Tag: news

Global COVID-19 cases have breached the 33 million mark as infections continue to soar worldwide. The official death count is around one million, as China is at it again, urging domestic companies to halt frozen imports of food from countries that have been severely impacted by the pandemic due to the risk of transmission through packaging, reported Bloomberg. 

This isn’t the first time China has tried to portray imported foods as a threat. Readers may recall, when the first post-lockdown cluster was found in Beijing and traced to a wholesale market in the southwestern parts of the city, officials there said traces of salmon tested positive. This resulted in a nationwide boycott that led to thousands of tons of imported salmon being thrown in the trash.

In July, we also noted imports of shrimp from Ecuador were found to be carrying the virus, well, not the shrimp itself, but, according to China, the packaging had traces of the virus. 

Now the Beijing city government on Monday warned companies to avoid importing frozen food from countries where the virus is rampant. This comes after China found its first local asymptomatic infection in more than a month as two workers at a port in Qingdao city tested positive after unloading frozen seafood. 

In recent weeks, China halted seafood imports from two Russian vessels and a Brazilian company after the virus was found on packaging. Individual food plants in Ecuador, Brazil, and Indonesia have seen their exports to China ground to a halt as well. 

Bloomberg notes that “cold-storage facilities and meat-processing plants are ideal environments for the virus to thrive, there has been no concrete evidence the virus can be transmitted through food and packaging, and experts remain doubtful that it’s a major threat.”

In August, China’s top virus expert advised the government to limit imports of frozen food to mitigate the spreading of the virus. The FDA has said it’s “not aware of any evidence” that links the transmission of the respiratory virus to food. 

Virus scares tied to imports is just another tool for Beijing to keep the narrative alive that the virus originated outside China – Beijing has been caught implicitly supporting these conspiracy theories. Maybe they’ve learned this time to be more subtle. 

Authored by Bill Blain via MorningPorridge.com,

Storm In A Teacup…

“You can’t buy happiness but you can buy tea, and that’s kind of the same thing..”

There are some weekends when its best to just not open a newspaper, listen to the wireless, or watch the BBC. If you did you are probably near-suicidal by now at the bleakness predicted ahead. The government is completely and utterly hamstrung by the Pandemic Fear it’s created versus the need to reopen the economy. They are tripping up over everything in a storm of confusion. After imploring us to save the NHS the reality is national economic suicide will close it down even faster. Our mop-top premier is nervous and conflicted. A poll at the weekend put Labour ahead in the polls. Well done Sir Kier. Keep hoping Boris trips over his laces for the next 4 years and you will do just fine… As national treasures like Rolls Royce desperately seek funding from overseas, it feels like panic is mounting… 

Relax. 

This is the just the way we do things in the UK. We like to fret, panic, tear our hair out.. and then have a nice cup of teaand not worry about it anymore. There, there… it will all be better tomorrow. And sure enough… the sun will eventually rise… On a broken dystopian ruined landscape of economic destruction or a bright new technology-led Britain? 

Personally.. I favour the latter… but fear the former. 

Top of the madness list is Students being charged £9,000 per annum for not being taught and charged £200 a week to be locked up in solitary confinement because nobody thought they might socialise? Next week it will be something else equally ill-considered and barmy.

There are always pragmatic solutions. The right thing to do with students would be to tell them:

 Sorry, you can’t go to pubs, discos, or bars, or use public transport, but the student unions will be open all night and the drinks are on us. You are all going to catch it whatever we do so catch it together, stay on campus don’t spread it, and when you recover (as you surely shall), we can get on with business of teaching you… Party On! Nope. The government’s policy is to create a new generation of non-students whose happiest days will be their most suicidal. Not good. 

Students matter.

The UK has excellent prospects. We’ve always been inventive, bright and innovative which a national penchant for being inquisitive – which is what matters. Exactly the right characteristics for a tech-savy future economy – if we can find the trained engineers, computer geeks, doctors and all the rest to make it happen. But if you crash education – our economic future will stall. 

I think I came to understand the problem on Friday evening watching the news. Some gormless acne’d creature was lecturing the BBC’s reporter about how anyone without a mask or wasn’t social distancing clearly didn’t care about anyone else, was willing to murder their own family and others, and should be locked up. It is all government’s fault for not completely locking down the economy again – he loudly told viewers. These words of wisdom were delivered from a packed table of equally spotty youths sitting in a pub.  

Stupidity rules. 

The UK has become a nation of scared idiots with the bleak reality of the Chancellor being “unable to save every job” means about a million unemployed by Christmas and penury for large parts of the UK’s small business and gig-economy sectors because they haven’t been getting equal access to support. 

The sheer misery of it all… it’s enough to turn one to drink.  (It works. I have the answer: Apples. Especially apples in their fermented state. My chum Jonnie and I found a good bottle of Calvados on Friday evening in the “special cupboard”. It was so good it literally kept my spirts up right through till Sunday afternoon when we celebrated the end of summer with a delicious pig and some excellent Cider.) Thank goodness for alcohol. Without it.. one might get a tad depressed at the UK Narrative. 

Winter is coming… (but Spring will surely follow….)

I really would like the name of Monetary Policy Committee (MPC) member Silvana Tenreyro’s drug dealer. In a wide-ranging Sunday Torygraph interview she said the evidence from other countries on the effectiveness of negative rates is “encouraging”. “We have been discussing our toolkit in recent months, including how effective negative rates might be in the current context,” she says. “The evidence has been encouraging.”

Even Andrew Bailey, the Man at the helm of the Bank, thinks that evidence is a “mixed bag”. Andy Haldane, chief economist must have found an even better pharmaceuticals supplier as he apparently still believes in the V-Shaped recovery… 

Tenreyho added;“Banks adapted well – their profitability increased with negative rates largely because impairments and loss provisions have decreased with the boost to activity and the increase in asset prices.” Really? (US readers – that’s a loaded comment oozing with sarcasm implying scepticism.) European banks are being paid billions by the ECB to borrow cash, but still aren’t lending because they fear losses, while low rates are killing their margins. And economies aren’t working.

