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Authored by Steven Kovac via The Epoch Times (emphasis ours),

A Michigan State Supreme Court justice accepted an $82,500 donation earlier this year from a PAC tied to Michigan Secretary of State Jocelyn Benson, at a time when the seven-member Supreme Court was deciding an appeal filed by Benson.

The campaign committee for State Supreme Court Justice Kyra Harris Bolden reported receiving the donation on May 17, 2024. The source of the donation, Legacy PAC, was founded and operated by Benson. Campaign finance reports show that an $82,500 donation was given on April 26, 2024, to the Keep Kyra Harris Bolden for Justice committee.

At the time, Bolden sat on the seven-member bench deciding an appeal Benson filed on Nov. 30, 2023.

On Aug. 28, 2024, Bolden filed the 5–2 majority opinion that granted Benson’s appeal. Republican election integrity advocates believe the decision will eliminate effective oversight of the conduct of elections by poll challengers.

The state Supreme Court ruling overturned a decision by the Michigan Court of Claims, and a subsequent 3–0 Michigan Court of Appeals ruling upholding the lower court’s decision, that Benson’s restrictive guidance regarding poll challengers violated state law and, therefore, had to be modified.

Benson’s loss in the Michigan Court of Appeals was the sixth legal defeat since 2020 involving her administration of statewide elections.

Calls for an Ethics Probe

On Oct. 1, election integrity activist Braden Giacobazzi and former state Sen. Patrick Colbeck, both Republicans, sent a formal request for an investigation of Bolden to the Judicial Tenure Commission, a panel that oversees the conduct of judges.

Giacobazzi and Colbeck asked the commission to look into the propriety of the Michigan Legacy PAC campaign donation.

Bolden, a Democrat, is a former state representative and criminal defense attorney from the Detroit area. She ran unsuccessfully for a seat on the Michigan Supreme Court in November 2022.

Just weeks after that election, Bolden was appointed by Gov. Gretchen Whitmer, a Democrat, to serve for a portion of the unexpired term of retiring Justice Bridget McCormack, a Democrat.

Bolden is running in the upcoming Nov. 5 election to retain her position until Jan. 1, 2029.

Democrats currently control the state Supreme Court 4–3.

In a statement on X, Colbeck posted the complaint which alleged that Bolden’s acceptance of the $82,500 campaign contribution from a defendant in a case that was currently before the court “has all the indications of a bribe intended to influence the decision of the court.”

The Michigan Code of Judicial Conduct states that a judge should uphold the integrity and independence of the judiciary, avoid impropriety and the appearance of impropriety in all activities, and perform duties impartially.

Bolden’s office referred inquiries to the spokesman for the Michigan Supreme Court, John Niven, who declined to comment.

On Oct. 11, Colbeck also submitted a request for an investigation of Benson, who is a lawyer, to the State of Michigan Attorney Grievance Commission, a group that oversees the ethics of lawyers.

In his request for investigation, Colbeck alleged Benson’s campaign donation to a Michigan Supreme Court Justice at a time when the court had a lawsuit with Benson as a defendant before it “constitutes a serious ethics violation and misconduct as a member of the Michigan Bar Association.”

Colbeck alleged that Benson’s “repeated violations” of MCR 9.104(3) and American Bar Association Rule 8.4: Misconduct, which seeks to maintain the integrity of the legal profession, were sufficient grounds to warrant her disbarment.

Under Michigan Court Rules 9.104(3), an attorney may be disciplined for conduct that is “contrary to justice, ethics, honesty or good morals.”

Benson did not respond to a request for comment.

The Michigan Legacy PAC could not be reached by phone or email. Its website lists a Detroit P.O. Box as the PAC’s address.

The website said, “Our goal at Michigan Legacy PAC is to keep working and fighting together to ensure we build the infrastructure necessary to win the battle for democracy.”

In recent weeks, we have discussed on multiple occasions (here, here and here) how in his desire to get Kamala Harris re-elected by rushing out a jumbo cut before November 5, Fed president Jerome Powell may have triggered the second coming of the Arthur Burns “galloping inflation” Fed, and sure enough recent inflationary prints have certainly raised the threat that the Fed is now aggressively easing even as inflation has not only not been defeated, but is once again rising.

Then overnight, it was Deutsche Bank’s chief credit strategist Jim Reid who observed that US 5yr inflation swaps have seen their “largest 5-week climb since just before SVB’s collapse in March 2023, an event that shifted the narrative away from around 4 more hikes to imminent cuts for a period of time.”

To be fair, it’s not just the 50bps Fed easing in itself that has changed the inflation and rates outlook over the last few weeks. We’ve also seen 1) expectations that the ECB will move more aggressively; 2) renewed geopolitical risk and a potentially large China stimulus turn the Oil price (and other commodities) higher after a late summer slump; 3) a bumper payrolls report; and 4) still generally firm US data, including an upside surprise in the CPI last week.

Then again, these are all dynamics that the Fed should have considered before it launched an aggressive easing cycle at a time when stock prices are at all time highs, when wage inflation ~5%…

… and when home prices are still rising at a mindblowing 6%!

It is therefore not surprising that the latest monthly survey of consumer expectations from the NY Fed found that inflation expectations rose at both the three-year horizon (from 2.5% to 2.7%) and the five-year horizon (from 2.8% to 2.9%), and remained unchanged at the one-year horizon (where they are driven primarily by recent moves in gas prices).

And the reason why the short-term inflation expectations were unchanged – if at the Fed’s raised inflation target of 3% – is because the median respondent saw gasoline up “only” 3.4% over the next 12 months, the least in two years. Expected food inflation ticked higher after falling in August to the lowest level since pre-pandemic, while expectations for rental inflation moderated to 6.3%. Median home price growth expectations decreased by 0.1 percentage point to 3.0%. Some other year-ahead commodity price expectations: an increase of 0.1% for food to 4.5%, college prices remained unchanged at 5.9%; medical care cost expectations dropped by 1.4% to 6.6% (the lowest reading since February 2020).

And while inflation expectations rose, sentiment about the broader economy deteriorated as perceptions among households that they might become delinquent on debts increased last month to the highest levels since April 2020.  The anticipated probability of missing a minimum debt payment over the next three months rose to 14.2% in September, marking the fourth straight month of increases; the increase was most pronounced for respondents between ages 40 and 60 and those with annual household incomes above $100k.

The latest data confirms the view that the US economy is becoming increasingly split as some households do well while others are getting crushed by rising prices, slower growth and higher unemployment. In other words, stagflation. 

While the orchestrated surge in the stock market – and one has the Fed’s recent rate cut to thank for that – has helped propel overall household net worth to a record over the past few months, tens of millions of Americans do not own any equities and have instead been accumulating debt in recent years amid elevated interest rates.

