Month: September 2024

Authored by Tom Ozimek via The Epoch Times,

A Wake County judge has ruled against Robert F. Kennedy Jr.’s attempt to be removed from North Carolina presidential ballots, finding that the harm Kennedy would suffer would be small compared to that facing the state Board of Elections, although the judge granted Kennedy a 24-hour stay to appeal.

Last week, the North Carolina State Board of Elections (NCSBE) decided in a vote at an emergency meeting on Aug. 29 to reject a request from the We The People Party to remove Kennedy, its nominee, from the general election ballot. In its decision, the board said it would be impractical to reprint ballots by the Sept. 6 deadline for mailing the first absentee ballots while also noting the additional costs involved in reprinting.

Kennedy filed a lawsuit the following day at the Wake County Superior Court, accusing the election board of causing him irreparable harm by refusing to remove his name from the ballot.

Wake Superior Court Judge Rebecca Holt ruled against Kennedy’s request on Sept. 5, finding that Kennedy would suffer minimal harm from having his name on the ballot, while the board would have to reprint ballots at considerable effort and cost and would likely miss the deadline for sending out absentee ballots.

The judge granted Kennedy a 24-hour stay to allow the state Court of Appeals to weigh in on the matter, leaving the Sept. 6 deadline in question.

According to Holt’s ruling, the ballots will need to go out at the end of the 24 hours unless the appellate court sides with Kennedy.

The state election board told county boards after Thursday’s hearing to make preparations not to send out ballots on the morning of Sept. 6 unless they receive confirmation to do so from the state board, according to an email from Pat Cox, NCSBE general counsel, obtained by The Epoch Times.

Cox said in the email that ballots will need to be sent out at the conclusion of the 24-hour period unless the appeals court intervenes, telling state boards to “stay tuned” for last-minute developments.

Meanwhile, Kennedy’s attorney argued in court that Kennedy had followed state law by presenting a written request to step down as a candidate and that forcing him to remain on the ballot violated his free speech rights.

“This is a very straightforward case about ballot integrity and following the law,” Strach said, adding that keeping Kennedy on the ballot would confuse voters.

State attorneys said in court that reprinting ballots without Kennedy’s name would take at least two weeks, which could derail a Sept. 21 federal deadline for absentee ballots to be released to military and overseas voters.

“Elections are not just a game, and states are not obligated to honor the whims of candidates for office,” North Carolina Special Deputy Attorney General Carla Babb said in court.

Strach contended that there’s a law allowing states to seek a waiver of the Sept. 21 deadline, while Babb argued that state regulations give the elections board the ability to reject a candidate’s request if the board determines it’s impractical to reprint ballots.

A request for comment sent to Kennedy’s campaign was not returned by publication time.

Pat Gannon, a spokesperson for the state election board, told The Epoch Times in an emailed statement that as of early Thursday afternoon, county boards of elections had received 129,400 absentee ballot requests, including about 12,300 requests from military and overseas voters.

Gannon, who provided the email sent by Cox to county boards, also pointed to a Thursday court filing from the state board opposing Kennedy’s request for a temporary restraining order. The filing argues that granting it would inflict “significant harm” on the state and county boards.

“Because ballot preparation is now almost complete, restarting that process would come at a tremendous cost. Some of that cost would be financial—it may cost upwards of one million dollars to remove Plaintiff’s name from the ballot … but it would also be logistical,” it states, adding that removing Kennedy’s name from the ballot means reconfiguring 2,348 different ballot styles that are used across the state.

“This work must be done by state and county elections officials, whose plates are already overflowing with other election-related tasks.”

The saga began after Kennedy, who initially fought to be listed as a third-party candidate on the North Carolina ballot, reversed course in late August and requested to have his name removed from 10 battleground states, including North Carolina.

His campaign stated that voters in noncompetitive states were encouraged to continue supporting him, while in battleground states such as North Carolina, Kennedy sought to avoid splitting the conservative vote.

Kennedy said that his decision to remove his name from the ballot was meant to avoid drawing votes away from Trump in key swing states.

“In about 10 battleground states where my presence would be a spoiler, I will remove my name and urge voters not to vote for me,” he said.

In 2020, Trump carried North Carolina by a narrow margin of 1.5 percent.

Polls carried out prior to Kennedy’s withdrawal suggest he held enough support in the key battleground state to potentially tip the balance in this year’s election.

There was some good news and some bad news in today’s jobs report – first the bad news: the August payrolls number came in at 142K, a small miss to estimates of a 165K print, if a big jump from the downward revised July print of 89K. The good news, however, is that while the payrolls print missed, the unemployment rate actually dipped from that critical “Sahm’s Rule trigger” level of 4.3%, to 4.2%, in line with expectations. So bottom line: the number could be better, but it is certainly not bad enough to trigger a 50bps rate cut in two weeks.

Here are the details.

As noted above, in August, the US added 142K jobs…

… which was slightly below estimates of a 165K print, but hardly some crazy outlier as in previous months.

Then again, as has become the norm, both previous months were revised sharply lower, so once again expect the August print to suffer the same fate. Specifically, the BLS said that the payroll print for June was revised down by 61,000, from +179,000 to +118,000, and the change for July was revised down by 25,000, from +114,000 to +89,000. With these revisions, employment in June and July combined is 86,000 lower than previously reported It also means that 4 consecutive job prints have been revised lower, and 6 of the past 7.

Developing.

Futures are set to end a dismal first week of September lower, with tech again under pressure ahead of a very important jobs report. As of 8:00am, S&P futures are down 0.6% set for a 4th straight day of declines following a sudden dump around the European open; Nasdaq futures slide 1% as NVDA slides more than 2% pre-market while Broadcom also weighed on tech stocks after falling 9% after delivering a disappointing sales forecast. Bond yields are also lower, with the 10Y at 3.70%, the lowest since June 2023 as 2-, 5-, 10- yr yields are 3bp, 3bp, 3bp lower. The Bloomberg dollar index was lower for third day while the yen continues to surge on expectations today’s NFP will come in below expectations and greenlight a 50bps rate cut. Commodities are mixed with base metals higher and oil flat. Today, all eyes on the NFP print at 8.30am ET. Consensus expects 165k jobs being added, with unemployment dropping to 4.2% (our full preview is here). Fed’s Williams and Waller will speak this afternoon before the blackout period begins.

