Category: zerohedge

Authored by Steve Watson via Summit News,

Just when it seemed the Biden Administration’s Afghanistan debacle couldn’t get any worse, The State Department texted a “final message” for Americans stranded in the country Tuesday, alerting them that they would be “without assistance”, but then deleted the warning just minutes later.

The message read, “THIS IS THE FINAL MESSAGE FOR AMERICAN CITIZENS WHO WISH TO DEPART KABUL. American citizens who choose to remain in Afghanistan should be prepared to arrange their departure without assistance from the U.S. government.”

US embassy in Afghanistan today sent out a “final message” for Americans wanting to leave Kabul with government help, per source. Tells them to bring husband or wife and children under 21 only. pic.twitter.com/zCc52MOFGU

— Catie Edmondson (@CatieEdmondson) August 24, 2021

It continues the theme of the embassy in Kabul repeatedly telling Americans they are essentially on their own after the Taliban has taken over the country.

NBC News reporter Richard Engel noted that the message was recalled half an hour after it was sent:

US embassy issues last alert for US citizens to leave afghanistan or they’re on their own, then recalls it 30 mins later.

— Richard Engel (@RichardEngel) August 24, 2021

When the Daily Caller asked the State Department for clarification, they received the following response:

“We sent an email to American citizens earlier that was recalled for technical reasons. We shortly thereafter sent a revised email, and recipients should follow the instructions in that message. For security reasons, we are not going to get into further detail.”

Pathetic.

The latest development comes after the State Department last week penned a letter, which has been signed by multiple other countries (but no Middle Eastern ones), essentially asking the Taliban to be nice to people in Afghanistan.

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The Meishan Terminal in Ningbo, China, has officially reopened following a two-week shutdown due to a COVID infection, according to Bloomberg. The shutdown snarled regional ports and major shipping routes between Asia and US West Coast. 

On Tuesday, shipping data provided by Bloomberg showed some of the first hints that operations at Meishan were underway though not officially reported by port officials. 

The suspension of the terminal was due to a COVID-19 infection that reduced capacity at the port by a quarter, resulting in severe vessel congestion at the terminal and other surrounding ports. We noted this in a recent shipping note titled “China’s Top Port Shuttered For Seventh Day As Congestion Crisis Spreads.” 

On Wednesday, Bloomberg quoted a port official saying “resumption of normal operations” is underway at the terminal. The importance of the port is that it’s China’s second-busiest in terms of container throughput. 

Congestion and delays at Chinese ports have pushed container prices to record highs. Drewry’s composite World Container index rose 600% in 2020 and another 100% so far this year to near $10,000 per 40-foot box container. 

Container costs for top shipping routes have exploded on a post-COVID basis. 

What suggested to us that Meishan was “imminently” reopening was a notice by the shipping line CMA CGM SA that said partial operations resumed at the terminal on Aug. 18. Two of the French company’s vessels, Rivoli and the Samson, were recently loaded and departed from the terminal. 

Throughput at the port will likely increase in the coming days in stages to whittle down the backlog of containers, with a full resumption of operations by mid-September. 

However, increasing throughput at Ningbo could be bad news if departed vessels are headed for the US West Coast due to port congestion. 

In other global supply chain news, a cargo terminal at Shanghai’s Pudong International Airport has experienced a virus outbreak and is now disrupting air freight shipments. 

Cargo-handling “capacity has been cut by an estimated 80-90%. We anticipate congestion to continue through the week of Aug. 30, with the hopes we can get back to ‘normal’ by early September,” according to Neel Jones Shah, executive vice president at Flexport Inc., a digital freight forwarder. “To keep goods moving, Flexport has been trucking significant quantities of client cargo from Pudong to Hong Kong.”

COVID continues to create kinks in the global supply chain that appear to be more persistent than first thought. 

Authored by Michael Lebowitz and Lance Roberts via RealInvestmentAdvice.com,

Markets are opening mixed this morning as investors await the Fed’s Jackson Hole Conference. Markets may be lifeless today and tomorrow as they await Powell’s speech on Friday and importantly his stance on tapering QE. Some investors have mentioned the Fed might delay tapering due to the delta variant. While a possibility, there is potentially some good news on that horizon. Florida and other hard-hit states are starting to see the number of cases decline or at least stabilize.

S&P 5000

In the rush to be the first person to put a S&P 5000 target price out, analysts are pushing 2022 price targets markedly higher despite slowing economic growth rates and high valuations.

“Wells Fargo’s Chris Harvey raised his year-end S&P 500 price target to 4,825 from 3,850, as reported by Bloomberg’s Lu Wang. This move follows a weekend note by David Lefkowitz, head of equities for the Americas at UBS Wealth Management, who raised his year-end price target for the S&P 500 to 4,600 from 4,500. 

Lefkowitz also raised his June 2022 price target to 4,800 from 4,650, with the real headline coming from his year-end 2022 S&P 500 price target — 5,000. 

‘Yes, the rally off the COVID-19 bottom in March 2020 has been extraordinary, but we think there are further gains ahead,’ Lefkowitz writes. ‘Solid economic and corporate profit growth, in conjunction with a still-accommodative Fed, means that the environment for stocks remains favorable. As a result of our higher EPS estimates, we raise our targets for the S&P 500 for December 2021 by 100 points to 4,600 and June 2022 by 150 points to 4,800. We initiate our December 2022 target of 5,000, representing about 13% price appreciation from current levels.’

With this 2022 outlook, Lefkowitz joins Credit Suisse’s Jonathan Golub who earlier this month put a price target of 5,000 on the S&P 500 for the end of 2022. The equity strategy team at Goldman Sachs also garnered headlines earlier this month in raising their year-end price target to 4,700 from 4,300 while putting a year-end 2022 price target on the benchmark index of 4,900.

Like Golub, Lefkowitz sees earnings growth — not multiple expansion — as the driving force behind the market’s rally in the year ahead. 

‘Our price targets assume a forward P/E multiple of about 20x, slightly below current levels of 21x,” Lefkowitz adds. “We expect valuations to remain above historical averages mostly due to the very low interest rate environment. Said another way, stocks continue to look appealing relative to bonds.’” – Yahoo

Money Flows Declining As Price Rises

While the market has indeed rallied over the last few days, as investors bought the 40-dma “dip,” volumes have declined sharply along with money flows. As we have witnessed over the last several months, these “buy the dip” run from the moving average to the top of the 2-standard deviation Bollinger Bands before correcting. If you haven’t bought the exact bottom of the dips, the gains have remained quite muted.

