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Authored by Paul Joseph Watson via Summit News,

Despite being dead for 70 years, George Orwell may become the latest public figure to be cancelled after a left-wing journalist called him a “vile man” who aided the Nazis with his strident criticism of Stalinist Russia.

Yes, really.

“In addition to being a gov snitch, fraud George Orwell spent WWII demonizing the USSR as it defeated Nazism,” tweeted Ben Norman.

“As the Red Army sacrificed millions fighting Hitler, and as the Nazi regime shoved Jews into gas chambers, Orwell was writing Animal Farm. Vile man,” he added.

In addition to being a gov snitch, fraud George Orwell spent WWII demonizing the USSR as it defeated Nazism

As the Red Army sacrificed millions fighting Hitler, and as the Nazi regime shoved Jews into gas chambers, Orwell was writing Animal Farm

Vile man https://t.co/m2gBhpG93o

— Ben Norton (@BenjaminNorton) July 8, 2020

Norton followed up by denouncing the 1984 author as a “reactionary who hated communists more than fascists” before claiming Orwell “didn’t actually believe in free speech. He wanted to take away the free speech of communists. Orwell was a total fraud.”

Respondents pointed out that criticizing Stalinism, which killed multiple times more people than Nazism, doesn’t make one a fascist enabler.

“Orwell cancelled. Stop reading Orwell everybody. There is nothing you are allowed to learn from his books. Ben says,” tweeted Ryan McGoverne.

Orwell cancelled. Stop reading Orwell everybody. There is nothing you are allowed to learn from his books. Ben says. https://t.co/f1GrEoo5Fm

— RyanMcGoverne (@RyanMcGoverne) July 8, 2020

“This is my favourite cancellation yet. Top 10 of the last hour anyway,” said Alex Boyd.

This is my favourite cancellation yet. Top 10 of the last hour anyway.

— Alex Boyd (@AlexBoyd) July 8, 2020

Norman was also accused of historical inaccuracies.

“To believe this is to be completely ignorant of the history of WWII,” remarked one Twitter user. “Stalin was completely fine with everything Hitler was doing up until the Germans invasion of USSR in 1941. Also the Red Army was not alone in defeating the Nazis.”

Yes, the glorious USSR defeated Hitler, and then promptly brought Stalinism to several European countries, which was just as bad, if not worse, than Hitler’s madness.

Good old Joe Stalin killed and brutally oppressed more people than the failed painter.

— A. Bear Esq., MBE, ICBM, PSU, E173, ISO2171, QED. (@Bearocalypse) July 8, 2020

To be fair to Norman, he does appear to be a supporter of free speech and an opponent of deplatforming.

However, this once again underscores how “cancel culture” is not merely just pushback on opinions considered to be “offensive”.

Orwell died in 1950 and his legacy as an icon of anti-authoritarianism has held firm over the last 70 years.

But just as we have seen with attempts to topple statues of Winston Churchill, George Washington and Thomas Jefferson, the woke mob is so intent on re-writing history and imposing a cultural revolution, not even some of the most seminal names in history are safe.

*  *  *

My voice is being silenced by free speech-hating Silicon Valley behemoths who want me disappeared forever. It is CRUCIAL that you support me. Please sign up for the free newsletter here. Donate to me on SubscribeStar here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.

It’s been a running joke for as long as we can remember that sell side analysts are behind the eight ball. They are notorious for upgrading and downgrading stocks after a large move has already taken place.

But at least they used to do their best to try and spin a yarn explaining the move so their bank’s investment banking clients wouldn’t feel like total idiots for missing the move after paying tons of money for research – just slightly less than total idiots for at least having an explanation. 

Well apparently that bar for sell side analysts has been lowered again. And for proof, look no further than Morgan Stanley’s Adam Jonas’ last note on Tesla. Jonas, who has watched Tesla blow through most of his price targets for the last few months, continues to try and play catch up: he has raised his Tesla target to $740 (which would represent downside of almost 50% at this point) and has pinned the stock’s move on “the power of hope”. 

“Hope is a powerful force,” Jonas’ latest mindless brain-fart begins, “and for millennia has driven mankind to reach for what was never before thought possible. Does anyone doubt how hope has changed the world? The power of hope, the formation of capital and the movement of share prices have long co-existed in a symbiotic relationship. Hope is the fuel of democratic capitalism. It doesn’t always work out, but when it does… it’s special.”

Great. But what the hell does that have to do with equity valuation?

Jonas then writes: “In the case of Tesla, in addition to the company’s proven leadership in EVs and sustainable transport, we believe investor hope has been playing an increasingly important role in driving a higher stock price.”

The diatribe continues: “Folks… we’re not pretending to have discovered a genre of behavioral economics and psychology in financial markets about which much has been written over the decades. We just wanted to highlight, based on our discussions with investors and other stakeholders, that this important engine of hope appears to be a contributing factor at work behind the increase of Tesla’s share price currency, further expanding the collective investor imagination of what is possible.”

