Global iPhone Shipments Could Plunge 30% If WeChat Removed From App Store 

Global iPhone Shipments Could Plunge 30% If WeChat Removed From App Store 

Tyler Durden

Mon, 08/10/2020 – 10:02

President Trump’s executive order banning Chinese messenger app WeChat next month could have a severe impact on Apple worldwide sales. 

TF International Securities’ Ming-Chi Kuo published a research note (viewed by MacRumors) describing his optimistic and pessimistic scenarios of Apple worldwide sales concerning the potential ban of WeChat from the App Store. 

Kuo’s optimistic scenario outlines if WeChat is removed from the US App Store it would impact annual iPhone sales by around 3–6% with other Apple products down 3%. 

Kuo’s pessimistic scenario would be devastating for Apple, estimates annual global iPhone shipments could plunge 25–30% if the messenger app is completely removed. 

“Because WeChat has become a daily necessity in China, integrating functions such as messaging, payment, e-commerce, social networking, news reading, and productivity, if this is the case, we believe that Apple’s hardware product shipments in the Chinese market will decline significantly. We estimate that the annual ‌iPhone‌ shipments will be revised down by 25–30%, and the annual shipments of other Apple hardware devices, including AirPods, iPad, Apple Watch, and Mac, will be revised down by 15–25%,” Kuo said in the note. 

Apple has a significant Chinese customer base. Many of the users utilize the multi-purpose messaging, social media, and mobile payment app on a daily basis. 

In total, China accounts for 15% of Apple’s total revenue during 2Q20. Kuo describes several emerging risks throughout Apple’s supply chain if a WeChat ban is seen: 

“Kuo recommends that investors reduce their stock holdings of companies in Apple’s supply chain such as LG Innotek and Genius Electronic Optical due to the risks of a WeChat ban. It does, however, remain to be seen what will happen as the prohibitions laid out in the executive order do not take effect until September 20. As a result, there is still time for the order to be clarified, modified, or rescinded,” MacRumors said. 

Apple shares are still melting up after reporting record revenue

Though this morning’s opening bid is fading fast…

If the Trump administration goes ahead with the ban on September 20, a lot of Chinese iPhones will no longer be able to access WeChat could trigger a move to Huawei smartphones and lead to a massive decline in global iPhone sales for Apple. 

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Gold, Silver, Small Caps, & Bonds Are All Soaring As Nasdaq Tumbles

Gold, Silver, Small Caps, & Bonds Are All Soaring As Nasdaq Tumbles

Tyler Durden

Mon, 08/10/2020 – 09:54

Buy all the things!!

As the dollar erases overnight gains…

Small Caps and The Dow were suddenly panic-bid at the open as Nasdaq dips)…

Bonds are bid…

Gold futures spiked above $2050…

And Silver futures are surging…

One of these things is not like the other.

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Rabo: Once Again The Global Architecture Is At Risk Of Collapse… Which Is Why Markets Will Keep Rising

Rabo: Once Again The Global Architecture Is At Risk Of Collapse… Which Is Why Markets Will Keep Rising

Tyler Durden

Mon, 08/10/2020 – 09:45

By Michael Every of Rabobank

Action, sanctions, action,…sanctions

The US Congressional stand-off between Democrats and Republicans over a new stimulus bill was temporarily resolved in controversial fashion by President Trump on Saturday via a series of executive orders which: extend unemployment benefits for two months at a level of USD300 per week, down from USD600, with an additional USD100 top up possible from states by tapping FEMA funding; extend the moratorium on rental evictions, although critics say the wording is too vague to help; extend zero rates and deferments on student loans; and defer payments of payroll taxes backdated to 1 July, with the explicit promise from Trump that if he is re-elected he will make this permanent.

Obviously this is less stimulus than was previously available, which was probably already not enough to stop the economy from slowing –regardless of the good US employment news on Thursday and Friday– and kicks the can at best. However, it is mathematically better than nothing. Markets get to see action – and, crucially, so do voters…and it’s the president taking it. (Yes, this is an election year, and all actions need to be viewed through that lens.) Of course, it is also highly controversial and, Democrats claim, of dubious constitutionality which may be challenged in court. Objectively, however, the measures don’t seem to be any more of a stretch than ones previously taken by the Democrats when in office. It does seem that the door is opening for the White House to dip into the huge Treasury balance it has on hand to keep kicking that can until 3 November.

Meanwhile, if Trump vs. Biden is the lens for most market actions, the other is still the US vs. China. Friday saw the US impose sanctions on Hong Kong CEO Carrie Lam as well as senior members of the Hong Kong government. Markets didn’t like this, presuming as usual that no such boats would be rocked. Indeed, the Hong Kong Autonomy Act (HKAA) allowed Trump far longer to make this decision, and there had been whispers, always wrong in my view, that only small-fry would be targeted rather than the head of government. For the bulls, the new “She’ll be right” mantra is that no *banks* were named and, as China has officially stated, this US action is both an egregious insult and ultimately meaningless.

Yet as the Financial Times’ Simon Rabinovitch tweeted over the weekend, quoting an unnamed executive from the Chinese unit of a major European bank:

“…the impact will begin to be felt on Monday morning. He variously described all officials on the list as “toxic” and as “pariahs” for all foreign banks, not just US banks, who deal with them…his view is that major Chinese banks, afraid of trouble with the US, would themselves comply with the sanctions.”

Indeed, as has been underlined before, the HKAA starts with individuals and then automatically moves to banks, and to the USD. So she won’t be right on this glide path.

Then today anti-Beijing Hong Kong press billionaire Jimmy Lai and his sons were arrested for “collusion with a foreign country, uttering seditious words, and conspiracy to defraud,” according to press reports of the words of an arresting officer. The HQ of Lai’s media empire, the newspaper HK Apple Daily, was also raided by dozens of police, all journalists made to show their IDs, and crates of evidence taken away.

Obviously, this does not help sell Hong Kong as an international media center any more than US sanctions on its government help to sell it as an international banking centre.

Moreover, what are the odds the US escalates sanctions in response to China’s reply to Friday’s action? Be assured if there is one thing feuding Democrats and Republicans have in common it will be anger at what China has just done.

So risk on for Trump’s actions, or risk off for China’s? What is actually happening seems to bear very little relation to what markets do nowadays.

One thing we can say, however, is that with July Chinese CPI at 2.7% y/y, only higher than consensus due to food inflation at 13.2% y/y, with core CPI at the lowest since 2010, and key PPI at -2.4% y/y, deflation is still the name of the game, not inflation; and despite the enormous USD62bn Chinese trade surplus for July, and the lack of outbound tourism, and the assumed gain in valuation in non-USD FX reserves from a weaker USD, China’s FX reserves did not move much in the month from their obligatory “none shall pass!” USD3.1x trillion level. Which means more money flowed out than in even when the USD was being talked about as a busted flush.

Meanwhile, New Zealand, which just celebrated 100 days with no local virus transmission, just saw ANZ business confidence FALL from -31.8 to -42.4 and the business outlook from -8.9 to -17. You can beat Covid-19, but if you are doing it all alone then you are still facing a very hard slog. Wait until nobody turns up for the key summer tourist season and imagine how things will look. Let’s see what the RBNZ has to say when they meet later this week.