As noted, there is a large divergence between “price” and the“advance-decline volume,” with the “advance-decline line” breaking below its 50-dma.

At some point, the 50-dma will fail. The drop to the 200-dma will be very fast as liquidity remains problematic. While “sellers live higher,” in this market, “buyers live a lot lower.”

More Pressure on Powell

Add Bloomberg to the list of people and groups asking Powell to taper sooner rather than later. The powerful message from Bloomberg’s editorial board states the following:

• He ought to nudge expectations in the direction suggested lately by some other top Fed officials. Short of making a formal announcement, he should say he’d prefer tapering to start soon and be completed by the spring.

• It isn’t the right tool for current conditions, and leaving the program in place serves to narrow the Fed’s options as conditions change.

• Asset prices have surged and the risk of bubbles and financial instability is growing. All this suggests it’s past time to start dialing back the Fed’s commitment to maximum stimulus.

2000 Redux

It is not just equity valuations that are near or have already exceeded levels from 2000. The graph below, courtesy of the Daily Shot, shows that investor willingness to bet against the market is also at levels last seen 20 years ago.

Tis the Season of Volatility

As Market Ear’s graph below shows, the season of higher volatility is upon us. Their seasonality graph jibes well with others that show markets tend to have their worst few months of the year during September and October.

A Bigger Short

It has been revealed that Michael Burry, portrayed in the book and movie The Big Short, has a large short position in U.S. Treasury bonds. His stance is not surprising given he has been vocal about inflationary concerns. Burry’s expectations are largely in line with Wall Street. Per a Bloomberg article on this topic: The median forecast in a Bloomberg survey is for the 10-year yield to end the year at 1.60%…” 

Bill Farrell rule #9- “When all the experts and forecasts agree — something else is going to happen”

Office Space Trouble?

The graph below, courtesy of Jim Bianco and Kastle, shows that well over half of the office space in major cities is being underutilized. Per Kastle’s data, nationwide only a third of office space is being used and no major city is above 50%. If the trends do not revert to normal over the coming year or two, the amount of vacant office space will become problematic, especially in the larger cities.

IPO Frenzy

The following graph and commentary from GMO, show that over the last year corporations have been taking advantage of higher share prices.

Interestingly, IPO issuance is currently running at the same pace as the market peak in 2000. Massive issuance from existing stocks is largely responsible for the big difference between total issuance today versus 2000.

As sentiment towards buying conditions crashes (UMich) in America, analysts expected a modest pull back in durable goods orders in preliminary July data, and they were right, but the 0.1% MoM drop in Durable Goods Orders was less than the -0.3% MoM expected (reflecting a pullback in orders for commercial aircraft).

Source: Bloomberg

And while Ex-Transports, orders beat expectations, we note that Capital Goods Orders non-defense, ex-aircraft (a proxy for business spending) was unchanged in July (after an upward revision from +0.7% to +1.0% MoM in June)…

Source: Bloomberg

This marks a pause in the months-long buildup in capital investment.

It does appear that a fair amount of “seasonal adjustment” is skewing this data dramatically as we note that while Motor Vehicles & Parts were a big driver of the outperformance, on a non-seasonally-adjusted basis, orders tumbled to their lowest since May 2020…

Source: Bloomberg

Not exactly a great time to be tapering?

The probabilities are increasing that China will try and seize Taiwan by force amid America’s disorganized exit from Afghanistan has tarnished U.S. prestige. Allies of the West, such as Japan and Taiwan, are set to hold a meeting about an increasingly aggressive China.

The Financial Times spoke with Masahisa Sato, a parliamentarian who manages foreign affairs for Japan’s ruling Liberal Democratic Party (LDP), on Tuesday, said discussions are needed about the implications of a China invasion of Taiwan because it would have “a serious impact” on Japan’s security and economy.

“That is how important we feel the situation in Taiwan is at the moment,” Sato said.

Sato wouldn’t be feeling this way if it wasn’t for America’s chaotic exit from Afghanistan has worried U.S. allies, such as Japan and Taiwan, if China attempts to seize Taiwan by force, even though the U.S. has a defense treaty with the island, America’s military might be too weak to support defense operations. 

We noted last week as Kabul, Afghanistan, collapsed, China immediately held war drills around Taiwan, with fighter jets, anti-submarine aircraft, and combat ships. 

Ruling parties of Japan and Taiwan will be holding their first bilateral security talks on Friday as the threat of China invading Taiwan increases. 

Vice President Kamala Harris on Tuesday traveled to southeast Asia, was held up due to an unnamed ‘health incident’ before departing from Singapore for Vietnam. Besides that, she scolded Beijing for its threatening actions to its neighbors. 

“Beijing continues to coerce, to intimidate and to make claims to the vast majority of the South China Sea,” Harris said in Singapore, describing China’s claims as “unlawful.” She added that “the United States stands with our allies and partners in the face of these threats.”

Japan and Taiwan currently do not have diplomatic relations, but that appears to change as the war threat increases. The dialogue between both countries coincides with U.S. and Japanese military officials preparing for a conflict in the Taiwan Strait or the South China Sea. 

Sato and Taku Otsuka, another LDP member heading defense issues, will hold Friday’s talks via teleconference with Taiwan’s ruling Democratic Progressive Party (DPP), such as Lo Chih-cheng, a lawmaker who heads the party’s international department. 

The initiative for direct communications between both countries would benefit the U.S but has angered China. 

“The Chinese side firmly opposes all forms of official interactions between Taiwan and countries having diplomatic ties with China,” said Hua Chunying, a spokeswoman for China’s foreign ministry.

Chinese leaders have long understood the military consequences of seizing Taiwan by force. But now, with the rapid deterioration of American hegemony, Beijing believes it could be the time to take back what’s rightfully their’s. 

America will remain a great power for many years, but its influence in the world and foreign policy is in rapid decline. 

Authored by Michael Snyder via TheMostImportantNews.com,

Have you noticed that it is a lot harder to get certain things these days?  Just recently, someone in my local area was surprised when her appointment to get the windshield on her vehicle fixed was canceled because it wasn’t possible to get a replacement windshield.  This was a windshield for a very common vehicle, and normally that wouldn’t be a problem at all.  But these are not normal times.  Thanks to several factors that I will detail in this article, global supply chains are now under more strain than we have ever seen in the post-World War II era, and unfortunately it appears that things are going to get even worse as we approach the holiday season.

I know that most of you probably don’t want to hear that the shortages that we are experiencing now are going to get worse.

So you may be tempted to stop reading this article now because you don’t want to see the bad news.

But it is imperative that you understand what is ahead, and so I urge you to keep reading.