Yeah. Hope and extremely interesting out of the money call option purchases that are taking place on a near-daily basis. 

But after the feel good sell-side note introduction of the year, Jonas reverts to his “Underweight” stance, choosing to finally address reality as his “analysis” barely bleeds into a second page. He brings up the very real concerns of:

China

2Q deliveries was further evidence of how much Tesla growth (and we believe profitability) is underpinned by an ability to freely/openly pursue a commercial strategy in the PRC. We harbor concerns over the sustainability of this model over the long term and believe investors should apply a discount to China growth and profit.

Competition

While investors, understandably, do not appear too concerned with the incursion of competing EV offerings to date from legacy auto OEMs, we do not believe that is where the biggest threat comes from. We continue to follow Amazon’s building of its captive transportation network that we ultimately see as becoming a formidable competitor to Tesla in many key markets. We urge investors to prepare for similar moves from the likes of Alphabet/Waymo, Apple and others.

“High Expectations”

At $1,400, we estimate the current price is discounting 2030 volume of at nearly 5 million units or more than 10x the volume the company appears on track to achieve this year. On our calculations, the earnings power embedded in the current market cap would imply group EBITDA margins in the 20% range or higher. We’re not saying these are assumptions are not possible, but they are a very big leap ahead from what the company has proven to date and implies a level of commercial success in a global EV market at less than 2% penetration today.

Caution About Full Self-Driving, Which We Again Remind You Does Not Exist

As one of the earliest firms to analyze the AV market in our 2013 Blue Paper, Autonomous Cars: Self-Driving the New Auto Industry Paradigm (6 Nov 2013), we have worked across multiple sectors and engaged with numerous parties in the AV value chain. While we see significant long-term potential for the technology, we are extremely cautious on adoption rates over the next decade where we forecast full self-driving to be less than 0.3% of global miles traveled by 2030. Our concerns around the moral, ethical, legal/regulatory and even the technological hurdles that must be overcome appear largely ignored by the market, in our opinion. Tesla may be a leader in the field, but we believe realization of the TAM for AVs will disappoint investors in the near to medium term.

For added laughs, Jonas also throws in a $2070 bull case for the stock, nearly 3x his price target. “Our bull case valuation for TSLA is $2,070 and our bear case is $281,” the note concludes.

This gives Jonas a nice, wide $1800 price target range to get it right before his next “update”.

If Jonas wants a real explanation, perhaps his time would be better served looking into the mechanics of the options market instead of feeling forced to drop a Tesla note every time the stock makes a profound move that he failed to predict would happen, leaving him to opine on it after the fact.

Submitted by Michael Every of Rabobank

Subterranean Joe, Sick, Blues

“There’s no way I can lose.” That is the title of a Bloomberg article today looking “Inside China’s Stock-Market Frenzy”. It notes ‘Leo Li, a 28-yar old freelance screenwriter in southern city of Kunming, says he’s “pretty much all-in” on stocks but isn’t borrowing to maximize returns – yet. “With leverage, it only makes sense to add it when you can be 100% certain of gains,” said Li, adding that his family sold property last year to buy stocks, “That usually happens when the old grannies start rushing in during the mid-to late stage of a rally. We are not there yet, but when the time comes I will be ready.”’ It’s nice to see young investors with such a keen understanding of the fundamentals of this rally – which are not related to Chinese CPI and PPI at 2.5% y/y (as expected) and -3.0% y/y (slightly better than the consensus), which is a very bad combination for many firms.

Yet that’s good news: it means more need for central banks to get the grannies to dive in to stocks. As do two contrasting Anglo-Saxon fiscal developments.

In the UK, Chancellor Sunak has gone kitchen sink with a mini-budget including no stamp duty on house purchases up to GBP500,000; VAT cut from 20% to 5%; paying firms GBP1,000 per head to bring back a furloughed worker; paying employers to create jobs for 16-24 year olds; green grants for households; and government meal vouchers for 50% off a sit-down-meal (up to GBP10 per head) from Mondays to Wednesdays. 10-year gilts sit just off record lows of 0.15%.

In the US, Joe Biden is largely eschewing Sanders’ radical policy agenda. No Medicare for all, tuition-free public college, or the Green New Deal in his released policy proposals. There are green targets, prohibiting government contracts to firms that pay less than USD15 per hour, and a pledge public procurement will buy American (which is Trumpian). Yet what we do not see is a kitchen-sink fiscal approach: the message is “gradualism”. Likewise, there is still no Trump fiscal plan to speak of. 10-year Treasuries sit at 0.66%.

Meanwhile, global virus cases are now 12 million and rising – which gives me the blues. Allow me to respond in song, with apologies once again to Bob Dylan.

Trump’s on the pavement; Mixing up his virus medicine

Biden’s in the basement; Talking ‘bout the lack of government

CIA man in the trench coat; Badge out, laid off

Says he’s got a bad cough; there was a Russian pay off

Look out kid; It’s somethin’ they did

God knows when; But even China’s doing it again

Bears better duck down the alley way; Lookin’ for a new friend

The man with the yield cap; More swill for the pig pen

You want one dollar bills, they only got ten

Maggie/Ronnie fleet foot; No mo’ miners full of black soot

Then the Greenspan put; Planted all the bed-rot

The phone’s tapped anyway; So’s TikTok many say

Can’t bust no matter what you trade; Orders from the D.A.

