Month: January 2022

Mandatory GMO Disclosure Doesn’t Sway Shopping Habits (But Will Drive Up Costs)


lrphotos135197

Consumers shrug at mandatory GMO labeling. Beginning this year, federal food-labeling laws require products made with genetically modified ingredients to carry a label saying they are “bioengineered.” But short of requiring extra work and costs for food makers and manufacturers, the law is likely to lead to little change.

Research suggests that consumers won’t alter their behavior based on mandatory disclosure of genetically modified organism (GMO) food products.

“In the presence of existing voluntary non-GMO labels, mandatory labeling did not have any additional effect on demand,” wrote researchers from Cornell University, the University of Massachusetts Amherst, and the University of Wisconsin-Madison in a November 2021 paper. “Our findings suggest that voluntary non-GMO labels may already provide an efficient disclosure mechanism without mandatory GMO labels.”

Looking at legislative consideration of GMO labeling in several states and the adoption of such labeling in Vermont, the authors found that public discussion of GMO labeling increased awareness of the issue and may have steered consumers toward products voluntarily labeled as non-GMO. “Heightened consumer awareness” was found to have “increased adoption of products with voluntary non-GMO labels, even absent actual implementation of mandatory GMO labeling,” they noted.

“Contrary to previous studies that indicated the mandatory labels for products made with bioengineered food would herald big swings in consumer preferences and buying, this new study shows a more muted effect,” points out Megan Poinski at Food Dive. “What did motivate consumers to change behavior was news about GMO food.”

The U.S. Department of Agriculture (USDA) has admitted that new federal regulations mandating the labeling of bioengineered food—passed in 2016 under former President Barack Obama and finalized by the Trump administration—may be useless. It “is not expected to have any benefits to human health or the environment,” the USDA said in 2018.

The changes are costly, however. “USDA estimates that the costs of the proposed [mandatory labeling] would range from $598 million to $3.5 billion for the first year, with ongoing annual costs of between $114 million and $225 million,” it said. (“So not only are the new regulations useless, implementing them will jack up food prices for consumers,” as Reason‘s Ron Bailey pointed out).

Food policy writer Baylen Linnekin has long been warning of the ways in which the National Bioengineered Food Disclosure Act “is a bad law, and likely unworkable.” The labeling requirements themselves are confusing:

Under the final rule, a food producer marketing a food that is genetically modified (GMO) or that contains GMO ingredients may comply with the rules in any one (or more) of four ways: 1) by clear wording on a food label; 2) by using the USDA’s new symbol “BE” to designate that it is bioengineered food; 3) via a QR code printed on a food label; or 4) by giving the consumer the option to send a text message to the manufacturer seeking more information.

Besides, there’s no evidence that “bioengineered” food is anything consumers should be concerned about.

“The move is universally confounding food safety advocate groups,” The Washington Post reports. “Eating bioengineered foods poses no risk to human health, according to the National Academy of Sciences and the Food and Drug Administration.”

“Critics say the rules devised by the U.S. Department of Agriculture will actually confuse consumers further and make it harder to know what’s in any given product,” notes NPR.  “One advocacy group [the Center for Food Safety] has even sued the USDA to try to block the new regulations from taking effect.”

Among other complaints, the ongoing lawsuit objects to manufacturers not being able to use the more widely-known term GMO, instead of bioengineered. It also objects to the fact that many foods made with bioengineered ingredients may be left out.

The USDA defines bioengineered food as “a food that contains genetic material that has been modified through in vitro rDNA techniques and for which the modification could not otherwise be obtained through conventional breeding or found in nature.” Foods made with genetically modified material that isn’t detectable in the final product aren’t considered bioengineered foods, it says.

The bottom line: Voluntary labeling of non-GMO products was working, providing consumers who—for whatever reason—wanted to know that sort of thing with the information they desired and allowing manufacturers who wanted to use non-GMO status as a marketing tool to do so. But since the federal government stepped in, the whole process has become more costly and confusing with seemingly no consumer benefit.

FREE MINDS 

Questioning paranoia about smartphones and attention spans. Journalist Matthew Sweet explores some of the cherry-picked examples and logical fallacies in Stolen Focus, a new book by Johann Hari about diminishing attention spans. (You can read the whole thread on Twitter, starting here.) One example: Hari cites a study about smartphones and distraction and draws some serious conclusions from it:

But not only was the study not the most rigorous (it “was commissioned by the authors of a business self-help book called The Plateau Effect” and is not peer-reviewed, Sweet points out), Hari also leaves out some vital information about how the study was set up. “The distracting messages mentioned were sent by the experimenters, and the subjects were told they contained important information about the test,” Sweet points out. “They HAD to respond. So it tells you very little – nothing, I would suggest – about the ordinary seductions of the smartphone.”

FREE MARKETS

New small business creation is thriving. “We’re now entering year three of the COVID-19 pandemic, and the U.S. economy is still struggling thanks to inflation, supply chain issues, and continually bad jobs numbers. However, small business creation has been an unexpected economic bright spot since the pandemic began,” notes Reason‘s Fiona Harrigan:

In 2021 (excluding data for December, which the U.S. Census Bureau has not yet released), an average of around 452,000 new business applications were filed monthly. That’s a significant increase compared to 2019, when an average of roughly 293,000 new business applications were filed each month. Those numbers dipped in March and April 2020 before catapulting to over 550,000 in July 2020 and remaining above 2019 levels through the end of the year.

The 2021 data look especially promising because new businesses tend to hire employees. From January 2021 through the end of Q3, 1.4 million applications were filed to form businesses likely to hire workers, more than any other comparable recorded period.

QUICK HITS

• On this day in 2015, terrorists killed 12 people in an attack on the satirical French magazine Charlie Hebdo. See Reason‘s coverage here.

• Chicago schools are still closed, as the city’s leadership and teachers union fight over in-person learning.

• A judge this week ruled that Texas Gov. Greg Abbott doesn’t have the authority to prevent local governments in the state from imposing their own mask mandates.

• Hormonal birth control is now available without a prescription in Illinois. “This legislation covers self-administered hormonal contraceptive methods — birth control pills, skin patches, and vaginal rings — which were previously available only with a prescription from a physician,” notes Chicago magazine.

• Perpetually truth-challenged and sex work–obsessed pundit Nicholas Kristof can’t run for governor of Oregon because he hasn’t lived in the state long enough, officials say. On Thursday, “Secretary of State Shemia Fagan announced that her office was rejecting Kristof’s bid to run for office, because he does not meet the state’s three-year residency requirement,” reports Oregon Public Broadcasting. “That decision is likely just the start of a legal fight that will be decided by the courts.”

• Encrypted messaging app Signal’s crypto payments feature has gone global.

• “Add swim diapers to the list of issues that can get turned into a federal case,” writes Ron Hurtibise in the South Florida Sun-Sentinel. In a new federal lawsuit, “a Florida family is suing their condo board over what they say is a rule barring children from using the community pool while wearing swim diapers.”

• “The feminist rejection of diet culture can, at times, shift to a rejection of the whole concept of health itself, or at least of the idea that it’s probably a good thing to pursue health,” points out feminist author Jill Filipovic, in a Substack post calling for both a rejection of unhealthy dieting obsessions but also an understanding that “it does actually matter what we eat — to ourselves, to our bodies, to our souls, to our cultures, and to our planet.”

The post Mandatory GMO Disclosure Doesn't Sway Shopping Habits (But Will Drive Up Costs) appeared first on Reason.com.

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Live: Supreme Court To Weigh Biden Vaccine Mandate

Live: Supreme Court To Weigh Biden Vaccine Mandate

The Supreme Court on Friday is scheduled to hear at least two hours of arguments beginning at 10 a.m. EST after GOP state officials and business groups filed requests to block President Joe Biden’s vaccine mandate for employers who have more than 100 workers, as well as a similar requirement for healthcare facilities.

