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Retail Sales Data Suggests A Strong Consumer Or Does It

Retail Sales Data Suggests A Strong Consumer Or Does It

Authored by Lance Roberts via RealInvestmentAdvice.com,

The latest retail sales data suggests a robust consumer, leading economists to become even more optimistic about more robust economic growth this year. To wit:

“It has been two years since forecasters felt this good about the economic outlook. In the latest quarterly survey by The Wall Street Journal, business and academic economists lowered the chances of a recession within the next year to 29% from 39% in the January survey. That was the lowest probability since April 2022, when the chances of a recession were set at 28%.

Economists don’t think the economy will get even close to a recession. In January, they, on average, forecast sub-1% growth in each of the first three quarters of this year. Now, they expect growth to bottom out this year at an inflation-adjusted 1.4% in the third quarter.” – WSJ

According to the March retail sales data, consumer spending added “fuel” to economists’ exuberance about this year.

Rising inflation in March didn’t deter consumers, who continued shopping at a more rapid pace than anticipated, the Commerce Department reported Monday. Retail sales increased 0.7% for the month, considerably faster than the Dow Jones consensus forecast for a 0.3% rise though below the upwardly revised 0.9% in February, according to Census Bureau data that is adjusted for seasonality but not for inflation.” – CNBC

The chart below shows the monthly change in the retail sales data over the last two years.

While mainstream economists trumpeted the strength of the consumer, the March retail sales data had some interesting points worth noting.

First, retail sales data was extraordinarily weak from October to January, the traditionally strongest shopping months of the year. That period included Halloween, Thanksgiving, Christmas, and NYear’sr’s. So, to some degree, the strength of spending over the last two months is unsurprising as, eventually, consumers need to buy goods or services previously postponed.

Secondly, while the March retail sales data was strong, it was weaker than February. However, March contained two significant spending periods, Spring Break and Easter, which generally don’t occur. Since Spring Break and Easter are considerable travel and shopping periods, it is unsurprising that the retail sales data increased with oil prices rising. As shown below, there is a very high correlation between nominal retail sales and oil prices.

Paying More For The Same Amount

Economists often overlook another important point about the retail sales data. As noted above, the March retail sales report was NOT adjusted for inflation. Furthermore, the report is in nominal “dollar volume” and not the amount of goods or services sold. Oil and gasoline prices are an excellent example of the issue with the retail sales data.

Let’s assume you own a car with 18-gallon fuel tank. Your daily activities are mostly going to work, going to the grocery store, eating out, having entertainment, etc. As such, you consume one tank of gas each week. Here is the math:

Week 1: 18-gallons of gas @ $3/gallon = $54.

That week, the store adds $54 to the monthly retail sales total for selling 18 gallons of gasoline. However, the price will increase to $4 per gallon next week.

Week 2: 18-gallons of gas @ $4/gallon = $72.

Here is the question.

While the retail sales data increased by $18 in week two, did the consumer purchase more gasoline? In other words, if the economy’s strength is ultimately measured by how much we produce (gross domestic product), then does spending more for the same amount of goods or services equate to a stronger economy?

The picture is quite different if we adjust the nominal retail sales data for inflation. Again, it is unsurprising that even on an inflation-adjusted basis, retail sales rose in February after declining for four months previously. However, with March containing Spring Break and Easter, the data suggests a weaker consumer that headlines tout.

It is worth noting that retail sales data is not very useful in determining whether the economy is nearing a recession. As shown below, an annual growth rate of 2% has been a good marker for economic growth. As such, retail sales should grow at roughly 2% annually as well, given that personal consumption expenditures comprise approximately 70% of the economic equation. However, other than 2007, retail sales did not clarify economic strength.

In other words, spending more for the same amount of goods and services is not a sign of economic strength.

Economic Forecasts Tend To Be Erroneous

Furthermore, while the recent nominal sales data was robust, it is crucial to remember the economic data has a significant lag. Each of the dates below shows the economy’s growth rate immediately before the onset of a recession. You will note in the table that in 7 of the last 10 recessions, real GDP growth was running at 2% or above. In other words, according to the media, there was NO indication of a recession. But the next month, one began.

Crucially, I am not saying a recession is starting next month. However, I suggest that relying heavily on one month’s retail sales data to claim the economy avoided a recession is not likely ideal. Let’s revisit that chart of the WSJ economic forecast. I have added two notations: the start and end of recessions and when the NBER officially dated that period. As shown in both previous recessions, WSJ economists had a very low probability of the economy entering a recession just before it occurred.

The reality is that on an inflation-adjusted basis, the retail sales data suggests the consumer remains weak. While spending more to buy the same amount of goods or services may look good on paper, the average household has less money to spend elsewhere. As shown, the annual rate of change in real retail sales is near some of the lowest levels outside of a recession.

Lastly, consumer credit supporting retail sales will become more problematic with rising interest rates. Higher interest rates tend to reduce the average growth rate of retail sales data.

Our advice is to remain cautious about economic exuberance. Those forecasts are often disappointing.

Tyler Durden Fri, 04/26/2024 - 11:05

JPY Plunges To Fresh 34-Year-Lows After BoJ Does Nothing... Again

JPY Plunges To Fresh 34-Year-Lows After BoJ Does Nothing... Again

Having already lost more than 10% of its value versus the US dollar this year, the yen plunged further overnight after Bank of Japan Governor Kazuo Ueda indicated monetary policy will stay easy as he kept rates unchanged and showed little to no support for the embattled currency during the press conference.

While investors had not expected the BoJ to change its policy this week, there was an expectations that Ueda would strike a hawkish tone regarding future rate rises to slow the yen’s decline.

Instead, Ueda said at a news conference on Friday that the central bank’s board members judged there was “no major impact” from the weaker yen on underlying inflation for now.

“Currency rates is not a target of monetary policy to directly control,” he said.

“But currency volatility could be an important factor in impacting the economy and prices. If the impact on underlying inflation becomes too big to ignore, it may be a reason to adjust monetary policy.”

And that sent the currency reeling (amid chaotic swings) back above 157/USD...

Source: Bloomberg

“There is no intention by the BoJ to stop the yen’s decline, at least looking at its statement and its outlook report,” said UBS economist Masamichi Adachi.

“The finance ministry will have to act [to stem the yen weakness]... It would have been more effective if both the government and the BoJ faced the same direction,” he added.

Blowing further below the 'interventionist' levels seen previously to a fresh 34-year low...

Source: Bloomberg

“Markets remain on high alert for any indication of whether the yen’s current weakness will be interpreted as a lasting inflationary signal,” said Naomi Fink, global strategist at Nikko Asset Management.

“The BoJ however is likelier to find any knock-on impact from yen weakness upon inflation as more concerning than short-term currency moves.”

Driving the depreciation is the yawning gap between the interest rates in the US - which are at highest in decades after the Fed’s aggressive tightening cycle last year - and those in Japan, where borrowing costs remain stubbornly low near zero.

“Intervention is possible at anytime, but it could have been just someone selling a large lot, which stoked intervention speculation and spurred follow-through moves,” said Koji Fukaya, a fellow at Market Risk Advisory Co. in Tokyo.

“It does not look like intervention, but the only way to confirm is to check data that will be released later by the Ministry of Finance.”

Policymakers have repeatedly warned that depreciation won’t be tolerated if it goes too far too fast.

Finance Minister Shunichi Suzuki reiterated after the BoJ meeting that the government will respond appropriately to foreign exchange moves.

Potential triggers for interventions are public holidays in Japan on Monday and Friday next week, which bring the risk of volatility amid thin trading.

“Should the yen fall further from here, like after the BOJ decision in September 2022, the possibility of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp.

“It is not the level but it’s the speed that will trigger the action.”

But so far, nothing! And so the market continues to call Ueda and Suzuki's bluff, knowing full well that a sudden intervention will perhaps briefly support the currency but will pancake the current gains in Japanese stocks.

However, not everyone is convinced intervention is imminent.

In a note this morning, Deutsche Bank says the currency's decline is warranted and finally marks the day where the market realizes that Japan is following a policy of benign neglect for the yen.