As a Harvard professor I’m not sure if Tenreyho is a member of the Bank’s pension scheme – which will no doubt be based on final salary. For those of us living in the real world and seeing the returns on our self-funded pension pots unlikely to fund any kind of retirement, zero rates means we’ll be working till we drop.  

As for the effectiveness of ultra-low rates… I am looking at Japan (a bit of a special case) and Europe (a basket case) and wondering just how successful NIRP (Negative Interest Rate Policy) will prove for economic regeneration when its only success thus far has been to prop up legions of zombie companies and not create many new jobs. If negative interest rates are so effective…. why has the occidental economy been bouncing along so weakly and skirting recessions these last 12 years? For all the talk of low rate and synchronous recovery – growth has been lethargic for years..   

Here’s a challenge for Porridge readers. Find me a single market economist who thinks negative interest rates will trigger economic growth and explain to me how? 

Negative interest rates do not obey the conventional physics of money.  As rates approach zero – behaviours change. The controls reverse.

NIRP acts as a disincentive to considered growth investment. Investors are forced to take increased risk to make any kind of returns, while the normal invisible hand effects on markets to efficiently allocate capital within an economy flatline. Zero rates cause the normal flow of money in an economy to hit stall speed. 

Why? 

When money costs nothing it is worth nothing. Which partially explains why companies don’t invest in plant, output, new jobs or capacity through low rate periods, but see the greatest returns from leveraging themselves up with ultra-cheap debt to convert equity into debt via stock buybacks. To management it’s the most “efficient” use of capital and meets the Miltonian diktats of all value being created for the benefit of the owner in a Shareholder Economy. (Plus, it ensures the largest bonuses for clever management who’ve been able to raise the stock price..)

Investors know companies buying back their own stock are creating zero-value-added, but favour these companies only because they expect the stock price to rise. Rational investment objectives in terms of wealth creation via growth strategies (ie new products or factories) are corrupted by zero rates – away from growth maximisation towards financial asset growth. 

The second part of the equation is that any economy using negative interest rates is clearly in trouble, is low growth, and therefore not worth investing in. 

The end result is negative interest rates directly fuel financial asset inflation while adding zero to economic value or growth. That creates 2 effects:

1) ever increasing government intervention which is inherently distorting, and

2) distorted entrepreneurial spirits and investment objectives aimed which ultimately destabilise society as the rich owners of financial assets get richer, while the toiling classes see less and less.   

Of course.. I might be wrong. When a distinguished Harvard Economics professor and member of MPC says NIRP is a good thing… whom am I to argue… 

Summary:

• Global deaths just below 1 million
• UK prepares new lockdown measures
• Case total tops 33 million
• Indian cases top 6 million
• Inovio pauses vaccine trial
• Russian outbreak worsens
• New UK fines take effect
• Australia’s Victoria region posts just 5 new cases

* * *

With COVID-19-linked deaths in the US accelerating to roughly 1,000 per day for the first time since before the Sun Belt outbreaks peaked over the summer, the US surpassed 200,000 deaths last week, and now the world is on track to surpass 1 million deaths within the next 24 hours, according to the Associated Press.

Globally, the number of deaths reported on Sunday fell by roughly 50% from the more than 5,000 reported on Saturday. Just 2,552 deaths were reported on Sunday, bringing the global total to 998,145 as of Monday morning, within 2,000 deaths of 1 million. Unless the pace of fatalities slows remarkably on Monday, we will top 1 million before midnight – and possibly before the close of the US market day.

Some experts, however, believe the true death tally might actually be twice the official number, as underreporting has largely gone unchallenged in China and elsewhere.

On the vaccine front, Inovio, a US biotech company, said its Phase 2/3 trials for a COVID-19 vaccine candidate had been put on hold as the company answers more questions from the FDA. Its shares slid 35% on the news, but news of the delay didn’t have any broader impact on markets.

The pace of new COVID-19 cases slowed again on Sunday to 155,542 new cases, but the 7-day average remained firmly in expansionary territory as outbreaks in the US and Europe, along with a handful of other regions, intensify. Many experts fear a quickening in the pace of deaths weeks after cases rise, though others argue that advances in the treatment procedures have helped to lower the mortality rate significantly. Sunday’s numbers pushed the global total past 33 million, to 33,130,914.

As Russia strikes deals around the world to hold Phase 3 trials for “Sputnik 5”, the COVID-19 vaccine developed by the Gameleya Institute and funded by a Russian sovereign wealth fund, an outbreak in Moscow has continued to drive the largest surge in infections since June. New cases in Russia have risen to the highest level since June 16, as authorities confirmed 8,135 new infections in the past 24 hours, pushing the total to 1,159,573. Another 61 people have died, taking the official death toll to 20,385.

But aside from the global figures, the biggest story overnight is India’s total coronavirus infections, which exceeded 6 million as the country reported 82,170 new cases in the last 24 hours, while its death toll jumped by 1,039 to 95,542. The new cases pushed India’s total to north of 6 million cases, leaving it within striking distance of the US total. Though the pace of new infections has slowed since India’s peak a couple of weeks ago, many still expect India to become the world’s biggest outbreak – surpassing the US – within the next 2-3 weeks. India is currently reporting new cases faster than any other country.

Of the total 6.07 million cases, 15.85% of patients are currently active while 82.58% have recovered, according to official data. The coronavirus mortality rate in the country stands at 1.57%, according to the latest update from the health ministry.

