Texas Regulator Tells Tesla He Will Subpoena Data Logs From Fatal Crash

Texas Regulator Tells Tesla He Will Subpoena Data Logs From Fatal Crash

It was no sooner than we wrote yesterday that Elon Musk had gone “all in” in insisting that a Tesla involved in a fatal Houston wreck didn’t have Autopilot turned on than Texas regulators have “called”. Now, we move to the showdown.

Texas police are going to be serving search warrants on Tesla to get the data involved in the fatal crash, Reuters reported late Monday. To matters even more interesting, Mark Herman, Harris County Constable Precinct 4, said he had already obtained witness statements indicating there was no one in the drivers’ seat prior to the wreck. 

“We have witness statements from people that said they left to test drive the vehicle without a driver and to show the friend how it can drive itself,” Herman said.

He also said that he had not seen the data that Musk claimed Tesla had sifted through: “If he is tweeting that out, if he has already pulled the data, he hasn’t told us that. We will eagerly wait for that data.”

On Monday, we reported about thje Tesla Model S wreck that killed two men when the vehicle with “no driver” slammed into a tree and caught fire. It appeared to be an obvious instance where Autopilot and/or Full Self Driving could and would be the “front and center” suspect for the wreck.

Then came what can only be described as either a baffling truth, or an all-in moment (as one Twitter user called it): Elon Musk took to Twitter Monday night to assert in a tweet that data logs “recovered so far” show Autopilot was not enabled in the car and that Full Self Driving had not been purchased on the vehicle.

Leaving out the unknown of what “so far” means and how it basically negates Musk’s point, we pointed out that Musk’s Tweet was stunning for a couple of reasons:

  1. The fact that nobody was in the driver seat of the car makes Autopilot the “Occam’s Razor” explanation for the wreck. The NY Times also wrote earlier in the day that the men in the vehicle had discussed Autopilot before leaving for their drive together, in addition to Herman’s witness statements. 
  2. It comes off as a preemptive PR effort to potentially mitigate and/or influence the outcome of the National Highway Traffic Safety Administration (NHTSA) and the National Transportation Safety Board (NTSB)’s look into the wreck.
  3. If it turns out that Autopilot was, in fact, off, the circumstances behind the wreck become even more baffling. But if it turns out that one of the regulators finds that Autopilot and/or FSD was on during (or seconds before) the wreck, Musk may need further PR efforts to repair the harm it could do to him and/or his brand. Several people on social media have brought this up:

Additionally, it has already been noted that these type of preemptive suggestions prior to investigations are frowned upon by regulators:

Recall, the Tesla slammed into a tree near Hammock Dunes Place in the Houston Area, a local NBC affiliate reported. The wreck was in the “Carlton Woods subdivision near the Woodlands,” the report says. According to authorities, “the vehicle failed to negotiate a cul-de-sac turn, ran off the road and hit the tree.”

Of the two occupants, one was seated in the passenger seat of the front of the car while the other was seated in the passenger seat of the back of the car. A reported 23,000 gallons of water needed to be used to extinguish the flames because the Tesla’s battery “kept reigniting”. 

The National Highway Traffic Safety Administration (NHTSA) and the National Transportation Safety Board (NTSB) are aware of the fatal Tesla crash that killed two, which occurred on Saturday night in Spring, Texas. Both agencies are sending investigators to conduct a safety analysis. 

“NHTSA is aware of the tragic crash involving a Tesla vehicle outside of Houston, Texas. NHTSA has immediately launched a Special Crash Investigation team to investigate the crash. We are actively engaged with local law enforcement and Tesla to learn more about the details of the crash and will take appropriate steps when we have more information,” the NHTSA told local news KHOU11 in a statement. 

And the NTSB tweeted Monday afternoon that their investigation team, “in coordination with the Harris County Precinct 4 Constable’s Office,” will “conduct a safety investigation of the fatal Apr. 17, 2021, Tesla vehicle crash near Spring, TX.”

NTSB also said their “investigation would focus on the vehicle’s operation and the post-crash fire. NTSB investigators will arrive in the area later this afternoon.” 

Sitting across the table from regulators, Musk has once again pushed “all in”. So far, he has been able to defy the odds and suck out. Will that remain the case?

Tyler Durden
Tue, 04/20/2021 – 09:10

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“Something Wicked This Way Comes”

“Something Wicked This Way Comes”

Authored by Bill Blain via MorningPorridge.com,

Watching The Sky For Clues

“When beggars die, there are no comets seen; the heavens themselves blaze forth the death of princes….”

There is a general sense that “something wicked this way comes” towards current priced for perfection markets, but trying to define the exact no-see-um likely to trigger a market correction or meltdown is a notoriously pointless game. However, there are plenty of ways to prepare for whatever comes next…

It’s never events you predict or expect that roil markets – it’s the no-see-ums, the unexpected shocks and surprises that snowball and trigger corrections, meltdowns and crashes.

Predicting the exact nature of no-see-ums is like waiting for a meteor thats spent billions of years wandering the solar system to neatly land in your catchers glove – it just ain’t going to happen. Yet, It feels like everyone is watching the heavens for portents of the next/coming crisis… Does the Greensill scandal, or the Archegos conflabulation hint at further scandals rooted in greed set to floor markets?

They are probably wasting their time looking for detail in single stars or constellations. They would be better to pick a big patch of the sky and watch. Meteor showers, which occur as the earth passes through the tails of old comets can pretty much be predicted. It hints that can have an inkling of timing and direction from whatever bas things might be coming towards markets.

Markets are about sentiment – understanding its direction can give a good idea of what may happen. Sure, there are multiple sentiment indices to peruse and ponder, but I prefer asking folk I know about what is bothering them.

Talking to a number of fund managers yesterday, most agreed the market seems due some kind of correction – it is just too perfectly priced for perfection. As prices make lower highs and higher lows, there is a definite feel momentum is slowing. The coronavirus newsflow is anything but perfect – new variants, new nations being added to “no-travel” red-lists, and few real reasons to expect the global travel economy to open as fast as airline stocks are pricing.

Not everyone is panicking. Some think the market is priced for a period of flatline activity, taking a breather before ultra-low interest rates and the sheer volume of money pumping into financial assets triggers a resumption in the stock upside. Global trade is recovering. Supply chains are being re-established.

There are an increasing number of money managers hedging the current market by going back into bonds – extending duration to juice returns and beat inflation at the long-end – taking the view bonds will rally on the back of any equity correction. Others think the trick is to buy bonds ahead of the sell off, expecting central banks will intervene to stabilise markets if stocks slip, and then exit quickly to re-invest in the inevitable stock price recovery. That’s exactly what happened last March.

Other folk are keeping a weather eye on inflationary signals – a good reason to exit any concept of a bond hedge. But what would it mean for stocks? Without the oxygen of ultra-low rates will equities continue to rally? In an inflationary environment driven by growth – stocks are good. But if we see an over-hyped post-pandemic recovery slow into recession plus inflation; Stagflation – a distinct possibility if the recovery gloss wears thin – then where is all that money going to go?