We have long argued that FX intervention is not credible and the toning down of verbal jawboning from the finance minister overnight is on balance a positive from a credibility perspective. The possibility of intervention can't be ruled out if the market turns disorderly, but it is also notable that Governor Ueda played down the importance of the yen in his press conference today as well as signalling no urgency to hike rates. We would frame the ongoing yen collapse around the following points.

  1. Yen weakness is simply not that bad for Japan. The tourism sector is booming, profit margins on the Nikkei are soaring and exporter competitiveness is increasing. True, the cost of imported items is going up. But growth is fine, the government is helping offset some of the cost via subsidies and core inflation is not accelerating. Most importantly, the Japanese are huge foreign asset owners via Japan’s positive net international investment position. Yen weakness therefore leads to huge capital gains on foreign bonds and equities, most easily summarized in the observation that the government pension fund (GPIF) has roughly made more profits over the last two years than the last twenty years combined.

  2. There simply isn't an inflation problem. Japan's core CPI is around 2% and has been decelerating in recent months. The Tokyo CPI overnight was 1.7% excluding one-off effects. To be sure, inflation may well accelerate again helped by FX weakness and high wage growth. But the starting point of inflation is entirely different to the post-COVID hiking cycles of the Fed and ECB. By extension, the inflation pain is far less and the urgency to hike far less too. No where is this more obvious than the fact that Japanese consumer confidence are close to their cycle highs.

  3. Negative real rates are great. There is a huge attraction to running negative real rates for the consolidated government balance sheet. As we demonstrated last year, it creates fiscal space via a $20 trillion carry trade while also generating asset gains for Japan's wealthy voting base. This encourages the persistent domestic capital outflows we have been highlighting as a key driver of yen weakness over the last year and that have pushed Japan's broad basic balance to being one of the weakest in the world. It is not speculators that are weakening the yen but the Japanese themselves.

The bottom line, Deutscxhe concludes, is that for the JPY to turn stronger the Japanese need to unwind their carry trade. But for this to make sense the Bank of Japan needs to engineer an expedited hiking cycle similar to the post-COVID experiences of other central banks. Time will tell if the BoJ is moving too slow and generating a policy mistake. A shift in BoJ inflation forecasts to well above 2% over their forecast horizon would be the clearest signal of a shift in reaction function. But this isn’t happening now.

The Japanese are enjoying the ride.

But there is potential for yen upside as Bloomberg's Simon White notes that profit taking on foreign asset positions might soon prompt some yen repatriation and pressure USD/JPY lower.

If it is perceived that the yen won’t get much cheaper due to intervention risk, domestic investors might choose to start switching some of their US equity positions back to the domestic market, repatriating yen and pressuring USD/JPY lower in the process.

The chart below shows that on the year, the Nasdaq in yen terms and the Nikkei are both up by the same 13%-14% on the year. A stronger yen would present an ongoing headwind to the US position.

Equity positions are typically less FX hedged than bond positions, meaning that the repatriation of the currency is not neutered by the unwind of the hedge.

The dynamics of spot trading, options barriers and potential intervention as well as US PCE data released later today will dominate the currency’s short-term gyrations, but the slightly longer-term considerations of profit taking on foreign positions will start to drive the medium-term outlook.

Once that trend establishes itself, longer-term drivers of the yen will come into focus. Japan is the world’s largest net creditor, and there is a significant structural short in the yen.

The country’s net international investment position is $3.3 trillion, but its net position in portfolio assets, i.e. so-called hot flows that could be liquidated quickly, is $4.4 trillion.

Only a fraction of that being repatriated has significant potential to drive the yen considerably higher.

The question is, how much pain is China willing to take from its regional neighbor's 'devaluation'?

Tyler Durden Fri, 04/26/2024 - 10:50

Yuan Devaluation Fever Heats Up As China Stockpiles Metals

Yuan Devaluation Fever Heats Up As China Stockpiles Metals

Authored by Simon White, Bloomberg macro strategist,

Gold trading in China has exploded and stocks of copper have risen sharply prompting speculation that policymakers are on the brink of a yuan devaluation. Even though it’s still a tail-risk, it’s one requiring greater vigilance as the economy becomes increasingly deflationary, redoubling capital outflow pressures.

The yuan has been steadily falling versus the dollar this year. So far the decline has been measured, but activity in commodities has prompted conjecture that China is about to orchestrate a significant one-off yuan devaluation. Futures gold trading in China has moved sharply higher, and the net long position has been rising.

Also, there has been a sharp rise in China’s copper stocks. Copper as well as other commodities is used as a source of collateral in China.

USD/CNY has been bumping up against the upper band of the PBOC’s fix for the currency pair.

China has a nominally closed capital account, but it is de facto leaky. Capital outflow is rising, and this puts further pressure on the economy as it has a geared negative effect on domestic liquidity.

Allowing the yuan to depreciate against the dollar (it is appreciating against most other currencies) takes some of the pressure off.

China, though, has been unofficially intervening, via the state banks, to stabilize the yuan’s fall.

Nonetheless, it is still less likely than not they will countenance a significant devaluation of the yuan versus the dollar.

  • First, it would compromise the financial stability that China has sought to obtain.

  • Second, it risks a tariff backlash from the US.

  • Third it may be counter-productive if it looks panicky and prompts even more capital outflow.

The stockpiling could well be for other reasons.

  • Rising global inflation risks (there is more to come, and even China will likely soon face consumer inflation);

  • reserve diversification in a more multi-polar world;

  • and raw materials for solar (AI needs a lot of energy) and EVs, and so on.

  • China planning for an invasion of Taiwan is another tail-risk that can’t be completely discounted.

Falling bond yields, though, show China is nearing a crunch point (read why here) and will need to do something soon to avert a debt deflation.

Even though a full-scale devaluation is less likely, it’s a non-negligible risk that can’t be ignored.

Tyler Durden Fri, 04/26/2024 - 10:35

George Soros Paying Student Agitators To Whip Up Anti-Israel Protests

George Soros Paying Student Agitators To Whip Up Anti-Israel Protests

George Soros and his far-left movement is paying student agitators to co-opt and amplify anti-Israel protests at colleges across the country, the NY Post reports.

The protests, which began at Columbia University, have expanded nationwide - with copycat tent cities erected at colleges including Harvard, Yale, Berkeley in California, the Ohio State University and Emory in Georgia, with organized branches of the Soros-funded Students for Justice in Palestine (SJP) having organized them.

Which might explain this:

The parent organization of SJP has been funded by a constellation of nonprofits which all lead to Soros.

At three colleges, the protests are being encouraged by paid radicals who are “fellows” of a Soros-funded group called the US Campaign for Palestinian Rights (USCPR).

USCPR provides up to $7,800 for its community-based fellows and between $2,880 and $3,660 for its campus-based “fellows” in return for spending eight hours a week organizing “campaigns led by Palestinian organizations.”

They are trained to “rise up, to revolution.”

The radical group received at least $300,000 from Soros’ Open Society Foundations since 2017 and also took in $355,000 from the Rockefeller Brothers Fund since 2019. -NY Post

The group has three "fellows" who have helped propel the protests into a nationwide phenomenon, which you can read more about here...

We're sure if the protests get violent, prosecutors will take appropriate action, yes?

And while many of the protesters are just morons...

Some of them are quite spicy, like the leader of Columbia's encampment...

Tyler Durden Fri, 04/26/2024 - 10:15

UMich Inflation Expectations Accelerated In April To 2024 Highs

UMich Inflation Expectations Accelerated In April To 2024 Highs

Short-term inflation expectations rose... again... according to the latest UMich sentiment survey with 1-year expectations at 3.2% final, up from preliminary 3.1% for April, and 2.9% for March. This is the highest level since Nov 2023...

Source: Bloomberg

The headline sentiment also declined in April from three-year-highs. Consumers’ perceptions of their current financial situation and the economic outlook over the next year both slid to four-month lows. The current conditions gauge dropped to 79 from 82.5. A measure of expectations fell to 76 from 77.4.

Source: Bloomberg

While “consumers’ frustration over high prices in their day-to-day spending decisions grew this month, price concerns for large purchases - durable goods, vehicles, and homes - were all little changed from last month,’’ Joanne Hsu, director of the survey, said in a statement.