In premarket trading, Broadcom weighed on tech stocks as it falls 7% after the chipmaker gave a revenue forecast that’s seen as disappointing. Other chip stocks are down in sympathy (NVDA -1.3%, AMD -0.9%). US Steel is up 2% after Cleveland-Cliffs’s top executive said he’s still in the market for his rival’s assets. Here are other notable premarket movers:

• Bowlero jumps 12% after the operator of bowling centers reported revenue for the fourth quarter that came in above the average analyst estimate.
• DocuSign ticks 1% lower after the e-signature company reported billings growth that analysts viewed as weak.
• Mobileye slips 2% after Bloomberg reported Intel is considering options for its stake in the automated driving systems provider.
• Planet Labs slumps 9% after the Earth-imaging company’s revenue forecast for the current quarter fell short of Wall Street expectations.
• Samsara rises 4% after the application software company raised its full-year forecast.
• Smartsheet climbs 4% after the software company reported second-quarter results that beat expectations and raised its full-year forecast for adjusted earnings.
• UiPath rises 8% after the software company’s full-year revenue forecast came in ahead of estimates.

Friday’s jobs report will help the Fed decide whether the US economy is heading for a soft landing or a recession after a week of mixed numbers that whipsawed markets. Swap traders are fully pricing in 25 basis points of cuts when Fed officials meet in two-weeks time, with a roughly 35% chance of a 50 basis-point reduction.

“There’s likely to be volatility in markets as we work through whether or not we can actually have a soft landing,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Co. “Investors need to be ready for more volatility, based upon a transition from a rate-hike cycle to a rate-cut cycle.”

As noted in our preview (link here), economists expect today’s report will show a bounce in hiring and a tick lower in the unemployment rate in August, marking a stabilization after July. Payrolls probably rose by 165,000 last month following July’s 114,000 increase, according to the median estimate in a Bloomberg survey of economists. Unemployment probably edged down to 4.2%. “Risk markets are sensitive to growth dynamics rather than to interest rates right now, said Bilal Hafeez, chief executive officer and head of research at Macro Hive. “If we were to see a weak number, risk markets such as equities will take that badly.”

Europe’s Stoxx 600 dropped 0.3% to the lowest in 3 weeks, but was off the lows; even so, the index is headed for the biggest weekly decline in almost a year. A key measure of euro-zone wage growth eased, proving further assurance to ECB officials seeking to lower interest rates next week. Should inflation continue to abate, borrowing costs will be lowered every quarter until they reach 2.5%, according to a Bloomberg survey. Here are the biggest movers Friday:

• InPost surges as much as 8.9%, the best performance in Stoxx Europe 600 Index, as improving profitability in France and the UK helped the Polish parcel-locker operator beat 2Q expectations
• Sectra gains as much as 10%, reaching a record high, after the Swedish medical imaging and cybersecurity firm reported its latest earnings, which included a 10% beat to 1Q Ebitda
• Elis declines as much as 17%, the most since March 2020, after it was said to have made offer for US workwear firm Vestis. Bernstein says the offer may weigh on Elis shares in the short term
• Raiffeisen falls as much as 7.7% after suffering another setback at its Russian unit after a court in the country froze its shares in the subsidiary, further complicating efforts to sell it
• Rubis falls as much as 8.9% after the fuel distributor reported a sharp drop in first-half earnings. Analysts at CIC said the results missed expectations because of non-recurring items
• Volvo Car falls as much as 6.1% to their lowest since January as Goldman Sachs says it sees potential for downside depending on revenue development and better opportunities elsewhere
• Planisware shares slip as much as 3.8% as shareholder Ardian Group looks to exit its stake in the French software company to capitalize on the gains booked since its IPO earlier this year
• Avanza declines as much as 4.1%, the most in a month, after JPMorgan placed the Swedish retail-trading platform and bank on negative catalyst watch leading into its 3Q report
• Baloise Holding falls as much as 3.8% after being downgraded by UBS. Analysts say the insurer is fairly valued and argue reports it could be a takeover target are unlikely to come to fruition
• Next 15 plunges as much as 53%, the most on record and to a four-year low, after the consultancy firm warned results will be materially below expectations this year
• Cairn Homes shares fall as much as 4.6%, the most since December 2022, after the housebuilder confirmed this morning that CEO Michael Stanley has sold 8 million shares in the company

Earlier in the session, Asian stocks were steady, with the regional gauge poised for its worst week since July, amid muted trading as Hong Kong’s market was halted due to a typhoon. The MSCI Asia Pacific Index added 0.1%, erasing earlier losses, but was set to snap three weeks of gains as risk sentiment abates ahead of the US non-farm payrolls report, due later on Friday.  The benchmark is headed for a weekly loss of 2.5% as concern was rekindled of overheating in artificial intelligence stocks. TSMC and Commonwealth Bank of Australia were among the biggest winners. Chinese shares in the mainland slid after news that the US administration plans export controls on critical technologies. Hong Kong scrapped trading for the day as Super Typhoon Yagi passed through the region. Persistent economic weakness in China, that prompted several strategists to lower their outlook on the nation’s stocks, has also quelled enthusiasm for riskier assets.

In FX, the Bloomberg Dollar Spot Index drops 0.2% while the yen has risen to the top of the G-10 FX pile, up 0.5% against the greenback. The Swiss franc is a close second with a 0.3% gain. Currency strategists see a strong chance the yen will test its August high versus the dollar if the payrolls data boost bets for a 50 basis-point move. The Japanese currency rose to trade below 143 against the dollar on Friday. The yen “is where the action will be” if there is any surprise in the figures, said Gareth Berry, a strategist at Macquarie Group Ltd. in Singapore.

In rates, treasuries climbed with US 10-year yields falling 3bps to 3.70%. European government bonds have followed suit although bunds showed little reaction to a downward revision to euro-area second-quarter GDP.

In commodities, oil prices were steady, with WTI trading near $69 a barrel; crude oil is poised for the biggest weekly loss in almost a year on concerns about soft demand and ample supply, even as OPEC+ delayed a planned increase in output by two months. Iron ore remained on track for its worst week since March, with few signs of a recovery for China’s steel market. Spot gold is also little changed near $2,518/oz.

