Category: zerohedge

By Michael Every of Rabobank

War and Peace

As Tolstoy said of ‘War and Peace’, it’s “not a novel, even less is it a poem, and still less a historical chronicle.” I agree: it’s a schlep. It’s one of those epic novels that you look at and think – can I? And I must confess, with my eyesight, I can’t. Of course, that doesn’t mean one isn’t aware of what the book covers, the Napoleonic war between France and Russia, or its key question – is history driven by powerful underlying forces, or powerful leaders?

That question, Russia, and war and peace, are all going to be key today. Russian President Putin is due to speak to his Federal Assembly against the backdrop of the largest military mobilization since the Cold War, and perhaps in the region since World War Two. This has already seen the closure of the Kursk Strait, and it now includes shutting down the airspace around the region until April 24. Nobody knows what Putin will say, and it could all just be rhetoric, with the army in the background to warn the West not to try to expand NATO eastwards. Yet there are also suggestions Putin may announce the annexation of the Donbas region of Ukraine, within which 650,000 have claimed Russian passports in recent years.

The first question is what the Western response would be to a unilateral redrawing of national borders: and the answer is very little short of rhetoric and sanctions; and any real sanctions would hurt Western economies a lot – particularly on the cost-push inflation side. The second question is if we would see a (Western-backed?) Ukrainian military response – and then a Russian reprisal, and how far into Ukraine given the scale of forces amassed if so; or if Russian agent provocateurs will try to instigate to the same ends. Yet the limited room for a pain-free Western response remains the same. (For a more on this issue, please see here.)

Those who speak Russian know the Peace in Война и мир is a homonym that also means World, so the book’s title can be ‘War and the World’ if one wants it to be. Homonyms aren’t seen only in Russian – try peace and piece in English. Which, to paraphrase Mel Brooks, may have Putin proclaiming: “All I want is peace! Peace! A piece of Ukraine, and a piece of…..”. But how large a piece might mean no peace for the world?

Similarly, if less militarily, yesterday’s Boao speech from China’s Xi Jinping is today reported differently by different media:

• Xinhua notes: “Xi’s global governance remarks strike strong tone at Boao”;

• Newsweek went with “China’s Xi Jinping Warns U.S. of ‘Meddling in Others’ Internal Affairs’”;

• Reuters with “China’s Xi calls for fairer world order as rivalry with US deepens”; and

• Bloomberg with “Xi Challenges US Global Leadership, Warns Against Decoupling”.

Yes, no decoupling, please! Yet as Bloomberg also argues today, China’s digital CNY, while no threat to the USD as a reserve currency (as it’s an electronic version of a currency nobody wants), or a way to avoid sanctions –which remains to be seen– still “appears potentially more geopolitically significant as leverage over multinational companies and governments that want access to China’s 1.4 billion consumers. Since China has the ability to monitor transactions involving the digital currency, it may be easier to retaliate against anyone who rebuffs Beijing on sensitive issues like Taiwan, Xinjiang, and Hong Kong.” As former US Deputy National Security Advisor Mat Pottinger is quoted: “If you think that the US has a lot of power through our Treasury sanctions authorities, you ain’t seen nothing yet. That currency can be turned off like a light switch.”

So good luck to multinationals heartily agreeing that decoupling is unwanted, as they try to straddle the US, and its growing thicket of USD sanctions wrapped around a human rights foreign policy focus, and China, with its Panopticon e-CNY that can be turned off to ensure US sanctions and human rights foreign policy have no power over it. Somewhere in-between this Scylla and Charybdis sails the good ship Liberal World Order, the crew all merrily singing “I am the very model of a Build-Back-Better General.”

New Zealand already appears to have jumped the gun(ship) here, with its foreign minister partially walking away from the post-WW2 Five-Eyes western intelligence grouping if it involves doing anything about China.  

Anyway, somewhere that powerful leaders are not being seen and powerful –dare I say revolutionary?– forces are sweeping in, is football. The European Super League, so derided in this Daily for the past two days, has crumbled. All six English clubs have pulled out, with one or two even apologizing to “legacy” fans, and the vice-chair of Manchester United resigning. Victory for the people’s game! Victory for localism over globalism! Well, yes,…except it’s far from certain the British government will now act as promised to deliver real power back into fans’ hands via partial ownership of the clubs they worship to stop this happening again. Moreover, the pre-existing football structure we revert to includes an expanded gilt-edged Champions League format, and a game that is still more about money than it is about anything else.

So does this portend the end of Build Back Better globalism? Or the end of neoliberal idiocy? Or the entrenchment of nasty neoliberalism as the savior from an even stupider version of neoliberalism? Well, in markets, every time our system fails we swear we are changing it in response – and then the same old faces do the same old things, but worse, under a new badge.

The primary way this now happens of course is that central banks pretend that not only do they not see the asset inflation they are deliberately stoking, they also don’t see the supply-side cost-push inflation. Instead, they talk about the wage inflation they can never stoke alone – and which even fiscal policy in tandem can’t either without people power ‘football’ policy. As we have just seen, this will also have to involve decoupling and (peaceful) redrawing of economic borders around a local, national, or limited international perimeter. On which note, the US push for a new liberal world fiscal order is reportedly already in trouble (no!) because Amazon doesn’t want to join the party: ‘Taxation Dies in Darkness’, it seems.

So to conclude my own epic here, which way are the powerful forces of history leading us? And what are powerful leaders going to do to either resist or accelerate this momentum? It seems odd for a global financial market with the attention span of a bowl of borscht to have to consider, but that kind of Tolstoyan question is still one for the ages. Today particularly so.

Less than a week ago we reported that after Morgan Stanley and BofA, Deustche Bank joined the growing bandwagon of sellside researchers warning that the market is facing a period of severe turbulence, investors appear to be heeding the caution in what BofA calls a significant shift to the “increasingly euphoric sentiment.”

Yesterday we reported that according to the latest institutional and HNW client data published by Bank of America, the bank’s flow desk just had seen the biggest outflows in five months as clients were net sellers of a whopping $5.2BN in US stocks last week – the biggest sales since mid-Nov. and fifth-largest on record – which took place just as the S&P 500 reached new highs.

Incidentally, BofA warned that “market weakness could continue near-term” and calculated that in the prior times weekly flows were this (or more) negative, the subsequent week’s returns were -1% on avg/median (chart below) with negative returns 75% of the time.

So nothing good coming for stocks in the near-term, at least based on empirical data (which probably means that some HFT will start a short squeeze as quants start piling in on the short side based on the historical record).

Then, overnight, Goldman’s Prime Brokerage Desk – which recently become famous thanks to its involvement in the Archegos fiasco – poured the latest flow cold water, and in a report from Tuesday night, Goldman wrote that the bank’s Prime book “saw the largest net selling since Mar 18th (-2.4 SDs vs. average daily flow of the past year), driven by short sales and to a lesser extent long sales (2 to 1).”

More remarkably, Goldman Prime notes that “US equities have been net sold for two straight days (7 of the past 8) on the GS Prime book“, and with the exception of Asia which was modestly net bought, all regions were net sold led by North America which made up more than 90% of the $ net selling.

Visually:

And some more details from GS Prime:

• Both Macro Products (Index and ETF combined) and Single Names were net sold yesterday and made up 70% and 30% of the $ net selling, respectively.
  • While yesterday’s selling activity was led by Macro Products, most of the recent selling flow had been driven by Single Names which made up more than 80% of the $ net selling from 4/8 to 4/16.
• US ETF shorts on the GS Prime book increased +2.75% – the largest one-day increase in nearly two months – driven by Large Cap and Small Cap ETFs.
• 8 of 11 sectors were net sold led in $ terms by Info Tech (long-and-short sales), Consumer Disc (long-and-short sales), Financials (long-and-short sales), and Real Estate (long sales > short covers), while Energy (short covers + long buys), Utilities (long buys > short sales), and Industrials (long buys > short sales) were the only net bought sectors.
• Most net sold industries – Software, Hotels, Restaurants & Leisure, Automobiles, Specialty Retail, Capital Markets, Internet & Direct Marketing Retail, Tobacco, HC Providers & Svcs
• Most net bought industries – Aerospace & Defense, Electric Utilities, Multiline Retail, LS Tools & Svcs, Tech Hardware, HC Equips & Supplies, Air Freight & Logistics, Household Products

While we have touched upon this in recent weeks, hedge fund leverage remains near all time highs, although the recent reduction in L/S ratio shows managers are turning a bit more cautious.