About 38% of consumers reported that high prices were weighing down their living standards, up from 33% who said so last month.

Sentiment gauges also provide insight into voters’ feelings about the economy and their finances leading up to the presidential election in November. President Joe Biden’s recent polling bump in key battleground states has mostly evaporated amid economic pessimism, the latest Bloomberg News/Morning Consult poll found.

“Consumers continue to express uncertainty about the future trajectory of the economy pending the outcomes of the upcoming election,” Hsu said.

Partisan differences in views of the economy remain pronounced. While Democrats and Independents saw little change in sentiment this month, sentiment for Republicans fell about 6 index points.

Republicans reported declines for four of the five components of the sentiment index, reflecting their deteriorating views across multiple facets of the economy. Despite these declines, sentiment for Republicans remains well above 2022 and 2023 levels.

In fact, the current reading for Republicans’ Expectations Index is the second highest (after last month) since the end of 2020, as the Trump presidency came to a close.

Tyler Durden Fri, 04/26/2024 - 10:09

Why Are There So Many Americans That Can't Find A Job Even Though They Are Desperate To Be Hired?

Why Are There So Many Americans That Can't Find A Job Even Though They Are Desperate To Be Hired?

Authored by Michael Snyder via The Economic Collapse blog,

According to the absurd numbers that the government feeds us, the unemployment rate is very low and there are lots of jobs available.  But if what they are telling us is true, why are so many Americans not able to find work?  As you will see below, some people haven’t been hired even though they have literally applied for hundreds of jobs. 

There seems to be an enormous disconnect between what is actually happening in the real economy and the economic narrative that they are constantly pushing.  By the time you are done reading this article, I think that you will agree with me.

Earlier this week, I received an email from a reader that has not been able to find work after seven months of searching.

He gave me permission to share part of that email with you, and it is certainly quite heartbreaking…

Hi Michael,

I am a long-time reader of theeconomiccollapseblog.com, and your recent article comparing the economy to the movie “Weekend at Bernie’s” really stood out to me.

I’m really trying to figure out WHY it is so hard to find a job.

I was laid off from my job as a Custodial Foreman in September 2023, and have had ZERO results for my countless hours spent searching for comparable work.

I don’t know if you want to use any of this for an article or not, but if you do, please just keep doing what you normally do: Praising Jesus Christ. Without my faith in him I don’t know what I’d do.

When I wake up, I make coffee and turn on the computer and go through the state’s unemployment job search sites they provided me when I was laid off. I have been looking and also applying for jobs DAILY since September 2023. And these are not “rocket science” positions; I’m simply looking for Maintenance or Custodial or Groundskeeper type jobs. You know, “normal working class” type jobs.

But after ~300 applications (And these are all just to the jobs that I not only have experience for but also would actually want to do), I have had 1 interview. One interview in 7 months of applying and sending tailored cover letters with, daily!

If the economy is doing so “great”, why can’t he find employment?

Some of you may be tempted to think that he is just an isolated case.

Well, here is another example of an experienced worker that has applied for approximately 300 jobs without any success…

Royal Siu, who lives in Seattle and is trained as a pharmacist, likes to make his friends guess how many jobs he’s applied to. They’ll often toss out some number around 40, he told BI. He’ll tell them to keep going. Most give up by the time they reach 100. That’s when Siu drops that he’s applied to about 300 jobs. “It’s usually a shock factor to them,” he said.

Siu, who’s trying to use his pharmacy degree to work in other parts of healthcare, is finding it harder to land interviews than in a prior job search. The 28-year-old was getting more phone screenings and first and second interviews in the past. This time, it’s been a couple of months since he had a screening call. So he continues to turn to his network but also doesn’t stop applying.

What in the world is going on here?

I thought that there were “millions” of good jobs just waiting for someone to step into them.

Something definitely does not add up.

Even Americans with advanced degrees from top schools are increasingly finding themselves out of work.

If you doubt this, just check out these numbers…

Even at some top business schools, the number of recently minted M.B.A.s without jobs has roughly doubled from a couple of years ago, when U.S. companies were rushing to hire as many workers as they could, according to data from the schools.

At Harvard Business School, 20% of job-seeking 2023 M.B.A. graduates didn’t have one three months after graduation, up from 8% in 2021. At Stanford’s Graduate School of Business, 18% didn’t, compared with 9% in 2021. About 13% of those at the Massachusetts Institute of Technology’s Sloan School of Management didn’t have a job within three months, up from about 5% in 2021.

How are those numbers possible if the unemployment rate is hovering near “historic lows”?

Of course the truth is that we have been sold a lie.

If you do not have a job, you are classified by the U.S. government as either “unemployed” or “not in the labor force”.

In 2008 and 2009, the combined total of those two categories never even reached 90 million.

Today, the combined total of those two categories is over 106 million.

The Biden administration says that only 6,429,000 Americans are officially “unemployed”.

The other 99,989,000 Americans without a job are considered to be “not in the labor force”.

And more will be lumped into those two categories soon, because large employers all over the nation continue to conduct mass layoffs.

For example, thousands of Tesla workers in California and Texas were just notified that they will be losing their jobs…

The notifications in California and Texas, where the electric vehicle (EV) maker has large presences, came in the form of WARN notices, according to reports.

In California, the planned Tesla headcount reductions will hit approximately 3,300 workers, The San Francisco Standard reported Tuesday.

They will apparently occur at locations in a total of four different cities in the Golden State.

Meanwhile, Texas will see almost 2,700 employees in Austin lose their jobs, according to the Austin American-Statesman.

Sadly, the pace of layoffs is likely to increase during the months ahead, because business activity in the U.S. is declining…

The U.S. economy lost momentum in April, a pair of S&P surveys found, as businesses reported a decline in new orders and reduced employment for the first time since the pandemic.

The flash U.S. manufacturing purchasing managers index slipped to a four-month low of 49.9 in April from 51.9 in March.

The S&P flash U.S. services PMI fell to a five-month low of 50.9 this month from 51.7 in March.

The surveys are the first indicators of each month to give a sense of how the U.S. economy is performing.

Meanwhile, the cost of living crisis just continues to escalate.

Shockingly, at one station in California gasoline now costs $7.29 per gallon…

Soaring gas prices have skyrocketed to a whopping $7.29 per gallon in some parts of California – which is above the current the national hourly minimum wage.

While the average price for a gallon of gas varies from state to state – drivers in a certain Silicon Valley town are facing particularly extortionate rates that set them back almost $150 for a full tank.

The Chevron gas station in Menlo Park was exposed on Sunday by a bewildered customer who posted on X that the price per gallon was four cents ‘above the federal hourly minimum wage.’

If you think that this is bad, just wait until the war in the Middle East transforms into the apocalyptic conflict that I believe it will become.

I am entirely convinced that inflation will continue to be a major problem even as economic activity in the U.S. slows down even more.

We are already experiencing “stagflation”.

What is eventually coming will be so much worse than that.

Of course the economic pain that we are going through is just one of the factors that is systematically destroying our nation.

Just about all of our major institutions are crumbling, just about every sector of our society is in the process of melting down, and conditions are rapidly getting worse all around us.

And now we are heading into the most chaotic election season in the entire history of our country.

This is a recipe for disaster, but there is no turning back now.

*  *  *

Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Tyler Durden Fri, 04/26/2024 - 09:50

Anglo American Rejects BHP's Takeover Deal, Calls It "Highly Unattractive" 

Anglo American Rejects BHP's Takeover Deal, Calls It "Highly Unattractive" 

The world's largest global diversified miner, BHP, is being forced to significantly raise its buyout offer of Anglo American or walk away from the proposed all-share deal valued at £31.1 billion ($38.9 billion). 

"The BHP proposal is opportunistic and fails to value Anglo American's prospects, while significantly diluting the relative value upside participation of Anglo American's shareholders relative to BHP's shareholders," Anglo chairman Stuart Chambers wrote in a statement on Friday. 

Chambers continued, "The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders."

The first indication that Anglo executives would reject the deal came Thursday afternoon when Reuters reported two sources familiar with talks with top Anglo investors who said the offer was 'unattractive.' 