Looking to the day ahead, and the main highlight will be the US jobs report for August at830am. In addition, we’ll get July data on German and French industrial production, along with Italian retail sales. The Fed calendar lists Williams (8:45am) and Waller (11am), the last scheduled events before quiet period lasting until the Sept. 18 policy announcement

Market Snapshot

• S&P 500 futures down 0.6% to 5,480.75
• STOXX Europe 600 down 0.4% to 510.05
• MXAP up 0.1% to 181.95
• MXAPJ up 0.2% to 564.89
• Nikkei down 0.7% to 36,391.47
• Topix down 0.9% to 2,597.42
• Hang Seng Index little changed at 17,444.30
• Shanghai Composite down 0.8% to 2,765.81
• Sensex down 1.1% to 81,256.16
• Australia S&P/ASX 200 up 0.4% to 8,013.38
• Kospi down 1.2% to 2,544.28
• German 10Y yield down 4 bps at 2.17%
• Euro little changed at $1.1116
• Brent Futures up 0.5% to $73.04/bbl
• Brent Futures up 0.5% to $73.03/bbl
• Gold spot up 0.0% to $2,517.51
• US Dollar Index down 0.17% to 100.94

Top Overnight News

• Chinese banks have built a $100 billion short against the US dollar using FX swaps to prop up the yuan — handing easy profits to hedge funds along the way. But the trade exposes the nation’s banks to billions of dollars of potential losses. BBG
• Japan’s MUFG said it would consider shifting more of its massive securities portfolio into Japanese gov’t bonds if/when 10-year yields reach 1.2%. BBG
• Former BOJ governor Kuroda signals the central bank has a lot of tightening to go before hitting a neutral policy rate. BBG
• German industrial production falls short of expectations in Jul, dropping 2.4% M/M (vs. the Street’s -0.5% forecast) and raising the risk of recession for the country. WSJ
• The ECB probably won’t accelerate easing in response to a weakening economy, a survey found. After next week’s expected 25-bp cut, respondents see quarterly reductions through next September, then rates remaining at 2.5% through 2026. BBG
• Nippon Steel proposed a national security agreement to ease US concerns about its takeover bid, Reuters reported. United Steelworkers said the deal needs reworking. Cleveland-Cliffs’ CEO told CNBC he’s still interested in the rival firm’s assets. BBG
• Intel is said to be exploring the sale of part of its stake in Mobileye. Intel also weighing options for its network and edge business: BBG
• Qualcomm has reportedly explored buying pieces of Intel’s design business: Reuters
• Berkshire Hathaway sold about 18.8mln Bank of America common shares for approximately USD 760mln between Sept 3 and Sept 5, according to an SEC filing
• Fed’s Goolsbee says employment and inflation data justify starting the easing process soon and proceeding with multiple rate cuts. Market Watch
• For this morning’s NFP print GIR is looking for headline number of +155k (vs +165k consensus and +114k prior), AHE MoM +.3% (vs +.3% consensus and +.2% prior) and U/E Rate of 4.2% (vs 4.2% consensus and 4.3% prior). After the string of recent weaker economic data points whisper for the print has crept lower to 140kish which is helpful. Vol market pricing in a 120bp move for S&P through the close. Mkt currently pricing in 34bps of cuts for the 9/18 FOMC meeting. We are still firmly in a good (econ data) is good (for stocks) and bad is bad set up. The stock market wants solid economic data and orderly/proactive adjustment cuts in 25bps increments. Powell’s Jackson Hole speech was quite dovish and I think he signaled the September cut is happening (only debate is 25bp or 50bp). If probability of a 50bp cut in Sept grows it will spook the stock market (U/E rate of 4.3% greatly increases the 50bp cut odds). GS GBM
• Berkshire Hathaway sold another $760 million of BofA shares since Tuesday, reaping almost $7 billion since the disposals started in July. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded without a firm direction following a similar lead from Wall Street, with the tone tentative heading into the much-awaited US jobs report, which could be the determining factor between a 25bps or 50bps cut by the Fed after the central bank shifted its emphasis to the labour market. As a reminder, Fed Vice Chair Williams and Governor Waller will be speaking after the jobs numbers ahead of the Fed’s blackout period set to begin this weekend for the September 18th announcement. ASX 200 just about held onto gains at one point, with Utilities, Financials, Real Estate and Gold names countering the underperformance in Energy and Tech. Nikkei 225 was subdued under the 37k mark (and briefly dipped under 36.5k) with mining and industrial names among the worst performers, whilst Nippon Steel shares fell around 3% amid the ongoing spat with the Biden admin after the US intervened in the Nippon Steel takeover of US Steel amid national security risks. Hang Seng saw its Friday trade scrapped amid a typhoon signal. Shanghai Comp saw subdued trade amid the broader tentative mood across the market and lack of Stock Connect flows. In terms of newsflow, former PBoC Governor Yi Gang offered a bleak prognosis of the Chinese economy, whilst the PBoC drained a net CNY 1.1916tln for the week via open market operations, marking the biggest weekly net cash withdrawal in eight months, according to Reuters calculations.

Top Asian News

• Former PBoC Governor Yi Gang, speaking at the Bund Summit, stated that China currently faces weak domestic demand, particularly in consumption and investment. He expressed hope that in the near future, China’s GDP deflator will turn slightly positive. Additionally, Yi hopes that the producer price industry will improve to about zero by the end of this year. He suggests that China should return to a proactive fiscal policy and an accommodative monetary policy.
• PBoC injected CNY 141.5bln via 7-day Reverse Repo at a maintained rate of 1.70%.
• PBoC drained a net CNY 1.1916tln for the week via open market operations, marking the biggest weekly net cash withdrawal in eight months, according to Reuters calculations.
• HKEX confirmed no trading on Friday in securities and derivatives markets due to the issuance of Typhoon Signal No. 8. Stock Connect trading is also suspended for the day. No securities clearing and settlement services will be provided for the day.
• Japan Finance Minister Suzuki said there is a need to examine the impact of potential investment tax hikes on the economy and stock prices when asked about the preproposal, according to Reuters.
• Toyota (7203 JT) to cut 2026 global EV production to around 1mln units, down 30% from previously announced 1.5mln, via Nikkei.
• Former BoJ Governor Kuroda said overnight “A nominal neutral rate, which the Bank of Japan is trying to gradually approach, could be less than 2%,” and “A short-term nominal rate may be less than 2%, maybe around 1.5% or maybe less than that.”
• S&P Global Ratings says China Vanke (2202 HK) is downgraded to “BB-” amid weakening sales and margins; outlook Negative

European bourses, Stoxx 600 (-0.3%) opened the session entirely in the red, and sentiment continued to sour as the morning progressed. Indices then found support and traversed worst levels, but with some choppy price action. European sectors hold a strong negative bias; Media takes the top spot, alongside Healthcare. Energy is towards the foot of the pile, hampered by the broader weakness in oil prices. US Equity Futures (ES -0.6%, NQ 1%, RTY -0.5%) are entirely in the red, as traders position themselves ahead of today’s key risk event, the US NFP report.