Additioanly, the UK is reportedly preparing to enforce new social lockdown across much of northern Britain and potentially London as the country deals with a second wave of coronavirus, according to a Times of London report, which cited unidentified government officials. All pubs, restaurants and bars would be ordered shut for two weeks, per the sources.

Finally, in the UK, the new fines promised by PM Boris Johnson take effect on Monday, with Britons now facing fines of up to £10,000 for people who refuse to self-isolate and follow other social-distancing measures. Britons are asked to snitch on any neighbors seen knowingly violating quarantine orders.

Here’s some other news from overnight:

Australia’s Victoria says its daily rise in new infections fell to five, dropping into the single digits for the first time in more than three months. The state placed nearly 5 million residents of its capital, Melbourne, into a hard lockdown in early August but lifted a night curfew on Sunday thanks to a steady fall in new daily cases (Source: Nikkei).

Saudi Arabia, which is presiding over the Group of 20 countries this year, says the upcoming November gathering of world leaders will be held virtually amid the pandemic (Source: Associated Press).

China reported 21 new cases on Sunday, up from 14 a day earlier, though it claimed all the new cases were “imported”. The number of new asymptomatic cases, which are classified differently from confirmed COVID-19 patients, fell to 14 from 26 a day earlier (Sources: Nikkei).

South Korea reported 50 new infections, down from 95 from the prior day, and the fewest since a new wave of outbreaks that first emerged after a couple of ‘super-spreader’ events last month (Source: Nikkei).

Japan plans to slowly lift overseas travel alerts in October, allowing travel from 10 countries and regions that have a low number of new coronavirus infections, including Australia, New Zealand, and Vietnam (Source: Nikkei).

US stocks future indexes rose on Monday following Friday’s gains and tracking major gains in European and Asian markets amid optimism that the recent selloff in equity markets is overdone. The dollar weakened and Treasury yields rose. The pound strengthened on hopes that U.K. and European Union officials will be able to make progress as a key week of Brexit talks begins, while the Turkish lira crashed to a new all time low on fears the country would be dragged into the sudden breakout of war between Armenia and Azerbaijan.

Hopes of a global economic recovery were supported by data showing continued growth in China’s industrial profits, despite fresh concerns that China’s data is once again being manipulated for political purposes with profits diverging massively from PPPI.

Shares of American Airlines, United Airlines, cruise operators Royal Caribbean Cruises Ltd and Carnival Corp rose between 2.5% and 5.6% in premarket trading as sentiment on covid-linked names reversed despite a continued rise in officially reported cases. The global death toll from Covid-19 will likely pass 1 million today, with cases already above 33 million. The milestone will be passed as governments continue to struggle to contain the disease, with authorities in many countries imposing or extending measures. The Times in London is reporting that the city may be forced into another lockdown. New York officials are concerned about localized spikes in infections, even as the city-wide rate remains low.

Late on Friday, American Airlines said it has secured a $5.5 billion Treasury loan and could tap up to $2 billion more in October depending on the allocation of extra funds under a $25 billion loan package for airlines. Uber surged in U.S. pre-market trading after a judge ruled that the ride-hailing app is “fit and proper” to operate in London. The FAAMG stocks rose between 1.1% and 2.2% as Nasdaq futures surged.

Global markets started the week solidly in the green, following Wall Street’s main indexes higher on Friday, helped by technology stocks, but the Dow Jones and the S&P 500 indexes posted their longest weekly losing streaks in a year on fears of a slowing pace of economic growth. Worries over rising coronavirus cases and waning hopes of more fiscal stimulus have led to a spike in market volatility in the past few weeks, and analysts expect trading to remain choppy in the run up to the Nov. 3 presidential election. The VIX spiked to its highest in nearly two weeks last Monday, with analysts warning of further upside to the index heading toward the end of the quarter, and Morgan Stanley warning of a “difficult trading environment” in the next 4-5 weeks.

Stocks also rose on lingering hopes a fiscal deal may still happen before the election. The rapidly diminishing chances of a new fiscal stimulus package ahead of the election got a modest kick after Speaker Nancy Pelosi said Democrats would unveil a new “proffer” shortly, adding that she would prefer the House majority to pass an actual deal than simply vote on a package that would be dead on arrival in the Senate. While there were some talks between Pelosi and Treasury Secretary Steven Mnuchin on Friday, the continuing deep divides on the size of any package and the very short timeline to the election means lawmakers remain skeptical a breakthrough is possible

The Europe Stoxx 600 Index rose more than 2% rebounding from the biggest weekly drop in more than three months as banks rallied the most in three weeks leading the advance among sectors. HSBC Holdings surged 9%, its biggest one-day gain since 2009 after Ping An Insurance Group, its biggest shareholder, raised its stake in the lender to 8%, in a bet the embattled lender will return to paying dividends and said it “remains confident” in HSBC’s long-term prospects.

European carmarkers rallied following comments from Nissan Motor that the company expects to return to profitability in 2021. Diageo rose after saying it expects business to improve as bars and restaurants reopen.

“It is hard to become too bearish,” said Mark Dowding, the chief investment officer at BlueBay Asset Management. “As we look into 2021, growth should be stronger, policy will stay supportive with further fiscal spending. A vaccine is also expected to be deployed and life to return closer to normal by the middle of next year.”

“Investors grapple with many variables that could bring increasing amounts of volatility in the week ahead,” said Hussein Sayed, chief markets strategist at FXTM.

Optimism spilled over from Asian trading hours after data over the weekend showed profits at China’s industrial firms grew for the fourth straight month in August.

Earlier in the session, Asian stocks gained, led by IT and industrials, after rising in the last session. Most markets in the region were up, with Taiwan’s Taiex Index gaining 1.9% and Japan’s Topix Index rising 1.7%, while Jakarta Composite dropped 0.8%. The Topix gained 1.7%, with Careerlink and Scala rising the most. The Shanghai Composite Index was little changed, with Shanghai Zijiang Enterprise Group advancing and Ribo Fashion declining the most.

