Month: October 2024

Authored by Luis Cornelio via HeadlineUSA.com,

Texas Attorney General Ken Paxton has demanded that the Biden-Harris administration turn over data to verify the citizenship status of nearly 454,289 registered voters in Texas. 

In a letter addressed to USCIS Director Ur M. Jaddou on Monday, Paxton raised concerns that these individuals may have unlawfully registered to vote without having their citizenship status confirmed.  

Paxton requested Jaddou’s assistance in identifying non-citizens on the voter rolls to ensure only eligible voters cast ballots in the 2024 presidential election, which is expected to be close.

“The Biden-Harris Administration is legally obligated to assist States in doing so, and it is imperative that we use every tool available to uphold the integrity of our elections,” Paxton wrote. 

I demand full cooperation from the federal government to ensure that any noncitizens remaining on Texas’s voter registration rolls are identified. The Biden-Harris Administration is legally obligated to assist States in doing so, and it is imperative that we use every tool… https://t.co/dvNkOpiLC4

— Attorney General Ken Paxton (@KenPaxtonTX) October 7, 2024

Paxton’s request follows an investigation by his office and Secretary of State Jane Nelson, which found individuals who registered to vote without providing a state driver’s license or other state-issued identification.  

This, Paxton argued, made it near impossible for state officials to verify these individuals’ citizenship. It is not immediately clear when these individuals were registered to vote. 

“I am not asking for verification of the citizenship of anyone whose voter registration records contains [sic] a driver’s license or state-issued identification number,” Paxton clarified. 

According to Paxton, over 1,300 non-citizens were found registered to vote during an audit of four randomly selected counties. 

“That is 1,300 too many when so many of our federal, state, and local election [sic] are decided by a handful of votes,” Paxton wrote.

Paxton noted that Texas has exhausted all available methods to confirm the citizenship status of the voters in question and is now demanding federal assistance.

However, it is unlikely that the Biden-Harris administration will respond or cooperate with Texas on this issue. 

On Sept. 27, the DOJ filed a lawsuit against Alabama after Wes Allen, the Republican secretary of state, inactivated the voter registrations of 3,251 individuals due to a lack of citizenship verification. 

The actual details of this DOJ lawsuit against Alabama are insane.

Kamala’s DOJ is suing them because they removed less than 4,000 people from the voter rolls who registered despite not being citizens. pic.twitter.com/rXne2h4l9d

— Greg Price (@greg_price11) September 28, 2024

The DOJ argued that Alabama’s actions violated the National Voter Registration Act of 1993.

Allen defended his decision in an interview with Headline USA, stating, “I was elected Secretary of State by the people of Alabama, and it is my Constitutional duty to ensure that only American citizens vote in our elections.”

Yesterday when commenting on Goldman’s recent upgrade of China’s market  to Overweight, only after a furious 30% rally had already taken place, we said this suggested that the “move in China has peaked and it’s all downhill from here, which incidentally none other than Goldman’s trading desk already predicted! Indeed, as we reported this weekend, while Goldman’s sellside desk was finally set to recommend China, the bank’s much more actionable FICC/S&T desk was already warning that the move in China is over unless Beijing does QE immediately, or else China “will end up in a bigger hole in 12 months.” And just a few hours later, that’s precisely what happened on Tuesday morning when China A-shares reopened from a week-long holiday and tried to catch up to the meltup only to see their gains slashed. Meanwhile, Hong Kong markets which were open the entire time, and which soared as much as 30% since the Beijing Bazooka was unveiled on Sept 26, cratered the most since the Lehman bankruptcy!

For those who missed it, here is a full rundown of everything that happened in China overnight courtesy of Goldman’s trading desk:

1/ What happened

HK shares had their worst single day since Oct 2008 with double-digit percentage losses for major indices as the highly anticipated NDRC press conference added little fresh details on China’s stimulus plans, leaving investors hoping for concrete numbers feeling disappointed (although expectations were high heading into the event).

The HSCEI also recorded its worst day since 2008, plunging 10.2% while CSI300 opened near limit up +10.8%, faded to +2% and managed to bounce and close +5.9%.  With that said HSCEI is still up 17% in the past 2 weeks. CSI300 is now up 32% in the past 2 weeks and been up every day. 

Indeed, while A-shares markets pared from opening strength they still managed to close with gains on their first day back, suggesting rotation out of HK market drove the losses. The move essentially erased all of HK market gains during the break with HSI -9.4% back to levels seen on Sep 30th. Out of the major indices, all 82 HSI names / 50 HSCEI names / 30 HSTECH names closed in the red, speaking to the breadth of the drawdown today. HSCI, a more broad index that covers 95% of total market cap in HK, has 517 constituents with just 12 gainers. Southbound returned for the first time in more than a week, and it clawed back from outflow of nearly US$1b in the morning to a US$265m of inflow by end of the session suggesting mainland investors started to see value as HK shares sold off aggressively.

Some more details:

• Record volume, again: one week after HK volume made fresh record high of HK$505b, today’s HK$620b absolutely knocked it out of the park again. However, even that pales in comparison to the activity level China’s A-shares market today: it took less than 27 minutes of trading for turnover to break above 1t yuan, and by end of the session over 3.4t yuan of A-shares changed hands. For context, that’s more than the turnover of HK market, every single day from Sep 24th up to today, combined.
   
• NDRC disappointment: The NDRC presser at 10am HKT was an reiteration of Politburo’s easing pledge with little fresh details offered. Investors were expecting, or hoping for, more solid numbers regard any fiscal stimulus, but walked away empty handed outside of more pledges and vague policy headers such as increased investment and increase subsidies for low-income groups and students. On new fiscal announcement, very small. Front load the planning of 2025 projects, with 100b yuan strategic and national security projects and 100b yuan on-budget investment front loaded to 2024. So the total 200b yuan is very small compared to 2-3t yuan market expectation for additional fiscal this year. Goldma’s view: any large stimulus package may require joint efforts from many key ministries, and will need to be largely funded by fiscal resources. The bank will be watching for upcoming ad hoc meetings and the next NPC standing committee meeting late October; expect policymakers to approve an additional RMB1-2tn ultra-long-term central government special bond quota by year-end, tap unspent local government bond issuance quota accumulated from previous years to facilitate debt swaps, and maintain their fiscal easing stance in 2025 and even beyond.

• Profit taking & rotation: Just like how the recent rally in HK was fueled by foreign inflows and fast money, today’s sell-off felt profit taking driven by hedge funds and rotations from Long Onlies out of H-shares into A, there was large size inflows into A from LOs from the open. The NDRC meeting this morning was a disappointment vs investors high expectations for China to keep strong stimulus rhetoric and incremental easing going. Note that short sells only made up 12% of the turnover today indicating that most of the selling were long selling / profit taking
   
• Within thematics, investors were trading policy again with China Semis (+14.4%) and China AI (+13.7%) leading gains while Little Giants (+13.6%) and China EV (+13.2%) rounding out the top performers. Meanwhile strong outperformers during Golden Week like H-listed Fins ex-Banks (-24.1%) and H-listed China Prop (-23.4%) tumbling. There is some equalizing effect there given divergence in A/H move – note that HSAHP now back to 150.9 level, sharply higher from 128.5 level seen yesterday on back of relentless rally in HK while China was out: China Brokers (+8.2%) and China Prop (-3.9%) move was not as aggressive if you include the A-shares components.
   
• Southbound: In the morning southbound was net selling almost US$1bn, this turned around intraday and ended up being net buyers of ~US$300m. 
   
• Movers:
  • Leading the positive moves: China Semis +14.53%, China AI +13.80% and China EV +13.36%
  • Selling in China H Real Estate -24.12%, SB Favorites-16.60%, China Consumption -11.87% and HK Tech -12.30%.
     
