced in Bunds/Gilts.
• Bunds are under modest pressure and held around Tuesday’s best at 135.01 for most of the morning, but took another leg lower after the the dire UK auction; Bunds fell to a 134.68 trough ahead of the German auction, which passed without issue.
• Gilts were flat and unreactive to commentary from BoE’s Greene who outlined her preference for a gradual approach to removing policy restrictiveness. Following the Gilt auction, which had a lower b/c and much wider tail, Gilt Dec’24 futures fell from 99.23 to 99.15 before extending to a 98.99 low.
• UK sells GBP 3.75bln 4.00% 2031 Gilt: b/c 2.98x (prev. 3.29x), average yield 3.814% (prev. 4.074%), tail 1.6bps (prev. 1.9bps).
• Italy sells EUR 2.75bln vs exp. EUR 2.25-2.75bln 3.10% 2026 BTP Short Term & EUR 2.5bln vs exp. EUR 2-2.5bln 1.50% 2029 & 2.40% 2039 BTPei Auctions.
• Germany sells EUR 2.424bln vs exp. EUR 3bln 2.40% 2030 Bund: b/c 2.4x (prev. 2.2x), average yield 2.0% (prev. 2.25%) & retention 19.2% (prev. 17.6%)

Commodities

• Crude is slightly subdued following the gains seen in the prior session, spurred on by the Chinese stimulus efforts but was unable to benefit from the draws in private sector inventory data. Brent’Nov sits at the foot of a USD 74.73-75.35/bbl parameter.
• Precious metals hold a downward bias with losses of some 1% seen in spot silver and spot palladium, whilst spot gold trades sideways amid a lack of drivers but cushioned by the increasingly tense geopolitical landscape. XAU eked another fresh all-time-high overnight at USD 2,670.60/oz (vs low 2,651.41/oz).
• Base metals are marginally softer as they take a breather from yesterday’s surge. 3M LME copper trades closer to the bottom of a USD 9,755.50-9,924.00/t range.
• US Private Energy Inventory (bbls): Crude -4.3mln (exp. -1.4mln), Distillate -1.1mln (exp. -1.6mln), Gasoline -3.4mln (exp. -0.02mln), Cushing -0.0mln.
• NHC said a storm surge and hurricane warnings were issued for the Gulf Coast of Florida, while it added that Helene’s large size will likely cause an extensive area to be affected by the storm’s hazards.
• Kazakhstan’s energy ministry says Kashagan oil field (400k BPD) to suspend operations for 38 days for maintenance.
• NHC says Helene strengthening as the centre approaches the north-eastern coast of the Yucatan Peninsula, new tropical storm watches and warnings for portions of the US.

Geopolitics: Middle East

• “Israeli strikes on Lebanon expanded to reach the Keserwan and Chouf areas in Mount Lebanon”, according to Sky News Arabia
• Israeli Defence Minister Gallant said they have more strikes ready against Hezbollah, while he added that they must continue until they achieve their goal and ensure the safe return of Israel’s northern residents to their homes.
• Israel conducted a strike on Jiyyeh which is south of Lebanon’s capital Beirut, according to security sources cited by Reuters.
• Sirens sounded in Tel Aviv and its surrounding area, as well as in central Israel, while explosions were heard in the sky of Tel Aviv caused by the interception of rockets, according to Sky News Arabia. Furthermore, Israel’s military said after Tel Aviv sirens were activated a missile was detected crossing from Lebanon and was intercepted.
• Iran-backed Iraqi militia claimed responsibility for overnight drone attacks on Golan, according to Times of Israel.
• Hezbollah confirmed its senior commander Ibrahim Qubaisi was killed in an Israeli strike on Beirut, while it was separately reported that Hezbollah said it targeted Israel’s Atlit navy base south of Haifa with drones.
• Hezbollah urged Iran in recent days to launch an attack against Israel as fighting between the Lebanese militant group and the Israeli military dramatically escalated, but Iran has so far refrained, according to Axios.
• Lebanon’s Foreign Minister said US President Biden’s UN speech was not strong and not promising, while the official added that the US is the only country that can really make a difference in the Middle East, as well as noted that Lebanon itself cannot end the fighting and needs US help despite disappointments of the past.
• Iran’s President Pezeshkian said the international community must immediately stop the violence and work to reach a permanent ceasefire in Gaza, while he added Tehran is ready to work with parties to the 2015 Nuclear Act pact to resolve the standoff and is ready to improve ties with the world.
• Iran’s President Pezeshkian met with French President Macron in what is described as a good meeting in which they discussed Gaza and a nuclear deal. Iran’s President said he expects a group of countries to meet on the nuclear deal, while Macron warned Iran’s President about Tehran’s continued support for Russia’s war in Ukraine.
• IAEA chief Grossi said he sees a willingness from Iranian officials to re-engage in a more meaningful way, while he will visit Tehran in the coming weeks and is aiming for October. Grossi said Iran is continuing the development of its nuclear programme at a regular pace and any future nuclear talks will be different from the 2015 nuclear deal with a bigger role for the IAEA expected. Furthermore, he noted the need to start preparing now for possible future negotiations between the West and Iran.
• Iran is brokering secret talks to send Russian anti-ship missiles to Yemen’s Houthis, according to Reuters citing sources. The report noted that experts said this would increase the Houthis to strike Red Sea commercial shipping and raise the threat to US and allied warships, while experts also stated that Houthis could use the missiles on land to threaten Saudi Arabia.
• “Israel Broadcasting Corporation: Israeli preparations for a possible ground operation in Lebanon”, according to Sky News Arabia.
• Israeli Military says a drone crossing into Israeli territory from Syria was intercepted by IDF fighter jets south of the Sea of Galilee.