And in the northern hemisphere, if it’s Monday it must be another bout of selling in TRY, which was below 7.30 at time of writing. As noted last week, this is a situation which is not going to resolve itself: outside involvement is likely to be needed in terms of foreign exchange. Ironically, today marks the 100th anniversary of the signing of the Treaty of Sevres, which dismantled the Ottoman Empire post-WW1, and which is likely to get far more attention in Turkey than it does in the West –where nobody seems to study history anymore– even as France jostles with Turkey over both Cyprus and Libya. Of course, it is also the date that saw the start of the French mandate in Syria and Lebanon, which coincides with French President Macron’s recent visit to ruined Beirut, a promise that France won’t walk away from it (which will be very expensive, if so), and a Lebanese petition signed by 61,000 people so far demanding the country once again “be placed under a French mandate for the next 10 years.”

Even if that is highly unrealistic, it underlines that once again the global architecture is at risk of collapse as we see realpolitik trump the ‘liberal world order’, huge explosions, warnings of war, political polarization, dubious constitutionality, warnings of election fraud, sanctions, tariffs, and now the arrest of press barons.

You know, the perfect environment for markets to keep rising.

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Key Events In The Coming Quiet Week: CPI, Retail Sales, End Of Earnings Season

Key Events In The Coming Quiet Week: CPI, Retail Sales, End Of Earnings Season

Tyler Durden

Mon, 08/10/2020 – 09:35

With much of Wall Street on vacation, there is a fairly sparse calendar this week so as Deutsche Bank’s Craig Nicol writes, it is likely that markets will be taking their temperature from the state of play in Washington. So far we’ve shrugged off the disappointment around the lack of agreement on the next US fiscal package, however with each passing day the greater the risk is to consumer confidence and spending as our US economists highlighted over the weekend, especially given that the over 31 million people receiving unemployment insurance as of the week of July 18 are set to see their monthly income decline by 60%-plus in August.

Aside from fiscal developments, the only notable data releases this week in the US are July CPI on Wednesday and July retail sales on Friday. The latest weekly jobless claims print on Thursday is also worth keeping an eye on.

In Europe we’ve got Germany’s August ZEW survey on Tuesday and a second look at Q2 GDP for the Euro Area on Friday. In China the highlight is on Friday with the July activity indicators data.

Finally, earnings season starts to wind down with the best part of 90% of the S&P 500 having already reported, with the most prominent reporters this week laid out below.

What’s notable is that the early trends of outsized and broad earnings beats has only continued, with forward estimates also ticking higher.

Courtesy of Deutsche Bank, here is a day-by-day calendar of events

Monday

  • Data: China July CPI and PPI; Bank of France July industrial sentiment; Euro Area Aug Sentix investor confidence; US June JOLTS job openings
  • Earnings: Duke Energy, Marriott, Barrick Gold, Saudi Aramco
  • Politics: Democratic presidential nominee Joe Biden is expected to announce his choice for Vice President this week

Tuesday

  • Data: Japan June trade balance; UK July jobless claims change and rate, June average weekly earnings, ILO unemployment rate; Aug ZEW survey expectations for Euro area and Germany; Germany Aug ZEW survey current situation; US July NFIB small business optimism, July PPI, July PPI ex Food and Energy
  • Central Banks: Fed’s Daly Speaks; Brazil central bank minutes
  • Earnings: Prudential, Vestas Wind System, Sysco

Wednesday

  • Data: UK June Monthly GDP and preliminary 2Q GDP, June industrial, manufacturing, and construction production and June trade balance; Japan July machine tool orders; Italy July final CPI; Euro June area industrial production; US weekly MBA mortgage applications, July CPI, July real average weekly earnings, July monthly budget statement
  • Central Banks: Fed’s Rosengren, Kaplan and Daly speak
  • Earnings: Orsted, Novozymes, Genmab, Cisco
  • Other: OPEC releases its monthly oil market report

Thursday

  • Data: Japan July PPI; France 2Q ILO Unemployment; Germany and Spain final July CPI; US July import price index, export price index, weekly initial jobless claims and continuing claims
  • Central Banks: Mexican central bank rate decision
  • Earnings: Zurich Insurance, Carlsberg, Deutsche Telekom, Applied Materials

Friday

  • Data: China July industrial production, July retail sales, surveyed jobless rate; France final July CPI; Euro area June trade balance, preliminary 2Q employment and preliminary 2Q GDP; US July retail sales advance, preliminary 2Q nonfarm productivity and unit labour costs, July retail sales, July industrial and manufacturing production, preliminary August U. of Michigan sentiment survey.

* * *

Focusing on the US, Goldman notes, that the key economic data releases this week are the CPI report on Wednesday and the retail sales report on Friday. There are several scheduled speaking engagements from Fed officials this week.

Monday, August 10

  • 10:00 AM JOLTS Job Openings, June (consensus 5,300k, last 5,397k)
  • 04:00 PM Chicago Fed President Evans (FOMC non-voter) speaks: Chicago Fed President Charles Evans will participate in a webinar on workforce issues during Chicago’s recovery from the pandemic.

Tuesday, August 11

  • 06:00 AM NFIB small business optimism, July (consensus 100.4, last 100.6)
  • 08:30 AM PPI final demand, July (GS +0.4%, consensus +0.3%, last -0.2%); PPI ex-food and energy, July (GS +0.2%, consensus +0.1%, last -0.3%); PPI ex-food, energy, and trade, July (GS +0.2%, consensus +0.2%, last +0.3%); We estimate that headline PPI increased by 0.4% in July, largely reflecting stronger energy prices. We expect a 0.2% increase in the core measure excluding food and energy, and also a 0.2% increase in the core measure excluding food, energy, and trade.
  • 11:00 AM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Thomas Barkin will participate in a webinar hosted by the Center for Regional Economic Competitiveness.
  • 12:00 PM San Francisco Fed President Daly (FOMC non-voter) speaks: San Francisco Fed President Mary Daly will participate in a virtual discussion hosted by the Professional BusinessWomen of California.

Wednesday, August 12

  • 08:30 AM CPI (mom), July (GS +0.50%, consensus +0.3%, last +0.6%); Core CPI (mom), July (GS +0.23%, consensus +0.2%, last +0.2%); CPI (yoy), July (GS +0.88%, consensus +0.7%, last +0.6%); Core CPI (yoy), July (GS +1.17%, consensus +1.1%, last +1.2%): We estimate a 0.23% rebound in July core CPI (mom sa), which would leave the year-on-year rate unchanged at +1.2% on a rounded basis. Our monthly core inflation forecast reflects further rebounds in apparel, hotel lodging, and airline prices, as well as continued firmness in car insurance inflation following steep declines in the spring. On the negative side, we expect a decline in education prices reflecting tuition cuts of as much as 5-15% for the fall semester at some universities. We also look for another month of lackluster shelter inflation (+0.1% mom sa for both rent and OER) reflecting continued rent freezes and a drag from rent forgiveness in some areas. We estimate a 0.50% increase in headline CPI (mom sa), reflecting higher energy prices.
  • 10:00 AM Boston Fed President Rosengren (FOMC non-voter) speaks; Boston Fed President Eric Rosengren will participate in a virtual discussion about the U.S. economy and current financial conditions hosted by the South Shore Chamber of Commerce. Audience Q&A is expected.
  • 11:00 AM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will participate in a moderated Q&A hosted by the Lubbock Chamber of Commerce.
  • 03:00 PM San Francisco Fed President Daly (FOMC non-voter) speaks: San Francisco Fed President Mary Daly will participate in a virtual discussion hosted by the Economic Club of New York. Audience and media Q&A are expected.