Look out kid; It’s what they all did

Don’t need to walk on tip toes; Don’t worry about your trade flows

Better stay away from those; That talk about a fire hose

Don’t need to keep a clean nose; Or even wear the plain clothes

You don’t need a weather man; To know which way the S&P blows

Oh, get sick, get well; It’s still the central-bankers’ ink well

Hang bail, sure can tell; That everything is gonna sell

Try hard, get barred; Get back, write braille

Get jailed, jump bail; Paid by the government, if you fail

Look out kid; You’re gonna get hit;

But losers, cheaters; Six-time users; Hanging round the central-bankers;

Powell by the whirlpool; Lookin’ for a new fool

But have to follow leaders, watchin’ vol parameters

Oh, get woke, keep warm; Long pants romance

Day traders get blessed; Everyone’s a success

Please her, please him, free gifts; Legal steal, don’t lift

…Or twenty years of schoolin’; And they put you on the day shift

Look out kid; They don’t try to keep it all hid

It’s ‘trade’ or jump down a manhole; Light yourself a candle;

Drop-out and wear sandals; It’s such a bloody scandal

Sell-out or be a bum; They’re sharks; you’re chum

Monet’ry pumps don’t work

‘Cause central-vandals took the handles  

Despite the hope-restoring nonfarm payrolls “recovery” and the over-hyped bounce in retail sales (ignoring the lack of ‘V’ in industrial production) and ‘soft’ sentiment surveys (which are biased by their nature as diffusion indices to bounce back hard), for the sixteenth week in a row, over 1 million Americans filed for unemployment benefits for the first time (1.314mm was slightly better than the 1.375mm expected).

Source: Bloomberg

Texas, New Jersey, and Louisiana suffered the biggest increases in jobless claims in the prior week…

That brings the sixteen-week total to 49.993 million, dramatically more than at any period in American history. However, as the chart above shows, the second derivative is slowing down drastically (even though the 1.314 million rise this last week is still higher than any other week in history outside of the pandemic)

Continuing Claims did drop very modestly but hardly a signal that “re-opening” is accelerating! And definitely not confirming the payrolls or sentiment data…

Source: Bloomberg

And as we noted previously, what is most disturbing is that in the last sixteen weeks, far more than twice as many Americans have filed for unemployment than jobs gained during the last decade since the end of the Great Recession… (22.13 million gained in a decade, 49.993 million lost in 16 weeks)

Worse still, the final numbers will likely be worsened due to the bailout itself (and its fiscal cliff): as a reminder, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed on March 27, could contribute to new records being reached in coming weeks as it increases eligibility for jobless claims to self-employed and gig workers, extends the maximum number of weeks that one can receive benefits, and provides an additional $600 per week until July 31.

Finally, it is notable, we have lost 378 jobs for every confirmed US death from COVID-19 (132,309).

Was it worth it?

The big question remains – what happens when the $600 CARES Act bonuses stop flowing?

Attorney General Bill Barr should transfer Jeffrey Epstein’s alleged ‘madam’ to Rikers Island while her case plays out, as the Metropolitan Detention Center (MDC) in Brooklyn is ill-equipped to handle the high-profile inmate.

“I don’t think the feds can handle these prisoners, such high-profile prisoners like Maxwell or Epstein,” former NYC Department of Corrections Deputy Warden Ed Gavin told Fox News‘ Tucker Carlson on Wednesday. “If I were William Barr, what I would do is, I would seek to obtain a substitute jail order and I would try to have Ms. Maxwell placed on Rikers Island with the New York City Department of Corrections.”

Maxwell was recently transferred from a New Hampshire prison to MDC, where according to The Sun, she was described as a ‘depressed loner’ branded a ‘snooty rich bitch’ by her fellow inmates – so if she winds up dead, she couldn’t have been taken out by powerful forces intent on burying Epstein’s secrets, even if cameras should break and prison guards fall asleep some fateful night in Brooklyn.

The 58-year-old ex-socialite, whose (suspected Mossad) father died in 2006 under mysterious circumstances, will be guarded by the “highest security available,” according to The Sun‘s anonymous source.

According to Gavin, however, MDC runs a sloppy operation.

“In 2011, there was a female corrections officer there, she had sex on duty with eight employees,” he said. “Two of them were superior officers. She also had sex with two inmates … We [also] have a lieutenant and two corrections officers recently who were convicted of sexually abusing over 10 women … So I don’t think that that facility is capable of handling it [Maxwell], there’s just too much that’s gone on there recently, and I don’t think any female inmate should be housed there” (via Fox News).

Maxwell was charged with six counts related to her alleged role in Epstein’s child sex-trafficking ring.