Finally, for those curious (i.e., anyone working in a hedge fund), here are some recent performance metrics from GS Prime which notes that while fundamental LS alpha improved for three straight weeks, it has been challenged again in the past few days

April MTD

• Fundamental LS +3.1% (alpha +1.2%) vs MSCI TR +4.8%
• Systematic LS +1.5% (alpha +1.4%)

2021 YTD

• Fundamental LS +1.5% (alpha -6.2%) vs MSCI TR +9.9%
• Systematic LS +10.1% (alpha +10.6%)

TL/DR: it’s time for another vicious squeeze higher.

Authored by Jonathan Turley,

Below is my column in the Hill on two issues that arose on the final day of the trial of Derek Chauvin that could now feature prominently in any appeal. There will likely be an array of conventional appellate issues from the elements of the murder counts to the sufficiency of the evidence. Obviously, any appeal will wait until after sentencing, which will take many weeks. However, two issues were highlighted on the final day which could play a role in the appeal.

The first on the denial of a venue change and the sequestering of the jury is very difficult make work on appeal. However, there are strong arguments to be made in this case.  I believe Judge Cahill should have granted the venue change and also sequestered this jury. It is not clear if the court polled the jury on trial coverage, particularly after the inflammatory remarks of Rep. Maxine Waters (D., Cal.). However, there are credible grounds for challenging how this jury may have been influenced by the saturation of coverage of the trial as well as rioting in the area.

Here is the column:

The final day of the Derek Chauvin trial in Minneapolis seemed at times to be a remake of the 1981 neo-noir film, “True Confessions.” Call it “True Concessions.” Judge Peter Cahill acknowledged that Rep. Maxine Waters (D-Calif.) may have given the defense a basis to overturn any conviction, while prosecutors seemed to drive a stake through the heart of their cases against three other officers charged in the death of George Floyd.

And it all played out on live television.

Damage Below the Waters Line

Rep. Waters ignited a firestorm of controversy by flying to Minnesota to tell protesters to remain in the streets and fight for “justice,” to be “more confrontational,” despite days of rioting, looting and other violence. She said no verdict in the Chauvin trial would be accepted except a conviction for first-degree murder — a demand that might be a tad difficult to satisfy since Chauvin is not charged with first-degree murder. All of this as the jury literally headed off to deliberate.

Some of us immediately noted that Waters single-handedly succeeded in undermining not just the Chauvin case but her own case against former President Trump. Waters, one of several House members suing Trump for inciting violence on Jan. 6, is now his best witnesses against her lawsuit. Where she charged that Trump sought to incite violence and intimidate Congress, Waters is being denounced for inciting violence and intimidating the trial court.

One of those denouncing Waters was Judge Cahill, who declared in open court that “I wish elected officials would stop talking about this case, especially in a manner that is disrespectful to the rule of law and to the judicial branch and our function. If they want to give their opinions, they should do so … in a manner that is consistent with their oath to the Constitution.” Calling such comments “abhorrent,” Cahill added this haymaker: “I’ll give you that Congresswoman Waters may have given you something on appeal that may result in this whole trial being overturned.”

His statement was not just a criticism but a concession that Waters’ comments could not have come at a worse time or put the court in a worse position. Some of us have criticized Cahill — who has done an otherwise outstanding job — for not changing the trial’s venue or sequestering the jury. Those rulings came back to haunt him as protests grew before the trial and then exploded with the killing of Daunte Wright in nearby Brooklyn Center, Minn. One of the Chauvin jurors lives in Brooklyn Center, where rioting and looting occurred even before Waters flew in to throw gasoline on the fire.

Cahill denied a defense motion for a new trial but acknowledged that Waters’ comments magnified the appellate challenges in sustaining any conviction. Such statements alone are unlikely to overturn a conviction — indeed, such motions are notoriously hard to win — but Waters has made it far more difficult for prosecutors in the case. The tragic irony is that Waters could be used to overturn the very conviction she demanded. If that happens, it is unlikely that rioters will go to her home or burn businesses in her district. Those crimes will be focused in Minnesota but could spend across the country, too.

The danger for unrest may be greater due to the array of charges. It is not clear that a manslaughter conviction will satisfy protesters if it is accompanied by acquittals on murder. This was always a stronger manslaughter than a murder case. More importantly, adding the murder charges created a potential flashpoint for protests with any acquittal or later reversal on appeal. Moreover, while total acquittal seems unlikely, there is a possibility of a mix of acquittals and a hung jury that could ignite further rioting.

Prosecuting the Powerless?

If Waters was undermining any conviction of Chauvin, the prosecutors themselves seemed to be undermining any prosecution of the other officers. In one of the trial’s most surprising moment, prosecutor Steve Schleicher seemed to exonerate the other three officers in order to further incuplate Chauvin.  In his closing argument, Schleicher declared that Chauvin “had the power, and the other officers, the bystanders, were powerless.”

Prosecuting the powerless is not usually part of the oath of district attorneys. What was striking about Schleicher’s statement is that the cases against the other officers depend on a conviction in this case. As discussed previously, prosecutors structured the cases against all four officers like an inverted pyramid; Alexander Kueng, Thomas Lane and Tou Thao are charged as aiders and abettors to Chauvin’s alleged murder or manslaughter. If Chauvin is acquitted or the jury deadlocks on the charges, their prosecutions would then collapse.

Now, prosecutors have admitted that the three other officers were as powerless as bystanders on the street. The standard for aiding and abetting is itself not particularly demanding, since it covers anyone who “intentionally aids, advises, hires, counsels, or conspires with or otherwise procures the other to commit the crime.” However, proving such a crime can be more difficult, particularly given a chaotic crime scene.

Schleicher’s concession adds to an already difficult case because the other officers did take steps that can be cited by their defense attorneys as seeking to help Floyd. The officers repeatedly called for an ambulance, and Lane, a new officer on the force, attempted to deescalate the situation. When Floyd pleaded, “Please don’t shoot me, man,” Lane replied: “I’m not shooting you, man.” When Floyd struggled not to get into a police car and said he could not breathe, Lane offered to sit with him, roll down the windows and turn on the air conditioning. It also was Lane — who had only been on the force a couple of days — who urged Chauvin to move Floyd from the knee-restraint position.

Schleicher’s words can be cited in defense pretrial motions to dismiss the case. While it will be more difficult to introduce such concessions from the prosecution into the actual trial of the three remaining officers, it could make it more difficult for this prosecution team to appear in those other cases— particularly Schleicher, who would have to argue the exact opposite to another jury of what he argued before this jury. And that never sits particularly well with a trial court.

Neither Waters nor the prosecution seemed concerned over how their words would impact this or later cases in the killing of George Floyd. Whatever benefit these statements may have brought, their true costs could be prohibitive as Minnesota struggles with the resulting uncertainties and unrest.

Authored by Jonathan Turley,

Below is my column in the Hill on two issues that arose on the final day of the trial of Derek Chauvin that could now feature prominently in any appeal. There will likely be an array of conventional appellate issues from the elements of the murder counts to the sufficiency of the evidence. Obviously, any appeal will wait until after sentencing, which will take many weeks. However, two issues were highlighted on the final day which could play a role in the appeal.

The first on the denial of a venue change and the sequestering of the jury is very difficult make work on appeal. However, there are strong arguments to be made in this case.  I believe Judge Cahill should have granted the venue change and also sequestered this jury. It is not clear if the court polled the jury on trial coverage, particularly after the inflammatory remarks of Rep. Maxine Waters (D., Cal.). However, there are credible grounds for challenging how this jury may have been influenced by the saturation of coverage of the trial as well as rioting in the area.

Here is the column:

The final day of the Derek Chauvin trial in Minneapolis seemed at times to be a remake of the 1981 neo-noir film, “True Confessions.” Call it “True Concessions.” Judge Peter Cahill acknowledged that Rep. Maxine Waters (D-Calif.) may have given the defense a basis to overturn any conviction, while prosecutors seemed to drive a stake through the heart of their cases against three other officers charged in the death of George Floyd.

And it all played out on live television.

Damage Below the Waters Line

Rep. Waters ignited a firestorm of controversy by flying to Minnesota to tell protesters to remain in the streets and fight for “justice,” to be “more confrontational,” despite days of rioting, looting and other violence. She said no verdict in the Chauvin trial would be accepted except a conviction for first-degree murder — a demand that might be a tad difficult to satisfy since Chauvin is not charged with first-degree murder. All of this as the jury literally headed off to deliberate.

Some of us immediately noted that Waters single-handedly succeeded in undermining not just the Chauvin case but her own case against former President Trump. Waters, one of several House members suing Trump for inciting violence on Jan. 6, is now his best witnesses against her lawsuit. Where she charged that Trump sought to incite violence and intimidate Congress, Waters is being denounced for inciting violence and intimidating the trial court.