Thursday, August 13

  • 08:30 AM Initial jobless claims, week ended August 8 (GS 1,050k, consensus 1,100k, last 1,186k); Continuing jobless claims, week ended August 1 (consensus 15,800k, last 16,107k): We estimate initial jobless claims declined, but remain elevated, at 1,050k in the week ended August 8.
  • 08:30 AM Import price index, July (consensus +0.6%, last +1.4%)
  • 11:00 AM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will discuss equitable solutions for the future of cities in a webinar.

 
Friday, August 14

  • 08:30 AM Retail sales, July (GS +1.1%, consensus +1.9%, last +7.5%); Retail sales ex-auto, July (GS +0.8%, consensus +1.3%, last +7.3%); Retail sales ex-auto & gas, July (GS +0.5%, consensus +1.0%, last +6.7%): Core retail sales, July (GS +0.1%, consensus +0.8%, last +5.6%): We estimate that core retail sales (ex-autos, gasoline, and building materials) edged up by 0.1% in July (mom sa), reflecting a pause in reopening across the country, a strong seasonal factor arising from Amazon Prime Day (which is delayed until the fall this year), and as indicated by continued gains in credit card spending and other high-frequency data. We expect relatively stronger monthly gains for restaurants, gas stations, and autos, and we estimate a 1.1% increase in the headline measure and a 0.8% increase in the ex-auto measure.
  • 08:30 AM Nonfarm productivity, Q2 preliminary (GS +1.4%, consensus +1.5%, last -0.9%); Unit labor costs, Q2 preliminary (GS +9.0%, consensus +6.2%, last +5.1%): We estimate non-farm productivity growth grew by 1.4% in Q2 qoq saar (+0.3% yoy). This reflects relatively larger declines in hours worked than in business output in Q2. We expect Q2 unit labor costs—compensation per hour divided by output per hour—to increase to +9.0% qoq ar (+4.1% yoy).
  • 09:15 AM Industrial production, July (GS +3.1%, consensus +3.0%, last +5.4%); Manufacturing production, July (GS +3.3%, consensus +3.0%, last +7.2%); Capacity utilization, July (GS 70.6%, consensus 70.3%, last 68.6%): We estimate industrial production rose by 3.1% in July, reflecting a continued rebound in manufacturing output. We estimate capacity utilization rose by 2.0pp to 70.6%.
  • 10:00 AM University of Michigan consumer sentiment, August preliminary (GS 72.5, consensus 71.9, last 72.5): We expect the University of Michigan consumer sentiment index to remain flat at 72.5, reflecting positive stock market gains and a high but declining number of daily new coronavirus cases.
  • 10:00 AM Business inventories, June (consensus -1.1%, last -2.3%)

Source: Deutsche Bank, Goldman, BofA

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McDonald’s Accuses Former CEO Of Lying And Fraud In Lawsuit Seeking To Clawback Comp

McDonald’s Accuses Former CEO Of Lying And Fraud In Lawsuit Seeking To Clawback Comp

Tyler Durden

Mon, 08/10/2020 – 09:24

As major corporations burn billions of dollars on “virtue-signaling” to avoid being targeted by the ‘cancel culture’ mobs, McDonald’s is apparently trying to offset some of these costs by going after compensation it already paid out to former CEO Steve Easterbrook, who was abruptly fired over an “inappropriate” relationship with a subordinate.

Back in November of last year, McDonald’s fired Easterbrook then released a statement claiming the CEO “violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee.” He had allegedly been caught “sexting” with the other employee. We speculated at the time that McDonald’s press release, which verged on shaming Easterbrook over what was admittedly a consensual relationship, had been crafted by Easterbrook’s boardroom enemies to make an example of the CEO, whose initiatives to change up the menu by adding all-day breakfast boosted sales, but clearly ruffled some feathers. Easterbrook was also removed from the board.

But according to a new securities filing and a lawsuit filed with the Delaware court of chancery, new whistleblowers from inside the company have apparently come forward over the past few months to accuse Easterbrook of having consensual relationships with 3 McDonald’s employees in the year before his ouster.

These whistleblowers also alleged that the CEO, who walked away with more than $40 million, awarded a huge grant of shares to one of these employees during their relationship.

The lawsuit filed by McDonald’s accuses Easterbrook of fraud by concealing evidence of these affairs from the board and the company on his way out the door. They argue that this information would have impacted negotiations over his exit.

McDonald’s filed a lawsuit against Mr. Easterbrook, accusing him of lying, concealing evidence and fraud.

The lawsuit, filed in state court in Delaware, alleges that Mr. Easterbrook carried on sexual relationships with three McDonald’s employees in the year before his ouster and that he awarded a lucrative batch of shares to one of those employees. McDonald’s said it was seeking to recoup stock options and other compensation that the company last fall allowed Mr. Easterbrook to keep — a package worth more than $40 million, according to Equilar, a compensation consulting firm.

The lurid allegations are reportedly backed up by “photographic evidence”. Easterbrook was fired without cause, but the suit seeks to claw back some of the money paid out to him by changing the nature of his firing to “with cause”.

Easterbrook’s successor, current MCD CEO Chris Kempczinski, has called for a new corporate emphasis on integrity, inclusion and supporting local communities as part of McDonald’s “core mission”.

“McDonald’s does not tolerate behavior from any employee that does not reflect our values,” Kempczinski wrote in an internal memo reportedly shared with the NYT. “As we recommit to our values, now, more than ever, is the time to lean in to what we stand for and act as a positive force for change.”

With the lawsuit, McDonald’s joins a handful of companies that have aggressively sought to deny compensation to CEOs over #MeToo-related indiscretions. Perhaps the most similar case is that of former CBS Chairman and CEO Les Moonves, who was denied his $120 million retirement package over allegations he interfered in an internal company probe. That dispute is now in arbitration, according to the most recent media reports.

During the internal probe, Easterbrook assured investigators that he had never engaged in a sexual relationship with an employee, and alleged that the “sexts” with the still-unnamed fellow employee constituted harmless flirting. However, the notion that “photographic evidence” has been brought to bear against Easterbrook would suggest that he has been caught in a different affair.

However, as the NYT reports, a clause in Easterbrook’s contract says that if it can be proved that he should have been fired “for cause”, that the company would have the right to recoup Easterbrook’s lucrative stock options awarded as part of his retirement package, which the company admitted he was eligible to receive.