Anglo owns massive copper mines in South America. The miner has become an acquisition target of BHP solely to create the world's largest copper mining giant, with control of about 10% of the global copper mining supply. Copper mining supplies are dwindling, and demand is expected to soar as power grids worldwide are upgraded to support the green energy transition. 

The Financial Review quoted hedge fund manager Rafi Lamm of Melbourne's L1 Capital as saying BHP would have to increase its bid for Anglo's assets, which have been underappreciated by the market and make strategic sense for BHP. 

"We think it's a sensible move by BHP and we think they can afford to pay the proposed deal pricing and a lot more," Lamm said. 

James Whiteside, head of mining and metals corporate research at consultancy Wood Mackenzie, said BHP will have to raise its offer to bring its value "closer to the share price in 2023 before operational issues emerged." 

On Thursday, BHP proposed an all-share deal valued at £31.1 billion ($38.9 billion). The transaction depends on Anglo spinning off its South African iron ore and platinum businesses to its shareholders. The offer is conditional and non-binding at £25.08 a share, or about a 14% premium to Anglo's closing share price on Wednesday.

BHP investor Equity Trustees Asset Management told the Sydney Morning Herald that BHP's bid to buy Anglo American made sense strategically, "but much will depend on what BHP will eventually pay." 

"Having a bit more copper in the portfolio is a positive. If copper can move up from here this will likely offset any errors made in its purchase price of Anglo," Equity Trustees head of equities Chris Haynes said.

Haynes added, "As we know, large acquisitions like this always have problems and will likely weigh on the BHP stock price in the short term."

Shares in BHP fell on Friday, ending the Australian session at 4.6% lower.

Meanwhile, copper prices hit $10,000 a ton for the first time in two years, fueled by speculation of dwindling supplies and robust demand from the green energy transition. 

Copper bulls like BlackRock and Trafigura Group have said the base metal must move higher to spur new mine development. 

BofA recently warned, "The copper supply crisis is here." 

Let's not forget our note titled "The Next AI Trade," which explains the investment opportunities in upgrading America's grid as generative AI data centers increase power demand. 

And Jefferies is on it: "Copper Demand in Data Centers." 

Recall billionaire mining investor Robert Friedland, who explained last year on Bloomberg TV that "copper prices might explode ten times." 

Tyler Durden Fri, 04/26/2024 - 09:35

Watch: Drag Queen Makes Tiny Kids Chant "Free Palestine"

Watch: Drag Queen Makes Tiny Kids Chant "Free Palestine"

Authored by Steve Watson via Modernity.news,

Video has emerged of a drag queen leading children barely older than toddler age in chanting “Free Palestine” during a so called “Queer Storytime for Palestine” event in Massachusetts.

The event, featuring a drag queen going by the name of ‘Lil Miss Hot Mess’, took place earlier this month at the Northampton Center for the Arts.

The event was advertised by the organisers as “dancing, celebrating Palestine culture, learning about queer heroes and doing arts and crafts.”

According to the hosts, Valley Families for Palestine, profits from the event were donated to alQaws, a Palestinian organisation that is “working for queer liberation.”

Video captured at the event shows ‘Hot Mess’ reading her book titled “If You’re a Drag Queen and You Know It,” and ordering the kids “If you’re a drag queen and you know it shout ‘Free Palestine.'”

First off, gay people are at best severely disrespected, and at worst murdered in Gaza and other Palestinian areas. In terms of how gay-friendly it is, The LGBT Equality Index ranks Palestine as 192 out of 197 countries. Syria, Somalia and Yemen are ranked as more open to homosexuality.

It’s safe to say that a drag queen encouraging American kindergarteners to say ‘free Palestine’ is not really going to shift the needle as far as that situation is concerned.

Secondly, these children are clearly being subjected to a double dose of ideological and political indoctrination.

What’s next? Queer Palestine vaccine furry Ukraine drag queen story time?

Who in their right minds are taking their kids to this kind of thing? What do they expect will come of it?

*  *  *

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Tyler Durden Fri, 04/26/2024 - 09:15

Ukrainian Drone Strikes Target Russian Oil Refineries Again Despite White House Pleas

Ukrainian Drone Strikes Target Russian Oil Refineries Again Despite White House Pleas

Just days after the Biden administration signed a new military aid package worth billions of dollars to Ukraine, Kyiv launched a series of suicide drone attacks on Russian oil refineries. Biden's top officials have pleaded with Kyiv to stop attacks on Russia's energy infrastructure because of the fears that turmoil in crude markets would send pump prices in the US higher ahead of the presidential elections in November. 

"Our region is again under attack by Ukrainian UAVs," Smolensk Governor Vasily Anokhin wrote in a post on Telegram on Wednesday. Kamikaze drones damaged oil facilities in western Russia. 

Another drone attack hit the Lipetsk region further south, which is home to steel production plants and pharmaceutical sites, Governor Igor Artamonov said.

"The Kyiv criminal regime tried to hit infrastructure in Lipetsk industrial zone," Artamonov said. 

The Moscow Times pointed out:

A source in the Ukrainian defense sector confirmed to AFP on Wednesday that drones in the service of the Security Service of Ukraine (SBU) had carried out the attacks.

The source made no mention of the attack on Lipetsk but claimed two oil depots were destroyed in the Smolensk region.

"Rosneft lost two storage and pumping bases for fuels and lubricants in the towns of Yartsevo and Rozdorovo," the source said, referring to the Russian state-controlled energy giant.

The Financial Times, citing unnamed US officials, recently said long-range drones have hit at least 20 energy facilities deep within Russia so far this year. Kyiv's drone attacks on Russia's energy complex have been frightening for the Biden administration, as Brent prices have risen to the $90/bbl level on higher war risk premiums. Higher energy costs feed into inflation as stagflation concerns mount in the US. Also, gasoline pump prices in the US are inching closer to the politically sensitive $4 level. 

According to AAA data, the average cost of gas at the pump across the US was $3.66 as of Thursday, up from $3.10 in mid-January. 

"The recent uptick in US consumer price inflation, driven by services, housing and fuel, is already of concern to the Biden administration, which is hoping to secure a second term in the November election," Markus Korhonen, senior associate at geopolitical risk consultancy S-RM, told Newsweek.

In recent weeks, Brent prices jumped to the $90bbl to $92bbl range on a higher war risk premium as Israel and Iran volleyed missiles and drones at each other. Prices sank to as low as the $85bbl handle as the market saw the Middle East conflict was just theatrics. However, prices have increased from $85bbl earlier this week, to $89.50 on Friday morning - perhaps on new fears of tighter Russia supplies. 

The latest Bloomberg data shows Russian seaborne crude exports hit a multi-month high in the four weeks to April 21. Refineries in the country have struggled to be repaired from the series of drone attacks as oil processing sinks to lows last seen in May 2023 when floods forced the Orsk refinery offline. 

So far, Ukraine has only attacked oil-processing facilities deep within Russia, avoiding crude and crude product export ports. 

"Should Ukraine begin also targeting crude oil facilities, this could threaten Russia's overall production and exports and, more meaningfully, global oil prices would tick up, driving up inflation and cost-of-living pressures in the US and elsewhere," said Korhonen, adding, "It would also raise the prospects of Russia retaliating, for example, targeting energy infrastructure that the West relies on."

The ultimate goal of Ukraine's drone attacks is to reduce Moscow's oil revenues that finance the war. This means that Russia's crude export ports will be targeted at some point. And we're 100% sure the Biden administration is terrified about this ahead of the elections. 

If that happens, "it would not only bring up the price of oil, it would put a lot of pressure on inflation because of the impact on prices," said O'Donnell.

The question becomes when does Kyiv begin hitting Russia's crude export terminals. 

Tyler Durden Fri, 04/26/2024 - 08:55

Fed's Favorite Inflation Indicator Prints Hotter-Than-Expected As Savings Rate Plunges

Fed's Favorite Inflation Indicator Prints Hotter-Than-Expected As Savings Rate Plunges

With inflation data surprising to the upside recently...

Source: Bloomberg

...the doves' last chance for sooner than later rate-cuts is today's Core PCE Deflator - often described as The Fed's favorite inflation signal. Last month saw an uptick in the headline deflator and following yesterday's core PCE rise for Q1, all eyes are on the March data released this morning.