More than a few fund managers believe the correlation between bonds and equities – where bond prices and equity prices rose together as a result of the QE/low rate distortion – is now breaking down. That makes sense as Central Banks look to normalise rates. When we see rates start to rise – it spells massive pain for over-indebted zombie junk, triggering all kinds of consequences for economic growth.

And, Central Banks may not be that concerned about inflation – a few years of modest inflation could inflate away significant amounts of their burgeoning national debt.

So – where to put money instead?

The traditional investment world – listed bonds and stocks – is looking jaded, tired and vulnerable. The consequences of years of distortion as a result of hasty post 2008 regulation, subsequent unnecessary tinkering with market mechanisms, and the pernicious consequences of addicting markets to low rates and flooding liquidity from QE, are becoming clear.

Much of the stock market today looks a lottery – which stocks will be quadruple baggers on the back of mispriced money driving exaggerated hopes? Its driven by FOMO, greed, inequality, and made markets less stable. When market rallies are driven by taxi-drivers and bored marketing executives bigging-up each other on Reddit sites about crypto-currencies and EV makers, we are in serious trouble trying to explain the logic of stock moves.

The answer is to ignore it. Forget about the mistakes others are making.

Fundamentals and logic is out the window. The trick is to ignore the noise. Focus on strategies instead:

  • Prepare for inflation: what assets are less likely to suffer? Assets where their underlying income and returns move in line with inflation – which isn’t just inflation-linked bonds. Most “rents” will move in line with inflation – rents meaning anything from property, leases, contracted payments, and even supply chain financing!

  • Prepare for liquidity crisis: famously there are 27 doors market “entry” in the New York Stock exchange. There is said to be only one marked “exit”. When the rush for the exits starts, don’t get caught in offered-only markets. Stick with liquidity – which in bond terms means US Bonds.

  • Get Real: think about alternative assets that offer returns based on the performance and income garnered by real assets rather than notional financial moves. Asset backed, private debt and equity, and outright ownership.

  • Understand the Zeitgeist and Fashions: some assets will remain deeply unpopular, from smoking to fossil fuels – but critical. Look at where you are sitting, what you are wearing and what you do through today: something will have been dug out the ground, transported around the planet or grown on a farm. We can’t do without them. You can’t make steel without metallurgical coal, you can’t make paints without oil, and won’t get a new fridge without global shipping. There are luxury/stupid anti-environment plays like coin-mining that will get wiped out, but other income streams will survive intact…. Or society wont…

In the meantime… lets standby to standby waiting to see where this market goes…

Tyler Durden
Tue, 04/20/2021 – 08:49

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Conservative Laschet Will Be German Ruling Party’s Candidate For Chancellor In First Post-Merkel Vote

Conservative Laschet Will Be German Ruling Party’s Candidate For Chancellor In First Post-Merkel Vote

Following a series of disappointments that has seen a string of would-be successors to Chancellor Angela Merkel rise and fall, Germany’s Christian Democratic Union, the dominant party in the country’s ruling coalition, has finally chosen a successor to the long-ruling Merkel.

On Monday, Conservative Armin Laschet put an end to a messy standoff over the future of Germany’s most powerful political party when he clinched the nomination to run for the chancellorship, signaling that, after 16 years of Merkel’s centrism, Germany might be heading in a more conservative direction.

Laschet, who, as leader of the CDU, is firmly entrenched within the party establishment, fended off an upstart challenge by Markus Soder, the minister-president of Bavaria and leader of the Christian Social Union in Bavaria, which serves in a ruling coalition with the CDU.

With rising fears about the liberal “Greens” potentially stealing power away from the German political establishment, Bloomberg noted that By picking the 60-year-old moderate, Germany’s conservatives are “foregoing Soeder’s greater electoral appeal and making a potentially risky bet that Laschet will be able to lift his flagging poll numbers, even as the Greens close in.”

Outside the ruling coalition, the Greens already have the biggest presence in the Bundestag following the parliamentary vote in 2019.

Source: Politico

In a statement acknowledging Laschet’s victory, Soeder – never one to skimp on the dramatic flourishes – proclaimed that “the die is cast”.

“The die is cast: Armin Laschet will be the chancellor candidate of the Union,” Markus Soeder, leader of the Christian Social Union (CSU) Bavarian sister party of Laschet’s Christian Democrats (CDU) told a news conference.

“The CDU met yesterday and decided. We accept that, and I respect that,” Soeder said, ending a damaging rift in the CDU/CSU alliance known as ‘the Union.’ “I called Armin Laschet and congratulated him. I told him that we as the CSU accept it. We offered him our full support. We will support him without a grudge and with all our power.”

As for the Greens, Annalena Baerbock, a 40-year-old political scientist and foreign-policy expert, was named the party’s first official chancellor candidate on Monday. She called out the conservatives for all the “mudslinging” that has taken place during the contest so far.

As analysts try to parse what all of this means for the ruling CDU, Bloomberg pointed out that the fact that Germany’s dominant party wound up in such a mess with just five months to go to polling day is a testament to the difficulties of moving past the 66-year-old Merkel, who has governed for 16 years and dominated the CDU for a generation.

Source: Bloomberg

While it’s still on track to be the biggest party in the next parliament in the latest polls, the CDU-CSU is heading for its worst-ever result in a federal election and is facing a challenge by the Greens to become Germany’s strongest force. That leaves Laschet with little time and little margin for error.

Tyler Durden
Tue, 04/20/2021 – 08:37

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WeWork Will Accept Payment In Bitcoin As Venmo Start Allowing Customers To Trade Crypto

WeWork Will Accept Payment In Bitcoin As Venmo Start Allowing Customers To Trade Crypto

Remember WeWork? The money-incinerating, coworking giant created by megalomaniac Adam I will live forever, be king of the world and be the first trillionaire Neuman and backed by SoftBank, was the first company to demonstrate just how big the asset bubble is when its IPO spectacularly imploded in late 2019, leading to questions about overvaluation, a bitter and acrimonious legal fight between Neuman and his sponsor, Masa Son (whose business acumen were seriously tarnished), and hammered other similarly overvalued stocks for weeks. Well, after a lengthy hiatus, WeWork decided to give going public a second try by merging with a SPAC.

But more apropos, the company whose entire business model is being “hip” with the “disruptive” zeitgeist even if it means burning even more cash, decided to at least try and capitalize on the latest crypto mania, and this morning WeWork announced that “it will begin servicing a new economy” by now accepting payment in select cryptocurrencies, and that in partnership with BitPay and Coinbase, “the company will expand its flexibility by utilizing cryptocurrency for inbound and outbound transactions.”