• Putting things in context: huge moves all over the place here with lots of “worst day since…” being thrown out. Bigger picture, after today’s move – ChiNext overtook HSCEI as top performing major index with +34.8% return. All China/HK indices are still outperforming SPX and NDX. CSI500 still lagging large cap counterparts CSI300 on YTD basis.

 2/ China retail

Securities times published an article talking about forbidding bank loans to households to go into stock market and former director of the PBOC warning about the risk of blind speculation. I believe China could be getting cautious of the growing soundbites of onshore retail frenzy (record cash transferred into stock trading accounts, explosive amount of broker account opening etc), especially considering the current administration have scar tissues from the 2014/2015 retail frenzy episode. This could potentially make the government more cautious around how they handle further stimulus policy roll-out. 

Worth keeping in mind, retail investors who opened new account during the National day holidays are only able to trade from tomorrow and not today (fund transfer settles T+1) article.

3. Now what

In terms of catalyst and events, we have to wait for ad-hoc meetings in the coming days/weeks to re-fuel the stimulus expectations led rally (especially joint ministry or MoF one). 

The next focus event is NPC standing committee meeting in late Oct/early Nov, which is when we expect the new fiscal budget to be approved. 

In conclusion, Goldman trader William Chan writes that “while I think profit taking is prudent especially if the sharp rally is behind us, I wouldn’t fade the China trade yet. China might want to pace the market, but the retail community hasn’t really started getting involved and the recent change of tone from the government be it on equity market downside, property stabilization or more stimulus is not something I think they will turn 180 on.“

And there you have it: Goldman, which this weekend upgraded China to overweight, admits it’s a bubble, but it’s not a full-fledged bubble with retail participation just yet. When it becomes that, Goldman will be selling hand over feet and, eventually, tell its sellside clients to do the same.

Authored by Steve Watson via modernity.news,

Disgraced former fixer Michael Cohen has ludicrously claimed that if elected in November, Donald Trump will command US Navy Seals to go after his political opponents and critics.

Without providing a shred of evidence, Cohen made the claim, specifically that Trump has said he would use SEAL Team Six to target his enemies, and MSNBC host and former Biden Press Secretary Jen Psaki provided zero pushback.

“The big warning I want people to understand is when Donald Trump says something, stop sane-washing it,” Cohen blathered.

“Stop trying to make it into something which has some normalcy to it,” he continued, adding “When he turns around and says the head of this network or other people who are critics, that he intends to use SEAL Team Six or the military to round up his critics or his opponents, he intends to do it.”

Trump has, of course, never said anything of the sort.

Cohen’s ridiculous accusation comes less than a week after he stated that he is working on creating an alternate identity with a foreign passport in a different name for when Trump gets back into office.

NEW: Michael Cohen says Donald Trump will use SEAL Team 6 to round up his political opponents if elected president.

The comment comes one week after Cohen said he was going to change his name and flee the country if Trump is elected in November.

Someone may need to do a… pic.twitter.com/77M67AL5nN

— Collin Rugg (@CollinRugg) October 7, 2024

The guy is clearly completely deranged, yet MSNBC presents his comments as if they hold gravitas.

Michael Cohen changing his name and leaving the country for no reason would be pretty hilarious.

— Collin Rugg (@CollinRugg) October 7, 2024

What a joke.

I heard Iran is really nice this time of year

— Angry Elephant (@Craptocracy) October 7, 2024

These people are clearly unwell.

Delusions and hallucinations are the bedrock of the ideologically possessed and mentally ill.

— Brian Kennedy (@Brian_Kennedy) October 7, 2024

They have severe, possibly terminal TDS.

Michael Cohen needs mental help. As much as I wouldn’t be sad if that happened, it’s definitely not going to happen. However, if I were Trump, and considering all of the lawfare and then attempts to kill him, I would find it very hard to resist the temptation.

— M Brace (@MBrace777) October 7, 2024

They all also hold weird fantasies about Trump using the office to throw them into detention camps and instituting a military dictatorship, meanwhile he’s the one fending off the weaponisation of the government against him by Democrats.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Roblox has come under some scrutiny before, but not quite like this.

In a new report out this morning from short seller Hindenburg Research,  the firm accuses the gaming company not just of running an in-game “pedophile hellscape”, but also inflating key metrics that have helped drive the company’s stock price since its direct listing in 2021.

Hindenburg says its research “indicates that Roblox is lying to investors, regulators, and advertisers about the number of ‘people’ on its platform, inflating the metric by 25-42%+”. 

“We also show how engagement hours, another key metric, is inflated by an estimated 100%+,” the report alleges. “Since Roblox isn’t profitable, its stock price (and, in turn, insiders’ ability to dump hundreds of millions of dollars of stock) is reliant on the growth metrics it presents to Wall Street,” the firm adds. 

Hindenburg writes: “To better understand the company’s reported engagement, we hired a technical consultant that monitored the top ~7,200 Roblox games across ~2.1 million Roblox servers, collecting 297.7 million rows of real-time player data.”

“The data suggests that Roblox could be massively overstating the true level of user engagement across its platform: our review of an average of 30.4 million unique daily users found they spent just ~22 minutes in games per day,” it adds. 

On top of questions about daily active users and engagement hours, the short seller called its in-game experience “an X-rated pedophile hellscape, exposing children to grooming, pornography, violent content and extremely abusive speech”.

“Following years of scandals, we performed our own checks to see if the platform had cleaned up its act. As a test, we attempted to set up an account under the name ‘Jeffrey Epstein’…only to see the name was taken, along with 900+ variations,” Hindenburg wrote.

Then, the details get graphic: “After we found a username, we listed our age as “under 13” to see if children are being exposed to adult content. By merely plugging ‘adult’ into the Roblox search bar, we found a group called “Adult Studios” with 3,334 members openly trading child pornography and soliciting sexual acts from minors.”

“We tracked some of the members of “Adult Studios” and easily found 38 Roblox groups – one with 103,000 members – openly soliciting sexual favors and trading child pornography,” Hindenburg says. 

The examples continued: “Posing as a child in Roblox’s “therapy” experience, our therapist introduced himself as a “rapper with only one p”. We were advised to run away from home and that he would come pick us up so we could move into his basement in exchange for paying rent with our body.”

“The chatrooms trading in child pornography had no age restrictions. Roblox reports that 21% of its users are under the age of 9, a number that is likely underestimated given that Roblox has no age verification aside from users seeking 17+ experiences,” it said.

““LGBTQ+ Vibes” is a game available to all ages that has accumulated over 40.6 million visits and over 224,000 favorites. Users regularly described lewd sex acts while others used hateful slurs,” the report added.

The report says there is “simulated rape, naked users, and rampant in-game sexual harassment”. 

It also detailed violent content: “In the game “Beat Up The Pregnant”, users hacked pregnant women to death in a Wal-Mart parking lot with machetes or killed them with frying pans or a selection of guns.”

Finally, Hindenburg calls out the listen company’s valuation: “The company has reported net losses every quarter since becoming a public company, with last twelve months (LTM) losses totaling $1.07 billion. Its stock trades at 8.6x sales, a 57% premium to gaming peers, pricing in expectations of rapid future growth and profitability.”

Hindenburg, best known for its ongoing row with Indian billionaire Gautam Adani and most recently for a critical report on Super Micro Computers that came one day before the company said it had to delay its 2023 annual report filing, says that meanwhile, Roblox “insiders have cashed out $1.7 billion in stock since the company’s 2021 direct listing”. 

You can read the full report here. 

94-year-old Warren Buffett’s Berkshire Hathaway has been on a multi-month dump-a-thon of Bank of America shares. The reason for the abrupt selling, which began in mid-July, has yet to be officially disclosed but should be viewed as an ominous sign that the ‘Oracle of Omaha’ foresees economic trouble ahead. 