However, both the headline and core PCE Deflator data printed hotter than expected (+2.7% vs +2.6% exp vs +2.5% prior and +2.8% vs +2.7% exp vs +2.8% prior respectively)...

Source: Bloomberg

The silver lining is that this hot PCE print is 'dovish' relative to the GDP-based data we saw yesterday, with whisper numbers of +0.4 to +0.5% MoM (vs the +0.3% print).

But still - it's not good for the doves.

As WSJ Fed Whisperer Nick Timiraos notes, the 3-Month annualized core PCE jumped to 4.4%...

The Service sector led the MoM and YoY acceleration in headline PCE...

Source: Bloomberg

And for Core PCE, it was Services prices too that drove the acceleration...

Source: Bloomberg

The so-called SuperCore - Services inflation ex-Shelter - rose once again, and was revised higher...

Source: Bloomberg

Stripping it back even further, Transportation Services and 'Other Services' were the biggest gainers in SuperCore...

Source: Bloomberg

Income and Spending both rose again on a MoM basis with spending outpacing income (again). The 0.8% MoM rise in spending was the highest since Jan 2023...

Source: Bloomberg

Spending is accelerating fast relative to incomes (on a YoY basis) - and remember this is all nominal...

Source: Bloomberg

On the income side, government and private wage growth accelerated:

  • Govt wages rose to 8.5% YoY, from 8.3%, the highest Dec 22

  • Private wages rose to 5.5% YoY, from 5.4%, highest since Dec 22 as well

Source: Bloomberg

Which meant the personal savings rate plunged to 3.2% from 3.6% - its lowest since Nov 2022...

 

And the soaring credit card balance explains how people are getting by...

Source: Bloomberg

And all this amid the fourth straight month of government handouts...

Source: Bloomberg

Finally, while the markets are exuberant at the survey-based disinflation, we do note that it's not all sunshine and unicorns. The vast majority of the reduction in inflation has been 'cyclical'...

Source: Bloomberg

Acyclical Core PCE inflation remains extremely high, although it has fallen from its highs.

Is The (apolitical) Fed going to be able to cut at all this year like Joe Biden said they would?

Tyler Durden Fri, 04/26/2024 - 08:39

China Is Pivotal For US Inflation's Path

China Is Pivotal For US Inflation's Path

Authored by Simon White, Bloomberg macro strategist,

A more forthright response from China to its deflationary predicament would further support US inflation that is already proving sticky, adding to longer-term upwards pressure on term premium and thus yields.

There are upside risks to the US PCE release today after the higher-than-expected core-PCE price index released on Thursday.

Inflation is more stubborn than most expected.

That’s proven to be the case even without China so far managing to engineer robust recovery.

The San Francisco Fed separates out core PCE to a cyclical and an acyclical component, with the first being those inputs to PCE most correlated to Fed policy and acyclical is anything left over.

Most of the fall in core inflation has been driven by the acyclical component, while the cyclical has only fallen marginally, inferring that much of the disinflation was not directly down to Fed policy.

The acyclical component, though, is highly correlated to China PPI, i.e. China is a big driver of global inflation pressures. If the country had had stronger recovery, it is likely the US (and other countries) would be contending with a larger inflation problem than they currently have.

That’s why China’s next move is so important. Falling bond yields, in contrast to rising ones in almost every other country, signal the economy is nearing a crunch point. Typically, China has responded with much broader stimulus - reflected in rising M1 growth - when yields have seen such a fall.

If it responds similarly again, inflation pressures in the US will receive an unwelcome boost even as it is already dealing with price growth that is becoming embedded.

Tyler Durden Fri, 04/26/2024 - 08:25

Futures Jump As Tech Giants Soar, Yen Plummets After BOJ Refuses To Prop Up Crashing Currency

Futures Jump As Tech Giants Soar, Yen Plummets After BOJ Refuses To Prop Up Crashing Currency

In a rollercoaster 48 hours to close the week, yesterday's early market slump (after the disappointing Meta guidance) has been fully reversed and stock futures are now pointing sharply higher after blockbuster earnings from Microsoft and Alphabet with attention now turning to the release of US personal consumption data - the Fed’s preferred measure of inflation, where a hotter-than-expected reading after Thursday’s weaker GDP figures may signal US rates will remain higher for longer. As of 7:40am, S&P futures are 0.7% higher while Nasdaq futures gain 1.1%. The positive sentiment carried into European trading, with tech stocks leading equity gains, with miners outperforming as copper hit $10,000 a ton for the first time in two years. Traders are also speculating as to whether Japan will intervene to support the Yen after the currency slid to a 34-year low before rebounding after the central bank kept rates on hold and Ueda said nothing to prop up the currency in what Deutsche Bank has called a policy of "benign neglect." Later in the day, attention will shift. Elsewhere, the USD is higher and bond yields are slightly lower. In commodities, oil and precious metals are higher; base metals and Ags are mixed. Today, key focus will be the March PCE release at 8.30am ET, where consensus expects headline PCE and core PCE to both rise +0.3% MoM.

In premarket trading, Google parent Alphabet surged as much as 12%, poised to add more than $230 billion to its market capitalization and exceed $2 trillion in valuation. Microsoft rose 4% after the software giant reported third-quarter results that beat expectations, a sign that AI is fueling growth and demand. The companies trounced Wall Street estimates with their latest quarterly results, fueled in part by demand for AI services.  In other earnings-related moves, Exxon fell 1.2% after missing EPS but smashing revenue estimates, while Intel slumped more than 7% after providing weaker-than-anticipated guidance. Here are some other notable movers:

  • Atlassian shares slide 5.3% after the application software company said co-founder Scott Farquhar is stepping down as co-CEO after 23 years.
  • Boyd Gaming shares fall 14% after the regional casino operator reported adjusted earnings per share for the first quarter that missed the average analyst estimate.
  • Chinese stocks listed in the US rise, reflecting a rally in Hong Kong as Asian big tech names get a boost following robust earnings from Alphabet and Microsoft. Alibaba +2.0%, Baidu +2.6%, PDD Holdings +2.5%, JD.com +5.0%, NetEase +1.7%, Trip.com +3.1%, KE Holdings +3.3%, Bilibili +5.4%
  • Cloud software stocks rise following better-than-expected sales in Microsoft and Google’s cloud divisions. Datadog +4.9%, Snowflake +3.5%, MongoDB +3.8%, Cloudflare +2.3%
  • Enphase Energy (ENPH US) shares rise 2.9% as Barclays upgrades its recommendation to overweight from equal-weight, saying the solar-equipment manufacturer is nearing an inflection point.
  • Intel shares drop 7.3% after the chipmaker’s second-quarter outlook was weaker than anticipated, underlining the difficulties the company has had in executing a turnaround.
  • KLA Corp shares rise TKTK after the semiconductor equipment supplier’s third-quarter earnings beat estimates and outlook for the fourth quarter was strong, prompting analysts to raise their price targets.
  • Marathon Digital shares rise 3.3% after the company increases year-end hash rate target to 50 EH/s from 35-37 EH/s.
  • Mobileye shares fall 3.0% after a downgrade to underweight at Morgan Stanley in the wake of the company’s results.
  • Roku shares fall 4.8% as the streaming-video platform company said it expects adjusted Ebitda to moderate in the second half of the year, after reporting first-quarter results that beat expectations.
  • Snap shares surge 24% after the social-media company reported first-quarter results that beat expectations and gave an outlook that is stronger than forecast, helping to ease concerns about its growth.
  • T-Mobile shares waver after the carrier’s results received a mixed reception from analysts, who said that the earnings were overall solid, but were disappointed that the company didn’t raise its guidance for postpaid phone subscribers as it looks raise prices.
  • Teladoc Health shares drop 4.4% after a second-quarter forecast missed estimates. The healthcare services company also reported a first-quarter gross margin that fell short of expectations.

While earnings remain center stage, the focus Friday will also be on US data, with the Fed's preferred measure of inflation of particular interest. Treasury yields dipped following yesterday’s bond-market losses when stagflationary GDP data pushed back expectations for policy easing. A gauge of the dollar was steady.