Listen live here.

Justice Sonia Sotomayor has chosen to participate in the arguments from her chambers, and two arguing attorneys, the solicitors general of Ohio and Louisiana, will also participate remotely by telephone, a court spokeswoman said.

The justices spent most of the pandemic working remotely but returned to in-person arguments in October. All nine are fully vaccinated, the court said. The court remains closed to the public due to the pandemic. –Reuters

The plaintiffs have argued that the Biden administration exceeded its authority by imposing requirements that were never authorized by Congress, and that it f ailed to follow the proper administrative rules for issuing emergency regulations. 

Of note – and possible relevance to the argument; in July, Biden explicitly stated that people who take the vaccine will not get COVID-19, a statement we know (and knew at the time) was false.

Under one of the Biden policies, OSHA required that businesses employing more than 100 employees need to require vaccinations or weekly testing – which would apply to more than 80 million workers nationwide.

Taking the lead in trying to block the mandate is the state of Ohio and the National Federation of Independent Business. Meanwhile, several religious groups, including the Southern Baptist Theological Seminary, have filed similar cases.

The second policy under consideration by the Supreme Court requires that approximately 10.3 million workers across 76,000 healthcare facilities receive the vaccine.

Tyler Durden
Fri, 01/07/2022 – 09:55

via ZeroHedge News https://ift.tt/3f37kYy Tyler Durden

Ten Dead Bodies Crammed Into Car Left Outside Mexican Governor’s Office

Ten Dead Bodies Crammed Into Car Left Outside Mexican Governor’s Office

In the latest sign of Mexico’s out-of-control cartel violence, ten bodies were abandoned outside the governor’s office, in a public square lit up with Christmas decorations, in the north-central Mexican state of Zacatecas on Thursday.

According to CBS News, the state governor, David Monreal, said the bodies of eight men and two women were crammed into a Mazda SUV outside his office; all of the deceased had signs of beating and bruising. 

“They came to leave them here … bodies, apparently beaten, with wounds,” Monreal said.

Francisco Murillo, the state’s chief prosecutor, said seven of the ten bodies died of “asphyxiation by strangulation.” He said five bodies had been identified so far. Three of them have a past criminal record. 

Murillo said several suspects had been arrested in possible connections to the body dump. 

The federal public safety department said a man drove the Mazda SUV to the governor’s office, then exited the vehicle early Thursday and walked down the street into an alley. 

Zacatecas has been transformed into a warzone in recent years as Sinaloa and Jalisco cartels, and other drug cartels are fighting to control highways in the state used to transport drugs to the US border. 

Drug cartels use grisly tactics, such as killing their enemies and displaying them for the public to see as a way to intimidate rival gangs and or even local officials. 

In November, ten bodies were found hanging from a highway bridge in northwest Zacatecas. 

“What we received was a cursed inheritance” from previous administrations, Monreal said, referring to the high violent crime in the state. 

So far, President Andrés Manuel López Obrador has had little success in decreasing homicides across the country. There were 31,615 killings in the first 11 months of 2021, a decline of 3.6% from 32,814 in 2020.

Meanwhile, Mexico is suing US gunmakers for arming drug cartels. The country is one of the most dangerous in the world. 

Tyler Durden
Fri, 01/07/2022 – 09:44

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

Mandatory GMO Disclosure Doesn’t Sway Shopping Habits (But Will Drive Up Costs)


lrphotos135197

Consumers shrug at mandatory GMO labeling. Beginning this year, federal food-labeling laws require products made with genetically modified ingredients to carry a label saying they are “bioengineered.” But short of requiring extra work and costs for food makers and manufacturers, the law is likely to lead to little change.

Research suggests that consumers won’t alter their behavior based on mandatory disclosure of genetically modified organism (GMO) food products.

“In the presence of existing voluntary non-GMO labels, mandatory labeling did not have any additional effect on demand,” wrote researchers from Cornell University, the University of Massachusetts Amherst, and the University of Wisconsin-Madison in a November 2021 paper. “Our findings suggest that voluntary non-GMO labels may already provide an efficient disclosure mechanism without mandatory GMO labels.”

Looking at legislative consideration of GMO labeling in several states and the adoption of such labeling in Vermont, the authors found that public discussion of GMO labeling increased awareness of the issue and may have steered consumers toward products voluntarily labeled as non-GMO. “Heightened consumer awareness” was found to have “increased adoption of products with voluntary non-GMO labels, even absent actual implementation of mandatory GMO labeling,” they noted.

“Contrary to previous studies that indicated the mandatory labels for products made with bioengineered food would herald big swings in consumer preferences and buying, this new study shows a more muted effect,” points out Megan Poinski at Food Dive. “What did motivate consumers to change behavior was news about GMO food.”

The U.S. Department of Agriculture (USDA) has admitted that new federal regulations mandating the labeling of bioengineered food—passed in 2016 under former President Barack Obama and finalized by the Trump administration—may be useless. It “is not expected to have any benefits to human health or the environment,” the USDA said in 2018.

The changes are costly, however. “USDA estimates that the costs of the proposed [mandatory labeling] would range from $598 million to $3.5 billion for the first year, with ongoing annual costs of between $114 million and $225 million,” it said. (“So not only are the new regulations useless, implementing them will jack up food prices for consumers,” as Reason‘s Ron Bailey pointed out).

Food policy writer Baylen Linnekin has long been warning of the ways in which the National Bioengineered Food Disclosure Act “is a bad law, and likely unworkable.” The labeling requirements themselves are confusing:

Under the final rule, a food producer marketing a food that is genetically modified (GMO) or that contains GMO ingredients may comply with the rules in any one (or more) of four ways: 1) by clear wording on a food label; 2) by using the USDA’s new symbol “BE” to designate that it is bioengineered food; 3) via a QR code printed on a food label; or 4) by giving the consumer the option to send a text message to the manufacturer seeking more information.

Besides, there’s no evidence that “bioengineered” food is anything consumers should be concerned about.

“The move is universally confounding food safety advocate groups,” The Washington Post reports. “Eating bioengineered foods poses no risk to human health, according to the National Academy of Sciences and the Food and Drug Administration.”

“Critics say the rules devised by the U.S. Department of Agriculture will actually confuse consumers further and make it harder to know what’s in any given product,” notes NPR.  “One advocacy group [the Center for Food Safety] has even sued the USDA to try to block the new regulations from taking effect.”

Among other complaints, the ongoing lawsuit objects to manufacturers not being able to use the more widely-known term GMO, instead of bioengineered. It also objects to the fact that many foods made with bioengineered ingredients may be left out.

The USDA defines bioengineered food as “a food that contains genetic material that has been modified through in vitro rDNA techniques and for which the modification could not otherwise be obtained through conventional breeding or found in nature.” Foods made with genetically modified material that isn’t detectable in the final product aren’t considered bioengineered foods, it says.

The bottom line: Voluntary labeling of non-GMO products was working, providing consumers who—for whatever reason—wanted to know that sort of thing with the information they desired and allowing manufacturers who wanted to use non-GMO status as a marketing tool to do so. But since the federal government stepped in, the whole process has become more costly and confusing with seemingly no consumer benefit.

