Trump Challenges Kavanaugh Accuser To Produce Actual Evidence Of Assault

In what will, we are sure, now become the liberal media’s focus for the next 24hr news cycle, President Trump appears to have weighed in on Supreme Court nominee Brett Kavanaugh’s accuser’s credibility.

Trump appeared to set the scene for his latest tweet by noting earlier that Judge Brett Kavanaugh is a fine man, with an impeccable reputation, who is under assault by radical left wing politicians who don’t want to know the answers, they just want to destroy and delay. Facts don’t matter. I go through this with them every single day in D.C.”

Which led to the following tweet, questioning the fact that if the attack was as bad we are led to believe, why did she or “her loving parents” not file with local law enforcement?

” I ask that she bring those filings forward so that we can learn  date, time, and place!”

And cue the outraged accusations that he is attacking a poor woman who was too afraid to come forward at the time, because when it comes to this kind of crime accusation, as Trump says “facts don’t matter” and you’re guilty, period, or something.

However, Trump was not done. He doubled-down on his questioning of Ford’s recollection of events, asking “Why didn’t someone call the FBI 36 years ago?”

Why indeed?

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Wells Fargo Announces 10% Staff Cuts As CEO Struggles To Impress Analysts

As hopes for a steeper yield curve have lifted bank stocks, Wells Fargo CEO Tim Sloan is apparently trying to bolster Wells’ lagging share price as the numerous scandals that have tarnished the banks credibility and triggered fines, criminal probes and an unprecedented Fed sanction have continued to take their toll.

Per Bloomberg, Sloan is planning to trim its workforce by between 5% and 10% over the next three years with the explicit goal of propping up the company’s shares. While the cuts could provide the bank with necessary cover to purge bad apples from its employee ranks, they have also been broadly expected since the bank reported one of its worst-ever mortgage numbers as the division struggles under the yoke of Fed sanctions and with a housing market that is already beginning to roll over.

Wells

In recognition of Wells’ collapse in mortgage lending, Sloan announced last month that the bank would lay off more than 600 employees from its mortgage division after losing the mantle of America’s top mortgage lender to nonbank fintech phenom Quicken Loans. Also, the fact that the housing market is beginning to roll over isn’t helping bolster the bank’s assets.

Sloan, who made the announcement to employees at a town-hall meeting on Thursday, has reduced headcount as he cleans up the bank and streamlines operations. The San Francisco-based lender is struggling to grow under the weight of a Federal Reserve assets cap. It had 265,000 employees as of June 30, according to a regulatory filing.

“It says something about the revenue environment for them,” Charles Peabody, an analyst at Portales Partners, said in an interview. “If they’re not in the midst of recognizing that revenues are in trouble, they’re anticipating it.”

Sloan has already promised $4 billion in cost cutbacks by the end of next year. The cuts announced Thursday have already been incorporated into the bank’s year-end expense targets for 2018, 2019 and 2020, according to the company.

“We are continuing to transform Wells Fargo to deliver what customers want – including innovative, customer-friendly products and services – and evolving our business model to meet those needs in a more streamlined and efficient manner,” Sloan said in a statement.

Wells shares have climbed 23% since Sloan took the reins in October 2016. However, it continues to lag the KBW Ban Index by 53%.

Wells

Meanwhile, analysts’ continued pessimism has sparked rumors that the bank’s board is seeking to oust Sloan. Earlier this year, reports circulated that they had approached Gary Cohn about taking over.

Analysts cut their estimates for Wells Fargo earnings again and again after the Fed punished the bank with an unprecedented cap on growing assets. The analysts began this year predicting a record $24 billion annual profit, and now the average estimate is for less than $21 billion, the weakest since 2012. Speculation that the bank wants a new CEO spilled into public this week when the New York Post said the board had approached former Goldman Sachs Group Inc. executive Gary Cohn. Cohn, who earlier this year finished a stint as a White House adviser, denied the report, as did Wells Fargo Chair Betsy Duke, who said Sloan “has the unanimous support of the board, and this support has never wavered.”

But with the bank unable to meaningfully expand its assets thanks to the Fed’s sanctions, Sloan has few alternatives aside from trimming head count and costs if he wants to impress the analysts. Expect more heads to roll in the near future.

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Tilray Crash Continues As Early Week Gains Go Up In Smoke

Well that escalated quickly…

Yesterday’s waterfall collapse has extended in the pre-market, sending the cannabis company’s stocks back below $154.99 – the closing price from Tuesday – and down almost 50% from its record highs Wednesday at $300…

 

And after Wednesday’s chaotic reaction in crypto, as Tilray went crazy, Bitcoin is holding things together, for now…

Oh, and as a reminder, Tilray trades at 971-times-Sales…”no brainer”

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When Does This Travesty Of A Mockery Of A Sham Finally End?

Authored by Charles Hugh Smith via OfTwoMinds blog,

Credit bubbles are not engines of sustainable employment, they are only engines of malinvestment and wealth destruction on a grand scale.

We all know the Status Quo’s response to the global financial meltdown of 2008 has been a travesty of a mockery of a sham–smoke and mirrors, flimsy facades of “recovery,” simulacrum “reforms,” serial bubble-blowing and politically expedient can-kicking, all based on borrowing and printing trillions of dollars, yen, euros and yuan, quatloos, etc.

So when will the travesty of a mockery of a sham finally come to an end? Probably around 2022-25, with a few global crises and “saves” along the way to break up the monotony of devolution. The foundation of this forecast is this chart I prepared back in 2008 (below).

This is of course only a selection of cycles; many more may be active but these four give us a flavor of the confluence of crises ahead.