“We have a precarious situation where the earnings of a few big companies are driving sentiment on the entire market,” said Justin Onuekwusi, chief investment officer St James Place Management. “We have seen a bit of volatility driven by earnings as well as rate decreases being priced out and that’s likely to continue.”

Almost 80% of S&P 500 firms that have reported so far have beaten analysts’ earnings estimates, according to JPMorgan strategists. Still, stock price reactions have been underwhelming, with better-than-expected results seeing below average upside, while those missing estimates are being penalized by more than usual, the strategists wrote. More than 50% of S&P 500 companies have yet to report.

A big highliight of the overnight session was the latest collapse in the Japanese yen which fell to a fresh cycle low near 157 versus the dollar after the Bank of Japan stood pat on interest rates and Governor Ueda did little to push back against recent weakness in the press conference. The yen’s slump to a record low versus the dollar has left traders on guard for any hints of intervention from Japan. The yen swung sharply from the day’s low to near its high amid jittery trading in the wake of the Bank of Japan’s decision to keep monetary policy unchanged.

“Should the yen fall further from here, like after the BOJ decision in September 2022, the possibility of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp. “It is not the level but it’s the speed that will trigger the action.”


European stocks rose along with US equity futures: the Stoxx 600 is up 0.6%, with technology and construction sectors leading gains, while chemicals and insurance subgroups are the biggest losers. Thyssenkrupp shares jumped after Czech billionaire Daniel Kretinsky’s EP Corporate Group agreed to buy a fifth of the German manufacturer’s troubled steel unit. Miners outperformed as copper hit $10,000 a ton for the first time in two years. Here are the biggest movers Friday:

  • Saint-Gobain shares gain as much as 6.3% after the French building-materials producer reported first-quarter sales that were slightly above expectations, according to Oddo. Separately, management is seeing signs of bottoming out for new build markets in Europe
  • NatWest rises as much as 5.2% after net interest income and pretax operating profit for the first quarter beat the average analyst estimate
  • Amundi soars 7%, most in two years, after the French asset manager reported net inflows for the first quarter that beat the average estimate. Citi analysts expect mid-single digit consensus upgrades. KBW called the results “solid.”
  • Electrolux shares gain as much as 7%, the most since December, after first-quarter figures from the Swedish maker of domestic appliances weren’t as bad as feared, with an operating loss of SEK720 million, versus an expected SEK809 million
  • Jeronimo Martins soars most in six months after Ebitda margin erosion in 1Q was smaller than analysts expected, showing that Portuguese retailer can withstand competition pressure in Poland as well as negative impact from slowing inflation
  • Airbus shares fall as much as 3% to the lowest since early March after its first-quarter results were significantly below estimates, even as the planemaker reiterated its full-year targets
  • IMCD’s shares sink as much as 10%, the most since March 2020, after the specialty chemicals and ingredients company reported first-quarter operating Ebita that missed estimates. ING says the story was “underlying quite weak.”
  • Hexagon shares fall as much as 4.4% after the software firm reported sales and operating profit that missed estimates, while saying that demand will remain mixed in the near term
  • ConvaTec Group shares decline as much as 7.2% after the medical equipment maker was downgraded to reduce by analysts at Peel Hunt, which has growing concerns about its wound care products in the US
  • Yara shares fall as much as 6.9%, the lowest intraday since May 2020, after the Norwegian agricultural chemicals firm reported adjusted Ebitda below estimates

Earlier in the session, Asian stocks rose, headed for their best week since November, as investors cheered upbeat earnings from technology firms and sentiment on China continued to improve. Japanese stocks rose as the Bank of Japan left interest rates unchanged. The MSCI Asia Pacific Index rose 0.8%, with TSMC and Tencent among the biggest boosts. The gauge extended its weekly gains to more than 3%. Stocks rose in mainland China and Hong Kong, with the Hang Seng China Enterprises Index poised for its best week since April 2015. Signs of an improving Chinese economy, better corporate earnings and Bejing’s support measures have spurred inflows from global funds.

  • Hang Seng and Shanghai Comp. were underpinned by strength in tech and property, while the constructive mood was also facilitated by a meeting between US Secretary of State Blinken and Chinese Foreign Minister Wang where it was stated that the US-China relationship has stabilised although negative factors are building.
  • ASX 200 underperformed after the prior day's losses caught up with the index on return from holiday.
  • Nikkei 225 was initially choppy and briefly dipped into negative territory as participants braced for the BoJ policy announcement and whether the central bank flags a reduction in bond buying, but then surged as the central bank kept policy settings unchanged and refrained from any major hawkish surprises.

In FX, the dollar was slightly lower, as all the action was in the Japanese yen which cratered to a fresh 34 year low near 157 versus the dollar after the Bank of Japan stood pat on interest rates and Governor Ueda did little to push back against recent weakness in the press conference. USD/JPY did swing sharply lower to sub-155 before swiftly rebounding in jittery trading amid heightened speculation that authorities may intervene in the market.

In rates, treasuries climbed, paring some of Thursday’s post-data drop. US yields are richer by up to 2bp across long-end of the curve with 5s30s spread around 8bp, tighter by around 1bp on the day; 10-year yields around 4.685%, down 1.5bp on the day with bunds outperforming by 1bp in the sector.

In commodities, oil prices advance, with WTI rising 0.4% to trade near $83.90 a barrel. Spot gold rises 0.7% to around $2,350/oz. Copper hit $10,000 a ton for the first time in two years.

Looking at today's calendar, the US session highlight is the March personal income/spending (8:30am); we algo get the April revised University of Michigan sentiment (10am) and April Kansas City Fed services activity (11am). Fed members are in self-imposed quiet period ahead of May 1 policy announcement

Market Snapshot

  • S&P 500 futures up 0.8% to 5,121.00
  • STOXX Europe 600 up 0.6% to 505.47
  • MXAP up 0.7% to 172.65
  • MXAPJ up 0.8% to 536.04
  • Nikkei up 0.8% to 37,934.76
  • Topix up 0.9% to 2,686.48
  • Hang Seng Index up 2.1% to 17,651.15
  • Shanghai Composite up 1.2% to 3,088.64
  • Sensex down 0.7% to 73,833.99
  • Australia S&P/ASX 200 down 1.4% to 7,575.91
  • Kospi up 1.1% to 2,656.33
  • German 10Y yield little changed at 2.60%
  • Euro up 0.2% to $1.0748
  • Brent Futures up 0.2% to $89.21/bbl
  • Brent Futures up 0.2% to $89.21/bbl
  • Gold spot up 0.6% to $2,347.56
  • US Dollar Index down 0.10% to 105.49

Top Overnight News

  • BOJ leaves rates unchanged, as expected, and retained its guidance from Mar about purchasing gov’t bonds (there had been some speculation of a taper or a hint of one). WSJ
  • Japan’s Tokyo CPI for April cools far more than anticipated, coming in +1.8% ex-food/energy vs. the Street +2.7% and down from +2.9% in March. BBG
  • China’s foreign minister says the relationship w/the US was starting to stabilize but that “negative factors” were increasing. NBC News
  • Eurozone inflation expectations over the next 12 months ticked down to 3% (from 3.1%), hitting the lowest level since Dec 2021. ECB
  • The ECB is likely to need extra interest rate cuts if global borrowing costs are pushed up by the US Federal Reserve maintaining its restrictive monetary policy stance, a top eurozone policymaker has said. Fabio Panetta, head of Italy’s central bank, said that if the Fed keeps rates on hold longer than markets expect, or even raises them, it would be “likely to reinforce the case for a rate cut [by the ECB] rather than weakening it”. FT
  • Donald Trump’s allies are quietly drafting proposals that would attempt to erode the Federal Reserve’s independence if the former president wins a second term, in the midst of a deepening divide among his advisers over how aggressively to challenge the central bank’s authority. WSJ
  • Walmart's CEO says inflation continues to cool: “At Walmart, we are now seeing prices that are in line with where they were 12 months ago. I haven’t been able to say that for a few years now. The last few weeks, we've taken even more prices down in areas like produce and meat and fresh food”. ABC News
  • Annualized US core PCE inflation accelerated to 4.5% over the last three months, but underlying trends are less alarming. The Q1 acceleration mostly reflected one-off surprises in acyclical categories where costs pass-through with long lags, and forward-looking indicators are at target-consistent levels. Progress therefore appears delayed but not reversed, and we forecast that core PCE inflation will slow to 2.2% on a sequential annualized basis in 2024Q2-Q4. GIR
  • Microsoft and Alphabet jumped premarket after stellar earnings and expectations for a surge in cloud revenue fueled by AI demand. Execs at both companies said they plan to spend more on AI. BBG