But sources inside the company said their internal probe was “insufficient”, and that new information, including information taken from Easterbrook’s former corporate email account, proves he carried on a physical affair with at least two other employees, and even awarded one of them a block of hundreds of thousands of shares during the affair.

From the NYT:

But McDonald’s severance plan, which the company said applied to Mr. Easterbrook, contained an important clause: If, in the future, McDonald’s determined that an employee was dishonest and actually deserved to be fired for cause, the company had the right to recoup the severance payouts.

Last month, after McDonald’s received the anonymous tip alleging that Mr. Easterbrook had had a sexual relationship with another employee, the company opened a new investigation.

In its review last fall, McDonald’s did not thoroughly search through Mr. Easterbrook’s email account; the company’s outside lawyers had only looked at messages that were on his company-issued mobile phone. And Mr. Easterbrook, according to McDonald’s lawsuit, had deleted certain emails from his phone.

This time, McDonald’s said, its investigators conducted a more detailed search, and in Mr. Easterbrook’s email account they found evidence of him carrying on sexual relationships with three employees in the year before his firing.

“That evidence consisted of dozens of nude, partially nude, or sexually explicit photographs and videos of various women, including photographs of these company employees, that Easterbrook had sent as attachments to messages from his company email account to his personal email account,” McDonald’s said in the lawsuit. The company said the emails were sent in late 2018 and early 2019.

This doesn’t look good. And whether the company succeeds in clawing back Easterbrook’s money could have important ramifications for how companies deal with C-Suite “misconduct.”

To sum up: For a company that invented the slogan “you deserve a break today,” it clearly doesn’t feel inclined to cut any slack to the CEO who revitalized its lagging stock with fresh ideas and all-day breakfast.

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Tropical Disturbance Spotted In Atlantic, Could Form Into Storm This Week 

Tropical Disturbance Spotted In Atlantic, Could Form Into Storm This Week 

Tyler Durden

Mon, 08/10/2020 – 09:05

The National Hurricane Center (NHC) in Miami, Florida, is tracking a tropical wave over the Atlantic that could form into a tropical cyclone this week. 

“NHC is monitoring a tropical wave over the open Atlantic for possible development over the next few days. No impacts to South Florida are expected at this time. This is a reminder that we are in hurricane season. Make sure your hurricane plan is in order,” NHC said. 

The disturbance, dubbed Invest 95L, is located a couple of hundred miles south-southwest of the Cabo Verde Islands. With a 40%-60% chance of forming into a tropical depression over the next few days. The directional heading of the wave is westward across the tropical Atlantic Ocean.

Spaghetti models are showing Invest 95L could track west-northwestward into the Caribbean. 

So far, 2020 has been an extremely active hurricane season, which goes through November 30. Last week, the East Coast of the US was walloped by Hurricane Isaias.

Josephine will be the next named storm in the Atlantic.

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Chaos In Chicago: Bridges Raised To Prevent Gun-Toting Looters Getting Downtown

Chaos In Chicago: Bridges Raised To Prevent Gun-Toting Looters Getting Downtown

Tyler Durden

Mon, 08/10/2020 – 08:43

Hundreds of ‘mostly peaceful protesters’ swept through the Magnificent Mile and other parts of downtown Chicago early Monday, smashing windows, looting stores, confronting police and at one point exchanging gunfire with officers, authorities said.

As The Chicago Tribune reports, officers had stopped several people on Lake Street near Michigan Avenue when shots were fired from a passing car around 4:30 a.m., nearly five hours into the widespread vandalism, according to police spokesman Tom Ahern.

No officers were shot but a squad car was hit, he said. It was not known if anyone in the gunman’s car was shot.

Police made “a lot of arrests” and recovered at least one gun, officials said.

And that escalation, as Summit News’ Paul Joseph Watson details, prompted Chicago authorities took the decision to raise all major bridges in an effort to prevent looters reaching the downtown area after a night of chaos.

Luxury department stores were ransacked as hundreds of looters caused mayhem in response to the police shooting of an armed suspect in Englewood.

Police sent to respond to the looting were physically attacked, prompting authorities to raise major bridges in order to keep more people out of the area.

“All bridges are being raised along the river throughout The Loop,” reports CBS Chicago. “Chicago’s Office of Emergency Management announced street closures throughout areas in the Magnificent Mile, Gold Coast and South Loop.”

Numerous bus and train services have also been suspended, while large areas of downtown Chicago are also closed.

Bridges were previously raised last month in an effort to keep Black Lives Matter protesters away from the business district, but the call to do so this time around appears to have come too late.

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Wearing Masks Outdoors Now Mandatory In Paris As WHO Warns “Majority Of World Still Susceptible” To COVID-19: Live Updates

Wearing Masks Outdoors Now Mandatory In Paris As WHO Warns “Majority Of World Still Susceptible” To COVID-19: Live Updates

Tyler Durden

Mon, 08/10/2020 – 08:24

Summary:

  • World on the cusp of 20 million confirmed COVID cases
  • Paris mandatory outdoor mask rules take effect
  • WHO warns “majority of world still susceptible” to COVID
  • Germany warns of “alarming” rise in new cases
  • Former Indian president tests positive
  • Situation in Pakistan improves as lockdowns ease
  • Lebanon suffers worst jump in infections yet

* * *

As global confirmed COVID-19 cases near 20 million (with potentially millions more that were never catalogued), an uptick in new cases has inspired Paris officials to impose dramatic new restrictions involving mandatory mask wearing. Masks must now be worn in public, even outdoors.

The order was announced over the weekend. it applies to people aged 11 and over, and covers busy outdoor areas in the French capital and more than 100 streets, although tourist sites such as the Eiffel Tower, the Arc de Triomphe and Champs-Elysees boulevard are not included, as French politicians continue to extend concessions to the badly battered tourism industry.

As the BBC points out, the Paris mask rule is part of a trend of localized restrictions sweeping Europe.

The new mask rule in Paris is part of a pattern that is spreading across the country – indeed across Europe – as governments try to stamp down the new virus embers.

It has been obvious for weeks that in some much-frequented parts of the capital, keeping the one-metre (3.2ft) rule is a challenge.

On the Seine quays for example, walkers, joggers and cyclists brush past revellers at the many riverside bars.

Masks are already obligatory in France in all enclosed public spaces – including inside tourist attractions like the Louvre and the Eiffel Tower.

And across the country, well over 1,000 towns and cities have prescribed face coverings in certain streets and neighbourhoods.

The main target of the rules are young people who gather to enjoy the holiday and the sunshine.

All the evidence shows that they are the group among whom infection is growing fastest.

They may be at a lower risk of becoming seriously ill from the virus than older people. It is their role as vectors that is a cause for concern.

A top US health official has praised Taiwan’s response to the coronavirus pandemic, hailing it as “among the most successful in the world”, during a rare diplomatic visit to the island.

Elsewhere in Europe, Germany’s economy minister warned of an “alarming” rise in infections. “We need to flatten the curve and turn this around,” Peter Altmaier told German press as schoolchildren in Berlin return to classrooms for the first time in months. Germany has also seen its single-day case count top 1,000 for the first time in weeks.