FREE MINDS 

Questioning paranoia about smartphones and attention spans. Journalist Matthew Sweet explores some of the cherry-picked examples and logical fallacies in Stolen Focus, a new book by Johann Hari about diminishing attention spans. (You can read the whole thread on Twitter, starting here.) One example: Hari cites a study about smartphones and distraction and draws some serious conclusions from it:

But not only was the study not the most rigorous (it “was commissioned by the authors of a business self-help book called The Plateau Effect” and is not peer-reviewed, Sweet points out), Hari also leaves out some vital information about how the study was set up. “The distracting messages mentioned were sent by the experimenters, and the subjects were told they contained important information about the test,” Sweet points out. “They HAD to respond. So it tells you very little – nothing, I would suggest – about the ordinary seductions of the smartphone.”

FREE MARKETS

New small business creation is thriving. “We’re now entering year three of the COVID-19 pandemic, and the U.S. economy is still struggling thanks to inflation, supply chain issues, and continually bad jobs numbers. However, small business creation has been an unexpected economic bright spot since the pandemic began,” notes Reason‘s Fiona Harrigan:

In 2021 (excluding data for December, which the U.S. Census Bureau has not yet released), an average of around 452,000 new business applications were filed monthly. That’s a significant increase compared to 2019, when an average of roughly 293,000 new business applications were filed each month. Those numbers dipped in March and April 2020 before catapulting to over 550,000 in July 2020 and remaining above 2019 levels through the end of the year.

The 2021 data look especially promising because new businesses tend to hire employees. From January 2021 through the end of Q3, 1.4 million applications were filed to form businesses likely to hire workers, more than any other comparable recorded period.

QUICK HITS

• On this day in 2015, terrorists killed 12 people in an attack on the satirical French magazine Charlie Hebdo. See Reason‘s coverage here.

• Chicago schools are still closed, as the city’s leadership and teachers union fight over in-person learning.

• A judge this week ruled that Texas Gov. Greg Abbott doesn’t have the authority to prevent local governments in the state from imposing their own mask mandates.

• Hormonal birth control is now available without a prescription in Illinois. “This legislation covers self-administered hormonal contraceptive methods — birth control pills, skin patches, and vaginal rings — which were previously available only with a prescription from a physician,” notes Chicago magazine.

• Perpetually truth-challenged and sex work–obsessed pundit Nicholas Kristof can’t run for governor of Oregon because he hasn’t lived in the state long enough, officials say. On Thursday, “Secretary of State Shemia Fagan announced that her office was rejecting Kristof’s bid to run for office, because he does not meet the state’s three-year residency requirement,” reports Oregon Public Broadcasting. “That decision is likely just the start of a legal fight that will be decided by the courts.”

• Encrypted messaging app Signal’s crypto payments feature has gone global.

• “Add swim diapers to the list of issues that can get turned into a federal case,” writes Ron Hurtibise in the South Florida Sun-Sentinel. In a new federal lawsuit, “a Florida family is suing their condo board over what they say is a rule barring children from using the community pool while wearing swim diapers.”

• “The feminist rejection of diet culture can, at times, shift to a rejection of the whole concept of health itself, or at least of the idea that it’s probably a good thing to pursue health,” points out feminist author Jill Filipovic, in a Substack post calling for both a rejection of unhealthy dieting obsessions but also an understanding that “it does actually matter what we eat — to ourselves, to our bodies, to our souls, to our cultures, and to our planet.”

The post Mandatory GMO Disclosure Doesn't Sway Shopping Habits (But Will Drive Up Costs) appeared first on Reason.com.

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ARK’s Entire Suite Of ETFs Has Been Slammed By Rising Yields

ARK’s Entire Suite Of ETFs Has Been Slammed By Rising Yields

Rising yields are the culprit-du-jour to explain Cathie Wood’s cringe-worthy start to 2022.

The manager has seen her flagship ARK Innovation Fund fall almost 10% to start 2022 and all of her eight other ETFs have fallen in the three trading sessions since the start of 2022 after continued hawkishness from the Fed has pushed rates higher, according to Bloomberg. 

European leveraged notes that launched last month and were put in place to magnify ARK’s returns were down as much as 17% intraday during the week the week. Instruments put in place to track ARK’s returns have fallen, while those set up to deliver the inverse of ARK’s performance are starting the year off on the right foot. 

ARK’s ETF palette has fallen between -2.63% and -10.09% in the first three trading days of the year. 

Of these ETFs, only one has a positive 1 year return. MTD, YTD and 1 year returns for almost all other instruments show a sea of red.

Todd Rosenbluth, head of ETF and mutual fund research at CFRA, said: “Loyal investors to the ARK strategies hoped 2022 would be more like 2020 and not a repeat of 2021. But they are being reminded that past performance success is not indicative of future results and are being forced to decide if the risk is worth the reward in a rising rate environment.”

In what appears to be at least somewhat of a pivot by the mainstream financial media, who has been instrumental in touting Wood’s “strategies”, Bloomberg referred to some of Wood’s trades as “controversial” in a report this week.

Heading into Friday’s session, the ARKK team is likely hoping for a NFP miss that would increase the chance of the Fed backing off its hawkish stance. And Cathie is likely hoping for a shred of respite after surviving the first trading week of the year. 

51 weeks to go…

Tyler Durden
Fri, 01/07/2022 – 09:29

via ZeroHedge News https://ift.tt/3Ghn0TW Tyler Durden

Bonds, Stocks Slammed As Hot Wages, Unemployment Data Sparks Surge In Rate-Hike Odds

Bonds, Stocks Slammed As Hot Wages, Unemployment Data Sparks Surge In Rate-Hike Odds

A hotter than expected wage growth print and tumbling unemployment rate have been greeted by selling in bonds and stocks as no obvious ‘dovish’ excuse can be gleaned from the data.

Bloomberg’s Riccadonna says the biggest news from this report, without doubt, is the fact that the labor market has now arrived at (and surpassed) the Federal Reserve’s estimate of full employment (which the Fed pegs at 4.0%).

“As we are already beyond that level (3.9% reported), this will compel any lingering fence sitters on the FOMC to the view that the threshold for interest rate liftoff has been met — thereby titling policy makers’ inclination toward March vs. June liftoff.”

And that is now priced in with the odds of a March hike now above 90%…

Treasuries were dumped with the short-end surging most…

Stocks tanked on the print…

So, we are back at the “good news is bad news” period of the monetary/market panic-cycle.

Tyler Durden
Fri, 01/07/2022 – 09:06

via ZeroHedge News https://ift.tt/3q4bVjD Tyler Durden

Tucker Confronts Cruz For Calling Jan 6th A “Terrorist Attack”, Senator Apologizes For “Sloppy…Dumb” Comments

Tucker Confronts Cruz For Calling Jan 6th A “Terrorist Attack”, Senator Apologizes For “Sloppy…Dumb” Comments

Authored by Steve Watson via Summit News,

After encountering a huge backlash from conservatives for describing the events of January 6th 2021 as a “violent terrorist attack,” Senator Ted Cruz apologised and admitted that his language was “dumb” and “sloppy”.

Cruz appeared on Tucker Carlson’s evening show Thursday, apparently at his own request, and attempted to back track on what he said, claiming that he’d been referring to attacks on police.

Carlson said to Cruz “There are a lot of dumb people in the Congress. You are not one of them. I think you’re smarter than I am. And you never use words carelessly. And yet you called this a terror attack when by no definition was it a terror attack. That’s a lie. You told that lie on purpose, and I’m wondering why you did.”

Cruz responded “When you aired your episode last night, I sent you a text shortly thereafter and said listen, I would like to go on because the way I phrased things yesterday, it was sloppy, and it was frankly dumb.”

Carlson interjected, urging “Look, I’ve known you a long time. Since before you went to the Senate, you’re a Supreme court contender. You take words as seriously as any man who’s ever served in the Senate. And every word you repeated that phrase. I do not believe that you use that accidentally. I just don’t.”

Cruz again described his language as “a poor choice of words,” claiming that “as a result of my sloppy phrasing, it’s caused a lot of people to misunderstand what I meant.”

