Month: October 2024

Authored by Zachary Stieber via The Epoch Times,

Nevada’s governor on Oct. 15 said he supports female volleyball players refusing to participate in a game because their opponent has a male who identifies as a female on their team.

Female players from the University of Nevada, Reno said earlier this month that they would only play against San Jose State University if the game was restricted to women.

Officials from the University of Nevada later said that they intend “to move forward with the match as scheduled” and that the players’ position does not represent the university’s position.

The school said that Nevada’s Constitution and law ensure equality of rights.

“The student athletes at the University of Nevada, Reno have determined that they do not want to play against San Jose State, and I wholeheartedly respect the decision of the players,” Nevada Gov. Joe Lombardo said in a statement posted on social media. “No student athlete should ever be pressured to play a game where they don’t feel safe—period.”

Nevada Lt. Gov. Stavros Anthony previously expressed support for the team.

Officials also said no players will be disciplined if they do not participate in the match, which is slated to take place on Oct. 26.

The female volleyball teams at Boise State, Southern Utah, Utah State, and Wyoming previously chose not to play against San Jose State.

The governors of Idaho, Utah, and Wyoming have said they support the forfeits.

“I applaud @BoiseState for working within the spirit of my Executive Order, the Defending Women’s Sports Act,” Idaho Gov. Brad Little said in September.

“We need to ensure player safety for all of our female athletes and continue the fight for fairness in women’s sports.”

According to a legal complaint filed in federal court, one of San Jose State’s volleyball players is a male.

The player, Blaire Fleming, told Brooke Slusser, another member of the team, earlier this year that he was born male, according to a Sept. 23 filing. Slusser is one of the plaintiffs in the case.

Officials with the school later told the team that members should not talk about Fleming’s sex with anyone outside the team, the filing states.

If members did not comply, “things would go badly” for the members, according to the complaint.

The legal case is against groups and individuals including the National Collegiate Athletics Association, which in 2022 allowed males to participate in women’s sports.

A spokeswoman for San Jose State University (SJSU) did not respond to a request for comment.

In a recent statement, the school said: “SJSU student athletes are in full compliance with NCAA and Mountain West rules and regulations. We remain committed to supporting all of our student athletes—including their mental health and physical safety, both on and off the court—during this challenging time. We continue to work to ensure their ability to participate in an inclusive, fair, and respectful environment.”

Citadel founder Ken Griffin has gradually withdrawn from Chicago’s real estate market after relocating his hedge fund from the lawless city run by far-left Democrats to Miami in 2022. In addition to violent crime, an unfavorable tax environment was another primary driver for Griffin in moving his hedge fund and family to the Sunshine State. 

Bloomberg cited Zillow data showing Griffin went under contract for his 38th-floor penthouse at 9 West Walton. He never lived in the 7,500-square-foot (670-square-meter) condo, marketed as unfinished. The condo was listed 89 days ago in July for $11 million, or half of what the billionaire paid in 2017.

“The first time ever offered- This true penthouse at Chicago’s most distinguished address, No. 9 Walton! This a one-of-a-kind and exceptional opportunity to create a 7500+ square feet dream home, plus the added exclusivity of a private 39th-floor interior space and rooftop pool accessed by an in-unit private elevator,” listing broker Jameson Sotheby’s International Realty wrote in the description of the condo. 

Bloomberg noted that Griffin, ranked 36th on the Bloomberg Billionaires Index, has been trying to offload other residential real estate properties:

Griffin’s attempts to offload his Chicago real estate have faced challenges in a market where prices lag behind cities like Miami and New York. He previously sold properties in the Park Tower and Waldorf Astoria, each at losses exceeding $3 million. At No. 9 Walton, Griffin spent a total of nearly $59 million on the penthouse he’s now selling and three other units in the largest residential real estate transaction in Chicago’s history.

Taking a multi-million dollar hit to escape an imploding metro area is likely well worth it for Griffin. In 2021, during a speech at the Economic Club of Chicago, the hedge fund manager warned that Chicago would be limited to “years, not decades” unless violent crime was properly addressed. 

“It’s becoming ever more difficult to have this as our global headquarters, a city which has so much violence,” Griffin said at the time, adding, “I mean Chicago is like Afghanistan, on a good day, and that’s a problem.”

By 2022, he announced he was moving Citadel’s headquarters to Miami in a multiyear process. In a letter to employees at the time, he wrote that he personally moved to Florida—a state that doesn’t collect personal income. He noted that Florida has a better corporate environment than Chicago. 

So if all the rich people leave Chicago and dump real estate in the town, who will pay for the soaring, unfunded pension debt of the unionized public workforce? We have a hint: the suckers that are still there. Good luck. This must be the ‘utopia’ Democrats have been promising… 

Authored by Mike Shedlock via MishTalk.com,

The polls and election odds are breaking for Trump. Why?

Sky News has a nice video of the Harris Media Blitz.

I would not call a dead heat a polling disaster.

Let’s be honest. The disaster was Trump’s election odds 22.7 percentage point drop in the span of three weeks due to a miserable debate in which he did not practice.

In the last three weeks, Trump has gained back 8 points of the 22.7 points he lost.

Silver still has Trump behind, but just barely.

Polymarket Odds

On July 16, one could have bought Harris for 6 cents. Trump would have cost 72 cents.

Trump then fell to 44 percent down from 72 cents. That’s the real disaster.

You can now buy Trump for 58 cents or Harris for 42 cents.

How Much of a Political Lagging Indicator is Nate Silver?

On October 12, I asked How Much of a Political Lagging Indicator is Nate Silver?

Silver keeps changing to where Polymarket was a week ago.

The media blitz certainly did not help. Harris looked silly on 60 minutes and like a fool on The View when she said she would not have done anything differently than Biden.

Obama chastising black males likely backfired. But what about the economy?

Initial and Continued Unemployment Claims Surge

On October 11, I noted Initial and Continued Unemployment Claims Surge

But things are much worse than the chart of continued claims shows.

Also on October 11, I noted Continued Plus Long-Term Unemployment Claims Suggest Recession Right Now

Understanding the Chart

• The problem with continued claims is that benefits in 48 of 50 states expire after 26 week. Once a person hits 27 week, they are still unemployed but they have no claim.

• To address this issue, I add those unemployed 27 weeks or more to continued claims.

• Since claims are weekly, I compute a monthly average (not a 4-week moving average) of continued claims and add that to the monthly total of those unemployed 27 weeks or more.

Change in Unemployment by Age Group and Race

The next jobs report on November 1 (for October) could impact the election.

The Cost of Food Increased 0.4 Percent in September

Food prices from the BLS, chart by Mish

On October 10, I asked The Cost of Food Increased 0.4 Percent in Sept, What’s in Your Basket?

The BLS just handed Trump a huge campaign talking point. Five charts.

If Trump was smart (not that he can or will do anything about this), he would hammer this issue hard, in the correct way, blasting Harris for suggesting price controls.

Also see A Racist Proposal by Harris Would Make Forgivable Loans to Blacks

The political pandering on both sides of the aisle continues with free money handouts. The latest by Harris is unconstitutional and racist.