Cycles are not laws of Nature, of course; they are only records of previous periods of growth/excess/depletion/collapse, not predictions per se. Nonetheless their repetition reflects the systemic dynamic of growth, crisis and collapse, and so the study of cycles is instructive even though we stipulate they are not predictive.

What is predictable is the way systems tend to follow an S-curve of rapid growth with then tops out in excess, stagnates in depletion and then devolves or implodes. We can see all sorts of things topping out and entering depletion/collapse: financialization, the Savior State, Chinese credit expansion, oil production, student loan debt and so on.

Since each mechanism that burns out or implodes tends to be replaced with some other mechanism, this creates the recurring cycle of expansion / excess / depletion / collapse.

I plotted four long-wave cycles in the first chart:

1. The credit expansion/renunciation cycle. a.k.a. the Kondratieff cycle. Credit expands when credit is costly and invested in productive assets. Credit reaches excess when it is cheap and it’s malinvested in speculation and stock buybacks, and as collateral vanishes then credit is renunciated/written off.

This is inexact, but obviously the organic postwar cycle of expansion has been extended by the central bank money-printing / credit orgy.

2. The generational cycle of four generations/80 years described in the seminal book The Fourth Turning. American history uncannily tracks an 80-year cycle of crises and profound transformation: 1860 (Civil War), 1940 (world war and global Empire) and next up to bat, 2020, the implosion of the debt-based Savior State and the financialized economy.

3. The 100-year cycle of inflation-deflation described in the masterful book The Great Wave: Price Revolutions and the Rhythm of History. The price of bread remained almost constant in Britain throughout the 19th century. In contrast, the 20th century has been characterized by inflation–the U.S. dollar has lost approximately 96% of its value since the early 20th century.

Another characteristic of this cycle is wage stagnation: people earn less even as costs of essentials rise, a dynamic that inevitably leads to political crisis and upheaval.

The end-game for inflation is destruction of fiat currencies, i.e. rising inflation or complete loss of faith in paper money. This is of course “impossible,” just like World War I, the Titanic sinking, the global meltdown of 2008, etc. Impossible things happen with alarming regularity.

4. Peak oil, which does not mean the world runs out of oil, it simply means oil production no longer rises to meet demand and eventually declines even as new fields are brought online. It can also mean that the price of energy rises to the point that consumers can either buy energy or they can keep the consumer economy afloat, but they are no longer able to do both.

Many observers are confident that fracking and other technologies will enable current energy profligacy to continue unabated as the U.S. production of oil and natural gas soars.

All this surplus energy in North America sounds wonderful, but that doesn’t mean the world as a whole has escaped Peak Oil. Even if fracked wells didn’t deplete in a year or two (they do), that expansion of production will not replace the loss of production as supergiant fields in Mexico, the North Sea and the Mideast enter the depletion phase. Yes, technology can extract more oil, but technology is costly. The days of cheap natural gas may have arrived, but the days of cheap oil are numbered.

How all this plays out is unknown, but even raising U.S. production might not be enough to maintain current production levels. Since several billion more people desire the U.S.-type lifestyle of energy profligacy, then what are the consequences of the mismatch between global demand and supply?

What happened to crude oil production after the first peak in 2005?

We can also posit that “good-paying jobs” in developed economies are also tracking an S-curve. The post-industrial decline in labor has many causes, but the Internet is a key factor going forward as the Web, AI, Big Data and mobile telephony leverage all sorts of productivity gains without the pesky overhead, costs and trouble of employees.

This reality was masked by the initial boom in Web infrastructure that topped out in 2000, and again by the credit-fueled global malinvestment in real estate that topped out in 2007 and soon by the topping out of the social media/mobile app tech boom, the third stock market bubble and Housing Bubble #2.

Once these bubbles have popped, the reality of long-term employment stagnation can no longer be masked.

Credit bubbles are not engines of sustainable employment, they are only engines of malinvestment and wealth destruction on a grand scale.

A number of other questions arise as we ponder these dynamics. How “cheap” will all that energy be to those without full-time jobs? How will 100 million workers support 100 million retirees, welfare recipients and parasitic Elites plus Universal Basic Income as costs rise, taxes soar and wages stagnate?

The Status Quo is unsustainable on a number of fundamental fronts. How long it can maintain the facade of stability and sustainability is unknown, but the global willingness to squander additional years on artifice and propaganda suggests that another four years will fly by and the end-game will be at hand whether we approve of it or not.

Travesty of a Mockery of a Sham Book Sale: (September only) Why Our Status Quo Failed and Is Beyond Reform is now $2.99 for the Kindle ebook, a 25% savings, and $6.95 for the print edition, a 22% savings.

Why Things Are Falling Apart and What We Can Do About It is now $2.99 for the Kindle ebook, a ridiculous 70% discount, and $10 for the print edition, a 50% savings. 

My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free in PDF format.

My new book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition.

Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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Pound Tumbles After Defiant Theresa May Doubles Down On Brexit Plan

One day after EU Council president Donald Tusk poured cold over on hopes of Brexit negotiation progress, saying that “Theresa May’s Brexit plan will not work”, the UK prime minister is set to go “all in” and state that she “will not change tack” on Brexit despite her Chequers plan being rejected by EU leaders, according to the BBC.

May will shortly make a statement in Downing Street on the state of Brexit negotiations following a summit of EU leaders in Salzburg, as Brexit Secretary Dominic Raab said there was no “credible alternative” on the table from the EU at the talks.

He also expressed doubt over how serious EU leaders were about the negotiations. He told the BBC’s Politics Live: “It did not feel like the reciprocation of the statesmanlike approach that she (Mrs May) has taken”.

May says her plan for the UK and EU to share a “common rulebook” for goods, but not services, is the only credible way to avoid a hard border between Northern Ireland and the Republic of Ireland. The “Chequers” plan, as it is also known, remains opposed by many within her own party who argue it would compromise the UK’s sovereignty. And it got a cool reception at this week’s EU summit in Salzburg.