S&P futures were flat on Thursday, rebounded from an earlier dip in a low-volume session ahead of the closely watched weekly jobless claims report, with investors weighing the risk of another business shutdown amid soaring U.S. COVID-19 cases.

Despite the muted overnight session, the S&P 500 has now risen more than 40% from its March lows and is now about 7% below its February record high. The Labor Department’s most timely data on the economy is expected to show 1.38 million Americans filed for state unemployment benefits in the latest week, down from 1.43 million claims in the prior week. Cisco Systems rose 2% in premarket trading as Morgan Stanley upgraded its rating on the network gear maker’s stock to “overweight”. Walgreen’s slumped 3% after the company reported disappointing results with sales hit by the pandemic, announced it would suspend its buyback and cut 4,000 jobs. Best Buy was down 8.8% also as a result of sales and margin hits due to the pandemic.

The United States reported more than 60,000 new COVID-19 infections on Wednesday, setting a single day global record. And yet, investors continue to look past news of rising virus infections, concentrating on the continued reopening of economies. Confidence in policy support measures has mostly held firm, even as Hong Kong reported its biggest jump in cases since the start of the pandemic. The number of U.S. infections topped 3 million, more than a quarter of the global total.

“Risk is bouncing back broadly in equities but the real show is in Chinese equities, U.S. technology stocks and then gold,” said Saxo Bank CIO Steen Jakobsen. “U.S. Covid-19 cases rose yesterday to a new record and signs are now emerging that daily deaths are on the rise nationally which could suddenly become a new risk factor for the market.”

European stocks rose for the first time in three days, with shares in the region’s largest technology company, SAP SE, jumping over 7% after it reported better-than-expected second quarter revenue on returning demand for software in Asia.

Halfway across the world, the Chinese stock rally continued for an eighth day as margin debt soared to the highest level since 2015, even after authorities cracked down on margin financing platforms and state media warns of risks. The Shanghai Composite Index rose 1.4%, with Xining Special Steel and Shanghai Sanmao Enterprise Group posting the biggest advances.

Elsewhere in Asia, stocks gained led by communications and materials, after rising in the last session. Markets in the region were mixed, with Shanghai Composite and India’s S&P BSE Sensex Index rising, and Jakarta Composite and Singapore’s Straits Times Index falling. Trading volume for MSCI Asia Pacific Index members was 70% above the monthly average for this time of the day. The Topix was little changed, with FamilyMart rising and Aeon Financial falling the most. Hong Kong’s Hang Seng Index erased a gain after the news site HK01 reported that at least 16 new local virus cases were found Thursday.

In rates, treasuries edged higher on low volume, with the 30Y auction at 1pm today. Yields from 5- to 30-year sectors lower on the day by 1bp-1.5bp, 10-year to ~0.65%, flattening 2s10s by ~1bp; bunds, gilts ~0.5bp cheaper on the day vs U.S. 10-year. Treasury yields richened slightly from belly to long end during Asia session and European morning in lackluster trading; front end little changed. Bunds, gilts lag. The week’s Treasury auction cycle concludes with $19BN 30-year reopening at 1pm ET; Wednesday’s 10-year reopening was well-bid, stopping 1bp below the WI yield at the bidding deadline at a record low yield.

In FX, the Bloomberg Dollar Index inched down to a three-week low as risk assets mostly held firm, dampening demand for the world’s reserve currency ahead of U.S. jobs data. Weaker-than-expected data on jobless claims would add to market concerns that the coronavirus outbreak is impacting the U.S. labor market recovery, according to Commonwealth Bank of Australia in note. EUR/USD climbed to a four-week high as investors bought the euro against the dollar and the yen, according to one FX trader. Chinese stocks led a rally in Asian equities after U.S. shares climbed on Wednesday.

“Amidst the improvement in economic data of late and the relatively buoyant market sentiment, a bearish consensus with the greenback seems to have been the case,” said Jingyi Pan, market strategist at IG Asia.

In commodities, oil was steady around $41 a barrel in New York after swelling U.S. crude stockpiles raised fresh concerns about oversupply. Silver rose above $19/oz with gold trading above $1800.

To the day ahead now, and the data highlights will include the weekly initial jobless claims from the US, along with Germany’s trade balance for May, Canadian housing starts for June. Elsewhere, we’ll hear from the Fed’s Bostic and the ECB’s Hernandez de Cos.