“Let me tell you what I meant,” The Senator continued, explaining

“What I was referring to are the limited number of people who engaged in violent attacks against police officers. I think you and I both agree that if you assault a police officer, you should go to jail.”

“That’s who I was talking about. And the reason the phrasing was sloppy is I have talked dozens if not hundreds of times, I’ve drawn a distinction. I wasn’t saying that the thousands of peaceful protestors supporting Donald Trump are somehow terrorists. I wasn’t saying the millions of patriots across the country, supporting president Trump are terrorists,” Cruz declared, adding “And that’s what a lot of people have misunderstood that.”

Carlson continued to say he doesn’t believe Cruz.

“Hold on a second,” the host shot back, noting “What you just said doesn’t make sense. So if somebody assaults a cop, he should be charged and go to jail. I couldn’t agree more. We have said that for years, but that person’s still not a terrorist. How many people have been charged with terrorism on January 6?”

Carlson continued, “Like why’d you use that word? You’re playing into the other side’s characterization, that… allows them to define an entire population as foreign combatants. And you know that so why’d you do it?”

Cruz responded, “The reason I’ve used that word for a decade, I have referred to people who violently assault police officers as terrorists. I’ve done so over and over and over again. If you look at all the assaults we’ve seen across the country, I’ve called that terrorism over and over again.”

The Senator continued, “That being said, Tucker, I agree with you. It was a mistake to say that yesterday. And the reason is what you just said, which is we’ve now had a year of Democrats in the media, twisting words, and trying to say that all of us are terrorists trying to say you’re a terrorist, I’m a terrorist.”

“And so look, I don’t like people who assault cops and, and, and I stand up and defend cops,” Cruz carried on, adding “The reason I use that word is that’s the word I’ve always used for people that violently attack cops. But in this context, I get why people were angry because we’ve had a year of the corrupt corporate media and Democrats claiming anyone who objected to the election fraud.”

“I guess I just don’t believe you,” Carlson said.

“And I mean that with respect because I have such respect for your acuity and your precision.”

Cruz also tweeted the interview out, saying his words were dumb:

*  *  *

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Tyler Durden
Fri, 01/07/2022 – 08:46

via ZeroHedge News https://ift.tt/3q3Dtpb Tyler Durden

December Payrolls Huge Miss Again, Just 199K Jobs Added, Fewest Since December 2020

December Payrolls Huge Miss Again, Just 199K Jobs Added, Fewest Since December 2020

With everyone bulled up on the December jobs print which was expected to more than double the disappointing November print of 210K to 447K with a whisper of more than 500K, moments ago the BLS reported that in December the US job market deteriorated again, as only 199K jobs were added, a huge miss to expectations, and the lowest number since December 2020.

Developing

Tyler Durden
Fri, 01/07/2022 – 08:34

via ZeroHedge News https://ift.tt/3t29xMh Tyler Durden

Hard Court

Hard Court

By Wouter van Eijkelenburg, economist/strategist at Rabobank

Hard Court

Yesterday, it was Europe’s turn to take losses in equity markets following the release of Fed minutes on Wednesday with the DAX losing -1.35%, CAC in France losing -1.72% and the FTSE -0.88%. At the other side of the Atlantic most damage was already done in the US on Wednesday when tech-heavy Nasdaq had its worst session since February last year, losing more than 3%. Tech stocks didn’t rebound on Thursday, as investors rotated out of high valuation names. The 10-year Treasury stabilized yesterday and currently yields 1.73%, up 20 bps since the start of the year. Today started off well in the Hong Kong, with Hang Seng index up 1.6% boosted by higher prices of tech stocks and erasing the losses of earlier this week.

Equity markets might not be the only victim of the accelerating hawkish pivot of the Fed. Emerging markets (EM) are also confronted with the 2022 reality. It’s hard not to remember the “Taper Tantrum” back in the summer of 2013. EM assets and currencies collapsed as a result of the Fed’s announcement that they would be unwinding unconventional monetary policy after a prolonged period of monetary easing.

Sounds familiar? Yes it does, but we don’t expect a similar 2022 taper tantrum to occur. This time around the Fed was more careful in their messaging, providing the market with an advanced notice. This partially proved successful since markets anticipated further tightening by decreasing capital inflows towards EMs over the last months. Furthermore, EMs have fortified their FX reserves over the past years and many are experiencing records in exports, fueled by the global economic recovery. Both factors could help mitigate potential negative currency shocks caused by foreign capital outflows from EMs as a result of tighter US monetary policy. Nonetheless, the potential for rising inequality between developed and emerging markets remains. EMs might be forced to counter the Fed’s tighter monetary policy at a sub-optimal moment in their economic cycle since the economic recovery in many EMs is still fragile. Higher interest rate costs also pressure domestic governments who already squeezed their balance sheets in order to counter the consequences of Covid-19. This is certainly something to monitor over the course of 2022.

Meanwhile, “down under” the Djokovic saga continues as the federal government denied his entry. The tennis star received a medical exemption from the state of Victoria in order to be able to participate in the Australian Open which will start on the 17th of January. However, (No-vax) Djokovic was detained shortly after arrival (failing to provide evidence justifying his medical exemption) and will be deported from Australia and unable to defend his title, unless he wins his first game in “court” (of justice) to “qualify” (medically). It symbolizes the difficulties that countries face in providing transparent and equal rules while exploring “how to live with Covid-19”. Different rules in different countries for different sectors, professions and sports (stars) makes government guidelines less comprehensive and harder to logically justify. This adds to frustration and polarisation of societies. 

Which links to the 1-year anniversary of the insurrection of the Capitol. So much has happened in 2021, but it was only at the beginning of last year that a crowd of fired up “political” Trump enthusiast took over the Capitol with the aim to halt the certification of Biden’s election victory. A very confronting sight, illustrative of increased polarization in the US. However, it’s questionable if yesterday’s speech by Biden’s brought the American people closer by undeniably blaming Trump for the capitol riots. Moreover, does his tough stand benefit or hurt the electoral sentiment leading up to the 2022 mid-terms? The mid-terms will be very important in setting the tone for the 2024 elections. In this regard, president Biden may have asked a key question for coming year(s):” Are we going to be a nation that accepts political violence as a norm?”

Day ahead

Today, Eurostat will publish its flash estimate for Eurozone inflation. Data from several member states suggest that today’s figures for the Eurozone as a whole may finally show a stabilization in inflation following the sharp rise in recent months. The consensus is for a slight decline to 4.8% y/y from 4.9% last month. In Germany, the harmonized figure for December fell slightly, data showed yesterday. However, it rose further in Italy and Spain. More worrying is that the easing of inflation pressures appears to be coming mainly from energy but that other components, such as food and core-items, are gradually taking over. Although there are hopes that the figure for December (or perhaps even November) would mark the cyclical high in the y/y inflation rate, the underlying signals from recent data are far from reassuring. Whilst the headline inflation rate will almost certainly drop in January thanks to the German VAT hike falling out of the comparison base, the steady rise in non-energy inflation in recent months is clearly a matter of concern. Food price inflation could see a significant acceleration in coming months. Moreover, January is traditionally the month in which many companies set their new list prices for 2022. With shortages all around, we could be in for some surprises next month. So, a saying that not only applies to farmers, but also to central banks nowadays: do not count your chickens before they are hatched!