The latest Bloomberg data shows that Berkshire’s total proceeds from selling BofA shares have now topped a whopping $10bln.

Traders at Berkshire began paring down the massive investment in mid-July, pressuring the bank’s shares ever since. In the last three trading days, Berkshire sold $383mln worth of shares. 

The latest selling is the first round of Berkshire selling BofA shares since right before the pandemic.

Even with all the selling, Berkshire’s BofA position is still massive, totaling $31.35bln. 

Berkshire is still the largest shareholder of the bank.

Buffett’s stake in BofA has now dwindled to 10.1%, meaning just a bit more selling would drop it below the 10% regulatory threshold. Once that threshold is reached, Berkshire will no longer be required to report additional sales to the SEC.

We offered some theories about possible motives behind Buffett’s BofA dumping, including an overvalued market, recession risk, consumer downturn, and the possibility that a US regulatory probe into anti-money laundering surrounding fentanyl cash laundering could expand to major US banks. 

Buffett’s cash pile has also soared to record highs. 

Hmm.

Buffett also dumped half its Apple shares. 

The bottom line is that unlike in October 2008, Buffett led the call to “Buy American“…

… this time, he is selling American at a worrisome pace. 

Authored by Daniel Kowalski via The Mises Institute,

“Money does not grow on trees” is an old expression of wisdom that seems to have been disregarded by 21st century American policymakers. People all over the world and throughout time base their decisions primarily through lived experience. The US dollar became the world’s reserve currency in the aftermath of World War II, which is now almost eighty years ago. There is virtually no one in power at the American government or in leading institutions who has a living memory from before that period.

In fact, the elite status of US currency has been taken for granted and is being eroded by policies that create inflation as well as sanctions that exclude other nations from participating in the global economy that America dominates through its money. There is the danger that the constant erosion could precipitate an avalanche that could cause the dollar to lose its status.

This would shock the United States economy with massive price increases on consumer goods while crippling the local, state, and federal governments because deficit spending will no longer be possible if no one buys the debt. In this scenario, states like California and New York might find themselves turning to the federal government for some type of bailout while smaller states with more balanced budgets might find themselves wondering why they should be paying the bill for someone else’s reckless spending that they had no part of, which in turn could create a crisis of unity among the United States of America.

Bretton Woods

The World War II film “Flags of Our Fathers” tells the story of how the survivors from the famous flag raising at Iwo Jima photo were returned to the United States to promote the purchasing of war bonds while dealing with their own PTSD and guilt of their friends who died in battle. In one scene, Bud Herber, their handler from the Treasury Department, explains that they need to sell war bonds because the country is almost bankrupt and the Arabs selling oil will only accept payment in gold.

Prior to WWII, the reserve currency of the world was British Pound Sterling, but its status was greatly weakened by both WWI and WWII because the nation needed to spend massive amounts of money to fund its war efforts. Meanwhile the Americans became their largest creditors and wealth flowed across the Atlantic to North America to pay back their debts.

In 1944, with the outcome of the war certain to be an Allied victory, representatives from the forty-four nations working together to defeat the Axis met in Bretton Woods, New Hampshire to plan the global monetary policy for the post-war order. In the end it was decided that all the nations would peg their currency to the US dollar and that would be pegged to gold at the fixed price of thirty-five dollars per fine ounce.

In less than thirty years, that system started to fall apart as the US government’s spending drastically increased because of the “guns and butter” policies initiated during the Johnson Administration and the depletion of gold reserves because foreign countries were redeeming their dollars for gold. On August 15, 1971 President Nixon suspended the convertibility for dollars to gold which effectively ended the gold standard. With the treasury’s printing press no longer restrained, the 1970s saw a spike of high inflation that lasted into the 1980s. An ounce of gold that cost $35 in 1971 now costs approximately $2500 today.

Despite the abandonment of the gold standard, the US dollar has been able to maintain its prominence in the past fifty years because of US economic and military power combined with the petrodollar. The petrodollar sets the US dollar as the currency to be used internationally when purchasing “black gold,” also known as oil.

Trade Deficits

Globalized trade requires the movement of goods between countries. Overall, this is a net benefit to the world as some countries are better at producing specific things and their resources are better spent on those endeavors while exporting their surpluses and using those proceeds to import what they don’t have or cannot efficiently create. The last time the United States had a trade surplus, meaning Americans exported more than they imported, was 1975.

Now, in order to import goods, Americans must have an item to trade because no one is giving their stuff away for free. What the United States exports are their dollars and they get away with it because they are the world’s reserve currency. But massive inflation combined with the overuse of sanctions has caused some nations—some of them quite big and powerful—to search for alternatives to the dollar.

The BRICS alliance was created specifically for this purpose, even though its members have yet to agree on an alternative currency in the years since its founding. Part of what is propping up the US dollar’s dominance is the fact that there is not an alternative ready to replace it. However, there has been speculation that gold—whose price is up 25% this year—could be that alternative, and the price increase is a reflection of the demand from other countries buying it to fill their central banks.

Massive Government Overspending

Modern Monetary Theory (MMT)—the idea that money does grow on trees because we can just print it when we need to and use taxes and other policies to control price inflation—was an idea from the 2010s that gained popularity before the runaway price inflation that started in 2021. During that decade, the US national debt almost doubled from $14.8 trillion to $27 trillion. This massive increase in borrowing was made possible by the Federal Reserve. They created the money from thin air and purchased the debt from the government through a policy called Quantitative Easing (QE). Currently, in 2024, the debt is now over $35 trillion and increasing exponentially every year. 

And it’s not just the federal government that spends more than it has. Every state in the union has a debt. But the big difference between them is how much that debt is. As of 2021, California is more than $500 billion in the red, while ten other states each had a debt of less than $10 billion. Should California receive a federal bailout because of its mismanagement, then, in theory, the taxpayers in states with lower debts would be paying the price.

Growing Divides

During the US Civil War, the nation was largely divided between the populous and industrial North and the slaveholding, rural, and agrarian South. In the decades since, we have witnessed America become a more united nation as advances in communication and transportation eased the ability to travel through this large nation. But, in the 21st century, we are starting to see a new split in the union between red and blue states.

Blue states are controlled by the Democrat party and have larger governments with more spending. In recent years, we have seen a migration of citizens from those states to others in the nation. These people tend to lean Republican, and their loss has increased the Democrat power in blue states, while also increasing Republican power in the red states they move to as the voter base shifts. Purple states are becoming fewer and fewer and it’s at the point where presidential candidates only travel to a handful of states for campaigning because the others are secured before the elections thanks to increasing partisanship. 

Businesses are also leaving blue states for red ones. California was once the economic leader in the country, but now many companies like Tesla and Chevron are moving to Texas where the government climate is more friendly. Many financial companies from New York have moved to Florida as well because the local tax burdens are much lower, allowing them to keep more of their money.

The Coming Crisis

New York Governor Kathy Hochul told Republican voters in her state to move to Florida if they are unhappy with the way the Democrat party governs the state under her leadership and many have taken her up on her offer. It’s very likely that she would have lost her 2022 reelection bid had so many Republicans not left the state since she assumed power. And, while this strengthens her and her party’s voter base, it weakens the state treasury’s tax base.

As economic power shifts, the deficits of blue states like California, New York, and Illinois will only increase further. And, if the dollar stops being accepted by producers in other nations for payment, then the trade deficit will become a shortage of goods manufactured abroad. The decrease in supply will lead to rising prices.

The ability to create money out of thin air will lose its magic as that money becomes near worthless as a form of payment. Everyone in America will feel the pain and, when people are struggling, they are less able and willing to help others, especially when they blame the out-of-control spending of some for the predicament that everyone is in. The danger to the United States of America is very real but it is also fixable, although it won’t be easy and it will require leaders that are not afraid to make difficult decisions instead of kicking them down the road.