Through BitPay, a cryptocurrency payment service provider, WeWork will accept Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC), Paxos (PAX), and several other cryptocurrencies as payment for its offerings. WeWork will also hold the currency on its balance sheet. The company will pay landlords and third party partners in cryptocurrencies where applicable through Coinbase, a WeWork member and the largest U.S. cryptocurrency trading platform.

WeWork CEO, Sandeep Mathrani, said “WeWork’s strength is in our ability to evolve and best meet the diverse needs of our members around the world. As our member base continues to grow in the fintech sector, so will our ability to adapt to their needs and service a new economy. WeWork has always been at the forefront of innovative technologies, finding new ways to support our members. It only makes sense for us to expand on the optionality we provide by adding cryptocurrency as an accepted form of payment for our members.”

In addition, Coinbase will be the first WeWork member to use cryptocurrency to pay for its WeWork membership, with the company noting that Coinbase’s decision to pay WeWork in cryptocurrency “demonstrates the growing demand for flexible and easy-to-use payment options.”

Understanding this growing demand for optionality and convenience, WeWork has accelerated its focus on leveraging technology to take flexibility to the next level. In 2020, WeWork digitized its real estate portfolio with the release of its WeWork On Demand and WeWork All Access products, enabling members to choose when, where, and how they work.

* * *

And speaking of optionality, as well as the growing acceptance of crypto, on Tuesday morning PayPal said it would begin allowing select Venmo customer to buy, sell and hold cryptocurrencies as consumers increasingly look for ways to pile into the digital assets. The firm will make it available to all the app’s users, who number more than 70 million, within the next few weeks.

For now, Venmo is allowing customers to trade in just four types of cryptocurrency: Bitcoin, Ethereum, Litecoin and Bitcoin Cash. Users will also have the ability to share their cryptocurrency purchases on the Venmo feed.

“We do think some customers will certainly want to share this fun experience,” Darrell Esch, senior vice president and general manager of the Venmo app at PayPal, said in an interview. “They can share with their friends and community that they’ve taken the step into this space.”

“We think that the timing is right for this,” Esch said. “Our goal here is to provide customers with a really easy-to-use way to learn about and experience ownership of crypto from a trusted platform.”

PayPal has been adding new features to its PayPal and Venmo apps as the payments giant seeks to become a one-stop shop for consumers’ financial needs. After adding the ability to buy, sell and hold cryptocurrency to its PayPal app, the company saw customers who used the feature begin signing into the app at twice the rate they previously did.

Since Venmo’s customer base skews younger than the traditional PayPal user, the company is planning to debut a series of videos with the new offering to make sure clients are educated about their purchases.

“Crypto is volatile — any crypto you buy can rise and fall in value, sometimes pretty quickly,” according to one such video, titled “Crypto vs. Stock.” “It’s important to tread carefully.”

As Bloomberg adds, there are signs Venmo users are already taking the plunge into cryptocurrency trading after the value of many of the biggest digital currencies soared in recent months. In one survey of 2,200 Venmo users, the company found that almost a third have already started purchasing cryptocurrencies or stocks.

Tyler Durden
Tue, 04/20/2021 – 08:20

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Watch: Protestor At Shanghai Auto Show Climbs On Tesla, Screams “Brake Failure”, In Now-Viral Video

Watch: Protestor At Shanghai Auto Show Climbs On Tesla, Screams “Brake Failure”, In Now-Viral Video

A protestor at the Auto Shanghai expo this week climbed on top of a Tesla Model 3 sedan and screamed in protest while wearing a t-shirt that said “The Brakes Don’t Work” and “Invisible Killer”.

Video of the incident has caught fire in China and ” hit a nerve in China, sending complaints about the company ricocheting across the Chinese internet,” according to the Wall Street Journal

The woman was eventually dragged away by security guards, but not after catching the attention of hundreds in the building – and millions more on the web. The hashtag of the incident was viewed by 150 million people on Weibo, WSJ reported. 

Her plight garnered sympathy online, with one user saying Tesla was “hoodwinking Chinese consumers” and others encouraging people to buy from competitors. Another user with 5 million followers shared their “litany of complaints” about other alleged glitches with their Tesla. 

In a statement, Tesla said the woman’s father was involved in a February accident where his Model 3 crashed into another vehicle. She had demanded a refund from the company, blaming the crash on a “technical problem”. Tesla said that her father had wrecked due to “excessive speed”. A woman who claimed to be the protestor wrote on a Weibo account that she would “seek justice through the legal system” and that the incident “exposed the true face behind Tesla’s vaunted brand”.

Recall, we highlighted another Tesla wreck that took place in Houston just days ago, though the brakes have not been determined to be an issue in that case. 

The woman was “detained for five days”, according to a local police statement provided by Bloomberg on Monday night. 

Even more interesting – as we continue to watch for signs of tumult between Elon Musk and the CCP – was the Global Times’ quick response to the incident, broadcasting it on its Twitter feed the day it happened:

Tyler Durden
Tue, 04/20/2021 – 08:04

via ZeroHedge News https://ift.tt/32BUfPD Tyler Durden

Futures Slide For Second Day Amid Renewed Virus Worries

Futures Slide For Second Day Amid Renewed Virus Worries

S&P 500 and Nasdaq 100 stock futures extend declines for a second day, with both down about 0.5% as of 7:00 am in New York as travel and leisure stocks led the move, indicating fresh concerns over reopenings. US futures tracked Europe’s Stoxx 600 index which was 1.1% lower, its biggest drop in a month as a growing tally of virus cases primarily in emerging markets tempered enthusiasm for a global growth rebound. Bond yields fell. 

Some notable premarket moves:

  • United Airlines dropped 2.1% after the carrier booked a bigger-than-expected loss for the first quarter.
  • IBM gained 2.8% as it reported its biggest revenue gain in 11 quarters boosted by its bets on the high-margin cloud computing business.
  • Johnson & Johnson, whose COVID-19 vaccine was put on pause last week to review reports of rare blood clots, tightened its forecast for profits this year. Its shares slipped 0.2%.
  • Altria extended Monday’s declines, British American Tobacco shares tumbled as much as 7.3% in London, while Imperial Brands also drops as much as 7.3%, after Dow Jones reported the Biden administration is considering only allowing cigarettes with non-addictive nicotine levels, as well as a possible ban on menthol cigarettes. Analysts noted regulatory pressures in the past, and said any new policies may take years to implement.  Altria extended Monday’s declines spurred by a Wall Street Journal report saying the U.S. government may only allow cigarettes with non-addictive nicotine levels.

After blockbuster earnings from major U.S. banks last week, analysts expect first-quarter profit for overall S&P 500 firms to jump 30.9% from a year earlier, according to Refinitiv IBES data. Investors are now turning to results from Netflix which reports after the close and other major technology-related companies this week to sustain the positive start to the earnings season. The streaming giant which thrived during last year’s lockdowns will be the first among the FAANG group to report quarterly numbers. NFLX shares slipped about 0.5% in pre-market trading, ahead of its results after markets close. Chipmaker Intel Corp is slated to report results on Thursday.