One of those denouncing Waters was Judge Cahill, who declared in open court that “I wish elected officials would stop talking about this case, especially in a manner that is disrespectful to the rule of law and to the judicial branch and our function. If they want to give their opinions, they should do so … in a manner that is consistent with their oath to the Constitution.” Calling such comments “abhorrent,” Cahill added this haymaker: “I’ll give you that Congresswoman Waters may have given you something on appeal that may result in this whole trial being overturned.”

His statement was not just a criticism but a concession that Waters’ comments could not have come at a worse time or put the court in a worse position. Some of us have criticized Cahill — who has done an otherwise outstanding job — for not changing the trial’s venue or sequestering the jury. Those rulings came back to haunt him as protests grew before the trial and then exploded with the killing of Daunte Wright in nearby Brooklyn Center, Minn. One of the Chauvin jurors lives in Brooklyn Center, where rioting and looting occurred even before Waters flew in to throw gasoline on the fire.

Cahill denied a defense motion for a new trial but acknowledged that Waters’ comments magnified the appellate challenges in sustaining any conviction. Such statements alone are unlikely to overturn a conviction — indeed, such motions are notoriously hard to win — but Waters has made it far more difficult for prosecutors in the case. The tragic irony is that Waters could be used to overturn the very conviction she demanded. If that happens, it is unlikely that rioters will go to her home or burn businesses in her district. Those crimes will be focused in Minnesota but could spend across the country, too.

The danger for unrest may be greater due to the array of charges. It is not clear that a manslaughter conviction will satisfy protesters if it is accompanied by acquittals on murder. This was always a stronger manslaughter than a murder case. More importantly, adding the murder charges created a potential flashpoint for protests with any acquittal or later reversal on appeal. Moreover, while total acquittal seems unlikely, there is a possibility of a mix of acquittals and a hung jury that could ignite further rioting.

Prosecuting the Powerless?

If Waters was undermining any conviction of Chauvin, the prosecutors themselves seemed to be undermining any prosecution of the other officers. In one of the trial’s most surprising moment, prosecutor Steve Schleicher seemed to exonerate the other three officers in order to further incuplate Chauvin.  In his closing argument, Schleicher declared that Chauvin “had the power, and the other officers, the bystanders, were powerless.”

Prosecuting the powerless is not usually part of the oath of district attorneys. What was striking about Schleicher’s statement is that the cases against the other officers depend on a conviction in this case. As discussed previously, prosecutors structured the cases against all four officers like an inverted pyramid; Alexander Kueng, Thomas Lane and Tou Thao are charged as aiders and abettors to Chauvin’s alleged murder or manslaughter. If Chauvin is acquitted or the jury deadlocks on the charges, their prosecutions would then collapse.

Now, prosecutors have admitted that the three other officers were as powerless as bystanders on the street. The standard for aiding and abetting is itself not particularly demanding, since it covers anyone who “intentionally aids, advises, hires, counsels, or conspires with or otherwise procures the other to commit the crime.” However, proving such a crime can be more difficult, particularly given a chaotic crime scene.

Schleicher’s concession adds to an already difficult case because the other officers did take steps that can be cited by their defense attorneys as seeking to help Floyd. The officers repeatedly called for an ambulance, and Lane, a new officer on the force, attempted to deescalate the situation. When Floyd pleaded, “Please don’t shoot me, man,” Lane replied: “I’m not shooting you, man.” When Floyd struggled not to get into a police car and said he could not breathe, Lane offered to sit with him, roll down the windows and turn on the air conditioning. It also was Lane — who had only been on the force a couple of days — who urged Chauvin to move Floyd from the knee-restraint position.

Schleicher’s words can be cited in defense pretrial motions to dismiss the case. While it will be more difficult to introduce such concessions from the prosecution into the actual trial of the three remaining officers, it could make it more difficult for this prosecution team to appear in those other cases— particularly Schleicher, who would have to argue the exact opposite to another jury of what he argued before this jury. And that never sits particularly well with a trial court.

Neither Waters nor the prosecution seemed concerned over how their words would impact this or later cases in the killing of George Floyd. Whatever benefit these statements may have brought, their true costs could be prohibitive as Minnesota struggles with the resulting uncertainties and unrest.

Hedge fund manager Leon Cooperman is well known for his sometimes bizarre but always entertaining appearances on CNBC, where he has pontificated about the intemperance of investing in “fads” like crypto, GameStop and Tesla (“it will end in tears”, Cooperman recently warned investors during a screed about the GameStop craze) while criticizing progressive tax policies (and praising President Trump’s tax cuts).

And as Zero Hedge readers may remember, Cooperman knows a thing or two about tears. But we digress.

Back in March, Cooperman revived his feud with Warren, which dates back to the early days of the Democratic primary, when he again slammed her wealth tax proposal as “foolish”, and argued that it would merely inspire the wealthy to hide even more of their money offshore. “The idea has no merit. It’s foolish. It probably isn’t legal,” he said on “Squawk Box”. He scoffed that “if a wealth tax passes, go out and buy yourself some gold because people are going to rush to find ways of hiding their wealth.”

Warren and her staff are clearly eager for a chance to strike back, because last night CNBC reported that Warren had invited Cooperman to testify next week before a Senate Finance subcommittee on taxes – officially the “Subcommittee on Fiscal Responsibility and Economic Growth”.

Cooperman says no to @SenWarren’s invite https://t.co/OUEN7evGfC https://t.co/WakKqGJ85w

— Brian Schwartz (@schwartzbCNBC) April 20, 2021

But Cooperman has declined the invitation to testify and face off against Warren, and in a response given to CNBC, he called it “self-serving and disingenuous.” While he said that he personally has no problem paying a 50% income tax, Cooperman worries that those high rates become “confiscatory” for residents who live in high-tax cities and states.

“As I have stated many times before (including in my Open Letter to Senator Warren), I believe in a progressive income tax,” Cooperman wrote.

“Personally, I am happy to work six months of the year ‘for the government’ and six months for myself. But many who live in high-tax cities and states already pay even more than the 50 percent combined effective rate that that implies, and at some point, higher effective rates (federal, state, and local combined) become confiscatory, which should never be the ethos of this country.”

In her letter inviting him to testify, Warren told Cooperman that she is interested in giving the longtime Wall Street executive “an opportunity to discuss my Ultra-Millionaire Tax Act, which would level the economic playing field and narrow the racial wealth gap by asking the wealthiest 100,000 households in America, or the top 0.05%, to pay their fair share.” The letter was sent to Cooperman on Monday.

“But as we move expeditiously toward consideration of changes to our rigged tax code so that the wealthy pay their fair share, I believe you should be afforded the chance to present your perspective directly to Congress,” Warren wrote to Cooperman.

“The opportunity will allow you to fully air your views, not merely in front of the financial news audience where you often express them, but before the entirety of the American people.”

Readers can find the full letter below:

A rivalry between Warren and Cooperman exploded during the Democrat’s campaign for president back in 2019. After Warren sent a condescending tweet urging Cooperman to “pitch in” more, the hedge fund manager and former Goldman exec infamously slammed Warren and her proposal in a letter that went public.

“However much it resonates with your base, your vilification of the rich is misguided,” Cooperman wrote in the letter dated Oct. 30, 2019.

“For you to suggest that capitalism is a dirty word and that these people, as a group, are ingrates who didn’t earn their riches … and now don’t pull their weight societally indicates that you either are grossly uninformed or are knowingly warping the facts,” he continued.

Leon, you were able to succeed because of the opportunities this country gave you. Now why don’t you pitch in a bit more so everyone else has a chance at the American dream, too? https://t.co/OODIM7RcRn

— Elizabeth Warren (@ewarren) October 23, 2019

Readers can find Cooperman’s complete letter below:

A month later, Warren’s campaign ran a TV ad on CNBC featuring a viral clip of Cooperman crying about the prospect of Warren taking on Trump in the 2020 race. Her campaign also sold a mug that read “BILLIONAIRE TEARS”, further mocking Cooperman.

A show-down between Warren and Cooperman would have made for some gripping political theater. But just because Cooperman won’t appear at the otherwise low-profile hearing, doesn’t mean he will stop his campaign of interviews bashing Warren and her wealth tax. If anything, we imagine the billionaire, who will turn 78 later this month, might redouble his efforts, while robbing Warren of the opportunity to generate some more sound bites for her campaign advertising.

Authored by Sven Henrich via NorthmanTrader.com,

The amount of liquidity pumped into the markets and the economy in the last year dwarfs anything we’ve seen in history. Markets certainly have reacted to it with exuberance and the bounce currently seen in the economy is highly encouraging. Enjoy it while it lasts for markets and the economy will soon have to contend with a new concept and that is: Relative tightening. No, not in the form of Fed tapering or rate increases. Those won’t happen no matter what the data says, central banks have already made that clear. To even discuss it would cause havoc in financial markets.