Let’s take this one step at a time.  Right now, local news outlets all over the country are doing stories about the shortages in their local areas.  Here is one example…

Have you recently gone to the grocery store and found some of the shelves empty? If so, you aren’t alone.

Many people can’t find some of their favorite and essential items since the pandemic started.

As that article points out, the stores are trying to order the products that they need.

They just can’t get them.

This is happening all across the United States, and as a result the inventory to sales ratio for U.S. retailers has been pushed to the lowest level on record…

In April, May, and June, the inventory-sales ratio of around 1.08 – or about 33 days’ supply – was at the lowest point in the data going back to 1992. In the years before the pandemic, the overall ratio was around 1.5, providing 45 days of supply.

So why is this happening?

Well, the truth is that there are several contributing factors, and one of them is fear of COVID.

When a single worker recently tested positive for COVID, China shut down one of the busiest port terminals in the entire world “indefinitely”…

One of the world’s busiest ports partially closed this week after an employee tested positive for Covid-19. The closure raises fears of new disruptions to world trade that could slow the global economy’s recovery.

Meishan, a key terminal at China’s Ningbo-Zhoushan port, closed indefinitely Wednesday after a 34-year old worker tested positive for Covid-19. A member of the board of the Ningbo Port Group Company—which operates the port—also resigned Wednesday, citing personal reasons, reported China’s Securities Daily.

This wouldn’t be such a problem if we had not become so dependent on goods from China.

Other nations are severely overreacting to outbreaks of COVID as well, and this is making it harder and harder to move goods around the world on an efficient basis.

Another major factor that we are dealing with is a historic global shipping container shortage.

The demand for shipping containers greatly exceeds the supply, and this has pushed global shipping container rates to levels we have never seen before.

And once shipping containers are delivered to U.S. ports, there isn’t enough port workers to unload them all.

It can now literally take months for products that are made in China to get to the U.S. retailers that originally ordered them.

Of course if those products contain computer chips, they may never arrive at all.

The global shortage of computer chips is deeply affecting thousands of other industries.  For instance, it is being estimated that the global auto industry will produce 7.1 million fewer vehicles this year because of the chip shortage…

VW’s main plant in Wolfsburg is only going to be running on its early shift after summer break due to the lack of supply, Bloomberg reported this morning.

Its plant in Wolfsburg is the “world’s biggest car plant” and employs about 60,000 people. Audi is also pausing production temporarily, extending its summer break by one week, the report notes.

Global shortages of semiconductors could wind up cutting worldwide production of autos this year by about 7.1 million vehicles, Bloomberg predicted this morning.

Now we are moving into the holiday season, and many in the retail industry are anticipating a complete and utter disaster…

Reuters surveyed nearly a dozen suppliers and retailers of everything from toys to computer equipment in the United States and Europe. All expect weeks-long delays in holiday inventory due to shipping bottlenecks, including a global container shortage and the recent COVID-related closure of the southern Chinese port of Yantian, which serves manufacturers near Shenzhen.

One executive that was interviewed by Reuters said that we are heading for “a major, major mess”…

“It’s going to be a major, major mess,” said Isaac Larian, chief executive of Los Angeles-based MGA Entertainment Inc, which sells LOL Surprise, Bratz, Little Tikes and other toy brands to Amazon, Walmart and Target.

And another executive openly admitted that it is “too late” to save Christmas…

“it’s too late for Christmas,” said Thompson, founder of Washington-based Plugable Technologies.

This is what the immediate future of the U.S. economy looks like even if nothing else goes wrong.

So what is going to happen if another major crisis suddenly erupts in the middle of all this?

As inventories get tighter and tighter, prices are rising to compensate.  One area that I am particularly interested in is the price of food.  According to the FAO, the global price of food is 31 percent higher than it was a year ago…

Whether at supermarkets, corner stores, or open-air markets, prices for food have been surging in much of the world, forcing families to make tough decisions about their diets. Meat is often the first to go, ceding space to less expensive proteins such as dairy, eggs, or beans. In some households, a glass of milk has become a luxury reserved only for children; fresh fruit, once deemed a necessity, is now a treat.

Food prices in July were up 31% from the same month last year, according to an index compiled by the United Nations’ Food and Agriculture Organization.

Have global paychecks risen 31 percent over the past year to keep up?

No way.

As a result, many are having a much harder time buying the food that they need and more people are going hungry.  Needless to say, this is setting the stage for the sort of global crisis that I have been warning about.

There was so much optimism during the first half of 2021, but now everyone is starting to realize which way all the needles are pointing.

Very choppy seas are ahead, and those at the helm do not seem to know what they are doing.

*  *  *

It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.

US equity futures traded flat near all-time highs in a muted session as traders prepared for the Fed’s annual Jackson Hole symposium with little action across markets. The dollar was steady, while Treasurys and bitcoin fell and oil reversed losses. Contracts on the Nasdaq 100 and S&P 500 were fractionally lower after trading in the green for much of the session. Their underlying indexes closed at a record as strong corporate earnings and a rally in commodity prices outweighed lingering concerns about the threat of Covid-19 to the global economy. 

“There is a sense of stabilization in the markets, as investors are already looking forward toward the Jackson Hole meeting,” said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB.  “With uncertainty regarding Fed Chair Jerome Powell’s message, markets are likely to not take new major positions until there is more clarity on the Fed’s outlook.”

In premarket trading, Locust Walk Acquisition soared after its shareholders approved its SPAC deal with Effector Therapeutics. Cassava Sciences plunged 22% after a lawyer asked the FDA to halt the company’s clinical trials of an experimental drug, citing concerns about the quality of past studies of the medicine.. Meanwhile, the meme frenzy which staged an abrupt return late on Tuesday continued: AMC Entertainment (AMC), Express Inc. (EXPR) and Koss Corp. (KOSS), all of which were caught up in the meme stock frenzy earlier in the year, are climbing in U.S. premarket trading. AMC gains 4% and Express rises 7.6%, while Koss advances 2.1%.

Overnight, Chinese tech stocks struggled to extend their rally into a third day as bargain hunters retreated amid lingering concerns about how far Beijing may push its clampdown on private enterprise. Tensions return after SEC chair Gary Gensler pledged to enforce a three-year deadline for U.S.-listed Chinese firms to permit inspections of their financial audits or face delisting. Traders are also anticipating the Federal Reserve’s Jackson Hole policy symposium later this week which focuses on J-Powell’s 10am Friday speech. 