“Optimism is running very high and the earnings outlook has likely been priced to perfection at these levels, so anything less than absolutely stellar results might be seen as a negative surprise,” said Marios Hadjikyriacos, investment analyst at online broker XM in Cyprus, echoing what we said last week.

Even with this week’s pullback, global stocks are just inches away far from record highs. That’s prompting concern markets may be overplaying bets on economic reopenings as countries in the developing world – India and Brazil in particular – struggle to contain a rising tide of infection.

We do think the market is a little overextended here,” Dave Sekera, chief U.S. market strategist at Morningstar Investment Services, told Bloomberg TV, adding that broad U.S. equities look about 5% overvalued.

European shares extend declines to session-low as all industry groups within the regional equities benchmark drop; tobacco stocks were among the hardest hit by a report that the U.S. government is considering a rule to strip cigarettes of addictive levels of nicotine. British American Tobacco Plc plunged 6.6%. The Stoxx Europe 600 Index falls 1.2%, the sharpest intraday drop since March 19. Travel and leisure and banking stocks are worst perfomers. Here are some of the region’s biggest movers today:

  • Elementis shares rise as much as 22% after Sky reported that the company had received takeover interest from Innospec.
  • Nordic Semiconductor gains as much as 8.1% after 1Q earnings, with DNB saying 2Q sales guidance was “massively ahead” of consensus and the bank’s estimate
  • Jenoptik climbs as much as 7.9%, the most since Jan. 25, after HSBC upgraded the optical systems and lasers company to buy from hold, saying risks look limited and opportunities are underappreciated.
  • EQT falls as much as 12%, the most in eight months, after TA Associates exited its remaining stake in the private equity firm.
  • AMS slides as much as 12% in Zurich following Manager Magazin report that Apple has begun including Face ID sensors from rival companies in the iPhone 12. This is one of the reasons AMS division head Ulrich Huewels lost his job, the German magazine says.
  • Juventus declines as much as 9.3% while Borussia Dortmund falls as much as 5.3% after both soccer clubs rallied in the previous session on plans for a European Super League.

Asian stocks also fell, set to end a five-day winning streak. The MSCI Asia Pacific Index fell 0.6%, poised to snap its longest winning streak in more than two months. Industrials and health care shares led losses on the gauge. Japanese shares were the worst performers in the region. The blue chip-heavy Nikkei 225 fell 2% as Tokyo and Osaka moved closer to declaring states of emergency amid rising Covid-19 infections. A strengthening yen hurt demand for Japan’s exporters. In Hong Kong, Meituan was the biggest contributor to the Hang Seng Index’s advance, which closed up 0.1%. The Chinese delivery giant’s shares rose 1.5% after it raised $9.98 billion from a record top-up placement and a convertible bond sale. Other tech stocks slipped, with Alibaba down 1.6% while Baidu fell by 2.6%.

Chinese stocks erased an earlier gain to close slightly weaker, snapping a two-day gain as foreign investors trimmed holdings. The benchmark CSI 300 index edged down less than 0.1% to 5,083.37 points, joining broad declines among Asia equities after U.S. stocks fell from a record overnight. Telecommunication services led the drop in the index, with a sector subgauge losing 1.2%. The key equities gauge has traded mostly sideways in recent weeks following its tumble into a technical correction last month, with analysts citing that investors are waiting for a catalyst for the next big move. The main investment theme in China’s stocks is mixed currently “as it lacks additional money flows,” Li Lifeng, an analyst at Huaxi Securities, wrote in a note. Foreign investors net sold almost 500 million yuan worth of A shares via the mainland-Hong Kong stock link, after buying in the previous two sessions. Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said Monday that the watchdog is paying “high attention” to hedge fund inflows through the Stock Connect program. Sentiment in the broader market held up, with the turnover in Shanghai and Shenzhen coming in at 803 billion yuan, just 2.4% less than Monday’s figure that was a one-month high.

India’s benchmark equity index fell, after swinging between gains and losses, led by software exporters and lenders. The S&P BSE Sensex slipped 0.5% to 47,705.80, its lowest since end-January, while the NSE Nifty 50 Index dropped 0.4%. Both measures had risen as much as 1% earlier in the session as the government said it will allow citizens over the age of 18 years to be vaccinated against coronavirus from next month, a step toward controlling a spread that’s led to more lockdown-like curbs in the country. Twelve of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of healthcare companies. “Market sentiment depends on the success of the move, which can only be determined after some time,” said Gaurav Garg, head of research at CapitalVia Global Research Ltd. “We expect the Indian market to continue trading in a small range.”

In rates, Treasuries rose after spending much of the London morning lower and were last trading near session highs after erasing earlier Asian session declines, gaining as U.S. stock futures followed European bourses lower. 10Y Treasury yields traded around 1.59%, richer by 1bp vs Monday’s close after peaking at 1.631% in early European session; 2s10s and 5s30s curves are flatter by ~1bp; bunds and gilts lag Treasuries slightly. Weakness during Asia session was guided by USD/JPY and Australian bond market.

In FX, the Bloomberg Dollar Spot Index fell a seventh consecutive day and the greenback fell against most of its Group-of-10 peers as commodity currencies lead gains; the euro advanced to $1.2080, the highest level since March 3, and breaching the 100-DMA. The pound traded in a narrow range despite an unexpected weakening of the jobs market. The yen reversed a gain against the dollar as Japan’s coronavirus infections climbed and consolidation set in. Australia’s yield curve bear steepened further after the release of minutes from the latest central bank meeting while the Aussie touched a one-month high amid broad greenback weakness and a rally in commodities. The Reserve Bank of Australia said its policy settings were helping hold down the currency, while surging property prices meant it needed to monitor trends in home borrowing, according to minutes of its April meeting. China’s yuan advanced past 6.5 per dollar for the first time since March 18 amid broad weakness in the greenback.

In commodities, oil traded near $64 a barrel, a year to the day after futures for the U.S. benchmark collapsed below zero, with the world’s most important commodity extending a powerful rally on bets for better demand.

After a slide in early overnight trading, bitcoin rebounded and was last trading just shy of $56,000.

Looking at the day ahead now, and there are a number of further earnings releases including Johnson & Johnson, Procter & Gamble, Netflix, Abbott Laboratories, Philip Morris International and Lockheed Martin. Otherwise, data releases include UK unemployment for February and German PPI for March, while the ECB’s Hernandez de Cos will be speaking. There is no economic data in the US.

