Futures Slide, Yields Jump Above 4% As Jobs Report Looms

Futures Slide, Yields Jump Above 4% As Jobs Report Looms

What was already the worst start to a new year for stocks since 2008…

… was set to turn even uglier with futures and global markets sliding on the last day of the first week of 2024, which is set to be the biggest weekly retreat since October, fuelled by specualtion that a resilient labor market – expected in Friday’s December jobs report (full preview here) – may delay interest-rate cuts by the Fed. Global stocks sank and the dollar strengthened for a sixth day as 10Y Treasury yields rose above 4%, last trading at 4.04% or 5bps higher, after flirting with the “nice round number” level for the past 3 days.

In premarket trading, Apple shares are down 0.7%, putting the stock on track for its fifth straight decline. The company has had a rough start to the year, with at least two brokers downgrading the stock on iPhone demand concerns. Here are some other notable premarket movers:

  • Agilon Health sinks 25% after cutting its adjusted Ebitda outlook for the year, missing estimates.
  • Allogene Therapeutics shares fall 28% as analysts noted that the company’s plan to streamline its trial footprint could cause delays entering the market. JMP cut its rating to market perform.
  • Beyond Inc. gains 3.7% after the company behind Bed Bath & Beyond and Overstock is upgraded to buy from hold at Needham & Co. due to the household goods retailer’s self-help initiatives.
  • Carnival shares are up 1% after Wells Fargo Securities upgraded the cruise operator to overweight from equal-weight.
  • PayPal Holdings drops 1% after picking up a second downgrade this week.
  • Peloton rises 4.7%. The stock surged 14% on Thursday amid residual optimism over the company’s partnership with TikTok for a new fitness hub, which Evercore ISI analysts said is positive.

Traders are now waiting for the latest US nonfarm payroll report, which is expected to show that employers added 175,000 positions last month, although there is a wide divergence in opinions among sellside strategists, while the whisper number edges up to 189k following Thursday’s ADP employment change and weekly jobless claims data.

That said, the whisper is higher than the consensus, with Goldman expecting a number just shy of 200K as it reflects a “boost from mild winter weather and a favorable swing in the December seasonal factors (worth roughly +50k). While Big Data employment indicators indicate a lackluster pace of hiring, initial jobless claims fell further, consistent with fewer end-of-year layoffs.”

While the consensus estimate reflect slower hiring pace than November, it would still suggest economic strength and add to evidence that wagers on easier monetary policy have gone too far (full preview available here).

Meanwhile, with data coming in hotter than expected so far in 2024, swaps traders now see around a 65% chance the Fed will cut rates by the Fed’s March meeting, down from almost fully pricing such a move a week ago. As a result, investors are backtracking on some of last year’s most popular trades. Futures on the tech-heavy Nasdaq 100 Index slid 0.3% on Friday and the index has lost more than 3% so far this week. The yield on 10-year notes is back above 4%.

“We are seeing a bit of scaling back,” said Timothy Graf, head of EMEA macro strategy at State Street. “The only thing that can change things dramatically is a super-weak or super-strong NFP number today, an on-consensus print wont change anything.”

“Equity valuations are largely priced for a very benign macro outcome which makes it tough for the market to move higher from here,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. “The first half of 2024 may thus be a difficult one for equity markets as downside risks prevail.”

The Vol market is currently pricing in just a 67bp move for S&P through Friday’s s close; here is how the Goldman trading desk is thinking about S&P’s reaction function to the headline print:

  • >250k S&P sells off at least 150bps
  • 200k – 250k S&P sells off 75 – 150bps
  • 150k – 200 S&P + / – 50bps
  • 50k – 150k S&P rallies 50 – 100 bps
  • <50k S&P sells off at least 75bps

European stocks and bonds also fall in tandem as traders also pared bets on interest-rate cuts from the ECB and Bank of England following key inflation data in the region on Friday. The pace of Euro-zone price growth quickened for the first time since April, in line with expectations, the data showed.  Money markets now see less than 145 basis points of cuts from the European Central Bank by the end of 2024.

Europe’s Stoxx 600 benchmark fell around 1%, on track to end a seven-week run of gains. Remy Cointreau SA and Pernod Ricard SA led a drop in liquor stocks as China launched an anti-dumping investigation into products like brandy from the European Union. All subindexes trade in the red, with retail the biggest laggard. Here are the biggest movers Friday:

  • Remy Cointreau falls as much as 12% to May 2020 lows and was among several liquor stocks suffering after China launched an anti-dumping investigation into liquor products from the EU
  • Ubisoft falls as much as 6.8% after JPMorgan lowers price target on the French video game maker for a second time in a month, citing signs of weakness in sales of its Avatar game
  • Croda shares fall as much as 2.1% as Berenberg says it sees another round of cuts to FY24 consensus ahead of the specialty chemicals firm’s results
  • Swatch shares fall as much as 2.2% after both Stifel and Vontobel cut their estimates and price targets on the luxury Swiss watchmaker, citing headwinds from the Swiss franc’s strength
  • Signify falls as much as 3.3% after receiving its only negative analyst rating, as Barclays initiated the lighting manufacturer at underweight due to its exposure to non-residential spending
  • Endeavour Mining shares in London fall as much as 15%, the most on record, after firing president and chief executive Sébastien de Montessus for serious misconduct
  • Ithaca Energy drops as much as 3.9% to the lowest level since Aug. 31 after announcing that CEO Alan Bruce is standing down to pursue new opportunities, with the CFO named as interim CEO
  • Clarkson shares surge as much as 9.7%, to highest since 2022, after the shipping company guided that underlying pretax profit will probably come in ahead of expectations
  • Redcare Pharmacy rises as much as 6.4%, while DocMorris surges as much as 12%, after Berenberg upgraded both stocks to buy, citing positive momentum for e-prescriptions
  • Ariston and Nibe rise after being both initiated at overweight by Barclays, saying the heat pump producers are well positioned with the industry’s structural oversupply narrative looking overdone

“A tempering of rate cut expectation euphoria will inevitably translate into soggier market performance,” said Charles Hepworth, Investment Director, GAM Investments. “That is what we are seeing so far this year.”