I suspect that messaging didn’t and won’t work.

Who Will Decide the Election?

Back in February, I commented that renters would decide the election. That is still my base case.

Who are the renters?

Young voters and black. They are the ones least likely to have assets and the most impacted by inflation. In unprecedented numbers, young voters and blacks have switched to Trump.

Here’s the question that may be on their minds: Are you better off than four years ago?

On her media Blitz, Harris proved she will be just like Biden. That message coupled with the economy has Trump on a path to victory.

I will take Polymarket over Silver. But three weeks remain. Don’t start cheering (either way), until the votes are counted.

Following Tuesday widespread reports that Prime Minister Netanyahu will heed the Biden administration’s plea to avoid targeting Iranian oil and nuclear sites, Israeli officials now say Israel’s military response for Iran’s October 1st ballistic missile attack is ready.

“Israel’s plan to respond to Iran’s October 1 attack is ready, a source familiar with the matter told CNN, without providing further information,” writes the US news outlet on Wednesday.

As for the timeline, Israel sources have only revealed that the retaliatory strikes are expected to happen before the US election day.

“American officials expect Israel will retaliate against this month’s Iranian attack before November 5, sources tell CNN — a timeline that would thrust the growing volatility in the Middle East squarely into public view within days of the US presidential election,” CNN has said in a separate report.

“The timeline and parameters of Israel’s retaliation against Iran have been subject to intense debate inside Israel’s government and are not directly related to the timing of the US election,” per the sources.

The Biden administration has also been intensely lobbying the Israelis to only hit military infrastructure in the Islamic Republic, on fears that if energy or nuclear sites are struck, Tehran could choose to strike out at oil facilities in nearby gulf states, which would send the price of crude soaring.

Iranian leaders have considered the Oct.1st attack, which saw some 200 ballistic missiles sent on Israel, a ‘win’. They’ve said Iran seeks peace but will hit back hard in response to any Israeli aggression.

Threats and counterthreats continue to fly:

Iran’s Foreign Minister Abbas Araghchi warned UN chief Antonio Guterres that Tehran is ready for a “decisive and regretful” response if Israel attacks his country in retaliation to the almost 200 ballistic missiles at Israel on October 1.

Defense Minister Yoav Gallant said last week that Israel “will soon respond” to the missile attack, vowing it will be “precise and deadly.”

Israel’s Kan public broadcaster has meanwhile confirmed that “the political echelon” has already decided on the targets, with an Israeli source saying, “The targets are clear. Now it’s a matter of time.”

Israel is trying to show its powerful backer Washington that it is taking urgent action over the spiraling humanitarian crisis in Gaza.

On Tuesday the Biden administration submitted a letter to the Israel government warning that the US could withdraw key aspects of US military aid to Israel if it doesn’t reign in the devastating humanitarian situation in Gaza. As we noted, like with prior such ‘warnings’ (this isn’t the first), the message seems more timed for the November election

Israel on Wednesday has announced that fifty trucks loaded with supplies have entered northern Gaza—much of which was supplied by Jordan.

A statement from the Israeli Defense Ministry agency overseeing the supplies said that “50 trucks carrying humanitarian aid — including food, water, medical supplies and shelter equipment provided by Jordan — were transferred today to northern Gaza through the Allenby Bridge Crossing and the Erez West Crossing as part of our commitment to deliver humanitarian aid to Gaza.”

Israel said that “will continue to facilitate and ease the entry of humanitarian aid to Gaza.” The Israeli military has stood accused of blocking aid, including trucks with American-supplied support.

“Blinken and Austin raise alarm in the letter that the amount of aid entering Gaza has dropped by 50 percent compared to assurances provided in March and April,” The Hill among others has noted.

The letter, issued by US Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin is being widely considered the ‘strongest’ written warning by the US thus far.

“We are now writing to underscore the US government’s deep concern over the deteriorating humanitarian situation in Gaza, and seek urgent and sustained actions by your government this month to reverse this trajectory,” it said.

“We are particularly concerned that recent actions by the Israeli government – including halting commercial imports, denying or impeding nearly 90% of humanitarian movements between northern and southern Gaza in September, continuing burdensome and excessive dual-use restrictions, and instituting new vetting and onerous liability and customs requirements for humanitarian staff and shipments – together with increased lawlessness and looting – are contributing to an accelerated deterioration in the conditions in Gaza,” the letter laid out.

The failure to secure a ceasefire in #Gaza, has caused violence to now spread in #Lebanon and other parts of the Middle East. The violence has to stop.

Demand the UK government helps to secure a permanent #CeasefireNOW at https://t.co/AB2WJngyuj pic.twitter.com/wHj0D49F5Q

— Oxfam (@oxfamgb) October 16, 2024

It emphasized that Israel “must, starting now and within 30 days” act on a series of measures to rapidly boost aid or else this will “have implications for US policy”. This is being taken as a threat that the US could begin restricting or else throttling defense aid deliveries to Tel Aviv.

Israel has since affirmed that it has received the letter and said that the country “takes this matter seriously” and intends to “address the concerns raised” with its American ally.

Authored by Jonathan Turley,

Former J6 Committee Co-Chair and Rep. Liz Cheney has long been criticized for her role in creating a one-sided and at times erroneous record of what occurred on January 6th. That includes editing out Trump’s call for supporters to protest “peacefully,” burying evidence on Trump’s offer to supply National Guard support for that day, and highlighting a false account of Trump in his presidential limo that was directly contradicted by witnesses.

She now stands accused of unethically contacting a key represented witness to get her to change her testimony. In my view, ethical proceedings are unlikely after the disclosure of ex parte communications with former Trump aide Cassidy Hutchinson. However, the evidence seemingly contradicts public accounts of how Hutchinson decided to fire her counsel and change her testimony.

Hutchinson was represented by Stefan Passantino, who some clearly viewed as a stumbling block to getting Hutchinson to turn against Trump.

Hutchinson would claim under oath that Passantino pressured her to stay “loyal” to Donald Trump and coached her responses to support Trump despite her conflicting accounts.

However, newly disclosed evidence allegedly contradicts that account, including Hutchinson telling former Trump aide (and now The View co-host) Alyssa Farah Griffin that “[Passantino’s] not against me complying.”

Griffin reportedly responded “I actually agree with Stefan’s approach and think it’s accomplished everyone’s goals. I am happy to tip liz off.”

Hutchinson would later dump Passantino and testify to allegations that have been challenged as untrue. That includes the limo allegation that was repeatedly raised by Cheney and others. Hutchinson recounted the story that Trump allegedly grabbed the wheel of the vehicle after the Secret Service allegedly refused to take him to the Capitol.

Cheney and the Committee were aware that the account was directly and clearly refuted by the driver of the vehicle.

However, they buried his account and highlighted that claim in its final report as being credible.

The new allegation concerns the communications leading up to that changed testimony. Rep. Barry Loudermilk, R-Ga., chairman of the House Administration oversight subcommittee has released the new evidence while alleging that Cheney used an encrypted phone app to evade defense counsel in speaking with Hutchinson.