Market Snapshot

  • S&P 500 futures little changed at 4,158.25
  • Stoxx Europe 600 fell 0.8% to 438.78
  • Brent Futures up 1.2% to $67.84/bbl
  • Gold spot down 0.2% to $1,767.70
  • U.S. Dollar Index down 0.14% to 90.94
  • MXAP down 0.4% to 208.24
  • MXAPJ up 0.3% to 698.69
  • Nikkei down 2.0% to 29,100.38
  • Topix down 1.5% to 1,926.25
  • Hang Seng Index up 0.1% to 29,135.73
  • Shanghai Composite down 0.1% to 3,472.94
  • Sensex little changed at 47,971.27
  • Australia S&P/ASX 200 down 0.7% to 7,017.77
  • Kospi up 0.7% to 3,220.70
  • German 10Y yield rose 1.3 bps to -0.232%
  • Euro up 0.3% to $1.2069

Top Overnight News from Bloomberg

  • Dollar bears are making a comeback as falling Treasury yields shackle the reserve currency. Technical indicators suggest the decline may extend. The Bloomberg Dollar Spot Index is on track for its longest losing streak since June after Treasury 10-year yields dropped almost 15 basis points since the end of March. Leveraged traders have slashed bullish positions, according to the latest data from the Commodity Futures Trading Commission
  • The U.K. labor market weakened unexpectedly, with company payrolls falling for the first time in four months and more people dropping out of the workforce
  • The aggressive rebound in global economic growth still isn’t enough for most of the world’s central banks to pull back on their emergency stimulus. In Bloomberg’s quarterly review of monetary policy covering 90% of the world economy, the Federal Reserve, European Central Bank and Bank of Japan are among the 16 institutions set to hold interest rates this year
  • The Reserve Bank of Australia said its policy settings were helping hold down the currency, while surging property prices meant it needed to monitor trends in home borrowing, according to minutes of its April meeting
  • Justin Trudeau’s government released a budget that promises big spending on new social programs and a return to small deficits by 2025, setting the stage for a possible election in Canada this year
  • Oil edged higher toward $64 a barrel as traders monitored a patchwork recovery in demand from the coronavirus pandemic a year to the day since futures for the U.S. benchmark went negative OPEC and its allies are discussing downgrading next week’s full-scale ministerial meeting, delegates said, a signal the coalition may stick with plans to gradually revive oil production

A quick look at global markets courtesy of Newsquawk

Asian equity markets traded mixed with risk appetite dampened following the losses on Wall Street where most majors retreated from their recent record highs with the declines led by tech and growth amid a rise in yields and bond selling. ASX 200 (-0.7%) was subdued with nearly all sectors in the red following the headwinds from US peers and as participants digested quarterly updates including Rio Tinto which posted lower iron ore production although its shipments increased Y/Y. Nikkei 225 (-2.0%) underperformed as the recent detrimental currency flows reverberated across Japanese stocks in which exporters took the brunt after USD/JPY briefly gave up the 108.00 handle. Hang Seng (+0.1%) and Shanghai Comp. (-0.1%) were indecisive after a lack of surprises from the PBoC which maintained the status quo on rates for a 12th consecutive month as expected with the 1-year and 5-year Loan Prime Rates kept at 3.85% and 4.65%, respectively. Focus was also on Chinese President Xi’s keynote speech at the Boao Forum where he stated that China has continued deepening reform and opening up, as well as called for countries to join hands in dealing with the pandemic but also reiterated the view for countries to not meddle in the internal affairs of others. Finally, 10yr JGBs were lacklustre after the recent weakness in USTs and slightly lower demand at the 20yr JGB auction, while 10yr yields in Australia and New Zealand were higher by around 4-5bps as they tracked the upside in global counterparts.

Top Asian News

  • Goldman Names Sean Fan Co-Head of China Investment Banking
  • Japanese Stocks Slide After Gain in Yen as Virus Concerns Grow
  • RBA Sees Policy Helping Stem Aussie, Monitors Home Borrowing
  • Bank Indonesia Holds Key Rate Steady While Lowering GDP Outlook

Major bourses in Europe saw another lacklustre cash open before a downside bias solidified (Euro Stoxx 50 -1.1%) within the first hour of trade, as sentiment sullied following a mixed APAC handover and amid a lack of fresh catalysts. US equity futures, meanwhile, have extended losses with the RTY underperforming vs peers with no particular trigger for the move lower. Back to Europe, sectors are primarily in the red with shallower losses seen for the Energy and Materials sectors on the back of firmer price action for oil and copper prices. The downside meanwhile sees Personal and Household Goods as the laggard amid disappointing metrics from AB Foods (-2.0%) coupled with hefty losses in tobacco names Imperial Brands (-6.2%) and British American Tobacco (-6.7%) following reports that the US is seeking to lower the nicotine level in cigarettes sold in the US. Travel & Leisure also resides towards the foot of the Stoxx 600 amid the rising COVID cases across some significant economies, whilst Air France-KLM (-3.8%) adds to the glum tone in the sector after a capital increase and as the French government raised its stake in the Co. to tighten its control. The IT sector has failed to gain upside impetus from IBM’s (+3% pre-mkt) numbers. In terms of individual movers, BMW (+0.7%) trades firmer after its prelim Q1 figures exceeded market expectations, with growth reported in all significant regions and in particular China. ASM (-10.8%) plumbed the depths amid reports from German press that the Co. is “massively” losing Apple business.

Top European News

  • Credit Suisse Prime-Brokerage Heads to Leave After Archegos
  • AMS Falls After Report Apple Has Started Using Rival Sensors
  • DWS, CDPQ Said Near 3 Billion-Euro Deal for France’s Ermewa
  • U.K. Reaches $2 Billion Deal to Buy Boeing’s Chinook Helicopters

In FX, the Antipodean Dollars are taking full advantage of their US counterpart’s ongoing demise, with Aud/Usd and Nzd/Usd both extending rebounds to top round numbers at 0.7800 and 0.7200 respectively. The Aussie has not really been hampered by RBA minutes reaffirming dovish policy guidance overnight given some external impetus from a firmer PBoC Cny fixing, but has lost a bit of momentum in Aud/Nzd cross terms from 1.0820+ towards and through 1.0800 as the Kiwi eyes NZ Q1 CPI tonight for some independent direction. Moreover, Aud/Usd could still be drawn to hefty expiry options sitting below 0.7800 between 0.7795-65 in 1.2 bn for the NY cut.

  • CAD/EUR/DXY – 1.2500 is still proving to be a sticking point for the Loonie vs its US peer, but Usd/Cad has pulled back from circa 1.2535 against the backdrop of firmer crude prices and the Canadian budget that was mixed in terms of 2020/21 and 2021/22 fy deficit forecasts vs prior projections, though pretty neutral on balance, awaiting CPI and the BoC on Wednesday. Conversely, the Euro has breached 1.2050 that held on Monday and key technical resistance in the form of the 100 DMA that comes in at 1.2058 today on the way up to 1.2080 before stalling, as the Greenback tries to regroup or contain further losses to keep the index within sight of 91.000 between 91.101-90.856 parameters.
  • GBP/CHF – Both narrowly mixed vs the Buck having probed more psychological levels, but not sustaining sufficient thrust or garnering enough follow-through buying to clear 1.4000 and 0.9150 convincingly. However, Cable could get another fillip from UK inflation data tomorrow following somewhat mixed labour and earnings given the consensus for a rise in headline CPI.
  • JPY – Almost all change for the Yen that seemed set to overcome 108.00 against the Dollar after scaling the 50 DMA, but Usd/Jpy has bounced firmly to 108.50+ alongside Jpy crosses, such as Eur/Jpy beyond 130.50 and almost reaching 131.00 in what appears to be a technical correction rather than something fundamental, aside from a resumption of US Treasury bear-steepening.