The increased odds of delinquency were mirrored in a broader deterioration of perceptions about households’ current financial situations, with fewer consumers reporting being better off and more reporting being worse off than a year ago, according to the survey.

Sticking with the stagflation theme, year-ahead household income and spending growth expectations declined by 0.1 percentage point to 3.0 percent and 4.9 percent, respectively.

There was slightly more cheer in consumers’ labor market expectations, where the probability of leaving one’s job voluntarily in the next twelve months increased to 20.4% from 19.1%, and the mean perceived probability of finding a job in the event of job loss increased to 52.7% from 52.3% in August.

Hilariously, median year-ahead expected growth in government debt declined by 1.1 percentage points to 8.0%, reaching the measure’s lowest level since February 2020. Spoiler alert: it will be much, much higher.

And confirming that many of the respondents are absolutely clueless, the mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now decreased by 1.5 percentage points to 25.1%. Yes, about 25% of households have no idea that the Fed is now cutting rates and rates on savings accounts will be much lower in 12 months… unless of course we get hyperinflation in the next 3-9 months and the Fed panics into a hiking frenzy

Last but not least, the mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.0 percentage point to 40.3%. It was unclear how many bulls also expected lower rates in the coming year.

Overall, an ugly, stagflationary survey, and hardly what the Fed may have expected to see several weeks into the first easing cycle since the global economy was shut down by a genetically engineered flu virus in 2020.

Walgreens shares in New York surged the most in 16 years on Tuesday after the struggling pharmacy chain delivered an unexpectedly optimistic forecast for 2025. Simultaneously, Walgreens announced plans to shutter over a thousand stores nationwide as its turnaround plan gains steam. 

Fourth-quarter earnings were 39 cents, beating the Bloomberg consensus of 36 cents. This indicates that the struggling drugstore chain is executing on its aggressive cost-cutting measures in an ambitious turnaround plan after years of pain.

Here’s a snapshot of the quarterly results (courtesy of Bloomberg):

• Adjusted EPS 39c vs. 67c y/y, estimate 36c
• International sales $5.97 billion, +3.2% y/y, estimate $5.84 billion
• Sales $37.55 billion, +6% y/y, estimate $35.56 billion
• Adjusted gross margin 16.9% vs. 18.6% y/y, estimate 17.6%
• US Retail Pharmacy Sales $29.47 billion, +6.5% y/y, estimate $27.48 billion
• US Healthcare Sales $2.11 billion, +7.2% y/y, estimate $2.15 billion
• Adjusted gross profit $6.33 billion, -4% y/y, estimate $6.24 billion
• Adjusted operating income $424 million, -38% y/y, estimate $396 million

With the fourth quarter print not so bad, Walgreens issued profit guidance for 2025 that was in line with the average analysts tracked by Bloomberg:  

• Sees adjusted EPS $1.40 to $1.80, estimate $1.73 (Bloomberg Consensus)
• Sees sales $147 billion to $151 billion, estimate $146.9 billion
• Sees adjusted operating income $1.6 billion to $2.0 billion, estimate $1.89 billion

CEO Tim Wentworth wrote that the “turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term.”

Walgreens also announced that 14% of its US stores, or around 1,200 locations, will close over the next three years. About 500 of those stores will close in 2025.

In June, the drugstore chain announced that 300 underperforming locations would close as part of the turnaround plan. It also noted about a quarter of all stores were unprofitable and would usher in “imminent” changes.

Here’s analyst commentary about Walgreens’s ER and turnaround plan:

Leerink Partners, Michael Cherny (market perform, PT $9)

• Says WBA’s FY25 guidance “needs more details from the upcoming deck on the full breakdown from revenue guidance to EPS guidance”
• The updated commentary on the store closure plan is a start, although further visibility into the makeup of the closures is going to be another focus
• “All-in, the FY4Q’24 print and FY25 guidance was not as bad as it could have been, which is somewhat of a positive relative to recent trends”

Evercore ISI, Elizabeth Anderson (in line, PT $7.50)

• Says WBA finished its FY24 on a relative high note, with strong pharmacy comp sales
• “US Healthcare adj op margin was also positive (first time!) as the company continued to make progress on both GMs and OpEx”

Barclays, Stephanie Davis (underweight, PT $7)

• Calls the 2025 guidance “better than feared”

Jonathan Palmer, an analyst with Bloomberg Intelligence

• “The decisive decision to shutter a large cohort of underperforming stores is a positive in a narrative where the expectations are exceedingly low.” 

WBA shares jumped as much as 15% in markets—the most in 16 years. Shares peaked at the $96 handle in August 2015 and have since tumbled 91%. The latest downward pressure comes from budget-conscious consumers. 

We wonder how many of the Walgreens stores slated to close next are in lawless progressive cities. 

Brazen theft at @Walgreens. Yet @Flo4Sacramento is against @YesOn36Now and said cut @TheCityofSac police by -20%. pic.twitter.com/sa5bZW96Oi

— BetterSacNow (@SunnySacParks) October 13, 2024

In San Francisco, we went to the Walgreens that is the #1 spot for theft in all the 9000 US stores, per Walgreens. This is where chains once shut the freezer section. And we saw 3 thefts right in front of us. But across SF, coffee, mustard, nail polish– are all locked up: pic.twitter.com/IfYBVgpeI2

— Kyung Lah (@KyungLahCNN) July 25, 2023

Unchecked theft in Portland

Guy with sleeping bag was stealing through Walgreens, walked behind the counter and stole from the cigarette section, and left while the poor beaten down checker asked him to stop. Thief knows there’s no consequences

Checker didn’t even notice the… pic.twitter.com/wOCqT6H9EN

— garbage ghost Tara Faul⚡️ (@tarafaul503) January 15, 2024

Here’s what ⁦@annamajaCNN⁩ & I saw at San Francisco’s Richmond area Walgreens, the worst spot of all 9000 US Walgreens for theft, per the co. We watched 3– and grabbed video of this shoplifter walk out right in front of us. pic.twitter.com/XJJxNcJ8Yj

— Kyung Lah (@KyungLahCNN) July 25, 2023

Group of thieves steal cash registers from Walgreens in Oakland, California pic.twitter.com/s70gUKdMLN

— BAY AREA STATE OF MIND (@YayAreaNews) November 3, 2023

Sigh.  

Authored by Jonathan Turley,

Roughly five centuries ago, a new dance first reported in Augsburg, Germany was promptly dubbed the “waltz” after the German term for “to roll or revolve.”

Today, there is no more nimble performer of that dizzying dance than Democratic vice presidential nominee Tim Walz.

Indeed, “Walzing” has become the Minnesota governor’s signature political two-step after his controversial statements on his allegedly socialist views, eliminating the electoral college and other topics.

On Sunday, Walz’s dance partner was Fox News host Shannon Bream, who seemed to be fighting vertigo as the candidate tried to deflect his shocking prior statements on free speech.