Company earnings, expanding vaccinations and support from monetary policy have partially repaired sentiment after a bout of jitters over economic prospects caused by the delta strain as well as a hammering across Chinese tech giants. The next key read on the central-bank outlook is due later this week when Fed Chairman Jerome Powell speaks at the virtual Jackson Hole get-together on Friday.

Europe’s Stoxx Europe 600 Index erased earlier gains and turned negative around 730am ET, as travel stocks outperformed while banking and retail shares also rose. German stocks edged lower on Wednesday after weaker economic sentiment data, even as the broader European market clung near record highs ahead of a Federal Reserve speech on Friday.

Germany’s ifo business climate index weakened to 99.4 in August, below consensus expectations, and confirming that Europe’s recovery is losing steam fast. This decline was primarily driven by a sharp fall in the assessment of business expectations, while current conditions rose slightly in August. Across sectors, trade saw the steepest decrease followed by another fall in services and manufacturing, while the construction sector remained resilient. According to the press release, the softer ifo print reflects supply bottlenecks in manufacturing consistent with the German flash PMI and the drag of delta variant concerns on expectations, in particular in the hospitality and tourism sectors.

Adding insult to injury, German exports to China declined for the first time in nearly a year in July, easing by 3.9% year-on-year to 8.4 billion euros ($9.9 billion), the statistics office said on Wednesday. That was the first decline in exports to China, Germany’s second biggest sales market outside the European Union, since August 2020, and it was the biggest slump since May 2020, when the world was gripped in the first wave of the coronavirus pandemic.

Here are some of the biggest European movers today:

• Stadler Rail shares gain as much as 5.8% after its 1H update, which ZKB said shows that the recovery for the train manufacturer continues with its order backlog at a record level.
• ASR Nederland shares rise as much as 5.2% following its 1H results, with KBC upgrading its rating on the insurer and saying the numbers look “very strong.”
• Mowi shares climb as much as 4% with DNB saying the dividend from the Norwegian seafood company was a positive surprise in its 2Q update. Peer Bakkafrost up as much as 4.5%.
• Grafton shares up as much as 3.5% with Peel Hunt saying its 1H results were strong as expected, with the builders’ merchant continuing to benefit from a strong U.K. and Ireland market.
• Elekta shares drop as much as 8% after the Swedish medical-equipment firm’s 1Q profit fell and it flagged cost headwinds, which Bernstein said are likely to linger.
• Aroundtown shares decline as much as 4.8% after the German property firm’s 1H results, with Morgan Stanley saying the numbers contained no surprises and that it sees better value elsewhere.

Earlier in the session, Asian equities gave back their intraday gains, with the Hang Seng Index closing 0.1% down after rising as much as 3.5% during the day. Asian markets swung between gains and losses, as investors paused for breath following the best two-day rally since early November. The MSCI Asia Pacific Index added 0.3%, having swung between a gain of 0.5% and loss of 0.1%. Financials were the biggest drag on the regional benchmark, while technology stocks gave the most support to the gauge, which gained 3.5% over the previous two sessions. Chinese tech shares listed in Hong Kong fluctuated after a two-day jump on bargain hunting. A number of observers have said the selloff sparked by Beijing’s multipronged crackdown went far enough, although uncertainty will likely remain until Chinese authorities provide more clarity on the regulatory campaign.

“Some global investors wonder if the Nasdaq Golden Dragon Index’s 30% plunge and Hang Seng Tech Index’s 25% drop since early July now mostly price in upcoming regulatory curbs,” Bloomberg Intelligence analyst Francis Chan wrote in a note. “A definite set of rules could actually help stabilize equity prices for Chinese tech and other sectors.” The Hang Seng Index fell while South Korea’s Kospi rose after both seesawed earlier in the day. Japan’s Topix eked out a small gain. The Philippine benchmark jumped more than 2%, while Taiwan’s Taiex gained more than 1%.

In rates, Treasuries were slightly cheaper across intermediates, although yields broadly remained within a basis point of Tuesday’s close. 10-year yields were around 1.305%, outperforming bunds and gilts by around 2bp each; on the charts, the 50- and 200-DMA’s are threatening to cross, something which has not happened since November 2020. According to Bloomberg, futures activity continues to be dominated by rolls, while cash volumes in the Asia session improved from Tuesday in two-way price action. U.S. auctions resume with $61BN 5-year note sale at 1pm ET, ahead of Thursday’s 7-year sale; it follows Tuesday’s strong 2-year which traded 1.1bp through the WI level

In FX, the Bloomberg Dollar Spot Index advanced modestly though moves were largely confined to tight ranges. The New Zealand dollar and Australian dollar rose slightly against the greenback, while the Japanese yen and Canadian dollar fall among G-10 peers.  The pound traded in tight ranges against a broadly stronger dollar. The euro was steady versus the dollar even as a businesses confidence gauge by the Munich-based Ifo Institute fell to 99.4 in August from 100.7 in July, more than economists predicted in a Bloomberg survey. An index measuring expectations also fell, while current conditions were judged more favorably. The yen continued to be tamped down by generally positive risk sentiment.

In commodities, oil was steady after the biggest two-day gain since November with Covid-19 still shadowing assessments of the demand outlook. Base metals complex is rising. LME lead and nickel are top the bill, followed by LME aluminum, and LME copper. Iron ore futures extended a rebound from last week’s rout on optimism that China won’t allow steel demand to collapse while its economic prospects remain uncertain. Gold fell below $1,800 an ounce as traders geared up for the annual Jackson Hole symposium that’s expected to provide more clues on the Federal Reserve’s tapering outlook.

Looking at the day ahead, we get the latest durable goods orders and core capital goods orders. From central banks, ECB Vice President de Guindos will be speaking, and earnings releases include Salesforce, Autodesk and Royal Bank of Canada.