At the same time, Bloomberg notes that tension between Beijing and Washington continues to simmer. President Donald Trump’s ban on TikTok was temporarily blocked by a federal judge, dealing a blow to the government in its showdown with the popular Chinese-owned app over national security concerns. China’s largest chipmaker, Semiconductor Manufacturing International Corp., sank to a four-month low in Hong Kong after the U.S. imposed export restrictions.

In rates, treasuries bear steepened, with long-end yields cheaper by ~2bp vs. Friday close as the the risk-on backdrop weighed on long-end. Treasury 10-year yields cheaper by 1.5bp at ~0.67%, trading broadly in line with bunds; gilts lag by ~1.2bp. Month-end flows may also support long-end with with Bloomberg Barclays U.S. Treasury index to extend by 0.09y, more than usual October extension. IG credit issuance slate includes AngloGold Ashanti Holdings 10Y; $25bn expected to price this week

In FX, the Bloomberg Dollar Spot Index retreated from a two-month high reached on Friday, and the greenback fell versus most of its Group-of-10 peers. The pound was on track for its biggest gain this month, even with the EU stiffening its demands over how any trade deal will be enforced after losing trust in Boris Johnson because of his attempt to rewrite last year’s divorce agreement. The Canadian dollar was the weakest performer as oil prices struggled to build on recent gains. Australian dollar edged up as investors unwound short positions after Westpac pushed out its forecast for RBA easing to Nov. 3 from Oct. 6. Aussie bond futures drop briefly before recovering. Japan’s currency caught a bid after The Times of London reported the U.S. may relocate American assets away from an airbase in Turkey to Crete to boost its military presence in the eastern Mediterranean

In commodities, oil and the dollar traded lower, while gold rebounded after hitting extremely oversold territory, aided by the drop in the dollar.

On today’s data calendar, we have the Dallas Fed Manufacturing Outlook, while Thor Industries and Cal-Maine Foods are set to report earnings.

Market Snapshot

• S&P 500 futures up 0.9% to 3,316.75
• STOXX Europe 600 up 1.7% to 361.53
• Brent Futures down 0.6% to $41.65/bbl
• Gold spot down 0.4% to $1,854.14
• U.S. Dollar Index down 0.2% to 94.45
• German 10Y yield rose 1.4 bps to -0.515%
• Euro up 0.04% to $1.1636
• Brent Futures down 0.6% to $41.65/bbl
• Italian 10Y yield fell 0.8 bps to 0.682%
• Spanish 10Y yield fell 0.3 bps to 0.245%
• MXAP up 1.1% to 170.21
• MXAPJ up 0.7% to 551.50
• Nikkei up 1.3% to 23,511.62
• Topix up 1.7% to 1,661.93
• Hang Seng Index up 1% to 23,476.05
• Shanghai Composite down 0.06% to 3,217.54
• Sensex up 1.6% to 37,968.28
• Australia S&P/ASX 200 down 0.2% to 5,952.32
• Kospi up 1.3% to 2,308.08

Top Overnight News from Bloomberg

• The Bank of England’s discussions on negative interest rates have been “encouraging,” according to policy maker Silvana Tenreyro, in a sign that the U.K. could yet follow peers such as the European Central Bank below zero
• London’s major clearinghouses for derivatives, energy and metal trades will be able to do business with banks in the European Union next year in a move that averts Brexit market disruption
• Bank of America Corp. and Lloyds Banking Group Plc have completed one of the first cross-currency swaps using Libor’s replacements, marking the latest step in the long exodus out of the scandal-tainted rate
• Safe-haven assets seen as traditional hedges aren’t panning out as they once did, according to JPMorgan Chase & Co. Easy- money policies may actually be keeping investors in cash and away from other traditional buffers, strategists led by John Normand wrote in a note Friday. That’s because such policies create a zero-yield environment where cyclical assets might be too difficult to hedge, they said
• A Conservative Party rebellion against Boris Johnson’s emergency coronavirus powers is gaining momentum after opposition parties signaled their support
• Battle lines are being drawn at the heart of the European Central Bank over whether to add monetary support soon to head off any economic slowdown, or wait for stronger evidence that it’s needed

A quick look at global markets courtesy of NewsSquawk:

Asian stocks began the week mostly higher, but ultimately finished mixed, as the region initially picked up the baton from last Friday’s tech-driven momentum on Wall Street. ASX 200 (-0.2%) and Nikkei 225 (+1.3%) were initially positive with Australia led by tech as the sector followed suit from US peers and with sentiment mildly underpinned by news Victoria state is to speed up its easing of COVID-19 restrictions. However, gains were capped and price action weighed on due to weakness in consumer staples and financials, while Tokyo stocks largely shrugged off a choppy currency. Hang Seng (+1.0%) and Shanghai Comp. (U/C) finished mixed mixed with underperformance in the mainland following a net liquidity drain by the PBoC and as participants digested the latest developments between the world’s 2 largest economies. This includes the US federal judge decision to grant a preliminary injunction against President Trump’s ban on TikTok downloads from US app stores which had been set to take effect from midnight, while SMIC shares slumped after the US Commerce Department announced tighter restrictions on China’s largest chipmaker on allegations that exports to the Co. posed an unacceptable risk of being diverted to military end-use. Nonetheless, the mood in Hong Kong was more constructive with HSBC registering its biggest intraday gain in over a decade after Ping An Insurance acquired 10.8mln H-shares to boost its stake to 8%. Finally, 10yr JGBs were rangebound with price action sideways as demand is sapped by the mildly positive risk tone but with downside stemmed amid the BoJ’s presence in the market for a total of JPY 900bln of JGBs.