Earlier in the session, Asian equities seesawed, with a regional gauge headed for its worst start to a year since 2016 as investors remain cautious ahead of the US jobs report later today.  The MSCI Asia Pacific Index swung between a gain of as much as 0.3% and a drop of 0.1%, as the measure heads for a weekly loss of about 2%. Benchmarks in Korea and China were also set for their worst first week of trading in at least eight years. Regional stocks’ lackluster start to the year matches that of global peers as doubts over the Federal Reserve’s scope to cut interest rates and China’s continued weak economic momentum cloud the outlook for Asian stocks. “In the lead-up to the upcoming US job numbers, sentiment is back to wait-and-see,” said Jun Rong Yeap, a strategist at IG Asia. “We may have to see a substantial weakening of the US labour market to justify market pricing of a rate cut as early as March,” he said.

  • Hang Seng and Shanghai Comp moved between gains and losses but held a downside bias towards the end of the session, whilst the PBoC drained a net CNY 2.423tln through open market operations this week, marking the biggest weekly cash withdrawal on record, according to Reuters calculations.
  • ASX 200 was initially supported by gold-related names alongside the Financials and Healthcare sectors, but gains were later countered by losses in Tech.
  • Nikkei 225 outperformed and briefly topped 33,500 with the weak JPY providing tailwinds, although the index closed under the level.
  • KOSPI fell into the red after South Korea ordered an evacuation on Yeonpyeong Island near the North Korean border “due to the situation related to North Korea’s provocation”.

In China, shadow banking giant Zhongzhi Enterprise Group filed for bankruptcy. The downfall marks one of China’s biggest-ever corporate collapses, putting more stress on already fragile consumer and investor sentiment.

In FX, the Bloomberg Dollar Spot Index adds 0.2% and up a total of 1.4% in six trading sessions; the dollar has risen for a six straight trading session – the longest winning streak since late September – ahead of payrolls data; all G-10 currencies retreated, led by the Swedish krona and Norwegian krone. 

  • EUR/USD resumes decline, down for the third time in four days to 1.0920.
  • GBP/USD falls 0.2% to 1.2662, down the first time in three days
  • USD/JPY extends gains for a 4th day, the longest winning streak since Nov. 13; the pair now trades at 145.15, back to levels seen before the Dec. 13 FOMC meeting
  • USD/CHF rises 0.4% to 0.8533, up for a second day

In rates, Treasuries extended this week’s losses ahead of December payrolls data, following wider selloff seen across core European rates and bunds and gilts underperform. US yields are cheaper by 4bp across the curve with front-end leading losses on the day, flattening 2s10s, 5s30s spreads by 0.3bp and 1.5bp; 10-year yields around 4.035% with bunds and gilts underperforming by 1.2bp and 4bp in the sector. Gilts lead the selloff in European government bonds, with UK 10-year yields rising 8bps. 

In commodities, oil prices advanced, with WTI rising 0.6% to trade near $72.60. Spot gold falls 0.2%.

To the day ahead now, US data includes December non-farm payrolls, unemployment rate, average hourly earnings, factory, durable and capital goods orders as well as the ISM Services Index. Fed’s Barkin is scheduled to speak to Maryland Bankers Association at 1:30pm ET

Market Snapshot

  • S&P 500 futures down 0.2% to 4,721.75
  • STOXX Europe 600 down 0.8% to 474.00
  • German 10Y yield little changed at 2.15%
  • Euro down 0.2% to $1.0927
  • Brent Futures up 1.0% to $78.36/bbl
  • MXAP down 0.1% to 165.52
  • MXAPJ down 0.4% to 515.34
  • Nikkei up 0.3% to 33,377.42
  • Topix up 0.6% to 2,393.54
  • Hang Seng Index down 0.7% to 16,535.33
  • Shanghai Composite down 0.9% to 2,929.18
  • Sensex up 0.3% to 72,091.70
  • Australia S&P/ASX 200 little changed at 7,489.07
  • Kospi down 0.3% to 2,578.08
  • Brent Futures up 1.0% to $78.36/bbl
  • Gold spot down 0.1% to $2,042.16
  • U.S. Dollar Index up 0.18% to 102.61

Top Overnight News

  • Taiwan’s CPI for Dec comes in firmer than anticipated, including +2.71% headline (vs. the Street +2.6% and vs. +2.9% in Nov) and +2.43% core (vs. the Street +2.3% and vs. +2.39% in Nov). BBG
  • Beijing has informally asked some money managers in China to prioritize the launch of equity funds over other products like bond funds, four sources with direct knowledge of the matter said, as authorities scramble to revive its lagging stock market. RTRS
  • China is launching an anti-dumping investigation into liquor products like brandy from the European Union, in a relatively modest step after the bloc opened a probe last fall into its electric vehicle subsidies. BBG
  • Biden planning to retain most of Trump’s China tariffs and will increase them on EVs and certain critical materials (like cobalt and lithium) while cuts could take place on certain consumer goods. Axios
  • Huawei’s newest laptop runs on a 5-nanometer chip made in Taiwan—not China. A TechInsights teardown found a chip made by TSMC, countering speculation that Shanghai-based SMIC may have achieved a major leap in fabrication technique. BBG
  • Tesla recalled virtually every car it’s ever sold in China due to issues with the driver-assistance system Autopilot that increase the risk of crashes. The carmaker will deploy an over-the-air software fix to more than 1.6 million vehicles produced between August 2014 and December 2023, including locally built Model 3s and Model Ys and imported premium models, the State Administration for Market Regulation said in a statement. BBG
  • EU inflation mostly inline with expectations, including the Dec headline CPI (+2.9% vs. the Street +2.9% and up from +2.4% in Nov), the Dec core CPI (+3.4% vs. the Street +3.4% and down from +3.6% in Nov), and the Nov PPI (-8.8% vs. the Street -8.6% and up from -9.4% in Oct). BBG  
  • Fundraising by US venture capital firms hit a six-year low in 2023, an ominous sign for start-ups with dwindling cash reserves and fledging businesses reliant on such backing for survival. The $67bn raised by US VCs in 2023 is the lowest annual total since 2017 and represents a 60 per cent drop from the $173bn raised in 2022, the peak year for fundraising, according to analysis by private markets data provider PitchBook and the National Venture Capital Association. FT
  • COST reported core Dec comps +8.1% (about ~80bp ahead of the Street), including the US +7.4% (about ~40bp ahead of the Street) and Canada +11.9% (this is ahead of plan). RTRS
  • Goldman estimates nonfarm payrolls rose 190k in December (mom sa), somewhat above consensus of +175k. Our forecast reflects a favorable swing in the December seasonal factors worth roughly +50k and a boost from mild winter weather, as snowfall was minimal in major cities in the Northeast and Midwest. While Big Data employment indicators indicate lackluster hiring, initial jobless claims fell further, consistent with fewer end-of-year layoffs. On the negative side, we assume another sizeable decline in retail payrolls, reflecting soft brick-and-mortar spending trends during the holiday season