With the election only 28 days away, Vice President Kamala Harris, the Democratic presidential candidate, and her running mate Minnesota Gov. Tim Walz sat down for an interview with CBS’ “60 Minutes.” They discussed a wide range of topics including ongoing wars, the economy, and immigration, while also addressing criticisms directed at them.

In the pre-taped interview, Harris faced some actual journalism, squirming awkwardly as she faced questions about her nomination, and was asked to clarify her shifting positions on fracking, border security, and other policy flip-flops.

“I have been traveling our country, and I have been listening to folks and seeking what is possible in terms of common ground,” Harris responded.

“I believe in building consensus.”

CBS: You were basically handed the nomination. No primary process. No votes. That’s not how our system was intended to work.

KAMALA: “I am proud to have earned the support.”

CBS: People don’t even know who you are.

KAMALA: “I’ve been in this race for 70 days!” pic.twitter.com/j0U3hiPExv

— Trump War Room (@TrumpWarRoom) October 8, 2024

As Emel Akan writes at The Epoch Times, the prime-time special on CBS is part of the Harris campaign’s final push to sway independent voters. According to recent polls, Harris and former President Donald Trump, the Republican nominee, are tied in all seven battleground states.

In prior interviews, Harris stunned people by revealing that she owned a gun.

“I have a Glock, and I’ve had it for quite some time,” the vice president told CBS News correspondent Bill Whitaker during the interview when asked what type of gun she owned.

“My background is in law enforcement.”

When asked if she had ever fired it, Harris replied, “Of course, at a shooting range.”

My background is in law enforcement. Yes, I own a glock.pic.twitter.com/gTbjrEMCPA

— Kamala Harris (@KamalaHarris) October 8, 2024

The interview started with questions on ongoing tensions in the Middle East, particularly following Iran’s missile attacks on Israel in retaliation for Israel’s killing of Hezbollah’s leader Hassan Nasrallah in Lebanon.

Kamala claims she considers Iran to be our “greatest adversary.”

Except Kamala and Biden have enriched Iran with HUNDREDS OF BILLIONS of dollars — allowing Iran and its proxies to repeatedly attack and kill U.S. troops and our allies.

Under President Trump, Iran was BROKE. pic.twitter.com/dDUNV1eDTY

— Trump War Room (@TrumpWarRoom) October 8, 2024

The Israeli government pledged to retaliate, although it’s unclear if it will target the Iranian leadership and its nuclear program. Meanwhile, the Biden administration has been seeking to avoid a full-fledged conflict in the Middle East.

When asked whether the administration has lost its sway over Israeli Prime Minister Benjamin Netanyahu, Harris said:

“We’re not going to stop pursuing what is necessary for the United States to be clear about where we stand on the need for this war to end.”

Harris was also asked about how she planned to end the war in Ukraine and what success would mean for her.

“There will be no success in ending that war without Ukraine and the U.N. Charter participating in what that success looks like,” she responded.

The vice president also stated that she would not meet with Russian President Vladimir Putin bilaterally without Ukraine’s attendance.

“Ukraine must have a say in the future of Ukraine,” she said.

She criticized Trump, stating that his plan to end the war would mean “surrender.”

As far as China is concerned, no comment…

“If China attacks Taiwan, would we use military force to support Taiwan?”

KAMALA: “Bill, I’m not gonna get into hypotheticals.”

She is completely clueless — and dangerous. pic.twitter.com/qU38tzvdR5

— Trump War Room (@TrumpWarRoom) October 8, 2024

Harris also faced several questions regarding the funding of her economic plan, which included the expansion of the child tax credit.

Harris maintained her position that she would increase taxes on the wealthy.

According to the Committee for a Responsible Federal Budget, the vice president’s plan is projected to raise the debt by $3.5 trillion over the next decade.

When questioned about Congress’s lack of willingness to raise taxes and how she would achieve consensus on the matter, Harris became defensive.

“I disagree with you,” she told Whitaker, noting that there are “a lot of folks in Congress” who agree with her on taxes.

“I am a devout public servant. You know that I am also a capitalist, and I know the limitations of government,” she added.

Obviously, border security came up and Whitaker actually pressed her for a real answer.

Whitaker pressed Harris on reports that the number of undocumented immigrants that came into the United States quadrupled under her watch, and questioned whether she regretted not taking authoritative action on the border sooner. 

Harris responded that the first bill that the administration proposed to Congress was on immigration because it knew that in order to fix the border, Congress would need to take action. She also highlighted a more recent border security bill that was allegedly shot down by former President Donald Trump.

“It’s a long-standing problem,” Harris insisted. “Solutions are at hand, and from day one, literally, we have been offering solutions.”

Whitaker doubled down on a question about whether lifting some of Trump’s policies were a mistake, given that it led to a sudden surge in illegal immigration. In response, she pointed out that illegal immigration numbers in 2024 are down.

“The policies that we have been promoting are about fixing a problem, not promoting a problem,” Harris said firmly. 

“But the numbers did quadruple under your watch,” Whitaker responded.

“And the numbers today because of what we have done, we have cut the flow of illegal immigration by half, we have cut the flow of fentanyl by half,” she said, speaking over Whitaker.

“We need Congress to be able to act, to actually fix the problem.”

Kamala Harris is asked THREE TIMES if it was a mistake to allow millions of illegal aliens to cross our southern border.

Every single time she deflects, shifts blame, and claims she took steps to fix the problem.

Get ready to be gaslit like never before. pic.twitter.com/SfrBdv6j7N

— Trump War Room (@TrumpWarRoom) October 8, 2024

In a separate interview with 60 Minutes, Walz was asked whether he could be trusted after falsely claiming he was in Hong Kong during the 1989 Tiananmen Square massacre.

“I can. I think I can,” Walz stated.

“I will own up to being a knucklehead at times, but the folks closest to me know that I keep my word.”

During the interview, the Harris team sent out an email urging donors to support her campaign.

“The New York Times recently released polls of Georgia, Arizona, and North Carolina. Unfortunately, Trump leads in all three states,” the email said, requesting donors to contribute $25 to help meet their fundraising goals.

Trump declined to participate in an interview with “60 Minutes” for its election special. According to the network, he changed his mind after initially agreeing to a sit-down at the former president’s Mar-a-Lago estate in Florida last Thursday. The communications director for the Trump campaign, Steven Cheung, said on Oct. 1 that despite initial discussions, “nothing was ever scheduled or locked in.”

We give the last word to Bill Ackman, who has picked up on an inflection point in the media’s mediocrity…

If, as we approach the election, the polls begin to make clear that @realDonaldTrump will win, we could see other media organizations abandon their short-term efforts to get @KamalaHarris elected and start to play more fair as they become concerned with the damage to their… https://t.co/tw1TvOyuAt

— Bill Ackman (@BillAckman) October 8, 2024

US equity futures are higher, even as Europe and Asia stumble after a horror show in Hong Kong as China’s record rally hit a brick wall. As of 8:00am ET, S&P futures are 0.4% higher, recovering about half of Monday’s drop which was the worst day since early September, while Nasdaq futures rise 0.5% led by the Mag 7 (NVDA +1.4%, MSFT +0.8% and GOOG +0.6%). Both indexes slid Monday after traders faded bets on rate rate cuts, pushing 10Y bond yields above 4.0% for the first time in 2 months. Taking a step back, US stocks remain unchanged since the Fed’s jumbo rate cut.

Chinese markets returned from a weeklong holiday and the country’s central planner said it was confident that it will hit its economic targets this year, but stopped short of unleashing more stimulus measures. That disappointed investors and though Chinese stocks kicked off the day with a bang – as they had one week of gains to catch up on – the rally fizzled with Hong Kong stocks crashing the most since Lehman.