No, relative tightening is going to occur no matter what happens as the amount of liquidity having been injected won’t be repeated. The fiscal and political appetites won’t permit it. And while we may still see an infrastructure bill in some form this year everything that happens will be incrementally less.

Recognize that the amount money pumped into markets is simply unfathomable:

In the US alone 55% of GDP, $12.3 trillion in just 13 months. There is no precedence for this. None. And consider the context: By the end of this year US debt will stand at $30 trillion up from $10 trillion in 2008. 66% of the US’s entire historical debt load will have been added in just 13 years. $20 trillion or 90% of GDP of debt expansion in just 13 years.
Keep dreaming it’s all consequence free.

To full grasp the enormity of the cumulative size of the most recent intervention amounts: Did you enjoy your $1,400 stimulus check? Yea? What happened to the other $36,100? You didn’t get those? No? Cause for $12.3 trillion the total actually comes to $37,500 for every man, woman and child in the US (population 328M).

That’s how much was just injected into the economy and financial markets over the past 13 months.

You know it takes real effort to make rich really rich:

The most dangerous phrase in economics:
We are from the Federal Reserve and we are here to help. pic.twitter.com/SKfpPcCw91

— Sven Henrich (@NorthmanTrader) April 19, 2021

Another way of looking  at this chart above: Since just before the financial crisis the top 1% have added $20 trillion to their assets while the bottom 50% have added a mere $1.5 trillion between them.

With an asset appreciation of $21.5T between the 2 groups the top 1% took 93% of the gain. This is the result of a monetary system that is entirely focused on managing the economy with asset prices, the very assets that are owned predominately but the top 1%.

It’s been my contention that they’ve totally overdone it on the intervention front and as a result we’re staring at the largest asset bubble ever.

Yes the economy got hit, and yes intervention was needed in some form, but imagine the world has previously gone through shocks, even pandemics, and has managed to recover without all such intervention methods:

And it didn’t even require 0% rates, unlimited QE and historic debt expansion. Imagine that.

Our system is so reliant on intervention it has lost all confidence in the self healing mechanisms of the organic economy. Instead we keep distorting it. https://t.co/Fh8KPWmLrD

— Sven Henrich (@NorthmanTrader) April 18, 2021

But these are different times where policy makers have apparently zero confidence in the ability of an economy to heal itself without massive interventions, after all constant intervention has been the name of the game since 2009.

Now one could argue this period of peak liquidity is going to make way toward a healthy transition as the economy will recover with strong growth offsetting the relative less stimulus coming in and that process would then somehow justify the historic 200% market cap to GDP we are currently seeing. Maybe. But I submit that nobody knows what the organic economy looks like. But I can tell you it’s a lot lower as it is now. Take the stimulus checks away and spending will drop like a brick.

Same goes for all these fabulous earnings reports we will now see. Next year’s earnings growth will collapse on a relative basis. Perhaps not on an absolute basis but these year over year comparisons will start sucking wind and then this market which has lived on multiple expansion for 3 years straight will have to contend with reality. Question is when it will start thinking about it all.

In addition the notion that creating $12.3 trillion out of thin air is consequence free is a complete fantasy. And while the theoretical consequences of all this debt creation is just that for the moment, theoretical, the real life consequences in prices accelerating vertically is already all around us.

Indeed we can stare at lumber in awe as an example:

But it’s not only lumber is it?

We live in the age of universal vertical price acceleration where even an intended joke can reach a $50B market cap. Yes I’m talking Dogecoin.

Who knew one could ever craft a tweet that puts these asset classes together yet everyone gets the joke:

Non Bitcoiners: #Bitcoin is a speculative bubble.
Bitcoiners: #dogecoin is a speculative bubble.

Lumberjacks: Hold my beer.

— Sven Henrich (@NorthmanTrader) April 20, 2021

This is the vertical casino you get when you flood a system with too much excessive liquidity.

The most vertical pile in into margin debt ever:

I see margin calls waiting to happen. pic.twitter.com/SrxnrRET3s

— Sven Henrich (@NorthmanTrader) April 20, 2021

Courtesy of the loosest financial conditions ever:

I maintain the Fed is playing with fire and in their arrogance they are way too confident with their talk of “tools” to be able to contain inflation.

This entire market is so vertically bloated with excess across all asset classes and filled with speculative frenzy I see it as incredibly dangerous and this relentless drift higher in recent weeks and artificially produced calm could make way to something very sinister at some point. Nobody will ring a bell at a top and I certainly will not aim to make such a folly attempt, but I keep looking at market structures and charts and something is brewing:

Looks like something very big is going to happen within the next 12 months.$VIX pic.twitter.com/9FfpXEUJ4F

— Sven Henrich (@NorthmanTrader) April 15, 2021

This was posted last week as markets made new all time highs.

Timing unknown. Indeed this structure could chop for months to come. But like its predecessors it looks to lead toward a major volatility event to come. And by major I mean major drop your jaw volatility.

Notable here is that this week’s weakness in markets saw the structure firming with the bounce right off the trend line:

I’m not saying the chart suggests volatility is ready to blast off into high gear yet, it may take months, but it’s clearly building and as such it has room to move higher and continue to build out the pattern which also does not preclude new lows in $VIX yet to come this year either. These structures take time to build as we’ve seen in the prior years.

But what this chart tells me is that the loosest financial conditions ever won’t remain so, and that markets soaked with peak liquidity will have to contend with relative tightening at a point where expectations, valuations, margin debt and optimism have never been higher leaving room for major reversion risk.

*  *  *

For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.

Russian President Vladimir Putin on Wednesday gave his 17th annual state-of-the-nation address to a joint session of the Russian parliament in Moscow, which is arguably his most important given the number of different crises the country faces both at home and abroad. 

Not only does a ‘new Ukraine conflict’ loom amid mounting international pressure for Russia to reduce its forces in Crimea and near the border with eastern Ukraine, but hunger-striking Kremlin critic Alexei Navalny’s supporters are planning widespread protests Wednesday. Putin’s address further comes days after Biden’s sanctions rollout targeting the Kremlin as well as select Russian companies and government entities last Thursday. Moscow is further trying to get the coronavirus pandemic under control, as it also faces geopolitical roadblocks in efforts to export its Sputnik V vaccine more broadly, and a continued weakening ruble and economy at home. 

Putin introduced first that he would focus domestic issues, but would leave “just a few words about security issues.” While he didn’t unveil any major moves in relation to he Ukraine or Belarus situations in his speech, he did have some interesting things to say about attempts to “organize a coup in Belarus” – which is something “the West is silent on…”.

The New York Times summarized of this moment of Putin’s annual address to the nation:

“Now in his third decade in power, Mr. Putin, 68, appears more convinced than ever of his special, historic role as the father of a reborn Russian nation, fighting at home and abroad against a craven, hypocritical, morally decaying West.“

Putin said related to Russia’s deteriorating relations with the West, especially the United States, “If someone uses an arrogant and selfish tone, Russia will always find a way to defend its position.”

He also sarcastically and somewhat humorously quipped, “This is turning into some kind of sport — who can say something negative about Russia the loudest.”

Protests in support of @navalny begin in eastern Russia.

His team has called for protests across the country’s 11 time zones at 7pm local, describing it as the “final test between good and neutrality”.

Russian police are expected to be out in full force. https://t.co/glFtUfxxQs

— Bianna Golodryga (@biannagolodryga) April 21, 2021

Below are some further key quotes from the speech on Foreign Policy…

“We behave in a restrained, modest manner. Oftentimes we do not respond to outright rudeness; we want to have good relations. We are not looking to burn any bridges.”

“I hope no one will think of crossing so-called ‘red lines’ against Russia, which we ourselves will define in each separate case. Russia’s response will be symmetrical, fast and tough. The organizers of any provocations threatening our core security interests will regret their actions more than they’ve regretted anything in a long time.”

“But now this practice is degenerating into something more dangerous — for example, an attempt to organize a coup in Belarus and an attempt to assassinate this country’s president…. The West is silent on this matter.”

“You can have any position on Lukashenko’s policies, but staging a goverment coup and planning the assassination of a head of state is too much.”

And on Biden’s recent sanctions…

“It seems that everyone is already accustomed to the practice of imposing illegal, politically motivated sanctions, attempts to impose their will on others by force.”

Russia’s President Vladimir Putin gives his annual State of Nation Address in Moscow against a backdrop of growing tensions with Ukraine pic.twitter.com/QlLkaG8ciH

— TRT World Now (@TRTWorldNow) April 21, 2021

On nuclear weapons and strategic deterrence, he said…

“Russia once again urges its partners to discuss issues related to strategic weapons, possibly to create an environment of conflict-free coexistence.”