Top European News

• ECB’s Elderson speaks on “Nature-related risk: legal implications for central banks, supervisors and financial institutions”; not pertinent to monetary policy.

FX

• DXY is flat ahead of the much-awaited August NFP report, where the headline figure is expected to print at 160k. Should the release come in soft, the YTD low from August 27th sits at 100.51.
• EUR/USD is sitting just above the 1.11 mark with not much follow-through from yet more soft German data and the appointment of Barnier as French PM. Upside sees the late-August peak at 1.1201, downside sees yesterday’s low at 1.1074.
• Flat trade for GBP vs. the USD and EUR, with UK-specific newsflow quiet today. Cable did briefly take out yesterday’s 1.3186 high but is ultimately struggling to move back onto a 1.32 handle
• JPY the best performer across the majors after gaining ground vs. the USD in early European trade. No clear fundamental driver behind the move, but comments from ex-BoJ Governor Kuroda that the short-term nominal rate may be less than 2%, could be a factor. USD/JPY has slipped from an overnight peak at 143.48 to a current session low at 142.07.
• Antipodeans are mildly diverging. AUD is a touch softer vs. the USD but with AUD/USD near the mid-point of the week’s 0.6685-0.6794 range. Similar price action for NZD/USD with the pair contained within this week’s 0.6169-0.6299 band.
• PBoC set USD/CNY mid-point at 7.0925 vs exp. 7.0927 (prev. 7.0989)

Fixed Income

• USTs are bid but not to quite the same extent as European peers after the pronounced two-way action seen on Thursday’s data points and as participants await today’s NFP report. USTs are holding around 115-00+ which marks the December contract high and is just three ticks shy of the September contract peak from early August.
• Bunds are firmer and above Thursday’s ADP-driven 134.29 best to a fresh 134.61 WTD peak. If the upside continues, resistance features at 134.93 before the figure and then the contract high of 135.66.
• Gilts are also benefiting from the general risk tone. Gilts eclipsed the 100.00 mark with nothing of note now until the 100.30 contract high from the 14th of August.

Commodities

• Crude was initially firmer, benefiting from the weaker Dollar. Since, oil turned lower, in-fitting with the general risk tone and as markets await US NFP. Brent’Nov currently around USD 72.75/bbl.
• Spot gold is little changed and in a narrow range but one that is entirely above USD 2500/oz.
• Base metals are steady and unable to benefit from the softer USD which has been overshadowed by the risk tone deteriorating in the European morning.
• Kazakhstan expects a significant reduction in oil production during planned repair period at Kashagan oil field (400k BPD) in October.
• Citi sees the OPEC+ unwind delay and ongoing geopolitics and financial positioning providing price support at USD 70-72/bbl in Brent. Citi recommends selling on a bounce toward USD 80/bbl Brent, as it looks ahead to move down to the USD 60/bbl range in 2025 as a sizeable market surplus emerges.
• Goldman Sachs pushed back their end-2024 copper price target of USD 12,000/t to after 2025 and lowered the 2025 aluminium price forecast to USD 2,540/t (from USD 2,850/t).
• Citi maintains 0-3-month price forecasts for copper at USD 9,500/t, aluminium at USD 2,500/t, and zinc at USD 2,800/t; “We reiterate our cautious outlook for the base metals complex until after the US election when we expect more clarity on US and China policy and improving manufacturing sentiment as Fed rate cuts progress.” (Newswires)
• Indian gov’t is reportedly considering cutting diesel and petrol prices, via Reuters citing India Today sources.
• BofA says that fundamentals for Tin remain solid and sees prices rising to an average of USD 37k/ton by 2026 vs. prev. view of USD 32.5k/ton.

Geopolitics

• US Secretary of State Blinken said 90% of the Gaza ceasefire agreement is agreed upon, but critical issues remain where there are gaps; Incumbent on both parties to get to yes on remaining issues.
• “The Israeli army withdraws from Jenin and its camp after 10 days of military operations”, according to Sky News

US event calendar

• 08:30: Aug. Change in Nonfarm Payrolls, est. 165,000, prior 114,000
  • Aug. Change in Private Payrolls, est. 140,000, prior 97,000
  • Aug. Unemployment Rate, est. 4.2%, prior 4.3%
  • Aug. Underemployment Rate, prior 7.8%
  • Aug. Labor Force Participation Rate, est. 62.7%, prior 62.7%
  • Aug. Average Weekly Hours All Emplo, est. 34.3, prior 34.2
  • Aug. Average Hourly Earnings MoM, est. 0.3%, prior 0.2%
  • Aug. Average Hourly Earnings YoY, est. 3.7%, prior 3.6%
  • Aug. Change in Manufact. Payrolls, est. -2,000, prior 1,000

DB’s Jim Reid concludes the overnight wrap

After much anticipation, we have finally arrived at the latest US jobs report day, which is of crucial importance as the Fed decides how much to cut rates this month. It was only five weeks ago that the last jobs report underwhelmed, with payrolls growth down to just +114k alongside negative revision to the previous couple of months. So the big question today is whether that disappointing report was just a blip, or was it the start of a more serious deterioration.

That last report triggered significant market turmoil, and led investors to immediately dial up the likelihood that the Fed would start cutting rates with a 50bp move. However, it’s also worth noting that the turmoil last month came on the back of several other factors, including the BoJ’s hike that week (hence an unwinding of the yen carry trade) along with a very underwhelming ISM manufacturing print the previous day. So the downside surprise in the jobs report was running into a very tough context. By contrast, the data over the weeks since has been a lot more mixed, with plenty for both sides of the debate to focus on.