With the world on the cusp of reporting 20 million confirmed cases of the coronavirus, the WHO delivered a stark warning during a Monday morning press briefing from Geneva: the majority of the world’s population remains susceptible to infection.

Dr Maria Van Kerkhove, famously the agency’s technical lead on COVID-19 research who once caused an uproar by declaring asymptomatic transmission a “rare” event, and seemingly undercutting the case for compulsory mask-wearing, told reporters on Monday that there was “no indication that there is seasonality with this virus” and urged people to do everything they could, including physical distancing, wearing a mask where appropriate and avoiding crowded settings, to prevent the spread of infection.

Earlier, the WHO’s Director General Dr Tedros Adhanom Ghebreyesus praised the UK’s decision to take “targeted action” by imposing ‘partial lockdowns’ in parts of Leicester and parts of northern England.

Dr. Tedros told the briefing: “Strong and precise measures like these, in combination with utilizing every tool at our disposal, are key to preventing any resurgence in COVID-19 and allowing societies to be reopened safely.”

After crossing the 2 million mark last week, infections in India have slowed slightly as antibody surveillance testing suggests that some of the worst-hit slums in Mumbai and New Delhi have achieved roughly 50% infection rates, not far from levels where ‘herd immunity’ might come into play.

What’s more, on Monday, Pranab Mukherjee, India’s president from 2012-2017, has just announced that he has tested positive for the virus.

But the world’s second-most-populous country hasn’t had nearly as much success as its neighbor, Pakistan, where the outbreak has continued to wane as the country’s ‘partial lockdowns’ have been slowly unwound.

Here’s more on that from the BBC:

With restaurants, cinemas and tourist spots reopening (albeit with some restrictions in place) life in Pakistan is returning to “normal”.

Partial lockdowns have been in place since March, but have been progressively eased.

With just over 6,000 coronavirus deaths in a population of about 230 million, despite the country’s weak healthcare system, Pakistan appears to have fared far better than many in the West.

Finally, as anti-government protesters return to the streets, clashing with security forces, Lebanon reported its highest daily increase in coronavirus infections yet on Monday, compounding the country’s problems after a devastating explosion tore through Beirut last week.

Another 294 cases were recorded on Sunday, bringing the country’s total number of infections to 6,517, per health ministry data.

via ZeroHedge News https://ift.tt/3ikGT06 Tyler Durden

Blain: “The Brutal Reality Of Slowdown Is Becoming Clearer”

Blain: “The Brutal Reality Of Slowdown Is Becoming Clearer”

Tyler Durden

Mon, 08/10/2020 – 08:11

Authored by Bill Blain via MorningPorridge.com,

Who Pulled the Plug?

“Unnervingly coherent and laughably mindless”

This morning’s opening quote isn’t an independent assessment of the Morning Porridge – but is lifted from a newspaper article on Artificial Intelligence.  It ends on a very scary tag: the AI is asked if it is conscious and responds:

 “To be clear, I am not a person.  I am not self-aware.  I am not conscious.  I can’t feel pain.  I don’t enjoy anything.  I am a cold, calculating machine designed to simulate human response and to predict the probability of certain outcomes.  The only reason I am responding is to defend my honour.”  

This is not from some dystopian novel or a reboot of the Terminator series… but from the this morning’s FT

Should we pull the plug or ask it some more questions? 

Back in the real world…

We are now in the depths of the summer doldrums – and markets are showing even less correlation to global events than usual.  Stock and Bond Markets remain chronically distorted by the effects of Central Bank liquidity. China markets have shrugged off the new Trump US sanctions – and Xi has stepped up the arrest of protest figureheads in HK.  Ten-cent has taken a tumble on the back of Trump banning Tik Tok and WeChat – confirming the degree to which individual stocks are vulnerable to shifts in the narrative. Watch for case-by-case wobbles as the China-US rift opens wider – when will China decide to make trouble for Tesla to boost its copy-cars? 

But even the China/US tiff is likely to be something of a sideshow. My first question to the AI machine would be – just how deep is the coming global recession going to be?  Despite some recent strong economic releases, the trend shows the recession is underway. Just read through the news this morning, or open any serious research, and it’s all bad stuff heaped upon yet more depressing noise.  But… when all around are panicking… let me remind you of a critical Blain’s Market Mantra: 

“Things are never as bad as you fear, but never as good as you hope.”

Smile. Be hopeful.

The brutal reality of slowdown is becoming clearer. Surveys predict 1/3 of UK companies are going to announce layoffs and zero wage rises.  Unemployment remains stubbornly high in Europe.  Despite the US adding jobs it’s still well below the long-term trend.  Recovery is not going to be driven by consumption.  New Bank NPL provisions in the US and Europe exceed $140 bln – almost as high as losses from 2008!  Even China’s much vaunted virus recovery seems stuck at 80% return to normality. 

As the crisis deepens, the greed stories are beginning to leak out. If you haven’t read about the naked graft and corruption of Kodak reinventing itself as Big Pharma overnight with the help of US Govt loan, or companies paying bosses massive bonuses shortly before they go bust – then catch up. For every scam that’s been uncovered, hundreds are probably occurring – slipping under the radar because of the incessant deluge of bad news.. These stories are inflaming already frustrated voters. 

If you were expecting the world to return to its proper place by Christmas… welcome to 1939. It feels more and more like we’re in for a long haul of ongoing government support measures, distorted markets and an ever more difficult search for returns in a null-entropy global economy…. Get used to it.. Adapt. 

The trick to understanding investment flows and opportunities over the coming.. months, years or decades.. (I don’t know how long..), will be to understand how the global economy and governments relate, adapt and function in this new reality.  Wide-range change is inevitable. I suspect it goes on for much longer-than-anticipated…  

But I also expect the scale of the ongoing pandemic damage is going to dramatically lessen as we come to understand and cope with Virus.  In time we’ll pretty much forget about COVID-19 as we cope with it’s economic aftermath.

The biggest problem is likely to be Government leadership and critical timing. It’s clear the US administration is barely functional – in election mode they can’t agree on the next stimulus package. Here in the UK it’s just embarrassing noise – there is no sign of any joined-up underlying plan or deep thinking on how the UK is going to adapt, change and cope with the enormous changes the Virus has triggered. Out unmatched ability to “muddle through” is unlikely to help. 

We’re anticipating a 22% Q2 decline in UK GDP… dwarfing the scale of slowdown in the US and Europe. In a superb article on Bloomberg, Marcus Ashworth contrasts the doom and gloom being expressed by the banks and business, with the rosy outlook from the Bank of England – which expects an 18% rebound in Q3! I should like a quarter ounce of whatever Mr Bailey is smoking please… The reality is few workers are heading calls to return to work. 

Landlords and Retail tenants have cooked up an interesting solution to the conundrum that shops and restaurants can’t afford to pay their rents – they are asking Government to step in to make up the rental payments. That’s an interesting call.. does government decide to smooth the economy by bailing out commercial property, or does it let evolution take its course? The high-street was already in crisis before the virus. Shopping, and large offices are going to be changed utterly by the Pandemic.