Market Snapshot

• S&P 500 futures little changed at 4,486.25
• STOXX Europe 600 up 0.1% to 472.46
• MXAP up 0.2% to 198.21
• MXAPJ up 0.4% to 651.40
• Nikkei little changed at 27,724.80
• Topix little changed at 1,935.66
• Hang Seng Index down 0.1% to 25,693.95
• Shanghai Composite up 0.7% to 3,540.38
• Sensex up 0.2% to 56,059.39
• Australia S&P/ASX 200 up 0.4% to 7,531.87
• Kospi up 0.3% to 3,146.81
• German 10Y yield little changed at -0.458%
• Euro little changed at $1.1753
• Brent futures down 0.4% to $70.78/bbl
• Gold spot down 0.5% to $1,794.03
• U.S. Dollar Index little changed at 92.92

Top Overnight News from Bloomberg

• The Meishan terminal at China’s second-busiest port reopened Wednesday following a two-week shutdown that further snarled already stressed shipping routes in Asia
• Vice President Kamala Harris urged countries in the region to apply more pressure on China in a meeting with Vietnam’s president, stepping up her criticism of Beijing on a visit to Asia
• Japan’s economic recovery will be delayed more than previously expected as the delta variant pushes up infections to record levels, according to a Bank of Japan board member.
• Britain’s construction, manufacturing and food preparation industries are pushing wages higher across the economy due to a shortage of workers to fill available jobs
• A contingent of Wall Street veterans and high-level Chinese government officials are seeking to open up talks again, as business leaders work outside of the Biden administration for greater access to the world’s most populous country
• The Hong Kong dollar is gaining attention due to China’s regulatory crackdown and bets on higher U.S. rates; the currency has fallen 0.2% in August, poised for its biggest monthly loss since March
• Two months after Goldman Sachs Group Inc. led Wall Street’s return to the office, it’s taking pages from the pandemic playbooks of its more cautious rivals, requiring employees to don masks and prove they’ve been vaccinated against Covid-19 to enter the firm’s U.S. workplaces
• The lowest rank of European junk bonds, those rated CCC and below, are handing investors annualized returns of 16.3%, outstripping last year’s 11.7%. It puts them among the best performing asset classes in 2021, according to Bank of America Corp. analysts
• Famed investor Michael Burry is betting long-term Treasuries will sink. Someone has just placed a contrasting bet that any declines will be limited by selling 10,000 of $110 puts expiring in January 2023 on the iShares 20+ Year Treasury Bond ETF, with open interest at 3,800, according to data compiled by Bloomberg

Quick look at global markets courtesy of Newsquawk

Asian stocks traded somewhat mixed and failed to fully sustain the early momentum from the US where the S&P 500 and Nasdaq extended on record highs amid notable strength in cyclicals, with upside limited as participants continued to await taper clues from Friday’s Jackson Hole Symposium. ASX 200 (+0.4%) was kept afloat amid outperformance in tech and mining names and with earnings releases also driving the biggest moving stocks including WiseTech Global which rallied around 30% after its FY net profit doubled, while Nine Entertainment and Seven Group were at the other end of the spectrum despite posting improved results, with the latter’s Chairman and billionaire Kerry Stokes to step down in November. Nikkei 225 (-0.1%) was indecisive amid a mixed currency and as Japan seeks to extend its state of emergency to include an additional 8 prefectures, with comments from BoJ board member Nakamura also not providing much to excite markets as he stuck to the BoJ’s all too familiar script. Hang Seng (-0.1%) and Shanghai Comp. (+0.7%) traded tentatively despite the PBoC increasing its liquidity efforts to meet month-end demand, as participants also digested the latest varied US-China related headlines. These include the US approval of Huawei license applications to buy auto chips valued at hundreds of millions of dollars although it was separately reported that the SEC are to demand all Chinese firms to disclose more regarding investor risks including firms already trading in the US. Furthermore, insiders noted that China and the US should strengthen cooperation on cross-border regulation but stressed that China won’t back down on bottom-line issues such as key data utilized by some Chinese companies related to national security, while there were more comments from US VP Harris who maintained a hawkish tone on China. Finally, 10yr JGBs were flat amid the indecisive mood in the region and following the lacklustre picture in T-notes despite a strong US 2yr auction and disappointing Richmond Fed survey, with the BoJ presence in the market for nearly JPY 1tln of JGBs also doing little to spur prices.

Top Asian News

• China Reopens Terminal at World’s Third-Busiest Port
• China Marks First Arrest in Sex-Assault Case That Rocked Nation
• China Boosts Liquidity Injection After Funding Costs Climb
• BOJ Sees Delta Variant Delaying Recovery More Than Expected

Major bourses in Europe have conformed to a mixed picture (Stoxx 600 +0.2%) as the modest optimism seen around the cash open waned. Fresh fundamental newsflow has been light, whilst immediate price action was limited upon the release of an overall cautious German Ifo survey – with businesses citing supply chain concerns alongside rising COVID infections, whilst half the companies in manufacturing and retail also want increased prices to cover rising costs. US equity futures meanwhile remain stable in early European trade as eyes, for now, turn to the Fed’s Jackson Hole Symposium ahead of next week’s crucial US labour market report. Back in Europe, the breadth of the price action among the majors are narrow, with no standout underperformer/outperformer. Sectors are also mixed with no real theme. Travel & Leisure is however the standout outperformer – although likely on the back of the Leisure side with Evolution Gaming and Flutter Entertainment among the top gainers in Europe. Banks follow a close second amid the more favourable yield environment. Chip names meanwhile have not seen a clear reaction to source reports that contract manufacturer TSMC (+2.7% pre-market) is hiking prices by 10-20%. Some large-cap customers of TSMC include the likes of Apple, NVIDIA, Intel and AMD. On the other end of the spectrum, autos continue to be hit by the chip crunch prompting further halting of production, while Oil & Gas and Basic Resources also see mild losses. Interesting individual movers remain somewhat scarce but Deliveroo (-2.0%) shares slumped over 10% at the cash open but pared back losses within five minutes – with no clear catalysts behind the move. Note, US President Biden is today expected to host a cybersecurity summit with executives from major tech, bank and energy firms – with the focus reportedly on national security threats. Some companies reportedly attending include Apple, Amazon, Microsoft, Alphabet, JP Morgan, Bank of America, ConocoPhillips, PG&E, and Duke Energy.

Top European News

• Nord Stream 2 Loses Case to Have EU Pipeline Rules Waived
• U.K. Construction and Manufacturing Boost Wage Inflation
• German Business Confidence Slips Amid Persistent Supply Squeeze
• Switzerland’s Economic Recovery Seen Coming to a Sudden Halt

In FX, no major change in risk appetite or the general market tone, but the Greenback has gleaned enough traction to stall selling pressure that was slowly building on Tuesday to the point where the DXY looked prone to losing sight of 93.000 altogether and the Buck was on the verge of collapse through key levels against major and EM peers. However, the index appears to have found a base, albeit tentative, just above yesterday’s low (92.804) and is attempting to consolidate between 92.872-93.057 parameters ahead of US durable goods and a speech from Fed’s Daly that is due alongside results of the 5 year T-note auction.