As we reported yesterday, European Council President Donald Tusk said there were some “positive elements” in Mrs May’s proposals, but he said EU leaders had agreed that the proposals needed to be redrawn: “The suggested framework for economic co-operation will not work, not least because it is undermining the single market.”

He followed it up by posting a photograph on Instagram of he and Mrs May looking at cakes with the caption: “A piece of cake, perhaps? Sorry, no cherries.”

The EU has argued that the UK cannot “cherry-pick” elements from its rulebook.

The pound, which has been whiplashed constantly by every new Brexit headline, dropped on the BBC report, sliding to session lows, and down over 100 pips.

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Analyst Quits His Job Days After Downgrading Tilray

Marijuana stock Tilray has dominated the media over the last week, making early investors (read: anyone who bought it more than a month ago) boatloads of cash. The stock skyrocketed from its July IPO price of $17 and reached highs of $300 on Wednesday, before paring gains and finishing the Thursday session around $172.

But it appears that not everybody benefited from the spike higher in the name. Analyst Charles Finnie from Roth Capital Partners, who tried to warn the investing public that Tilray looked “increasingly speculative” at $59 – after the stock had more than doubled – and Downgraded it to Neutral, has now “left his job” after making said call. He quit on September 5, a day when the stock closed at $89, and just two weeks before the pot stock euphoria sent it to $300.

Shortly after he downgraded his Buy rating on the name on August 30, TLRY proceeded to surge 45% over the next five days. From there, it doubled again.

Finnie tried to warn investors about the company’s limited float and how it could cause volatility. He was right about the volatility – except it came to the upside, not the downside – with the stock tacking on nearly $240 per share at one point after he issued his note. Still, not only was Finnie right about the volatility – if in the wrong direction – he was spot on: trading in Tilray on Wednesday was so volatile that the stock was halted 5 times.

During this time, we reported that investors in Tilray like Peter Thiel had made a killing on the name. Thiel was invested in TLRY through Tilray CEO Brendan Kennedy’s Privateer Holdings, which holds more than 58 million of the total 76 million shares outstanding. Their stake is now valued somewhere near $10 billion thanks to the stock’s “volatility”. 

Despite the interesting timing behind Finnie leaving the firm, Roth Capital claims that he chose to leave. Jeff Martin, Roth Capital’s director of research told Bloomberg that he left “on his own accord” and that plans to replace him “haven’t been finalized”. 

Perhaps Finnie just didn’t know the rules that every other analyst on Wall Street seems to live by in today’s market environment: don’t try to warn investors when their capital could be at risk, otherwise they miss the mania and you could be out of a job as angry clients complain to your boss for having listened to you. And while Finnie will ultimately be proven right, in this case timing was all that mattered.

Now, if only everyone on the street was just as accountable, and left their jobs “on their own accord” after missing a call, the monthly JOLTS reported would be far more exciting.

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Walmart Warns It Will Be Forced To Raise Prices Due To Trade War

One of the reasons why the US economic response to Trump’s trade war with China had been lukewarm at best, is that US consumers had not been subject to any of the inflationary consequences of the escalating tariffs between Washington and Beijing. That, however, is about to change: overnight Walmart issued a warning in a letter to U.S. Trade Representative Robert Lighthizer that it may have to raise prices due to tariffs on Chinese imports, CNN Money reported.

“The immediate impact will be to raise prices on consumers and tax American business and manufacturers,” Walmart said, according to the CNN Money report.

The letter came two weeks after Walmart asked the Trump administration to walk back its plan to put tariffs on Christmas lights, shampoo, dog food, luggage, mattresses, handbags, backpacks, vacuum cleaners, bicycles, cooking grills, cable cords and air conditioners.

However, the administration was unmoved and on Monday, it pressed forward with 10% tariffs on those products and $200 billion worth of other imports from China. The tariffs, which take effect next week, will jump to 25% at the end of the year, and target far more consumer goods – some $78BN according to DB calculations – than the first phase of $50BN in tariffs, that had relatively little impact.

Other retailers and consumer goods companies, including Ace Hardware and Joann fabric and craft stores, also lobbied the administration. Target said the tariffs will “hurt American consumers,” and said working families will pay more for school and college essentials like notebooks, calculators, binders and desks. And while administration generally ignored the concerns, it did spare bicycle helmets, high chairs, car seats and playpens from the final list. It also left off Apple Watches and Air Pods, a reprieve for Apple.

Target and Walmart will now face a tough choice: They can absorb the higher costs from tariffs by taking a hit to their profit margins, or they can pass some of the price increases on to their customers.

“Either consumers will pay more, suppliers will receive less, retail margins will be lower, or consumers will buy fewer products or forego purchases altogether,” Walmart warned in its letter.

The National Retail Federation, a trade group, estimated that a 25% tariff on furniture would cost Americans $4.5 billion more per year, while a 25% levy on travel items like luggage and handbags would cost an additional $1.2 billion.

As a reminder, washing machines were an early example of how tariffs filter down to shoppers. The Trump administration imposed a 20% trade penalty on washers earlier this year, and laundry equipment prices spiked over 16% in recent months.

Walmart will have to wrestle with the price question in a big way: of the company’s $500 billion in sales last year, about $50 billion was linked to Chinese imports or investments in Chinese businesses, estimated Greg Melich, a retail analyst at MoffettNathanson.

Needless to say, for the company which promises “everyday low prices”, raising prices is anathema to Walmart, a company that controls 10% of the US retail market and has a customer base of low- and middle-income Americans.

“Given that Walmart was such a huge source of cheap products for low income customers over the years, this really hurts the very people that Trump professes to help,” said Sucharita Kodali, a retail analyst for research firm Forrester.