Geopolitics: Other

• China’s PLA rocket force successfully launched an intercontinental ballistic missile with a simulated warhead in international waters in the Pacific Ocean with the launch said to be routine and part of the rocket force’s annual training, according to Xinhua. China notified relevant countries ahead of the missile launch, while China’s Defence Ministry said the launch was not directed at any country or target and was in line with international laws and practices.
• Former US President Trump was briefed by US intelligence officials regarding threats from Iran to assassinate him, according to his campaign.

US Event Calendar

• 07:00: Sept. MBA Mortgage Applications, prior 14.2%
• 10:00: Aug. New Home Sales MoM, est. -5.3%, prior 10.6%
• 10:00: Aug. New Home Sales, est. 700,000, prior 739,000

Central Bank Speakers

• 16:00: Fed’s Kugler Speaks on Eco Outlook at Harvard Kennedy School

Government agenda

• 9:30 a.m. ET: Antony Blinken meets with Foreign Ministers of the Gulf Cooperation Council Member States in New York City ~
• 11:15 a.m. ET: Joe Biden joins ABC’s “The View” for a live interview in New York
• 11:30 a.m. ET: Antony Blinken participates in a G20 Foreign Ministers Meeting
• 1:15 p.m. ET: Antony Blinken hosts a multilateral meeting on building on progress to restore security in Haiti
• 2:00 p.m. ET: Joe Biden hosts a bilateral meeting with General Secretary Tô Lâm of Vietnam
• 3:15 p.m. ET.: Kamala Harris will deliver remarks at a campaign event in Pittsburgh, Pennsylvania
• 3:30 p.m. ET: Joe Biden hosts an event with world leaders launching a Joint Declaration of Support for Ukrainian Recovery and Reconstruction
• 4:30 p.m. ET: Antony Blinken participates in a ministerial on Sudan
• Janet Yellen will travel to New York, New York for private meetings and events on the sidelines of the United Nations General Assembly (UNGA).
• USTR Ambassador Katherine Tai will meet with Germany’s State Secretary Jörg Kukies

DB’s Jim Reid concludes the overnight wrap

Morning from Paris where the last time I was here 7 weeks ago I was trying to get away from Mickey Mouse giving me a hug on the hottest day of the year. This time a hug from Mickey would have warmed me up on a cold wet evening last night.
Markets are more adhering to a Disney script at the moment and have continued to push higher over the last 24 hours, with the S&P 500 (+0.25%) inching up to its 41st record high this year, even as weak US data hit risk appetite and investors dialled up the chances of more aggressive rate cuts. However it was a difficult day for a one-size-fits all narrative, with a fairly divergent performance across different asset classes. To be fair there was plenty of good news, and China-exposed stocks did very well globally after their initial stimulus announcement just over 24 hours ago. This has carried on overnight with the PBoC cutting the medium-term lending facility from 2.3% to 2%, the largest cut since they started using the tool to guide policy in 2016. Chinese equities are again outperforming this morning. Meanwhile gold prices (+1.08%) have hit another all-time high of $2,657/oz as more US rate cuts are priced in. But the weak US numbers prevented a more aggressive advance in US equities as they played on lingering fears about a potential downturn given the jobs numbers over recent months.

In terms of that US data, the main point of concern was the Conference Board’s consumer confidence print for September, where the headline reading slipped back to 98.7 (vs. 104.0 expected), and the monthly decline of -6.9pts was also the largest in just over three years. And if that wasn’t enough, the much-followed differential between those saying jobs are plentiful versus hard to get fell back to 12.6, which is the narrowest it’s been since March 2021. At the same time, we also had the Richmond Fed’s manufacturing index for September, which fell to its weakest level since May 2020 at -21 (vs. -12 expected).