Market snapshot

• S&P 500 futures down 0.1% to 3,160.00
• MXAP up 0.6% to 166.19
• STOXX Europe 600 up 0.3% to 367.63
• German 10Y yield fell 0.6 bps to -0.446%
• Euro up 0.04% to $1.1335
• Italian 10Y yield fell 0.2 bps to 1.075%
• Spanish 10Y yield fell 0.6 bps to 0.404%
• MXAPJ up 0.7% to 552.43
• Nikkei up 0.4% to 22,529.29
• Topix unchanged at 1,557.24
• Hang Seng Index up 0.3% to 26,210.16
• Shanghai Composite up 1.4% to 3,450.59
• Sensex up 0.9% to 36,669.43
• Australia S&P/ASX 200 up 0.6% to 5,955.46
• Kospi up 0.4% to 2,167.90
• Brent futures up 0.1% to $43.35/bbl
• Gold spot up 0.3% to $1,814.94
• U.S. Dollar Index little changed at at 96.43

Top Overnight News

• Gold’s allure in 2020 continues to strengthen, with spot prices surpassing $1,800 an ounce and inflows into bullion-backed ETFs already topping the record full-year total set in 2009.
• European policy makers who frantically assembled plans to help their economies weather the coronavirus lockdowns are starting to focus on how to prevent cascading bankruptcies that could derail the rebound.
• Asian stocks pushed higher Thursday as investors continued to place faith in policy support and shrugged off simmering tensions between Washington and Beijing.

Asian equity markets traded mostly higher as the region took its cue from the positive rollover from US, where a late tech-led push helped all major indices finish in the green and lifted the Nasdaq to another record close on what had otherwise been predominantly indecisive session amid COVID-19 concerns. ASX 200 (+0.6%) and Nikkei 225 (+0.4%) were positive with gains in Australia led by tech as the sector found inspiration from its counterparts stateside and with gold miners euphoric after spot prices of the precious metal rose above USD 1800/oz for the first time since 2011, while stocks in Tokyo remained afloat after better than expected Machinery Orders data which showed a surprise expansion of 1.7% M/M although upside was initially capped amid virus fears. Hang Seng (+0.3%) and Shanghai Comp. (+1.4%) began indecisive after the PBoC continued to refrain from liquidity operations and with Chinese press calling for investors to manage risks, but gradually advanced amid a more amicable tone from China as Foreign Minister Wang stated that US-China relations need a more positive message and that China is willing to develop ties with US based on sincerity, despite noting that relations face serious challenges. Furthermore, Alibaba shares were among today’s stellar performers to track the upside in its US listing following reports its unit Ant Financial plans a Hong Kong IPO despite a denial by the unit. Finally, 10yr JGBs were indecisive as gains in stocks saw prices stall around the 152.00 level and with participants side-lined ahead of today’s 5yr auction. Finally, 10yr JGBs were indecisive as gains in stocks saw prices stall around the 152.00 level but later eked mild gains following firm demand at the 5yr JGB auction result.

Top Asian News

• Australia Suspends Hong Kong Extradition Deal in Swipe at China
• India Plans to Raise $2.7 Billion Selling Stakes in Two Firms
• Top Hong Kong Official Says Pan-Dem Primary May Break New Law

European equities have somewhat diverged to trade mixed [Euro Stoxx 50 +0.5%] as the optimism seen during the APAC session, which initially reverberated across Europe, petered out for some indices. Sentiment overnight was more-so a function of the tech-led gains seen on Wall Street and rally among miners, whilst Chinese press called on investors to manage risks accordingly amid the recent gains seen in the Mainland and Hong Kong. On that front, and more-so from a technical standpoint, reports note that over 70% of the CSI300 have a 14-day RSI over 70 – i.e. an overbought signal. Back to Europe, the FTSE 100 (-0.1%) is the only core bourse in the red amid unfavourable currency dynamics coupled with some large-cap movers to the downside. Sectors are mixed with a cyclical bias, with the detailed breakdown also painting a similar picture. The IT sector heavily outperforms peers and the broader market amid SAP’s (+7.7%) prelim earnings in which it reiterated guidance and stated that business recovered more than expected in Q2, while its flagship cloud revenue rose 21% YY. SAP carries an almost-10% weighting in the DAX and as such, the German index outperforms regional peers. Elsewhere, Rolls-Royce (-7.0%) immediately reversed course after opening higher by 3%, originally stemming from a positive trading update at face-value, as the breakdown warned of a significant revenue drop over the next seven years. Elsewhere, Siemens (+1.0%) hold onto gains after reports shareholders will vote on its proposal to spin off 55% of Siemens Energy to them. Finally, Atlantia (-9.0%) shares were halted to the downside after Italy’s 5-Star Leader Di Maio said the Co’s motorway concessions need to be withdrawn.

Top European News

• Siemens CEO Says Spinoff Is Best Way to Boost Share Price
• Commerzbank Power Vacuum Set to Last as Board Extends Search
• WeWork Rival Workspace Is Losing More London Office Tenants
• ECB Should Examine Targeting Average Inflation, Villeroy Says
• Bulgarian Police Raid President Radev’s Offices

In FX, cable is consolidating gains on the 1.2600 handle in wake of Wednesday’s fiscal support measures from UK Chancellor Sunak, while Eur/Gbp probes stops and support said to be sitting sub-0.8970 on positive Brexit vibes following EU chief negotiator Barnier conceding some ground on post-transition zonal arrangements, prompting more short covering of oversold Sterling positions. However, resistance looms ahead of the next round number in the form of a Fib retracement level at 1.2680 and then the 200 DMA at 1.2698.