“Advanced weaponry in Russia’s nuclear triad that comprises strategic aircraft, intercontinental ballistic missiles and nuclear-powered missile-carrying submarines will top 88% this year.”

“The share of advanced weapons and hardware in the troops will make up almost 76% by 2024. This is a very good figure. In the nuclear triad, it will exceed 88% already this year.”

The pandemic and economy, amid a backdrop of the ruble continuing to weaken against the dollar…

“It was impossible to avoid budget cuts [last year] altogether. To support the creation of new jobs, the state will stimulate business. I’m instructing the government to submit additional measures to support small and medium-sized businesses, including in the tax area, within a month.”

“The pandemic has exacerbated problems of social inequality and poverty around the world. We are faced with rising prices. It is impossible to rely only on targeted, directive measures. This leads to empty shelves, as was the case in the late 1980s. Now, even at the peak of the epidemic, we did not allow this. With the help of market mechanisms, it is necessary to ensure price containment.”

“The main thing is to ensure the growth of citizens’ real incomes.”

“Russia must be ready to develop test systems and vaccines within four days in case of a new dangerous infection.”

“Along with a naturally great anxiety, I personally had a firm conviction that we would overcome all trials [of the pandemic]. Having rallied together, we were able to work ahead of the curve. The number of beds in hospitals has increased more than fivefold… For the enormous work of people in all regions, I want to thank you from all my heart.”

“The three coronavirus vaccines developed in Russia are a direct embodiment of our country’s growing scientific and technological potential.”

“I’m appealing to all citizens of Russia: Get vaccinated. This will allow the formation of herd immunity by the fall.“

Reversing Russia’s demographic decline…

“The demographic crisis of the 1940s and 1990s is hitting us now. The preservation of the Russian people is our highest national priority.”

“Russia will always defend and defend traditional values that have been forgotten in a number of countries.”

“In 2030, the average life expectancy should be 78 years. We will not change our strategic goals in this area. This is a daunting task, especially since the coronavirus has not yet been completely defeated. We see how dramatically the situation is developing in other countries. We need to keep the line on all frontiers of the fight against coronavirus.”

“Our goal is to reach a steady growth of the Russian population.”

On Russia’s traditional spiritual and moral values as a unifying force for the nation…

He noted that throughout history, the people of Russia had triumphed over their trials and tribulations thanks to their unity.

“And today, family, friendship, mutual assistance, and compassion have come to the fore for us. Spiritual and moral values, which some countries are forgetting about, have, on the contrary, made us stronger, and we will always uphold and protect these values,” Putin pledged.

Putin added that the service of representatives of traditional religions had become “the spiritual backbone of society, as it always was in difficult times.” That said, the head of state addressed the clergy present in the hall, “I would like to take a deep bow before you all. Thank you very much.”

And one interesting note from the speech in US-funded media outlet Radio Free Europe…

One new development was Putin’s revelation that he is a fan of the “great writer” Rudyard Kipling.

Putin dropped the English novelist’s name while alleging that many countries were making a sport of ganging up on Russia, with “all kinds of small Tabaquis running around Shere Khan…howling to gain the favor of their ruler.”

The assumption is that Putin meant that the tiger king Shere Khan was the United States and the scrap-eating jackals surrounding him were U.S. allies, but he did not give any hint as to which Jungle Book character Russia might be.

Nevertheless, pro-Kremlin blogger Maksim Kononenko described the comment on Telegram as “powerful,” while alleging that Kipling was an “imperialist and a Nazist.” Other commenters on the thread suggested, however, that Putin’s “joke about Kipling being a good writer did not go over well.”

* * *

Meanwhile, the European Union seen as a bunch of hyenas…

Nothing too exciting in the big annual Putin speech, perhaps apart from suggestion that a coup attempt against Lukashenko had been exposed. Countries being critical of 🇷🇺 were described as a tiger with hyenas around. I guess he sees 🇪🇺 as a bunch of hyenas. pic.twitter.com/vbJwThvS7f

— Carl Bildt (@carlbildt) April 21, 2021

Deutsche Boerse said on Wednesday it would de-list the shares of cryptocurrency exchange Coinbase Global from its Xetra trading system and the Frankfurt stock exchange by end of Friday’s trading session.

“The reason for the de-listing is a missing reference data for these shares,” Deutsche Boerse said, adding the de-listing would apply until further notice.

The reaction in COIN is clearly sell first, think later…

As Reuters reports, when Coinbase trading started at Deutsche Boerse’s platforms, a wrong reference code – a so-called LEI code – was used by mistake, Deutsche Boerse said.

“The only way for Coinbase to resume trading is for the issuer to apply for an LEI,” Deutsche Boerse said.

It was not clear whose mistake it was, but reading the brief vacuous statement from Deutsche Boerse suggests this could be an exchange issue, as opposed to something Coinbase missed.

Yesterday’s guilty verdicts in the George Floyd murder case will almost certainly send former Minneapolis Officer Derek Chauvin to prison for the rest of his life once the sentence is finally handed down next month. But already more police shootings are capturing the nation’s attention.

Roughly one week after the Civilian Office of Police Accountability of Chicago released body camera footage depicting the shooting of 13-year-old Adam Toledo, sparking national outrage, footage of yet another police shooting of a teenager has just been released.

Columbus police on Tuesday night released bodycam footage showing an officer’s fatal shooting of a 16-year-old girl earlier in the day. Police have not identified the teen, but family members told 10TV she was Ma’Khia Bryant. Bryant’s aunt told The Columbus Dispatch that Bryant lived on the block at a foster home.

In a social media post, Bryant’s mother described her daughter as a “peaceful, loving little girl” who had a “motherly nature about her” and “promoted peace.”

“Ma’Khia had a motherly nature about her. She promoted peace,” said the 16 year-old girl’s mother, Paula. pic.twitter.com/vhBauZn3Kc

— Lacey Crisp (@LaceyCrisp) April 21, 2021

The shooting has already sparked protests in the city that threaten to spread nationwide.

The Ohio Bureau of Criminal Investigation is conducting an independent probe of the shooting according to Columbus Mayor Andrew Ginther.

The truncated video begins at the moment the officer exits his vehicle and then encounters the teen who appears to be armed with a knife while chasing another girl outside of a home.

Seconds into the encounter, the girl who was being chased falls on the lawn in front of the cop. The officer screams at the girl wielding the knife to “get down”.

As the teen swings the weapon toward the second girl, the officer fires several shots, striking the teen. In the video, a black-handled blade resembling a kitchen knife can be seen in the video lying on the sidewalk next to the girl.

Police were called to the home at around 1645ET on Tuesday with reports of an attempted stabbing.

In the video below, which depicts a police press briefing where the video was played, the relevant footage begins at around the four-minute forty-five-seconds mark.

S&P futures were little changed, paring earlier declines with the Nasdaq underperforming following dismal Netflix guidance, which saw the company report its worst quarter in 8 years sending the stock 8% lower.  At 7:00a.m. ET, Dow e-minis were up 13 points, or 0.04%, S&P 500 e-minis were up 0.50 points, or 0.01%, and Nasdaq 100 e-minis were down 27 points, or 0.20%.

Nasdaq futures edged lower on Wednesday as Netflix kicked off quarterly earnings for technology behemoths with a disappointing report which barely saw any subscriber growth in Q2, while concerns about a surge in global coronavirus cases hit demand for equities. Netflix tumbled 8.1% in premarket trading after its report showed slower production of TV shows and movies during the pandemic hurt subscriber growth in the first quarter.

“Markets remain very much caught between the rock of improving macroeconomic conditions and the treacherous waters of geopolitical risks and alarming Covid-19 case growth in some corners of the world,” according to ING Groep NV strategists including Padhraic Garvey in a note to clients.

Wall Street closed lower in the previous session as a global spike in coronavirus cases hit travel-related shares and investors had second thoughts about big U.S. banks’ apparently stellar earnings last week. Global stocks were also subdued on Wednesday due to rising concerns over spiking COVID-19 infections in Asia and their impact on oil prices.

“While the UK and the US may be moving towards re-opening, it’s not necessarily a straight line of recovery,” said Joshua Mahony, senior market analyst at IG. “What’s been happening in Brazil and India highlights the fact the virus is a massive issue.”

There are also concerns about stretched valuations, with global equities trading at all-time highs and earnings expectations surging as vaccination drives and stimulus programmes support global recovery.