A more detailed look at global markets courtesy of Newsquawk

Asian stocks eventually traded mixed as the earlier positivity gradually waned despite a lack of major newsflow but in the run-up to the US NFP and ISM Services PMI. ASX 200 was initially supported by gold-related names alongside the Financials and Healthcare sectors, but gains were later countered by losses in Tech. Nikkei 225 outperformed and briefly topped 33,500 with the weak JPY providing tailwinds, although the index closed under the level. KOSPI fell into the red after South Korea ordered an evacuation on Yeonpyeong Island near the North Korean border “due to the situation related to North Korea’s provocation”.  Hang Seng and Shanghai Comp moved between gains and losses but held a downside bias towards the end of the session, whilst the PBoC drained a net CNY 2.423tln through open market operations this week, marking the biggest weekly cash withdrawal on record, according to Reuters calculations.

Top Asian News

  • PBoC drained a net CNY 2.423tln via open market operations this week, marking the biggest weekly cash withdrawal on record, according to Reuters calculations.
  • PBoC injected CNY 75bln through 7-day reverse repos at a maintained rate of 1.80% for a net drain of CNY 411bln.
  • Nikkei published an article titled “BoJ easing exit in the first half still on the table despite earthquake” citing market implied rates, and noted that if the Yen avoids a sharp upswing, “we can thoroughly gauge domestic wages and prices,” according to a BoJ insider.
  • Foxconn (2317 TT) December Sales -26.89%; overall operations in Q1-2024 gradually entering the traditional off-peak season. Outlook for Q1 expected to decrease Y/Y.
  • China shadow bank Zhongzhi files for bankruptcy; Beijing court says application was on the grounds that it could not pay off its due debts and its assets were insufficient to pay off all its debt.

European equities, Eurostoxx50 (-0.9%), extended losses throughout the session following a negative APAC handover with newsflow light and data having little equity follow through. European sectors are entirely in the red; Retail slumps following dire German Retail Sales, whilst Energy fares best amid higher Crude prices. US Equity Futures are lower, though not the same magnitude as their European peers, with the tone a touch more cautious stateside into NFP; ES -0.3%.

Top European News

  • Maersk (MAERSKB DC) says all of its vessels travelling through Red Sea and Gulf of Aden are to be diverted South around the Cape of Good Hope for the foreseeable future; situation is constantly evolving, remains highly volatile, security risks still elevated.
  • China’s Commerce Ministry is launching an anti-dumping investigation on brandy imported from the EU; Remy Cointreau (-9.9%), Pernod Ricard (-5.5%)

FX

  • DXY is firmer, peaking at 102.80 thus far, in a seemingly safe-haven play as participants position ahead of US NFP later today, also deriving strength from pressure in the EUR.
  • EUR was initially weighed on by broader Dollar strength before then being dragged lower post softer German Retail Sales, testing but not losing 1.09. Unreactive to Flash EZ HICP.
  • The Yen continues its horror run as the USD/JPY jumps above the 145.00 mark; 145.99 marks the 13th Dec high before the round 146 level.
  • Antipodeans continue to sink as risk sentiment remains subdued.
  • PBoC set USD/CNY mid-point at 7.1029 vs exp. 7.1593 (prev. 7.0997)
  • China’s major state-owned banks have been seen active in USD/CNY swaps and selling USDs for Yuan in the spot-FX market during the week, via Reuters citing sources; seen curtailing Yuan lending in offshore FX on Friday

Fixed Income

  • USTs are directionally led by EGBs, but with magnitudes slightly more contained ahead of December Payrolls and ISM services thereafter; yields firmer across the curve and slightly steeper.
  • Bunds began with a dovish reaction on soft Retail Sales, lifting the benchmark to a 136.13 peak; though entirely pared the move and continue to move lower, currently pivoting the 135.52 trough.
  • Gilts conformed with broader price action alongside peers; action slightly more pronounced with specifics light but perhaps some influence from Halifax House Prices, though this is caveated by being supply rather than demand driven.

Commodities

  • WTI and Brent are firmer but well within Thursday’s boundaries amid reports that the US is drafting plans to respond to Houthi militants.
  • As such, benchmarks are shy of their respective USD 74.00/bbl and USD 79/42/bbl WTD peaks.
  • Spot Gold is marginally weaker amid the recent strength in the Dollar but struggling for direction somewhat into payrolls; Base Metals hold a negative bias in-fitting with the broader risk tone.
  • China’s oil trade talks with Iran has stalled after Tehran sought higher prices, via Reuters citing sources; seeks to narrow discounts on Crude sales to China by USD 4-5/bbl

Geopolitics – Middle East

  • The US military is drafting plans to hit back at Iran-backed Houthi militants who have been attacking commercial shipping in the Red Sea, according to Politico sources; plans also include striking Houthi targets in Yemen. “Biden administration officials are drawing up plans for the US to respond to what they’re increasingly concerned could expand from a war in Gaza to a wider, protracted regional conflict” “Four officials familiar with the matter, including a senior administration official, described internal conversations about scenarios that could potentially draw the US into another Middle East war.”
  • US State Department said Secretary of State Blinken will visit Turkey, Greece, Saudi, Israel, West Bank, and Egypt from Jan 4th-11th; Blinken to raise the need to take steps to deter the Houthis’ attacks on shipping in the Red Sea.
  • UK maritime security firm Ambrey received intelligence of missiles fired from Yemen’s Taiz towards Bab Al Mandab, according to an advisory note.
  • US Pentagon official said the US carried out a strike in Baghdad that killed a leader of an Iraqi faction loyal to Iran that was involved in attacks on US forces, according to Sky News Arabia.
  • Iraqi armed factions announce the attack on a US base in the field of Omar in Syria with drones, according to Sky News Arabia.

Geopolitics – Korea

  • Yonhap, “due to the situation related to North Korea’s provocation”.
  • North Korean military fired over 200 coastal artillery shells between 9-11 am (local time) in the northern part of Baeknyeong Island and Yeonpyeong Island, no damage was reported from South Korea, and shells landed north of the northern limit line, according to Yonhap and Reuters.
  • South Korea is preparing a show of force after North Korea fired artillery near Yeonpyeong Island; South Korea to carry out live-fire drills in response to North Korean artillery near Yeonpyeong Island, according to Yonhap.
  • Residents of a second South Korean island asked to evacuate, according to AFP citing a local official.