On the bright side, yesterday brought a further decline in the weekly initial jobless claims, which is one of the timeliest indicators we get on the state of the US labour market. They fell to 227k (vs. 230k expected) over the week ending August 30, which was an 8-week low. In turn, that also pushed the 4-week moving average down to 230k, which is a 12-week low. Bear in mind that four weeks earlier, the 4-week moving average stood at 241k, so that’s seen a clear improvement in the last month. On top of that, we also found out that the ISM services index remained in the expansionary territory in August at 51.5 (vs. 51.4 expected). So again that points away from a sharper downturn.

That said, yesterday also brought some more negative prints. In particular, the ADP’s report of private payrolls for August fell to just 99k (vs. 145k expected). That’s the lowest it’s been since January 2021, and it was also a 5th consecutive monthly decline for that measure. And of course, the previous day we had the JOLTS report for July, where job openings fell to a three-and-a-half year low.

In terms of what to expect today, DB’s US economists are forecasting payrolls rose by +150k in August, which assumes that we get a rebound from the weather issues from last month’s report. Similarly for the unemployment rate, they see that coming down from 4.3% last month to 4.2%. Their take is that some bounce back in the labour market data would support their baseline view that the Fed should start cutting in 25bp increments. But if the jobs report is weaker than expected, then that could motivate a more aggressive start to rate cuts, with a 50bps move in September on the table. We’ll hear from the Fed’s Williams and Waller today, but the blackout period begins tomorrow ahead of the next meeting, so today is the last opportunity we’ll get to hear from Fed officials before their decision.

Going into the report, markets slightly dialled back the chance of a 50bp rate cut, which was down to 41% by the close, although it’s ticked up again overnight to 43% as we go to press. That trend yesterday was supported by the stronger ISM services release, which also saw the prices paid component rise to 57.3 (vs. 56.0 expected). However, the total amount of rate cuts priced over the next 12 months was little changed at 220bps by the close, and 2yr Treasury yields saw a marginal decline to their lowest in nearly two years (-1.1bps to 3.74%). 10yr yields were down -2.8bps to 3.73%, their lowest since June 2023. Overnight that trend has continued, with the 2yr yield down -1.2bps to 3.73%, whilst the 10yr yield is down a further -1.3bps to 3.71%.

US equities also struggled going into the payrolls release, with the S&P 500 (-0.30%) losing ground for a 3rd consecutive day. So September is continuing to live up to its reputation as the weakest month for the index, with the S&P 500 already down -2.57% since it began. Remember if it does end the month lower, it would be the 5th consecutive September that it’s lost ground now. Those losses also came despite a strong performance for the Magnificent 7 (+1.56%). This was led by Tesla (+4.90%), which outperformed after announcing that it plans to launch its advanced driver assistance system in Europe and China in early 2025. But the equity mood was more downbeat otherwise, with the equal-weighted S&P 500 (-0.61%) and the small cap Russell 2000 (-0.61%) underperforming.

Overnight that weaker trend has continued, with futures on the S&P 500 (-0.09%) and the NASDAQ 100 (-0.38%) both pointing towards further losses. In part, this follows an underwhelming outlook from chipmaker Broadcom after the market close, with its shares down by nearly -7% in after-hours trading. Meanwhile in Asia, the major indices have lost ground as well, with declines for the Nikkei (-0.49%), the KOSPI (-0.84%), the Hang Seng (-0.07%), the CSI 300 (-0.27%) and the Shanghai Comp (-0.23%).

Over in Europe, the main news yesterday was that French President Macron named Michel Barnier as the new Prime Minister. It follows the legislative elections that took place in July, after which no party or grouping was able to achieve a governing majority in the National Assembly. Barnier comes from the centre-right Les Républicains, and has significant experience in the EU, having most recently served as their chief Brexit negotiator.

When it came to European markets, equities performed similarly to the US, and the STOXX 600 (-0.54%) posted a fourth consecutive decline. Sovereign bonds also posted similar moderate gains, with yields on 10yr bunds (-1.7bps), OATs (-2.6bps) and BTPs (-1.4bps) all moving lower.

To the day ahead now, and the main highlight will be the US jobs report for August. In addition, we’ll get July data on German and French industrial production, along with Italian retail sales. From central banks, we’ll hear from the Fed’s Williams and Waller.

Executives of ChatGPT maker OpenAI have discussed new pricing models that cost as much as $2,000 per month for upcoming advanced large language models, such as a new reasoning-focused LLM dubbed “Strawberry” and a new flagship LLM called “Orion,” The Information reports. This news follows Elon Musk’s public criticism of OpenAI’s transition from a non-profit to a hybrid “capped profit” business model. 

People with direct knowledge of OpenAI’s proposed subscription price, which could soon cost some users $2,000 a month for premium LLMs, said nothing is final, suggesting there are ‘strong doubts the final price would be that high.’ 

The Information pointed out, “Still, it’s a notable detail because it suggests that the paid version of ChatGPT, which was recently on pace to generate $2 billion in revenue annually, largely from $20-per-month subscriptions, may not be growing fast enough to cover the outsize costs of running the service. Those costs include the expenses of a free tier used by hundreds of millions of people per month.” 

There will likely still be a base tier but for more advanced models, such as Strawberry and Orion, which include additional thinking or processing time, more computing power only means more power costs.

The higher price point suggests that OpenAI executives are comfortable with the current white-collar demand and will likely be able to afford pricer LLMs.

New pricing discussions come as venture capital firm Thrive Capital and a handful of big tech companies, such as Apple and Nvidia, plan to invest in the Microsoft-backed OpenAI at (or around) a $100 billion valuation. 

Meanwhile, in August, Elon Musk filed a new lawsuit against OpenAI and its chief executive, Sam Altman, reviving his claim that the startup backtracked on its mission to benefit humanity after signing a commercial deal with Microsoft.

“Elon Musk’s case against Sam Altman and OpenAI is a textbook tale of altruism versus greed,” the lawsuit read, adding, “Altman, in concert with other defendants, intentionally courted and deceived Musk, preying on Musk’s humanitarian concern about the existential dangers posed by AI.”