Top Asian News

• Singapore Regulator, Banks in Talks to Extend Debt Relief Scheme
• Credit Suisse’s Pozsar Warns of Funding Flood: Liquidity Watch
• Betting on Yen Strength Is More Popular Than Ever Among Funds

Stocks in Europe kicked the week off higher across the board (Euro Stoxx 50 +2.1%) following a relatively mixed APAC session, with gains in Europe more pronounced than performance in State-side equity futures at present. Broad-based gains were seen across European bourses at the cash open, but since then Germany’s DAX (+2.6%) emerged as the front runner, whilst the UK’s FTSE 100 (+1.4%) waned on a currency dynamics and Switzerland’s SMI (-0.6%) remains the laggard due to a losses in large-cap stocks including Roche (-0.7%) and Nestle (-0.3%). Sectors are higher across the board with a cyclical/value tilt – with Banks outpacing on the back of HSBC (+8.8%) and Commerzbank (+5.1%) with the former bolstered by Ping An Insurance upping its stake in the Co. to 8% via a purchase of 10.8M, whilst the latter cheers the appointing of a new CEO effective Jan 2021. On the other side of the sector spectrum resides the defensive sectors such as healthcare, telecoms and consumer staples. In terms of individual movers, ArcelorMittal (+10%) extends on gains after M&A, with Cleveland-Cliffs (CLF) to acquire ArcelorMittal’s US operations for ~USD 1.4bln, meanwhile the Co. has also announced a share buyback programme. Diageo (+6.6%) is higher after highlighting that business is performing strongly and ahead of expectations. William Hill (-11.1%) unwinds some of Friday’s speculation-fuelled gains after Caesars offered to take over the group at GBP 2.72/shr (vs. Friday’s GBP 3.12/shr close). Rolls-Royce (-4.5%) also sees losses and resides towards the foot of the Stoxx 600 as the engine maker said there has been no final decision in regards any sovereign wealth fund taking a stake in the group. Despite the broader gains across the Travel & Leisure sector, Air France-KLM (-0.7%) bucks the trend as the Co. expects their November-December program to be at 50% of initial plan.

Top European News

• Siemens Energy Slumps on Debut Pushing Value Below Expectations
• Key London Clearinghouses Win Right to Operate in EU Post-Brexit
• Brexit Talks Enter Key Week With Time and Trust Running Out
• French Minister Says LVMH Letter Controversy Excessive

In FX, the Dollar has drifted down from Friday’s highs following a Wall Street recovery rally that has filtered through to APAC and EU equities to varying degrees. However, the DXY remains anchored around the 94.500 level and for once may derive some underlying support into month/quarter end given at least one bank model signalling a buy vs the Eur based on a relatively strong rotation into stocks from bonds to balance asset positions. Meanwhile, on an especially quiet Monday in terms of data, option expiries may have more influence on direction alongside another heavy slate of Central Bank speakers. The index is currently holding within a 94.344-640 range after reaching 97.745 at the tail end of last week, but the Buck is still maintaining strength vs EM currencies and extending gains against some.

• GBP – Sterling is firmer across the board, with Cable back on the 1.2800 handle again and Eur/Gbp down below 0.9100 amidst hope if not conviction of progress on a Brexit trade deal going into the latest formal negotiations between the UK and EU in Brussels this week. Moreover, the cross looks technically bearish (bullish from the Pound’s perspective) after breaching the 10 DMA and a key pivot point at 0.9153 and 0.9118 respectively, while Cable is nudging beyond 1.2850 having cleared its 10 DMA circa 1.2828 amidst latest NIRP nuances from the BoE (Tenreyro noting encouraging evidence from tests of sub-zero rates, but Ramsden more circumspect as he still sees the effective lower bound at 0.1%).
• AUD – Decent option expiry interest at the 0.7000 strike in Aud/Usd (1.3 bn) appears safe as the Aussie hovers near 0.7050 on a sudden change in RBA rate outlook from Westpac to -15 bp in November instead of the looming policy meeting next week, while COVID-19 restrictions are to be relaxed further in Victoria after the daily rate of infections in the state slowed to sub-20.
• JPY/CHF/EUR/NZD – All clawing back some losses vs the Buck, with the Yen rebounding above 105.50 where 1.8 bn expiries reside, but perhaps capped by another 1 bn sitting from 105.00 to 104.90, while the Franc has bounced just ahead of 0.9300 and is pivoting 1.0800 against the Euro following mixed weekly Swiss bank sight deposit balances. Elsewhere, Eur/Usd is just under 1.1650 and also eyeing option expiries as 1.1 bn roll off between the half round number and 1.1640, but ECB commentary could be more influential after a ramp up in verbal intervention from de Cos and Visco before 2 scheduled speeches by Schnabel and one from President Lagarde. Back down under, the Kiwi is straddling 0.6650 and 1.0750 against the Aussie awaiting official NZ election results that PM Adern’s Labour Party seems on course to win without requiring any assistance in the form of a coalition.
• SCANDI/EM – Contrasting starts to the new week as the Swedish and Norwegian Crowns recoup declines vs the Euro and unwind recent underperformance regardless of data that is weak on paper via retail sales and trade in the case of the former. Conversely, the Turkish Lira has lost all and more of its post-CBRT rate hike recovery momentum to trade at fresh record lows close to 7.7900 even though the country’s banking watchdog will lower the asset ratio for deposit banks to 90% from 95% effective this Thursday and President Erdogan reckons the resumption of talks with Greece will be constructive and views this week’s EU Summit as a chance to ‘reset’ relations.

