Month: October 2024

Boeing shares are lower in premarket trading in New York after a Bloomberg report revealed the struggling aerospace giant, plagued with a multi-week strike by its union, will need to raise at least $10 billion through a new stock offering as cash reserves dwindle. 

People familiar with the matter say Boeing executives are working with advisors to explore different avenues to raise cash as the company’s financial health deteriorates due to the strike of 33,000 workers, which is nearing its third week. 

The company is working with advisers to explore its options, said the people, asking not to be identified discussing confidential matters. Raising equity isn’t likely to happen for at least a month, assuming the planemaker can resolve the strike, because Boeing wants a firm grasp of the financial toll from the walkout by 33,000 workers, the people said. 

No final decision on timing and the amount has been made, and Boeing could end up deciding against the move, the people said.-BBG

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

A liquidity squeeze strangles the company, which burned through a whopping  $8.25 billion in free cash during the first half. Some Wall Street analysts expect a $3.36 billion cash outflow in the third quarter. 

In the market, Boeing’s shares are down around 1% on dilution fears. On the year, shares tumbled nearly 42%.

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

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

Just days ago, Goldman analysts Noah Poponak and Anthony Valentini told clients:

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

Raising equity will come after Boeing solidifies a labor contract offer with the union. The timing is uncertain.

US equity futures are down a touch as we enter Q4 after trading overnight in a narrow range, with NDX leading and RTY lagging, a familiar pattern from the first half of the year. So far in 2024, S&P is +20.8%, NDX +19.2%, and RTY +10.0% (a full YTS performance return in a latter post). As of 8:00am ET,. S&P futures are down 0.1% after the index notched a fresh record Monday, the 43rd of the year,  following a third-quarter rally that capped the longest such winning stretch since 2021; Nasdaq futs are unchanged with Mag7 names mixed as Semis hold a slight bid. FTSE +35bps, CAC -20bps, DAX +30bps, Nikkei +1.93%, the record China market juggernaut (Hang Seng/Shanghai) is closed for the next week due to holidays. Bond yields are lower as the yield curve bull steepens, and USD is higher. Commodities are mixed with Ags/Energy under pressure and Precious Metals are leading Base metals. Overnight news focused on Israel “targeted ground raids” into Lebanon (Israeli security official said a wider operation into Beirut is not on the table) and the US Dockworkers strike starting on the East Coast with economic costs estimated to be up to $5bn/day; hurricane recovery continues in the Southeast. Today’s macro data focus is on ISM-Mfg, JOLTS, Construction Spending, and Vehicle Sales. There are five Fed speakers today.

In premarket trading Boeing slips about 1% as the company is considering raising at least $10 billion by selling new stock, according to Bloomberg. Apple is down 1.5% after Barclays warns of weak demand for iPhone 16, countering JPM optimism yesterday. Marine shipping firm ZIM Integrated Shipping fell as much as 4.9% after dockworkers walked out of every major port on the US East and Gulf coasts, marking the beginning of a strike. FedEx Corp. and United Parcel Service Inc. edged higher after Stifel said they are the “most obvious beneficiaries” of disruptions caused by the strike. Here are the other notable premarket movers:

• Atlassian (TEAM) rises 2% as Raymond James turns bullish, citing growth potential for the cloud business despite a period of undershooting expectations.
• CVS Health (CVS) gains 2% as the company is conducting a strategic review of options including a possible breakup, according to a person familiar with the matter.
• IGM Biosciences (IGMS) sinks 23% after its chief executive, scientific and medical officers stepped down amid a pivot to focus exclusively on autoimmunity.
• Pennant Group (PNTG) declines 2% after the health-care company launched a 3.5 million share offering to repay debt.

A global bond rally got fresh fuel Tuesday from data that euro-area inflation has been mostly vanquished, emboldening bets on interest-rate cuts. Treasuries advanced, while yields on 10-year German bonds fell as much as seven basis points to the lowest level since January. Optimism that the Fed can engineer the elusive “soft landing,” restricting policy but not so much that it chokes off growth, helped drive rallies in both bond and stock markets in the third quarter as markets are pricing in a recessionary 200bps in cuts which however is viewed as good for stocks. Indeed, money markets imply a one-in-three chance the Fed will deliver another half-point cut in November, and price a total of about 190 basis points of easing by the end of next year. That scenario may not pan out as expected, Larry Fink warned.

“The amount of easing that’s in the forward curve is crazy,” Fink, the chief executive officer of BlackRock Inc. said in an interview with Bloomberg TV. “There’s room for easing more, but not as much as the forward curve would indicate.”

European markets rise, with the Euro Stoxx 600 up 0.4% near session highs. FTSE 100 outperforms peers, adding 0.3%, IBEX lags, dropping 0.3%. Tech, real estate and travel are the strongest performing sectors. Euro-area inflation slowed below the European Central Bank’s 2% target for the first time since 2021, prompting money markets to add to bets on another quarter-point decrease by the ECB this month. Earlier, ECB President Christine Lagarde said the bank is becoming more optimistic about getting price pressures under control.

Earlier in the session, Asian stocks edged higher in thin trading on Tuesday, with a number of major markets including China, Hong Kong and South Korea closed for a holiday. The MSCI Asia Pacific Index was up about 0.2%. Japanese stocks recouped some of their losses from the previous day, when benchmarks were down more than 3%, thanks to a weaker yen. Australian stocks slipped. The outlook for Japanese equities has become uncertain as investors digest policy signals from new Prime Minister Shigeru Ishiba’s cabinet, as well as a potential fund rotation given China’s outperformance. Also boding well for the region’s outlook is a strong rally in Chinese stocks on the back of government measures. Any spillover to the rest of the region this week may be limited as the mainland Chinese market is closed for the Golden Week holiday.

“For China, the recent re-rating has been driven by the rising belief in a PBOC/government put option supporting shares off a low base,” Macquarie strategists including Eugene Hsiao wrote in a note. “Structural concerns on China remain unchanged, but in a one-party system, a little love to the markets can go a long way”

Mfg PMIs in Europe were mostly still in contractionary (Italy worse, Germany/EZ/Spain/France better/UK in-line). EZ CPI printed in-line (1.8%) and below the ECB target since the first time since June ’21. Japan Aug unemployment was slightly lower vs consensus (2.5 vs 2.6%).
 
ISM preview: ISM manufacturing index expected to tick up to 47.6 in September from 47.2 in August but remain in contraction. New orders component likely to get some additional scrutiny after falling to weakest level since May 2023 in the last print.

In FX, the Bloomberg Dollar Spot Index rises 0.2% while the euro falls as euro-area inflation slowed below the ECB’s 2% target for the first time since 2021. AUD and JPY are the best performers in G-10 FX; NOK and NZD underperform.