In addition to prices, Walmart is facing a different threat: collapsing supply chains.

As CNN notes, Walmart’s American suppliers rely on parts from China to assemble and finish production in the United States. For example, Lasko fans, which are assembed in the United States and sold at stores, rely on motors from China. The same with bikes: Each mass market bicycle requires 40 individual parts to make, all of which are imported. “Tariffs on these parts would make U.S. manufacturing uncompetitive and drive up the price of bicycles for children and families,” Walmart told Lighthizer.

And while the company has been working to buy more bikes from American manufacturers, not enough are made in the United States to meet demand. Even with 25% tariffs, buying bikes with Chinese parts will still be cheaper than suppliers shifting production entirely, Walmart said.

One of Trump’s prerogatives with pursuing trade war is to push companies to manufacture more goods in the United States. But the National Retail Federation says the administration’s thinking is flawed and carefully planned supply chain plans can’t be redrawn overnight.

Retailers order their products six months to a year in advance, and they are left scrambling to find new options for 2019.

“The [administration] continues to overestimate the ability of US companies to shift supply chains out of China,” the trade group said in its own letter to Lighthizer. “Global supply chains are extremely complex. It can take years to find the right partners who can meet the proper criteria and produce products at the scale and cost that is needed.”

Case in point: the United States imported close to $220 million worth of dog leashes last year, and more than 80% came from China. And $474 million worth of lights for Christmas trees were imported to the United States last year, 85% of which were from China.

So while Walmart is already locked in for the coming holiday season, Christmas lights will probably be more expensive next year.

 

 

 

 

 

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NYC Home Sellers Are Slashing Prices “Like It’s 2009”

The crumbling New York City real estate market has continued apace during the third quarter, after more than half of homes sold in Manhattan during the second quarter closed below asking price – the worst Q2 tally since 2009. And while real-estate brokers had hoped that the seasonal shift during Q3 would help lift sales as a flood of higher-quality offers hit the market, it appears canny buyers – wary of being left holding the bag after nearly a decade of asset appreciation – are refusing to indulge sellers’ lofty asks.

To wit, NYC home sellers slashed prices on almost 800 listings during a single week this month, the largest wave of discounts in at least 12 years, per Bloomberg.

In the week through Sept. 9, there were 774 homes in Manhattan, Brooklyn and Queens that got a price cut, the most for any seven-day period in data going back to 2006, according to a report Friday by listings website StreetEasy. The previous weekly record was in March 2009, during the global recession, when 713 properties were reduced.

NYC

With another post-Labor Day wave of listings expected, sellers are experiencing a “gut check” as they realize they must lower  prices to the point of demand, because the days of foreign (mostly Chinese) buyers willing to pay the “Chinese premium” are over.

Sellers with older listings are adjusting expectations just as a wave of newer properties hits the market – customary in New York after Labor Day. In that same September week, Manhattan got 662 additional listings, the third-highest total for any week in StreetEasy’s data.

“It’s a big gut-check for sellers,” said Grant Long, senior economist at StreetEasy. “We’re at a period in the sales market where sellers have been incredibly ambitious with the prices they’re asking. They’re having to come down and bring prices to where demand actually exists.”

As we pointed out earlier this year, sales of luxury apartments (those that cost $5 million or more) plummeted more than 31% over the first six months of this year, forcing sellers to slash price (and developers, who have neglected the sub-luxury market in favor of supposed higher margins at the top end, to eat losses).

NYC

Steven James, CEO of Douglas Elliman, provided an apt summary of the dynamics at play in the contemporary NYC housing market.

“It’s about perception – that the market went way up, and it went way up real fast, and it’s not happening anymore, and I am not going to be the fool who gets burned by overpaying,” said Douglas Ellman CEO Steven James, who adds that buyers “do believe that over time, the market will go up, but it’s not going up right now.”

Meanwhile, in the real world outside of New York, the familiar problems remain: with housing starts still lagging expectations, the housing market appears stuck in a vicious cycle. Low development and supply are squeezing prices higher, which are rising more than 2x faster than wage growth across the nation, and as a result most working and middle-class Americans still can’t afford to buy a home.

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Euphoria Grips Markets As Traders Brace For Quad Witching, Huge Index Rebalance

Global equity markets rallied into the last day of the week, with euphoric sessions in Asia and Europe pushing U.S. equity futures through overnight highs and into new all time highs, amid a trader focus on today’s quadruple witching and huge S&P rebalancing.

US traders braced for a surge in volume on “quad-witching” day that will see stock index futures, stock index options, stock options, and single stock futures expire…

… on top of the largest revision to the Global Industry Classification Standard since 1999 as Facebook, Google and others exit the Info-Tech sector and move to the newly created Communication Services sector, which replaces the venerable Telecom sector.

The MSCI All-Country World Index was poised for a seven-month high after its strongest week since May, as stocks across Asia capped their best two-week rally since February. China’s Shanghai Composite soared 2.5% amid receding trade war fears, despite a flimsy start after the PBoC refrained from liquidity operations and dramatically slowed its net liquidity efforts for the week.

Japan’s Topix Index closed at the highest in four months as the yen continued to slide despite the BOJ’s announcement to further taper its bond buys in the 25+ year bucket, which bear steepened the JGB curve, and sent the yield on 10-year JGB bonds up 1.5 bps to 0.13%, the highest level since Aug. 3. Morgan Stanley revised upward its USD/JPY forecast through to mid-2019, citing continued strength in U.S. asset prices and rising bond yields in developed markets.