Some other notable premarket movers:

• Anthem Inc rose 2% after the health insurer raised its profit target for 2021, as strength in its pharmacy benefits management business helped it beat estimates for first-quarter earnings.
• U.S. railroad operator CSX Corp fell 0.9% after it missed estimates for first-quarter profit, hurt by frigid polar vortex temperatures, ongoing pandemic disruptions and higher fuel costs.

European stocks rebounded, with the Eurostoxx 50 rising as much as 0.8%, just shy of halving Tuesday’s sharp sell off, but it was the opposite in Asia, where financial markets took the brunt of a risk reassessment by investors as Covid-19 cases surge in the region. India reported a record of more than 2,000 deaths on Wednesday and Japan is moving towards declaring a state of emergency. While investors expect markets with high vaccination rates to avoid the worst of the setback, the global reflation trade appears to have paused for now.

The pan-European STOXX 600 index rose 0.4% after a blistering seven-week rally ran into a bout of profit-taking on Tuesday, when it fell 1.9%, its biggest decline in four months as positive earnings reports outweighed concerns over resurgent virus cases.  European earnings are expected to rise a record 61% in the first quarter of 2021, according to Refinitiv IBES data, placing Europe on course for a rare outperformance versus corporate America.

European food-delivery stocks declined on Wednesday after news that Uber Eats plans to expand its service to Germany in the coming weeks, ramping up competition with Just Eat Takeaway. The world’s second-largest brewer Heineken NV gained 3.9% after it reported better-than-expected beer sales, helped by increased beer sales in Africa and Asia. French luxury goods group Kering was up 1.4% after Gucci’s revenue rebounded strongly in the first quarter. Oil & gas stocks got a boost despite weaker oil prices, as Deutsche Bank started coverage of stocks including Royal Dutch Shell and France’s Total with a “buy” rating. Among decliners, Italian football club Juventus slumped 12.7% after breakaway European Super League founder and Juventus chairman Andrea Agnelli said the league can no longer go ahead after six English clubs withdrew. Dutch food delivery company Just Eat Takeaway fell 4.5% after the Financial Times reported Uber Eats was planning to launch in Germany. Here are the biggest European movers:

• ASML shares climb as much as 5.8%, with ING saying that the semiconductor equipment maker’s results are “very strong” and that the company raised its FY21 guidance “significantly.”
• Heineken shares rise as much as 4.8% to the highest since Feb. 2020, after reporting 1Q figures that Jefferies (buy) said was a “better-than-expected start to the year.”
• Carrefour shares rise as much as 4.4%, the steepest gain in two months, after the grocer impressed with strong 1Q sales and a beat at its French hypermarkets, a crucial element of sentiment on the stock, while also announcing a buyback.
• Juventus shares fall as much as 13% as Europe’s rebel Super League edges toward collapse following a public outcry, with the six English clubs involved pulling out of the project late on Tuesday.
• Temenos shares fall as much as 5.8% after the co. reported 1Q figures, with Jefferies saying the results were “unlikely to drive any material upgrade” to consensus.

It was a mirror image of market sentiment earlier in the session, when Asian stocks tumbled as concerns over a new surge in infections around the world and the economic impact of potential lockdowns weighed on markets. Japanese shares were the worst performers for a second straight day, with the Topix sinking 2% to its lowest level in more than six weeks. Tokyo and Osaka are preparing to ask the Japanese government to declare a state of emergency as cases surge. Hong Kong’s Hang Seng Index slid 1.8%, while China’s CSI 300 Index’s defied the broader selloff in the region and rose 0.3%. The MSCI Asia Pacific Index fell 1.5%, on course for its steepest drop since March 24, with most major national benchmarks in negative territory. All sectors were in the red, with IT and industrials leading losses. Markets in India and Vietnam were closed for local holidays. The resurgence of virus in some Asian nations, with the current epicenter of the surge in India, is causing concern of derailed economic growth, said Nirgunan Tiruchelvam, head of consumer equity research at Tellimer.

Chinese stocks closed slightly higher, bucking broad weakness across Asia, as investors are optimistic that a climate summit set to bring leaders of the world’s two biggest economies together will help ease political tensions. The benchmark CSI 300 index rose 0.3% to the highest since April 8, supported by gains in health-care and bank stocks. Energy companies were the biggest decliners, after oil slumped the most in two weeks with the resurgence in virus cases casting a cloud over global economic recovery prospects. Hong Kong’s Hang Seng Index fell as much as 2.2%, following a drop in U.S. equities overnight that marked their first back-to-back decline since late March. A-share investors are looking forward to the climate meeting on Thursday for positive signals about China-U.S. relations, while traders in Hong Kong “tend to be more cautious when placement plans in the market increase,” said Stanley Chan, an analyst with Emperor Securities. Vaccine makers such as Zhifei Biological and Walvax Biotech were among the best performers in the CSI 300 Index, while banking shares advanced after Ping An Bank reported strong earnings for the first quarter. Still, foreign investors offloaded A shares via the mainland-Hong Kong stock link for a second day, selling a net 1.1 billion yuan in the biggest outflow in nearly two weeks. Hedging demand in the broader market has been high, with the latest data showing the value of Chinese stocks being shorted climbed to an all-time high of 152 billion yuan on Tuesday.

Australia’s S&P/ASX 200 index fell 0.3% to 6,997.40, dropping to a one-week low as growing cases of Covid-19 around the world renewed concerns over the pandemic’s economic impact. Nuix was the benchmark’s worst performer, falling to an all time low after the company cut revenue guidance. IDP Education was among the best performers, climbing the most since Feb. 25. In New Zealand, the S&P/NZX 50 index fell 1.1% to 12,535.34

In rates, Treasuries paused a rally that sent the 10-year yield to its lowest level in more than five weeks and within reach of 1.5%. The yield curve was steeper after declining during European morning, and ahead of a $24BN 20-year bond reopening auction at 1pm, whose WI yield is ~2.165%, ~12.5bp richer than last month’s, which stopped 2bp through the WI level. Yields were higher by 1bp-2bp at long end, steepening 5s30s by ~1bp; 10-year around 1.57% is 1.3bp cheaper on the day. Gilts are weakest European debt market following a 15-year bond auction, while Italy outperforms. Treasuries were underpinned in Asia as Nikkei fell more than 2% with rising domestic Covid-19 cases spurring shutdowns.

In FX, the dollar rose for a second day, the longest streak since March and was higher against most of its Group-of-10 peers thanks to a short squeeze, though most currencies traded in narrow ranges.  The Canadian dollar led gains before a Bank of Canada policy announcement, in which it’s poised to pare back its asset purchases amid a stronger-than-expected economic recovery. The euro fell a second day, nearing the $1.20 handle; the ECB meeting on Thursday carries little risk of setting off fireworks in the currency market as overnight volatility in euro-dollar trades below 10%, which is the second-lowest reading on the day before an ECB policy decision since March 2020. The pound dipped slightly, and was on track to fall for a second session, consolidating after a winning streak and as inflation accelerated less than expected. The yen rose against many of its Group-of-10 peers as investors sought refuge in haven assets amid a renewed surge in Covid-19 cases in many regions; Asian stock indexes fell after the World Health Organization cautioned that coronavirus infections were on the rise in all regions except Europe, with India driving a surge in Asia. The Australian dollar was weighed down by a price decline of the nation’s key export iron and amid the risk-off tone in the Asian session.

In commodities, crude drifted lower with WTI dropping 1.3%, failing to breach $62.50, while Brent slipped back on a $65-handle, failing a test of $66.50. Spot gold reverses modest early strength to trade near $1,780/oz. Base metals are mixed with LME aluminum and tin outperforming.

There are no major U.S. economic data scheduled Tuesday; ahead this week are existing home sales, Markit manufacturing PMI and new home sales. Earnings releases today include Verizon and NextEra Energy.