Those releases saw investors dial up the chance that the Fed would deliver another 50bp rate cut at their next meeting in November, and futures raised the probability from 54% to 62% on the day. And in turn, that led to a fresh steepening of the yield curve, with the 2yr yield (-4.9bps) closing at a fresh two-year low of 3.54%, whilst the 10yr yield (-2.1bps) saw a smaller decline to 3.73%. That meant the 2s10s was up to 18.4bps by the close, which is the steepest it’s been since June 2022, just before it became apparent that the Fed would start hiking rates by 75bps.

That data weakness was also apparent in Europe yesterday, as the Ifo’s business climate indicator from Germany fell by more than expected in September, coming in at 85.4 (vs. 86.0 expected). That’s the weakest in 8 months, and the news contributed to a similar curve steepening in Germany, with the 2s10s curve (+4.3bps) up to 4.8bps by the close, which is the steepest since November 2022. The move happened as investors similarly raised their expectations for ECB cuts, with a growing probability priced in that they’ll accelerate the pace and start moving at every meeting rather than every other meeting. Indeed, the likelihood of an October cut has now risen from 26% on Friday, to 41% on Monday after the flash PMIs, to 63% by yesterday’s close, so there’s been a decent reassessment of the outlook. This came as we heard some mixed comments from the ECB’s Nagel who suggested that some factors weighing on growth are likely to be “temporary”, though Germany’s growth outlook “remains weak this year”. This backdrop led to a fresh rally among European sovereigns, with yields on 10yr bunds (-0.9bps), OATs (-2.2bps) and BTPs (-2.9bps) all moving lower.

While investors were concerned about the weak economic data, it wasn’t all bad news yesterday. In fact, China-exposed stocks did very well in the US and Europe after the stimulus announcement yesterday. For instance, the CAC 40 (+1.28%) was the biggest outperformer among the main European indices as it contains several luxury goods firms. The DAX (+0.80%) also put in a strong performance, lifted by automakers like BMW (+3.55%) given their exposure to Chinese markets. Meanwhile in the US, the NASDAQ Golden Dragon China Index (+9.13%) had its best daily performance since November 2022. That index is made up of companies which are traded in the US, but where a majority of business is done in China.

For equities more broadly, it was a fairly mixed performance, but ultimately the S&P 500 (+0.25%) still managed to reach another all-time high. Significantly, it also meant that the index is now up +20% on a YTD basis for the first time this year, and if it can maintain that into year end, it would be the first time that it recorded two back-to-back annual gains above +20% since 1997-98. The Philadelphia Semiconductor Index (+1.31%) was a significant outperformer, aided by a +3.97% gain for Nvidia. But there were also points of weakness, with 49% of the S&P 500 constituents lower on the day, as financials (-0.92%) and utilities (-0.76%) underperformed. Over in Europe, the gains were relatively strong, with the STOXX 600 (+0.65%) posting another advance.

Asian equity markets are largely continuing their upward trend this morning with Chinese markets notching outsized gains on the back of the MLF rate cut we mentioned at the top. This is the second cut to the MLF in recent months following a reduction to 2.3% in late July. As I check my screens, the CSI (+2.19%) is leading gains across the region having initially risen as much as +3.2% with the Hang Seng (+1.97%) and the Shanghai Composite (+1.74%) also among the top performers. Meanwhile, the Nikkei (+0.34%) is holding on to its gains with the KOPSI (+0.02%) swinging between gains and losses. Elsewhere, the S&P/ASX 200 (+0.08%) is also struggling to gain traction. S&P 500 (-0.16%) and NASDAQ (-0.23%) futures are edging lower.

Turning our attention back to Australia, consumer price inflation slowed to a three-year low of 2.7% y/y in August, down from a +3.5% gain in July, but aligning with market forecasts. Core CPI inflation remains elevated and above the RBA’s target range but did also ease. The trimmed mean inflation rate slowed to an annual 3.4%, from 3.8% in July.

In FX, the offshore yuan briefly hit its strongest level in over 16 months this morning, strengthening to 6.9951 before settling to trade at 7.0107 against the dollar.

To the day ahead, and data releases include French consumer confidence for September, along with US new home sales for August. Meanwhile from central banks, we’ll hear from the BoE’s Greene and the Fed’s Kugler.

A recent Pew Research Center survey shows that most U.S. teens between 13 and 17 think they spend just the right amount or too little time on their smartphones and social media.