In commodities, WTI and Brent front month futures are modestly firmer and are beginning to derive benefit from the improving risk-sentiment more broadly. For the majority of the morning, the benchmarks have been drifting lower in-spite of the aforementioned gains seen across the equity complex, with attention remaining on the demand outlook for crude given the resurgence of COVID-19 triggering talks of tighter lockdowns in certain economies. Russian Energy Minister Novak emerged on the wires today and noted that global oil markets have been stable with restored balance; albeit, cited a second wave of COVID-19 as a downside risk. Subsequently, reports highlight that Russia’s Rosneft is intending to cut output by 10% in October from September levels potentially due to weaker refining margins and an expected drop in demand for oil products in Russia and Europe, the sources stated. Elsewhere, conflict has erupted between Armenia and OPEC member Azerbaijan, although reports thus far point to the military actions being contained within border regions and not close to any Azeri fields, refineries or ports. Something to keep on the radar – Norwegian offshore workers are planning strike action if annual pay negotiations fail, which could lead to the shuttering of around 22% of Norway’s oil and gas output, according to The Norwegian Oil and Gas Association. WTI Nov currently resides around the USD 40.40/bbl level and towards highs of 40.46/bbl, whilst Brent Nov sees itself just north of USD 42.00/bbl (vs. high 42.12/bbl). Elsewhere, precious metals are marginally softer with spot gold just above USD 1850/oz (vs. high 1865.96/oz) and spot silver above USD 22.50/oz (vs. high 23.08/oz) having tested the level in late APAC trade. In terms of base metals, LME copper remains firmer given the strength in stock markets, contained Dollar and expectations for firmer demand from China. Similarly, Dalian iron ore futures were buoyed overnight with participants also keeping an eye on lower volumes ahead of the Chinese October 1st – 8th National Day Holiday.

US Event Calendar

• 10:30am: Dallas Fed Manf. Activity, est. 9.5, prior 8

DB’s Jim Reid concludes the overnight wrap

Asian markets have started the week on front foot this morning with the Nikkei (+0.72%), Hang Seng (+0.74%), Kospi (+1.49%) and Asx (+0.11%) all up. Futures on the S&P 500 are also up +0.43%. Chinese bourses are trading flat to down however with the CSI (+0.07%) and the Shanghai Comp (-0.22%) lower. In Fx, the US dollar index is down -0.16%.

Looking forwards now, this week we move into Q4, on which we have an in-line with consensus view that it will start on Thursday. Politics will move increasingly into the spotlight for investors, with the coming week featuring the first presidential debate in the US tomorrow. This comes in what is likely to be a febrile atmosphere after the expected weekend announcement of President Trump’s pick for the Supreme Court. Staying with politics we’ll see the resumption of Brexit negotiations between the UK and the EU. In data terms the US jobs report on Friday and global manufacturing PMIs on Thursday will be the keys.

Going into more detail now and tomorrow we see the much-anticipated first debate between Mr Trump and Mr Biden. This will be the first time that the candidates have directly debated each other, and will last for 90 minutes, with the debate divided into six segments. We’ve already been informed that subject to new developments, the topics will be: the Trump and Biden records; the Supreme Court; Covid-19; the economy; race and violence in our cities; and the integrity of the election. The New York Times report over the weekend on the President’s tax returns, which he had avoided disclosing in the 2016 race, as well throughout his first term in office, is quite likely to make an appearance as well. This is the first of three debates between the two, with the others taking place on October 15 and 22, and a debate between the Vice Presidential candidates taking place as well on October 7.

Heading into this debate, Mr Trump picked Amy Coney Barrett to be his choice for the vacant US Supreme Court seat. Confirmation hearings are expected to start on October 12th with a full Senate vote possible by October 26th and just before the election. As has been well flagged this could turn the Supreme Court 6-3 in favour of the Republicans and could have legal ramifications for the US for a generation. And as has also been well flagged, this nomination is highly contentious this close to an election with the Democrats looking at all options to address the balance if they win the White House and Senate in November – assuming the nomination goes through before a new Senate is seated in January.

Elsewhere in the US we see the September jobs report on Friday, which will be the last report we get before Election Day. In August, the unemployment rate fell to a lower-than-expected 8.4%, and the consensus is looking for a further decline to 8.2 % in September. In terms of nonfarm payrolls, the consensus is looking for job growth of +865k, but it’s worth bearing in mind that having lost over -22m jobs in March and April, even this figure would mean that just over half of them have been recovered, still leaving nonfarm payrolls over 10m below their peak back in February.

The other important data release to watch out for next week will be the release of the manufacturing PMIs and the ISM manufacturing index on Thursday. The flash readings we’ve already had generally showed manufacturing holding up relative to expectations, whereas the services readings disappointed, possibly as hospitality/entertainment related industries start to see heightened restrictions again. For example in the Euro Area, the flash manufacturing PMI rose to 53.7, which was its highest reading since August 2018 but the services reading was down to 47.6 from 50.5 last month.

Elsewhere, a special European Council meeting of EU leaders will be taking place on Thursday and Friday. This was originally meant to have taken place the previous week, but was postponed after European Council President Michel had to self-isolate after coming into contact with a security officer who tested positive. In terms of the agenda, there are a number of items, including relations with Turkey and the situation in the Eastern Mediterranean, as well as relations with China. The full day by day calendar is at the end including key central bank speakers.

Back to last week and global equity markets continued to fall as a mix of rising coronavirus cases and further deteriorating data weighed on risk sentiment. The S&P 500 dropped -0.76% despite a strong Friday (+1.47%), declining for a fourth straight week. Banks (-6.18%) and Airlines (-8.01%) were among the largest laggards as the selling expanded from large cap tech. Tech stocks actually broke its recent slide, with Friday’s +2.26% gain helping the NASDAQ to finish up +1.11% on the week. It was the first weekly gain in the index since August. European equities continued their slide with the Stoxx 600 ending the week -3.60% lower (-0.10% Friday). The DAX (-4.93%), FTSE 100 (-2.74%), FTSE MIB (-4.23%), IBEX (-4.35%) and CAC (-4.99%) all posted deep weekly losses as the increasing Covid-19 cases have caused some restrictions to be reinstated in countries, most notably the UK, France and Spain.