Bream asked Walz about his prior declaration that there is “no guarantee to free speech on misinformation or hate speech”— a statement that runs counter to decades of Supreme Court decisions.

Walz notably did not deny or retract his statement. Instead, his interview ironically became itself a flagrant example of misinformation.

First of all, misinformation and hate speech are not exceptions to the First Amendment: Whether it is the cross burnings of infamous figures like KKK leader Clarence Brandenburg or the Nazis who marched in Skokie, Ill., hate speech is protected.

Yet both Harris and Walz are true believers in the righteousness of censorship for disinformation, misinformation and malinformation.

The Biden administration defines misinformation as “false, but not created or shared with the intention of causing harm” — meaning it would subject you to censorship even if you are not intending harm.

It defines malinformation as “based on fact, but used out of context to mislead, harm, or manipulate.”

So you can post “true facts,” but would still be subject to censorship if you are viewed as misleading others with your pesky truth-telling.

Furthermore, “book bans” are not equivalent to the Harris-Walz censorship policies.

After years of supporting censorship and blacklisting, Democrats are attempting to deflect questions by claiming that the GOP is the greater threat.

“We’re seeing censorship coming in the form of book bannings in different places,” Walz told Bream.

“We’re seeing attempts in schools.”

First, a reality check: The Biden-Harris administration has helped fund and actively support the largest censorship system in our history, a system described by one federal court as “Orwellian.”

These are actual and unrelenting efforts to target individuals and groups for opposing views on subjects ranging from gender identity to climate change to COVID to election fraud.

While Walz and others rarely specifically reference the book bans in question, Florida is one state whose laws concern age limits on access to graphic or sexual material in schools.

School districts have always been given wide latitude in making such decisions on curriculum or library policies. Indeed, while rarely mentioned by the media, the left has demanded the banning or alteration of a number of classic books, including “To Kill a Mockingbird” and “Of Mice and Men,” under diversity or equity rationales.

I have long opposed actual book bans perpetrated by both the left and the right. However, school districts have always made such access and curriculum decisions.

Finally, Walz and others often sell censorship by citing the dangers of child pornography or of threats made against individuals.

Walz on Sunday followed Hillary Clinton’s recent pro-censorship campaign as he employed such misdirection.

“The issue on this was the hate speech and the protected hate speech — speech that’s aimed at creating violence, speech that’s aimed at threats to individuals,” he claimed.

“That’s what we’re talking about in this.”

First, he’d said there is no protected hate speech.

Second, the law already provides ample protections against threats toward individuals.

What’s most striking is that, after years of unapologetically embracing censorship (often under the Orwellian term “content moderation”), the left does not seem to want to discuss it in this election.

Democrats in Congress opposed every major effort to investigate the role of the Biden administration in the social-media censorship system it constructed. Many denied any such connection.

Elon Musk ended much of that debate with the release of the Twitter Files showing thousands of emails from the administration targeting individuals and groups with opposing views.

Now the public is being asked to vote for the most anti-free speech ticket in centuries — but neither Harris nor Walz want to talk about it in any detail.

The result may be the largest bait-and-switch in history.

Walz, Clinton and others also falsely claim they are simply trying to stop things like child pornography — which is already covered by existing criminal laws.

But what many on the left want is to regain what Clinton called their loss of “control” over what we are allowed to say or hear on social media.

Make no mistake about it: The “Walzing” of free speech is one dance you would be wise to decline.

Otherwise, do not be surprised if, when the music stops, you find yourself without both your partner and your free speech.

*  *  *

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University and the author of “The Indispensable Right: Free Speech in an Age of Rage.”

The National Retail Federation’s annual Prosper Insights & Analytics survey shows that total Halloween spending is forecasted to drop by 5% to $11.6 billion this year, down from last year’s record $12.2 billion. With inflation still elevated and interest rates sky-high, low- to mid-tier consumers are expected to cut back on seasonal splurges this fall.

The survey asked nearly 8,000 consumers about their Halloween shopping plans in the first week of September. Respondents, on average, said they planned to spend around $103.63, about $4.62 less than last year’s record of $108.24. This means some households (working-poor ones) are reducing purchases of costumes, decorations, and party supplies. 

Additional color on NRF’s survey:

Seventy-two percent of consumers plan to celebrate Halloween this year, consistent with last year’s record of 73%. Top holiday activities include handing out candy (67%), decorating their home or yard (52%), dressing up in costume (49%), carving a pumpkin (43%) and throwing or attending a party (29%).

Slight decline in participation compared with last year. 

“Halloween marks the official transition to the fall season for many Americans, and consumers are eager to get a jump start on purchasing new seasonal décor and other autumnal items,” NRF Vice President of Industry and Consumer Insights Katherine Cullen wrote in a statement, adding, “Retailers are prepared to meet this early demand by offering shoppers all the holiday essentials to make this year’s celebrations memorable.”

Bloomberg noted that NRF’s dismal outlook for the Halloween spending season is yet another “blow for heavily indebted retailers,” adding to the continued pressure on spending slowdowns from low—to mid-tier consumers. 

More from Bloomberg:

“2024 has been a perfect storm for retailers of all stripes,” said Erica Weisgerber, a partner at law firm Debevoise & Plimpton LLP. “Inflation, high operational costs, and reduced consumer spending have been especially challenging for brick-and-mortar retailers, and online retailers have struggled with steep competition from e-commerce giants like Amazon.”

Many of the troubled firms, including Michaels and At Home Group Inc., are owned by private equity managers after buyouts during the pandemic proved ill-timed when interest rates rose and inflation crimped household budgets. Home, clothing and hobby retailers dominate the list of distressed retailers because the size of their debt means they lack the liquidity to compete with better capitalized competitors, according to Moody’s Ratings.

The bigger picture is that the dismal Halloween spending outlook may indicate a continued souring consumer environment that worsens from here. And this could be a bellwether for the big holiday spending season, which kicks off on Black Friday and Cyber Monday in late November.

Via HeadlineUSA.com,

The owner of Time magazine blasted Vice President Kamala Harris for rejecting multiple interview requests from the prominent left-leaning publication ahead of November’s election.

Marc Benioff, the billionaire co-founder of Salesforce, bought Time magazine in 2018. He noted that since he’s been in charge of the publication, every presidential candidate has agreed to sit down for interviews during their campaigns, including former President Donald Trump and President Joe Biden.

Harris, however, has rebuffed every one of the magazine’s interview requests.

“Despite multiple requests, TIME has not been granted an interview with Kamala Harris — unlike every other Presidential candidate,” Benioff wrote on X.

“We believe in transparency and publish each interview in full,” he continued. “Why isn’t the Vice President engaging with the public on the same level? #TrustMatters #TransparencyMatters #Leadership.”