Furthermore, today’s US Employment Report is not likely to show much of an impact from the Omicron variant as it reflects the labor market situation around mid-December. The Bloomberg consensus expectation for nonfarm payroll growth in December is 440K, which would mean a pickup from the disappointing 210K in November and a return to the pace we saw in August through October. Earlier this week, ADP’s employment change for December surprised with 807K. However, ADP has been more optimistic about employment growth than the Bureau of Labor Statistics since September. The unemployment rate is expected to fall to 4.1% from 4.2%. In combination with increased participation this would be a sign of further labor market progress. The participation rate is expected to rise slightly, to 61.9% from 61.8%. Participation has remained below pre-pandemic levels as labor supply continues to be restrained by COVID-19. Average hourly earnings are expected to slow down in year-on-year terms, to 4.2% from 4.8%. This is largely a base effect from the 1.0% jump in average hourly earnings (month-on-month) in December 2020. In month-on-month terms, an acceleration is expected to 0.4% in December 2021 from 0.3% November 2021. Due to composition effects, average hourly earnings are not a good measure of wage pressures anyway. In fact, it was the high Employment Cost Index on the eve of the November meeting of the FOMC that helped Powell make his pivot to an inflation fighting stance. While strong employment growth and a decline in unemployment would strengthen the case for an earlier rate hike by the Fed, the key test will be whether this momentum can be sustained when the impact of Omicron is incorporated in the data in the coming months.

Tyler Durden
Fri, 01/07/2022 – 08:20

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

Futures Rise Ahead Of Jobs Data That Could “Wreak Havoc In Markets”

Futures Rise Ahead Of Jobs Data That Could “Wreak Havoc In Markets”

US index futures climbed on Friday, paring this week’s losses fractionally as investors braced for jobs data that should provide clues about the pace of Fed tightening and which is expected to come in strong (whisper number at 502k, above 447k estimate, up from 210K last month; Wednesday’s ADP print was 807k, well above 410k estimate, our full preview is here) but not too strong – remember we now live in a “good news is bad news” world – or else the market will freak out that the Fed will hike even faster than is currently expected. Nasdaq futures also showed signs of recovery after a three-day selloff even as cryptocurrencies crashed again during the Asian session. As of 730am, emini S&P futures were up 4 points or 0.1%, Nasdaq futures were 0.24% higher, or 37 points and Dow futures were unchanged.Treasuries were steady, with the two-year yield heading for the biggest weekly spike since October 2019. Crude oil headed for the longest streak of weekly gains since October on tightening supplies.

U.S. hiring likely more than doubled in December from the previous month to 447,000 new jobs, according to consensus projections for nonfarm payrolls. “A low figure, around 100,000-200,000, wouldn’t change the direction the Fed is preparing to take,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “However, a strong NFP print, and a beat on unemployment rate, have the power of boosting the Fed hawks, on the idea that the jobs market no longer needs the Fed’s support.” That “could wreak havoc in risk markets.”

A surprisingly hawkish stance from the Fed revealed in the latest Minutes roiled financial markets at the start of a new year, with investors reassessing how to price assets in an environment of rising interest rates. The removal of crisis-era accommodation marks a shift not seen in at least three years, a time that also saw a spike in volatility.

“We knew coming into 2022 that the Fed was going to be a creator of volatility within the market and we’re seeing that right out of the gate at the start of the year,” said Lindsey Bell, chief markets and money strategist at Ally. “The good news is that today things seem to be stabilizing a little bit after yesterday’s knee-jerk reaction.”

Comments by regional Fed presidents provided some additional insight Thursday as traders attempted to predict a possible schedule for tightening. St. Louis Fed President James Bullard, a more hawkish policy maker, said in a speech the central bank could raise its target interest rate as soon as March. Meanwhile, San Francisco Fed President Mary Daly said at a virtual event that trimming the Fed balance sheet would come after normalizing the Fed funds rate.

Back to markets, Among meme stocks, GameStop jumped 18% in premarket trading after a report that the gaming retailer plans to launch a marketplace for non-fungible tokens this year. AMC Entertainment gained 6.5%. Discovery Inc. rose in New York premarket trading after BofA Global Research recommended the stock. Cryptocurrency-exposed stocks slip as Bitcoin extended its decline, falling below $42,000, before recovering slightly; the largest token declined as much as 4.9% to $41,008, marking a tumble of about 40% from its record near $69,000 reached Nov. 10. Marathon Digital dropped 1.6% in U.S. premarket, Riot Blockchain -1.3%, MicroStrategy -0.4% In Europe, Safello -4%, Arcane Crypto -5.7%, Northern Data -3.1%. Other notable premarket movers:

  • GameStop (GME US) shares surge 19% in U.S. premarket trading after the gaming retailer was said to be planning to launch an NFT marketplace.
  • Kohl’s (KSS US) falls 3.8% in premarket trading after UBS downgrades it to sell and slashes price target to a Wall Street-low on the “challenging” outlook for the stock in 2022 on inflationary pressures.
  • Cryptocurrency-exposed stocks slip as Bitcoin extends its decline, falling below $42,000, before recovering slightly. Marathon Digital (MARA US) drops 1.6% in U.S. premarket, Riot Blockchain -1.3% (RIOT US), MicroStrategy -0.4% (MSTR US).
  • Thursday’s court ruling was a “clear win” for Sonos (SONO US), and provides further proof that the firm has industry-leading intellectual property that it can successfully defend, Morgan Stanley (overweight) says. Shares rose 5.7% post-market.
  • Marin Software (MRIN US) soars 36% in U.S. premarket trading after the marketing software firm announced an integration with Amazon Ads’ demand-side platform. Marin’s market capitalization was about $53m at Thursday’s close.
  • Duck Creek Technologies’ (DCT US) net new annual recurring revenue is “back to beating,” Barclays (overweight) says. The shares rose 7.7% in postmarket trading after co. boosted its full-year revenue forecast.
  • Quidel (QDEL US) rose 3% postmarket after the maker of Covid tests reported 4Q preliminary revenue that sailed past expectations.
  • Armada Hoffler Properties (AHH US) fell 4.7% in premarket after launching a share sale to help pay the cash cost of its previously announced deal for the Exelon Building in Baltimore.
  • Absci Corp. jumped 48% after announcing a research agreement with Merck & Co.

European equities had a choppy morning, settling flat to small lower as losses for travel and real-estate stocks outweighed gains in the mining industry, pulling the Stoxx Europe 600 Index down 0.3%. The gauge has had a bumpy first week of the year, pulling back from three consecutive record highs. In Milan, STMicroelectronics rose as much as 6.5%, the most since October, after the chipmaker reported higher-than-expected revenue. DAX lagged peers, dropping as much as 0.75%. Most indexes trade around lows for the week. Travel and real estate are the weakest sectors; miners, tech and oil & gas stocks lead to the upside. Here are some of the biggest European movers today:

  • STMicroelectronics shares rise as much as 6.5% in Milan, the most since Oct. 28, after the chipmaker reported 4Q21 revenue that exceeded projections.
  • Banca Carige soars as much as 13% amid reports that Cerberus submitted a non-binding offer for the troubled lender.
  • Lanxess jumps as much as 3.3% to the highest since Nov. 3 after the stock is upgraded to overweight from equal-weight at Barclays, which sees “an attractive set-up” for share outperformance this year.
  • Aston Martin gains as much as 3.8% after an update from the luxury car-maker that Jefferies (hold) called a “reassuring profit warning.”
  • Inpost falls as much as 8.6%, reversing early gains, after the firm posted a 4Q and FY operational update. Growth in 4Q parcel volumes was 1% below Jefferies’ estimates, writes analyst David Kerstens (buy).
  • Evolution drops as much as 6.2% after Berenberg says the market is “overly optimistic” about the Swedish online gambling giant’s top-line growth prospects, initiating with a hold rating on the stock.
  • M&C Saatchi falls as much as 12%, the most intraday since July 2020, erasing some of the gains since the Jan. 5 announcement that AdvancedAdvT acquired a stake. The drop came after AdvancedAdvT said it’s interested in exploring a share- exchange merger.
  • C&C falls as much as 5.8% after the Irish cider maker said performance was behind expectations in December due to the latest U.K. and Ireland measures to control the spread of Covid-19.