The dollar rose (+1.78%) for the third week out of the last four as investors sought protection in the downturn, it was the largest weekly dollar rally since early-April and the greenback finished at 2 month highs. Core sovereign debt rose as risk sentiment waned, with US 10yr Treasury yields falling -3.4bps (-0.7bps Friday) and 10yr bunds dropping -3.9bps (-1.1bps Friday). With the dollar’s rise and the weaker risk appetite WTI (-2.12%) and Brent crude (-2.76%) fell sharply for a second week. Elsewhere in commodities, gold fell (-4.36%) to two month lows as inflation expectations dropped in the US.

In terms of data last Friday, Italian Consumer Confidence came in at 103.4, which was above expectations (100.8) and 2.4pts higher than last month’s revised figure. This was driven by a jump in manufacturing confidence from 87.1 last month to 92.1 in September (vs. 87.4 expected). The overall confidence level remains below the pre-pandemic levels but continues to trend higher and may reflect the relatively smaller second wave of coronavirus cases in the country. In the US durable goods orders increased by +0.4%, a slower pace than expected (+1.5%), though August’s number was revised up three tenths of a per cent to +11.7%. Meanwhile core capital goods rose +1.8% (vs. 1.0% expected) while last month was revised up to +2.5%, indicating that business and manufacturing investment continues to rebound.

So much for last Thursday’s surprise rate hike by the Central Bank of Turkey. 

Two trading days after the CBRT unexpectedly hiked rates by 200bps to stem the ongoing plunge in the country’s currency, overnight the Turkey’s lira dropped to a record as geopolitical risks rose in the region due to clashes between Azerbaijan and Armenia.

Shortly after Japanese traders arrived, the lira flash crashed as much as 2.1% to 7.8279 against the U.S. dollar. Then after recovering most losses, it resumed the drift lower and was down 1.7% at 7.914 by 7:00 a.m. ET. 

“The fear is that Turkey, whose economy is on its knees and is actively engaged in escalating conflicts in northern Syria, and with Greece in the Mediterranean, could get dragged into yet another regional conflict it can ill afford, either politically or economically,” says Jeffrey Halley, senior market analyst in Singapore at Oanda

“That has torpedoed the Turkish lira this morning, whipping out any gains from the surprise rate hike by the central bank last week and an easing of currency trading restrictions,” he added.

The lira fall reversed all the brief benefits from the Turkish central bank’s surprise policy-rate hike and the banking regulator’s decision to ease trading restrictions for foreign investors last week. The regulator also eased the asset-ratio rule for banks on Monday in a move that paves the way for lenders to increase lira-loan rates.

It wasn’t just the lira: Russia’s ruble also stumbled the most among emerging-market currencies after the Turkish lira, amid concern the regional powers may be dragged into an escalation in fighting between Azerbaijan and Armenia. The Rusian currency was down -0.7% to 78.76/USD, fourth straight day of declines, to weakest since April 2.

“The proximity of the armed conflict to Russia’s borders, as well as Turkey’s alleged role in supporting the Azeri side, could make foreign investors more wary of Russian assets,” Rosbank analysts write in a note; ruble could weaken to 80/USD before it recovers, they write.

“Geopolitical headwinds remain a threat to the Russian investment case, particularly the ruble, with campaigning for the US election gathering pace” Alfa-Bank analysts write in a note.

 

 

A scheme run by a so-called ‘ballot harvesters’ in Rep. Ilhan Omar’s Minneapolis district was uncovered in a shocking exposé by Project Veritas. In one segment, alleged ballot harvester Liban Mohamed – the brother of Minneapolis city council member Jamal Osman, can be seen sifting through piles of ballots in his car in videos posted to his own snapchat channel under the name “KingLiban1.”

“Just today we got 300 for Jamal Osman,” said Mohamed. “As you can see my car is full. All these are absentees’ ballots. Can’t you see?“

BREAKING: @IlhanOmar connected cash-for-ballots harvesting scheme EXPOSED

“Money is the king in everything”; harvester boasts harvesting HUNDREDS of 2020 absentee ballots ILLEGALLY! “Numbers do not lie…these here are all absentee ballots…my car is full…”#BallotHarvesting pic.twitter.com/cB2Bz31mSY

— James O’Keefe (@JamesOKeefeIII) September 28, 2020

Attorney Jeff Wojciechowski of Hennepin County told Project Veritas that the ballot harvesting described in the video appears “illegal, and we will be investigating.”

According to Veritas, “Mohamed said he was collecting the ballots to help his brother win the city’s Aug. 11 special election for a vacant Ward 6 city council race—which was held the same day as the primary for Omar’s MN-05 congressional seat. Ward 6 is the heart of the city’s Somali community and the Omar’s political base.”

Our investigation found that among three locations inside Ward 6, a ballot harvesting triangle,  where the scheme operates: the Riverside Plaza apartments,  the senior citizen community at Horn Towers and the Minneapolis Elections and Voter Services office at 980 E. Hennepin Ave., which also functions as a voting location and ballot drop-off site.

Mohamed continued: “Money is everything. Money is the king in this world. If you got no money, you should not be here period. You know what I am saying.” –Project Veritas

Mohamed also opined on what it takes to run a campaign, saying “Money is everything and a campaign is managed by money. You cannot campaign with $200 or $100 you got from your grandmother or grandfather. You cannot campaign with that. You gotta have an investment to campaign. You gotta have fundraisers.”

The scheme was uncovered by Omar Jamal, chairman of the Somali Watchdog Group. Jamal works with the Ramsey County Sheriff’s Department and is a political insider who is active within the city’s Somali community.

“I have been involved in the community for the last 20 years,” he said.