US Event Calendar

  • 08:30: Dec. Change in Nonfarm Payrolls, est. 175,000, prior 199,000
    • 08:30: Dec. Change in Private Payrolls, est. 130,000, prior 150,000
    • 08:30: Dec. Change in Manufact. Payrolls, est. 5,000, prior 28,000
  • 08:30: Dec. Unemployment Rate, est. 3.8%, prior 3.7%
    • 08:30: Dec. Labor Force Participation Rate, est. 62.8%, prior 62.8%
    • 08:30: Dec. Underemployment Rate, prior 7.0%
  • 08:30: Dec. Average Hourly Earnings MoM, est. 0.3%, prior 0.4%
    • 08:30: Dec. Average Weekly Hours All Emplo, est. 34.4, prior 34.4
    • 08:30: Dec. Average Hourly Earnings YoY, est. 3.9%, prior 4.0%
  • 10:00: Nov. Factory Orders, est. 2.3%, prior -3.6%
    • 10:00: Nov. Factory Orders Ex Trans, est. -0.1%, prior -1.2%
    • 10:00: Nov. Durable Goods Orders, est. 5.4%, prior 5.4%
    • 10:00: Nov. Durables-Less Transportation, est. 0.5%, prior 0.5%
    • 10:00: Nov. Cap Goods Ship Nondef Ex Air, prior -0.1%
    • 10:00: Nov. Cap Goods Orders Nondef Ex Air, prior 0.8%
  • 10:00: Dec. ISM Services Index, est. 52.5, prior 52.7

DB’s Jim Reid concludes the overnight wrap

Morning from a very wet London. I don’t think I can remember being much wetter than during my long walk home from the station last night or seeing bigger lakes form. And then to make matters worse, I scalded myself as soon as I got in from pouring hot water into my daughter’s very long and thin (and cuddly) hot water bottle she got for Xmas that is proving a nightmare to fill every night without accident! Blooming Santa!

The recent extended Santa Claus rally has turned into a little bit of a memory with the New Year hangover continuing as we welcome in yet another payrolls Friday today. DM 10yr government yields sold off 8-12bps yesterday as the 10yr Treasury yield closed above 4% for the first time since mid-December, while the Nasdaq (-0.56%) completed a five-day losing streak for the first time since December 2022. So the set-up is a little weak as we turn to the employment report.

Our US economists see nonfarm payrolls slowing to +150k in December, having been at +199k in November (consensus +175k). That mainly reflects an unwind from the boost by returning auto workers in the November data. Otherwise, they see the unemployment rate moving up a tenth to 3.8% (in line with consensus), and average hourly earnings growth to moderate after November’s spike, coming down two tenths to +0.2% (consensus +0.3%). See here for their full preview and details of how to register for their webinar after the report. After payrolls, the US Services ISM will also be out today.

Ahead of this, the US employment data yesterday was positive which didn’t actually help risk much due to the higher yields we saw throughout the day yesterday. This was kick-started by better European PMI data with the euro area composite PMI revised up from the flash reading of 47.0 to 47.6, and with services revised up from 48.1 to 48.8. This upward surprise was broadly shared across the euro area, erasing the PMI decline seen in the flash December reading and with services actually inching up to a 5-month high. We then had the US ADP’s report of private payrolls, which showed an increase of +164k in December (vs. 125k expected). That’s the highest print since August, and it was also the first time since the July print that it had come in above consensus. Then 15 minutes later, we had the latest weekly claims data, which showed initial jobless claims were down to 202k over the week ending December 30 (vs. 216k expected), which was an 11-week low. Xmas seasonals likely lowered this to some degree but it was still a decent number. Continuing claims also surprised to the downside at 1.855m (vs. 1.881m expected) .

With the data looking more promising, yesterday saw investors grow increasingly sceptical about the likelihood of a rate cut by March. For the Fed, the probability of a 25bp cut by March was down to 69% by the close, which is its lowest since the December meeting, back when they published the dot plot that was more dovish than the consensus expected. And in turn, Treasuries sold off across the curve, with the 2yr yield up +5.4bps to 4.39%, whilst the 10yr yield was up +8.3bps to 4.00%. That’s the first time it’s closed above 4% since December 13, the day of the last Fed meeting .

Over in Europe, the sovereign bond sell-off was even bigger, with yields on 10yr bunds (+10.0bps), OATs (+10.0bps), and BTPs (+11.4bps) all seeing sizeable increases even with softer inflation than expected. German CPI was up to +3.8% (vs. +3.9% expected) on the EU-harmonised measure, up from +2.3% in November. But it’s worth noting that was partly down to base effects rolling out of the annual comparison, as support for heating bills last winter had helped push down energy prices. Similarly in France, headline CPI was back up two-tenths to +4.1%, but the reading was in line with expectations .

Later this morning, we’ll also get the euro-area wide release, which will be one to look out for in terms of the potential for any ECB rate cuts. Following the country prints so far, our European economists see the euro-area print tracking in line with consensus at +3.0% yoy for headline and +3.4% yoy for core inflation, though with risks tilted to the downside for core. While for headline inflation this represents a rise from the previous month due to volatile energy base effects, for core inflation this would be the lowest print since March 2022.

Risk appetite had begun to recover again yesterday but lost momentum during the US session, in part held back by the rise in yields. Over in Europe, the STOXX 600 (+0.69%) recorded its first advance of 2024 so far. In the US, the S&P 500 had traded nearly +0.5% up on the day around the time of the European close, but then lost ground over the rest of session to close down -0.34%. Tech stocks lost ground as the NASDAQ (-0.56%) fell for a 5th consecutive session and for the first time in over a year. This included underperformance for the Magnificent Seven (-0.69%). Within the S&P 500, energy stocks also lost ground (-1.63%) after their recent outperformance as oil prices saw a modest retreat again (Brent down -0.84% to $77.59/bbl). Overnight, Brent crude futures (+0.46%) have slightly rebounded as I type.

Asian equity markets are mixed this morning with the Nikkei (+0.68%) leading the way, helped by further weakness in the yen, with the CSI (+0.17%) also seeing gains for the first time this week. Elsewhere, the Hang Seng (-0.14%), the Shanghai Composite (-0.13%) and the KOSPI (-0.40%) are losing ground. US futures are fairly flat.