Market Snapshot

• S&P 500 futures little changed at 4,126.75
• Stoxx Europe 600 rose 0.4% to 435.54
• German 10Y yield rose 5.0 bps to -0.249%
• Euro down 0.2% to $1.2013
• MXAP down 1.4% to 204.96
• MXAPJ down 1.1% to 688.22
• Nikkei down 2.0% to 28,508.55
• Topix down 2.0% to 1,888.18
• Hang Seng Index down 1.8% to 28,621.92
• Shanghai Composite little changed at 3,472.93
• Sensex down 0.5% to 47,705.80
• Australia S&P/ASX 200 down 0.3% to 6,997.48
• Kospi down 1.5% to 3,171.66
• Brent Futures down 0.6% to $66.15/bbl
• Gold spot up 0.2% to $1,782.20
• U.S. Dollar Index little changed at 91.31

Top Overnight News from Bloomberg

• Investors trying to predict the European Central Bank’s stimulus plans are about to run into deeper uncertainty even as the clouds around the pandemic start to lift
• As strategists line up with sell recommendations on bonds ahead of this week’s European Central Bank meeting, there’s been a resurgence of bearish bets via the Euribor options market
• Germany’s Greens are in a position to make history, surging past Angela Merkel’s conservative bloc in the race to replace the four-term chancellor after September’s election
• European Union lawmakers reached a late- night deal to make the bloc’s ambitious climate goals legally binding, paving the way for a torrent of new rules and standards to overhaul the entire economy
• Germany is nearly doubling the pace of vaccinations after an increase in supplies and the decision to let general practitioners administer doses in their regular offices. France, Italy and Spain are following a similar trajectory
• U.K. households took on more debt and suffered a bigger hit to incomes during the pandemic than those in France and Germany, according to new research that indicates weakness in the potential for an economic recovery

A quick look at global markets courtesy of Newsquawk

Asian equity markets mostly slumped as the negative mood rolled over from the US where the major indices extended on declines led by underperformance in energy and financials amid lower oil prices and yields. In addition, earnings releases did little to spur risk appetite and Netflix shares slumped around 10% after hours despite beating on top and bottom lines, as its subscriber additions were significantly below forecasts and Q2 estimates also underwhelmed. ASX 200 (-0.3%) was negative with the energy sector the worst hit following the recent retreat in oil prices and as participants digested the latest quarterly updates including from BHP which reported a decline in iron ore output and lower than expected shipments. Nikkei 225 (-2.0%) was heavily pressured by a firmer currency and with the government reportedly to declare an emergency in Tokyo, Osaka and Hyogo due to COVID-19 whereby a formal decision could be made as soon as this week. Hang Seng (-1.8%) and Shanghai Comp. (U/C) conformed to the lacklustre mood amid concerns of a regulatory crackdown after MIIT noted that China is to strengthen its inspections of internet companies and although mainland bourses eventually showed resilience, the Hong Kong benchmark languished near its lows after having gapped below the 29k level amid notable losses in the oil majors and with Anta Sports the worst hit among the blue chips after reports its controlling shareholder will offload 88mln shares. Finally, 10yr JGBs were higher following the recent gains in T-notes and as the broad risk aversion spurred a flight to safety, with prices helped by the BoJ’s presence in the market for JPY 955bln of JGBs in mostly 1yr-3yr and 5yr-10yr maturities, while the central bank also offered to buy JPY 75bln in corporate bonds with 3yr-5yr maturities from April 26th.

Top Asian News

• China Is Said to Mull Supporting Huarong With PBOC Funds
• BlackRock Cuts China Tech Holdings on Policy Woes
• Japanese Stocks Cap Worst Two-Day Slide Since June on Virus Woes
• Toshiba Drops After Disclosing CVC Buyout Offer Has Stalled

European bourses trade higher across the board (Euro Stoxx 50 +0.8%) following a mixed APAC session as earnings season starts picking up pace. State-side, US equity futures are somewhat mixed, with sideways trade seen in the ES and YM whilst the tech-laden NQ lags slightly and the cyclically-driven RTY outperforms. The underperformance in the NQ could be a function of the rising yields in European hours, but maybe more so on Netflix (-8% pre-market) post-earnings. Barclays, suggests that sentiment surrounding earnings has rarely been so bullish in recent years, but the bank acknowledges that cyclicals are logically expected to lead the bound in earnings, and expect Q1 metrics to lead to more selectivity in finding value stocks offering better risk-reward – “Consensus estimates of 30% Q1 EPS growth in the US and 53% in Europe are not out of reach given easy Y/Y comps and stronger demand, but a lot seems priced in. Lofty P/Es leave little room for upside and stretched technicals raise correction risks. Yet, provided earnings deliver, we think dips should be bought and see equities grinding higher”, the bank says. Back to Europe, the Dutch AEX (+1%) narrowly outperforms amid support from ASML (+4.7%) after reporting strong earnings, and updated revenue growth guidance, and the early completion of its share buyback programme, noting that it saw significant demand across all market segments in Q1. That being said, commentary surrounding the chip shortage in the release was sparse. Nonetheless, ASML has provided the IT sector with impetus and thus outperforms. Sectors, in general, are mostly firmer with no standout theme nor risk bias. Meanwhile, the retail sector is propped up by Kering (+1.6%) post-earnings who reported a string of strong metrics – albeit with low-base effects in play – but providing positive omens for the likes of LVMH (+2.0%), Richemont (+0.5%), whilst Hugo Boss (+6.0%) trades firmer with participants pointing to very vague and unconfirmed speculation that the Co. could be a takeover target, whilst another trader mentioned LVMH as a potential party that could be involved. Earnings-related movers this morning include the likes of Heineken (+4.0%), Carrefour (+4.0%) Roche (+1.5%), and Ericsson (-0.3%). Elsewhere, Just Eat Takeaway (-4.5%) and Delivery Hero (-0.9%) trade lower amid reports that UberEats is looking to enter the German market.

Top European News

• Putin to Address Nation as Russia Braces for Navalny Protests
• Heineken Beer Shipments Beat Estimates on Emerging Market Growth
• Blackstone Sells Mega-Office to Funds Investing $1.2 Billion
• Roche Sees Return to Sales Growth as Drugs Unit Turns Corner

In FX, the buck has bounced further from worst levels, albeit remaining soft against a few major and EM counterparts, and still largely in corrective trade rather than any real change in fundamentals. However, the technical landscape is getting more constructive as the index climbs from a higher low above 91.000 after closing over the 100 DMA and carves out a higher high at 91.388 ahead of MBA weekly mortgage applications and Usd 24 bn 20 year issuance that could keep US Treasuries on a bear-steepening trajectory, and supportive for the Greenback all else equal.

• CHF/EUR/JPY – All conceding ground to the Dollar, with the Franc back below 0.9150, Euro holding just above 1.2000 and Yen retreating though 108.00 again following a relatively strong safe-haven rally overnight when APAC bourses suffered heavy losses in sympathy with US stocks over the preceding session. Indeed, Usd/Jpy hit lows circa 107.88 at one stage, but perhaps crucially from a chart standpoint held just above key Fib support at 107.77 (38.2% retracement), in keeping with the DXY’s rebound on Tuesday from a cloud base protecting a Fib level.
• NZD/CAD/GBP/AUD – The Kiwi is still ‘outperforming’ or at least putting up more resistance than most in the face of the Buck revival, and slightly firmer than expected NZ inflation data could be helping to keep Nzd/Usd afloat between 0.7162-87 parameters, on top of stronger Aud/Nzd tailwinds as the cross loses further momentum below 1.0800 to probe under 1.0750. Conversely, stronger than forecast Aussie retail sales have not offered Aud/Usd much encouragement in the low 0.7700s, and the pair appears to have decoupled somewhat from Usd/Cnh-Cny that remain anchored around 6.5000. Elsewhere, the Loonie is now pivoting 1.2600 following its oil-related reversal and awaiting Canadian CPI before the BoC for fresh direction that may be bullish if the Bank does tweak guidance to flag measured QE tapering. Meanwhile, the Pound derived little if any independent impetus via UK inflation data that was somewhat mixed, as Cable manages to stem declines from 1.4000+ to roughly 100 pips and meanders either side of 0.8625 vs the Euro.
• EM – Not much reaction to softer than anticipated SA core CPI given that the headline readings matched consensus and the Rand seems content to rotate on a 14.3000 axis eyeing Gold that in turn is fixated on US yields and the Greenback within striking distance of Usd 1800/oz, but capped by recent peaks. In contrast, the Lira is lurching towards 8.2000 and ironically, though not without president amidst a tirade from Turkish President Erdogan about the nation’s battle against interest, inflation and exchange rates.

In commodities, WTI and Brent front month futures see another choppy European morning but are ultimately softer, with the former sub-USD 62/bbl (61.64-62.56 intraday range) at the time of writing, whilst the latter extends losses under USD 66/bbl (65.53-66.52 range). The choppiness in the crude complex in recent weeks goes to show the near-term uncertainty surrounding the supply/demand imbalance in the context of rising COVID infections during the recovery phase, and as geopolitical tensions remain heated on multiple fronts. Yesterday, we also saw reports that the US House is advancing the NOPEC bill, which essentially aims to restrict OPEC’s influence on prices via deep production-cuts, although this is unlikely to materialise ahead of the JMMC meeting next week. Note, the US has been at loggerheads with OPEC over the higher crude prices feeding to American consumers ahead of an expected rebound in demand heading into the summer months. Further adding to the bearish narrative, yesterday’s Private Inventory report printed a surprise build, albeit modest, with traders now eyeing the weekly DoE figures as the next scheduled catalyst – with the headline expected to show a draw of almost 3mln bbls. Elsewhere, spot gold and silver have largely been moving in tandem with the Dollar throughout early European hours amid a lack of fresh catalysts, with the former hitting highs just shy of USD 1,800/oz (1,776-1,788 range), ahead of its 100 DMA at USD 1,803/oz. Spot silver oscillates on either side of USD 26/oz. Turning to base metals, copper prices in Shanghai fell almost 1% amid COVID woes surrounding India and Japan as the countries enter targeted lockdowns. Meanwhile, Chinese steel futures rose due to concerns over stricter capacity and output controls from regulators in the coming months.