European markets ignored poor PMI data, and were green across the board, as the Stoxx Europe 600 Index headed for its best week in six months rising 2% from last Friday, led by the beaten-down mining and auto sectors, while banks have also been outperformers. Those sectors have been increasingly immune to the global trade noise, which is a hint that investors have started to price in the impact of tariffs and are now seeing upside risks if a trade deal is signed. Europe will see some index rebalancing today as well, as Dassault Systemes will replace Solvay in the CAC40, Wirecard will replace Commerzbank in the DAX, while Linde Tendered, Amadeus IT and Kering will replace Saint-Gobain, E.ON and Deutsche Bank in the Euro Stoxx 50.

Still, storm clouds may be gathering because as Bloomberg notes, there have been quite a few profit warnings in Germany since August, including Henkel, Continental, K+S, Zalando, Ceconomy, Suedzucker, Tom Tailor to name a few.

Amid the bubbly stock market, further political drama erupted in Europe, with French president Macron branding Brexiteers as “liars” and ongoing fighting inside the Italian coalition government over the next budget. But the noise did not stop the pound and the euro from flying. With the dollar weakening in recent days, the correlation between the Euro Stoxx 50 and the euro reaches its highest level in two years.

Even as stocks soared, core European bonds inched higher after the latest PMI data showed euro-area expansion edged lower in September as manufacturing export orders slumped to the weakest in five years, though the euro clung onto gains to head for a three-month high. Europe’s September Composite PMI showed misses across the board, with France 53.6 vs 54.6 est; Germany 55.3 vs 55.4 est; Eurozone 54.2 vs 54.5 est; Markit noted the near stagnation of exports dragging manufacturing slower, and despite a buoyant services sector, risks to growth appear tilted to the downside.

Italian bonds climbed as Finance Minister Giovanni Tria prepares a draft budget.

The greenback whipsawed before edging higher, but remained on course for its worst weekly performance in two months as measured by the Bloomberg Dollar Spot Index. The euro briefly climbed above $1.18 as medium-term accounts closed shorts, while fast-money names took profit on pound longs.

Elsewhere in FX, the euro initially edged up against the dollar although it has since dropped to session lows after a disappointing round of Manufacturing and Service PMI data, while the pound weakened against pairs after European Union leaders bluntly rejected U.K. Prime Minister Theresa May’s “chequers” Brexit blueprint and warned that time is running out for striking a deal; the Swiss franc rallied a second day against the dollar. In Japan, the yen slid, touching a two-month low as investors looked past the U.S.-China trade war, boosting stocks and sapping demand for haven assets; Japan’s government bond yields advanced after the Bank of Japan signaled it is persisting with stealth tapering by cutting purchases of bonds due in more than 25 years. The Aussie touched a three-week high, supported by the improving risk sentiment and as S&P Global Ratings raised the outlook on Australia’s AAA credit rating to stable from negative

US 10Y yields traded north of 3.00%, although so far all attempts to stage a firm break out above the key technical level of 3.10% have been unsuccessful.

In Brexit news, former UK Brexit Secretary Davis warned as many as 40 MPs could vote against PM May’s Chequers plan but added that Brexiteers are “reasonably terrified” of a Labor general election victory and that Downing Street is “banking on” this fear. UK PM May today will review the fallout of the Salzburg summit with her closest aides with suggestions from a senior minister that she could have to re-write her Chequers Brexit plan. However, BBC’s Kuenssberg tweeted that no announcement is to be made today by PM May, despite suggestions there would be.

Meanwhile, over in Italy Deputy PM and Five Star Leader Di Maio said he never wanted to bring down the government and reiterated being committed to keep election promises, while Italy’s League said it will govern with Five Star Movement for five years and will respect all the points in the government program. Di Maio later said new pension rules, flat tax and universal income will be part of the 2019 budge.

Elsewhere, crude oil headed for a second weekly advance, with Brent and WTI set to end the week positive by over 1% ahead of the OPEC meeting in Algeria this weekend, leading the Bloomberg Commodity Index to its highest level in more than a month. JP Morgan raised its Q4 Brent forecast by $22/bbl to $85/bbl.

Elsewhere on Friday, copper climbed to highest level in more than a month as metals extend their surge, with Goldman Sachs predicting raw materials will gain through the year-end as investors become used to trade war tensions and growth in major economies remains strong. Gold still holds strong above $1,200.

On today’s calendar, expected data include PMIs with no major company scheduled to report earnings.

Market Snapshot

  • S&P 500 futures up 0.1% to 2,943.00
  • STOXX Europe 600 up 0.5% to 384.69
  • MXAP up 1% to 166.04
  • MXAPJ up 1.2% to 529.29
  • Nikkei up 0.8% to 23,869.93
  • Topix up 0.9% to 1,804.02
  • Hang Seng Index up 1.7% to 27,953.58
  • Shanghai Composite up 2.5% to 2,797.49
  • Sensex down 1% to 36,762.09
  • Australia S&P/ASX 200 up 0.4% to 6,194.60
  • Kospi up 0.7% to 2,339.17
  • German 10Y yield fell 0.8 bps to 0.463%
  • Euro up 0.08% to $1.1786
  • Italian 10Y yield rose 2.9 bps to 2.521%
  • Spanish 10Y yield fell 0.7 bps to 1.504%
  • Brent futures up 0.8% to $79.35/bbl
  • Gold spot little changed at $1,207.87
  • U.S. Dollar Index little changed at 93.95