Despite multiple requests, TIME has not been granted an interview with Kamala Harris—unlike every other Presidential candidate. We believe in transparency and publish each interview in full. Why isn’t the Vice President engaging with the public on the same level? #TrustMatters…

— Marc Benioff (@Benioff) October 13, 2024

Despite Harris’s rejections, Time magazine published another predictably glowing profile of Harris on Friday.

The magazine published a similar puff-piece about Harris in August, after the vice president took over the top of the Democratic ticket. Harris also refused to speak to Time then.

“Harris declined repeated requests for an interview for this story. In contrast, Trump talked about his policy vision with a TIME reporter for 90 minutes across two interviews. Biden spoke to TIME at similar length before dropping out of the race.” https://t.co/5wUbsSsLoR

— Marc Benioff (@Benioff) October 13, 2024

For most of her campaign, Harris has avoided the media. In the past couple of weeks, however, Harris has opted to appear on friendlier shows, including The View, The Howard Stern Show and The Late Show with Stephen Colbert.

The result has been a cataclysmic drop in the polls for Harris, who is now in a dead-heat with Trump, according to the latest NBC polls.

The poll marks a five-point drop for Harris from NBC’s last poll in September, which found her leading Trump 49% to 44%.

“As summer has turned to fall, any signs of momentum for Kamala Harris have stopped,” said Democratic pollster Jeff Horwitt, who conducted this survey with Republican pollster Bill McInturff. 

Horwitt noted that Harris’s initial refusal to sit down for interviews likely hurt her, since voters still have significant questions about her campaign and its proposals.

“The challenge for Kamala Harris: Can she meet the moment and fill in the blanks that voters have about her?” he said.

She is scheduled to be interviewed by Fox News host Bret Baier later this week, in what could prove to be her biggest challenge yet.

Although the appearance that Harris is losing momentum may be a negative, it could also be the latest leg in her astroturfed three-month-old campaign with early voting now open in many swing states. The perception that she is tied or trailing may help drive more Democrats to the polls in advance of Election Day.

It wasn’t just Goldman Sachs that reported better than expected Q3 earnings this morning: on the surface, Bank of America surprised to the upside as well, and in fact its FICC division reported an even better results than Goldman’s. The bank, which had gotten Warren Buffett’s seal of disapproval, after the billionaire investors dumped much of his shares in what was once a Top 5 position, performed better than expected as it benefited from volatile markets while net interest income topped analysts’ estimates. On the other hand, there were also quite a few red flag, with the company’s Net Interest Yield sliding to a cycle low even as charge offs and credit losses jumped to the highest in years.

Here is a snapshot of what BofA reported in Q3:

• Revenue net of interest expense $25.35 billion, beating estimate $25.27 billion
  • Trading revenue excluding DVA $4.94 billion, beating estimate $4.57 billion
    • FICC trading revenue excluding DVA $2.94 billion, beating estimate $2.77 billion
    • Equities trading revenue excluding DVA $2.00 billion, beating estimate $1.81 billion
  • Investment banking revenue $1.40 billion, beating estimate $1.24 billion
  • Wealth & investment management total revenue $5.76 billion, beating estimate $5.63 billion
• EPS $0.81, beating estimates of $0.77

Taking a closer look at the Global Markets group, revenue from equity and fixed income, currencies and commodities trading rose 12% to $4.93 billion in the third quarter:

• FICC revenue increased 8%, to $2.9BN, beating estimates of $2.8BN, “driven primarily by improved client activity and trading performance in currencies and  interest rate products”
• Equities revenue increased 18%, to $2.0BN, beating estimates of $1.8BN “driven by strong client activity and trading performance in cash and derivatives”

Similar to Goldman, BofA’s investment banking also outperformed expectations, a sign that the long-awaiting rebound in dealmaking is taking hold. The company benefited from “year-over-year growth in investment banking and asset management fees, as well as sales and trading revenue,” CEO Brian Moynihan said in the statement.

Investment-banking revenue rose 15% to $1.40Bn, better than analysts expected amid renewed strength in dealmaking. Fees for advising on mergers and acquisitions fell 14%, less than the almost 24% decline analysts had expected. Revenue from equity and debt issuance increased 16% and 37%, respectively.

Not everything was stellar however: the second-largest US bank said that net interest income, a key source of revenue for the company, fell 2.9% to $14 billion, the lowest of the cycle; still this was better than the 3.4% drop analyst had expected (on an FTE basis, NII was $14.11 billion, also better than the estimate of $14.07 billion). The number increased $0.3B from 2Q24, driven by fixed-rate asset repricing, higher NII related to Global Markets (GM) activity, and one additional day of interest accrual, partially offset by higher deposit costs; it also decreased $0.4B YoY, as higher deposit costs more than offset higher asset yields, higher NII related to GM activity, and loan growth. Overall, BofA’s net interest yield came in at 1.92%, down both sequentially and YOY, and just below the estimate 1.93%. And now that the Fed is cutting rates again, that’s as good as it gets for BofA’s NII.

 

It wasn’t just the Net Interest Yield that left much to be desired: similar to JPM, BofA’s provision for credit losses unexpectedly rose to the highest in years, and was $1.54 billion in Q3, higher than the $1.53 billion estimates with a Q3 net reserve build of $8MM in 3Q24 vs. net reserve release of $25MM in 2Q24; This was the highest since the covid crash!

Charge offs also rose to $1.534 billion, above the $1.5 billion estimate and a 0.58% charge off ratio. This may come as a surprise to anyone looking at the stock which is still up, if not for long, and thinking that the results were somehow much better than expected.

According to the bank, commercial net charge-offs of $490MM increased $16MM; this was driven by commercial and industrial NCOs which increased $111MM, driven by two borrowers; at the same time commercial real estate NCOs declined $101MM.

 

On the spending side of the income statement, things were generally in line with expectations:

• Non-interest expenses $16.48 billion, estimate $16.49 billion
• Compensation expenses $9.92 billion, estimate $9.9 billion

Here is some other data:

• Return on average equity 9.44%, estimate 9.01%
• Return on average assets 0.83%, estimate 0.78%
• Return on average tangible common equity 12.8%, estimate 12.2%
• Basel III common equity Tier 1 ratio fully phased-in, advanced approach 13.5%, estimate 13.5%
• Standardized CET1 ratio 11.8%, estimate 11.9%

Looking at the balance sheet, we find:

• Loans $1.08 trillion, estimate $1.07 trillion
• Total deposits $1.93 trillion, estimate $1.93 trillion

Shares of Bank of America, which gained 24% this year through Monday, climbed 1.4%, but were well off session highs, and we expect it to close red as investors override the euphoria algo kneejerk reaction.