Under Rule 4.2 of the Rules of Professional Conduct, “a lawyer shall not communicate or cause another to communicate about the subject of the representation with a person known to be represented by another lawyer in the matter, unless the lawyer has the prior consent of the lawyer representing such other person or is authorized by law or a court order to do so.”

Cheney is a D.C. licensed lawyer.

At the outset, in my view, Cheney was acting as a member of Congress in this matter. That has always been a rather grey area for lawyers who are also members of Congress. The bar has taken a broad view of the need for lawyers to adhere to these ethical standards. However, it is not clear politically or ethically if the Bar officials would be inclined to pursue Cheney, who has been lionized in Washington for her role in the investigation.

Yet, the record does indicate that Cheney was not just aware of the represented status but the policy of the House to respect the rules governing represented parties. In one message Griffin tells Hutchinson, “Her one concern was so long ad [sic] you have counsel, she can’t really ethically talk to you without him.”

That did not appear to prove a barrier. Before Passantino withdrew as counsel, Cheney communicated secretly with Hutchinson. A later message was send to Cheney reading on June 6, “Hi, this is Cassidy Hutchinson. I’m sorry for reaching out this way, but I was hoping to have a private conversation with you (soon), if you are willing.”

Cheney responded, “I would be happy to. Let me know what time works for you.”

A few days later, Hutchinson fired Passantino, who told Just the News that “I absolutely had no knowledge at the time that Congresswoman Liz Cheney was communicating with my client behind my back – either directly, through her staff, or through cutouts.”

However, Cheney has claimed that it was Hutchinson who reached out to her and indicated that she was severing her counsel. As an investigating member of Congress, she had an institutional interest, if not a duty, to pursue witnesses.

In her memoir, Cheney said that it was Hutchinson who contacted her directly after her third interview and added “I was very sympathetic to her situation, but I did not want our committee to be advising her on what she should do next…I told Cassidy that she could consult another lawyer, and seek his or her independent advice on how best to move forward.”

We have previously discussed Passantino’s defamation lawsuit against MSNBC legal analyst and former Mueller aide Andrew Weissmann.

Once again, I am doubtful that this would rise to a formal Bar ethics investigation. However, the evidence shows the communications leading to Hutchinson’s firing of her counsel and changing of her testimony, including accounts later challenged by critics.

Hutchinson, Griffin, and Cheney have been reportedly campaigning together this month in support of Vice President Kamala Harris.

In the end, there are ethical concerns raised by these communications. Cheney should have worked through new counsel and proposing alternative counsel raises additional concerns given the interest of Cheney in having the witness “flip” against Trump. She could have waited for new counsel to communicate with her and the Committee.

Alternatively, Hutchinson could have fired her counsel and formally contacted the Committee as an unrepresented party. The ethical rules are designed to avoid this type of murky representational posture. Nevertheless, I am doubtful that this will result in any ethical proceedings against Cheney.

One of NATO’s two newest members has issued a warning about war fatigue related to Ukraine. Asked in an interview in FT about Western fatigue, Finnish Foreign Minister Elina Valtonen responded that “It’s real. And increasingly so.”

She described that the wars in Gaza and Lebanon have further served to heighten this fatigue, having also distracted the West’s attention from supporting Ukraine. “These two conflicts are, of course, very much linked,” she began.

“But for us Europeans, it would be important to realize that if we allow Russia to win in Ukraine, then essentially we end the credibility of our deterrence,” Valtonen continued.

“There is support for Ukraine, but what is sufficient? That is the question,” the diplomat said. “Many [countries] would like to think, since especially with the war waiting in the Middle East, it would be great if we found an answer to this war.”

And yet officials like Valtonen continue to try and frame the war as a matter of the Western alliance ‘winning’ or else risking its reputation. This very mentality contributes to prolonging the war, causing ‘war fatigue’ to grow in Europe and around the world.

The Finnish FM’s warnings seem also timed in connection with the US presidential election. Former President Donald Trump has been the only candidate to articulate that a negotiated end the to war must be urgently sought, and he now leads in many polls.

Trump recently said on the campaign trail, “I will end the war in Ukraine, stop the chaos in the Middle East, and Prevent World War Three.”

US and European media headlines have meanwhile continued sounding the alarm on depleted arms and ammo supplies. Germany has no more heavy arms to send, recent reports say, while the Pentagon has warned that “our supplies are not endless” in addressing missiles and ammo being shipped to both Israel and Ukraine.

The Ukrainian government under President Zelensky has been complaining that arms shipments from Western allies are growing smaller and smaller. He is still presenting his ‘victory plan’ to the nation in Ukraine’s parliament this week, but tellingly it was met with a lackluster response in Washington during his late September trip.

A broad overview of America’s beer, spirits, and wine consumption reveals a steady increase since the Dot Com bust, with per capita levels approaching the highs last seen during the inflation-driven misery storm of the 1970s. Economic misery and rising alcohol consumption often go hand in hand.

“During periods of recession, US per capita alcohol consumption from beer, spirits and wine has been very resilient. Total beer volume declined in 2009 whilst spirits volume continued to grow,” Goldman’s Olivier Nicolaï told clients in a note on Tuesday. 

Nicolaï noted, “Within overall US alcohol consumption, beer has been steadily losing share to spirits over the last 20 years. Within the spirits category, tequila has been gaining market share at the expense of vodka over recent years.”

Six decades of US per capita alcohol consumption data shows how war and economic misery can impact drinking rates among consumers. From the 1960s to the 1970s, the rate of alcohol consumption soared on a per capita basis, likely due to foreign wars and high inflation. Around the time the Fed regained control of inflation with interest rate hikes in the late 1970s and early 80s, consumption rates eventually topped and fell as easier economic conditions led to boom cycles. However, drinking rates bottomed at the end of the 90s, rising just after the Dot Com bust, rising higher with endless Middle East wars, dipped slightly but jumped following the 2008 GFC, and surged in recent years after government-enforced lockdowns during the pandemic, Ukraine War, and ongoing inflation storm. 

One noticeable trend Nicolaï found in the latest surge in drinking trends is that spirits have become increasingly popular in the US market as beer demand slides. 

He said tequila has become the top spirit of choice among US drinkers, a trend that became apparent in 2016. 

Only five players control about 50% of spirit volumes in the US. 