In commodities, WTI and Brent front-month futures are on the rise amid supply disruptions in Libya, whereby the NOC declared a force majeure on crude exports from its Hariga port, whilst Agoco was forced to reduce output amid a lack of funding. These developments would see Libya’s output drop below 1mln BPD for the first time since October vs the 1.3mln BPD production Libyan press reported in early April. This, alongside the Dollar softness, have taken WTI back above USD 64/bbl (vs low 63.38/bbl) and Brent to around USD 68/bbl (vs low 67/bbl). Elsewhere, reports suggest that next week would only see a JMMC meeting with no OPEC+ confab to follow. This indicates that the policy agreed upon last month will not be tweaked as the JMMC does not carry out policy decisions but instead offers recommendations. Energy journalists have noted that the Islamic period of Ramadan could be a reason not to hold two meetings in a short time frame. Turning to metals, spot gold and silver have remained around recent ranges and have been mainly moving in tandem with the Buck in early European hours amidst a distinct lack of catalysts – with spot gold hovering around in a tight range around USD 1,770/oz and spot silver visiting levels on either side of USD 26/oz. Over to base metals, LME copper continues to climb to near 10-year highs as a function of the Dollar, whilst overnight Dalian iron ore futures were bolstered amid improved Chinese steel margins and lower output from the mining giant Rio Tinto. On the recent commodity rise, Chinese Industry Ministry said China will actively take measures to stabilise raw material prices. The Ministry added that the current round of commodity price increases will impact manufacturing, but is overall controllable.

US Event Calendar

  • Nothing major scheduled

DB’s Jim Reid concludes the overnight wrap

Henry and Apurv are finishing off this morning as I’m having a rare lie-in to coincide with my vaccine appointment yesterday. To be honest I was really bunged up with hay fever before I had the jab and on passing this over late on Monday night after watching another demoralising football display from Liverpool I feel the same as I did earlier. Virtually everyone I know has had some kind of noticeable 12-72 hour cold/flu type reaction to the AZ vaccine so I await that. Maybe the next injection I get will be the hay fever one as this season has been near intolerable. If anyone has had that I’d love to hear about its success.

Global equities saw the mildest of side effects to Friday’s fresh record highs as sovereign bond yields shifted higher and investors struggled to find a catalyst that could justify further gains, particularly amidst a global rise in Covid cases that is one of the fastest since the pandemic began. By the close of trade, the S&P 500 (-0.53%) and Europe’s STOXX 600 (-0.07%) had both lost ground, and the VIX index of volatility ticked up +1.04pts in its biggest daily increase in 3 weeks. That said, this pullback still leaves the S&P and the STOXX at their 3rd and 2nd highest ever levels respectively, so let’s not get too carried away.

Looking at the sectoral moves, tech stocks underperformed on both sides of the Atlantic, with the NASDAQ (-0.98%) and FANG+ (-1.33%) both struggling, though it was a fairly broad-based decline with 334 in the S&P 500 ending the day lower, the largest so far this month. 20 of the 24 industry groups in the S&P 500 fell back yesterday with only Real Estate (+0.29%), Technology hardware (+0.27%), Biotech (+0.11%) and Telecoms (+0.01%) seeing marginal gains. As well as that, small-cap stocks were another underperformer, with the Russell 2000 index falling -1.36% with c.80% of the index falling back.

Earnings could be a catalyst to give the overall market a sense of direction. After the close, IBM reported its first revenue gain since mid-2018 as cloud-service demand, which has been a key focus for the new CEO, exceeded expectations. The stock rose +3.06% in after-market trading as three of the five business segments showed sales growth, led by Cloud and Cognitive Software – the biggest unit. United Airlines (-2.16% post-market) also reported after the close last night, indicating that quarterly losses would continue until air travel returns to 65% of 2019 levels. In terms of 2021 Q1, the airline posted a larger-than-expected loss (-$7.50/share loss vs. -$7.02/share expected) and expects yet another loss this upcoming quarter. This came after reports earlier in the day that the airline was going to add three new US-Europe flights this July to Croatia, Greece and Iceland, all of which have reopened to vaccinated travelers. Meanwhile of some note was Tesla (-3.40%) which fell after two passengers died in a Tesla car that local authorities in Texas said that no-one appeared to be driving. Nevertheless, Elon Musk has tweeted overnight that data logs recovered so far indicated the car didn’t have its Autopilot driver-assistance technology enabled. Separately Bitcoin (-0.14%) lost ground for a 4th day running, and this morning is down a further -3.02% to take the cryptocurrency to $54,511, more than $10,000 beneath its all-time intraday high last week.

Elsewhere, sovereign bonds had a pretty eventful day, and at one point yields on 10yr bunds traded just above -0.22%, on track to close at their highest level in over a year. Though they pared back some of those losses towards the end of the session, yields on bunds (+2.7bps to -0.24%), OATs (+2.2bps) and BTPs (+4.3bps) all closed higher, and 10yr OATs were back in positive territory once again. Over in the US, 10yr UST yields were up +2.5bps to 1.605%. The driver was a pickup in real yields (+4.1bps), while inflation expectations (as approximated by the 10yr breakeven) are still within 2bps of 8-year highs. The dollar index fell -0.53%, for the index’s sixth straight decline and now sits at its lowest levels since March 3. Likewise, the euro traded above $1.20 for the first time since then as well.

Overnight in Asia, markets are trading mixed with the Nikkei (-1.80%) down, Hang Seng (-0.01%) stable, and the Shanghai Comp (+0.29%) and Kospi (+0.59%) moving higher. We also received the Reserve Bank of Australia’s latest policy minutes which highlighted members agreed on monitoring surging house prices as a potential risk and added that “it would be important to watch carefully for increased risk-taking by lenders.”The Australian dollar is up +0.53% this morning, although part of that strength is down to the dollar’s general weakness (-0.18%). Outside of Asia, futures on the S&P 500 are up +0.23% and European ones are somewhat more subdued with Stoxx 50 futures down -0.13% as those on the DAX and FTSE 100 point to little change.

Though equities more broadly fell back from their all-time highs, one of the few winners yesterday were publicly-traded elite football clubs, as the prospect of participating in a European super league sent their share prices substantially higher. The Italian club Juventus (+17.85%) had its best day since 2013, while Manchester United (+8.81%) had its best day since November, back when we got the initial results from the Pfizer vaccine trial. However, the proposals have come under sustained criticism since their release, and even politicians have stepped in, with UK PM Johnson tweeting that the plans “would be very damaging for football and we support football authorities in taking action.” A fascinating period awaits as we see how this develops.