In rates, treasuries were underpinned by gains for core European rates after euro-area inflation slowed below the European Central Bank’s 2% target for the first time since 2021. Yield curve is notably flatter led by similar price action in bunds. US yields are richer by 2bp to 5bp across the curve near session lows with 2s10s, 5s30s spreads flatter by 1bp-2bp on the day; 10-year around 3.74% is down about 4bp vs Monday’s close with bunds and gilts in the sector outperforming by 3.5bp and 2bp. German bonds rally across the curve, led by the long end, while also outperforming comparable 10-year gilts and Treasuries.  Bull-flattening rally in bunds has German 2s10s, 5s30s spreads flatter by 4bp and 3bp on the day with 10-year German yields remaining down around 8bp at ~2.05%. US session highlights include ISM manfacturing data and JOLTS job openings, along with several Fed speakers.

In commodities, concerns of oil oversupply as Libya is set to restore production weighs on prices. While they’ve trimmed some losses, WTI and Brent are down on the day. Spot gold climbs roughly $14 to trade near $2,649/oz on haven demand amid rising tensions in the Middle East. 

Looking at today’s calendar, US economic data calendar includes September final S&P Global US manufacturing PMI (9:45am), August construction spending and JOLTS job openings and September ISM manufacturing (10am) and September Dallas Fed services activity (10:30am). Fed speakers scheduled include Bostic (11am, 11:10am, 6:15pm), Cook (11:10am), Barkin and Collins (6:15pm)

Market Snapshot

• S&P 500 futures little changed at 5,810.75
• STOXX Europe 600 up 0.2% to 523.97
• MXAP up 0.2% to 195.43
• MXAPJ down 0.3% to 619.11
• Nikkei up 1.9% to 38,651.97
• Topix up 1.7% to 2,690.78
• Hang Seng Index up 2.4% to 21,133.68
• Shanghai Composite up 8.1% to 3,336.50
• Sensex little changed at 84,291.28
• Australia S&P/ASX 200 down 0.7% to 8,208.93
• Kospi down 2.1% to 2,593.27
• German 10Y yield little changed at 2.06%
• Euro down 0.2% to $1.1115
• Brent Futures down 1.8% to $70.40/bbl
• Gold spot up 0.4% to $2,644.96
• US Dollar Index up 0.15% to 100.93

Top Overnight News

• Dockworkers have walked out of every major port on the US East and Gulf coasts, marking the beginning of a strike that could ripple through the world’s largest economy and cause political turmoil just weeks before the presidential election.
• Macau’s gaming revenue rose 15.5% year-on-year in September, exceeding analysts’ forecast as casinos gear up for one of China’s biggest holidays, which usually fuels travel to the gambling hub. Gross gaming revenue reached $2.2 billion. The result is compared to the median analyst estimate of a 14.2% increase, and has returned to 78% of the pre-pandemic level seen in 2019. BBG
• BOJ board members meeting in September highlighted the need to enhance communications with financial markets, while some members stressed the importance of staying wary of downside risks. “When conducting further policy interest rate hikes, the bank will need to communicate its policy stance and other factors to markets more carefully,” one of nine policy board members said at the September 19-20 meeting. BBG
• Euro-area CPI rose 1.8% in September year on year as expected, dipping below the 2% target for the first time since 2021 and bolstering the case for an ECB rate cut this month. The euro slipped. BBG
• Israel launched a ground operation in Lebanon, escalating its battle against Hezbollah. Troops began what Israel said were “targeted” raids on villages close to the border and emphasized operations would be “limited.” The US said it “agreed on the necessity of dismantling attack infrastructure.” BBG
• VP nominees JD Vance and Tim Walz face off at 9 p.m. ET for their first and potentially only debate before the election. The presidential candidates themselves also offer strikingly different visions of the economy. BBG
• Consumers plan to boost their holiday spending by ~7% according to a new study from PwC, but retail industry price competition will be intense. BBG
• CVS Health is conducting a strategic review of options for the company, including a possible breakup of the industry giant, according to people with knowledge of the matter. WSJ
• BlackRock CEO Larry Fink said the market is pricing “crazy” levels of Fed rate cuts given the US economy continues to grow. BBG
• Michel Barnier will face France’s parliament for the first time as prime minister on Tuesday to deliver a make-or-break speech outlining how he plans to regain control of public finances while navigating bitter divisions between lawmakers.
• Hurricane Helene has killed more than 100 people in six states across the US South — and most of the victims lived hundreds of miles away from where the storm made landfall.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the new quarter mixed amid a slew of data releases and several key market closures with markets in Mainland China, Hong Kong and South Korea closed, while participants also reflected on Fed chair Powell’s recent comments and Israel’s ground offensive in Lebanon. ASX 200 was pressured as underperformance in the mining, materials and financial sectors overshadowed the resilience in tech and defensives, while data releases were mixed as Retail Sales topped forecasts but Building Approvals showed a sharper-than-feared contraction. Nikkei 225 rallied after the recent heavy selling with the recovery facilitated by a weaker currency amid mixed Tankan data and varied BoJ opinions.

Top Asian News

• BoJ Summary of Opinions from the September meeting stated that a member said there is no change to the stance of adjusting the degree of monetary support if the economy and prices move in line with forecast although they must be vigilant to factors behind still unstable markets, while there was an opinion from a member that there is no need to raise rates when markets are unstable because they are not behind the curve on inflation and a member also said that given economic and market uncertainties, it is undesirable to make further changes to policy rate in a way that give markets impression they are moving to full-fledged policy tightening. Furthermore, a member said there is no change to the view that the BoJ must raise rates without waiting too long, but the rate hike must not be purpose in itself, while a member also thought that the rate path should move policy rate to 1.0% in the latter half of fiscal 2025 at earliest.
• Japan’s newly appointed Finance Minister Kato says he has been instructed to promote a growth-orientated economy driven by wage increases and investment, via Jiji.
• Japan’s newly appointed Economy Minister Akazawa says he wants the BoJ to decide on future rate hikes carefully; Taking Japan completely out of deflation is the top priority.

European bourses, Stoxx 600 (+0.2%) began the session around flat, but quickly dipped lower as sentiment took a hit early in the morning; a move which has since stabilised. As it stands, indices in Europe are mixed and trade very modestly on either side of the unchanged mark. EZ Manufacturing PMI/HICP figures passed through with little impact on price action. European sectors hold a slight positive bias, but with the breadth of the market fairly narrow. Tech takes the top spot alongside strength in Travel & Leisure. Energy is found at the foot of the pile, given the continued weakness in oil prices. US Equity Futures (ES -0.1%, NQ U/C RTY -0.3%) are mixed, with slight underperformance in the economy-linked RTY as traders continue to digest remarks from Fed Chair Powell who pushed back against another oversized cut in 2024.