BofA Q3 investor presentation below (pdf link)

After nine straight months of ‘contraction’, September’s surge to 30-month highs in the Empire Fed’s Manufacturing survey was greeted by all as proof that Bidenomics (or something…) was working and everything was awesome once again… so vote for Kamala…

October is a very different matter as the survey crashed from +11.5 to -11.9 – the lowest since May. That is the biggest MoM drop since January…

Source: Bloomberg

A measure of current new orders plunged nearly 20 points to -10.2 after climbing a month earlier to the highest since April 2023.

The index of shipments decreased almost 21 points to minus 2.7.

The employment index, however, rebounded to 4.1 – the first expansion in a year – while a measure of hours worked also climbed.

Meanwhile, the New York Fed’s gauge of prices paid for materials increased to a six-month high of 29, while an index of prices received by state manufacturers also accelerated.

Finally, to add further confusion, at the same time, the six-month outlook for overall activity increased to a three-year high of 38.7, indicating the state’s manufacturers are more upbeat about the economy’s prospects.

…baffle ’em with bullshit is back.

Just days after Boeing announced plans to cut 10% of its workforce due to intensifying financial pressure, such as dwindling cash reserves and mounting risk of a credit downgrade, as well as a drawn-out strike, the beleaguered planemaker filed a $25 billion shelf registration on Tuesday morning. 

“This universal shelf registration provides flexibility for the company to seek a variety of capital options as needed to support the company’s balance sheet over a three-year period,” Boeing wrote in the filing. 

Separately, Boeing entered into a $10 billion “supplemental credit agreement” with a consortium of lenders. It noted that the credit facility provides “additional short-term access to liquidity as we navigate through a challenging environment,” adding that it has not drawn down on this facility or its existing credit revolver. 

Sources familiar with the situation told WSJ that Boeing is expected to pursue a stock offering of about $10 billion. 

The company has not turned a profit since 2018 and has already burned through $1 billion in the monthlong strike. At the end of September, it had $10.3 billion in cash and securities, around the minimum amount needed to operate. It also has $45 billion in net debt.

The latest strike estimates from JPMorgan analysts indicate Boeing will lose $1.5 billion each month if workers stay off the production lines of commercial jets and continue picketing in the streets. Three major rating agencies have warned that the strikes could downgrade Boeing’s investment-grade credit rating to speculative territory, in other words, ‘junk.’ 

Last month, CFO Brian West told analysts at the Morgan Stanley conference that Boeing “will take any necessary actions” to preserve its investment grade rating and beef up its balance sheet. 

“We are perfectly comfortable to supplement our liquidity position to support those two objectives,” West told investors when asked about future money raises. 

Last week, Goldman analysts Noah Poponak and Anthony Valentini told clients:

“The company faces a balance sheet question, and has suggested raising capital is possible given the importance of the credit rating. We assume Boeing raises $12bn of equity before year-end, which matches the total maturities due in 2025 + 2026, and keeps the cash balance well north of $10bn in the near-to-medium-term while they ramp back up commercial deliveries and strive to resolve defense profitability.”

On Friday, the CEO penned a memo to employees about coming reductions of executives, managers, and employees (as much as 10% of its 171k workforce), warning that:

“Our business is in a difficult position, and it is hard to overstate the challenges we face together.”

According to preliminary figures, Boeing expects to report third-quarter revenue of $17.8 billion and a loss per share of $9.97.

Meanwhile, Boeing’s latest talks with its union to resolve 33,000 striking employees at its main Seattle-area facilities imploded early last week, prompting S&P Global Ratings to place the aircraft manufacturer on CreditWatch negative, with mounting risks that its investment-grade credit rating would be slashed to junk. 

In markets, Boeing shares are up about 1% following the news of the shelf registration. On the year, shares are down 43%, trading around $148-$150 handle. 

Dilution fears are here.

US equity futures pointed to an unchanged open as earnings from Bank of America and Goldman Sachs beat expectations while megacap tech stocks showed modest moves. As of 8:00am ET, S&P futures were unchanged after closing at a 46th record high on Monday, while Nasdaq futures dipped 0.1% as Nvidia shares fell 1% in premarket after Bloomberg reported Biden administration officials have discussed capping sales of advanced AI chips from Nvidia and other companies. Bond yields are lower and USD is weaker; 2-, 5-, 10-yr yields are down 0.36bp, 1.75bp, 3.53bp respectively. Oil tumbled as much as -5% from yesterday close after the WaPo reported that Israel may avoid targeting Iran’s crude infrastructure, although Israel later denied the claim. Chinese stocks slumped: HSI and CSI closed -2.6% and -3.7% lower today after the WSJ reported that the motivation behind the recent policies is not “massively stimulate demand but to fend off a brewing financial crisis.” Aluminum and Copper are both more than -1% lower this morning. On the macro front we get October Empire manufacturing (8:30am) and September New York Fed 1-year inflation expectations (11am), and three Fed speakers. All eyes on earnings from BofA and Goldman today.

In premarket trading, Bank of America climbed 2% after its Wall Street operations performed better than expected as the company reaped the benefits of volatile markets. Net interest income topped analysts’ estimates. Goldman rose more than 3.3%, after it also reported earnings that beat across the board. Nvidia and AMD dell after Bloomberg reported the Biden administration discussed capping sales of advanced AI chips to some countries. Here are some other notable premarket movers:

• Coty drops 4% after the beauty company provided some preliminary 1Q results that disappointed.
• Etsy declines 5% after Goldman Sachs cut the online retailer to sell, citing a more selective approach to e-commerce stocks ahead of earnings.
• Schwab climbs 3% after posting adjusted earnings per share for the third quarter that beat the average analyst estimate.
• Trump Media & Technology rises 7%, putting the stock on course to extend its rally into a fourth consecutive session.
• UnitedHealth slips 3% after the health insurer trimmed the higher end of its profit forecast for the full year.
• Walgreens Boots gains 5% after the pharmacy chain gave a sales forecast for its 2025 year that exceeded the average analyst expectation.
• Wolfspeed rises 21% as the company is in line to win $750m in US government grants as well as $750m in financing led by Apollo Global Management Inc. to support its factory expansion plans.

Energy shares fell premarket trading, as oil prices plunged below $75 a barrel after a WaPo report that Israel will hold off attacking Iranian oil facilities. Israel later denied this, saying “it is listening to US misgivings about its planned counter-strike against Iran but will act based on its own assessments” but by then it was too late and the oil selling CTAs had been engaged.  The IEA added to the selling pressure as they warned swelling American production is set to create an oil glut in early 2025.

Elsewhere, Citigroup, Goldman and Bank of America are among the companies reporting Tuesday, while Netflix and JB Hunt will also present results later this week. Investors appear undeterred by reduced profit forecasts and are instead betting on positive surprises. Nathan Thooft, chief investment officer and senior portfolio manager at Manulife Investment Management, expects earnings season to be pretty good, but mostly because expectations have been lowered. “Consensus is around 4% year-over-year. It’s a fairly low bar,” he said.