Early morning data showed that Japan’s December service activity expanded at a slightly faster pace after the final estimate of the services PMI climbed to 51.5 in December from 50.8 in November. The expansion was still the second weakest recorded in 2023. In FX, the Japanese yen (-0.15%) is drifting lower for the fourth straight day, trading at 144.85 against the dollar amid significantly reduced bets for a BoJ policy shift in January.

Yesterday did also brighter economic data from the UK. First, mortgage approvals were stronger than expected in November at 50.1k (vs. 48.8k expected), taking them up to a 5-month high. And alongside that, there were positive revisions in the final PMI readings, as the services PMI was revised up to 53.4 (vs. flash 52.7), and the composite PMI was revised up to 52.1 (vs. flash 51.7). There was also a bit more speculation about the date of the next UK election, after Prime Minister Sunak said that his “working assumption is we’ll have a general election in the second half of this year”.

To the day ahead now, and US data releases include the December jobs report, the ISM services index for December, and factory orders for November. Meanwhile in the Euro Area, we’ll get the flash CPI release for December. From central banks, we’ll also hear from Richmond Fed President Barkin.

Tyler Durden
Fri, 01/05/2024 – 08:22

via ZeroHedge News https://ift.tt/YB0uhZD Tyler Durden

ECB Rate-Cut Odds Tumble As EU Inflation Re-Accelerates In December

ECB Rate-Cut Odds Tumble As EU Inflation Re-Accelerates In December

Eurozone inflation re-accelerated in December, breaking seven months of declines, leaving analysts questioning whether The ECB will be able to cut rates as aggressively as the market had thought.

Euro area headline HICP inflation rose 52bp in December to 2.92% YoY, in line with consensus expectations.

The breakdown by main expenditure categories showed services inflation remained unchanged at 4.0%YoY, and non-energy industrial goods inflation fell four-tenths of a percentage point to 2.5%YoY. Of the non-core components, energy inflation rose 4.8pp to -6.7%YoY, while food, alcohol and tobacco inflation fell eight-tenths of a percentage point to 6.1%YoY.

But, you should just ignore this:

“December’s jump in headline inflation in the eurozone was widely anticipated and entirely due to a base-effects driven increase in energy inflation, so it won’t alter ECB policymakers’ views on the outlook for monetary policy,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.

Except the market is not, as it prompted the market to cut the odds of a March ECB rate-cut significantly…

Source: Bloomberg

“The increase (in inflation) serves as a reminder that interest rate cuts in the first quarter are unlikely but this shouldn’t dispel expectations of cuts later in the year,” said Bert Colijn, senior eurozone economist at ING.

And expectations for total 2024 cuts have fallen to 140bps (from 190bps last week)…

Source: Bloomberg

“150 basis points of cuts is still ambitious,” said Christoph Rieger, head of rates research at Commerzbank AG.

He expects the ECB will only deliver half of that, broadly matching the majority of economists surveyed by Bloomberg.

“The gap versus consensus forecasts will probably shrink from both sides.”

Will we see the EUR slide back at the rate-differential implies?

And send the dollar even higher?

Tyler Durden
Fri, 01/05/2024 – 08:17

via ZeroHedge News https://ift.tt/BcqpNmY Tyler Durden

The Modern Miracle of Cheap Aluminum Foil


aluminum foil | Photo 210299304 | Aluminum Foil © Sergio Yoneda | Dreamstime.com

My favorite social-media post in recent weeks (from a Seattle-based engineer named Grant Slatton) seems esoteric, but is quite insightful: “We don’t talk enough about how insane aluminum foil is. Imagine telling some ancient person we have so much abundance in our time that we use very thin metal as a disposable paper-like wrapping and it costs essentially nothing.”

Seriously, Americans are so used to our unparalleled abundance that we don’t pause and appreciate what this means in the context of human existence. An NPR story on the history of aluminum notes that “it used to be more valuable than gold.” The National Park Service explained that in 1884, “The U.S. government wanted to have a precious metal cap for the (Washington) monument, so it chose aluminum.” I used it to cover up ordinary Christmas dinner leftovers.

At that above-mentioned dinner, we had so much food—of the quality that would have suited a pope, emperor, or king—that it was almost embarrassing. I know inflation is taking its toll, and groceries are pricier than they’ve been in ages, but our middle-class family enjoyed prime rib, ham, fine wine, all the trimmings, and pastries from an artisanal bakery. The main complaint I’ve heard from friends was they had so much food they didn’t know what to do with it.

Spending time on social media can distort one’s perspective, but I’ve nevertheless been reading an endless array of nitpicking complaints about every real and imaginary problem. This “there ought to be a law” mentality has gotten out of hand, with many people moaning about every aspect of life that doesn’t operate to perfection or every endeavor that doesn’t benefit everyone equally. It’s as if we’ve forgotten that everything has costs and benefits.

One common category of complaint: We have too much, we spend too much, we’re too wasteful. This is often the province of environmentalists, who—like Puritans from the past—want to reduce Americans’ astounding standard of living and make life less pleasant in the name of some ill-defined greater good. From a religious perspective, I understand the spiritual aspect of suffering. But it’s not an appropriate public-policy goal to promote more of it.

Just as 19th century robber barons would be astounded that we use aluminum as a throwaway, struggling people throughout history (and in less-affluent nations today) would be shocked we spend so much time, wealth, and effort making life costlier and more difficult. Obsessing over plastic bag use, gas stoves, electric vehicles, fish ladders, nearly immeasurable pollutants, and cow emissions might be justifiable—but it certainly smacks of “first world problems.”

I like the aluminum foil story because it’s one small example of our bounty. It reminds me of a booklet called “I, Pencil,” which is an “autobiography” of a pencil by libertarian writer Leonard Read. The tract points to the complexity of assembling and selling this simple, inexpensive device, all of which occurs without central planning: “The absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being.”

When I started writing this column a couple of hours ago, I ordered online a Bluetooth adapter for my old pickup truck. It arrived shortly after I finished. Forget about the complexity of the device itself, but think about what’s involved in delivering that $30 item to my door in three hours. Not long ago, I ordered a custom motorcycle seat from a shop in India—and the perfectly fitting, quality product arrived at my doorstep nine days later for the grand sum of $109. If you’re not amazed, then you’re probably, as the saying goes, letting the perfect become the enemy of the good.

These are results of a relatively free society and relatively free trade. They stem from human ingenuity—and that much-maligned profit motive. If it weren’t for the chance to profit, no one would take the time to sew together a seat or ship it across the globe. I wouldn’t have written this piece. We’d be living lives that are “nasty, brutish and short,” as Thomas Hobbes wrote in “Leviathan.”