Top Overnight News from Bloomberg

  • Donald Trump continued to hit out at China days after announcing another round of tariffs. The Trump administration hasn’t put a process in place for companies to get exemptions from 10 percent tariffs it’s imposing on $200 billion of Chinese goods, unlike earlier rounds of the duties, four people familiar with the matter said
  • Japan’s 40-year yield climbed above 1 percent after the Bank of Japan cut buying of debt due in more than 25 years by 10 billion yen at its regular operation on Friday, the first reduction in the segment since July
  • Theresa May promised fresh plans to break the stalemate in Brexit negotiations after European Union leaders bluntly rejected her blueprint and warned that time is running out for striking a deal
  • Nafta talks have probably missed the latest in a string of deadlines, leaving all eyes on the U.S. over what will happen next
  • Oil retreated after U.S. President Trump resumed his criticism of OPEC, as the global benchmark crude flirted with $80-a-barrel earlier this week
  • Australia ratings outlook revised to stable from negative by S&P. Stable outlook reflects expectations that the general govt fiscal balance will return to surplus by the early 2020s, S&P Global Ratings says
  • U.K.’s Theresa May promised fresh plans to break the stalemate in Brexit negotiations
  • Hong Kong’s sleepy foreign- exchange market suddenly came to life on Friday, propelling the local dollar to its biggest gain in 15 years. In a city that keeps its currency on one of the world’s tightest leashes, swings greater than 0.4 percent have only happened three times since Hong Kong widened its trading band in 2005
  • A former Deutsche Bank AG trader who was responsible for submitting the company’s daily borrowing rates — combined with those of other banks to calculate the Libor benchmark — said he would often alter the figure at the request of other traders to benefit their own positions
  • GAM holding AG said it had begun paying out some investors as it proceeds with the wind-down of suspended star manager Tim Haywood’s funds, and plans to return more than 80 percent of the money to clients in certain funds in coming days
  • Euro-area expansion edged lower in September as manufacturing export orders slumped to the weakest in five years, according to IHS Markit’s composite Purchasing Managers Index which slowed to 54.2 in September, down from 54.5 in August

Asian equity markets traded higher as the region took impetus from the rally in US where the Nasdaq outperformed on a rebound in tech, while the S&P 500 and DJIA notched all-time highs. ASX 200 (+0.4%) and Nikkei 225 (+0.8%) were positive with Australia led by strength in miners following the recent upside in the metals complex, while the Japanese benchmark remained underpinned by a weaker currency and approached closer towards this year’s highs. Hang Seng (+1.7%) and Shanghai Comp. (+2.5%) both conformed to the heightened global risk appetite and markedly outperformed their peers, despite a flimsy start for mainland China after the PBoC refrained from liquidity operations and dramatically slowed its net liquidity efforts for the week. Finally, 10yr JGBs declined amid gains in stocks and after a reduction of the BoJ’s Rinban purchases of 25yr+ JGBs to JPY 50bln from JPY 60bln, which pushed the 20yr yield and 30yr yield to their highest since July 2017 and October 2017 respectively. PBoC skipped open market operations for a net weekly injection of CNY 60bln vs. CNY 330bln net injection last week. Japanese Economy Minister Motegi said they will hold a 2nd round of bilateral trade discussions with US in New York on Monday, while he added he wants a win-win outcome and doesn’t expect it to lead to FTA negotiations. Furthermore, Japanese Chief Cabinet Secretary Suga said PM Abe and US President Trump will meet for dinner on September 23rd and will hold a summit on September 26th.

Top Asian News

  • India Stock Market Rocked by Sudden Plunge in Financial Shares
  • Japan’s Long Bonds Join Global Selloff as BOJ Tapers Buying
  • Hong Kong Dollar Gone Wild: A 0.6% Move Shocks a Sleepy Market
  • Dewan Crashes as Much as 60% on Fear Default at Rival May Spread

European equities have started the day on the front foot, with the Eurostoxx 50+0.8% on the day, and setting the index up for a 2.7% climb this week, as trade concerns continue to ease. The FTSE MIB is todays outperformer, driven by Atlantia, who have  reportedly not had the Hochteif-Abertis acquisition next week quashed, despite suggestions it may be delayed by the Italian bridge disaster. Mining names are leading gains in the FTSE 100, with Rio Tinto, Glencore and Anglo American benefitting from higher metals prices. Just Eat are at the foot of the index on competition concerns after source reports suggested Uber is looking to take over Deliveroo.

Top European News

  • Euro Area Expansion Unexpectedly Slows on Trade War Turmoil
  • Italian Data Revision Gives Tria Final View for Populist Budget
  • Spain’s CaixaBank to Take $530 Million Charge on Repsol Sale
  • Denmark Says U.S. Won’t Take Drastic Steps Against Danske Bank
  • Putin’s Government Said to Fume After First Rate Hike Since 2014

In FX, the Euro extended and widespread gains for the single currency with early tests of 1.1800 vs the Greenback and 0.8925 vs the Pound before weaker than expected Eurozone preliminary PMIs (German manufacturing in particular) stymied the Eur’s advance. CHF/NZD/AUD – All firmer vs the Usd, as the DXY attempts to keep its head above key chart support (93.713 and 93.640) and in touch with the 94.000 handle, with the Franc now eyeing 0.9550, Kiwi hovering just below 0.6700 and Aud re-testing 0.7300 in wake of Moody’s reaffirming NZ’s AAA rating and maintaining a stable outlook after S&P’s upgraded its outlook for Australia overnight. In EM, The Rand continues to outperform or carry the recovery baton across the region after yesterday’s hawkish hold from the SARB, and the Zar is now eyeing the 14.2000 level flagged by the Central Bank vs the Usd with extra momentum derived from SA President Ramaphosa’s economic stimulus plan based on reallocating budget expenditure rather than ramping up spending.