Overnight moves today are a reversal of yesterday’s: yields falling with 2y and 10y declining 3bp and 1bp, respectively. The Bloomberg dollar index is flat for the second day in a row as the yen gains. Oil is -2.2% lower after disappointment from China’s NDRC press conference (no details on the structure rebalancing details nor stimulus announcement) and a NYT report saying Israel’s first retaliation will likely not target nuclear facilities (here). Today will be day 2 for the NVDA AI Summit and AMZN will kick off its 2-day Prime Day Sale. Macro calendar today contains NFIB Small Business Optimism at 6am ET (91.5, missing est of 92.0); PEP will report earnings pre-market.

In premarket trading, Super Micro Computer rose after shipment data suggested robust demand for its servers, while Honeywell gained as the Wall Street Journal reported the industrial company plans to spin off its advanced materials division. Here are some of the other notable premarket movers:

• US-listed Chinese stocks tumbled as Beijing stopped short of launching more major stimulus. Alibaba (BABA) -6%, Bilibili (BILI) -13%,  NetEase (NTES) -7% US firms with high revenue exposure to greater China, or a high releince on Chinese consumers, also fall: Albemarle (ALB) -3%, Estee Lauder (EL) -2%, Las Vegas Sands (LVS) -3%
• DocuSign (DOCU) rises over 5% after S&P Dow Jones Indices said that the e-signature company will join the S&P Midcap 400 Index before trading opens Oct. 11.
• Honeywell (HON) gains 2% as the Wall Street Journal reported that the company is expected to unveil plans to spin off its advanced materials division.
• PepsiCo (PEP) slips 1% as the company trimmed its revenue outlook for the year as cash-strapped consumers, boycotts in the Middle East and a major recall hit volumes of its food and beverages.
• Sage Therapeutics (SAGE) drops 12% after posting disappointing results from a Phase 2 study for a drug candidate aimed at treating mild dementia in Alzheimer’s disease.

“Global risk appetite remains constructive overall,” said an optimistic Benoit Anne, investment director at MFS Investment Management. “The fundamental story remains strong, the US labor market is still in good shape. The direction of travel for interest rates is still going to be lower.”

Focus will now turn to the US consumer inflation data, which is forecast to slow to 2.3% year-on-year from the previous 2.5% reading. Traders are pricing a rate cut of less than a quarter-point at the Fed’s November meeting, though they still see about 48 basis points of policy easing by year-end. The inflation data is seen as especially key, given the possibility that the ongoing US hurricane season and workers’ strikes will impact this month’s jobs print.

“CPI data probably has more importance now than in prior months, as labor data is going to be more muddied going forward,” said Robert Dishner, senior portfolio manager at Neuberger Berman.

On the corporate front, big US banks kick off the earnings season in earnest from Friday, with companies’ guidance for the coming quarters seen as key. “Now most of investors will be looking to build a 2025 outlook and getting a steer from the corporate sector on how it is thinking about the earnings picture going into next year,” said Shaniel Ramjee, senior investment manager at Pictet Asset Management.

As noted above, US-listed Chinese shares dropped sharply after China’s latest pledge to support its economy disappointed investors who had hoped for a fresh wave of stimulus. That also weighed on Europe’s Stoxx 600 index, which fell 0.7% after China’s pledge to support its economy disappointed; Estoxx 50 was down 0.4%, and the FTSE 100 slide 1%. China-exposed names such as luxury firm Kering SA and Burberry Plc bearing the brunt; basic resources and consumer products also underperformed. Here are the top European movers:

• Imperial Brands rises as much as 4.8%, the most since May. The tobacco giant said trading has been in-line with expectations as it upped its dividend and switched to quarterly payouts, while lifting its buyback plan for FY25
• Greencore shares gain as much as 6.6%, to highest since April 2020, after the food manufacturer again lifted its annual guidance
• Vistry Group shares plummet as much as 36% to send the stock to a 2024-low, after the firm slashed its profit outlook. The housebuilder warned cost projections at some of its developments have been understated
• Senior shares fall as much as 18%, after the UK engineering company said it expects the performance of its Aerospace division to be lower in the second half than the first amid strikes at Boeing and supply chain challenges at Airbus
• VAT shares drop as much as 4.1% after the Swiss chipmaker warned that 3Q sales will come in below the low end of its guidance due to technical issues related to the implementation of new software
• Remy Cointreau shares slump, leading losses across European distillers, after China said it will start to collect anti-dumping duty deposits on EU brandy from Oct. 11

Earlier, Asian stocks slumped as gains in Chinese shares quickly evaporated after a strong open, and Hong Kong equities plunged. The MSCI Asia Pacific Index dropped as much as 2.7%, the most since an Aug. 5 rout, led by Chinese tech names including Tencent Holdings Ltd. and Meituan. A gauge of China’s stocks listed in Hong Kong tumbled as much as 11%, its biggest drop since the Lehman bankruptcy. Meanwhile, the onshore benchmark CSI 300 Index jumped 11% in early trading before paring its advance to 6%. Regional equities are coming under pressure as traders reassess the outlook for China’s growth recovery after a press briefing by the nation’s top economic planner yielded little by way of fresh stimulus. Hong Kong shares dived as mainland markets reopened after a holiday and investors rotated into onshore stocks.

“The rhetoric was positive but the market was looking for some more concrete policies coming out,” said Stephanie Leung, Chief Investment Officer at StashAway Group. “NPC meeting at the end of October may be a more appropriate venue for announcing substantial plans.”

In FX, the Bloomberg Dollar Spot Index is little changed. The Aussie dollar is the weakest of the G-10’s, falling 0.5% against the greenback as optimism around China fades. The yen is the best performer with a 0.2% gain.

In rates, treasuries are mixed with the curve steeper as front-end outperforms, unwinding a portion of Monday’s losses. 2-year yields, still richer by more than 2bp on the day, are off session lows, while 20- and 30-year are slightly cheaper vs  Monday’s closing levels. 10-year yields are little changed around 4.02%, outperforms bunds in the sector and trails gilts. US session includes three scheduled Fed speakers and the monthly 3-year note auction. The week’s Treasury auction cycle begins with $58b 3-year note sale at 1pm New York time. WI 3-year yield around 3.875% is ~43.5bp cheaper than September’s, which stopped 1.7bp through the WI level. Auction series also includes $39b 10-year and $22b 30-year reopenings Wednesday and Thursday

Commodity markets also felt the lack of fresh China stimulus, with Brent crude futures dropping about 2% to near $79 a barrel while iron ore slumped from a five-month high. Spot gold reversed earlier losses and was trading near session highs, at $2650.

Looking at today’s calendar, US economic data calendar includes August trade balance at 8:30am. Fed speakers scheduled include Bostic (12:45pm), Collins (4pm) and Jefferson (7:30pm)

Market Snapshot

• S&P 500 futures little changed at 5,749.00
• STOXX Europe 600 down 0.9% to 514.76
• MXAP down 2.1% to 192.40
• MXAPJ down 2.5% to 611.41
• Nikkei down 1.0% to 38,937.54
• Topix down 1.5% to 2,699.15
• Hang Seng Index down 9.4% to 20,926.79
• Shanghai Composite up 4.6% to 3,489.78
• Sensex up 0.8% to 81,691.66
• Australia S&P/ASX 200 down 0.3% to 8,176.95
• Kospi down 0.6% to 2,594.36
• German 10Y yield little changed at 2.25%
• Euro little changed at $1.0985
• Brent Futures down 1.9% to $79.40/bbl
• Gold spot down 0.2% to $2,637.38
• US Dollar Index down 0.14% to 102.39