Please don’t send an email reminding me of the world’s myriad problems. That’s not in dispute. But it’s frustrating when moralistic social critics lament some “crisis,” but offer no context. Because they fail to understand the “invisible hand” that Read championed, these complainers offer “solutions” (e.g., more government) that usually make matters worse. They rarely acknowledge good news, such as dramatic and ongoing declines in worldwide poverty.

I do enough complaining, so don’t take my hectoring personally. But as we spend another year on the top side of the ground, I urge us all to spend more time appreciating and less time whining. We should recognize that the world’s advancements—even such little things as disposable aluminum foil—are mostly the result of human ingenuity and freedom.

This column was first published in The Orange County Register.

The post The Modern Miracle of Cheap Aluminum Foil appeared first on Reason.com.

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Treasuries Face Further Downside Barring A Jobs Report Shock

Treasuries Face Further Downside Barring A Jobs Report Shock

By Ven Ram, Bloomberg Markets Live reporter and strategist

Unless we get a huge downside surprise from today’s jobs data, Treasuries will extend the losses we have seen so far this week as the markets correct after their year-end exuberance.

Treasury two-year yields slumped some 80 basis points last quarter, a phenomenal move not usually seen except during crises times. Indeed, we haven’t seen that scale of move outside the financial crisis and, more recently, during the first wave of the pandemic.

In rallying too fast and too far, the markets were positioned as though the Fed would cut rates imminently, a notion that is now being challenged.

The correction we have seen so far has been rather mild, meaning there is more to come, with the jobs data providing another excuse for yields to head higher.

The headline number is forecast to show another decent print, with some 175k jobs being added in December. It matters little from the Fed’s perspective if the number bobs around that estimate so long as employers are still expanding their payrolls.

It is far more significant what the jobless rate does, and so far in this cycle, we have seen that number just move feebly around the expected number of 3.8%.

Given how strong the expansion has been since the pandemic, we need a number higher than 4% to clear the market — a state where demand and supply are in equilibrium.

Sticky wage inflation also matters a whole lot and then some in today’s numbers.

Employees’ average hourly earnings is forecast to have slowed by a notch to 3.9% from a year earlier.

Even though a lower number would be welcomed by the Fed, an outcome that is in line with the median estimate would be incompatible with its inflation target.

Unless we see a materially higher-than-forecast jobless rate or a much weaker-than-expected hourly earnings number, Treasuries will extend their losses.

Tyler Durden
Fri, 01/05/2024 – 07:45

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Sorry President Biden, But Nobody Wants A Glorified Golf Cart

Sorry President Biden, But Nobody Wants A Glorified Golf Cart

Authored by Duggan Flanakin via RealClear Wire,

President Biden in 2021 drove a Ford F-150 Lightning and expressed his desire to electrify the White House’s fleet of vehicles, including the armored presidential limo known as “the Beast.”

At the time, Bryan Hood doubted the wisdom, given its weight of 15,000 to 20,000 pounds, its armor and high-tech security features, and its oversized truck frame. At twice the weight of the GMC Hummer EV, the Beast would require a massive battery array to provide any real protection – and would be defenseless in the event of a battery failure.

In his first week in office, President Biden announced his goal of electrifying the entire 600,000-vehicle federal fleet of civilian vehicles, to be “made right here in America.” He pledged, “I’m going to start the process where every vehicle in the U.S. military is going to be climate friendly.”

Biden’s goal, reiterated last April by Energy Secretary Jennifer Granholm, is to electrify all U.S. military vehicles, including tanks and aircraft, by 2030, a daunting, budget-busting task. The Army’s  242,000 tactical vehicles should for now be hybrids, but its 170,000 non-tactical cars and trucks “could go right to electric,” according to Deputy Defense Secretary Kathleen Hicks.

Biden even envisions electric tanks, which Kyle Mizokami, writing in Popular Mechanics, says makes a lot of sense. In his view, EV tanks reduce the vulnerability of fuel-laden convoys; are more easily upgraded than tanks with internal combustion engines and transmissions; and are cheaper to run and “easier on the planet.”

After all, the chief goal, says Mizokami, is “to get away from fossil fuels,” not to win wars.

One obstacle to the Biden Administration’s goal was the adoption in 2021 of a new postal vehicle design, to be built by Wisconsin-based Oshkosh, that can be fitted with both gasoline and electric drive trains. The award dealt a heavy blow to the favored all-electric contractor, Workhorse.

Recent reports indicate that only about 2 million fully electric vehicles have been sold in the United States, two-thirds of them Teslas. Total electrification for federal vehicles alone could match that number – at enormous, budget-busting cost.

The EV merchants, however, have been rocked of late by some very bad news. Most Americans appear unwilling to adapt to a plug-in future. Like Mad Max, they queue up at the pump saying, “I’m just here for the gasoline.”

Ford just nnounced it was cutting production of Biden’s beloved F-150 Lightning pickups in half, to just 1,600 vehicles per week, for 2024. This on the heels of cutting the price by $10,000, despite the fact that the storied automaker was already losing $66,000 for every electric vehicle that comes off its assembly lines.  

General Motors is pushing back the opening of an electric truck factory in Detroit after scrapping an earlier goal of producing 400,000 EVs over a two-year period through 2024. The automaker may be dropping its Buick line to stay afloat.

Was Biden’s plan to drive all U.S. auto makers into bankruptcy?

Then there’s the report that investors are backing off from EV charging companies. Stock prices have fallen at ChargePoint, EVgo, and Blink Charging in spite of Biden’s $7.5 billion in subsidies. Blink Charging CEO Brendan Jones told The Wall Street Journal, “I think the investor class has grown weary of the industry’s lack of profitability.”

And no wonder.

Back in February Biden praised ChargePoint, which operates the nation’s largest public network of EV charging stations, for demonstrating that his efforts had “spurred network operators to accelerate the buildout of coast-to-coast EV charging networks.”

Oops!

ChargePoint’s stock value had dropped from a high of $46.10 per share in December 2020 to just $2.24 per share in December 2023, down nearly 75% in this year alone. CEO Pasquale Romano has stepped down, and the company is facing a class action lawsuit. Plaintiffs claim the firm’s share price was artificially inflated because of false and misleading statements by company executives.

Biden’s dream of an all-electric vehicle fleet is further compounded by an April 2023 Gallup Poll that showed only 12% of American auto buyers (and just 1% of GOP voters) were “seriously considering” purchasing an EV.