Top European News

• Deutsche Bank now expects an ECB cut in October and believes a 50bps move in December could be a close call if recent weaker growth and inflation trends continue.
• ECB’s de Guindos says expectations surveys are an important part of the toolkit available to central banks for their policy analysis.
• ECB’s Rehn sees EZ inflation stabilising at 2% during 2025; direction of monetary policy is clear – rate cuts have begun; stance is becoming less restrictive; pace and scale of cuts decided meeting-by-meeting. Draghi report is a necessary wake-up call about Europe’s low growth and will provide good bases for next commission work programme. EZ growth could be weaker than forecast. In his view, there are now more reasons to justify a rate cut in October; recent weakening of EZ growth outlook also tips the scale in direction of an October cut
• ECB’s Nagel says that future purchases of government bonds by the European Central Bank should be reserved for special cases, according to Bloomberg.
• French PM Barnier is planning to announce additional tax increases of EUR 15-18bln in an attempt to gain back control of the nation’s finances, according to Le Parisien. To speak at 14:00BST/09:00ET
• Riksbank minutes (September meeting): Thedeen said; “The fact that we explicitly state in the draft report that we may make cuts in larger steps is a clear indication that, given the favourable inflation outlook, this is now part of our gradual monetary policy strategy”. “Krona remains undervalued and our inflation forecast is based on the assumption of a gradual appreciation of the exchange rate”. 

FX

• DXY is building on the gains seen yesterday that were driven by comments from Fed Chair Powell. DXY has briefly made its way onto a 101 handle, topping out at 101.04.
• EUR/USD is on the backfoot vs. the USD as the post-Powell USD buying has dragged the pair lower. Today’s in-line EZ HICP metrics provided little follow-through into the EUR given soft regional prints ahead of the release.
• GBP is softer vs. the broadly firmer USD as Cable extends its move further south of the 1.34 mark, taking out its 10DMA at 1.3338 in the process.
• After a soft start to the session, which looked to be a continued fall out from the post-Powell USD buying, JPY has been able to regain some poise vs. the USD after the pair topped out at 144.53.
• AUD/USD is currently straddling the 0.69 mark after yesterday’s Powell-induced selling pressure dragged the pair away from its 0.6942 YTD peak. For now, the pair is holding above yesterday’s low at 0.6894 with Retail Sales overnight offering some support. NZD/USD is holding just above the 0.63 mark
• BNZ forecasts a 50bps at the October RBNZ policy announcement.

Fixed Income

• USTs are firmer and back to pre-Powell levels after the marked bear-flattening the Chair induced on Monday evening. USTs to a 114-21 peak, approaching Monday’s best which itself is a tick below Friday’s 114-25 peak. Docket ahead is headlined by Final Manufacturing and then, more pertinently, the ISM Manufacturing PMI before remarks from Barkin, Bostic & Cook.
• EGBs are firmer, lifted by the Final PMIs as while there were modest upward revisions the overall growth-narrative remains weak and factors in favour of the doves who are considering an October cut; EZ CPI printed largely in-line, and had no impact. Bunds to a 135.72 peak, which has eclipsed the August 135.66 best for a new contract high.
• Gilts are at a 99.15 peak with supply strong but spurring no move ahead of remarks from Chief Economist Pill this afternoon. BoE’s Greene spoke overnight and noted that she is attentive to any sign that firms could begin passing on higher costs if consumption rebounds strongly. Today’s Manufacturing PMI data for the UK was unrevised.
• UK sells GBP 2.25bln 4.75% 2043 Gilt: b/c 3.27x (prev. 3.37x), average yield 4.421% (prev. 4.372%) & tail 0.1bps (prev. 0.2bps)
• Germany sells EUR 3.301bln vs exp. EUR 4bln 2.50% 2029 Bobl: b/c 1.9x (prev. 2.2x), average yield 1.9% (prev. 2.17%) & retention 17.48% (prev. 16.25%)

Commodities

• Subdued trade in the crude complex as the China optimism loses steam (against the backdrop of a cautious risk tone) and with the complex largely ignoring recent geopolitical developments. Do note, Libyan supply is slated to resume today after the dispute between eastern and western factions was settled. Brent’Dec sits just off today’s trough, with the range for today is USD 69.91-71.97/bbl parameter.
• Precious metals are modestly firmer despite the stronger Dollar but amidst the backdrop of escalating geopolitics. XAU sits in a current USD 2,633.31-2,647.51/oz parameter.
• Base metals are somewhat muted/mixed as the complex takes a breather from the recent China-induced gains and in the run-up to risk events including ISM Manufacturing today and NFP on Friday. As a reminder, Chinese markets will be away for the rest of the week amid Golden Week Holiday.
• US buys 6mln bbls of oil for SPR with 1.5mln bbls of oil per month for delivery from February to May 2025, according to the Energy Department.
• Chevron (CVX) reports unplanned flaring at its 290k BPD El Segundo California refinery, according to a community alert.
• BofA retain their bullish call on gold and see yellow metal hitting USD 3000/oz next year. Copper at USD 12,000/t or USD 5.44/lb in 2026

Geopolitics: Middle East

• “Al-Arabiya correspondent: Lebanese army deployed in the Bekaa”, according to Al Arabiya.
• “Israel Broadcasting Corporation quoting an Israeli official: The scale of ground operations in Lebanon could change”, according to Sky News Arabia.
• Israel Security Official says Israeli ground operation is limited, and a wider operation targeting Beirut is “not on the table”; no clashes with Hezbollah reported yet on the ground.
• “Al-Arabiya sources: The Israeli army plans to incursion into Lebanon from 1 to 2 km in the first phase”, according to Al Arabiya
• Israeli military said it began limited, localised and targeted raids against Hezbollah targets in the border area of southern Lebanon, while it said the targets are located in villages near the border and pose an immediate threat to northern Israeli communities. Furthermore, Axios reported that officials also confirmed that the Israeli ground operation in southern Lebanon has started.
• An Israeli strike was reported on a building in Ain Al-Hilweh Palestinian Camp near Lebanon’s Sidon and Lebanese sources noted an Israeli raid targeted the house of Major General Munir Al-Maqdah inside the Ain al-Hilweh camp, according to Sky News Arabia.
• Israel informed Washington it is planning a limited ground operation in Lebanon that could start imminently, according to the Washington Post. Furthermore, a senior US official told Fox that Israel will launch a “limited” ground incursion into South Lebanon, while the official added that an incursion is imminent and will be smaller in scale than in 2006 and last a shorter period of time.
• Israeli Security Cabinet approved the war’s next phase and ministers slammed US leaks about ground operations, according to Times of Israel.
• Hezbollah said it is countering Israeli ground military movements and it targeted Israeli troop movements across from Lebanese border towns.
• Israel’s Channel 12 reported that about 10 rockets were fired from Lebanon and landed in open areas in Miskaf in northern Israel, according to Sky News Arabia. It was separately reported that the IDF said it monitored the launch of 3 rockets from Lebanon towards Safed and it intercepted two rockets while the other landed in an open area, according to Al Jazeera.
• Syrian state media reported that explosions were heard over Syria’s capital Damascus with Syrian air defences intercepting hostile targets.
• Yemen’s Houthis said they will escalate military operations in response to Israeli attacks.
• Media outlets close to the Houthis noted talk about the Houthis launching a ballistic missile towards Tel Aviv, according to Sky News Arabia. Israel’s Channel 12 reported shortly after that residents in central Israel heard an explosion in the Tel Aviv area.
• A military base hosting US forces near Iraq’s Baghdad International Airport was targeted by a rocket attack.
• Yemeni Houthi spokesperson says group targeted Israeli military posts in Tel Aviv and Eilat with drones.