• NZD/AUD – The Kiwi and Aussie continue to benefit from Greenback weakness alongside upturns in broad risk sentiment that are compensating/offsetting negatives for the latter via the COVID-19 related problems in Melbourne, Victoria that has now prompted Tasmania to extend its state of emergency. Nzd/Usd has advanced closer to 0.6600 with independent impetus coming from an improvement in ANZ business sentiment and even more pronounced rebound in the activity outlook, while Aud/Usd has retested 0.7000 as the Aud/Nzd cross hovers above 1.0600. Conversely, the DXY is struggling to retain sight of 96.500 having dipped below support to 96.233 in the run up to the latest US initial claims data and wholesale inventories, as the Buck remains prone to safe haven unwinding and the ongoing spiral in coronavirus infections/deaths in several hotspots.
• CAD/CHF/EUR/JPY – All narrowly mixed and still eyeing Usd moves alongside the general market tone, but the Loonie also conscious of decent option expiry interest between 1.3495-1.3500 (1 bn) and the 200 DMA (bang on 1.3500) ahead of Canada’s June leading index that follow’s yesterday’s economic and fiscal snapshot. Meanwhile, the Franc is meandering around 0.9375 and 1.0635 vs the Euro that pivots 1.1350 against the Dollar amidst expiries extending from 1.1300 (1.8 bn) through 1.1350-60 (1 bn) to 1.1375 (1.1 bn). Elsewhere, the Yen has eked gains towards 107.00 having been confined to a relatively tight range either side of 107.50, but could yet gravitate back given 1.1 bn option expiry for the NY cut, and with Jpy crosses firmer in line with the overall risk tone.
• SCANDI/EM – Indecisive and choppy trade across the board, but currencies mostly on the up and especially the Yuan that has made a more concerted 7.0000+ break following a PBoC midpoint fixing very close to the level and yet more strength in Chinese stock indices overnight.

In commodities, WTI and Brent front month futures trade choppy within tight ranges with price action somewhat lacklustre amid a lack of newsflow for the complex coupled with a number of bearish factors including this week’s inventory releases. News-flow for the complex has been light in early trade, although on the geopolitical front, one to keep on the radar would be the escalating tensions between Saudi and the Houthis, with the latest reports nothing that a Saudi-led coalition in Yemen have reportedly struck and destroyed two explosive laden-boats south of the port of Al Salif, according to Saudi TV. Nonetheless, crude prices remain flat/modestly softer with WTI Aug just above USD 40.50/bbl and Brent Sep keeps its head above USD 43/bbl. Elsewhere, spot gold retains at USD 1800/oz+ status having touched a recent high of USD 1816/oz. Shanghai copper hit a 16-month high on supply woes coupled with a firm performance in Chinese markets, whilst Dalian iron ore extended gains for a fifth straight day as steel mills replenish inventories on higher demand hopes.

US Event Calendar

• 8:30am: Initial Jobless Claims, est. 1.38m, prior 1.43m
• 8:30am: Continuing Claims, est. 18.8m, prior 19.3m
• 9:45am: Bloomberg Consumer Comfort, prior 43.3
• 10am: Wholesale Trade Sales MoM, est. 4.5%, prior -16.9%; Wholesale Inventories MoM, est. -1.2%, prior -1.2%

DB’s Jim Reid concludes the overnight wrap

In terms of yesterday’s market moves, one of the major headlines was the continued rally in gold, with the precious metal surpassing $1800/oz yesterday for the first time since 2011, before closing at a fresh 8-year high of $1809/oz. As we’ve written about in our monthly performance reviews, gold has been one of the strongest performing assets on a YTD basis in 2020 – up +19.22%. In many ways this isn’t surprising given central banks are printing money like it is going out of fashion. See Tuesday’s CoTD here showing that US money supply is up 25% yoy – only the 10th time above 20% in last 190 years of data.

Other metals continued to perform strongly too yesterday, with silver advancing by +2.45% yesterday to its own 4-month high, with the industrial bellwether of copper (+0.71%) up for a 7th straight session and to a new 5-month high. For more on the outlook for commodities see our strategists’ new note linked here. Notably our team has upgraded their 2021 gold target to $2000/oz, while shifting to a bullish Crude bias.

As gold and other metals advanced, US equity markets had a tough early session falling over 1% as several US states again announced elevated case counts. However, a steady recovery to just above flat was given a late boost in the last couple of hours of the day. It is possible that the late rally was partly due to Fed Reserve Bank of Atlanta President Bostic saying that the current pace of virus infections may warrant further policy action by either the central bank or Congress. With that the S&P 500 ended the session up +0.78% with another strong performance from tech stocks which saw the NASDAQ rise a further +1.44% and to a new record. Europe underperformed significantly however having been long closed before sentiment got a boost. The STOXX 600 ending the session down -0.67%, as other bourses experienced even larger declines, including the DAX (-0.97%) and the CAC 40 (-1.24%). Banks were among the laggards once again with the STOXX Banks index falling a further -2.12%. It was the reverse picture in fixed income though, with US Treasuries losing ground as European sovereign bonds advanced. By the close, 10yr Treasury yields had risen +2.5bps, in contrast to bunds which fell -1.1bps. BTPs were fairly flat to bunds.