Top overnight news

• China said it’s confident in reaching its economic targets this year and promised to further support growth, although it held back in unleashing more major stimulus in a disappointment to investors looking for more fuel for a world-beating stock rally.
• When Prime Minister Keir Starmer and Chancellor of the Exchequer Rachel Reeves plotted Labour’s path to power in the UK, they banked on eye-catching moves to hike taxes on private equity and ultra-rich “non-dom” residents to fund key spending plans. Now, those promises are meeting reality.
• Hurricane Milton is set to approach the Florida peninsula as a catastrophic Category 4 storm, bearing down on a region still struggling to recover from Helene’s devastation.
• Israel’s defense minister is traveling to Washington soon as the country continues to weigh how to respond to an Iranian missile attack and the US urges restraint.
• Brent oil dropped below $80 a barrel as China’s top economic planner ended a highly anticipated briefing on Tuesday without new stimulus measures, sparking a risk-off mood across markets.
• Fed’s Williams (voter) said the US economy is well positioned for a soft landing and the current monetary policy stance is well positioned to both keep maintaining strength in the economy and labour market. Willaims said the rate decision was right in September and right today, while he added that the half-point rate cut in September was not the rule of how we will act in the future, according to FT.
• Fed’s Musalem (2025 voter) said more rate cuts are likely given the economic outlook and his personal rate outlook is above the Fed’s median view, while he won’t predict the timing or size of future Fed easing. Musalem commented that the costs of easing too much outweigh easing too little and he supported the Fed’s decision last month to cut rates by 50bps. Furthermore, he said the September jobs report was very strong and the labour market is strong and healthy, as well as noted there is no emergency in the job market right now and the jobs report didn’t cause a change in the outlook
• Fed’s Kugler (voter) will support additional rate cuts if progress on inflation continues as expected; said policy will be data dependent. If downside risks to employment escalates, cutting rates more quickly may be appropriate. If incoming data does not provide confidence that inflation is moving to target, slowing normalisation may be appropriate. Kugler wants ‘balanced’ approach to inflation to avoid undesirable slowdown in labour market and economic growth. Adds that Hurricane Helene, and Middle East events could impact the US economic outlook. Last Friday’s job report was very welcome, showed healthy level of jobs. Labour market cooling has started; Fed is looking at trends, not single data. Have seen a decline in inflation.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were ultimately mixed after the negative lead from Wall St amid firmer yields and higher oil prices, while geopolitical concerns lingered as participants braced for Israel’s response to Iran and China’s NDRC press conference was met with disappointment. ASX 200 slightly weakened amid losses in the commodity-related sectors but with downside limited by the improvement in  consumer and business surveys. Nikkei 225 retreated amid a firmer currency while the data was varied as Household Spending topped forecast and Labour Cash earnings slowed. Hang Seng and Shanghai Comp diverged in which the Hong Kong benchmark suffered heavy losses as it took a back seat to the return of mainland bourses, while price action was volatile for the mainland index with a double-digit percentage gain seen at the open on return from the National Day Golden Week holiday. However, the index nearly gave back all of its gains after the NDRC press conference was met with disappointment with very little new announced regarding stimulus, although mainland stocks then caught a second wind again but are well off their opening highs.

Top Asian News

• China’s NDRC Chairman said China’s economy is largely stable but is facing a more complex internal and external environment, while he added that new policies will improve the health of economic actors and he is fully confident of achieving full-year economic and social development targets. The state planner head said they will promote a sustained, stable and healthy economic development in 2024 and 2025, as well as expand domestic demand and prioritise consumption, promote an economic rebound and quicken fiscal spending to support the economy. Furthermore, they will speed up the implementation of additional measures, release an updated foreign investment negative list, speed up local government special bond issuance and plan to issue CNY 200bln in advance budget spending and investment projects from next year.
• China’s regulator urged financial institutions to strengthen internal control over leverage and said Chinese bank loans are banned from entering China’s stock market, according to Financial News.
• RBA Minutes stated the Board discussed scenarios for lowering and raising interest rates in the future and members felt not enough had changed from the previous meetings that the current Cash Rate best balanced risks to inflation and the labour market, while it stated that future financial conditions might need to be tighter or looser than at present to achieve the board’s objectives and that scenarios lowering, holding and raising rates are all conceivable given the considerable uncertainty about the economic outlook. RBA noted that policy could be held restrictive if consumption growth picks up materially or could be tightened if present financial conditions are insufficiently restrictive to return inflation to target, while policy could be eased if the economy proves significantly weaker than expected and it is not necessary for the cash rate to evolve in line with policy rates in other economies. Furthermore, it stated that underlying inflation is still too high and policy will need to remain restrictive until board members are confident inflation is moving sustainably towards the target range, as well as noted that it is not possible to rule in or out future changes in the cash rate target at this time.
• China’s Commerce Ministry say China is studying measures such as raising tariffs on imported Large displacement fuel vehicles; also to make a fair and objective ruling based on the investigation results of EU pork and dairy. China will take all necessary measures to firmly safeguard the legitimate rights and interests of Chinese industries and enterprises, a spokesperson for the commerce ministry said.
• Hyundai Motor India IPO to open October 14th for institutional investors, October 15-17 for others – Company to be valued up to USD 19bln.

European bourses, Stoxx 600 (-0.8%) are subdued across the board to varying degrees as markets digest the losses from Wall Street yesterday alongside the disappointment from China’s NDRC overnight, who expressed confidence in economic stability but announced no new major stimulus measures. European sectors are mostly negative with a clear defensive bias amid the risk aversion. Basic Resources is the clear laggard following the hefty losses across base metals after China’s disappointing NDRC press conference, whilst Consumer Products and Services are dragged by the luxury sector. US Equity Futures (ES +0.3%, NQ +0.4%, RTY -0.1%) are mixed, but with the ES and NQ on a firmer footing, despite the losses seen across Europe. RBC Capital Markets Upgrades US healthcare sector to Overweight; downgrades utilities to market weight. Honeywell (HON) plans to spin off its advanced materials business, which could be worth more than USD 10bln as a separately traded public company; an announcement could be made today, via WSJ.

Top European News

• UK launched the Regulatory Innovation Office in an effort to speed up approvals for new technology, according to FT.
• UK homes are reported to be offered payments to reduce electricity use all year round, according to FT. In relevant news, Britain’s energy grid operators are confident of sufficient electricity and gas supply this winter, according to Reuters.
• Barclaycard said UK September consumer spending rose 1.2% Y/Y vs. prev. 1.0% growth in August and it cited a boost from discretionary spending but noted that essential spending fell 1.7% which was the steepest drop since April 2020.
• ECB’s Elderson said many indicators show that the risks of lower economic growth are materializing; ECB is open-minded ahead of the October 17th meeting, ECB decisions are made on a meeting by meeting basis, via local press Delo.
• ECB’s Kazaks said “The data points to October rate cut”.
• ECB’s Vasle said inflation risks abating but still some uncertainty, a rate cut in October is an option but this cut does not mean another in December; rates likely to be neutral by 2025 end.
• ECB’s Nagel says he is open to an October rate cut, via a podcast.
• Kantar UK Grocery Market Share: Grocery price inflation increased slightly to 2.0% during the four weeks to 29 September, up from 1.7% last month.

FX

• USD is net softer vs. peers after a recent run of gains that lifted DXY from a 100.17 low last week to a 102.68 post-NFP. Fed’s Williams speaking to the FT, noted that the US economy is well positioned for a soft landing; remarks which had little impact on the index. Next up, US NFIB and speak from Fed’s Bostic and Collins are due.
• EUR is marginally firmer vs. the broadly weaker USD but with EUR/USD unable to reclaim 1.10 status. If 1.10 does give way, last Friday’s high kicks in at 1.1039. If downside resumes, Monday’s low is at 1.0954.
• GBP is a touch firmer vs. the USD after what has been a tough run for the pound on account of last week’s dovish interjection by BoE Governor Bailey. For now, Cable is tucked within Monday’s 1.3060-1.3134 range, and awaiting commentary from BoE’s Breeden.
• JPY is the best performer across the majors. However, this appears to be more a case of scaling back recent losses rather than outright bullishness on the JPY.
• AUD is the laggard across the majors after the Chinese NDRC announcement disappointed lofty expectations heading into the event. NZD/USD is lower but to a lesser extent than its antipodean counterpart; ahead of the RBNZ announcement on Wednesday.