Yet, here on the South Coast of England – you would hardly know there is a crisis underway. The pretty Devon village of Salcombe was absolutely heaving with visitors this weekend.  It’s a favourite summer hideaway with the Chelsea-set, but this year its busier than ever with frustrated gilded-young things who can’t go to their favourite White Lines destinations. Everyone is trying to look “oh so casual” in their brand-new sailing gear. The water is jam-packed with paddle-boarders who know not what they are doing. (I knew what I was doing.. I was falling off the d*mn thing..)

Apparently, there’d been a mini-riot one evening, so the streets were being patrolled by fully tooled up police – who must have been wondering what threat the mobs of inebriated and braying Henrys, Thomases, Casandras and Imogens presented.  The shops and restaurants were mobbed – what recession? (We decided to eat on the boat instead – which worked pretty darn well.) As I read about UK bosses being paid 250x the average worker’s salary and ignoring shareholder votes on bonuses.. I’m wondering just what the rest of miserable Britain is thinking of government bailouts going into the Elites’ pockets…  

Meanwhile, I made the mistake of posting a photo of us and the kids on the boat over the weekend. Our local Coronanazi Gauleiter was furious – demanding to know what social distancing was being done, and haranguing me about “Didn’t I Understand the Crisis?”  Our village site is peppered with similar posts about the stupidity of people walking too close to others, or not wearing a mask with filling up their cars with petrol (apparently they might kill the next customer who picks up the nozzle if they breathe on it). 

It’s hard to see how the UK will recover from the terror the virus has created. 

Is there any point delaying inevitable change via yet more government bailout spending? Or should we just let it happen and invest in the future, rather than bailing out the past… 

Big Problems.. Big Answers.  Move Forward.

via ZeroHedge News https://ift.tt/2F1NcY2 Tyler Durden

Futures Shrug Off Latest China Sanctions, Approach All Time Highs

Futures Shrug Off Latest China Sanctions, Approach All Time Highs

Tyler Durden

Mon, 08/10/2020 – 08:03

S&P futures edged higher with European stocks, and approached all time highs after President Donald Trump signed 4 executive orders to maintain some assistance, including for unemployment benefits, a temporary payroll tax deferral, eviction protection and student-loan relief, in doing so bolstering investor enthusiasm and helping market shrug off a brief wobble after China announced token sanctions against 11 US politicians over Hong Kong but no members of Trump’s cabinet.

“The fresh stimulus provided by President Trump through executive orders is better than none at all and provides a stop- gap solution,” wrote analysts at MUFG in London.

Trump’s orders, aimed at unemployment benefits and evictions, came after negotiations broke down between the White House and top Democrats in Congress over new stimulus steps to help the US economy.  Trump’s policy announcements come as Democrats and Republicans are still negotiating a broader additional coronavirus relief package. The two sides are still trillions of dollars apart on overall spending and on key issues, including aid to state and local governments and the amount of supplementary unemployment benefits. Still, Nancy Pelosi and Steven Mnuchin said on Sunday they were open to restarting aid talks. 

“The fresh stimulus provided by President Trump through executive orders is better than none at all and provides a stopgap solution,” said Lee Hardman, a strategist at MUFG Bank in London. “Pressure remains though on both the Democrats and Republicans to reach a more substantial and durable compromise solution.”

And even though total infections in the country crossing five million and recent data suggesting that an economic recovery was stalling, and markets had few positive cues to trade on, futures still continued on last week’s momentum, approaching within 1% of the 3,387.50 all time high hit on Feb 19, 2020. A better-than-expected earnings season – with P 500 EPS plunging by 34% year/year, but above consensus expectations for -45% growth at the start of earnings season – and hopes of more stimulus put the S&P 500 higher on the day, while the Nasdaq scaled several peaks as its major technology constituents benefited from the pandemic.

Among individual movers, Eastman Kodak plunged 44.3% premarket after its $765-million loan agreement with the U.S. government to produce pharmaceutical ingredients was put on hold due to “recent allegations of wrongdoing.”

Marriott International dropped about 2% and Royal Caribbean Cruises fell 0.6% ahead of their quarterly reports. The No. 1 U.S. mall owner Simon Property Group rose 4.5% after a report that it has been in talks with Amazon.com Inc about turning some of its department-store sites into Amazon fulfillment centers.

European Bank shares rallied and oil advanced after Saudi Aramco said demand will continue to improve. Portugal’s 30-year bond yield fell below 1% for the first time since March. Shares in BP and Royal Dutch Shell rose 2.6% and 1.5% respectively after Saudi Aramco raised optimism about a growth in Asian demand and Iraq pledged to further cut supply.

Earlier in the session Asian shares outside Japan seesawed in holiday-thinned trade, staying below a six-and-a-half-month peak touched last week.  Stronger industrial activity in China offered signs it was recovering from the coronavirus pandemic that outweighed jitters over U.S.-Sino trade tensions. Deflation at China’s factories eased in July, data showed, driven by a rise in global energy prices and as industrial activity climbed back towards pre-coronavirus levels.

Industrial output in China is returning to levels seen before the pandemic paralysed huge swathes of the economy, driven by pent-up demand, government stimulus and surprisingly resilient exports. That bodes well for the global recovery from the coronavirus pandemic, analysts said.

“China is so much in advance in this process of lockdowns and exiting lockdown, that any good signs for the Chinese economy is essential (for the world economy),” said Florian Ielpo, head of macroeconomic research at Unigestion.

In FX, the dollar gained 0.3% to 93.620 against a basket of currencies, rising against most major currencies after Beijing’s retaliation. Markets are also assessing President Donald Trump’s executive orders to bolster the U.S. economy and the chances of Democrats and Republicans making progress on a fresh fiscal stimulus plan. The Norwegian krone sees the biggest gains among the G-10 as oil prices advance, while the Australian dollar trimmed gains, with the Kiwi falling and the yen little changed.

The euro fell for the second session in a row against the greenback as France’s central bank warned the pace of economic recovery is slowing. The common currency was largely bought by speculative-oriented investors such as hedge funds for much of last week, which implies it is now “trading in even more overbought territory, with such conditions keeping corrective downside risk high,” Credit Agricole strategists including Valentin Marinov said.

In commodities, WTI and Brent continued to drift higher in early trade, with the benchmarks underpinned by Saudi Arabia, Iraq and Gulf producers stating that they are encouraged by recent signs of improvement in the global economy and reaffirm commitments to the OPEC+ supply curb deal. Looking ahead, participants are likely to focus on any further US-Sino developments and State-side stimulus talks in the absence of pertinent data releases.

Elsewhere, spot gold remains uneventful on either side of USD 2030/oz, with spot silver eking mild gains above USD 28/oz. In terms of base metals, Dalian iron ore and Shanghai copper both saw losses on Monday as sentiment in the region was dampened by the US’ sanctions on the Hong Kong and Chinese officials in relation to the National Security Law. Meanwhile, analysts at Westpac have lifted their near term iron ore forecast to USD 100/t (Prev. USD 90/t for September) but still see it moderating from there to USD 87/t by end-2021 (unchanged); copper revised higher from USD 6,000/t to USD 6,400/t.

Looking ahead, Canopy Growth and Marriott International are among companies reporting earnings.