Consumer prices in the euro area jumped a record 5% from a year earlier in December, adding pressure on the ECB to join a growing legion of central banks from the Fed to the Bank of England in tightening monetary conditions.

Earlier in the session, Asian stocks rose, rebounding after a two-day drop, as financials gained amid the outlook for higher U.S. interest rates while traders remained wary of risks from the end of easy-money policies and coronavirus flare-ups. The MSCI Asia Pacific Index pared gains after rising by as much as 0.7%. South Korean chipmakers and Chinese internet giants were among stocks supporting the advance, helping offset drops in Taiwanese and Japanese tech stocks. The regional stock benchmark was poised for a weekly loss of 0.8%, sparked by a more hawkish than expected tone in the Federal Reserve’s December meeting minutes. The prospects of faster-than-expected monetary tightening spooked global investors, triggering a selloff of growth stocks. 

“Value stocks continue to be strong, with higher yields pushing up banking stocks,” said Shogo Maekawa, a strategist at JP Morgan Asset Management in Tokyo. But, “for value and cyclicals to continue to be strong, the reasoning over monetary tightening needs to be backed by robust economic fundamentals and corporate earnings.”

Key gauges in Hong Kong, South Korea and Australia rose more than 1%. Japan’s Topix swung from a gain of as much as 1% to a loss of 0.8% at one point as investors reacted to news of spiking Covid-19 cases in some areas and possible restrictions to counter them. For Japan, the “risk of going into a state of emergency again seems to be weighing on the minds of investors,” said Serdar Armutcu, head of electronic trading at Mita Securities Co. in Tokyo.

Japanese stocks finished a volatile day slightly down amid concerns on interest rates and virus measures. Electronics makers and service providers were the biggest drags on the Topix, which closed 0.1% lower after swinging from a gain of 1% to a loss of 0.8%. Banks outperformed amid a rally in global lenders on an outlook for higher U.S. rates. The Nikkei 225 was little changed, with SoftBank Group gaining while Omron and Daikin dropped. “I guess it’s the continuation of yesterday’s market weakness, concerns over the FOMC,” said Serdar Armutcu, head of electronic trading at Mita Securities Co. in Tokyo. Plus, the “risk of going into a state of emergency again seems to be weighing on the minds of investors.” Okinawa was set to record over 1,400 new Covid cases, FNN reported. Kyodo reported earlier that Japan will delay resumption of its “Go To” travel subsidy program until after February and that Tokyo may tighten guidelines on group dining.

Indian stocks rose on optimism that state governments will opt for specific restrictions, instead of broad-based lockdowns, to curb a surge in coronavirus cases. The S&P BSE Sensex climbed 0.2% to 59,744.65, in Mumbai, taking its advance this week to 2.6%, the biggest five-day advance since early September. The NSE Nifty 50 Index gained 0.4%. Reliance Industries Ltd. climbed 0.8% and was the biggest boost for both gauges.  Thirteen of 19 sector indexes compiled by BSE Ltd. advanced, led by a gauge of basic materials companies. Of 30 shares in the Sensex index, 16 rose and 14 fell.  Mumbai, India’s financial capital, has no plans to shut down even as daily Covid-19 cases increase, the city’s municipal commissioner said. Separately, India will release its official estimate of the economy’s expansion for the fiscal year ending in March later today

In Australia, the S&P/ASX 200 index rose 1.3% to close at 7,453.30, regaining ground after Thursday’s 2.7% slump. All sectors advanced, led by energy shares and banks. Overall, the benchmark added 0.1% in the shortened first trading week of the year. Medibank was the top performer on Friday, gaining the most since March 2020. Magellan was among the worst performers after reporting net outflows of about A$1.55 billion for the December quarter. In New Zealand, the S&P/NZX 50 index fell 0.1% to 12,970.65

In FX, Bloomberg dollar spot drifts 0.2% lower. The euro was marginally higher against the greenback. Scandies top the G-10, AUD lags although ranges are relatively narrow.

In rates, price action was subdued with cash USTs and eurodollars quiet ahead of today’s payrolls report, with yields marginally cheaper across the curve but within Thursday session range. Treasury yields were cheaper by up to 1bp across long-end of the curve with spreads marginally steeper; 10-year yields around 1.725%, remain near top of weekly range. Long-end bunds and gilts richen ~1.5bps, peripheral spreads widen to core.

In commodities, oil was on course for a third weekly increase amid supply constraints; crude futures tagged on another percentage point of gains. WTI regains a $80-handle, Brent stalls near $83 in early London trade. Gains in commodities and emerging-market stocks further underscored the Friday rebound in risk sentiment. Spot gold drifts either side of $1,790/oz. Base metals are set to end the week strongly with LME nickel leading. Cryptos crashed during the Asian session, as usual.

Looking at the day ahead now, and the main highlight will be the aforementioned US jobs report for December. Otherwise, data releases from the Euro Area include the flash CPI reading for December, the final consumer confidence reading for December, and retail sales for November. Elsewhere, there’s also industrial production in November for France and Germany. Central bank speakers include the Fed’s Daly and Bostic, and the BoE’s Mann.

Top Overnight News from Bloomberg

  • Federal Reserve policy makers could start to raise their target interest rate as soon as March and shrink the central bank’s balance sheet as a next step in response to surging inflation, Federal Reserve Bank of St. Louis President James Bullard said
  • China’s delta variant-fueled Covid-19 outbreak isn’t showing signs of easing, with cases now cropping up elsewhere and technology hub Shenzhen on high alert, despite a dropoff in the latest epicenter Xi’an
  • Local governments in China have started mapping out their economic blueprints for 2022, setting moderate to ambitious growth targets that give a signal of national goals
  • President Kassym-Jomart Tokayev declared that order had largely been restored in Kazakhstan, after efforts to suppress mass protests that erupted over fuel price increases
  • Oil was poised for a third weekly gain as the market tightened due to supply constraints across OPEC+ members following civil unrest.
  • Peru hiked for a sixth straight month as inflationary pressure mounts amid the economy’s strong rebound from the pandemic. Argentina also raised its benchmark interest rate for the first time in over a year as it faces calls from the International Monetary Fund to tighten its monetary policy
  • Japanese Finance Minister Shunichi Suzuki says he’s closely watching moves in foreign exchange markets and the impact of currencies on the economy

Market Snapshot

  • S&P 500 futures up 0.18% to 4,696.00
  • STOXX Europe 600 down 0.3% to 486.86
  • MXAP up 0.5% to 191.98
  • MXAPJ up 0.8% to 625.21
  • Nikkei little changed at 28,478.56
  • Topix little changed at 1,995.68
  • Hang Seng Index up 1.8% to 23,493.38
  • Shanghai Composite down 0.2% to 3,579.54
  • Sensex up 0.1% to 59,687.14
  • Australia S&P/ASX 200 up 1.3% to 7,453.35
  • Kospi up 1.2% to 2,954.89
  • Brent Futures up 0.9% to $82.71/bbl
  • Gold spot little changed at $1,790.39
  • U.S. Dollar Index down 0.21% to 96.12
  • German 10Y yield little changed at -0.05%
  • Euro up 0.2% to $1.1316

A more detailed look at global markets, courtesy of Newsquawk

Asia-Pac equities traded mostly higher but off best levels following a choppy Wall Street session – which saw the Russell 2000 close in the green whilst mild losses were seen across the Dow Jones, Nasdaq and S&P 500. US equity futures resumed trade with modest gains but the upside momentum faded, with the ES Mar’22 on either side of 4,700 in the run-up to the US jobs data. European equity futures traded flat with an upside bias for most of the overnight session. In APAC, the ASX 200 (+1.3%) was supported by its Financials, Energy, and Consumer Discretionary sectors. The Nikkei 225 (unch) was choppy but ultimately negative, with the index subdued by reports the Japanese government is seeking approval to declare COVID “quasi-emergencies” in three prefectures. The KOSPI (+1.2%) saw its Tech sector among the top performers after Samsung Electronic rose over 1.5% following its prelim earnings. The Hang Seng (+1.8%) and Shanghai Comp (-0.2%) held onto the mild gains seen at the cash open, although the property sector felt no reprieve as Shimao – thought to be one of the safer property firms – reportedly defaulted on a trust loan, thus triggering freefalls across its stock and bonds. In fixed income, US 10yr cash yield trimmed some of the prior session’s gains.