In Europe, where most new vehicles are sold via lease, the rapidly declining value of used EVs is causing rental car firms and other fleet purchasers to cut back on EV adoptions that end up costing money on the back end.

Chinese motorists have purchased an estimated 14 million EVs, but today its used car lots are overflowing with unsold vehicles, and junkyards brim with abandoned EVs with plants sprouting from their trunks.

Add the significantly lower resale value of used EVs to the list of reasons motorists are resisting state and federal lawmakers and regulators and other EV enthusiasts who demand submission without any questions.

The Biden Administration has spent trillions to jumpstart a (heavily subsidized) EV “market.” Several states have followed California’s lead to forbid the sale of non-electric vehicles. New Jersey’s ban begins in 2035, but Rhode Island and Washington upped the ante to 2030.

That’s earlier than the 2040 date set at COP 26 in Glasgow and adopted by dozens of countries from Canada to Azerbaijan (host to COP 29). Curiously, some commentators see the 2040 deadline as a “weak and unambitious goal.”

Electrek’s Fred Lambert believes “there will be a major shift in consumer demand around 2024-25 that will result in virtually all new car buyers realizing that their next car is going to have to be electric.”

And that’s the key – HAVE TO BE ELECTRIC.

The UN, the Biden White House, the myriad states that have adopted EV-only mandates, and numerous Al Gore and John Kerry wanna-be’s have decided that the world’s 1.4 billion motor vehicle owners, most of whom have voted with their mouths and their pocketbooks that they do not trust electric vehicles, can have no say in how they spend their hard-earned money.

Prior clashes between autocratic governments and noncompliant masses have not turned out well. In the world of Mad Max, governments lose all control over the population and collapse, leading to the collapse of civilized society and a return to a nomadic search for, well, gasoline.

Today, there remains the possibility of voting out those who intend to impose an all-electric future on unwilling people – despite the gargantuan efforts of those in control to prevent such a political uprising.

In the U.S., 2024 will mark a major turning point. Those who still prefer their gas appliances, gasoline-powered vehicles, rare steaks, and innumerable other benefits of modern society need to recognize that this may be the last time they have a chance to keep those choices available in the future.

Otherwise, Fred Lambert may be right. People will tuck their tails, bow their heads, and submit their entire lives to the whims of a few self-righteous billionaires and their greedy lieutenants.

Meanwhile, the bullies still insist that we drive electric golf carts whether we like it or not.

Duggan Flanakin is a senior policy analyst at the Committee For A Constructive Tomorrow who writes on a wide variety of public policy issues.

Tyler Durden
Fri, 01/05/2024 – 07:20

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Dollar Off To Best Start To A Year Since 2005

Dollar Off To Best Start To A Year Since 2005

The U.S. Dollar Index peaked in fall 2022, the highest it had been in nearly two decades, rising in response to aggressive interest rate hikes.

The index measures the value of the U.S. dollar against a basket of major currencies from six countries.

A gain indicates the dollar is appreciating against the basket and vice-versa.

The euro is the biggest component on the index and thus sways the index value and return.

In 2023, the U.S. Dollar Index declined from its highs while still maintaining a fairly elevated level as interest rates have stayed steady.

By far, the best performing major currency of 2023 was the Mexican peso, which appreciated nearly 15% against the dollar.

The peso appreciated significantly thanks to aggressive interest rate hikes by its central bank (currently at 11.25%) which pulls money into the country as investors chase better returns.

However, the peso’s continued appreciation could negatively impact the competitiveness of Mexico’s exports. In tandem, Asian imports to the country become cheaper which can hurt the country’s domestic industrial sector.

From across the Atlantic, the Swiss francBritish pound, and euro all gained as well.

Meanwhile, the Japanese yen, while down 7% for 2023 has a much stronger outlook for 2024, with the Bank of Japan likely to raise rates to curb inflation, strengthening the currency.

At the bottom of the list, the Russian ruble and Turkish lira lost nearly one-fifth, and one-third of their value against the dollar, respectively.

The lira has been declining steadily for over a decade now (down 94%) as the country has witnessed several political upheavals that have shaken the economy as well as investor sentiment.

Meanwhile Russia’s economy relies heavily on fossil fuel exports, a sector hit hard by Western sanctions. With fewer buyers for its oil and gas, export revenue has declined, reducing the country’s trade surplus.

In the graphic below, Visual Capitalist’s Marcus Lu visualizes the returns of 12 currencies against the U.S. dollar in 2023, using data from TradingView.

However, in the first few days of 2024, the dollar index has ripped higher, erasing over half of 2023’s losses.

The Dollar index is up five straight days (its longest streak of gains since September)…

This is the best start to a year for the dollar since 2005(but we note that the dollar appears to be bid at the start of almost every year)

The question is – can it sustain the gains.

Given the strength of the Euro to the USDollar (which, as we noted above constitutes a large part of the dollar index basket) relative to EU and US rate-differentials, the dollar gains could continue here as EURUSD slides (even with a dovish Fed).

The Fed and The ECB battle this year will be an interesting one

Tyler Durden
Fri, 01/05/2024 – 06:55

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Gold Set To Make History In 2024

Gold Set To Make History In 2024

Authored by Stefan Gleason via Money Metals,

The gold market is poised to make history in 2024. It enters the New Year within striking distance of new all-time highs.

How high will gold go? Much depends on how low interest rates and the U.S. dollar go.

The Federal Reserve ended its rate hiking campaign last fall. It is expected to pivot toward monetary easing later this year.

That should work to the benefit of gold and other hard assets.

Of course, there remains much uncertainty surrounding the economy, inflation, and interest rates. If persistent inflation pressures force central bankers to keep rates elevated, then stock and bond markets could tank – possibly taking down precious metals markets with them at least temporarily.

Market volatility could also ramp up later in the year around the presidential election.

With partisan prosecutors and judges threatening to jail the leading rival to incumbent President Joe Biden, and some state election officials moving to remove former President Donald Trump from the ballot, questions about the legitimacy of the election are already being raised.

Some pundits are warning that something akin to a civil war could break out if the declared winner of the election is perceived to have stolen it.

Regardless of the outcome, larger questions loom about the ability of the political system to deal with the mounting debt crisis. Neither Republicans nor Democrats in positions of power have any realistic plans to get spending under control, balance the budget, or pay down the debt.

It will cost the government more than $1 trillion in 2024 just to make interest payments on the debt.

As the national debt crosses the $34-trillion mark, Social Security and Medicare are rapidly heading toward insolvency and represent trillions more in unfunded liabilities.