US Event Calendar

• 7am: April MBA Mortgage Applications +8.6%, prior -3.7%

DB’s Jim Reid concludes the overnight wrap

This morning we are launching our latest monthly survey. We revisit a few Working from Home (WFH) questions given that many countries will be providing increased access to the office over the next few months. We’re very interested to hear what you think the permanent arrangements will be. We also ask about whether you have or would consider moving further away from your normal office given WFH options. We also ask about your thoughts on vaccine passports and on potential implications of the upcoming German election. In terms of markets we ask what you think are the biggest risk to the current relative calm (yesterday accepted). In addition we ask all the normal directional questions. The survey will stay open until Friday morning London time. All help very welcome. The link is here.

Well I’m glad I had a post jab lie in yesterday as I had 2-3 hours of night sweats and was unable to sleep. Yesterday I was groggy and my Apple Watch told me my resting heart rate was 17bpm higher than normal. I spend my life obsessed with the calories and heart rate function on the Apple Watch so yesterday was a big outlier on both!! I’m feeling a bit better this morning so hopefully I’ll be more alert today with more Apple calories burnt off! In fact the side effects are lingering longer than the new European Super League.

Yesterday saw some rare market side effects to the pandemic as a fairly out of the blue selloff in global equities was the main story. This came in the shadow of a significant rise in cases across multiple regions over recent weeks, and as I covered in my chart of the day yesterday (link here), the global rate of increase now stands at its highest level since the start of the pandemic, with recorded cases up by more than 5m a week now. India has been the biggest contributor to that with an exponential rise in cases lately, but the increase has been much more widespread with others including Turkey, Argentina and Japan similarly grappling with a renewed wave. For markets, the risk is that this latest increase in cases starts to undermine the narrative that the global economy is on an inexorable path back to normality as the world gets vaccinated, with multiple economies facing the threat of fresh restrictions on mobility. Furthermore, a higher level of cases circulating around the world raises the odds of a new and potentially more dangerous variant emerging, with the nightmare scenario being that it proves more resistant to our existing portfolio of vaccines. Anyway that’s not here yet but the continued rise in global cases is increasing the risks. By the way we’ve revamped the columns on our daily vaccine table (below and in the link) to make it a bit easier to understand. All feedback welcome.

Looking at the moves in more depth, Europe experienced the brunt of the selloff and the STOXX 600 (-1.90%) suffered its worst day so far this year, with many of the continent’s other indices including the DAX (-1.55%) and the CAC 40 (-2.09%) seeing sizeable declines as well. The fact that Covid concerns were at play was evident in the sectoral breakdowns, with the STOXX 600 Travel & Leisure index seeing a -3.69% decline, whilst other cyclical industries including banks (-3.67%), energy (-3.07%) and basic resources (-3.02%) led the STOXX 600’s move lower. Over in the US, the major indices likewise fell back, including the S&P 500 (-0.68%), the NASDAQ (-0.92%) and the Dow Jones (-0.75%), while the small-cap Russell 2000 fell a larger -1.96%. 63% of S&P 500 members saw their shares fall back with a similar mix of cyclicals leading the declines as US banks (-2.79%), energy (-2.66%) and consumer durables (-2.82%) being among the largest laggards. Another notable sign of stress could be seen in the volatility indices, with the VIX index of volatility up another +1.4pts in its biggest daily increase since late March. With the reflation trade seeing a set back today’s U.K. inflation data just after we hit inboxes will be interesting.

In earnings news that will get the attention of inflation-watchers, Procter & Gamble (+0.83%) said on their earnings call before the US open that the company would be boosting the prices of some consumer products due to higher commodity costs. Elsewhere in earnings, Johnson & Johnson (+2.33%) reported stronger sales than expected and increased guidance even in the face of its vaccine pauses. After the close, Netflix fell back as much as -12.7% in after-hours trading as the company announced it added only 3.98mn subscribers last quarter, missing estimates of 6.29mn and its forecasted 6.0mn.

Asian markets have taken Wall Street’s lead this morning with the Nikkei (-1.90%), Hang Seng (-1.63%) and Kospi (-1.59%) all down. Chinese bourses are an exception though with both the CSI (+0.32%) and Shanghai Comp (+0.15%) up. Futures on the S&P 500 are down -0.15% while those on the Nasdaq are down a larger -0.39% with weak earnings from Netflix not helping. Nonetheless, European futures are pointing towards a slightly more positive open with those on the Stoxx 50 (+0.18%) and the Dax (+0.19%) both up.

The risk-off moves yesterday benefited sovereign bonds, with yields on 10yr US Treasuries falling -4.6bps to 1.559%, its lowest closing level in over a month. The same pattern was seen in Europe too, where yields on 10yr bunds (-2.7bps), gilts (-2.4bps) and BTPs (-1.2bps) all moved lower as investors became somewhat less confident on the economic recovery. Over in FX, the Euro remained above $1.20 while the dollar index gained (+0.19%) for the first time in 7 sessions. Bitcoin (+1.05%) broke a mini-slump of its own, rising for the first time since last Thursday after substantial losses over the weekend.

In Germany, the race to be the CDU/CSU chancellor candidate was finally resolved in favour of CDU leader Armin Laschet, with the CSU’s Markus Soeder conceding yesterday after Laschet’s victory in a vote of the CDU’s leadership. Laschet is a relative moderate within the CDU, but polls indicated that he was less popular than Soeder, who many had hoped would increase the conservatives’ electoral appeal in September’s elections. Nevertheless, recent polling averages show the CDU/CSU are still the favourite to remain in power, meaning that Laschet has a decent shot at becoming Chancellor after Angela Merkel stands down, even if they are currently on track to score a lower vote share than in 2017. However, yesterday a poll by Forsa showed 28% of respondents support the Greens, 21% the CDU/CSU, and 13% the center-left SPD. It should be noted that the SPD party got a similar bounce before the 2017 election when Martin Schulz was selected as their chancellor candidate. The party closed a double digit gap to poll neck-and-neck with the CDU/CSU, but this only lasted a couple of months, and then the polling reverted. It is impossible to know whether this will repeat, but a bounce for a new leader being confirmed is not uncommon worldwide. An interesting few months ahead. A Green Chancellor would certainly be a huge long-term structural change story for Germany and Europe.

As mentioned at the top, the pandemic has remained in focus for investors given the deteriorating global picture. Looking at some of yesterday’s developments, Indian PM Modi said that lockdowns should only be used by states as a last resort, and they would not be needed if citizens took precautions. Nevertheless, increasing numbers of areas have moved to tougher restrictions recently in light of the rise in cases. Over in Japan, Sankei has reported that the Japanese government will declare a state of emergency in the Tokyo, Osaka and Hyogo regions. The country has seen its number of new cases quadruple since the low in late February/early March, with new cases now running at their most rapid since January. On the more positive side, the Nikkei has reported overnight that Japan is to receive an additional 50 million doses of Pfizer vaccine by the end of September. Elsewhere, the Netherlands are planning to ease restrictions starting next week with the nighttime curfew ending along with limits on the number of patrons allowed at shops and restaurants.

Finally on the vaccine front, the European Medicines Agency’s safety committee said that there was a possible link between the J&J vaccine and unusual blood clots, but that the overall benefits outweighed the risk of side effects. This was followed by the news that shipments will be restarted to the EU at once. We haven’t yet heard from the US authorities on their own review, but Bloomberg have reported that it should follow by the end of the week. Dr Fauci in recent days has said that the country could allow use of the shot with some form of restriction or warning, similar to what the EMA announced yesterday.

There wasn’t a great deal of data out yesterday, though the UK unemployment rate came in at 4.9% in the three months to February (vs. 5.0% expected). This was better than expected, but the real-time PAYE data from HMRC showed a decline in payrolled employees of -56k in March relative to the February number.

To the day ahead now, and the data highlights include the UK and Canadian CPI readings for March. On top of that, we’ll hear from BoE Governor Bailey and Deputy Governor Ramsden, with the Bank of Canada also deciding on rates. Finally, earnings releases today include Verizon and NextEra Energy.