Here’s the latest US spirits market data via Nielsen about drinking trends on a 4-week basis to October 5… 

Given all of this, Nicolaï explained to clients his rating coverage on each of the top spirit producers:

• Diageo (Sell): USA accounted for 35% of Diageo FY23 sales and 45% of EBIT. Diageo’s volumes including RTD declined -0.6% (-2.9% Aug/Sept). Sales were up +3.4%, ahead of the market at +1.9%. Performance continued to be driven by Don Julio, which grew volumes +35.9%, and Crown Royal, which accelerated to +16.3% thanks to Crown Royal Blackberry launched in February 2024. Casamigos volumes are weak down -7.9% (vs -8.5% in Aug/Sept). Captain Morgan underperformed the category, down -7.2% (vs -5.8% for the category). Cîroc (-21.7%) and Smirnoff (-5.1%) volumes both underperformed.
• Pernod (Buy): USA accounted for 19% of Pernod FY23 sales and 24% of EBIT. Pernod’s volumes including RTD declined -0.2%, sequentially improving from -3.4% in July/August. Sales declined by -5.4% due to negative price/mix. Volumes excluding RTD declined -5.4%, underperforming the market. Jameson volume improved sequentially to -6.6%, from -8.3% in Aug/Sept. Absolut saw volumes sequentially improve to -1.6%. Martell saw strong volume growth, up +16.3%, against an easier comp. Glenlivet (-10.6%) and Malibu (-7.8%) volumes sequentially improved. In RTD, Absolut saw strong growth up +75.4%. Due to destocking, we expect -10% sales in the US for Pernod in Q1 on October 17 (here) and are below consensus for the group.
• Campari (Neutral): USA accounts for 28% of FY23 group sales. Campari volume declined -0.4%, with sales up +2.2% still above the market. The sequential volume improvement was driven by an acceleration in Aperol to +5.3% (+2.0% in Aug/Sept). Espolon Tequila performed strongly, accelerating volumes to +21.4%, whilst SKYY volumes also improved sequentially to -4.7% (-11.1% in Aug/Sept). Appleton (+10.0%) and Wray and Nephew (+5.7%) saw strong growth in rum. Courvoisier (acquired April 2024) volume are declining -9.4%, but improved sequentially (-14.8% in September/August).
• Remy (Buy): USA accounts for 35% of FY24 group sales. Remy saw volumes decline -13.8%, with sales down -15.6%, implying -2.1% negative price/mix. In Cognac, Remy Martin volumes declined -21.4%, remaining broadly unchanged sequentially against a more difficult comp. Hennessy volumes declined -2.4%, but saw -3.4% price/mix compared to -0.1% for Remy Martin. Cointreau volumes improved sequentially to -3.7%. (vs -6.8% Aug/Sept).

The big takeaway is that US consumers have been steadily increasing their alcohol intake in the last several years, some of which has been spirits, amid the blowback in failed Bidenomics igniting an inflation storm – unleashing economic misery – similar to what was seen in the 1970s. Plus, disastrous foreign policy, igniting some of the highest World War III threats in a generation, has also pushed more folks to the bottle.

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

The financial media frequently opines on what the daily gyrations of the VIX (implied volatility index) signal regarding investor sentiment. Despite how often it is quoted and discussed, many investors do not truly appreciate what implied volatility measures.

We take this opportunity to help you better understand implied volatility. Furthermore, we discuss other lesser-followed measures of implied volatility that help better assess whether implied VIX readings infer bullish or bearish sentiment. 

The timing of this article is essential as the VIX has been rising alongside the market in a non-typical fashion. With the presidential election in a few weeks, the Fed changing course on monetary policy, and Israel potentially attacking Iranian oil facilities, the increasing level of implied risk should not be shocking. Will the elevated VIX persist alongside the rising market, or will the market correct?

What Is The VIX

The VIX volatility index, aka the “Fear Index,” is a well-followed measure of investor sentiment. Many investors believe that an increase in the VIX indicates that market participants are growing concerned about the stock market. While that is often true, it is not always true.

The VIX uses the prices of many one-month calls and put options on the S&P 500, weighing them based on their time to expiration and the difference between the strike price and the current price of the S&P 500. Based on the prices, the expected variance of the S&P 500 is estimated. After some advanced math, the VIX value is provided and expressed as an annualized percentage. Furthermore, the VIX is quoted as a one-standard deviation change. In other words, there is a 68% probability the S&P 500 will stay within the VIX percentage.

For example, a VIX of 15 implies expected annual volatility of 15%. In this case, the options market expects, with 68% certainty, that the S&P 500 will trade in a 15% range from the current level over the next year.

The graph below puts the recent range in the VIX in context. It shows how much change is and was expected for the S&P 500 based on the current (22), highest (37), and lowest (12) levels of VIX over the past year. The ranges vary significantly based on the VIX.

The VIX defines what market participants, in aggregate, think the possible market range will be. However, it doesn’t determine whether the put or the call has a larger influence. Accordingly, it doesn’t disclose whether the market is speculatively betting more on the upper band of the range or whether investors are aggressively protecting against the lower band.

Fortunately, as we now discuss, other volatility measures shine additional light on market expectations.

Put Call Skew

Put call skew measures the difference between put and call option prices at various strike prices for the same index or asset. When the price of a put and call differs despite being equally distanced from the strike price and with identical expirations, skew exists. Skew simply measures if investors are paying more for calls or puts.

A lower skew means investors are more aggressively buying call options than put buyers are looking for protection. Conversely, a positive skew implies investors seeking protection via puts are more aggressive than bullish call buyers.

The put-call skew helps us better appreciate whether bullish or bearish investors have a more significant impact on the VIX.

The graph below, courtesy of Market Chameleon, shows the put-call skew and its 20- and 250-day averages. Currently, it’s on its shorter 20-day moving average and above its longer-term averages. Thus, investors are more aggressive in buying puts than calls compared to recent history. This graph, like the VIX, implies that investor sentiment is bearish.

Put Call Ratio

Unlike the skew and VIX, the put-call ratio gauges sentiment by measuring the volume of options contracts. The ratio divides the volume of put options by the volume of call options over a specific period. A ratio below one suggests bullish sentiment, as more call options are being purchased than put options. Conversely, a ratio above one reflects a bearish sentiment.

As shown below, the index is currently at one year lows and the second lowest level since March 2022. Simply the volume of call buying is more than double that of puts. More simply, stock hedgers are few and far between.

CBOE Skew Index

Unlike the VIX, which measures expected market volatility with an expected one standard deviation or 68% band of accuracy, the Skew Index calculates the likelihood of extreme tail events defined as those of two to three standard deviations. While the Skew index and the VIX tend to move in the same direction, any differences can provide clues. Like the VIX, the Skew Index does not enlighten us on whether call or put trading drives the index.  

The Skew Index uses the prices of out-of-the-money (OTM) S&P 500 options. The index typically ranges from 100 to 150. Readings of 120 or less tend to reflect a stable environment. As it rises above 120, it suggests investors are increasingly betting on or hedging against a more outsized market move.

The table below, courtesy of VIXFAQ.com, quantifies the volatility implied by the Skew Index. For example, an Index reading of 130 indicates a 10.40% chance of a two-standard deviation move in the next 30 days and a 1.92% chance of a three-standard deviation change.

The graph below, courtesy of StockCharts, shows that the CBOE Skew Index is near its highest level in the past five years, suggesting investors are betting on higher-than-average levels of implied volatility to continue.  

Current Situation

We wrote this article to help better explain the VIX and implied volatility. Moreover, it’s important to consider whether the rising VIX alongside the market might be a warning worth heeding.