Asian markets are trading higher this morning following Wall Street’s lead with the Nikkei (+0.59%), Hang Seng (+0.47%), Shanghai Comp (+1.03%; marking 8 days of consecutive gains), Kospi (+0.78%) and ASX (+1.07%) all posting gains. In Fx, the US dollar index is down a further -0.13% after yesterday’s -0.47% decline. Meanwhile, futures on the S&P 500 are trading flat. In terms of data out overnight, China’s June CPI printed in line with consensus at +2.5% yoy while PPI came in at -3.0% yoy (vs. -3.2% yoy expected).

In other news, Bloomberg reported overnight that Joe Biden will call for a moderate approach toward reviving the U.S. economy if elected President that includes spurring manufacturing and encouraging innovation, shelving for now the more ambitious proposals pushed by progressive Democrats. He is likely to deliver an economic speech today framing his argument for the rest of the campaign. As an aside the challenges going forward were further highlighted yesterday as United Airlines notified 45% of its workforce (36,000 employees in total) that their jobs are at risk after federal payroll aid expires at the end of September.

On the coronavirus, there weren’t a great deal of fresh headlines yesterday, though we saw yet further case increases in the US, with Florida and Arizona rising by 4.7% and 3.3% respectively. The country overall has now passed 3 million cases, with daily cases now increasing by over 50,000 per day for the first time. For context, the peak in April saw 31,500 average cases per day. Texas posted its second record day of fatalities with a further 97 yesterday. The 7 day average rise in fatalities is now 1.9% per day, after being in a range between 1.3% and 1.5% for the last 3 weeks, so this bears paying attention to even if the lagged ratio of deaths to cases is still well below that of the first wave. Citing backlogs in some counties, the Governor of California announced that cases in the state rose by over 11,000, the largest one day rise yet. Positive test rates in the state are now up to 7% after being at 5% just 2 weeks ago. With caseloads rising, the New Jersey Governor said that he would issue an order for the public to wear masks outside where crowds are congregating, whilst here in the UK, one hospital in west London closed for emergencies following a Covid-19 outbreak there. Globally, cases have now crossed the 12 million mark and even in areas with a low number of cases there are still fears. Indeed Hong Kong’s government has expressed worries that the city might be in the early days of a wider outbreak. Hong Kong has seen 118 new cases since June 30 and reported 19 new community transmissions yesterday.

Elsewhere disputes emerged in the US over school reopenings, with President Trump tweeting that he disagreed with the CDC’s school reopening guidelines, referring to them as “very tough & expensive”. Meanwhile NYC mayor de Blasio said on schools that he anticipated a “blended” learning program that would see students in class 2-3 days each week once school restarts in September, though Governor Cuomo announced he will be making a final decision on NY schools in early August.

Back to the U.K., Chancellor Sunak announced a fresh package of fiscal stimulus measures to bolster the recovery, which could be worth up to £30bn in total. In terms of the main announcements, the biggest is potentially the job retention bonus, whereby employers who bring back furloughed workers can qualify for a £1,000 bonus per employee, provided certain conditions are met. In theory, if all 9.4m furloughed jobs were retained, then this could be worth £9.4bn. The other main highlights include a temporary 9-month VAT cut from 20% to 5% for hospitality, accommodation and attractions, as well as a temporary Stamp Duty cut (the tax paid on home purchases) that will see the threshold rise to from £125k to £500k up to the end of March. And finally, though it was far from the costliest measure announced, one of the most headline-grabbing was an “Eat Out to Help Out” scheme whereby diners will get a 50% discount of up to £10 per head when eating out, valid Monday to Wednesday throughout August. The Early Morning Reid will come live from the terrace at my golf course opposite my house early in the week in August. For more on the Chancellor’s announcement see out UK economists note here.

On the longer term implications, it’s worth noting that in spite of the fiscal largesse yesterday, Sunak said that “over the medium term, we must, and we will, put out public finances back on a sustainable footing.” So clearly a nod towards future fiscal tightening now that the national debt is over 100% of GDP for the first time since 1963. Furthermore, there was also the acknowledgement that the furlough scheme “cannot and should not go on forever.” We should hear more this autumn when we get the next Budget and Spending Review from the UK government. For what it’s worth I suspect governments (including the U.K.) will talk a tough game on fiscal discipline going forward but the reality is that the fiscal genie is now out of the bottle and we’re set for a decade of MMT and helicopter money type policies. We will see.

To the day ahead now, and the data highlights will include the weekly initial jobless claims from the US, along with Germany’s trade balance for May, Canadian housing starts for June, and Japan’s preliminary machine tool orders reading for June. Elsewhere, we’ll hear from the Fed’s Bostic and the ECB’s Hernandez de Cos.