Geopolitics: Other

• Russia’s Deputy Foreign Minister says Russia are ready for a long confrontation with the US; They send all necessary warnings.
• North Korea criticised the US deployment of nuclear assets in South Korea with a US B-1B bomber potentially to participate in a planned military parade on Tuesday.

US Event Calendar

• Sept. Wards Total Vehicle Sales, est. 15.7m, prior 15.1m
• 09:45: Sept. S&P Global US Manufacturing PM, est. 47.0, prior 47.0
• 10:00: Aug. JOLTs Job Openings, est. 7.67m, prior 7.67m
• 10:00: Aug. Construction Spending MoM, est. 0.2%, prior -0.3%
• 10:00: Sept. ISM New Orders, prior 44.6
  • Prices Paid, est. 53.5, prior 54.0
  • Manufacturing, est. 47.5, prior 47.2
  • ISM Employment, prior 46.0
• 10:30: Sept. Dallas Fed Services Activity, prior -7.7

Central Banks

• 11:00: Fed’s Bostic Gives Opening Remarks
• 11:10: Fed’s Bostic Moderates Conversation with Lisa Cook
• 18:15: Fed’s Bostic, Barkin, Collins on Moderated Panel

DB’s Jim Reid concludes the overnight wrap

Welcome to Q4. As it’s the start of the quarter, we’ll shortly be publishing our usual performance review for Q3 (and September), covering how various financial assets fared. Markets put in a strong overall performance, despite the turmoil in early August, and as it stands, the S&P 500 has now posted its strongest YTD advance of the 21st century so far up to Q3, having advanced more than +20% since the start of the year. Other Q3 highlights include the strongest advance for the Japanese Yen since Q4 2008, whilst US Treasuries are up for a 5th consecutive month for the first time since 2010. See the full report in your inboxes shortly.

When it came to the last day of the month, markets outside of China which had the best day since September 2008 on Monday, saw a mixed day. Europe was down heavily and the US stumbled a little following some less dovish comments from Fed Chair Powell, but positive month-end effects late in the session helped the S&P 500 (+0.42%) post its 43rd all-time high of the year.

Powell’s remarks led to some doubts over whether the aggressive pace of the easing cycle priced by markets would materialise. While maintaining data-dependence, he emphasised that the economy remains solid, noting that “this is not a committee that feels like it’s in a hurry to cut rates quickly”. He also reiterated the rates signal from the most recent SEP, saying that “if the economy performs as expected that would mean two more cuts this year, for a total of 50bps more”. So some conditional pushback relative to market expectations that had moved to fully price 75bps of further cuts by year-end.

In response, Fed funds futures tempered the rate cut expectations, with the amount of easing priced by December falling to 70bps, down from 77bps at the start of the day and 73bps before Powell spoke. Off the back of this, Treasury yields extended what had been a modest increase earlier in the day, with 2yr Treasury yields closing +8.2bps higher on the day at 3.64%, while 10yr yields were up +3.0bps to 3.78%.

US equities were briefly weighed down, with the S&P 500 falling by as much as -0.6% following Powell’s comments, but recovered to post yet another record high (+0.42% on the day). This came amid a sharp move in the final 30 minutes of trading, suggesting that month- and quarter-end effects were likely at play. The tech mega caps outperformed in this late rally, with the Mag-7 up around 0.8% in the final half an hour of trading to close +0.63% higher on the day.

Before Powell’s remarks, European markets had lost ground, despite growing anticipation that the ECB would be cutting rates again at their meeting in a couple of weeks’ time. Overnight DB’s European economics team have added a cut at this meeting into their forecast with back-to-back cuts out to neutral (2.00-2.50%) by mid-2025 with risks skewed towards a 50bps in December. See their piece here.

The increased October cut talk was initially driven by the latest German inflation data, where the EU-harmonised measure was down to +1.8% in September as expected. That’s the first sub-2% reading since February 2021, so it helped cement the view that the ECB was well on the way to getting inflation durably back to target. Similarly, the Italian data showed inflation down to just +0.8%, although it’ll be the Euro Area-wide release today that ultimately matters for the ECB’s decision.

After the inflation data, we then heard from ECB President Lagarde, who kept the door open to an October cut in her latest comments to the European Parliament’s Committee on Economic and Monetary Affairs. In her prepared remarks, she said that “inflation might temporarily increase in the fourth quarter of this year as previous sharp falls in energy prices drop out of the annual rates, but the latest developments strengthen our confidence that inflation will return to target in a timely manner. We will take that into account in our next monetary policy meeting in October.” That explicit mention of October raised investors’ hopes that the ECB were considering whether to cut once again, and overnight index swaps dialled up the likelihood of an October cut from 82% on Friday to 91% by the close last night.

Despite the mounting rate cut anticipation for October, sovereign bond yields saw little change in Europe yesterday, as investors’ expectations for rate cuts further out into 2025 didn’t see a similar dovish shift. Indeed by the close, yields on 10yr bunds (-1.0bps) were only slightly lower, and those on 10yr OATs (-0.3bps) and BTPs (+0.2bps) were little changed. And for equities there were more consistent losses, with the STOXX 600 (-0.98%) falling back from its all-time high on Friday, whilst the CAC 40 (-2.00%) posted its worst daily performance since August 1.

Asian equity markets are mixed and much quieter this morning with China starting a week long holiday and some other markets closed. The Nikkei is up +1.91% as I type, supported by a weaker yen, after a significant drop of nearly -5% in the previous session, following Shigeru Ishiba’s win in the Liberal Democratic Party’s leadership race on Friday, given they are seen as a monetary hawk. In contrast, the S&P/ASX 200 is down by -0.82%, reversing its previous gains after hitting an all-time high yesterday. US futures are pretty flat along with US Treasuries.

Early morning data showed that retail sales in Australia rose +0.7% m/m in August (v/s +0.4% expected) as unusually warm weather brought forward spring spending. This follows an upwardly revised increase of +0.1% in July. Separately, Japan’s unemployment rate dropped to 2.5% in August (v/s +2.6% expected) against a level of +2.7% the previous month. Also, the jobs-to-applicants ratio in August declined to 1.23 from 1.24 in July. The Bloomberg forecast was for 1.24. Meanwhile, business optimism among large Japanese manufacturers remained steady at +13, unchanged from the quarter before. Separately, sentiment among large non-manufacturers improved, rising to +34 from +33 in the second quarter, beating market expectations of +32. So a big data dump in Japan that was generally slightly positive.