• JPY/CAD/CHF – If there was any doubt surrounding the close correlation between UST/JGB yield differentials and the Yen, then the latest price action in Usd/Jpy should remove lingering uncertainty as the headline pair bounces further from sub-109.50 lows amidst renewed or ongoing Treasury curve steepening in wake of a stellar 2 year sale. Moreover, decent option expiry interest from 109.85-90 (1.24 bn) may well be compelling around the NY cut in similar vein to Tuesday when roughly the same size lower down acted like a magnet irrespective of broad Buck weakness. Elsewhere, the Loonie’s increasingly tight link to oil prices is also evident given a fade in WTI and the rebound in Usd/Cad to 1.2600+, while the Franc has pared gains from close to 0.9100 and even nearer 1.0700 vs the Euro in wake of a sharp deterioration in Swiss investor sentiment.
• NZD/GBP/AUD/EUR – The Kiwi has lost some altitude and momentum following NZ trade data showing a swing from surplus to deficit, but remains elevated around 0.6950 on divergent RBNZ/FOMC near term policy outlooks, while the Pound is still rangebound on the 1.3700 handle and just over 0.8550 in Eur/Gbp cross terms. Back down under, the Aussie is relatively resilient and pivoting 0.7250 even though construction work down during Q2 fell some way short of expectations. Conversely, the Euro is retesting resistance circa 1.1750 with some assistance from ECB’s de Guindos flagging imminent upgrades to macroeconomic projections rather than two misses out of three Ifo metrics, including a particularly big undershoot in expectations.

In commodities, WTI and Brent front month futures have remained choppy with a downside bias within recent ranges ahead of the Jackson Hole Symposium, but perhaps more importantly next week’s decision-making OPEC+ meeting. It will be interesting to see whether the producers continue with the 400k BPD/month output increase in the face of peak growth, persisting Delta threats and pressure from the US to bring down prices. Further, the German Ifo metric only added to economic slowdown woes, whereby COVID was cited as a factor behind the pullback in morale. Elsewhere, prices were little moved by the weekly private inventories yesterday which printed a smaller-than-expected – with traders now looking ahead to the weekly EIA figure. Until then, price action will likely be dictated by the overall market mood in the absence of any fresh catalysts. WTI Oct’ resides just above USD 67/bbl (vs USD 67.66 high) whilst its Brent counterpart dipped back below USD 71/bbl (vs high 71.20/bbl). Elsewhere, spot gold has remained under pressure sub-1,800/oz amid as yield and Dollar dynamics result in a net-net negative for the yellow metal ahead of Fed speak starting tomorrow. LME copper prices have firmed since the European open despite the indecisive risk tone, but potentially as the Buck waned off best levels. Overnight reports meanwhile suggested Chilean state-owned miner Codelco, the world’s largest copper producer, reached an agreement on a new contract with supervisors at the Andina mine – which accounted for some 10% of Codelco’s output. Meanwhile, iron ore futures saw a choppy overnight session as prices pulled back from recent highs, with traders citing fragile near-term fundamentals and the indecisive tone across the market.

US Event Calendar

• 8:30am: July Cap Goods Ship Nondef Ex Air, est. 0.7%, prior 0.6%
• 8:30am: July Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.7%
• 8:30am: July – Less Transportation, est. 0.5%, prior 0.5%
• 8:30am: July Durable Goods Orders, est. -0.3%, prior 0.9%

DB’s Jim Reid concludes the overnight wrap

Risk assets had another strong performance yesterday, and the S&P 500 climbed to yet another all-time high as markets continued their reversal after last week’s delta-related selloff. Further positive Covid developments have been part of the story, with investors taking solace in the plateauing number of cases at the global level. But in addition to that, we’ve also had some interesting developments on the policy front over the last 24 hours, with hopes for further fiscal spending bolstered by progress in the US House of Representatives on the Democrats’ economic agenda. And that in turn follows the PBoC’s statement we reported on yesterday that they’re going to improve credit support for the real economy, which has added to this theme of continuing policy support.

We’ll have to wait and see whether Chair Powell’s speech on Friday is part of that trend, but in the meantime US equities continued to advance, with the S&P 500 (+0.15%) at a fresh record thanks to a 4th consecutive advance for the index. Cyclical industries and small caps outperformed, with the Russell 2000 rising +1.02%, reflecting the increase in risk appetite among investors. This was surpassed by an even bigger gain from megacap tech stocks however, as the FANG+ index rose a further +1.31%. Over in Europe meanwhile, the STOXX 600 (-0.01%) had a more subdued day, but that balance between advancing cyclicals and retreating defensives was also present there too, and the German DAX outperformed with a +0.33% gain.

Another place where the improvement in the demand outlook was evident was in commodity prices. By the end of last week, both WTI and Brent crude oil prices had just posted their worst weekly performances of 2021 so far. But in the last 2 days alone they’ve posted massive gains of +8.38% and +9.01% respectively. In fact more broadly, the Bloomberg Commodity Spot Index (+1.34% yesterday) has now had its strongest 2-day performance in over a year, having also been aided by strength among metals and agricultural prices, which shows that this isn’t just an energy story either.

As mentioned at the top, over the last 24 hours the US House of Representatives moved to adopt the $3.5 trillion budget resolution while also starting the process of a floor debate on the bipartisan infrastructure bill. This doesn’t mean that the $3.5 trillion budget plan will go through yet, but it allows Democrats to now debate the finer points of the deal. The motion was approved in a 220-212 vote after the House Democratic leadership came to a compromise with some of their moderate members, who’d been refusing to vote for the reconciliation bill unless the infrastructure package were passed. Under the compromise, Speaker Pelosi committed to passing the infrastructure bill by September 27, and committed to rallying support among House Democrats for it to pass. While the process has been protracted, yesterday showed that the fiscal-stimulus-train remains on track for the US economy for the time being, and we should have a better idea of exactly how large the final package will be in a matter of weeks.

US Treasury yields moved higher against this backdrop, with the 10yr yield up +4.2bps to 1.294% thanks to higher inflation breakevens (+3.6bps) alongside a modest rise in real yields (+0.6bps). Meanwhile, Europe only saw a slight rise in yields, with those on 10yr bunds (+0.2bps), OATs (+0.4bps) and gilts (+0.3bps) just inching higher.

Overnight in Asia, risk appetite has weakened with markets trading lower for the most part, including the Nikkei (-0.06%), Hang Seng (-0.36%) and Kospi (-0.29%). That said, Chinese bourses are a bit more mixed with the CAI (-0.11%) and Shenzhen Comp (-0.07%) losing ground whereas the Shanghai Comp (+0.34%) has advanced this morning. Elsewhere, futures on the S&P 500 are down -0.08% while in foreign exchange markets, the US dollar index is up +0.13% this morning.