Earnings

  • Alphabet Inc (GOOGL) Q1 2024 (USD): EPS 1.89 (exp. 1.51), Revenue 80.54bln (exp. 78.59bln); board authorised Co. to repurchase up to an additional 70bln and declared a cash dividend of 0.20/shr. Shares +11.5% in pre-market trade
  • Microsoft Corp (MSFT) Q3 2024 (USD): EPS 2.94 (exp. 2.82), Revenue 61.86bln (exp. 60.8bln). Shares +4.1% in pre-market trade
  • Intel Corp (INTC) Q1 2024 (USD): Adj. EPS 0.18 (exp. 0.14), Revenue 12.70bln (exp. 12.78bln). Shares -7.5% in pre-market trade
  • Snap Inc (SNAP) Q1 2024 (USD): Adj. EPS 0.03 (exp. -0.05), Revenue 1.19bln (exp. 1.12bln). Shares +23.5% in pre-market trade
  • TotalEnergies (TTE FP) Q1 (USD): Adj. Net 5.11bln (exp. 5bln). Adj. EBITDA 11.5bln (exp. 11.1bln). Plans a USD 2bln share buyback Q2; Cash flow from operating activities 2.2bln (prev. 5.1bln Y/Y); Dividend +7% Y/Y
  • Airbus (AIR FP) Q1 24 (USD): Adj. EBIT 600mln (exp. 789mln), Revenue 12.80bln (exp. 12.87bln), Gross Orders 170 (prev. 156), Net Orders 170 (prev. 142), Deliveries 142. Reaffirms 2024 guidance.

A recap of overnight news courtesy of Newsquawk

APAC stocks were mostly higher as the region digested recent market themes including disappointing US data, strong big tech earnings and the BoJ policy announcement. ASX 200 underperformed after the prior day's losses caught up with the index on return from holiday. Nikkei 225 was initially choppy and briefly dipped into negative territory as participants braced for the BoJ policy announcement and whether the central bank flags a reduction in bond buying, but then surged as the central bank kept policy settings unchanged and refrained from any major hawkish surprises. Hang Seng and Shanghai Comp. were underpinned by strength in tech and property, while the constructive mood was also facilitated by a meeting between US Secretary of State Blinken and Chinese Foreign Minister Wang where it was stated that the US-China relationship has stabilised although negative factors are building.

Top Asian News

  • Chinese Foreign Minister Wang said in a meeting with US Secretary of State Blinken that the China-US relationship has stabilised but negative factors are building, while he added that sliding into conflict with the US would be a lose-lose situation that they ask the US not to interfere with China's internal affairs. Furthermore, Blinken said there is no substitute for face-to-face diplomacy and they need to avoid miscalculations, while he hopes the US and China can make progress on agreements, citing fentanyl, military-to-military ties and AI risks.
  • US is pushing allies in Europe and Asia to tighten restrictions on exports of chip-related technology and tools to China amid rising concerns about Huawei's development of advanced semiconductors, according to FT sources. US wants Japan, South Korea, and the Netherlands to use existing export controls more aggressively, including stopping engineers from their countries servicing chipmaking tools at fabs in China.
  • ByteDance reportedly prefers shutting down the app rather than a sale if it exhausts all legal options and the algorithms TikTok relies on are deemed core to ByteDance’s overall operations, making the sale of the app unlikely, according to Reuters sources.

European bourses, Stoxx 600 (+0.5%) are entirely in the green, though trade has been contained at session highs, as participants await March's US PCE at 13:30 BST. European sectors are almost entirely in the green, with the exception of Chemicals, following poor IMCD (-9.1%) results. Tech tops the pile, with optimism lifted following strong large-cap Tech earnings in the US. US Equity Futures (ES +0.7%, NQ +0.9%, RTY +0.1%) are entirely in the green, with the NQ outperforming, benefitting from significant pre-market strength in both Google (+11.1%) and Microsoft (+3.6%), after reporting strong earnings after-market.

Top European News

  • ECB's Panetta said they must weigh the risk of monetary policy becoming too tight, while he added that timely and small rate cuts would counter weak demand and could be paused. Furthermore, he stated that hesitations in adjusting rates would hurt investment and productivity, while large rate cuts could create a credibility issue.
  • ECB Consumer Inflation Expectations survey (Mar) - 12-months ahead 3.0% (prev. 3.1%); 3-year ahead 2.5% (prev. 2.5%). Economic growth expectations for the next 12 months 1.1% (prev. -1.1%)
  • SNB Chair Jordan said SNB has been successful in fight against inflation; uncertainty remains elevated and shocks can occur at and time

BOJ

  • BoJ kept its policy settings unchanged with the short-term interest rate target at 0.0%-0.1%, as expected, with the decision made unanimously, while it dropped the reference from the statement that it currently buys about JPY 6tln worth of JGBs per month but stated that it will conduct JGB, commercial paper and corporate bond buying in line with the decision in March. BoJ said it must be vigilant to FX and market moves and their impact on the economy and prices but noted no excessive behaviour is seen in Japan's asset market and financial institutions' practices. Furthermore, it stated that if trend inflation rises, the BoJ will likely adjust the degree of monetary easing but also added to expect accommodative monetary conditions to continue for the time being. In terms of the latest Outlook Report, Board Members' Real GDP median forecast for Fiscal 2024 was cut to 0.8% from 1.2% but the Fiscal 2025 median forecast was maintained at 1.0%, while the Core CPI Fiscal 2024 median forecast was raised to 2.8% from 2.4% and Fiscal 2025 median forecast was raised to 1.9% from 1.8%.
  • PRESS CONFERENCE: BoJ Governor Ueda said easy financial conditions will be maintained for the time being; Weak JPY so far is not having a big impact on trend inflation. Difficult to gauge timing of future rate hikes. Weak JPY so far is not having a big impact on trend inflation. Reduction in JGB buying in the future is in sight. Will not comment on FX moves

FX

  • USD is around flat, and holding within a 105.40-71 range. USD was initially being propped up by JPY softness post-BoJ, although that has abated somewhat, amid Yen intervention speculation.
  • JPY is the clear laggard across the majors following the BoJ policy announcement overnight, which provided no hawkish surprise. USD/JPY took another leg higher amid BoJ Ueda's press conference, before being slapped down to sub-155 levels, a few hours later. Some will likely view the move as intervention but we are yet to see any official confirmation of this.
  • EUR is flat vs. the USD and breached yesterday's 1.0740 best. If the pair ventures higher, 1.0756 from April 11th is the next potential target.
  • Antipodeans are firmer vs. the USD and outmuscling peers alongside the favourable risk environment. AUD/USD has gained a firmer footing above its 200 and 50DMAs at 0.6526 and 0.6532 respectively with focus now on a potential approach of 0.66
  • PBoC set USD/CNY mid-point at 7.1056 vs exp. 7.2449 (prev. 7.1058).

Fixed Income

  • USTs are a touch firmer after yesterday's data induced losses, which sent the Jun'24 UST to a contract low of 107.04. Today's trade has been contained within a 107.04-108.01 range, with all eyes on March's US PCE metrics later.
  • Bund price action has been following USTs and attempting to recoup recently lost ground which has been inspired this week by a combination of better data and speak from hawkish ECB members. Bunds are so far respecting yesterday's 129.53-130.38 range.
  • Gilts are firmer and in-fitting with global peers in an attempt to claw back recent losses. However, with a lack of UK-specific drivers, UK paper will likely remain at the whim of global peers.