Taxes can never be raised high enough to cover these massive obligations. And the political reality is that spending will never be cut and promised benefits will never be taken away either.

An inflection point is nearing. The U.S. government’s credit rating was twice downgraded by ratings agencies in 2023.

Under our fiat monetary system, however, the Treasury Department can always “borrow” more dollars into existence by dumping bonds onto the balance sheet of the Federal Reserve in exchange for cash created out of nothing.

Inflating the currency supply is the way the government will manage to keep paying its bills.

The way to preserve purchasing power amid rampant currency depreciation is to hold physical gold and silver.

Unlike fiat Federal Reserve notes, precious metals are scarce. In fact, they face widening supply deficits in 2024.

Major gold, silver, copper, platinum, and palladium mines are struggling with rising operations costs and degrading reserves.

As mining output hits a ceiling, demand for metals among industries, consumers, and investors continues to grow.

Investment demand is a wild card for gold and silver markets. It surged following the COVID-19 outbreak but softened in 2023 as higher interest rates lured savers into money market funds and rising equity markets diminished the perceived safe-haven appeal of bullion.

That could change in 2024. The prospect of Fed rate cuts, election uncertainty, and a gathering debt storm makes holding physical precious metals mandatory for those who seek to protect their wealth.

Tyler Durden
Fri, 01/05/2024 – 06:30

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Largest French Supermarket Chain Boycotts PepsiCo Due To “Unacceptable Price Increases”

Largest French Supermarket Chain Boycotts PepsiCo Due To “Unacceptable Price Increases”

The global consumer is so tapped out, it’s becoming virtually impossible to pass on constant price increases.

France’s largest supermarket chain, Carrefour, is boycotting food and drinks manufacturing giant PepsiCo, pulling the company’s snacks and soft drinks from store shelves due to recent price increases in the latest flare-up of a long-running clash between retailers and food companies over the cost of popular items.

Starting Thursday morning, the chain has removed PepsiCo items from supermarkets in France, and is placing banners in aisles for PepsiCo products such as Lay’s and Doritos crisps, and 7Up drinks and Lipton tea, advising customers: “We are no longer selling this brand due to unacceptable price increases,” a Carrefour spokesperson confirmed to news agency Reuters, adding the veto only applies to stores in France.

The supermarket giant’s latest backlash to consumer products manufacturers follows a ‘shrinkflation’ campaign launched in September, when PepsiCo was also targeted, along with Nestlé, Unilever and Lindt & Sprüngli. However, the US-based food and beverages producer has been singled out this time around, although as Just Food reports, it is unclear whether PepsiCo has been trying to force through further price increases for products sold in France.

The dispute with PepsiCo coincided with the issuance today of France’s latest inflation figures, which, while preliminary numbers for December, show food prices continue to rise at a faster pace than those in the wider economy. France’s national statistics body, Insee, said food prices likely rose at an annualised rate of 7.1% last month, easing slightly from 7.7% in November. That compares, for instance, to 12.1% in December 2022.

Nevertheless, food inflation remains at almost twice the rate of the government’s headline measure.

The French consumer price index increased 3.7% in the 12 months through December, up from 3.5% in November, Insee reported today for its provisional figures. In December 2022, the annualised rate stood at 5.9%. Month-on-month, overall inflation rebounded to a positive 0.1%, from a 0.2% decline in November, the statistics agency noted.

As reported previously, the French government has waged a campaign in recent months against both food retailers and their suppliers to bring down prices and ease the burden on consumers.

Authorities are now also joining Carrefour’s fight against shrinkflation, where manufacturers reduce pack sizes without necessarily making a corresponding drop in price. It has emerged that the government has reportedly applied to the EU to clear a move that would oblige grocers to tell consumers if a product has been reduced in size but its price has stayed the same.

Carrefour’s latest agitation against prices and the government’s plans on shrinkflation suggest concerns still remain about the pressures on consumers, despite food prices easing somewhat. Other supermarkets have also occasionally resorted to the more aggressive step of dropping products amid heated price disputes — notably when UK grocer Tesco Plc removed Unilever Plc’s Marmite spread from shelves in 2016. In a more recent price dispute in 2022, Mars Inc. stopped supplying two of its pet food brands to Tesco, while Kraft Heinz Co. withheld ketchup and baked beans.

When food inflation in France was still in double digits last August, Finance Minister Bruno Le Maire held talks with retailers and food producers to press for a reduction in consumer goods prices. The meetings followed a warning by Thierry Cotillard, the boss of the Les Mousquetaires supermarket chain, that people were cutting back on food purchases and shop prices were unlikely to fall until around March 2024.

Meanwhile, Carrefour’s own boss, CEO Alexandre Bompard, said in August consumers were curtailing purchases because of the impact of inflation on their spending power.

Tyler Durden
Fri, 01/05/2024 – 05:45

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Review: Should Humans Settle Mars? This Book Is Skeptical.


A portion of the book cover of 'A City on Mars' by Kelly and Zach Weinersmith | Penguin Press

The subtitle of the cartoonist-biologist husband-and-wife pair Zach and Kelly Weinersmith’s book A City on Mars asks, Can We Settle Space, Should We Settle Space, and Have We Really Thought This Through?

The answers the couple suggest are “not any time soon,” “maybe/maybe not,” and “definitely no.”

It’s a buzzkill of a thesis for anyone with even the remotest sense of wonder and optimism about humanity’s potential future among the stars. If you’re a space nerd at all, parts of the book read as if someone is telling you over and over again that ice cream has calories.

But busting space dreamers’ bubble is kind of the idea. The existing field of “space settlement” studies, the authors argue, is hopelessly captured by advocates for the idea. A City on Mars is intended as a pessimistic corrective. A punchy wit and exhaustive research make that pessimistic corrective both fun and compelling.

Much of the book is spent considering some very specific questions regarding space settlement, such as how people will be able to grow crops in razor-sharp radioactive lunar regolith, or what precise legal regime will govern asteroid miners shooting huge rocks somewhere closer to Earth.

Even if those technical problems are solved, the authors will still ask the existential question of why we’d go to enormous trouble and expense to expand to new planets just to live in a metal bubble, completely sealed off from our new home.

Hardcore space colonists won’t be deterred by the book’s pessimism. But they might gain some appreciation for how hard it is to replicate by design physical and social habitats that took millions of years of evolution here on Earth to get even somewhat right.

The post Review: Should Humans Settle Mars? This Book Is Skeptical. appeared first on Reason.com.

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