There wasn’t too much other data yesterday, although UK mortgage approvals picked up to 64.9k in August, which is their highest level since the month of the mini budget in September 2022. Separately, Q2 GDP growth was revised down a tenth to +0.5%.

To the day ahead now, and from the US we’ll get the ISM manufacturing for September, as well as the JOLTS job openings for August. Otherwise, there’s the global manufacturing PMIs for September, and the Euro Area flash CPI release for September. Central bank speakers include the Fed’s Bostic, Cook, Barkin and Collins, ECB Vice President de Guindos, the ECB’s Nagel, Rehn and Schnabel, and the BoE’s Pill. Today’s earnings releases include Nike. And in the political sphere, there’s a US election debate between the Vice Presidential candidates and French PM Barnier will give a policy speech and likely give clues to the latest on a difficult budget negotiation.

Over the past few years, plant-based meat substitutes have come closer and closer to mimicking the real thing, with brands like Beyond Meat having even sussed out how to create fake meat that “bleeds”.

But, as Statista’s Anna Fleck details below, after an initial boom, the company has rapidly come down from its peaks.

You will find more infographics at Statista

There are several reasons for the hype having died down, one of which being that many consumers decided to move away from buying the often more expensive items amid the cost of living crisis.

Another reason cited is that plant-based meats have become a part of the U.S.’s culture war, labeled as a symbol of left-wing politics and a binary to “real” meat.

According to data from Statista’s Market Insights, plant-based meat substitutes accounted for a mere sliver of the U.S. meat market last year.

Not counting insect-based meat alternatives or cultured, i.e. lab-grown meat, meat substitute sales amounted to $1.4 billion in 2023, while sales of fresh and processed meat added up to almost $124 billion.

Authored by Liz Heflin via Remix News,

The Ukrainian army is suffering from a steady decline in the capabilities of its front-line units, according to Polish news outlet Do Rzeczy, citing a report in the London Financial Times that between 50 and 70 percent of recruits survive only a few days on the frontlines.

Soldiers have low motivation and are prone to panic, while losses among trained and experienced units have led to a dependence on conscript units with very limited operational capabilities.

Training standards were reportedly so poor that not all of them knew how to hold a weapon. Furthermore, the depletion of the number of men considered fit to fight means that the average age of recruits now stands at 45.

The report follows a statement by Ukrainian Armed Forces Commander-in-Chief Oleksandr Syrskyi, who was appointed in early February. Syrsky said that recruits were consistently lacking the necessary training for frontline operations. Lamenting the sheer technological superiority of Russian forces, he said that personnel had received just two months of training, although other sources indicated that the training time was much shorter.

Meanwhile, Military Watch Magazine has said that poor training standards in frontline units have repeatedly emerged over the past two years, and back in mid-2023, the Wall Street Journal even reported that the Ukrainian army was recruiting poor men from the countryside, equipping them with Soviet-era rifles and uniforms, and then sending them to the front after just two nights at a base.

When some of the conscripts tried to sign a waiver, citing a lack of proper training, a Ukrainian sergeant replied, “Bakhmut will teach you,” referring to the frontline city that was then the epicenter of the fighting.

One of the conscripts recalled protesting that he had never held a gun before. The Wall Street Journal had written that such poorly trained and equipped men were necessary, as Western-trained and better-equipped brigades would be needed for the upcoming offensive. 

Since the beginning of June 2023, multiple offensives have resulted in extensive losses and further increased Kyiv’s reliance on conscripts.

In the meantime, Ukraine has even reportedly resorted to recruiting convicts.

A senior conscript officer in Ukraine’s Poltava region, Lieutenant Colonel Vitaly Berezhnyon, revealed on September 15, 2023, that the units had suffered huge losses.

“Out of 100 people who joined the units last fall, 10-20 remained, the rest are dead, wounded or disabled,” he said.

This indicates a loss rate of 80-90 percent in conscript units over the past year. Former Ukrainian ambassador to the U.K. and former Foreign Minister Vadym Prystaiko in April pointed to catastrophic personnel losses.

“From the beginning, our policy was not to discuss losses. When the war is over, we will admit it. I think it will be a terrible number,” he noted.

Read more here…

Another American is in Russian custody, but this is perhaps the most bizarre case so far. 72-year old Stephen James Hubbard pled guilty on Monday in a Moscow court to charges of fighting against Russia in the context of the Ukraine war.

He agreed that he was a mercenary on behalf of Ukraine. “Yes, I agree with the indictment,” RIA quoted him as telling the court. Russian media alleges that he had been part of a Ukrainian territorial defense unit in the eastern Ukrainian city of Izyum since the war’s start. Hubbard is the oldest American said to have been captured by Russian forces, but his family has disputed Moscow’s account.

His relatives have expressed doubts that he was ever a mercenary, given especially his old age and his at times expressing that he understood why Russia invaded Ukraine (that is, some media have described that he held ‘pro-Russian’ views and sympathies).

“He is so non-military,” his sister has told Reuters. “He never had a gun, owned a gun, done any of that…He’s more of a pacifist.” She has also said, “The Ukrainian military does not accept volunteers aged 60 and older, and Steven was 70 when they kidnapped him.”

The circumstances of precisely how he came to be in Russian custody remain somewhat mysterious and unclear:

In May, a Facebook user named Trisha Hubbard Fox claimed that her brother, Stephen James Hubbard, had been “kidnapped” in Ukraine nearly three years ago by Chechen soldiers, who allegedly beat him on video.

But with his confession he could be sentenced to up to 15 years in prison upon conviction when the trial wraps up.

Prosecutors said that he had signed a contract and was promised $1,000 a month to fight for Ukraine. He had already been living in Izyum for years, surviving off a small pension, for a time living with a Ukraine girlfriend.

Hubbard is a native of Big Rapids, Michigan – but he has spent many years living abroad and has worked as an English teacher in places like Japan and Cyprus.

There are currently ten total Americans behind bars in Russia for various alleged crimes, some of them serious. There have been two major prisoner swaps between Moscow and Washington thus far since the Ukraine war began, and there could be yet more to come.

An American retiree has pleaded guilty to working for the Ukrainian Armed Forces. A woman claiming to be his sister asserts that the man was an English teacher.

72-year-old American Steven Hubbard was detained at the very beginning of the war and accused of being a mercenary,… pic.twitter.com/MT7EcV2zis

— Sota News (@sotanews) September 30, 2024

As for Hubbard, the US Embassy has said it is “aware of the reports of the arrest of an American citizen in Russia” but that “due to privacy restrictions we are unable to comment any further.”

Authored by Charles Kennedy via OilPrice.com,

• Gold prices have surged to record highs due to a combination of geopolitical tensions, economic uncertainties, and a weakening US dollar.

• China and India play a significant role in the global gold market, with their demand for gold driving prices higher.

• The outlook for gold remains positive, but investors should be mindful of potential risks and maintain a diversified portfolio.