It said Altman and OpenAI co-founder Greg Brockman “assiduously manipulated Musk into co-founding their spurious non-profit venture by promising that it would chart a safer, more open course than profit-driven tech giants.”

Since 2019, Microsoft has invested $13 billion in OpenAI, giving the big tech firm a massive lead in the AI race over other Silicon Valley giants like Apple. 

Back to The Information’s report: If the story is correct, AI monthly subscriptions are about to get much more expensive for some OpenAI users. Inflation…

Authored by Charles Hugh Smith via OfTwoMinds blog,

Among the big winners of the Everything Bubble is–yes, I know you’re shocked–Wall Street.

Is the “Everything Bubble” about to pop? Let’s start with what we’re told: there is no bubble , all the assets soaring to unprecedented heights are reasonably priced at a “permanently high plateau” because of AI, scarcity of housing, scarcity of Ferraris, interest rates trending down, the Fed waving dead chickens around the campfire, people buying toothpaste, and so on: you name it, it’s a reason for assets to drift higher.

This all sounds rather splendid, but somehow the pump inflating the bubble goes unmentioned: it’s the money, Honey , the tens of trillions of yen, yuan, euros, dollars, pesos, etc., being borrowed or conjured into existence since the last spot of bother in 2008, where each unit of currency enters the global free-for-all chasing assets.

Thanks to historically low yields, cash is trash and the way to make a killing is to rotate from AI chip makers to Ferrari to Colgate, and then on to the next hot sector: maybe uranium, maybe bat guano, maybe a new doggy-themed crypto, maybe the next iteration of the yen carry trade, it doesn’t really matter because capital is digital and therefore mobile.

Hand-in-hand with the endless spew of new “money” and credit are financialization and globalization , which have transformed every asset into a fully globalized, commoditized asset that can be securitized, packaged, collateralized and leveraged in a financier’s Heaven of finance becoming the measure of all things .

The house across the street is no longer shelter: it’s a financialized asset that’s now part of a portfolio of rental properties owned (and leveraged) by some entity based in Dubai, which might securitize the portfolio and sell it to pension funds in Norway.

Or it’s one of dozens of short-term vacation rentals (STVR) in a wealthy family’s private wealth management portfolio.

The same holds true for every asset on the planet. Farmland isn’t for growing food–it’s for growing wealth as the global “scarcity” of places to stash capital drives its value out of the reach of those who would actually like to use the land to grow food.

For the wealthy, what’s abundant is credit, and what’s scarce is assets to soak up the sea of ​​capital sloshing around the wealth management funds, philanthro-capitalist foundations, and other outposts of the top 0.1%, which as this chart illustrates, have ridden the credit-fueled Everything Bubble to unprecedented heights of private wealth.

We’re told the bubble is a tide raising all boats, but this is, ahem,misinformation, as the bottom 50%’s share of the financial windfall remains a signal-noise of 2.6%.

The primary effect of the Everything Bubble is an extreme of wealth-power inequality. As the chart above illustrates, the wealthy got much richer while everyone else acquired more debt, ie the obligation to pay more of one’s earnings to the wealthy who own the mortgage, auto loan, student loan. etc.

There’s a funny little effect of extreme wealth-power inequality known as social disorder which can manifest in all sorts of equally funny ways, as popular uprising, wildcat strikes, opting out , civil disobedience, and various other ways of expressing no mas .

Here we see just how extreme the Everything Bubble has become in residential real estate, nearly doubling the insanity of the 2006 housing bubble. Recall that the Case-Shiller Index tracks the market price of the same houses over time, so there’s no way to game the statistics.

Among the big winners of the Everything Bubble is–yes, I know you’re shocked–Wall Street , as the broker-dealer index has outpaced even the bubblicious S&P 500 stock index.

The Everything Bubble is global , which means its deflation is going to hurt the entire global economy. Consider this chart reflecting the concentration of China’s household wealth in housing: almost 80% of all household wealth is in housing, a bubble which is now popping despite the authorities’ efforts to reinflate the bubble. Prices are off 25% to 37% in Tier 1 cities, and even more in Tier 2 and 3 cities.

The reverse wealth effect as the primary store of household wealth wilts will be monumental. Trust isn’t just personal? trust is the critical glue in markets and governance. Once trust is lost, it’s somewhere between difficult and impossible to win it back.

That the bloom is off the Everything Bubble Rose is visible in anecdotal evidence dribbling in from the real world: housing valuations in various markets are off 25% from their peak, housing inventories are rising, sales are slowing, restaurant chains are going belly-up , credit card debt is soaring to new heights, dollar-store stocks are cratering, and so on.

But hey, the real world doesn’t count? the only thing that matters is financialized assets going up. If the yen-quatloo pair is taking off, everything’s good.

There are a couple of funny things about amassing $315 trillion in debts globally to drive “growth”: one is the interest due on all that debt , which becomes unsustainable should yields rise, and inflation, which either pushes yields higher, making it impossible to continue funding “growth” with more debt, or it lays waste to the purchasing power of wage earners’ incomes, popping the bubble of free-spending consumption propping up the global economy and debt bubble .

Gordon Long and I explain these dynamics in our new podcast :

To summarize: will the Everything Bubble pop? Yes.

Will the authorities try to reinflate the bubble? Yes.

Will it work? No.

*  *  *

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The Harris honeymoon must be over…

As even CNN admits that things are not as rosy as the manufactured euphoria around Kamala’s ‘second coming’ would suggest, the Harris campaign has resorted to the old Democratic Party dirty tricks playbook – disinformation.

This mini-campaign began – like always – with mainstream media’s assistance. In this case, The Associated Press drops a story that insinuates (callous, evil, gun-toting – our words, not theirs) Trump running-mate JD Vance sees school shootings as a “fact of life”.

Wow, that sounds callous!! Perfect.

Except… the context is completely (and clearly intentionally) removed. Thankfully, in America (as opposed to Brazil), we still have X and its liberty-loving community-noters who swiftly destroyed AP’s narrative…

Vance’s full comment was as follows:

“I don’t like that this is a fact of life.”

Sounds sensible – who would ‘like’ that? Further, Vance pushed for moire security:

“But if you are a psycho and you want to make headlines, you realize that our schools are soft targets. And we have got to bolster security at our schools.

We’ve got to bolster security, so if a psycho wants to walk through the front door and kill a bunch of children, they’re not able.”