Such behavior is not typical, but it’s not unprecedented either. The first graph shows that the uptick in the VIX is still very mild in the context of its 30-year history. The second graph pinpoints similar periods where the S&P 500 was within 1% of a record high. As it shows, it may ultimately signal a significant drawdown, but that signal may be too early. In fact, based on history, it could be years too early.

In addition to the VIX, we presented other implied volatility calculations. The two skew measures support the theory that the higher VIX is more of a function of put buying than call buying. However, the put-call ratio, which sits at a one year low, does not confirm the negative sentiment. In fact, it is quite bullish.

The message we take away from the mixed options data is that the market is anxious but not fully committed to an overly bullish or bearish stance. As we note at the beginning, plenty of potential events warrant unease.

Summary

If the VIX remains elevated or continues to increase and the other indicators confirm that put buying is driving the VIX higher, stay alerted for changes in market patterns. Pay closer attention to technical analysis, including where prices lay compared to their key moving averages.

The VIX is currently warning of the potential for bearish price action. While the warning is helpful, remember that if one were solely positioned according to the VIX between 1997 and 1999, they would have forfeited massive profits. 

Futures are mixed as chip stocks recover partially from Tuesday’s rout and as traders looked ahead to more major earnings. As of 8:00am ET, S&P futures are up 0.1%, a day after a profit warning from Dutch chip equipment maker ASML rattled sentiment, and boosted by an across the board beat from Morgan Stanley which jumps 3%, Nasdaq 100 futs are up 0.2% with Nvidia rising 0.8% after sinking nearly 5% on Tuesday. Global equities trade mostly lower on follow through after ASML’s booking miss weighed on Semis and in turn broader markets (ASML call 9am EST today // Tokyo Electron -9%/SK Hynix -2% etc/Taiwan Semi -2% overseas overnight // watch for TSM earnings tomorrow). FTSE +55bps/DAX -35bps/CAC -50bps/Shanghai +5bps/Hang Seng -16bps/Nikkei -1.83%. Bond yields are lower with the 10Y yield dropping to just above 4.00%, the Bloomberg dollar index is unchanged. Commodities are mixed: precious metals are higher, while base metals are lower; oil edged higher as Israel said it was keeping options open in how to attack Iran: UST10yr -3bps @ 4.00% // WTI -$0.35 @ $70.20 // Bitcoin +2.10% @ $68,055. Main event for now is still earnings with ABT, CFG, FHN, MS, PLD, SYF, USB reporting pre open // AA, CCI, CSX, DFS, FR, KMI, PPG, REXR, SLG, STLD post close. Focus today in US will be earnings (ABT, MS, PLD); ASML earnings call will be at 9am ET.

In premarket trading, Morgan Stanley shares jumped 3.4% after the bank beat expectations across the board. ASML slid another 4% on continued follow through of light 3q orders (NVDA +70bps, AMD +50bps recovering); UAL is down 0.6% after better revs/eps/$1.5bn buyback (call 10:30am); JB Hunt Transport shares rose 7% in US premarket trading, after the logistics company’s third-quarter profit topped the analyst estimates. Among the biggest laggards was Qualcomm Inc., which fell on reports that it will likely postpone its offer to buy Intel Corp. until after the US presidential election. CSCO rose 1.5% on u/g away; NVCR +32% on FDA approval of Optune Lua Treatment. Here are some other notable pre-market movers:

• Interactive Brokers slumped drops 3% after the trading platform reported adjusted earnings that trailed the average analyst estimates.
• JB Hunt (JBHT) gains 7% after the logistics company’s 3Q profit topped estimates. The company said demand for its biggest segment — intermodal service — improved throughout the quarter, supported by strong performance from its rail providers.
• Novocure (NVCR) soars 24% after the oncology company said the US Food and Drug Administration approved Optune Lua to treat metastatic non-small cell lung cancer in adults who have progressed on or after a platinum-based regimen.
• Penguin Solutions (PENG) slides 14% after the semiconductor devices firm’s fourth-quarter adjusted earnings per share missed consensus estimates.
• Synchrony Financial (SYF) rises 3% after reporting earnings per share for the 3Q that beat the average analyst estimate

ASML’s slide Tuesday sent ripples across the industry, resulting in more than $420 billion of market value loss for an index of US-traded chip stocks and the largest Asian peers. While the weakness in names like Nvidia and ASML has an impact on the broader market, Peter Fitzgerald, chief investment officer for macro and multi-asset at Aviva Investors, pointed to the strength of demand for artificial intelligence as well as supportive central bank policy.

“If the Federal Reserve is going to continue to ease and cut rates between now and the end of next year, we are in the soft landing,” Gerard Cassidy, head of US bank equity strategy at RBC Capital Markets, said on Bloomberg TV. That would be supportive for investment banking, especially initial public offerings and mergers and acquisitions, he said.

The pound fell 0.6% below $1.30 for the first time since August and money markets bolstered wagers on Bank of England rate cuts after UK inflation slipped below the BOE’s 2% target for the first time since April ’21 (YoY headline 1.7% vs 1.9% cons // market now pricing more rate cuts in ’24). London’s FTSE 100 outperformed European stock indexes and yields on UK gilts tumbled. China announced that their housing minister along with officials from the MOF and PBOC will hold a press conference tomorrow which will likely provide details on new property support measures

Europe’s Stoxx 600 index retreated 0.4% after ASML extended losses and fell another 3.5% after yesterday’s 15.6% decline. LVMH and Salvatore Ferragamo SpA led the retreat in luxury stocks after weak updates, both slumping as much as 7%. Major European markets are mixed: UK stocks outperform as a result of lower than expected CPI print (Core CPI prints 3.2% YoY vs. 3.4% survey vs. 3.6% prior), with the FTSE 100 rising 0.7% as most of its regional peers decline. European stocks have been hampered by a double-dose of negative earnings news from ASML and LVMH. EU Most Short and EU Defence are higher; Periphery Banks and China Exposed Consumer are among the underperforming baskets. Here are the biggest movers Wednesday:

• Teleperformance rises as much as 6.3%, outperforming amid a decline in French stocks, as Kepler Cheuvreux raises its recommendation on the customer-contact services firm to buy from hold
• Whitbread shares advance as much as 4.8% after the Premier Inn owner reported first-half revenue that met consensus estimates. The company also said it was making “excellent progress” on its five-year plan
• Rio Tinto’s London-listed shares edged about 0.9% higher after third-quarter earnings met analysts’ expectations. However, softer demand from China meant iron ore shipments rose only marginally, while analysts also noted ongoing issues at the miner’s Kennecott operation
• Quilter advances as much as 11%, to highest since April 2022, after the wealth-management firm delivered net flows significantly ahead of expectations in the third quarter
• ASML shares extend a decline on Wednesday, a day after the chip-equipment maker reduced 2025 guidance and reported weaker-than-expected quarterly bookings. A rout of its European peers also deepened
• LVMH shares dropped as much as 7.5% in Paris trading to its lowest level in over two years, after the luxury-goods company missed estimates for third-quarter organic sales in its important fashion & leather goods unit
• Adidas shares fall as much as 5.2% as a guidance upgrade from the German sportswear firm failed to impress investors, with the stock still up over 25% in 2024. Baader says the new numbers were already reflected in consensus estimates
• Ipsos falls as much as 12%, the most since July 2023, after the market and consumer analytics firm updated its guidance for 2024 and published preliminary 3Q revenue figures
• Kinnevik falls as much as 11%, the most since June, after the Swedish investment company reported its latest earnings, showing a 5% sequential drop in net asset values and a 14% decline year-on-year
• Nel shares drop as much as 6.6% as analysts highlight weak order intake for the hydrogen technology supplier, and commentary which suggests a cautious outlook for the market next year