The global gold market is currently experiencing a remarkable resurgence, with prices surging to unprecedented levels and investors scrambling to acquire this precious metal. The epicenters of this buy spree are India and China, where gold holds a unique cultural significance and where economic conditions have further amplified its allure.

The Price Surge: A Closer Look

Gold prices have been relentlessly upward, shattering records and defying expectations. In India, prices have risen by over 19% in 2024 compared to the previous year, reaching approximately US $812 (Rs 76,000) per 10 grams. In the international markets, gold has touched US $2,665 an ounce, setting it on course for its best annual performance in 14 years.

This price surge is not limited to physical gold alone. Gold Exchange-Traded Funds (ETFs) have also witnessed substantial inflows, with global assets under management reaching a new peak of US $257 billion. This underscores the growing investor confidence in gold as a safe-haven asset in turbulent times.

Factors Driving the Gold Rush

Several factors are contributing to this modern-day gold rush.

• Geopolitical Tensions: The ongoing Russia-Ukraine conflict and rising tensions in the Middle East have heightened global uncertainties, driving investors towards safe-haven assets like gold.

• Interest Rate Cuts: The U.S. Federal Reserve’s aggressive interest rate cuts and expectations of further easing have made gold more attractive by reducing the opportunity cost of holding it.

• Weakening U.S. Dollar: The U.S. dollar’s decline has made gold cheaper for holders of other currencies, further stimulating demand.

• Economic Uncertainties: Lingering concerns about global economic growth and inflation have also boosted gold’s appeal as a hedge against economic instability.

China’s Role 

China plays a pivotal role in the global gold market. As the world’s largest consumer and producer, China’s actions significantly impact gold prices. The country’s strategic shift towards gold as a hedge against economic uncertainties and a counterbalance to the U.S. dollar has further amplified its influence on the market. Chinese investors, including the People’s Bank of China, have accumulated gold reserves, contributing to the price surge.

India: A Love Affair with Gold

In India, gold holds a deep-rooted cultural and religious significance. It is considered an auspicious metal and integral to weddings, festivals, and other celebrations. Moreover, gold is seen as a safe and reliable investment, especially in rural areas where access to formal financial institutions may be limited.

However, the high gold prices challenge Indian consumers, potentially dampening demand. Despite this, the upcoming festive season and the wedding season could provide some support to gold prices in the short term.

The Outlook for Gold

The outlook for gold remains positive, with several factors likely to sustain the upward trajectory of prices. The ongoing geopolitical tensions, the prospect of further interest rate cuts, and the continued weakness of the U.S. dollar all support gold prices. Moreover, the growing demand from China and other emerging markets will likely provide further impetus.

However, investors should also be mindful of potential risks. A sudden improvement in the global economic outlook or a hawkish shift in central bank policies could lead to a correction in gold prices. Therefore, it is crucial to maintain a balanced and diversified portfolio and to stay informed about the latest market developments.

What’s Next?

The current gold rush is a testament to the enduring appeal of this precious metal. Gold’s unique combination of safety, liquidity, and cultural significance makes it an attractive investment option in times of uncertainty. While the high prices pose some challenges, the long-term outlook for gold remains bright. As the world navigates a complex and uncertain landscape, gold’s role as a safe-haven asset and a store of value is likely to become even more prominent.

Germany has become the first Western country to initiative an emergency evacuation of its citizens from Lebanon utilizing military transport planes amid the rapidly deteriorating security situation.

Some 110 passengers were flown out of Beirut international airport in an initial flight on a German air force A321 plane on Monday. The group included diplomats and non-essential staff from the German embassy as well as their families. German citizens who with medical conditions were also on this first flight out.

Essential personnel at Germany’s embassy in Beirut have remained, in order to help facilitate the safe exit of the estimated 1,800 German citizens still in the country.

“German nationals who are particularly at risk due to medical circumstances are also being taken,” a statement of the military transport flight. 

More such military facilitated flights are likely, but a timeline is unclear at this point. There’s an expectation of wider war as Israeli builds up military forces along the border for an ‘imminent’ ground incursion into south Lebanon. 

Israel has also for the first time since 2006 begun striking targets in central Beirut. An estimated one million people throughout the country, but especially in the south, have been displaced thus far.

A German government spokesman announced Monday that “we are currently at a stage where we support the departure (of citizens) but we are explicitly not in an evacuation scenario.”

The statement emphasized that “all Germans in Lebanon have been urged to leave the country since October 2023.”

However, given the almost complete halt to commercial airline traffic at Beirut–Rafic Hariri International Airport, and the fact that Germany had to utilize a military flight to get its diplomats and citizens out in a first wave, it sure looks like this is the start of an evacuation scenario.

No other country ever done something like this before – full terror

IDF JETS LAUNCH MISSILES ON BEIRUT AS COMMERCIAL AIRCRAFT APPROACHES LANDING AT BEIRUT INTERNATIONAL AIRPORT pic.twitter.com/SpGGnmepX2

— Furkan Gözükara (@GozukaraFurkan) September 28, 2024

Currently the US and UK have troops positioned in nearby Cyprus, ready to help if those countries order military-assisted evacuations.

Authored by Carus Michaelangelo via The Mises Institute,

Like many people, I eagerly await Scott Horton’s upcoming book, Provoked, which will explain in detail the US provocations that led to Russia’s invasion of Ukraine. But will it come too late?

Since the Russia-Ukraine war began, the Biden administration, in collaboration with the Ukrainian government and much of Europe, has continued incessantly provoking Putin toward a wider conflict with the West. One can recognize the dangerous path we tread without justifying any of Russia’s responses to these provocations.

The US and Europe have armed Ukraine to the teeth.

The West has funded Ukraine’s military effort—and a great deal of corruption—to the tune of hundreds of billions of dollars. Supposedly this is good for the US because it aids the US military-industrial complex, but this will be cold comfort in the event of war with Russia. 

Ukraine sabotaged the Nord Stream pipeline, but everyone rushed to blame Russia initially. Ukraine launched an invasion of Russia’s Kursk region in early August, apparently surprising the US government. Since the invasion and the Wall Street Journal’s revelations about the Nord Stream pipeline, the US government’s support for Ukraine has not changed one iota. Indeed, the Kursk incursion ultimately met US approval.

The US government supplied Ukraine with ATACMS missiles that exploded a beach in Crimea in April. And now, Ukraine is again launching attacks on Moscow, this time sending drones that have attacked residential buildings and an airport. Is our blank check to Ukraine—as its action steadily increases in desperation—going to make war less likely, as the war hawks seem to imagine? Hardly.

The US makes an elementary blunder: they treat war with Ukraine as a proxy war. But to Russia, it is anything but. Our Ukrainian proxy is not fighting a Russian proxy, but Russia itself. Just because the fighting was taking place in neighboring Ukraine, rather than in Russia, changes nothing. US money, weapons, and intelligence are being used to make war on Russia. It is that simple to Russian leaders.