Oil’s drop fed through to energy stocks, which dragged European stocks lower. Europe’s Stoxx 600 index slipped 0.2%, dragged down by declines in energy shares such as TotalEnergies SE and BP Plc. Beauty stocks LVMH, L’Oreal SA, Puig Brands SA also fell after US outfit Coty Inc. lowered its sales-growth guidance overnight.

Earlier int he session, Asian stocks reversed gains of as much as 0.7%, driven by sharp losses in Chinese and Hong Kong stocks. The MSCI Asia Pacific Index declined as much as 0.4%, reversing a 0.7% climb, with Chinese technology stocks including Meituan, Tencent and Alibaba the top laggards. Stocks in both mainland and Hong Kong dropped, raising doubts over the outlook for a market that is struggling to sustain the ferocious rally of late September. Energy was the worst-performing sector on the regional index, as oil dropped after a report that Israel may avoid targeting Iran’s crude infrastructure eased concerns over a major supply disruption. Sentiment took a hit after China’s export growth slowed in dollar terms from last year, hurting one of the few bright spots in the economy. Investors are still trying to assess the scope for government stimulus after its latest pledge for support.

“This is Beijing’s ‘whatever it takes’ moment,” Yan Wang, chief of emerging markets and China strategist at Alpine Macro, told Bloomberg TV. “If Beijing is really committed to boosting the economy, they need to use the balance sheet of the central bank and the central government to reflate the economy,” he said.

And yet according to the WSJ, this is anything but China’s whatever it takes moment: citing “people familiar with the decision-making”, the WSJ said that this isn’t a stimulus measure, but rather a derisking step, indicating that this is just another half-baked “half-measure” from the Xi admin, assuring that much more stimulus will be needed eventually: “Absent from the measures are any significant moves to boost consumption. People close to the ministry say such measures are in the works but nothing substantial is imminent.”

In FX, the Bloomberg Dollar Spot Index held steady after rising 0.3% Monday. “The bias is for a stronger USD,” Elias Haddad, senior markets strategist at Brown Brothers Harriman & Co., wrote in a note. “Encouraging US economic activity and sticky underlying inflation argue for a cautious Fed easing cycle.” The pound rose 0.1% after mixed UK jobs data, while the Japanese yen tops the G-10 FX leader board with a 0.5% gain: USDJPY briefly dipped below 149 after rising just shy of 150 on Monday.

In rates, treasuries and European government bonds rise as traders gravitate toward safe-haven assets. Treasury yields are richer by 1bp to 4bp across maturities with the curve flatter in cash trading after Monday’s holiday, during which stocks and futures were open. 10-year yields at around 4.07% are ~3bp richer on the day with bunds and gilts in the sector outperforming by an additional 1bp. Bull-flattening in Treasuries leaves 2s10s, 5s30s spreads about 2.5bp tighter vs Friday’s close. Bonds have support from slide in oil prices spurred by a report Israel may avoid targeting Iran’s crude infrastructure, which eased concerns about supply disruption.

In commodities, brent crude futures fall some 4.8% to below $74 a barrel after the WaPo reported that Israel may avoid targeting Iran’s crude infrastructure eased concerns over a major supply disruption. The IEA added to the selling pressure as they warned swelling American production is set to create an oil glut in early 2025. Amusingly, even though Israel later denied the WaPo report – which was meant precisely to hammer oil – the price of the commodity failed to rebound. Spot gold reversed an earlier fall to rise $6.

Looking at today’s calendar, we get the October Empire manufacturing (8:30am) and September New York Fed 1-year inflation expectations (11am). Fed speakers scheduled include Daly (11:30am), Kugler (1pm) and Bostic (7pm).

Market Snapshot

• S&P 500 futures little changed at 5,904.25
• STOXX Europe 600 down 0.1% to 524.23
• MXAP down 0.2% to 191.98
• MXAPJ down 0.7% to 609.24
• Nikkei up 0.8% to 39,910.55
• Topix up 0.6% to 2,723.57
• Hang Seng Index down 3.7% to 20,318.79
• Shanghai Composite down 2.5% to 3,201.29
• Sensex down 0.3% to 81,766.76
• Australia S&P/ASX 200 up 0.8% to 8,318.37
• Kospi up 0.4% to 2,633.45
• German 10Y yield down 3.6 bps at 2.24%
• Euro little changed at $1.0904
• Brent Futures down 4.2% to $74.24/bbl
• Brent Futures down 4.2% to $74.24/bbl
• Gold spot up 0.2% to $2,655.02
• US Dollar Index down 0.14% to 103.15

Top Overnight News

• China is starting to enforce a tax on overseas investment gains by the country’s wealthiest citizens, an initiative aimed at both driving gov’t revenue (to help pay for fiscal stimulus) and pursuing Xi’s “common prosperity” initiative. BBG
• Xi isn’t looking to massively stimulate demand or ease his iron grip on the country’s economy but instead stave off a financial crisis by providing support to overindebted local governments and bolster the stock market (his shift on policy was more tactical than strategic). WSJ  
• Chinese banks are set to trim rates on 300 trillion yuan ($42.3 trillion) of deposits as soon as this week after the latest barrage of stimulus policies further squeeze their profitability. BBG
• The International Energy Agency trimmed its forecast for this year’s oil-demand growth for the third month in a row, as a rapid slowdown in Chinese consumption weighs on the global outlook. WSJ
• Global sovereign debt will hit $100T by the end of 2024, or ~93% of aggregate GDP, with the figure headed to 100% by 2030 as it warned governments will be forced to make difficult fiscal decisions. BBG
• Israel has told Washington it will hit Iranian military targets, not oil or nuclear infrastructure, as Netanyahu looks to retaliate without escalating the situation. WaPo
• The Swiss financial regulator has ordered UBS to bolster its emergency and recovery plans in light of the added risk it has taken on following its takeover of Credit Suisse last year. FT
• Biden administration officials have discussed capping sales of advanced AI chips from Nvidia Corp. and other American companies on a country-specific basis, people familiar with the matter said, a move that would limit some nations’ artificial intelligence capabilities. BBG
• Home builders are still offering mortgage rate buydowns to attract buyers, despite falling mortgage rates. The cost of buydowns is eating into home-builder profits, and they might need to turn to other strategies such as price reductions. Home-builder share prices have been rising, but the outlook is more challenging if more previously owned homes come on the market. WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed as most major indices followed suit to the gains stateside where a tech rally led the S&P 500 and Dow to fresh all-time highs, although Chinese markets lagged following weak trade data. ASX 200 climbed to a record high with advances led by the top-weighted financial sector and miners. Nikkei 225 outperformed and gapped back above the 40,000 level on return from the long weekend. Hang Seng and Shanghai Comp were pressured after weak trade data and stimulus disappointment, while trade frictions also lingered with the US mulling capping NVIDIA and AMD AI chip sales to some countries.