Earlier in the session, a key Asian index declined to its lowest level in three weeks, driven by losses in chipmaker shares. Chinese stocks fell. The MSCI Asia Pacific Index fell as much as 1%, with TSMC, Tokyo Electron and Samsung Electronics among the biggest contributors to the decline. Their weakness weighed on the tech-heavy markets of South Korea, Taiwan and Japan. Semiconductor companies faced selling pressure after ASML Holding NV missed order estimates and cut its outlook for next year, sparking a global rout in the sector. A Bloomberg gauge of chipmakers in Asia fell as much as 3.6%.

Chinese stocks faced another day of big swings, with the benchmark CSI 300 Index ending lower for the second straight day and coming close to entering a correction. A lack of clarity over the extent of fiscal stimulus, as well as muted economic data, has cooled sentiment toward the market.  On the other hand, a Bloomberg gauge of China’s property shares surged as much as 8.3% as markets prepared for a joint news conference to be held by government officials including the housing minister and central bank on Thursday.

“It’s mostly a wake up call to reality” for many investors in artificial intelligence stocks, Olivier d’Assier, head of investment research at SimCorp, told Bloomberg Radio. “Analysts or investors had outsized expectations for sales and earnings, so I think it’s a bit of a reality check but not yet a red flag for the global economy.”

In FX, the Bloomberg Dollar Spot Index was steady; the pound falls 0.4% and earlier dipped below $1.30 for the first time since Aug. 20 after UK inflation slowed more than expected in September. Traders were quick to increase bets on interest-rate cuts by the Bank of England, boosting gilts.

In rates, treasuries are richer across the curve amid steeper gains for gilts after UK inflation slowed more than expected in September. UK yield curve steepened as OIS contracts priced in a more aggressive path of rate cuts by the Bank of England this year and next year. Treasury yields are lower by 2bp-2.5bp across a slightly flatter curve as long-end outperforms; US 10-year is down ~2bp at 4.01% with gilts in the sector outperforming by 6bp; UK 10-year gilt yields fall 8 bps to 4.08%. The US session is expected to include more bank bond offerings following JPMorgan’s four-part transaction Tuesday.

In commodities, oil prices advanced, with WTI rising 0.3% to $70.80 a barrel after slumping on Tuesday, as traders continued to monitor the risk of escalation in the Middle East and the outlook for next year. Gold surged $16 to a new all time high of $2,679/oz as investors turned their attention to the upcoming US election, with polls forecasting a razor-thin contest with less than three weeks to go. . Spot gold climbs

Looking at today’s calendar, US economic data calendar includes the latest MBA Mortgage Applications (which plunged 17.0% after sliding 5.1% the previous week) and the October New York Fed services business activity and September import/export prices (8:30am); no Fed members scheduled for Wednesday

Market Snapshot

• S&P 500 futures little changed at 5,862.25
• STOXX Europe 600 down 0.3% to 518.87
• MXAP down 0.9% to 190.10
• MXAPJ down 0.6% to 604.62
• Nikkei down 1.8% to 39,180.30
• Topix down 1.2% to 2,690.66
• Hang Seng Index down 0.2% to 20,286.85
• Shanghai Composite little changed at 3,202.95
• Sensex down 0.2% to 81,631.61
• Australia S&P/ASX 200 down 0.4% to 8,284.75
• Kospi down 0.9% to 2,610.36
• German 10Y yield down 3 bps at 2.20%
• Euro down 0.1% to $1.0880
• Brent Futures little changed at $74.23/bbl
• Gold spot up 0.6% to $2,677.53
• US Dollar Index up 0.11% to 103.38

Top Overnight News

• Chinese property-developer stocks rallied on speculation the government and central bank will announce new measures to boost the housing sector at a joint briefing scheduled for Thursday. BBG
• Adidas shares slide in European trading despite the company issuing a modest upside preannouncement on Q3 GMs/op. income and nudging up its full-year op. income guidance (they now see op. income of EU1.2B vs. the prior forecast of EU1B) as the revenue performance was approximately inline. RTRS
• Saudi Arabia is entering a new phase of austerity as the Kingdom dials back on aggressive spending amid a drop in oil revenue. FT
• UK inflation in Sept tumbled sharply, spurring calls for more aggressive BOE easing (the headline CPI sank to +1.7% in Sept, down 50bp from +2.2% in Aug and below the Street forecast of +1.9%). RTRS
• Indonesia is blocking sales of the iPhone 16 after Apple failed to meet its investment commitments in the country. SCMP
• Georgia judge blocks a new rule that would have required county election workers in the state to count ballots by hand (many worried this rule would have delayed the state reporting its results). WaPo
• Donald Trump has elevated his threat to impose sweeping tariffs on imported cars including from Mexico and the EU, placing increased US trade protectionism at the heart of his agenda if he wins a new White House term. FT
• Elon Musk has given nearly $75mn to help Donald Trump’s bid to win back the White House, as the world’s richest man tries to influence the outcome of next month’s US presidential election. FT
• Private equity investors are selling second-hand stakes in ageing funds at a blistering pace this year, as pensions and endowments find ways to get out of unlisted investments amid a slump in deal activity that has curtailed cash payouts. FT
• Fed’s Bostic (2024 voter) said the US economy is performing quite well and he is confident inflation will get back to the 2% target, while he doesn’t have a recession in his outlook but expects inflation to be choppy and employment to stay robust. Bostic also noted his dot was for 25bps more in 2024 beyond the 50bps September cut and is keeping his options open.
• JPMorgan sees good chances of a US economy soft landing; expects caution to Chinese stocks to continue; Fed is facing challenges managing the impact of supply chain and inflation from geopolitics.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were ultimately mixed with early declines seen as the risk-off mood rolled over into the region after Wall St pulled back from record levels with global sentiment sapped by disappointing earnings updates from ASML and LVMH. ASX 200 was restrained as weakness in tech and consumer stocks overshadowed the gains in financials and real estate,  while miners were also lacklustre with Rio Tinto shares pressured following its quarterly update. Nikkei 225 underperformed after slipping beneath the 40k level and amid disappointing Machinery Orders.     Hang Seng and Shanghai Comp clawed back opening losses following the PBoC’s firm liquidity efforts and with China to hold a press briefing tomorrow on promoting the steady and healthy development of the property sector.