The US establishment is playing a dangerous game. Blinded by their own hubris into thinking that they know better, they claim that Putin bluffs when he hints that he may use nuclear weapons, or when Russian officials indicate Russia is changing its nuclear doctrine in response to the West’s actions. Establishment hacks claim Putin is a “coward” who will back down to displays of power and resolve from the West. (One might call this the “coward, coward, coward” narrative). The Ukrainian government, unsurprisingly, spins the same yarn.

Of course, this narrative is blatantly inconsistent and self-serving. Michael McFaul, former US Ambassador to Russia and a fanatical Russia hawk, at one and the same time knows Putin will back down to US deterrence, but can state with a straight face that, “Putin consistently acts belligerently even when the costs would seem to outweigh the benefits.” Moreover, he says, “American policymakers also underestimate the Russian leader’s tolerance for risky behavior, often assuming he will respond predictably to threats and inducements.” Well, which is it? Do we know Putin will back down, or is he unpredictable and willing to take costly actions driven by fear? It is no exaggeration to say that everything hinges on this single, unverifiable speculation about Putin.

When their narrative invariably runs into the harsh mistress of reality, they resort to page one of the Washington, DC playbook—unprecedented action and funding was not enough, we need to do and spend even more. If the West does not fund Ukraine or if we make peace with Russia, Putin hawks say, we are rewarding aggression. Hundreds of billions of dollars to signal that we cannot “reward aggression” is the typical Beltway or out-of-touch, think tank logic: take costly, symbolic action that makes no difference. Because in the end, it will have made no difference, other than to prolong the conflict and increase death and suffering. Doing more will only move us closer to the brink. As revealed in the New York Times in late August, the Biden administration at one point “feared the likelihood of nuclear use might rise to 50 percent or even higher.” Yet, we escalate further.

At every step, the US political establishment has been an obstacle to peace. Victoria Nuland, Biden’s former Under Secretary of State for Political Affairs, recently admitted what we already knew: that the US helped sabotage a peace proposal that could have ended the Russia-Ukraine war in its infancy. Their incessant refrain that Putin could not be trusted, and that he was salivating at the prospect of moving on to Eastern Europe after Ukraine, was not helpful either. History will remember that the war could have been over almost immediately, and countless Ukrainians alive today, had the US establishment had peace in mind, rather than Putin in their crosshairs.

When will US leaders say enough is enough: it’s time to end our support for Ukraine; it’s time to pull back from the bellicosity against nuclear powers; and it’s time for peace, commerce, and honest friendship with all nations, entangling alliances with none? To paraphrase Murray Rothbard, while some may prefer death in nuclear war to Russian rule over Ukraine, most Americans—and many Ukrainians—rightly prefer not to end up in a “free world” cemetery.

Some European leaders are coming around to peace. But only an intense and sustained campaign for peace from the American people can counter the hawkish establishment impulses to defend Ukraine at all costs.

Authored by Carl M. Cannon via RealClearPolitics,

This article was originally published on Friday, Sept. 27, 2024 – with the election in 40 days, which in the Judeo-Christian tradition is a number of profound significance. It signals, among other things, the difficulty of maintaining one’s spiritual faith in the face of adversity.

The Bible tells us that the rains of the “great flood” lasted 40 days and 40 nights. Moses fasted for 40 days – and spent 40 days and nights atop Mount Sinai waiting to receive the Lord’s law. The New Testament tells us that Jesus fasted for 40 days and nights in preparation for his ministry – and ascended to heaven 40 days after his crucifixion.

Is it merely a metaphor? Perhaps. But a comforting one, as the number 40 also suggests that God has patience with us. This year, in America, He will need it.

Friday is also the day of the week when I reprise a quotation intended to be uplifting or educational. Today’s words of wisdom concern the secular issue of criminal justice policy, as rendered not in the Old Testament, but in the Old West – by none other than Wild Bill Hickok.

But first, some context: Eight years ago this week Hillary Clinton and Donald Trump held their first debate. More than midway through the session – by then they were openly contemptuous of one another – the pair sparred over criminal justice policy. The context was rising homicide rates, particularly in Chicago and several other large cities.

The two candidates talked past one another. Trump tried to pin the violent crime increase on progressive Democratic Party reforms such as getting rid of “stop and frisk” in New York City. Clinton denied crime was really increasing and, with an assist from NBC anchorman Lester Holt, tried to pivot the discussion into a conversation about race.

Suffice it to say that nothing enlightening was uttered that night. But, in fairness, criminal justice policy is complicated. It’s difficult to even know the basic facts. In 2024, for example, despite assurances from Kamala Harris and her fellow Democrats (repeated word-for-word by the press) that violent crime is declining in this country, the picture isn’t that simple.

The source for the Democrats’ claim is the annual FBI Uniform Crime Report, which does show declining homicide rates. But the FBI numbers aren’t as solid as they once were. The reasons vary. For one thing, not every major police department even reports their numbers to the FBI anymore. Also, there is some evidence that more crimes, even serious felonies, are going unreported.

Another government metric, which comes from the Department of Justice’s Bureau of Justice Statistics, is the National Crime Victimization Survey. It’s not perfect, either, but it shows an increase in crime. I suspect the truth is somewhere in the middle, as it often is, but I will say this: When someone smugly assures you that crime is going down, check and see if you still have your wallet in your pocket or purse.

Which brings me (at long last) to Wild Bill Hickok.

Crime, a perennial political hot potato in this country, was the main issue in a local election held in central Kansas more than a century and a half ago. Tired of being brutalized by itinerant cowboys and local roughnecks who liquored up in the saloons in the county seat of Hays City, the citizens of Ellis County turned to an outsider in a special election on August 23, 1869.

The results were disputed, but ultimately Wild Bill Hickok was installed as sheriff. It didn’t take long for people to notice a difference.

Just a few days later, a bad hombre from Missouri named Bill Mulvey showed up in town. Mulvey’s reputation as a mean drunk preceded him, and the journey to Hays hadn’t mellowed him out. When informed that Wild Bill was the new law in town, Mulvey shot out the mirrors in the saloon where he was drinking whilst using bad language and issuing menacing warnings.

They were not veiled threats. Mulvey went so far as to boast that he’d come to Kansas to kill Bill Hickok. This may have just been whiskey talk, but as events unfolded it happened the other way around.

According to one eyewitness account, Mulvey rode up the street on his gray horse, rifle at the ready. Wild Bill strode out to meet him. Hickok broke the ominous silence by suddenly calling out to an imaginary gunman behind Mulvey.

“Don’t shoot him in the back!” Hickok shouted. “He is drunk.”

When Mulvey turned around, Hickok drew his pistol and shot him in the head.

A few weeks later, at 1 a.m. on September 27 – 155 years ago today – Hickok and his deputy came upon a gang of drunken cowboys tearing the hell out of John Bitter’s Beer Saloon. When Hickok ordered them to desist, one of the men, Samuel Strawhun, turned as if to rush the sheriff. Hickok quickly shot and killed him, quelling the melee.