Offering an early glimpse of what the Q2 earnings season might be like, Walgreens Boots Alliance kicked things off – though the season doesn’t ‘unofficially’ start until next week, to be sure – with a disappointing batch of numbers driven by a drop in same-store sales that was far larger than Wall Street expected.

Adjusted earnings for Walgreens third fiscal quarter (comprising the three months ending in May) came in at 83 cents per share, down 43.5% YoY. That was well shy of the Wall Street consensus estimate of $1.18 per share. Group revenues rose 0.1% to $34.6 billion, just below analysts’ projections for $34.35 billion.

The company’s biggest quarterly hit came from the United Kingdom, where it operates under the Boots brand. The company counted charges of ~$2 billion, with the company unveiling plans to cut some 4,000 jobs as a result. It also announced the suspension of its share buyback program – which didn’t exactly help bolster investor confidence.

Looking ahead, Walgreens sees adj. earnings of $4.65 per share to $4.75 per share, which factors in between $1.03 and $1.14 per share of covid impact.

To be sure, Walgreens is already reworking its business to account for the virus: Just yesterday, the Dow laggard announced plans to build 500 to 700 full-service primary-care clinics within its retail stores in the next five years in partnership with VillageMD. That lifted shares as investors cheered the company’s commitment of $1 billion in capital to build out the operation by investing the money in VillageMD, taking a 30% stake.

Wednesday was another brutal day for the US during the global coronavirus outbreak as all of the worst hit states in the sunbelt produced new single-day records ranging from the highest 7-day positivity rate (Florida) to new records for deaths (Texas), single-day cases (California) and hospitalizations (Arizona, Florida, Texas etc).

After the US reported more than 60k new cases on Tuesday for the first time, the country repeated that feat on Wednesday, essentially tying its record number from the prior day.

Our daily update is published. New records for cases, and a top-5 day for tests. Patients currently hospitalized jumped to over 43,000, about the levels of mid-May.

States reported more than 800 new deaths. The 7-day average is creeping back up. pic.twitter.com/b2IvB4RH7r

— The COVID Tracking Project (@COVID19Tracking) July 8, 2020

But as the COVID tracking project points out, the 7-day average for deaths is “creeping back up” after two days of deaths near 1,000 (on Monday, the US reported fewer than 500 deaths for the entire country).

As deaths continue falling in New England, the sun belt has more than compensated for it.

There’s been a lot of discussions about deaths continuing to trend down as cases have surged. This chart provides a partial answer to what’s been happening. The falling numbers in the NE were offsetting rising deaths in AZ, TX, FL. pic.twitter.com/hmZkhZXTPS

— The COVID Tracking Project (@COVID19Tracking) July 8, 2020

As we noted, the US also topped 3 million cases yesterday.

We reached 3 million cumulative cases today, less than a month after reaching 2 million. pic.twitter.com/tNw81l9rDZ

— The COVID Tracking Project (@COVID19Tracking) July 8, 2020

So far on Thursday, the bad news out of the US has apparently carried over to Asia, as Hong Kong and Tokyo both reported new single-day records of new cases, as new outbreaks in both territories have come roaring back in recent weeks. Both areas are closely watched bellwethers of the outbreak in East Asia.

Tokyo confirmed 224 new infections on Thursday, its  largest single-day tally yet. While Tokyo has focused its virus suppression efforts on nightlife districts, more mundane places like diners and – of course – nursing homes have seen several outbreaks.

 

 

The city’s mayor has said there are no plans to reinstate the state of emergency that was lifted in Tokyo last month.

Hong Kong health officials have warned of a third wave of coronavirus infections after the city recorded 23 new cases in two days. Social distancing measures in HK were largely lifted over the past two months as the city’s cases dwindled. An outbreak at a nursing home in Kowloon has contributed 8 infections to today’s total – four residents and four staff tested positive, on top of one resident who tested positive yesterday.

India reported 22,752 new cases, up slightly from 22,252 yesterday, bringing India’s virus total to 742,417. The death toll has jumped to 20,642, up 482.

Meanwhile, as tensions with Beijing intensify, with the White House mulling new retaliatory measures ranging from an assault on the HKD currency peg to barring the popular social media app TikTok, Beijing hurled a few rhetorical rocks Thursday morning when Foreign Ministry spokesperson Zhao Lijian slammed the Trump Administration’s decision to withdraw was “another demonstration of the US pursuing unilateralism, withdrawing from groups and breaking contracts.”

The WHO is “the most authoritative and professional international institution in the field of global public health security,” Zhao said at a briefing Wednesday, adding that the US departure would hurt the developing world, the AP reports – contrasting America’s WHO withdrawal with President Xi’s promises of forgivable or zero-interest loans and bundles while supplying the developing world with the vaccine.

In Australia, Victoria, the worst-hit Australian state, recorded another 165 case, as an outbreak at a Melbourne high school emerged as the largest cluster in the country. Queensland state also closed its border to people fleeing a six-week lockdown in Melbourne. In addition to the lockdown, Victoria has effectively sealed its borders, while neighboring New South Wales has also shut its border with Victoria.