Rational, common-sense strategy to counter the ‘psychos’ in society.

After the ‘Community Note’, AP then deleted the post on X, and added ‘context’…

But that didn’t matter to the Harris campaign who jumped on the fake news bandwagon, issuing a statement decrying the heartless Vance’s out-of-context statement, and at the same time somehow claiming that a vote for Harris is a vote to keep your children safe from crime (quick question – why didn’t she ‘keep children safe from crime’ for the last four years?)

Watch Vance’s full comments here (and decide for yourself)…

Not even close to what he actually saidpic.twitter.com/RhjzwLAhc1

— Greg Price (@greg_price11) September 6, 2024

Perhaps AP should be rebranded – Always Propaganda?

Authored by Naveen Athrappully via The Epoch Times (emphasis ours),

Solar energy firm Lumio filed for Chapter 11 bankruptcy after getting caught up in a “severe liquidity crisis” following a fall in market demand.

The Utah-based company made the filing at the U.S. Bankruptcy Court for the District of Delaware to “complete a value-maximizing sale process and strengthen its financial position,” according to a Sept. 3 statement. The company has already entered into an agreement with an affiliate of White Oak Global Advisors, which has agreed to buy “substantially all” of the firm’s assets for $100 million in a credit bid. In the case the bid is successful, White Oak also intends to provide “significant equity ownership” to Lumio employees.

“The company anticipates completing the sale process in less than two months. During the sale process, the company’s operations will continue as usual without interruption,” the statement said.

In a court declaration, Jeffrey T. Varsalone, a Lumio board member, said the company has faced a “severe liquidity crisis” over the past year, which he attributed to “a sharp decline in demand in the solar market and various macroeconomic headwinds.”

Varsalone blamed increases in inflation and a subsequent jump in interest rates to have resulted in “reduced demand across the entire solar power industry,” thus negatively affecting Lumio’s financial performance.

The reduced demand and revenue eventually led to the deterioration of Lumio’s liquidity position, the board member said.

White Oak has provided Lumio with $8 million, which is expected to support the company’s operations as the sales process proceeds.

“Today’s announcement marks an important step forward for Lumio and a continuation of our deliberate efforts to position the business with the strategic, operational, and financial foundation to operate at the forefront of the solar industry as it enters its recovery phase,” Lumio CEO Andrew Walton said.

“With enhanced financial stability and the support of new ownership following the completion of our sale process, we will be well-positioned to capitalize on growth opportunities.”

Solar Bankruptcies

Multiple solar companies have gone bankrupt over the past year. Last month, San Jose-based SunPower, for example, filed for Chapter 11 bankruptcy, with $1.1 billion in debts.

The company had announced in April that it would lay off around 1,000 employees to transition to a “low fixed-cost model.” The firm said the solar market had been “slower to recover” than it initially expected.

In February, solar installer Sunworks and three subsidiaries ceased operations and filed for bankruptcy.

According to a post by Solar Insure, a provider of solar-monitoring and warranty-protection services, there have been more than 100 solar bankruptcies in 2024 alone, a number “unseen before” in its “almost 20 years in the solar sector,” the company said.

The firm blamed factors such as high interest rates and borrowing challenges faced by solar companies for contributing to the bankruptcies. High rates make borrowing expensive, discouraging customers from installing solar devices. The rise in rates boosted the cost of capital for businesses, affecting their financial situation.

“Smaller contractors, in particular, struggled to absorb these increased costs, lacking the financial buffers of larger firms. This disparity led to a disproportionate impact on these smaller players, many of whom were forced to close their doors,” the post said.

During an interview with The Epoch Times earlier this year, Solar Energy Industries Association spokesman Morgan Lyons said they “expect installations to fall off sharply in 2024.”

A new rule implemented in April 2023 by the California Public Utilities Commission (CPUC) substantially reduced the amount of money customers who installed solar energy can make by selling excess energy back to the grid.

“All over California we are seeing the grim reality of how the CPUC’s cuts to solar are taking livelihoods away from thousands of families,” Bernadette Del Chiaro, executive director of the California Solar and Storage Association, said in a statement in December 2023.

Jill McLaughlin contributed to this report.

Authored by Owen Evans via The Epoch Times (emphasis ours),

French President Emmanuel Macron has named the European Union’s former Brexit negotiator Michel Barnier as France’s next prime minister.

Barnier’s new role was announced on Sept. 5 after a caretaker government was in place for more than 50 days.

Barnier’s new role was announced on Sept. 5 after a caretaker government was in place for more than 50 days.

The 73-year-old led the EU’s talks with Britain from 2016 to 2021 over its exit from the bloc.

Before that, the conservative politician held roles in various French governments and also served as the EU’s commissioner.

Barnier’s appointment follows weeks of intense efforts by Macron and his aides to find a candidate who could form a new government, two months after a snap election defeat.

The leader of the right-wing populist National Rally Party and Macron’s two-time presidential rival, Marine Le Pen, said on social media platform X that Barnier “seems to meet at least the first criterion” that had been requested.

Michel Barnier semble répondre au moins au premier critère que nous avions réclamé, c’est-à dire, quelqu’un qui soit respectueux des différentes forces politiques et capable de pouvoir s’adresser au Rassemblement national, qui est le premier groupe de l’Assemblée nationale. pic.twitter.com/tW7rjULMNA

— Marine Le Pen (@MLP_officiel) September 5, 2024

“That is to say, someone who is respectful of the different political forces and capable of addressing the National Rally, which is the first group in the National Assembly,” she said.

However, Le Pen wrote that she would “not participate in a government of any kind whatsoever of Mr Barnier’s.”

“For the rest, that is to say on the fundamental issues, we are waiting to see what Mr Barnier’s general policy speech is and the way in which he leads the compromises that will be necessary on the budget,” she wrote.

National Rally’s president, Jordan Bardella, said that “after an interminable wait, unworthy of a great democracy” his party acknowledged Barnier’s appointment.

“We will judge his general policy speech, his budgetary decisions and his actions on the evidence,“ he said. ”We will plead for the major emergencies of the French, the cost of living, security, immigration, to finally be addressed, and we reserve all political means of action if this is not the case in the coming weeks.”

‘Democratic Coup’

The left-wing New Popular Front alliance (NFP) had nominated civil servant Lucie Castets for prime minister.