Top Asian News

• Chinese banks mull cutting rates on CNY 300tln of deposits as early as this week with the major banks to be guided by the PBoC’s interest rate self-disciplinary mechanism to lower rates on a number of deposit products, according to Bloomberg.
• China began enforcing an up to 20% tax on overseas investment gains by the country’s ultra-rich.
• US weighs capping NVIDIA (NVDA) and AMD (AMD) AI chip sales to some countries, according to Bloomberg.
• China and NDRC are to hold a meeting on financing for small businesses on October 21st
• Reuters Poll, China: growth & CPI forecasts cut.

European bourses, Stoxx 600 (-0.1%) began the session generally on a modestly firmer footing, but sentiment has waned as the session progressed, but with no fresh catalyst emerging in European hours. European sectors are mixed; Travel & Leisure takes the top spot, benefiting from lower oil prices, but also in a paring to some of the significant losses seen in the prior session. Telecoms follows closely behind, lifted by post-earning strength in Ericsson. Energy is found at the foot of the pile, alongside Basic Resources, which is hampered by continued Chinese demand fears. US Equity Futures (ES -0.1% NQ -0.2% RTY +0.1%) are trading tentatively on either side of the unchanged mark, taking a breather from the hefty gains seen in the prior session. US weighs capping NVIDIA (NVDA) and AMD (AMD) AI chip sales to some countries, according to Bloomberg. UBS Global Research has increased its 2024 year-end S&P 500 target from 5600 to 5850 and increased its 2025 target from 6000 to 6400 Earnings include: Ericsson (headline beat, CEO pointed to increasing customer momentum and N. America stabilising) Unitedhealth Group Inc (UNH) Q3 2024 (USD): adj. EPS 7.15 (exp. 7.01), Revenue 100.8bln (exp. 99.28bln). FY adj. EPS view 27.50-27.75 (exp. 27.70), FY Revenue view (exp. 399.42bln); results which sparked marked pressure in the DJIA.

Top European News

 

• Dutch to Cut ABN Amro Stake Further as Exits Gather Pace
• Israel: Hamas in Turkey Directed Aug. Tel Aviv Suicide Bombing
• EU Agrees COP29 Climate Stance With Money Quandry Unanswered
• UBS Must Revise Post-Takeover Emergency Plans, Finma Says
• Orange Gets Holder Consent to Amend Terms of 2031 Notes

FX

• USD is mixed vs. peers alongside a lack of fresh macro drivers for the US other than comments from Fed’s Waller who said the Fed should proceed with more caution on rate cuts than was needed at the September meeting. For now, DXY is holding above the 103 mark and within Monday’s 102.91-103.45 range.
• EUR is flat vs. the USD with not much in the way of follow-through from a mixed batch of ZEW data; focus no doubt will be on the ECB on Thursday. EUR/USD has made its way back onto a 1.09 handle but is yet to approach yesterday’s 1.0936 peak.
• GBP is incrementally firmer with not much in the way of follow-through from the latest UK jobs report, which on the surface looked hawkish given the stronger than expected employment change and unexpected decline in the unemployment rate. However, the ONS stated in the release that the report may be overstating underlying employment growth.
• JPY is attempting to claw back some lost ground vs. the USD after USD/JPY stopped shy yesterday of the 150 mark, topping out at 149.98. USD/JPY has delved as low as 149.04 vs. yesterday’s 149.01 trough.
• Antipodeans are both softer vs. the USD and towards the bottom of the G10 leaderboard. AUD/USD is just about holding above Monday’s low at 0.6701 and the 0.67 mark. NZD/USD has extended its move below the 0.61 mark and 200DMA at 0.6093, ahead of the region’s CPI later on.
• PBoC set USD/CNY mid-point at 7.0830 vs exp. 7.0840 (prev. 7.0723).

Fixed Income

• Benchmarks are bid in a continuation of Monday’s modest rebound with upside today driven by marked crude pressure and Final inflation readings from France.
• Bunds at a 133.74 peak, resistance at 133.80 and 134.03, upside spurred by the crude moves (see commodities) and French final inflation which saw the harmonised numbers revised down and factor in favour of the doves into Thursday.
• Session high for benchmarks in the wake of remarks that the EU’s fiscal burden for upcoming Ukraine aide could be reduced if the US gets involved.
• Gilts gapped higher on the above energy angle and also the regions latest employment data which shouldn’t stand in the way of continued BoE easing; 96.71 session peak printed after a robust DMO tap.
• USTs firmer with the above applying, at a 112-07+ peak; yield curve mixed (returning from holiday outages for cash) with the short end seemingly propped up by Fed’s Waller on Monday while the long-end slumps given energy.
• UK sells GBP 2.25bln 4.375% 2054 Gilt: b/c 3.08x (prev. 2.89x), average yield 4.735% (prev. 4.329%), tail 0.3bps (prev. 0.9bps)

Commodities

• Crude benchmarks are well into the red, weighed on at the beginning of the APAC session on reports that Israeli PM Netanyahu informed the US that their response to Iran will target military facilities, not nuclear or oil sites. The complex then took another leg lower after the IEA OMR saw a downgrade to their 2024 world oil demand view, primarily driven by China. Brent’Dec currently near session lows around USD 73.50/bbl.
• Spot gold is firmer, but only modestly so. At a USD 2654/oz peak, a point which is over USD 10/oz shy of Monday’s USD 2666/oz best.
• Pressured, base metals in the red across the board and 3M LME Copper within reach of USD 9.5k from a high point just shy of USD 9.7k.
• WSJ article on Chinese stimulus: “Absent from the measures are any significant moves to boost consumption. People close to the ministry say such measures are in the works but nothing substantial is imminent.”
• IEA OMR (Oct): 2024 world oil demand growth forecast to 860k bpd (prev. forecast 900k); says China is the main drag on global oil demand growth, with China’s demand expected to rise only 150k bpd in 2024.
• Russia’s seaborne oil product exports in September are up 5% on the month, according to Reuters.

Geopolitics: Middle East

• Iranian government says “Our response will be at the right time and place and we will not hesitate or rush”, via Al Arabiya.
• Israeli Broadcasting Corporation reports that a full agreement has been reached on the method, timing and strength of the response to an attack Iran, via Al Jazeera; the strike plan is awaiting the approval of the Ministerial Council for implementation.
• Israeli Broadcasting Corporation reports that a full agreement has been reached on the method, timing and strength of the response to an attack Iran, via Al Jazeera; the strike plan is awaiting the approval of the Ministerial Council for implementation.
• Israeli PM Netanyahu told the US that Israel will strike Iranian military, not nuclear or oil, targets, according to officials cited by The Washington Post.
• Israel Broadcasting Corporation cited Israeli PM Netanyahu’s office stating that they listen to the views of the US administration, but will make decisions based on Israel’s interests, according to Al Jazeera.
• UN Security Council expressed strong concern after several UN peacekeeping positions in Lebanon came under fire, while it urged all parties to respect the safety and security of UNIFIL peacekeepers and premises, as well as expressed deep concern for civilian casualties and the destruction of civilian infrastructure.
• US President Biden asked the National Security Council to inform Iran that any attempt on former President Trump’s life would be considered an act of war, according to Fox News. The White House later said it has been closely tracking Iranian threats against Trump and former Trump administration officials for years, while it warned Iran will face severe consequences if it attacks any US citizen.