Over in New Zealand, which is facing its highest number of Covid cases since the very beginning of the outbreak last year, another 62 cases were reported today, up from 41 yesterday and bringing the total number of community cases to 210. And in Australia, New South Wales reported a record 919 new daily cases whilst Japanese PM Suga is set to hold a news conference at 9pm local time today to announce the extension of a state of emergency to 8 more prefectures.

Otherwise on the pandemic, the issue of booster jabs are coming increasingly to the forefront of the debate as scientists look into the question of whether vaccine efficacy is likely to wane over time. In fact in Israel, where the booster is already available to many, the eligibility age was reduced yesterday so that anyone over 30 can now receive, down from 40 previously. And separately in the UK, the Times newspaper reported that sources close to the Joint Committee on Vaccination and Immunisation would likely end up approving booster jabs in stages. Staying on the UK, Scotland’s First Minister Sturgeon didn’t rule out the prospect of bringing back Covid-19 restrictions after Scotland recorded its highest number of daily cases since the pandemic started. In the US, the number of vaccine mandates in the private sector has increased following the FDA’s full approval of the Pfizer vaccine now, and Deloitte and Goldman Sachs will be requiring proof of vaccination to enter their US offices starting this Autumn.

Turning to the situation in Afghanistan, President Biden announced that the US would stick to its August 31 deadline for evacuations from Kabul airport, which went against the calls to extend the withdrawal deadline at the G7 yesterday, where UK Prime Minister Johnson convened world leaders to discuss the ongoing situation. German Chancellor Merkel said during the G7 meeting that the deadline should get pushed out as she didn’t think it would be possible to get everyone out by the August 31 deadline, calling on allies to leave reduced troops on the ground. President Biden is also facing domestic calls to push out the deadline, with Senate Minority Leader McConnell saying “extend the deadline, get outside the perimeter, make sure that every single American who wants to leave is able to get out with our assistance and our Afghan allies.”

Staying on the political scene, we got another important election development from Germany yesterday, as a poll from Forsa showed the centre-left SPD (23%) taking an outright lead over Chancellor Merkel’s CDU/CSU (22%) bloc, which is the first time that’s happened since 2017. This continues the trend of steadily-increasing SPD support over recent weeks, and brings into play the prospects that Merkel’s party could be out of power soon for the first time since 2005. One potential coalition option this could throw into play is a so-called traffic-light coalition between the SPD, the liberal FDP and the Greens. However, as DB’s Barbara Boettcher wrote in her blog on Monday (link here), there are doubts that the liberal FDP would help the SPD or the Greens into the chancellery, particularly given they hold diametrically different stances across a range of key policy areas, including on fiscal and climate policy.

There wasn’t much at all on the data front yesterday, though the final estimate of German GDP growth in Q2 was upgraded to show a +1.6% expansion (vs. +1.5% previous estimate). Otherwise in the US, we also had July’s new home sales, which came in at an annualised rate of 708k (vs. 697k expected), and the Ricmond Fed’s manufacturing index fell by more than expected in August to 9 (vs. 24 expected).

To the day ahead now, and data releases to look out for will include the Ifo’s business climate indicator from Germany for August, as well as the preliminary July readings from the US for durable goods orders and core capital goods orders. From central banks, ECB Vice President de Guindos will be speaking, and earnings releases include Salesforce, Autodesk and Royal Bank of Canada.

Via SchiffGold.com,

There’s been a lot of talk about the Federal Reserve tapering its asset purchases. Peter Schiff talked about it during his podcast, saying even if the Fed does getting around to tapering, that doesn’t equate to a legitimately tight monetary policy. Furthermore, any tapering today sows the seeds for its own destruction.

The minutes from the July Federal Reserve meeting came out last week. They revealed the Fed is starting to talk about tapering asset purchases later this year. That sent stocks lower as traders continue to anticipate Fed monetary tightening. The hardest-hit sectors were economically sensitive cyclical stocks and anything that was part of the reflation trade.

Peter said there was really nothing new in the minutes.

The Fed did not reveal anything that hadn’t already been revealed by other FOMC members in their various talks.”

Nevertheless, according to all the experts, the Fed is Johnny on the spot. It is now tightening. And because it is tightening, inflation is no longer a concern.

Peter said the markets are reacting to this anticipated tightening cycle in the same way they have to past tightening cycles without appreciating the difference between this tightening cycle and those that preceded it. In fact, it’s hard to call the Fed’s next step a “tightening cycle.”

So far, the only thing that has happened during this cycle is that the Fed has talked. That’s it. It’s all talk and no action.”

Peter conceded that the central bank may well taper and slow down quantitative easing.

Now, it’s not a sure thing. We may never get a taper. The only thing we may get is talk of a taper, and in fact, that might constitute the entirety of the tightening cycle, because by the time the Fed actually gets around to tapering, it could be too late. The economy could already be turning down. The markets could already be turning down, in which case any plans to taper are going to have to be torn apart because the Fed is basically hostage to the markets and to the economy.”

This raises a question: if the entirety of the taper is talk, why should that mean anything? Why should the dollar be rallying? Why would you be selling gold?

You can’t say this is a normal tightening cycle and so it’s negative for gold if all we’re going to get is taper-talk. Why is that negative for gold?”

Peter said gold should be going up right now based on the reality of what’s going to happen, not based on a fantasy conjured up out of Fed talk.  And he said he thinks even if the Fed does begin to taper, it won’t actually complete the process. It will never wind down QE completely.

Currently, the Fed is buying about $120 billion a month in assets split between US Treasuries and mortgage-backed securities. The only thing we know so far about this mythical taper is that the Fed plans to cut back on both assets equally, not favoring one over another and that it might happen this fall.

Maybe.

The Fed also went out of its way to emphasize that tapering asset purchases does not mean the Fed is close to raising interest rates. Peter said he doesn’t think the central bank will ever raise rates given that during the last tightening cycle, it only managed to get rates to 2.5% before it broke the back of the overleveraged economy. During the cycle before that, the Fed pushed rates all the way to 5%.

If as high as they could get last time was two-and-a-half percent, it makes sense that this time they can’t raise them at all. In fact, I think the only thing they can do this time is taper. Because last time they were able to taper and raise rates. This time, I think, at best, they’re just going to have a taper.”

Peter noted that as each tightening cycle has gotten less tight, each loosening cycle gets looser and looser.

The next time the Fed has to go back to the QE well, it’s going to be drawing a lot more water. So, we’re going to be doing even more QE the next time than we did following the COVID disaster.”

It’s like a drug. You always need more of it, and when you try to kick the habit, you can give up less and less of it.