The city fathers of Hays were left to contemplate that after only five weeks in office, Wild Bill Hickok had killed two men in the name of restoring order. Voters mulled it over, too, and in the regular November election that year, Hickok was voted out of office in favor of his deputy.

This tension between freedom and law and order is not a new one.

Benjamin Franklin referenced it in the context of frontier strife between settlers and Native Americans in 1755. Twenty years later at a conference in Boston intended to forestall war between the colonists and the British, Ben Franklin reprised a slightly different version of his aphorism. The Massachusetts Conference, as it was called, was in vain. War was coming. And Franklin’s comment explains why: “They who can give up essential Liberty to obtain a little temporary Safety,” he wrote, “deserve neither Liberty nor Safety.”

And that is our quote of the week.

Carl M. Cannon is the Washington bureau chief for RealClearPolitics and executive editor of RealClearMedia Group. Reach him on X @CarlCannon.

Authored by Pepe Escobar,

Leading website Guancha has published the transcript of a first-class lecture at Renmin University on China-U.S. relations by Martin Jacques, author of When China Rules the World. Jacques is one of the very few Westerner scholars with on the ground experience who actually understands the Chinese psyche and way of life in contrast to the West.

A particularly intriguing section of the lecture concerns research by Danny Quah, the dean of the widely respected Lee Kuan Yew Institute in Singapore. This is the money quote:

“Between 1980 and 2020, Europe’s share of global GDP fell from 26% to 15%. In other words, it fell by 11 percentage points, a very large drop. Although the decline in the United States was smaller, it fell from 21% in the 1980s to less than 16% in 2020. From another perspective, Asia and East Asia are constantly rising. The share in 1980 was 11.5%, and it has risen to 25% in 2020. Among this 25%, China has made the largest contribution, accounting for 18% of the world.”

What this graphically illustrates is the acute swing in the world’s center of economic gravity – no matter the rhetorical tsunamis emanating from the Hegemon. In 1980 the economic center was Atlanticist. Quah though believes that the economic center will reach the Sino-Indian border only by 2050.

When we take China compounded with the 10 members of ASEAN, without even considering South Asia, it’s fair to argue that the economic center will already be in the East by 2030, and will be Sino-Indian before 2040.

Jacques is correct that by then “the ‘Asian Age’ will replace the ‘Western Age’, and since 1750, the world has always been in the Western Age.” On a personal note, after living and working in Asia for most of the past three decades, I qualify our century as “The Eurasian Century”.

And that, in a nutshell, is the reason why the Hegemon/Atlanticist elites are in Deep Panic mode. The free lunch – of exploiting the wealth of the Global South – is coming to an end.

Hong Kong back in the spotlight

China has already designed the masterplan of its development strategy all the way to 2035 and in many aspects all the way to 2049. The current juncture though is extremely tricky.

The People’s Bank of China is taking the necessary master tweaks of the economy very seriously. Earlier this week the PBoC announced cuts to the outstanding mortgage rate and the reserve requirement ratio: that’s the amount of cash commercial banks need to hold as reserves. The PBoC also cut the benchmark policy rate and boosted capital markets.

Then the Politburo, chaired by President Xi Jinping himself, intervened in full force, vowing to protect China’s private enterprises; finally stabilise the always wobbly property sector; and adopt the necessary fiscal expenditures.

That’s the domestic front. On the external front, China is on a roll. The top priority is the slowly but surely internationalization of the yuan. And that’s where the crucial role of Hong Kong comes in – as detailed in a report by Renmin University.

China is already de-dollarizing at nearly breakneck speed. The U.S. dollar’s share of bilateral trade has already fallen from 80% to less than 50%.

China is now trading with the world mostly in yuan – and the petroyuan is not even in full force. Since the start of the SMO by Russia in Ukraine in February 2022, the yuan is the de facto Asian reserve currency for Russia. In parallel, Beijing is accelerating currency swaps all across the spectrum and designating more clearing banks around the world.

Hong Kong is in a class by itself when it comes to state of the art financial institutions. Hence the connection is inevitable for global investors: all sorts of deals are open in China via Hong Kong, with the added bonus of avoiding Hegemon sanctions.

So from now on Hong Kong will be even more of a Holy Grail for all sorts of yuan-denominated transactions. Talk about a magnet for finance tech wizards.

Hong Kong is already the world’s top market for the offshore yuan – processing nearly 80% of all settlements. Three months ago, according to the Hong Kong Monetary Authority (HKMA), the Special Administrative Region had $151.7 billion in offshore deposits.

A top HKMA executive not by accident attended the Eastern Economic Forum in Vladivostok earlier this month. With high U.S. interest rates and low PBoC interest rates, offshore yuan bonds will be issued like there’s no tomorrow.

Nuclear destruction or an imperfect evolving new order

From Beijing to Hong Kong, Chinese politico-economic elites are quite comfortable with the fact that for the first time in History, the rise of a great power is not being conditioned by imperialism, war, slavery, looting and all of the above, but under what has been codified since the Little Helmsman Deng Xiaoping’s late 1970s reforms as “peaceful development.”

That is mirrored in several concepts such as win-win; mutual prosperity; equality; “community of shared future for mankind”; and as a master geoeconomic project, the interlocking connectivity corridors across the Belt and Road Initiative (BRI).

While China invests in infrastructure development around the world, the Hegemon imposes sanctions, engages in bombing, supports variations of the Forever Wars, finances and weaponizes color revolutions.

Hegemon “strategy” barely qualifying as utter mediocrity ranges from the U.S. government funding a $1.6 billion campaign to smear China to Republicans divided on whether regime change in Beijing is their ultimate goal and the Democrat ambassador in Beijing convinced that Washington’s China policy is not too hawkish.

Then there’s puny functionary and Deputy Secretary of State Kurt Campbell – the man who invented the “pivot to Asia” during the first Obama administration – ordering the Europeans to go hawkish on China and defining Beijing in front of the House Foreign Affairs Committee as “the most significant challenge in our history”.

Very few IQs above room temperature across Asia pay attention to such clowns. In contrast, what is now emerging in informed discussions from South to Southeast Asia is that BRICS progress will not be steady enough if the emphasis remains on consensual decisions.

A daring proposition is emerging that Russia and China – the actual BRICS leaders – should announce at the summit in Kazan next month that they are backing a yuan/ruble/gold alliance: as in if the world needs to choose between NATOstan hegemony or a BRICS alternative, better start with sound (real) money.

Beyond the feasibility of such proposal, there’s a serious critique of Utopia; the Global Majority must be pushed to face the harsh reality it faces – nuclear destruction or an imperfect evolving new order – and make a stand, fast.

Meanwhile, like a river undisturbed while traversing a rocky wilderness, China silently flows away on its path to peaceful primacy.