Geopolitics: Other

• German official says if the US participates in the USD 50bln loan for Ukraine, the EU’s share of the loan may be reduced.
• NATO Secretary General Rutte in his first visit to Ukraine mission, welcomed plans for temporary deployment of US long-range missiles to Germany from 2026, while he said NATO will not be cowed by Russian threats and will keep its strong support of Kyiv.
• North Korea blew up part of inter-Korean roads, according to South Korea’s military. It was separately reported that South Korea’s military fired warning shots south of the demarcation line after North Korea destroyed inter-Korean roads.

US Event Calendar

• Oct. 15-Oct. 25: Sept. Monthly Budget Statement, est. $37.5b, prior -$380.1b
• 08:30: Oct. Empire Manufacturing, est. 3.6, prior 11.5
• 11:00: Sept. NY Fed 1-Yr Inflation Expectat, prior 3.00%

Central Bank speakers

• 11:30: Fed’s Daly Gives Keynote Remarks
• 13:00: Fed’s Kugler Participates in Moderated Discussion
• 19:00: Fed’s Bostic Participates in Moderated Discussion

DB’s Jim Reid concludes the overnight wrap

Even though it was a partial US holiday with US fixed income closed, the S&P 500 (+0.77%) notched up its 46th record high of 2024 last night. The next hurdle is US earnings seasons that swings back into action today with Bank of America, Citigroup, Goldman Sachs and Johnson & Johnson all reporting.

Markets got another boost right before the US open, as a Caixin report came out saying that China may issue 6tn yuan of ultra-long special government bonds as part of its fiscal stimulus. So that helped to support risk appetite, and the S&P 500 is now up +22.85% on a YTD basis, making this its strongest performance at this point in the year since 1997. Moreover, in the last 50 weeks it’s managed to advance for 36 of them, which is a joint record back to 1989.

Tech stocks were the largest driver of that rally, with information technology (+1.36%) the strongest performing sector within the S&P 500. The Magnificent 7 (+0.82%) saw a decent advance, led by a +2.43% gain for Nvidia. This saw the chipmaker post a new all time closing high, capping off a +39.6% gain from its low on August 7. This also helped the NASDAQ (+0.87%) to close less than 1% beneath its all-time high from July. There is a report overnight that the US is mulling over whether to place more limits on chipmakers exports of advanced AI chips to certain countries but the story doesn’t seem to have impacted Nasdaq futures which are flat.

Even with the tech moves yesterday, equity gains were pretty broad beyond that, with 80% of the S&P 500 constituents higher on the day and the small-cap Russell 2000 rising +0.64%. Over in Europe, the story of tech outperformance dragging up the broader indices was a clearer one, with the STOXX 600 (+0.53%) ending the day also less than 1% below its own all-time high from last month.

Whilst risk assets were climbing to new highs, oil prices started the week on a lower note amid some disappointment around the urgency surrounding China’s stimulus details as well as pricing out of geopolitical risk premium. On the China angle, investors were also concerned about several data releases, including the weekend inflation data that showed price pressures were even weaker than anticipated. Then yesterday, we had another set of trade data for September, which showed imports were only up by +0.3% year-on-year (vs. +0.8% expected), and exports only rose by +2.4% as well (vs. +6.0% expected). So the numbers were underwhelming, and yesterday also saw OPEC cut its forecast for oil demand growth in its latest report.

With this backdrop, Brent crude fell -2.00% yesterday, and it is down another -2.9% overnight amid reduced perceptions of escalation risks in the Middle East. The overnight fall follows a Washington Post report that Israeli PM Netanyahu has agreed to limit its retaliation in response to the October 1 strikes to Iran’s military targets rather than its oil facilities or nuclear installations.

Moving onto rates, it was an uneventful session thanks to the bond holiday in the US. But futures markets were open, and there were some indications that investors were becoming a bit more sceptical about rapid rate cuts from the Fed. For instance, the probability of a rate cut in November was dialled back slightly to 87%, having been at 89% at Friday’s close. And looking further out, the rate priced in by the Fed’s June 2025 meeting was up +3.2bps on the day to 3.65%. The moves came as Fed speakers continued to steer us away from expecting rapid easing, with Minneapolis Fed President Kashkari saying that “further modest reductions” would be appropriate over the quarters ahead, while Fed Governor Waller noted that “policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting”. The oil move over the last 36 hours may temper some of these more hawkish rate expectations today but Treasuries have reopened fairly flat in Asia hours after the holiday.

One reason that investors have been dialling back their expectations for rate cuts is a growing focus on inflation risk. Henry pointed out yesterday that the US 5yr inflation swap has now seen its biggest jump over five weeks since early March 2023, just before SVB’s collapse. That’s been driven by several factors, but it’s clear that inflationary pressures have been building, with commodities bouncing back thanks to China’s stimulus and developments in the Middle East, whilst central banks have engaged in faster easing than was expected only a few weeks earlier, not least with the Fed cutting by 50bps last month. So with the ECB widely expected to become the latest central bank to cut rates again this week, that’s one to keep an eye on.
Ahead of the ECB’s decision, sovereign bond yields were fairly steady in Europe, with those on 10yr bunds (+0.8bps), OATs (-0.3bps) and BTPs (-1.4bps) not seeing big moves in either direction. The main exception to that pattern was here in the UK, where yields on 10yr gilts (+3.1bps) moved up to 4.24%. It also pushed the UK-German 10yr spread up to 197bps, which is the widest it’s been since August 2023.

In Asia, the Nikkei is leading the gains in the region, up by +1.58%, and reaching a three-month high as trading resumed after a holiday. The S&P/ASX 200 is also up by +0.77%, and the KOSPI has seen minor gains of +0.13%. In contrast, the Hang Seng is down by -1.24%, the CSI by -0.53%, and the Shanghai Composite by -0.52%, following weak inflation and trade data released over the past two days.

To the day ahead now, and data releases include the German ZEW survey for October, UK unemployment data for August, and Euro Area industrial production for August. There’s also Canada’s CPI release for September, and in the US there’s the Empire State manufacturing survey for October. Central bank speakers include the ECB’s Nagel, and the Fed’s Daly and Kugler. Finally, today’s earnings releases include Bank of America, Citigroup, Goldman Sachs and Johnson & Johnson.