Fixed Income

• Dec’24 USTs are essentially flat, and taking a breather after four consecutive sessions of losses which were triggered by remarks from Powell guiding markets towards a 25bps rate cut and of course last Friday’s hot US NFP report. The US 10 yr yield is currently around the 4% mark but down from Monday’s peak at 4.03%.
• Bunds began the session on a firmer footing but has now edged lower and is unchanged on the session thus far; downticks from solid German Industrial output data proved to be fleeting given that the report is not enough to reassure markets about the Eurozone’s growth prospects. The German 10yr yield is currently tucked within Monday’s 2.212-2.26% range.
• Gilts are following suit to peers, initially holding a positive bias but now flat. However, Gilts may forge their own path later in the session with BoE’s Breeden due to speak at 11:30BST. The UK 10yr yield is currently towards the top end of Monday’s 4.153-4.212% range.
• UK sells GBP 1bln 0.125% 2039 I/L Gilt: b/c 3.14x (prev. 3.0x) & real yield 1.044% (prev. 1.053%).
• Germany sells EUR 0.95bln vs exp. EUR 1bln 2.30% 2033 Green Bund: b/c 2.4x (prev. 3.4x), average yield 2.16% (prev. 2.51%) & retention 5% (prev. 15.4%).

Commodities

• Softer price action across the crude complex as risk aversion in markets keeps prices subdued for now, but with geopolitics still very much in focus.
• Softer trade across the precious metals complex with hefty underperformance in spot palladium (-2.7%) whilst spot silver (-1.9%) also sees notable losses. XAU sits in a USD 2,631.23-2,649.26/oz range.
• Substantial losses across base metals after China’s NDRC expressed confidence in economic stability but announced no new major stimulus measures. 3M LME copper slipped from a USD 9,991/t intraday peak to a low of USD 9,705.50/t.
• India’s Oil Minister said India will be consuming 6mln bpd of crude oil in the foreseeable future from 5.4mln bpd now

Geopolitics: Middle East

• Iran’s Foreign Minister is to visit Saudi Arabia and other countries in the region, starting on Tuesday
• “Israel army said a fourth Division joins operations in Southern Lebanon”, according to Walla News’ Elster
• There was an initial unconfirmed report on X regarding explosions heard in Isfayah and Tehran in Iran. However, Iraqi Sabreen News, which is close to Iran, shortly denied that there was an attack on Iran and Iranian media also denied any violation of Iran’s airspace by hostile aircraft.
• Israel’s cabinet is in permanent session to discuss the response to Iran and choose the location, according to Al Jazeera citing an Israeli delegate to the UN.
• New York Times cited officials that stated Israel is likely to target Iranian military bases and possible intelligence sites in its response, while Israel seems to have postponed after a long discussion the targeting of Iranian nuclear sites to a later date, according to Al Jazeera.
• Israel’s army said their fighter jets bombed Hezbollah intelligence headquarters in Beirut, while it was later reported that Israel’s military said it eliminated Hezbollah HQ commander Suhail Hussein Husseini in Beirut.
• Israeli Home Front announced sirens sounded in western Galilee, while the IDF later stated that about 175 rockets were fired from Lebanon into Israel in the past 24 hours.
• Hezbollah announced that it shelled with rockets a gathering of enemy forces in the settlement of Shlomi and it targeted a military intelligence unit in the suburbs of Tel Aviv in a missile launch operation.
• Israel’s army issues an urgent warning to beachgoers and boat users from Lebanon’s Awali river southward and said it is easing some protective guidelines for residents in some areas of Galilee in northern Israel and Golan Heights.
• Israel’s military issued new evacuation warnings on specific buildings in Beirut’s southern suburbs on Monday evening.

Geopolitics: Ukraine

• Ukraine announced that a Russian missile hit a grain ship in the Odesa region which killed one person onboard the grain ship.
• Russian and Chinese ships conducted a joint practice of anti-submarine missions in Asia-Pacific, according to RIA.
• North Korean leader Kim said they are to speed up steps towards military superpower and strong nuclear power, while Kim also said they are to further strengthen Russia-North Korea cooperation in a birthday message to Russian President Putin, according to News1 and KCNA.

US Event Calendar

• 06:00: Sept. SMALL BUSINESS OPTIMISM 91.5, est. 92.0, prior 91.2
• 08:30: Aug. Trade Balance, est. -$70.5b, prior -$78.8b

Central Bank Speakers

• 03:00: Fed’s Kugler Speaks at ECB Event (Schnabel Chairs Session)
• 12:45: Fed’s Bostic Speaks on the Economic Outlook
• 16:00: Fed’s Collins Speaks at Community Banking Conference
• 19:30: Fed’s Jefferson Speaks on Discount Window

DB’s Jim Reid concludes the overnight wrap

Its been a challenging start to the week so far for risk assets as mounting geopolitical risks have collided with disappointment overnight that we haven’t heard any new information about the nature of China’s stimulus package as the nation returned from its week long holiday this morning.

Kicking off with Asia, comments from the head of China’s National Development and Reform Commission (NDRC) Zheng Shanjie did not provide any more details around the shape and size of the fiscal support that has been announced. This led to a loss of momentum in China’s equity rally, with the CSI seeing its initial gains being pare back from +11% to 2% before recovering to trade +6.31% higher. The Shanghai Composite also pared big post holiday early gains, now trading +4.54% higher. In contrast, the Hang Seng briefly dropped over -10% at the open before recovering to a smaller loss of -6.06% as I type. The Nikkei is down -1.20%, and the KOSPI -0.51%, following worse-than-expected third-quarter guidance from Samsung Electronics. US futures are flat after a tough session yesterday as we’ll see below.

Prior to this morning’s volatility, yesterday’s news were dominated by the risks in the Middle East, as Hamas launched a fresh rocket attack against Israel on the one year anniversary of the October 7th attacks, and speculation continued about how Israel might retaliate against last week’s missile strikes from Iran. This drove a fresh increase in oil prices yesterday, with Brent crude up (+3.69%) for a fifth consecutive session to $80.93/bbl by the close. In fact, the oil price gain over those 5 sessions (+12.76%) is the biggest since March 2022, shortly after Russia’s full-scale invasion of Ukraine, which just shows how investors are now reassessing the geopolitical outlook. Overnight oil has come off around -1.5%.

At the same time, there were clearly other signs of jitters, with the VIX index of volatility (+3.43pts) rising to 22.64pts, its highest level since early August. And with oil prices on the up and the US macro data strengthening, there were further signs that investors are pricing in more inflation risk. In fact, the US 2yr inflation swap (+5.0bps) was up to 2.39% yesterday, marking its highest level in nearly 3 months, and after having briefly fallen to below 2% this time last month.

That growing awareness of inflation risk helped drive a fresh bond selloff yesterday, as investors dialled back the likelihood of rapid rate cuts from central banks. Interestingly, there’s even started to be some initial doubt as to whether the Fed will cut at all at the next meeting in November, with futures now pricing in another rate cut as just an 88% probability. So it’ll be fascinating to see what the CPI print contains on Thursday and how that might influence the narrative. Looking further out to subsequent meetings, there was also a similar trend, and the rate priced in for the December 2025 meeting moved up another +8.2bps to 3.37%, the highest since August 15. That had been as low as 2.78% just three weeks earlier, so more than two rate cuts have been priced out over that period.