Market Snapshot

  • S&P 500 futures up 0.1% to 3,349.25
  • MXAP down 0.02% to 167.91
  • MXAPJ up 0.03% to 559.72
  • Nikkei down 0.4% to 22,329.94
  • Topix down 0.2% to 1,546.74
  • Hang Seng Index down 0.6% to 24,377.43
  • Shanghai Composite up 0.8% to 3,379.25
  • Sensex up 0.5% to 38,232.84
  • Australia S&P/ASX 200 up 1.8% to 6,110.20
  • Kospi up 1.5% to 2,386.38
  • STOXX Europe 600 down 0.03% to 363.44
  • German 10Y yield fell 0.7 bps to -0.516%
  • Euro down 0.2% to $1.1763
  • Italian 10Y yield fell 0.3 bps to 0.803%
  • Spanish 10Y yield fell 0.9 bps to 0.269%
  • Brent futures up 1% to $44.84/bbl
  • Gold spot down 0.1% to $2,033.03
  • U.S. Dollar Index little changed at 93.45

Top US News from Bloomberg

  • China said it will sanction 11 Americans including Senators Marco Rubio and Ted Cruz in retaliation for similar measures imposed by the U.S. on Friday, but the list doesn’t include any members of the Trump administration
  • Hong Kong police arrested media tycoon Jimmy Lai and raided the offices of his flagship newspaper, the highest-profile case yet against the city’s democracy activists under a national security law that has fueled U.S.-China tensions
  • Banks operating in Hong Kong are stepping up scrutiny of their customers and at least one U.S. bank is moving to suspend accounts to avoid running afoul of U.S. sanctions slapped on city officials
  • The pace of France’s economic recovery is slowing, the country’s central bank said, confirming expectations of a prolonged period before output catches up with pre-crisis levels

In today’s global recap courtesy of NewsSquawk, Asian equity markets eventually traded mostly higher on what was an indecisive start to the week amid the thinned conditions due to holiday closures in Japan and Singapore, with participants mulling over the recent US NFP beat, firmer than expected Chinese inflation data and last week’s Congressional impasse which prompted US President Trump to sign executive orders over the weekend. ASX 200 (+1.8%) was underpinned with financials and consumer staples frontrunning the broad-based sector gains and as earnings also provided a tailwind. Elsewhere, a rally in Hyundai Motor shares helped fuel the KOSPI (+1.5%) after reports it is to create a family of Ioniq-brand electric vehicles in its pursuit to become the third-largest EV maker by 2025, while Hang Seng (-0.5%) and Shanghai Comp. (+0.8%) were indecisive as participants digested the latest inflation figures from China which were firmer than expected but showed that PPI remained negative and with risk appetite in Hong Kong mired by the arrest of Next Digital’s founder Jimmy Lai who is a main contributor to the pro-democracy camp and the highest-profile arrest under the National Security Law so far which subsequently saw as much as a 16% intraday drop in Next Digital shares.

Top Asian News

  • New Oriental Is Said to Pick Banks for Hong Kong Second Listing
  • Temasek Unit Scraps $3 Billion Bid for Keppel After Loss
  • Lira Extends Drop in Sign of Further Turkish-Market Turmoil
  • Turkey Lowers Key Banking Ratio to Slow Credit as Lira Falls

European stocks have lost steam since the cash open and now see a mixed performance [Euro Stoxx 50 +0.1%], following on from a similar APAC handover – with downside in the European session emanating from China’s sanctions announcement against some US officials in a tit-for-tat retaliation for US’ move last week over HK Chief Executive Lam alongside ten other Chinese/Hong Kong officials. The move from China was widely expected but reinforces the ever-escalating tensions between the two nations, not to mention the condemned high-level meeting between US and Taiwan on Monday. Broader indices trade without conviction with no major under/outperformers, albeit the region has come off post-China lows. Sectors are also seeing a mixed performance with no clear risk profile to be derived – Energy outperforms amid gains in the complex whilst IT continues to be weighed on by the escalating US-Sino tech landscape. The sectoral breakdown adds little meat to the bones, with Banks outpacing, Travel & Leisure retaining gains and Tech the laggard. Individual movers include Suez (+3.2%) amid reports Co’s Waste division is said to have attracted interest from German billionaire Scharz and could be worth EUR 35bln. Co. could mull an auction for the unit if talks with Scharz collapse, sources stated. Elsewhere, AA (+12.9%) shares soared after Co’s top shareholder Dickson (12% stake) said he believes GBP 0.40/shr very “opportunistic” and argued the stock is worth much more than current price. Finally, Roche (-0.1%) remains subdued after its Phase III study for Etrolizumab met its primary endpoint of inducting remission vs. placebo in only two out of three studies.

Top European News

  • U.K. Bank Stocks Shrug Aside Report of Further PPI Payouts
  • France’s Economic Recovery Loses Pace After Initial Surge
  • Pharming Enrolls First Patient in Covid Trial; Shares Surge
  • Italy’s Richest Family Builds $3 Billion Side Bet to Candy Giant

In FX, the Greenback remains on a firmer footing following Friday’s above forecast rise in jobs and lower than expected unemployment rate, but the DXY looks toppy around 93.500 and has not quite been able to emulate its post-NFP peak (93.629) within a 93.601-290 band. Relatively light, lacklustre Monday trading volumes have been compounded by market holidays in Japan (Mountain Day) and Singapore (National Day), while the Buck may be capped by the ongoing stalemate over fiscal stimulus in Washington and some modest unwinding of bear-steepening along the US Treasury curve.

  • GBP – Sterling continues to display a degree of resilience across the board, and aside from a short base Cable seems to be forming a base circa 1.3050 and Eur/Gbp appears intent on a test of 0.9000 given the Euro’s failure to sustain gains through 0.9050 and 0.9100 in line with key round number or psychological level failures vs the Dollar. However, the Pound faces some independent hurdles in wake of last Thursday’s BoE from tomorrow in the form of labour and earnings data before GDP and ip on Wednesday.
  • AUD/JPY/CAD/EUR/NZD/CHF – All weaker against their US rival, albeit mildly and to varying extents as the Aussie pivots 0.7150 amidst bullish iron ore projections from Westpac, the Yen meanders between 106.05-105.73, Loonie pare some losses to reclaim 1.3400+ status and Euro finds some support ahead of 1.1750 having waned circa 1.1800. Note, mega option expiry interest at the big figure (3 bn) could be keeping the headline pair in check, but a decent amount in Usd/Jpy at 105.50 (1.65 bn) appears to be safe ahead of the NY cut. Elsewhere, the Kiwi is hovering just below 0.6600 and lagging its Antipodean peer with Aud/Nzd straddling 1.0850 after deteriorations in ANZ’s business sentiment and activity outlook overnight. Nevertheless, the Franc is the current G10 laggard sub-0.9150 vs the Greenback and under 1.0750 against the single currency as weekly Swiss bank sight deposits increase yet again.
  • SCANDI/EM – A firm start to the week for crude prices via supportive vibes from Saudi Arabia, Iraq and Gulf oil producers has helped the Norwegian Crown rebound further than the Swedish Krona from recent lows, but the former may also be taking note of largely firmer inflation metrics. Conversely, the Turkish Lira has handed back a chunk of Friday’s recovery gains to revisit all time lows under 7.3650 even though the Banking Watchdog has trimmed the asset ratio rate to 95% from 100%