In commodities, oil is in the green heading into the weekend, with Brent and WTI set to end the week positive by over 1% ahead of the OPEC meeting in Algeria this weekend. In energy newsflow JP Morgan raised their Q4 Brent forecast by USD 22/bbl to USD 63/bbl. Metals are generally higher, with the market benefitting from a marginally softer dollar and further dissipation of trade tensions. Gold is set for a 1.5% weekly rise in prices, its first weekly rise in four, and is up on the day. This comes despite Goldman Sachs revising down their gold price forecast to USD 1325/oz from USD 1450/oz. Copper is the largest benefactor of reduced trade tensions, with the industrial material up 2% on the day, and hitting a 6 week high, despite Barclays expecting copper prices to fall from USD 6,603/T in 2018 to USD 6,263/T in 2019

Looking at the day ahead, the main focus datawise should be the flash September PMIs in Europe and the US. The consensus expects no great change in the composite level for the Eurozone of 54.5 and likewise the manufacturing component while in the US only very modest increases in the manufacturing and services prints are expected. Away from that the final Q2 GDP revisions are due in France while in the UK August public sector net borrowing data is slated for release. A reminder also that today is quadruple witching day in the US which is when the quarterly expiration of futures and options occurs on the same  day – a four days a year phenomenon. It can usually lead to increased volumes and volatility in certain equity markets so something to be aware of.

US Event Calendar

  • 9:45am: Markit US Manufacturing PMI, est. 55, prior 54.7
  • Markit US Services PMI, est. 55, prior 54.8
  • Markit US Composite PMI, prior 54.7

DB’s Jim Reid concludes the overnight wrap

Risk is having a great time at the moment with the main highlight yesterday being another fresh all-time high for the S&P 500 (+0.78%) – the 19thtime this year we’ve closed with a new high but only the 5th since January. The NASDAQ (+0.98%) and DOW (+0.95%) were up even more with the latter also hitting a new high – the first since January.The VIX also hit an intraday low of 11.31 (closed at 11.80) while it was one-way traffic in Europe too with the STOXX 600 rallying +0.70% to notch up a fifth consecutive daily gain – the longest streak since early July. The DAX (+0.88%), CAC (+1.07%), FTSE MIB (+0.51%) and IBEX (+1.03%) also didn’t miss out and as you’ll see shortly it’s been a decent end to the week for Asia too.

In early US trading yesterday it looked like we might be talking about new highs for equities and a new YTD high for 10yr Treasury yields after they rose sharply to an intraday high of 3.094% (within two basis points of the May YTD and 7yr high) following a decent slug of US data releases. However, a rally back saw yields eventually pare all of that move to close unchanged at 3.064%. Yields in Europe also ended largely 1-2bps lower. There were no obvious headlines which drove the u-turn for yields but with 10yr Treasury yields up 26bps from the August lows, pullbacks are to be expected.

As we discussed yesterday this most recent sell-off in rates has not been accompanied by a sell-off in bond implied vol measures as it was with the selloffs in January/February and in May. I asked our rates strategist Francis Yared last night why vol hasn’t increased this time around and he believed it was because there hadn’t been any major change in inflation expectations as part of the move. It has been as much about removing some of the flight to quality premium that had been in the bond market over the summer due to Italy, Turkey, wider EM woes and the trade war. Indeed, since the recent trough on 25 August, real yields have driven 21bps of the 26bps move in Treasuries; inflation breakevens have moved only 5bps. Inflation remains the glue to stability in financial markets. Growth is strong (especially in the US) but the Fed can be measured, vol can stay relatively contained and risk firm if inflation remains subdued. We still think the risks on inflation are still asymmetric on the upside at the moment though. In terms of activity indicators all eyes next on today’s flash PMIs from around the world.

Back to yesterday, the factors which appeared to be contributing to the strong day for risk were a rebound for US tech, decent US data, no further escalation in the trade war, and in fact incrementally positive news from China with Premier Li Keqiang announcing that China would reduce tariffs on non-US imports from the majority of its trading partners, possibly as soon as next month. A weaker USD (-0.66%) and yet another strong day for EM FX (+0.71%) probably didn’t hurt either.
As mentioned at the top Asia is finishing the week on a high after taking its lead from Wall Street yesterday. The Nikkei (+1.03%) – which is up for the sixth consecutive session and five of which have seen gains of at least +0.96% – is joined by the Hang Seng (+0.93%), Shanghai Comp (+0.98%) and Kospi (+0.39%) in posting solid gains. Futures in the US are also up while in bonds long end JGBs have seen the biggest move (30y +3.8bps) after the BoJ trimmed purchases of bonds with maturities of more than 25 years by 10bn yen overnight. Meanwhile comments by President Trump on Fox News yesterday in which he said “it’s time to take a stand on China” has seemingly done little to dampen sentiment while the only data out overnight has come in Japan where core and corecore inflation printed in line with expectations at +0.9% yoy and +0.4% yoy respectively.

Touching on that US data that we highlighted above, the headline grabber was another new 48-year low (when population was a lot lower) for jobless claims at 201k (vs. 210k expected). Continuing claims also hit the lowest since 1973. Meanwhile the Philly Fed PMI hit 22.9 for September (vs. 18.0 expected) which was an 11pt rise from August. Helping risk (and perhaps stabilising bond yields) was the soft prices component while other components like new orders, shipment and employment all jumped. Later in the day, the August Conference Board Leading Index printed at 0.4%, modestly below expectations but still consistent with third quarter growth above 3% and consistent with our expectations. August home sales were flat mom, suggesting some softness, which is understandable given the 80bps rise in mortgage rates over the last year.

In Europe it was more strong data out of the UK which stole the show. Core retail sales printed +0.3% mom compared to expectations for a -0.2% mom decline. Prior month data was also revised up and as a reminder this follows better than expected CPI earlier this week and strong wages data last week. So we’ve seen a strong run of data from the UK of late and the latest has helped Sterling (+0.92% yesterday) to rise back above $1.32 for the first time since July. As for the latest Brexit headlines, the two sides continue to go back and forth with no immediate progress. Nevertheless, press reports suggested that EU officials have picked 17-18 November for another summit, at which they aim to agree on a formal Brexit arrangement before the transition period begins in March next year.