Top Asian News

  • Hong Kong to Send All Partygoers to Government Quarantine
  • Hong Kong’s Growth Forecasts at Risk as Omicron Spreads in City
  • Property Stocks Rally, Shimao Pares Losses: Evergrande Update
  • China Says It Supports Kazakhstan’s Efforts to End ‘Chaos’

European equities trade mixed/flat (Stoxx 600 -0.1%) with the Stoxx 600 on course to end the week in minor positive territory as markets await the December US NFP report. The handover from Asia was a mixed bag with upside seen for the ASX 200 (+1.3%) and Hang Seng (+1.8%) whilst the Nikkei (unch) was unable to gain much traction to the upside amid reports the Japanese government is seeking approval to declare COVID “quasi-emergencies” in three prefectures. Stateside, after yesterday’s session which saw the Russell 2000 close in the green and modest losses for the Nasdaq and S&P 500, futures are indicative of a relatively flat open with the ES +0.2%. In a recent note, Morgan Stanley suggested that this year’s equity set-up is “is best in Europe and Japan, where estimates look low while valuations are undemanding.” Sectors in Europe are mixed with Basic Resources the clear outperformer amid price action in underlying commodity prices whilst Rio Tinto (+2.0%) has also garnered support from a broker upgrade at Berenberg. Banking names are taking a breather today after gains of 4.4% for the Stoxx 600 Banking Index this week amid the more favourable yield environment seen since the beginning of the year. To the downside, Travel & Leisure names lag peers with no obvious catalyst behind the move whilst Real Estate and Food & Beverage names are also seen lower. In terms of individual movers, STMicroelectronics (+5.5%) is the best performer in the Stoxx 600 after Q4 prelim. revenue exceeded expectations, citing better than anticipated operations in an ongoing dynamic market; gains in the Co. have provided support for the likes of Infineon (+2.8%) and ASML (+2.1%). Shell (+0.2%) has seen marginal, but waning, support after announcing that the remaining USD 5.5bln of proceeds from the Permian divestment are to be distributed in the form of share buybacks at pace. To the downside, Airbus (-1.2%) is a laggard in the CAC after reports that Qatar Airways is seeking compensation regarding surface flaws on the A350.

Top European News

  • Sanofi Forms Potential $5.2 Billion AI Deal With Exscientia
  • Aston Martin Assures Valkyrie Is On Track After Ramp-Up Issues
  • Polish Inflation Hits 21-Year-High With More Rate Hikes Expected
  • ABG Hires Partners for Equity Sales From Nordea and Arctic

In FX, not much deviation and perhaps inclination for the Dollar to venture too far before the latest BLS report that may be key in terms of determining whether the Fed pulls the rate hike trigger in March and sets the ball rolling for QT at the next or a nearby FOMC meeting. The index remains finely poised between 96.086-299 parameters amidst fractionally softer US Treasury yields and another downturn in broad risk sentiment, albeit relatively mild compared to previous episodes of aversion this week. Moreover, several Greenback/G10 pairings could be preoccupied with option expiries in the run up to the jobs data (and after pending the outcome) given hefty interest rolling off at today’s NY cut.

  • EUR/GBP – The Euro and Pound are marginally outperforming, with the former reclaiming 1.1300+ status vs the Buck and latter retesting resistance around 1.3550 that includes the 100 DMA. However, Eur/Usd has faded multiple times above the round number and needs to breach 1.1350 convincingly to turn the corner, so 1.5 bn option expiry interest from 1.1290 to 1.1300 may still prove to be an impediment. Conversely, Eur/Gbp continues to hold above the 0.8333 mark that equates to the psychological 1.2000 level in the inverse cross to offer the Euro support and cap Sterling regardless of another encouraging UK PMI (construction this time) or flash Eurozone inflation flash ‘surprising’ to the upside (in line with Germany’s preliminary CPI outcome yesterday).
  • NZD/CAD – Aud/Nzd dynamics rather than NZ specifics might be propping up the Kiwi as well, while the Loonie is deriving traction from ongoing strength in crude oil (WTI pivoting Usd 80/brl and Brent basically bid within a Usd 82-83 range) before Canada’s LFS. Nzd/Usd is hovering around 0.6750, as the aforementioned Antipodean cross probes 1.0600 and Usd/Cad is inching towards 1.2700.
  • CHF/AUD/JPY – The Franc is treading water sub-0.9200 against its US counterpart with little reaction to an unexpected dip in Swiss sa unemployment or an acceleration in retail sales, while the Aussie and Yen both look trapped by option expiries very close or not far outside intraday extremes. Note, Aud/Usd has been up to 0.7178 and down to 0.7143 and Usd/Jpy topped and tailed at 116.05 and 115.75, so well within striking distance of 2.6 bn at 0.7160, 2.2 bn at 0.7200, 1.1 bn between 115.45-50 and 2.7 bn at 116.00.

In commodities, crude benchmarks are firmer in European trade with action directionally following, but eclipsing in magnitude, broader equity/risk performance. Currently, posting gains of around USD 1.0/bbl featuring WTI back above USD 80.00/bbl and Brent probing USD 83.00/bbl. Specific newsflow has been limited. Focus remains on geopolitics with increasingly punchy rhetoric emanating from Kazakhstan leaders regarding fuel-protests, though updates to output there remain limited after the sparse developments yesterday, highlighted by the Tengiz facility making a temporary adjustment. Elsewhere, adding to the positive tones from earlier in the week, the French Foreign Minister says there has been progress in Iranian nuclear discussions, but caveated that time is running out. Moving to metals, spot gold and silver are essentially unchanged at present despite some modest gyrations around the APAC/Europe crossover with newsflow sparse and broader sentiment cagey pre-NFP. Note, the weekly BofA Flow Show highlights the first inflow in a five-week period for precious metals, amounting to USD 0.3bln. Elsewhere, particularly for the copper watchers, a magnitude 5.2 earthquake occurred in Ricardo Palma, Peru – does not appear to be in direct proximity to a copper mine though, no commentary/guidance on any potential impacts yet.

US Event Calendar

  • 8:30am: Dec. Change in Nonfarm Payrolls, est. 447,000, prior 210,000
    • Dec. Change in Private Payrolls, est. 405,000, prior 235,000
    • Dec. Change in Manufact. Payrolls, est. 35,000, prior 31,000
    • Dec. Unemployment Rate, est. 4.1%, prior 4.2%
    • Dec. Underemployment Rate, prior 7.8%
    • Dec. Labor Force Participation Rate, est. 61.9%, prior 61.8%
    • Dec. Average Hourly Earnings YoY, est. 4.2%, prior 4.8%
    • Dec. Average Hourly Earnings MoM, est. 0.4%, prior 0.3%
    • Dec. Average Weekly Hours All Emplo, est. 34.8, prior 34.8
  • 3pm: Nov. Consumer Credit, est. $20b, prior $16.9b

DB’s Jim Reid concludes the overnight wrap

My wife dropped a bombshell last night over dinner. She says she is going to start life drawing classes as of next week. I felt slightly better once I had it confirmed that she would be going as an artist rather than the subject. My offer to allow her to draw me at home was swiftly rebuked. She used to do a lot of this when she was at art college but ultimately now the children are at school she wants to get back into art in some form or another. Her long-term goal is to write and illustrate children’s books. So in couple of years time it will be buy one EMR and get a children’s book for free. Or indeed the other way round.