In Germany, there were further developments ahead of September’s federal election as the Green party selected co-leader Annalena Baerbock as their chancellor candidate. In past elections this wouldn’t have got a mention in the EMR, but the German Greens have surged in the polls lately, and are currently set to beat the centre-left Social Democrats into second place. Indeed, it’s no longer implausible to suggest that there could even be a Green chancellor, particularly given the recent decline of the CDU/CSU in the polls, albeit with them still in first place. Baerbock is from the more moderate, so called “realo-wing” of the Greens, and the pretty smooth process of nominating her as the candidate contrasts with the current infighting within the CDU/CSU bloc. Speaking of which, late last night the CDU’s Armin Laschet overcame the CSU’s Markus Soeder in a vote among the CDU leadership, with a 31-9 vote with 6 abstentions. Though Laschet lost support since the committee unanimously backed him a week ago, Soeder has previously said he would accept a clear CDU vote for his opponent. Nevertheless, Laschet still requires the CSU’s support in order to confirm his nomination as the joint chancellor candidate.

Turning to the pandemic, the global case count is continuing to increase rapidly, with a record number of weekly cases recorded around the world. A number of countries including India, Japan and Argentina have seen a sharp increases in cases of late. In the US, the numbers continue to be fairly stable in terms of the overall growth, but this masks some noticeable divergences between states. On the one hand, Michigan in particular has seen a very rapid increase, as have others including Pennsylvania and Maine. On the other hand, New York City’s positivity rate fell beneath 5% for the first time in months yesterday, according to Mayor de Blasio. New York State continues to reopen the economy with indoor capacity increased to 50% at museums and 33% at theatres. Meanwhile in Europe, UK PM Johnson cancelled his planned visit to India next week, and India was added to the UK’s travel ban list in light of the surging growth in cases there. Elsewhere France has started to refocus efforts on educating the country about the AstraZeneca vaccine with a government spokesman saying that confidence “must be rebuilt”, while citing studies that show that for those over 55 “there aren’t any risks and the vaccine is safe and effective”. Finally, the EU yesterday exercised an option for a further 100mn doses of the Pfizer-BioNTech vaccine – the option was built into the original purchase agreement from February. The plan is for all doses to be delivered this year.

To the day ahead now, and there are a number of further earnings releases including Johnson & Johnson, Procter & Gamble, Netflix, Abbott Laboratories, Philip Morris International and Lockheed Martin. Otherwise, data releases include UK unemployment for February and German PPI for March, while the ECB’s Hernandez de Cos will be speaking.

Tyler Durden
Tue, 04/20/2021 – 07:52

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Canadian National Sparks Bidding War With $30 Billion Offer For Kansas City Southern

Canadian National Sparks Bidding War With $30 Billion Offer For Kansas City Southern

As worries about fragile global supply chains stoke fears about rising prices and inflationary pressures, Canadian National Railway is planning to make a $30 billion bid for Kansas City Southern, which had already agreed to sell itself to Canadian Pacific. The bid will likely kick off a bidding war amid another wave of consolidation in the freight.

Canadian National plans to offer $325 for each Kansas City Southern share Tuesday, including $200 a share in cash and 1.059 Canadian National shares, the people said. Shares of KSU surged 20% on the news, as the Canadian National offer represents a 20% premium over the previous offer made by Canadian Pacific.

Canadian Pacific, meanwhile, offered shareholders $90 and 0.489 share of Canadian Pacific stock for each share of Kansas City Southern, which would give KC Southern shareholders 25% ownership of Canadian Pacific’s outstanding stock.Their formula values KC Southern stock at $275 a share, a 23% premium from Friday’s closing price. Under those terms, the Canadian railroad also said it would assume $3.8 billion in outstanding Kansas City Southern debt. The companies said the transaction has an enterprise value of roughly $29 billion.

Kansas City Southern is the smallest of the five major freight railroads in the US, and plays a key role in US-Mexico trade, with a network across both countries. Its trains bring autos and other industrial products up from factories south of the border into Texas and the Midwest and haul American farm goods back to Mexico. It also runs a rail link along the Panama Canal. But a merger with either rival will create a massive firm with operations sprawling across North America.

Either deal would create the first freight-rail network linking the US, Mexico and Canada by connecting ports in all three countries.

Tyler Durden
Tue, 04/20/2021 – 07:13

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Quarter Of UK Population Wants To Work At Home Forever, New Survey Finds

Quarter Of UK Population Wants To Work At Home Forever, New Survey Finds

Authored by Steve Watson via Summit News,

Almost a quarter of the UK workforce wants to stay at home FOREVER, according to a survey conducted by Deloitte.

The London Telegraph reports that around 25% never want to go back to their place of work ever again, noting that the figure equates to 7.5 million people who would be happy to stay at home and work on their own for the rest of their lives.

Only slightly more, 28% say they do not want to work at home any more and want to get back to their offices or other work environments as soon as possible.

Most people, 42% said they want to see some sort of balance, spending at least two days a week working at home.

The reasoning behind the desire for one in four to stay at home for good was being ‘more efficient’ and ‘more relaxed’, as well as not having to commute and saving time.

In other words, 25% can’t be bothered moving and interacting with other people, and are perfectly happy staying at home alone in their jogging pants until they retire and then stay at home in their jogging pants until they die.

As we have previously highlighted, almost half of Brits, including a majority of women, say they will struggle to revert back to normal life after lockdown, with only 37 per cent saying they would not miss anything about lockdown.

similar poll conducted by the London Times found that a “significant proportion” of Brits enjoyed lockdown.

Another separate opinion poll conducted last month by YouGov found that over half of Brits said they would miss “many” or “some” aspects of the lockdown.

The figures once again underscore how a majority of people appear to be utterly oblivious to the precedent that lockdown has created, handing government the power to completely restrict basic civil liberties on a whim.

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Tyler Durden
Tue, 04/20/2021 – 07:04

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German Regulator Accuses Deutsche Bank Board Member Of Insider Trading Linked To Wirecard

German Regulator Accuses Deutsche Bank Board Member Of Insider Trading Linked To Wirecard

For a minute there, it appeared that Credit Suisse might have snatched Deutsche Bank’s crown as the most dysfunctional bank in Europe as the Swiss lender struggled with the fallout from the Archegos blowup and the collapse of Greensill (a scandal that has set off a massive corruption scandal in the UK, and triggered renewed calls for regulatory reform in the European financial system). CS has announced billions of dollars worth of losses tied to the scandals, fired its head of risk and nearly half a dozen other senior employees, and taken other steps in an attempt at penance. But on Monday, Deutsche Bank, which seemingly can’t go more than couple of quarters without a scandal, has found itself in the headlines once again.