So, I think that to the extent that we actually get to a taper this time, I think the next easing cycle will never get to the taper. All we’ll have is the taper talk, but we’ll never actually walk the taper walk — if we even walk that walk now.”

And even if the Fed does bring down the level of asset purchases a bit – if that’s all we get – how is that tightening?

It’s slightly less ridiculously easy than what we have now? But going from completely ridiculously easy to slightly less completely ridiculously easy — how does that constitute tightening? Why is that a reason to buy dollars? Why is that a reason to sell gold? It’s not. Especially when you realize that any tightening today is going to be proceeded by loosening tomorrow, and the tightening simply lays the foundation for the next easing, which will be much bigger, even looser, than the last easing.”

In effect, Peter said any tapering today sows the seeds of its own destruction.

As Mike Maharrey put it in the Friday Gold Wrap podcast, modest tapering does not end the inflationary monetary policy. The Fed will just inflate a little more slowly. It’s like a faucet running full speed into the bathtub. If you turn the knob halfway back, water is still running into the tub. It’s still going to fill up and overflow.

Simply put, less loose is not tight.

In this podcast, Peter also talks about companies accepting bitcoin for mortgage payments, actual rent data compared to the formula the Fed uses to calculate rent for the CPI, and how Roosevelt and Nixon buried the dollar.

Authored by Daniel Lacalle,

Recent macroeconomic data from the United States should worry us. Amid the reopening and the biggest fiscal and monetary stimulus in recent history, and with all the possible tailwinds from policy decisions, consumer confidence has plummeted to the lowest level since 2016.
Retail sales have fallen sharply again in July, and the employment or industrial production data are far more than disappointing considering the level of stimulus and that GDP has returned to pre-pandemic level.

The use of industrial capacity, at 76%, is 4% below the average for the 1972-2020 period, and the labor participation rate, at 61.6%, has been stagnant for ten months and at 1980 levels.

The total savings rate as a percentage of disposable income has almost vanished from 33.8% to 9.4%.

Let’s put it in the context of a re-opening that has been in place for more than a year, a fiscal stimulus equivalent to three trillion dollars, and a monetary stimulus of 1.7 trillion dollars in 2021. The United States would go into a severe recession if it were not “doping ” the economy.
We cannot ignore the slowdown in China, where even the official data reflect a slowdown in the expansion process. If we take the typical difference between official and real data, we will see that, for example, gross capital formation has slowed down rapidly in 2021.

This is important because the entire recovery of the eurozone relies on fiscal and monetary impulse in addition to the European Recovery Fund.

The recovery of the euro area keeps some positive momentum simply because it is more delayed. The GDP of the euro area is still 4% below pre-pandemic levels (7% in the case of Spain) and employment is well below the levels of comparable economies, considering that we must add the workers in furloughed jobs that are still above six million while unemployment, at 7.1% estimated for August, is recovering slowly.

These data reinforce my view that central banks will maintain their ultra-expansionary policy with very modest changes. Tapering will likely be more cosmetic than real, and rates will remain low while, in the case of the euro area, negative. The fact that the Federal Reserve balance sheet has expanded further while officials talked about tapering reinforces this view.

The threat of an escalation of international tension after the Taliban coup in Afghanistan is added to the impact of the delta variant, which will be more evident in winter, as it happened in 2020.

The important thing is to understand that, from the investor point of view, we have probably passed the peak of recovery and the most cyclical sectors are already discounting the slowing momentum.

The unsustainable fiscal situation of developed countries makes a serious normalization of policy impossible. The ECB is the only buyer of Italian and Spanish debt, according to the IIF (Institute of International Finance), and this disguises an imminent risk but does not eliminate it.

Inflation, the great threat to the recovery, remains high and although some components have moderated, the most important factors for the average consumer, non-replicable goods, remain well above the levels of 2015.

Central banks are faced with the devil’s dilemma created by their own policy.

Either let inflation run and create a stagflation problem or scare the markets by reducing purchases.

They will choose the first, without a doubt.

A series of reports from the conservative Catholic blog “The Pillar” show priests at various levels of the Catholic hierarchy in the US and the Vatican are using the gay dating app Grindr. 

The Pillar released three reports over a three-day timeframe, one on July 20, the next on July 23, and the 27th. 

The first report detailed Reverend Monsignor Jeffrey Burrill of the general secretary of the US Conference of Catholic Bishops resigned after “it found evidence the priest engaged in serial sexual misconduct, while he held a critical oversight role in the Catholic Church’s response to the recent spate of sexual abuse and misconduct scandals.”

The second report made claims “about the use of location-based hookup apps” by people in unspecified rectories in the Archdiocese of Newark. The third report said, “16 mobile devices emitted signals from the hookup app Grindr on at least four days between March to October 2018 within the non-public areas of the Vatican City State, while 16 other devices showed the use of other location-based hookup or dating apps, both heterosexual and homosexual, on four or more days in the same time period.” 

All of the data analyzed by The Pillar was commercially available and contained location and usage information that users agree in the terms of service to be collected and commercialized as a condition of using the app. 

Extensive location-based hookup or dating app usage is evident within the walls of Vatican City, in restricted areas of St. Peter’s Basilica, inside Vatican City government and Holy See’s administration buildings including those used by the Vatican’s diplomatic staff, in residential buildings, and in the Vatican Gardens, both during daytime hours and overnight.  

Signals emitted from most of the Vatican’s extraterritorial buildings, which house the offices of several key Curial departments were excluded from analysis because of the proximity of tourists, pilgrims, and the general public to those buildings on a daily basis. -The Pillar 

The Pillar’s reporting put church officials in an embarrassing position because priests have an obligation to be celibate as a way to remain closer to Christ with an undivided heart. 

“If someone who has made a promise of celibacy or a vow of chastity has a dating app on his or her phone, that is asking for trouble,” Cardinal Joseph W. Tobin of Newark said during a Zoom conference organized by Georgetown University, quoted by NYTimes. 

“I would also say that I think there are very questionable ethics around the collection of this data of people who allegedly may have broken their promises,” Tobin said.

The only app mentioned in the reports has been Grindr, suggesting the Catholic Church still has a homosexuality problem. 

Grindr told NYTimes it was still trying to figure out how the small blog obtained large amounts of data from its userbase. 

“What is clear is that this work involved much more than just a small blog,” Grindr said. 

Ashkan Soltani, a former technology adviser to the White House and the Federal Trade Commission, said the complexity of the reports means that The Pillar had external help and advanced analytical skills to uncover Grindr usage within the Catholic Church.