Talking of new jobs, today is another important payrolls report as the Fed is rapidly catching up to the tightness in the labour market that has been clear in most of the data for many months now outside of the actual headline payroll data. We’ll review what our economists are expecting below but for now the consequences of Wednesday’s FOMC minutes continue to reverberate in markets, as Fed officials across the dove-hawk spectrum emphasised support for starting QT shortly after rate hikes. See my CoTD from yesterday here for what happened to assets the last time we saw QT.

Sovereign bond yields saw another leg higher yesterday even as there were some initial signs that equities might be beginning to stabilise. The moves came as investors dialled up their hawkish bets on the Fed’s policy trajectory for this year, with Fed funds futures now pricing in an 84% chance of an initial rate hike as soon as the March meeting, which is the highest probability to date and up from just 33% only a month earlier.

These growing expectations of future rate hikes meant that yields on 10yr Treasuries rose +1.6bps to 1.72%. That’s just below the 2021 highs of 1.74% reached on March quarter-end last year. If I ran a poll asking when yields will move above that level back in March last year, I’m not sure many people would’ve said January 2022. However it was only just before Xmas that we closed at 1.34%. Indeed this marks the 5th consecutive move higher in yields, which is their longest run of increases since October. If we get a 6th today, it would then become the longest sustained run since February. The moves were driven by higher real rates once again, with the 10yr real yield up +5.5bps to -0.80%, its highest level since June. The latest rise also means that real yields have surged by an astonishing +30.2bps since their close on New Year’s Eve, and so are entirely responsible for the increase in nominal yields, with inflation breakevens having continued to fall back as investors grow in confidence that the Fed’s hikes will be able to keep a handle on inflation.

It wasn’t just the US that was affected though, with sovereign bond yields moving higher throughout the world. Yields on 10-year bunds continued to edge closer to the zero mark (not seen since May 2019), after rising another +2.3bps yesterday to -0.07%, and those on gilts (+6.9bps), OATs (+3.1bps) and BTPs (+3.7bps) followed likewise. That said, it was evident how markets are increasingly pricing in a policy divergence between the Fed and the BoE relative to the ECB, with the gap between yields on 2yr Treasuries and 2yr bunds hitting a post-pandemic high, whilst the gap between yields on 2yr gilts and 2yr bunds hit its widest since August 2019.

For US equities, there were some initial signs that the selloff was beginning to stabilise yesterday, with the S&P 500 down just -0.1% and the NASDAQ (-0.13%) mire becalmed, though remaining in negative territory on a YTD basis, albeit after four business days of 2022. Traditional cyclicals led the way, with energy (+2.29%) benefitting from climbing commodity prices and financial shares (+1.55%) enjoying this yield run. Big tech shares were notably mixed today after a rocky start to the year, evidenced by the aforementioned flat Nasdaq, with 4 of 6 FANG (+0.58%) stocks advancing, and 6 declining on the day.

Europe was weaker, having closed the previous day before the release of the minutes, and that saw the STOXX 600 (-1.25%) lose ground for the first time so far this year. The main exception to the broader trend lower in European equities were banks, with the STOXX Banks Index (+0.95%) continuing its run of having advanced in every session so far this year, in turn taking the index to a 3-year high.

Overnight in Asia, most major indices are trading in positive territory, rebounding from its previous session losses. The Shanghai Composite (+0.35%) and CSI (+0.36%) are both edging up. Elsewhere, the Kospi (+1.02%) is outperforming after the index heavyweight Samsung Electronics Q4 operating profit jumped to its highest in four years, while the Hang Seng (+1.15%) is also seeing a decent move higher. However, the Nikkei slipped (-0.33%), giving up its early gains following a -3% drop yesterday.

Staying on Japan, data released earlier this morning showed that household spending eased more than anticipated by -1.3% y/y in November and -1.2% m/m. Separately, real wages fell -1.6% y/y for the third straight month in November reinvigorating concerns about the nation’s economic recovery. Meanwhile, core consumer prices for Tokyo advanced +0.5% y/y, notching its fastest pace in nearly two years in December.

Moving ahead, Futures market in the US are pointing towards a stronger start with the S&P (+0.22%), Nasdaq (+0.21%) and Dow Jones (+0.16%) contracts all in positive territory. US Treasury yields have edged slightly lower with 10yrs back below 1.72%.

Looking forward now, the main highlight today will be the US jobs report for December, which will be an important one as markets look to assess the potential implications for monetary policy. In terms of our what to expect, DB’s US economists are looking for nonfarm payrolls to grow by +600k in December, its fastest pace since July, with the unemployment rate ticking down a tenth to a post-pandemic low of 4.1%. And although their view is that Omicron-related disruptions present some downside risk, that’s more likely to be seen in the January report. You can see their full preview here

Ahead of that, there was somewhat underwhelming data out of the US yesterday, with the ISM services index falling by more than expected to 62.0 in December (vs. 67.0 expected), which was beneath every economist’s estimate on Bloomberg and down from 69.1 the previous month. In fact, that fall of -7.1pts in the space of a month marks the biggest monthly decline since April 2020 at the height of the initial phase of the pandemic, although to be fair it still remains firmly in expansionary territory and is down from a record high the previous month. In addition the prices paid measure rose to 82.5, so not echoing the decline in the prices paid reading that we saw in the ISM manufacturing a couple of days earlier. Meanwhile the weekly initial jobless claims ticked up to 207k in the week through January 1 (vs. 195k expected), and November’s factory orders grew by +1.6% (vs. +1.5% expected).

Alongside the persistent rise in Treasury yields, another familiar pattern of 2022 so far has been the gains in oil prices, which are continuing to cement their place as one of the top 2022 performers, having risen by at least +1% every day so far this year. In fact there was a particular milestone yesterday as WTI (+2.47%) and Brent Crude (+1.88%) both closed above their pre-Omicron level for the first time yesterday, which just shows you how markets have brushed off the risks of the new variant having a significant impact on growth.

Speaking of Omicron, there were some further positive signs yesterday as the total number of Covid-19 hospitalisations in London actually fell for the first time in over 3 weeks. Of course this is only one day, but as one of the first places among the developed economies to be seriously affected by the new variant, London is an important leading indicator for how other places may fare. One caveat to note however is that the UK has one of the most advanced booster programmes in the world, with a majority of the country’s population having now had a booster dose.

The other main data release yesterday came from Germany, where inflation fell to +5.7% in December on the EU-harmonised measure (vs. +5.6% expected). Separately, factory orders in the country rose by a stronger-than-expected +3.7% in November (vs. +2.3% expected).

To the day ahead now, and the main highlight will be the aforementioned US jobs report for December. Otherwise, data releases from the Euro Area include the flash CPI reading for December, the final consumer confidence reading for December, and retail sales for November. Elsewhere, there’s also industrial production in November for France and Germany. Central bank speakers include the Fed’s Daly and Bostic, and the BoE’s Mann.

Tyler Durden
Fri, 01/07/2022 – 08:05

via ZeroHedge News https://ift.tt/3EZ5uT3 Tyler Durden