“The President has just decided to officially deny the result of the legislative elections that he himself had called,” NFP leader Jean-Luc Melenchon said. “It is not the New Popular Front, which came out on top in the election, that will have the prime minister. … The election was therefore stolen from the French people. The message was denied.”

Left-wing lawmaker Mathilde Panot, who, like Melenchon, is part of La France Insoumise (France Unbowed), which includes the Communist Party, the Greens, and the Socialist Party, called for its supporters to join them “on the streets” on Sept. 7 to protest against an “unacceptable democratic coup in a democracy.”

Last month, Macron said he would not agree to a government led by the left-wing NFP, further extending the ongoing multi-party stalemate that prevented the nation from forming a government since a snap election in June.

He said at the time that France needed institutional stability and that a government led by the NFP would immediately face a no-confidence vote from all other parties.

“The Socialist Party, the Greens and the Communists have not yet proposed ways to cooperate with other political forces. It is now up to them to do so,” Macron said.

He said he would start new consultations with party leaders on Sept. 3, and he urged the left to cooperate with other political forces.

Macron called a snap election on June 9 that delivered a hung parliament, creating political uncertainty. He has been holding talks on a new government since the election and said he would continue to do so.

No group emerged from the snap election with a clear majority, with the vote evenly split among the NFP, Macron’s centrist political party En Marche, and the right-wing National Rally.

Reuters contributed to this report.

President Putin has continued to downplay Ukraine’s major Kursk invasion, which has resulted in Russian territory occupied by Kiev forces, and has instead maintained that capturing and holding all the Donbass in eastern Ukraine remains the goal.

“We have to deal with these thugs who made it into Russia,” he said at an event while visiting Russia’s east on Thursday. He’s yet to launch a broader general mobilization despite the assault on Kursk and the border region. 

He presented the Kursk operation as essentially a trap which he will not fall into. “The aim of the enemy [in Kursk] was to force us to worry, hustle, divert troops and to stop our offensive in key areas, especially in the Donbas, the liberation of which is our main primary objective,” Putin described at a forum in Vladivostok.

Putin further painted a picture of the Kursk operation already having backfired on the Zelensky government. He said Ukraine’s leadership sent “quite well-prepared units” into Kursk – but this only served to allow for Russia to make a quicker advance in Donetsk. 

“The enemy weakened itself in key areas, our army has accelerated its offensive operations,” he asserted. He still sought to emphasize that Russian forces have begun to push the Ukrainian invaders back from Russian territory, however. But Putin said, “Our armed forces have stabilized the situation and started gradually squeezing [the enemy] out from our territory.”

Yet the Kursk fight has been on since Aug. 6 – and this alone has been a big symbolic blow for Kremlin war planners. It is the biggest incursion into Russia since WW2. “It is the holy duty of the Russian army to do everything to throw out the enemy from this territory and to protect our citizens,” Putin additionally declared.

President Zelensky in an interview with NBC this week claimed that Moscow had been forced to divert 60,000 soldiers from Ukraine to Kursk, but this has not been verified. 

Currently there is broad consensus among analysts that Ukraine’s eastern city of Pokrovsk could fall at any moment. Russian forces are within five miles away, amid shelling and attacks on the city’s outskirts. If Pokrovsk falls, Russia will be in a position to more easily gobble up the rest of Donetsk, after which its hold on the whole of Donbass will be secured.

Al Jazeera reviews the situation, utilizing fresh battlefield maps, as follows:

Meanwhile Russian forces continued to press on towards Pokrovsk, a city in Ukraine’s eastern Donetsk region which has been their focus since they seized Avdiivka in February. They have formed a 29km (18 mile) long salient stretching to the west of Avdiivka since then and are within about 8km (5 miles) of the outskirts of Pokrovsk.

During the past week, Russian forces overran Novohrodivka and entered Hrodivka, two towns east of Pokrovsk. They also claimed to be on the outskirts of Myrnohrad, a town immediately to the east of Pokrovsk.

2/ Russian forces recently advanced in the Pokrovsk direction amid continued offensive operations in the area on September 4.

Geolocated footage published on September 4 indicates that Russian forces recently advanced south of Novohrodivka and marginally advanced west of… pic.twitter.com/PdlGexfStd

— Institute for the Study of War (@TheStudyofWar) September 5, 2024

With all eyes on Pokrovsk in Ukraine and Kursk in Russia, the White House is still said to mulling greenlighting long-range missiles for Kiev, and their possible use on targets inside Russia.

The latest news wire out of Washington and from the administration is that the “US sees little value in sending Ukraine long-range ATACMS” systems.

Intel and Japan are teaming up.

In fact, the Japanese national research institute is going to be teaming up with Intel to “build a research and development center in Japan for cutting-edge semiconductor manufacturing technology”, according to a new report from Nikkei Asia.

Japan’s National Institute of Advanced Industrial Science and Technology (AIST), under the Ministry of Economy, Trade, and Industry, will establish a new facility in three to five years equipped with extreme ultraviolet lithography (EUV) technology.

Intel will contribute its expertise in chip manufacturing using EUV. The center, the first of its kind in Japan, will allow equipment and materials manufacturers to pay a fee for prototyping and testing.

Nikkei reports that the initiative aims to strengthen Japan’s capabilities in the chip manufacturing sector, with total investment expected to reach hundreds of millions of dollars.

EUV (extreme ultraviolet lithography) is crucial for semiconductor manufacturing at scales of 5 nanometers and smaller, allowing more transistors to fit on a chip and increasing computing power.

And EUV equipment is expensive, costing over 40 billion yen ($273 million) per unit, making it a significant investment for suppliers of materials and equipment.

The U.S. has tightened restrictions on EUV-related exports to China amid growing strategic competition with China, slowing the return of research data to Japan. Having EUV equipment available at a domestic research facility will reduce this barrier, according to the report. 

ASML Holding, based in the Netherlands, is the leading manufacturer of EUV lithography equipment. However, semiconductor production involves over 600 steps, requiring a broad range of specialized equipment and materials.

Japanese companies like Lasertec dominate the EUV inspection equipment market, and firms like JSR specialize in photosensitive materials for silicon wafer circuits.

Intel aims to strengthen ties with these Japanese suppliers through the new research center.