Top Asian News

• BoJ announces the continuation of relaxation of terms and conditions for securities lending facility for cheapest-to-deliver issues
• BoJ Governor Ueda to visit China from Oct 17-18; attending meeting of central bank governors from Japan, China, South Korea
• Chinese President Xi said China is willing to be a partner and friend with the US, while he added the success of China and the US is an opportunity for each other and both countries should boost each other’s development rather than be an obstacle, according to state media.
• Hong Kong Chief Executive Lee said in his annual policy address that they plan to reduce wait times for public housing and will streamline procedures for companies seeking to list in Hong Kong as they seek to attract international enterprises listings. Lee also announced to cut duties on liquor with an import price of more than HKD 200 to 10% from 100% for the amount above HKD 200, while it was later reported that Hong Kong is to relax mortgage rules for some homes.
• BoJ’s Adachi says the risk of upward pressure heightening from the bigger-than-expected JPY fall has reduced significantly. Markets have stabilised when compared to when there was huge volatility in August.
• BoJ Board Member Adachi said conditions are already in place for the BoJ to start normalising monetary policy and it must take rate hikes in several stages, but added they must avoid drastic policy change that could stoke fear of a return to deflation. Adachi said the BoJ will raise rates at a very moderate pace and maintain an accommodative financial environment until underlying inflation stably and sustainably hits 2%, while he also stated that hiking rates at a rapid pace after the inflation target is met could cause a big shock to economy and the BoJ should raise rates in several stages to achieve smooth policy normalisation. Furthermore, he said the BoJ must avoid a premature rate hike, which means it should use conservative estimates in gauging Japan’s natural rate of interest.

European bourses, Stoxx 600 (-0.3%) are mostly trading in negative territory, with sentiment hit after poor earnings from heavyweights ASML and LVMH. The FTSE 100 (+0.6%) is the European outperformer, assisted by the cooler-than-expected UK inflation report. European sectors hold a strong negative bias; Energy is towards the top of the pile, attempting to recoup some of the hefty losses seen in the prior session. Consumer Products is found at the foot of the pile, dragged down by post-earning losses in LVMH (-3.60%), whilst ASML (-3.8%) acts as a drag on Tech. US Equity Futures (ES U/C NQ +0.1% RTY +0.2%) are trading mixed, with the ES and NQ flat, taking a breather from the losses seen in the prior session, whilst the RTY sees very modest gains. China’s Cyberspace regulator has called for a systematic examination of the risks of Intel (INTC) products. Intel -4% pre-market. Google (GOOGL) says multiple Google Cloud products are impacted in the US-West2 Region, US-West2-A Zone. European sectors hold a strong negative bias; Energy is towards the top of the pile, attempting to recoup some of the hefty losses seen in the prior session. Consumer Products is found at the foot of the pile, dragged down by post-earning losses in LVMH (-3.60%), whilst ASML (-3.8%) acts as a drag on Tech.

Top European News

• Italy’s Economy Minister Giorgetti says the government has reached a deal with the EU over a seven year adjustment path for deficit and debt

FX

• USD is mixed vs. peers. DXY has traded near the upper-end of today’s 103.17-39 range, but in recent trade has pulled back from best levels to reside towards the mid-point of today’s confines. Docket ahead includes US import and export prices.
• EUR is ever so slightly firmer vs. the USD but with EUR/USD attempting to climb back above 1.09 in recent trade. Fresh macro drivers for the EZ remain light in the run up to Thursday’s ECB policy announcement. For now, EUR/USD is managing to hold above its 200DMA at 1.0872.
• GBP is the worst performer across the majors in the wake of soft UK inflation data which saw headline Y/Y CPI slip further below target and services inflation decline to 4.9% vs. the MPC forecast of 5.5%. Cable has slipped onto a 1.29 handle for the first time since August 20th; technicians flag the 100DMA at 1.2952.
• Despite an attempted recovery vs. the USD yesterday, JPY is once again struggling against the greenback. USD/JPY has ventured as high as 149.48.
• Antipodeans are both softer vs. the USD by similar magnitudes. NZD/USD was in focus overnight and saw some weakness following CPI metrics which saw a softer-than-expected outturn for Q/Q CPI.

Fixed Income

• Bunds are firmer in a continuation of the upside seen in Tuesday’s session. Initial upside stemmed from cooler-than-expected UK CPI and has since extended to a 134.12 peak.
• Gilts gapped higher by 68 ticks and then extended further to a 97.76 multi-week peak after softer-than-expected UK inflation. A release which has all but cemented a November cut and makes one in December very likely as well.
• USTs are holding in the green, taking the lead from the above but yet to extend much further with US specifics light. USTs are just off a 112-20 peak, resistance at 112-21 from last week and thereafter 112-24 and 112-28+.
• UK sells GBP 3.5bln 4.0% 2031 Gilt: b/c 3.42x (prev. 2.98x), average yield 3.988% (prev. 3.814%), tail 0.2bps (prev. 1.6bps)
• Germany sells EUR 0.822bln vs exp. EUR 1bln 2.50% 2054 and EUR 0.854bln vs. exp. EUR 1bln 0.0% 2050 Bund.

Commodities

• Crude began the European session on a firmer footing as the complex took a breather from recent pronounced pressure. However, as the morning progressed oil prices edged lower, with Brent’Dec now residing near session lows at USD 74/bbl.
• Spot gold is bid, holding around a USD 2677/oz peak with support coming from the generally tentative risk tone (influenced by earnings), soft yields and ongoing geopolitical concern.
• Base metals are firmer paring back some of the pressure seen in yesterday’s session which was driven by the performance of China and continued assessment of recent stimulus efforts.
• Indian Gold imports (Sep) USD 4.39bln vs. USD 10.06bln in August, according to the Trade Ministry.
• Qatar has set the December term price for Al-Shaheen oil at USD 1.93bbl above Dubai quotes which is down vs. November, according to Reuters sources

Geopolitics

• Israel’s plan to respond to Iran’s attack is ready, according to CNN sources.
• “An Israeli official says a letter received from senior US officials on Gaza and is being carefully reviewed by Israeli security officials”, via Sky News Arabia
• Israel’s army presented PM Netanyahu and Defence Minister Gallant with a list of targets for a possible attack on Iran, according to Israel’s Channel 12 cited by Al Jazeera.
• Israeli PM Netanyahu’s government began disabling GPS in Tel Aviv in anticipation of the Iranian response to a possible Israeli attack, according to Al Arabiya.
• IDF said it killed a large number of Hezbollah members in raids and exchanges of fire in southern Lebanon during the last day, while it added that it hit more than 140 targets in more than 50 locations including weapons stores.
• Israel targeted a site in the southern suburbs of Beirut for the first time since Friday.
•    
• Israel’s army said about 50 rockets were detected from Lebanon towards the Upper Galilee, and a number of them were intercepted, according to Sky News Arabia.
• Iranian Foreign Minister Araqchi is to visit Jordan, Egypt and Turkey as part of a diplomatic reach out to countries in the region ‘to end genocide, atrocity and aggression’, according to Iran’s Foreign Ministry.
• Iran has told the UN that it is prepared for a decisive response if Israel attacks it, via journalist Elster.