This time, Germany’s financial watchdog BaFin has filed a criminal complaint against Deutsche Bank board member Alexander Schutz over alleged insider trading tied to shares of Wirecard – the bankrupt erstwhile German fintech darling whose fraud-induced slide into bankruptcy has shaken Germans’ faith in prosecutors and regulators, even as the criminal protection of several key players continues.


Prosecutors in Munich, who have been handling most of the criminal actions related to Wirecard, told the FT that they had received a criminal complaint regarding Schutz from BaFin on Monday, and that they were awaiting more details. Once all documents have been received, they will release more information to the press.

Schutz has emerged as an important figure in the Bundestag’s inquiry into the collapse of Wirecard. Deutsche Bank officially censured Schutz over an email he sent to former Wirecard CEO (now facing a host of criminal charges tied to the firm’s collapse) Markus Braun urging him to “do this newspaper in!!” – a reference to a report in the FT about new allegations of accounting fraud at Wirecard. Incidentally, BaFin nearly helped Braun and Wirecard accomplish just that, after BaFin ordered a ban on Wirecard short-selling and promised to investigate allegations that the FT was working with short-sellers to sabotage Wirecard shares.

Formerly a close confidant of Braun, Schutz has already promised to step down from Deutsceh Bank’s board next month. It’s not clear exactly how, but the FT said Schutz took advantage of insider information when he traded on Wirecard shares in both 2019 and 2020.

According to people with first hand knowledge of the matter, BaFin suspects he used inside information on several occasions in 2019 and 2020 when trading Wirecard shares. Bloomberg earlier reported that BaFin was probing potential insider trades by Braun.

That seems to suggest that Schutz may have used his connections to sell Wirecard shares before they finally slid all the way to zero, helping him avoid a potentially massive loss. Though the exact nature of the trades is unclear.

As the world learned after Wirecard’s collapse, Deutsche Bank at one point considered a merger with Wirecard, though the deal fell apart before it could be consummated.

Nearly a year after it filed for bankruptcy after a new outside audit exposed a $2 billion hole in its balance sheet, Wirecard remains a hot topic in Germany, where the company’s deep ties to Chancellor Angela Merkel’s ruling coalition are only just beginning to be explored. Merkel herself will appear later this week before the Bundestag committee tasked with exploring why the country’s regulators failed to spot Wirecard. Olaf Scholz, Germany’s finance minister, will also appear. Their testimony, coming five months before a critical election, will be closely watched.

Tyler Durden
Tue, 04/20/2021 – 05:45

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Renewables Dominate The Headlines, But Oil And Gas Remain King

Renewables Dominate The Headlines, But Oil And Gas Remain King

Authored by Irina Slav via OilPrice.com,

The transition to a global energy system that runs on renewable energy rather than finite and dirty coal, oil, and gas is arguably the number-one topic in the media, sometimes eclipsing even the pandemic. Yet, for all the enthusiastic talk, it seems that we are nowhere near accomplishing the transition—and it may already be too late to do anything about climate change anyway, according to some climate scientists. “Embedded power structures and support for a dying industry”: these are the factors that are keeping oil and gas as the world’s main sources of energy, according to the chief executive of one environmental nonprofit organization.

Speaking to CNBC, Carroll Muffett from the Institute for Environmental Law said, “It is not a matter of the absence of the technology or the inability to do it. If you actually look at what are the cheaper sources of the energy supply right now, it is not really even a matter of economics. It is much more about embedded power structures and continued support of dying industry.” 

It is very likely that Muffett is referring to government subsidies for the oil and gas industry in countries such as the United States or the UK, as well as many developing nations. What he doesn’t mention in the above comment, however, is the fact that the U.S. government—and many others—also have substantial subsidies for renewable power, and plans to boost these in a bid to encourage wider adoption. As Muffett puts it, the energy transition is “primarily a matter of political will and economic choices.”

Indeed, it is a matter of political choices. Virtually every reputable energy authority has repeatedly said that it is up to the politicians to make sure the transition occurs by encouraging renewables and discouraging oil and gas. This, however, begs one question and the question is this: if renewables were as economical as their proponents say, wouldn’t the private sector be embracing them on its own for the profit opportunities, rather than waiting for the subsidies to be granted before venturing into the field?

There is also another question: if renewables are the economic choice, why are the emerging—meaning poorer—economies of Asia investing so heavily in fossil fuel generation capacity that demand for oil there could jump by as much as 25 percent by 2040, according to Wood Mackenzie? Even China, the indisputable global leader in renewable energy capacity, is building new coal power plants despite celebrations of solar becoming as cheap as coal two years ago. These are not questions that the most vocal advocates of renewable energy like to discuss. They interfere with the narrative that solar and wind are not only emission-free, but they are also as cheap as fossil fuels. If that were the case, it would certainly make fossil fuels irrelevant. After all, if two sources of energy cost the same, but one is renewable and the other one is finite, it would make the best economic sense to bet on the first and not the second, from a purely pragmatic point of view, even without factoring in emissions.

And yet, poorer economies are betting on fossil fuels while richer ones are investing billions in renewable energy generation and storage capacity, and in electric cars. It seems there is a disconnect in the logical sequence of arguments for the energy transition. On the one hand, solar and wind are cheaper—and hydrogen and EVs will soon get cheaper—so it would make sense for everyone to get on board with them. Yet on the other, wealthy nations are the ones being the most generous with wind and solar adoption, and support for hydrogen and EVs.

“Human activity is driving climate change,” Colm Sweeney, the lead scientist for the Earth System Research Lab Aircraft Program of the U.S. National Oceanic and Atmospheric Administration, told CNBC.

 “If we want to mitigate the worst impacts, it’s going to take a deliberate focus on reducing fossil fuels emissions to near zero — and even then, we’ll need to look for ways to further remove greenhouse gases from the atmosphere,” he said.

Fossil fuel emissions account for the vast majority of greenhouse gas emissions from human activity on the planet. The increase in their use reflects an increase in energy demand, and the world’s energy demand is expected to continue growing as the global population grows, driven, once again, by emerging economies. Growing energy demand appears to be incompatible with the Paris Agreement targets given the above factors regarding the cost of different energy sources and their relative reliability, which is motivating investment decisions.

What this means is that the only way we could conceivably expect to progress towards limiting greenhouse gas emissions in any meaningful way is by curbing our energy demand. Indeed, one recent academic report from the UK calls for just that.

UK FIRES, a research program involving scientists from several reputable universities and businesses from resource-intensive sectors, said in the report that net zero was not enough and we should strive for absolute zero, to be achieved, among other measures, by people reducing their energy consumption to 60 percent of today’s levels.

Voluntary energy consumption cuts are highly unlikely, so this, too, would require political action. Some are already calling political action for renewable energy a form of government abuse. Imagine what they would call policies forcing people to consume less energy than they are used to consuming.

Tyler Durden
Tue, 04/20/2021 – 05:00

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