Jamal said he was motivated to reach out to Project Veritas, because he wants to eliminate the corruption that weakens his community, such as the ballot harvesting practiced by Minnesota’s Democratic-Farmer-Labor Party, in which Ilhan Omar has emerged as a rising power broker. 

“It’s an open secret,” he said. “she [Omar] will do anything that she can do to get elected and she has hundreds of people on the streets doing that.”

The political insider said he hopes there is still time to clean up elections in the country.

“If American people don’t pay attention to what’s happening, the country will collapse,” he said. –Project Veritas

 

“The regulations, if you ignore that and you let corruption and fraud become a daily business and then tough luck, the country will not exist as they [Americans] know it,” said Jamal, adding “I’m afraid it’s already too big to stop, you know, maybe it’s too late. Maybe it’s already too big to stop.”

“There’s a lot of people invested in this, you know, and they don’t care how they did it: ‘We win,’ and that’s it.”

Jamal interviewed a Somali-American ballot harvester as part of his participation in the Veritas investigation. The harvester told him how he was paid to vote in the August 11 special election and primary – and that Somali-American vote-buying operatives from the Omar machine came to his apartment building to make sure ballots were ‘correctly’ filled out – often doing it themselves.

“They come to us. They came to our homes. They said: ‘This year, you will vote for Ilhan,’” he said. “They said: ‘We will make the absentee ballots. We will fill out the forms for you and when you get them back, we will again fill it out and send it.”

Somali-Americans were told they don’t need to go to voting sites, because Omar operatives told him “You stay home and you will not go to the place.”

After the ballots are signed and documented the harvester said he got paid.

“When we sign the voting document and they fill it out is when they give us the money,” he said. “The minute we signed the thing [ballot] for the election. That’s when we get paid.”

Targeting the elderly:

Omar Jamal: So they [ballot harvesters] will request it [the ballot] for the elderly?
Ballot harvester: Yes. They [ballot harvesters] request [the ballot] for them [the elderly].
Omar Jamal: And it [the ballot] is taken away from them [elderly]?
Ballot Harvester: Yes. It [the ballot] is taken away from them [elderly].

Read the rest of the report here and watch the entire video below:

In a decision that ends a yearslong battle with the taxi regulator in Uber’s biggest European market, the American ride-hailing company has just had its license approved by a British judge who ruled that the company is “fit and proper” to hold a license after winning an appeals process.

Deputy chief magistrate Tan Ikram said Uber had met the “fit and proper” standard to receive a license almost a year after the London transport regulator, Transport for London (otherwise known as TfL), refused to extend the company’s prior license. That decision set in motion the second battle over Uber’s London operating license, after an investigation by the regulator turned up evidence that Uber drivers were still driving under others’ names, a security hole that the regulator immediately took issue with.

A ban, of course, would have been a major blow for the ride-hailing service, which has 45,000 drivers on the road in the British capital, and provides millions of rides each month.

The magistrate ruled that while “Uber does not have a perfect record…it has been an improving picture.” “I am satisfied that they are doing what a reasonable business in their sector could be expected to do, perhaps even more,” the judge added.

The issue stretches back to September 2017, when TfL first announced that Uber’s license wouldn’t be renewed, citing issues with the company’s process for reporting serious crimes committed by drivers, among other transgressions (including Uber’s “greyball” software). At the time, the regulator deemed the company was “not fit and proper” to hold the license.

Read the decision below:

Uber-v-TFL by Zerohedge on Scribd

A significant cooldown has arrived, with the jet stream from Canada plunging this weekend, which will allow the eastern United States to experience its first taste of fall for much of next week. 

The ten-day outlook in terms of the thermal aspect shows a cold airmass will encompass all U.S. Plains, Midwest, Southeast, and Northeast, where temperatures could hover 8 to 15 degrees below normal through the first week of October. 

E.C. Operational Forecast (with gray 32 degrees Fahrenheit line) shows the blast of cold air pouring in from Canada this weekend and will cover much of the eastern U.S. through Oct. 6. 

As for frost risks over the next ten days, Reuters’ commodity desk said:

“Although the greatest cool anomalies should be observed in Missouri and surrounding states, the risk for occasional and short-lasting overnight frost risks are on the rise across the upper Midwest. As for now, confidence in frost appearance is rather low, but the situation should be monitored and updated over the next week.”

The National Weather Service announced a moderate to high risk for cooler temperatures from the Midwest to the Mid-Atlantic between Oct. 1 and 7.

According to The Washington Post, “the surge of cold set to enter the eastern U.S. just one week after scores of locations in interior New England and western New York set record lows in the 20s and 30s. The chill even reached the Mid-Atlantic, where Washington observed lows in the 40s on four straight days in September for the first time since 1950.”

A chilly start to October will result in energy usage demand to increase. Heating degree day (HDD), the measure designed to quantify the demand for energy needed to heat a building, is set to rise in the Midwest, Southeast, and Northeast in the coming days. 

HDD Midwest

HDD Southeast

HDD Northeast 

Oilprice.com says the “coming winter season and the end of the hurricane season that has disrupted LNG operations and exports along the U.S. Gulf Coast, coupled with recovering gas demand for industrial activities in Asia and Europe, are likely to send natural gas prices to above $3 per million British thermal units.” 

The latest “rollercoaster” in nat gas prices was “indicative of a demand/supply picture in a so-called ‘shoulder season’ when power demand for air conditioning begins to wane, but demand for heating is not there yet. So prices reacted to the immediate drivers—storage, feed supply for LNG, and storm-induced shut-ins,” said the energy blog. 

In seasonal terms, nat gas futures are set to rise as the rapid onset of fall-like conditions begins. 

Readers may recall, we noted, at the start of September, how the 45-day HDD for the U.S. signaled energy demand to heat structures was set to increase. Now it’s a waiting game for nat gas futures to surge on the bullish fundamental shift.