US event calendar

• 07:00: Oct. MBA Mortgage Applications -17%, prior -5.1%
• 08:30: Sept. Import Price Index ex Petroleu, est. 0.1%, prior -0.1%
• 08:30: Sept. Import Price Index MoM, est. -0.3%, prior -0.3%
• 08:30: Sept. Import Price Index YoY, est. 0%, prior 0.8%
• 08:30: Oct. New York Fed Services Business, prior 0.5
• 08:30: Sept. Export Price Index MoM, est. -0.4%, prior -0.7%
• 08:30: Sept. Export Price Index YoY, prior -0.7%

DB’s Jim Reid concludes the overnight wrap

I went to a parent’s evening last night for 9-yr old Maisie and the Maths teacher flew through how they teach long division nowadays so we could help Maisie at home if needed. I must admit I didn’t have a clue what she was going on about, but given I’ve worked with numbers for nearly 30 years with many before that studying, I was too embarrassed to say and just nodded along. Then I accidentally spent most of the time with the English teacher, who is a Liverpool fan, speaking about the season so far. Fair to say I got a slight reprimand when I got home. I’m not looking forward to my domestic appraisal. Strengths: “sports”. Weaknesses: “everything else”.

Some rare weakness has come through in risk over the last 24 hours, with the S&P 500 (-0.76%) falling back from its record high the previous day. That followed significant disappointment among chipmakers after ASML’s earnings (-15.64% and its worst day since June 1998) were beneath expectations, whilst energy stocks also took a hit from the latest decline in oil prices. Indeed, the Philadelphia Semiconductor Index fell -5.28% over the day, whilst Nvidia was down by a similar -4.69% partly also because of the previous night’s story that the US was mulling stricter chip export rules for certain countries.

Even with the tech sell-off, in some ways the most important move yesterday was the decline in oil prices, with Brent crude (-4.14%) down for a third consecutive day to $74.25/bbl. That followed the Washington Post report we mentioned yesterday, saying that Israel would strike military infrastructure in Iran, and not oil or nuclear facilities. So that took out some of the geopolitical risk premium from oil prices, but there remains significant concern about an escalatory spiral and the potential for a wider conflict, as Iran have said that they would respond to any Israeli attack.

That decline in oil prices meant investors became more relaxed about inflationary pressures, which have moved increasingly onto the radar over recent weeks. In fact, the 5yr US inflation swap fell by -4.1bps yesterday to 2.48%, marking its biggest daily decline in over a month. And in turn, investors dialled up the likelihood of rate cuts over the months ahead, with the rate priced in for the Fed’s June 2025 meeting falling -2.8bps to 3.62%. That also came as the New York Fed’s latest Survey of Consumer Expectations showed that debt delinquency expectations moved higher once again, with the mean probability of not being able to make a minimum debt payment over the next 3 months rising to 14.2%, which is the highest since April 2020 at the height of the pandemic.

With rate cut expectations moving higher again, that led to a sovereign bond rally on both sides of the Atlantic. In the US, that meant the 10yr Treasury fell -6.7bps to 4.03%, although the 2yr yield was down by a smaller -0.9bps to 3.95%. The decline was most pronounced at the long-end, with 30yr yields (-9.1bps) seeing their sharpest decline since the vol shock on August 2.

Over in Europe, bonds saw a similar rally, with yields on 10yr bunds (-5.2bps), OATs (-7.8bps) and BTPs (-8.4bps) all moving lower. This also meant that the spread of Italian yields over bunds tightened to just 124bps, which is the tightest since March when it fell to 122bps. This came ahead of the Italian government last night announcing its 2025 Budget Bill, which our European economists’ previewed in a note earlier yesterday. Meanwhile, in a separate report overnight ahead of tomorrow’s ECB meeting, they discuss what the recent oil market volatility may imply for ECB policy.

For equities, it was a tougher day that saw the major indices struggle on both sides of the Atlantic. In large part that was driven by the semiconductor drop mentioned above, and the Euro STOXX 50 (-1.87%) saw a major decline given ASML’s weighting in the index, which itself was down -15.64%. In fact, it was the worst day for the Euro STOXX 50 since early August, when the underwhelming jobs report led to significant market turmoil. The plunge in ASML’s share price came as the company reported Q3 bookings of EUR 2.6bn, around half that expected by analysts, and lowered its 2025 guidance. The stock is now -33% down from its July peak amid more cautious demand for its advanced chip-making equipment and more restrictions on where it can export.

After the European close, we also had disappointing results from luxury giant LVMH, as weaker demand in China saw the company’s key luxury unit post its weakest revenue growth since the early phase of the Covid pandemic. Its ADRs fell by -7.94% in US trading and looks set to give up all the gains (and more) made since China’s stimulus announcement. Elsewhere, it wasn’t quite as bad, but the STOXX 600 was still down -0.80%, and in the US the S&P 500 fell -0.76%. The tech underperformance saw the NASDAQ slip by -1.01%, though the Mag-7 (-0.58%) actually outperformed slightly as the mega caps were fairly stable aside from Nvidia’s -4.69% fall. Defensive sectors including consumer staples (+0.64%) and utilities (+0.45%) outperformed within the S&P 500.

US banks also outperformed amid amidst positive earnings results, with the KBW Bank Index (+0.28%) rising to its highest level since April 2022. The gains were more pronounced for smaller banks, as the KBW Regional Banking Index advanced +1.18%. By contrast, some of the larger banks reporting actually saw their share price fall, with Citigroup down -5.11% despite beating headline estimates.

Asian equity markets are mostly lower after ASML earnings with the Nikkei leading the losses (-2.05%), followed by the KOSPI (-0.43%), and the CSI (-0.24%). By contrast, the Hang Seng (+0.90%) and the Shanghai Composite (+0.40%) are higher. S&P 500 (+0.09%) and NASDAQ futures (+0.23%) are also rebounding a bit.

Early morning data revealed an unexpected decline in Japanese core machine orders for August, which fell by -1.9% month-on-month, compared to an expected increase of +0.1% and a previous month’s decline of -0.1%.

Here in the UK, the latest employment report was reasonably positive yesterday, with unemployment ticking down to 4.0% in the three months ending August (vs. 4.1% expected). It’s true that the number of payrolled employees was down -15k in September (vs. -3k expected), but the previous month was revised upwards to show a smaller -35k decline (vs. -59k previously). Separately in Germany, the ZEW survey for October showed a decline in the current situation reading to -86.9 (vs. -84.0 expected), which was the weakest since May 2020. However, the expectations measure picked up to 13.1 (vs. 10.0 expected) after three consecutive monthly declines. Finally, the ECB’s latest quarterly Bank Lending Survey pointed to some ongoing improvement in bank credit conditions, especially for housing loans.

To the day ahead now, and data releases include the UK CPI reading for September. From central banks, we’ll hear from ECB President Lagarde. Otherwise, today’s earnings releases include Morgan Stanley and Abbott Laboratories.