In  commodities, WTI and Brent front month futures continue to drift higher in early trade, with the benchmarks underpinned by Saudi Arabia, Iraq and Gulf producers stating that they are encouraged by recent signs of improvement in the global economy and reaffirm commitments to the OPEC+ supply curb deal. These comments come ahead of the JMMC meeting on August 18th, in which the non-policy-setting panel will review compliance and demand data and make recommendations to the oil producers. Furthermore, Friday’s Baker Hughes rig count also provides some support after active oil rigs declined by four. Looking ahead, participants are likely to focus on any further US-Sino developments and State-side stimulus talks in the absence of pertinent data releases. Elsewhere, spot gold remains uneventful on either side of USD 2030/oz, with spot silver eking mild gains above USD 28/oz. In terms of base metals, Dalian iron ore and Shanghai copper both saw losses on Monday as sentiment in the region was dampened by the US’ sanctions on the Hong Kong and Chinese officials in relation to the National Security Law. Meanwhile, analysts at Westpac have lifted their near term iron ore forecast to USD 100/t (Prev. USD 90/t for September) but still see it moderating from there to USD 87/t by end-2021 (unchanged); copper revised higher from USD 6,000/t to USD 6,400/t.

US Event Calendar

  • 10am: JOLTS Job Openins, est. 5,300, prior 5,397

DB’s Craig Nicol concludes the overnight wrap

While most of the U.K. contends with finding anyway to cool down from these scorching temperatures, with a fairly sparse calendar this week it’s likely that markets will be taking their temperature from the state of play in Washington. So far we’ve shrugged off the disappointment around the lack of agreement on the next US fiscal package, however with each passing day the greater the risk is to consumer confidence and spending as our US economists highlighted over the weekend, especially given that the over 31 million people receiving unemployment insurance as of the week of July 18 are set to see their monthly income decline by 60%-plus in August.

Over the weekend President Trump signed four executive orders amid the impasse over the relief bill, including a temporary payroll tax deferral and continued expanded unemployment benefits however that has been met with criticism by Democrats and also some Republicans. There’s also some question marks around the legalities of Trump’s actions as per Bloomberg. There were
comments from Mnuchin and Pelosi yesterday – both signaling a readiness to resume talks – however neither offered any hints of when they may resume. Nevertheless, S&P 500 futures are up +0.14% in the early going while in Asia the Shanghai Comp (+0.42%), Kospi (+1.43%) and ASX (+1.60%) all up with just the Hang Seng (-0.36%) lower. Markets in Japan are closed for a holiday.

That retreat for the Hang Seng follows news that Hong Kong police have arrested media tycoon and prominent democracy activist Jimmy Lai under the national security law passed in late June, and raided the offices of his flagship newspaper. Police said that seven people aged between 39-72 had been arrested on suspicion of “breaches” of the security legislation, with offenses including collusion with a foreign country or external elements to endanger national security. The move comes after the US sanctioned the City’s Chief Executive Carrie Lam as well as other officials on Friday. A reminder that officials from US and China are due to meet this weekend to review compliance with the trade accord, while today a senior US official is visiting Taiwan for the first time in decades. So expect US-China tensions to also play a role in dictating sentiment this week.

Aside from that, there’s not a huge amount else to report from the weekend. Inflation data in China surprised to the upside (July CPI of 2.7% yoy vs. 2.6% expected) while in Italy Finance Minister Roberto Gualtieri told La Repubblica that the government will work on cutting taxes in fiscal 2021, including personal income taxes, and added that the economy is forecast to grow slightly below 15% in the third quarter given the strong rebound observed.

As for the latest on the virus, case growth in the US has continued to slow with cases growing at an average rate of 1.04% per day over the weekend versus the previous 5 weekends’ average of 1.60%. Meanwhile, in Europe, Paris has mandated masks outdoors in the busiest streets starting today while Germany’s transmission rate (Rt) rose to 1.16 on Friday, the highest level in 10 days. Italy also reported 463 new infections yesterday, the second-highest number in two months after reaching 552 on Friday.

Aside from fiscal developments, the only notable data releases this week in the US are July CPI on Wednesday and July retail sales on Friday. The latest weekly jobless claims print on Thursday is also worth keeping an eye on. In Europe we’ve got Germany’s August ZEW survey on Tuesday and a second look at Q2 GDP for the Euro Area on Friday. In China the highlight is on Friday with the July activity indicators data. Finally, earnings season starts to wind down with the best part of 90% of the S&P 500 having already reported. On that, our asset allocation team published a summary of earnings season so far which you can find here . What’s notable is that the early trends of outsized and broad earnings beats has only continued, with forward estimates also ticking higher.

To recap last week, in equity markets the S&P 500 climbed +2.45% (+0.06% Friday), closing the week roughly 1% below its record high reached in February. Friday’s gain meant the index has now risen for six sessions in a row, the longest such streak since April 2019. The Dow rallied +3.80% (+0.17% Friday), snapping two weeks of losses and the NASDAQ advanced +2.47% (-0.87% Friday). Risk assets in Europe also rose. The STOXX 600 ended up +2.03% (+0.29% Friday) for the week, the largest weekly gain since 19 June.

With risk sentiment rising core sovereign bonds yields rose. US 10yr Treasury yields climbed +3.6bps (+2.8bps Friday) after hitting record closing lows early in the week. The weekly rise in US yields broke a four week streak of yields dipping lower. Gilts rose +3.1bps on Friday, making up the majority of the weekly +3.5bps move while Bunds rose +1.5bps (+2.2bps Friday) to -0.51%. Peripheral spreads also tightened to Bunds in Italy (-10.0bps), Spain (-7.8bps), Portugal (-6.9bps) and Greece (-9.2bps). The BTP-Bund spread ended at the tightest level since the measure started widening in late February as the pandemic spread. Meanwhile, in credit high yield cash spreads in the US (-10bps) and Europe (-16bps) tightened.

In FX, the USD index rose +0.09% on the week, strengthening for the first time since mid-June. That move included a +0.70% gain on Friday after July payrolls surprised to the upside. In commodities, Gold made record highs midweek before
pulling back a bit on Friday. It finished +3.02% on the week (-1.36% Friday), the ninth weekly gain a row.

In terms of data, as hinted above the highlight was the US employment report on Friday. Nonfarm payrolls gained for a third straight month as jobs rose by 1.763m (vs. 1.480m expected) and the unemployment rate fell to 10.2% (vs 10.6% expected) – a near 4pp improvement from the peak of the pandemic. Even average hourly wages rose +0.2% (vs. -0.5% expected). For more on the US labour market, see our US economists’ new chartbook here. Elsewhere, in Germany June industrial output rose +8.9% (vs. +8.2% expected) after it expanded +7.4% the month prior, while France’s industrial production rose 12.7% (vs. +8.4% expected).

via ZeroHedge News https://ift.tt/33Frp2O Tyler Durden