Conversely, as Statista’s Florian Zandt details below, 38 percent of all teenagers say they spend too much time on their smartphones and 27 percent claim that social media takes up too much of their time. However, the study also shows that even though this awareness exists, only a minority of respondents have cut back on using said devices and services.

The survey conducted in the fall of 2023 among 1,453 parent-teen-dyads or pairs also highlights significant differences in usage awareness between teenage boys and girls. A third of all surveyed boys and 44 percent of all surveyed girls said their smartphone use is too intense. Girls are also more likely to cut down on their screen time, with 41 percent saying they use their smartphone less, contrasted with 32 percent of all male teens participating in the survey.

You will find more infographics at Statista

An analysis of the services young U.S. residents use regularly shows a clear preference for video-focused platforms like TikTok and YouTube. 17 percent of all respondents said they almost constantly use the former, while the share claiming the same about Alphabet’s video service stood at 16 percent. Overall, YouTube and TikTok were used at least once per day by 71 percent and 58 percent of survey participants, respectively. Facebook, a social network mostly mentioned in conjunction with older generations nowadays, was used at least once a day by 19 percent of teen respondents. Compared to a similar survey from 2014, the share of teens saying they’re online almost constantly has roughly doubled.

With this development in mind, tackling the issue of prolonged screen time has recently transcended the boundaries of parental guidance and control and has become an issue for state legislators. As ABC News reports, California Governor Gavin Newsom signed into law a new directive requiring schools to implement measures to ban or limit smartphone usage in schools by July 1, 2026. According to a statement by Newsom quoted by ABC, “this new law will help students focus on academics, social development, and the world in front of them, not their screens, when they’re in school.”

A summary by Education Week shows that Florida, Louisiana and South Carolina have wholesale bans of smartphone usage during school time in place, while five other states require the implementation of specific policies by their school districts and four additional states have issued policy recommendations. Most of these laws and recommendations were signed or issued in 2024 in what is likely a reaction to increased pressure on social media platforms to safeguard younger users from harm. For example, in June 2024, the U.S. Surgeon General suggested that said platforms should implement warning labels. However, it’s unlikely that U.S. teens will heed such warnings due to only a minority claiming that they indeed spend too much time on their phones and 70 percent of respondents to the cited Pew Research Center survey said using smartphones in their age bracket has more benefits than it does harm.

Authored by RFE/RL Staff via OilPrice.com,

• Tajikistan has announced that electricity rationing will begin a month earlier than usual this year due to a water shortage and growing population.

• The country has been promising to end energy rationing for decades, but construction of the Roghun hydroelectric plant has been delayed.

• Despite domestic shortages, Tajikistan continues to export electricity to neighboring countries.

Tajik officials have backed off comments that the energy situation in the country is improving, admitting that electricity rationing is being introduced a month earlier than usual this year.

Electricity rationing has turned into an annual routine in the tightly controlled former Soviet republic over the past three decades. It is usually introduced in late October or early November.

But the Barqi Tojik state energy holding announced over the weekend that rationing will be introduced as of September 22 due to “the upcoming longer and more severe winter period.”

The company also explained the move by saying a water shortage at hydroelectric power plants and “the rise of the country’s population” have exacerbated the situation.

Earlier in June, Energy Minister Daler Juma warned people to start thinking early about coal supplies to get ready for winter.

Immediately after the announcement by Barqi Tojik on September 21, some residents of Dushanbe, the capital, and several other towns and cities complained online about blackouts and criticized the government for failing to keep its decades-long promise to solve electricity shortages during the autumn and winter.

In August, Barqi Tojik said annual electricity rationing, which usually lasts for six to seven months from autumn to spring, will be scrapped only after the construction of the Roghun hydroelectric plant is completed.

The construction at Roghun was launched in October 2016, less than two months after the death of Islam Karimov, the first president of neighboring Uzbekistan, who had vehemently opposed the construction of the station for years, saying the dam would reduce water flows to his country’s cotton fields.

In November 2018, Tajik President Emomali Rahmon officially unveiled the first of the plant’s six planned turbines, announcing that “very soon we all will forget about energy rationing.”

Tajik authorities said at the time that the $3.9 billion project on the Vakhsh River would not only make the country self-sufficient in electricity, but would allow the export of some of its output to neighboring Afghanistan, Pakistan, and Uzbekistan.

Tajiks have complained that despite the energy shortages, the country has been selling energy to Afghanistan and other countries anyway. Officials said earlier that Tajikistan exported 715 million kilowatt-hours for more than $27 million in the first six months of 2024.

Last winter, electricity rationing was introduced for the first time in Dushanbe.