Speaking of Brexit, yesterday our UK economists published a special report diving into the impact on the UK economy from a crash Brexit. They calculate that UK growth would be around 4% cumulatively lower than under their baseline scenario by end-2020 with a two-year recession hitting in 2019 and 2020. With a large fiscal response (taken to be GBP 25bn of additional borrowing a year), the loss of output is less severe, with the UK economy growing 0.2% and 0.5% in 2019 and 2020 respectively. The team also make the point that the impact on the EU would be material. They expect the net cost of a crash Brexit to be around 0.5% of EU GDP. This would mean that their base case projection of EU growth (excluding the UK) would fall from 1.7% to 1.1% (y-o-y and rounded).

On the flip side our US economists were of the opinion that this time could be different and that Mr Powell could engineer the first ever soft US landing after unemployment has undershot the natural rate. This is especially relevant ahead of next week’s FOMC meeting, when officials will give their first macroeconomic projections for 2021. See here for their full report.

In Italy the only new news over the last day was a story about 5SM leader Di Maio threatening to quit the coalition over budget talks if it is not stretched to implement election campaign promises. Italian bonds sold off a bit after this, with 10y and 2y yields up 3.0 and 7.7bps, respectively.

Before we wrap up, in credit, Michal in my team published a one-pager with charts and commentary called “Credit Fund Flows – Europe Less Weak, US Still Strong” which provides the latest update on fund flows after rather brutal European IG outflows in the previous weekly period and puts them in the context of flows in other asset classes.

In terms of the day ahead the main focus datawise should be the flash September PMIs in Europe and the US. The consensus expects no great change in the composite level for the Eurozone of 54.5 and likewise the manufacturing component while in the US only very modest increases in the manufacturing and services prints are expected. Away from that the final Q2 GDP revisions are due in France while in the UK August public sector net borrowing data is slated for release. A reminder also that today is quadruple witching day in the US which is when the quarterly expiration of futures and options occurs on the same  day – a four days a year phenomenon. It can usually lead to increased volumes and volatility in certain equity markets so something to be aware of.

via RSS https://ift.tt/2xEb3pA Tyler Durden

Google Staff Discussed Search “Tweak” To Bias Trump Travel Ban Results

The notion that Google’s search algorithm is biased (explicitly or implicitly) against conservative voices and media outlets is nothing new. President Trump slammed Google for this tendency over the summer when he tweeted a screen shot of the results from a search using the terms “Trump news”…

Google

…and it came back with only left-leaning news organizations in the top spots.

So it’s hardly surprising that, according to a late Thursday report by the Wall Street Journal, two tech reporters exposed an incident where Google employees considered actively biasing the company’s search algorithm to favor news sources that would offer the perspective that Trump’s then-newly issued travel ban was unconstitutional, illegal and dangerous, while also surfacing links to resource and information that would allow users to contribute to the ACLU or other organizations working against the ban, while also providing resources for people impacted by the ban.

Google

The list of suggestions included:

“Actively counter islamophobic, algorithmically biased results from search terms ‘Islam’, ‘Muslim’, ‘Iran’, etc.”

“Actively counter prejudiced, algorithmically biased search results from search terms ‘Mexico’, ‘Hispanic’, ‘Latino’, etc.”

“Can we launch an ephemeral experience that includes Highlights, up-to-date info from the US State Dept, DHS, links to donate to ACLU, etc?” the email added.

Several officials responded favorably to the overall idea. “We’re absolutely in…Anything you need,” one wrote.

But a public-affairs executive wrote: “Very much in favor of Google stepping up, but just have a few questions on this,” including “how partisan we want to be on this.”

“To the extent of my knowledge, we’d be breaching precedent if we only gave Highlights access to organizations that support a certain view of the world in a time of political conflict,” the public-affairs executive said. “Is that accurate? If so, would we be willing to open access to highlights to [organizations] that…actually support the ban?”

While these suggestions were being bandied about, Google co-founder Sergey Brin, who moved to the US from the former Soviet Union as a child, was attending rallies in the Bay Area protesting the ban. Google also joined nearly 100 technology companies in filing a joint amicus brief that February challenging the ban. “The order inflicts significant harm on American business, innovation, and growth.”

According to the email chain, which was leaked to WSJ, employees responsible for search marketing said they were engaged in a “large brainstorm” about how to react to the search.

“Overall idea: Leverage search to highlight important organizations to donate to, current news, etc. to keep people abreast of how they can help as well as the resources available for immigrations [sic] or people traveling,” the email says. Some suggested ways to “actively counter” Google searches that produced anti-Islamic and anti-Hispanic search results. Others focused on how the company could use its “highlights” function, the code name for an experimental project that allowed influencers like politicians and musicians to post text updates that would appear directly in Google’s search feed.

A spokesperson for Google emphasized in a statement that none of these ideas was ever implemented, and that “Google has never manipulated its search results” – which is, of course, objectively untrue. In fact, Attorney General Jeff Sessions is expected to meet with states’ attorneys general next week to discuss possible criminal action against tech firms that bias their products against conservatives.

“These emails were just a brainstorm of ideas, none of which were ever implemented,” a company spokeswoman said in a statement. “Google has never manipulated its search results or modified any of its products to promote a particular political ideology – not in the current campaign season, not during the 2016 election, and not in the aftermath of President Trump’s executive order on immigration. Our processes and policies would not have allowed for any manipulation of search results to promote political ideologies.”

Because who could ever forgot how Trump’s electoral victory caused such “panic and dismay” among top Google executive, after the company actively aided the Clinton campaign only to find that its vast influence on the culture still wasn’t enough to push her over the line.

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