For bonds, this drove some pretty significant moves, and at one point intraday the US 2s10s curve became inverted again, before ending the session just outside inversion territory. That came as the US 2yr yield was up another +7.2bps to 4.00% (3.95% in Asia), building on last week when yields posted their largest weekly increase since June 2022. In the meantime, the 10yr yield (+5.9bps) was also up to 4.03%, closing back above the 4% mark for the first time since July. This morning they are back down a couple of basis point but holding just above 4% as I type. In Europe it was much the same story, with a similar move that saw investors dial back the chance of rapid ECB rate cuts, whilst yields on 10yr bunds (+4.5bps), OATs (+3.8bps) and BTPs (+6.4bps) all moved higher.

While the oil and bond moves were largely a continuation of those seen last week, yesterday also saw risk assets starting to come under more pressure. The S&P 500 (-0.96%) posted its largest decline in over a month, with every high-level sector group except for energy lower on the day. The Mag-7 (-1.86%) led the decline, in part following a US court ruling that Alphabet (-2.44%) must allow developers to set up rival android app stores. Nvidia (+2.24%) was the only of the Mag-7 to advance, again overtaking Microsoft (-1.57%) as the world’s second most valuable company. Credit spreads also came under a bit pressure, with US HY spreads widening by 6bps, though IG spreads were unchanged at their tightest since September 2021. Over in Europe, markets closed before the more negative mood took over, with the STOXX 600 (+0.18%) up for a second consecutive session and EUR IG credit spreads (-2bps) falling to their lowest since July.

Whether these signs of broader contagion from geopolitical risks for risk assets take further hold will clearly be crucial for investors. In a note yesterday (link here), Henry looked at the factors that have helped markets remain resilient despite the recent circumstances. For instance, unlike Russia’s invasion of Ukraine in 2022, which pushed oil prices up to multi-year highs, the recent rise in oil has still left prices beneath their 2024 average. So we haven’t yet seen a big inflationary wave as a result of events in the Middle East yet. The note also discusses some of the biggest historical selloffs driven by geopolitics, which have generally been stagflationary-type scenarios.

Coming back to Asia, early morning data showed that Japan’s real wages declined by -0.6% y/y in August (v/s -0.5% expected), marking the first drop in three months. It followed a downwardly revised +0.3% gain in July. Nominal wages rose for the 32nd consecutive month, increasing by +3.0% y/y, after rising +3.4% in the prior month. In other data, household spending fell -1.9% y/y in August (v/s +0.1% in July), but the decline was less severe than the market’s expected drop of -2.6%.

There was little data to speak of yesterday, although German factory orders fell by -5.8% in August (vs. -2.0% expected). In addition, Euro Area retail sales grew by +0.2% in August, in line with expectations.

To the day ahead, and US data releases include the NFIB’s small business optimism index for September, along with the trade balance for August. Elsewhere, there’s German industrial production for August. From central banks, we’ll hear from Fed Vice Chair Jefferson, and the Fed’s Kugler, Bostic and Collins, along with the ECB’s Centeno and Nagel.

Authored by Daniel Lacalle,

Many citizens want more government control of the economy to curb rising prices. It is the worst strategy imaginable. Interventionist governments never reduce consumer prices because they benefit from inflation, dissolving their political spending commitments in a constantly depreciated currency. Inflation is the perfect hidden tax. The government makes the currency less valuable by issuing more units of fiat money, partially dissolves its debt in real terms, collects more taxes, and presents itself as the solution to rising prices with subsidies in an increasingly worthless currency. That is why socialism and hyperinflation go hand in hand.

Socialism rejects human action and economic calculation and sells a false image of a government that can create wealth at will by issuing more units of fiat currency. Obviously, when inflation arrives, the socialist government will use its two favorite tools: propaganda and repression. Propaganda, which accuses stores and businesses of driving up prices, and repression, which occurs when social unrest intensifies and citizens legitimately hold governments accountable for scarcity and high prices, are the two main strategies.

If you want lower prices, you need to give less economic power to the government, not more. Only free markets, competition, and open economies help decrease consumer prices. Many readers might think that we currently have a free market with competitive and open economies, but the reality is that we live in increasingly intervened and overregulated nations where central banks and governments work to perpetuate unsustainable public deficits and debt. Therefore, they continue to print more money, leading many to question why it is getting harder for families to make ends meet, buy a home, or for small businesses to prosper. The government is slowly eating away the currency it issues. They call it “social use of money.”

What is “social use of money”? In essence, it means abandoning one of the main characteristics of money, the reserve of value, to give the government preferential access to credit to finance its commitments. Therefore, the state can announce larger entitlement programs and increase the size of the public sector relative to the economy, creating a self-fulfilling prophecy. The state issues more currency, which makes people’s money less valuable. Citizens become more dependent on the state, and they will demand more subsidies paid in the currency the state issues. It is, in essence, a process of control through debt and currency depreciation.

When governments and central banks talk about price stability, it means a two percent annual depreciation of the currency. Aggregate prices rising an average of two percent is hardly price stability because it is measured by the consumer price index, which is a carefully crafted basket of goods and services weighted by the same people who print the money. That is why governments love CPI as a measure of inflation. It fails to fully reflect the erosion of the currency’s purchasing power. This is why the CPI’s basket calculation fluctuates so frequently. Even if it accurately measures, it will underestimate the rise in prices of non-replaceable goods and services by adding them to a basket of things we consume maybe once or twice a year at best. When you put together shelter, food, health, and energy with technology and entertainment, there will always be distortions.

Thus, governments and central banks are never going to defend price stability. If aggregate prices fell, competition soared, and citizens saw their real wages rise and their deposit savings increase in real value, their jobs would disappear.

When a central bank like the Fed cuts rates and increases the money supply after an accumulated 20.4% inflation in four years, it is not defending price stability; it is defending price increases. This strategy serves to conceal the government’s financial insolvency. A currency with a declining value.

Governments are the ones that create inflation by spending a currency that is constantly losing purchasing power because the state issues more than what the private sector demands. No corporation or allegedly evil oil producer can make aggregate prices rise and continue increasing annually at a lower pace. Only the one that prints the money, and central banks don’t print money because they want to; they increase the money supply to absorb rising public deficit spending.

Inflation is a hidden tax, a slow process of nationalization of the economy, and the perfect way to increase taxes without angering voters and blaming private businesses in the meantime. The consumer will likely blame the store or business for higher prices, not the issuer of a currency that loses purchasing power.

Why would governments want higher prices? Because it gives them more power. Destroying the currency they issue is a perfect form of control. That is why they need more debt and higher taxes. High taxes are not a tool to reduce debt, but rather to justify rising public indebtedness.

You may have read numerous times that the government has unlimited borrowing power and can manage inflation to allow you to live comfortably. It is false. The government cannot issue all the debt it wants. It has an inflationary, economic, and fiscal limit.

Inflation is a warning sign of declining currency confidence and a loss of purchasing power. The economic limit is evidenced by lower growth, lower employment, weaker real wages, secular stagnation, and declining foreign demand for public debt.

The fiscal limit is evidenced by soaring interest expenses even with low rates, weaker receipts every time they hike taxes, and citizens and businesses leaving the country to more friendly tax systems, all of which add to the poor or negative multiplier effect of government spending.

If you want lower prices, you should give less economic power to governments, not more.

A government that tells you it will borrow $2 trillion per annum in a growth and record receipt economy and will continue to increase debt and borrow well into 2033 with the most optimistic assumptions of GDP and receipt is telling you it will make you poorer.

When a politician promises that he or she will cut prices, they are always lying. A weaker currency is a tool to increase government power in the economy. By the time you find out, it may be too late.

Money is credit, and government debt is fiat currency. Currency depreciation is inflation, and inflation is equivalent to an implicit default. No interventionist government or central bank wants lower prices because inflation allows the government to increase its power while slowly breaching its monetary commitments.