Commodities

  • A relatively tame session thus far for the crude complex following Thursday's choppy trade, as participants await monthly US PCE metrics; Brent Jun'24 range between 89.08-69/bbl.
  • Precious metals are firmer amid the softer Dollar and ahead of the US PCE data, with spot silver narrowly leading vs spot gold. XAU topped yesterday's peak (USD 2,344.93/oz) to trade in a current intraday range between USD 2,326.36-2,352.30/oz.
  • Base metals are stronger across the board amid bullish momentum after copper crossed key levels, with the broader complex underpinned by the softer Dollar and broader risk appetite; 3M LME copper is posting gains of over USD 100/t at the time of writing after mounting the key USD 10,000/t mark to levels last seen in 2022.
  • India Oil Minister said cartel of oil producers are responsible for current volatility in the market; oil producers are cutting down and holding back production, according to ETNow.

Geopolitics: Middle East

  • "US Secretary of State Blinken to visit Israel on Tuesday", according to Sky News Arabia
  • Hezbollah said it shelled an Israeli force with artillery at the site of Al-Malikiyah and achieved a direct hit, according to Al Jazeera.

Geopolitics: Other

  • US official said the US could announce as soon as Friday USD 6bln in new weapon purchases for Ukraine.
  • North Korean leader Kim supervised the test-firing of multiple launch rockets, according to KCNA.
  • China's Defence Ministry said Chinese and French militaries established a dialogue mechanism for cooperation between theatre commands, according to Reuters.

US Event Calendar

  • 08:30: March PCE Deflator MoM, est. 0.3%, prior 0.3%
    • March PCE Core Deflator MoM, est. 0.3%, prior 0.3%
    • March PCE Deflator YoY, est. 2.6%, prior 2.5%
    • March PCE Core Deflator YoY, est. 2.7%, prior 2.8%
  • 08:30: March Personal Income, est. 0.5%, prior 0.3%
    • March Personal Spending, est. 0.6%, prior 0.8%
    • March Real Personal Spending, est. 0.3%, prior 0.4%
  • 10:00: April U. of Mich. Sentiment, est. 77.9, prior 77.9
    • April U. of Mich. Current Conditions, prior 79.3
    • April U. of Mich. Expectations, prior 77.0
    • April U. of Mich. 1 Yr Inflation, prior 3.1%
    • April U. of Mich. 5-10 Yr Inflation, est. 3.0%, prior 3.0%
  • 11:00: April Kansas City Fed Services Activ, prior 7

DB's Jim Reid concludes the overnight wrap

It’s been a volatile 24 hours in markets, but in spite of a selloff yesterday, there’s increasing positivity this morning thanks to strong results from Microsoft and Alphabet after last night’s close. Both companies exceeded revenue and earnings expectations, with Alphabet seeing the larger beat on profitability, as their growth was boosted by demand for cloud computing and AI-related offerings. That’s seen Alphabet rise by over 11% in after-hours trading, while Microsoft is up more than -4%, having both been down in the main session yesterday. In turn, futures on the S&P 500 are currently up +0.81%, which is a significant turnaround from yesterday, as the index closed -0.46% lower, and that was only after recovering from initial losses that had pushed it down -1.60%.

That positivity has continued into Asian markets overnight, which comes as the Bank of Japan left their interest rates unchanged at their latest meeting. That’s seen the Japanese Yen weaken further, and it’s currently trading at 156.11 per dollar, which is its weakest level since 1990. Front-end government bond yields have also fallen overnight in Japan, with the 2yr yield down -0.7bps to 0.29%. And for equities, all the major indices have risen, including the Nikkei (+0.74%), the KOSPI (+1.10%), the Hang Seng (+1.98%), the CSI 300 (+1.03%) and the Shanghai Comp (+0.79%).

Before that overnight reversal, markets had struggled yesterday, as challenging data and poor earnings led to a notable selloff. That meant investors pushed back the timing of rate cuts yet again, and the 2yr Treasury yield (+7.1bps) closed at 4.998%, so almost at 5% for the first time since mid-November. That was mainly driven by the Q1 US GDP release, which had the unfortunate combination of a downside surprise on growth, and an upside surprise on inflation. As we found out in 2022, that stagflationary mix can potentially be a bad recipe for markets, so it wasn’t a surprise to see equities and bonds lose ground simultaneously even if equities have since been busy making up their initial losses.

In terms of the details, growth came in at an annualised rate of +1.6% (vs. +2.5% expected), which is the slowest growth since Q2 2022. But more alarmingly for markets, core PCE surprised on the upside, with an annualised rate of +3.7% in Q1 (vs. +3.4% expected). Headline PCE was also strong, at +3.4% in Q1, and core services ex housing (a measure Fed Chair Powell has cited in the past) was at +5.1%. So whichever way you crunch the numbers, this clearly isn’t the sort of inflation momentum where the Fed could be comfortable cutting rates. We’ll get the monthly US PCE numbers for March today within the spending report as well. If you’re looking for positives on growth, final private domestic sales came in at 3.1%, with the slowing in headline GDP growth coming from net exports, inventories and government spending. So domestic demand still holding up well. However you could argue that just ties in with the strong inflation component.

Unsurprisingly, that release meant markets dialled back the odds of rate cuts anytime soon. For instance, the chance of a rate cut by the July meeting fell from 50% the previous day to 34% afterwards. And for the year as a whole, futures are now pricing in just 34bps of cuts by the December meeting, down from 43bps the previous day and 67bps at the start of the month. So futures are now pricing the most hawkish profile we’ve seen to date in this hiking cycle, at least in terms of where rates are set to be by the end of 2024. Indeed for the first time, the first 25bp cut isn’t fully priced in until the December 2024 meeting.

With investors pricing out rate cuts, US Treasuries slumped and yields hit their highest levels of 2024 so far. In particular, the 2yr Treasury yield (+7.1bps) saw a closing value of 4.998%, having reached 5.02% intra-day. And similarly, the 10yr yield was up +6.2bps to 4.70%, although this morning it’s since come down -1.0bps to 4.69%. Bear in mind that just after Christmas, the 10yr yield hit an intraday low of 3.78%, so it’s moved up by almost 100bps from that point now. At the same time, there was a decent spike in real yields, with the 10yr real yield (+4.4bps) reaching a post-November high of 2.28%.

That trend was echoed in Europe, where investors lowered their expectations for ECB rate cuts this year, and now see just 68bps of cuts by December’s meeting, down -5.5bps on the day. As in the US, that meant 10yr yields hit new YTD highs, with those on 10yr bunds (+4.1bps) up to 2.63%, 10yr OATs (+3.7bps) up to 3.13%, and 10yr gilts (+2.8bps) up to 4.36%. For now at least, a June rate cut from the ECB is still seen as an 84% probability, but from Monday we’ll start to get the flash CPI prints for April, so it’ll be interesting to see if that changes anything.

For equities, this backdrop meant it was a tough day across the board even if the recovery was steady as the US session progressed. All the major indices fell, including the S&P 500 (-0.46%), the NASDAQ (-0.64%) and the Dow Jones (-0.98%). Rebounds by Nvidia (+3.71%) and Tesla (+4.97%) helped limit and reverse the earlier larger losses. But Meta (-10.56%) was the worst performer in the entire S&P 500 following its earnings release the previous day, meaning that the Magnificent 7 (-1.19%) underperformed despite the gains for Nvidia and Tesla. IBM (-8.25%) lost significant ground after its release the previous evening as well.

Over in Europe, the STOXX 600 (-0.64%) also saw a decent decline, although the FTSE 100 (+0.48%) was again an exception as it hit another record high, aided by a surge in Anglo American (+16.10%), which was the index’s best performer after BHP proposed a takeover. The proposed deal would bring together two of the world’s largest mining companies and create a clear number one globally. Our mining team think the deal rationale is about global scale and growth in copper, a structurally tight commodity which is key to future global electrification. Copper prices have risen by +17.6% so far this year, and overnight they’re trading at their highest level since April 2022. The mining team’s note (link here) runs through the deal terms and other talking points.

Looking at yesterday’s other data, the US weekly initial jobless claims fell to 207k in the week ending April 20 (vs. 215k expected), which is their lowest level in a couple of months. Otherwise, pending home sales grew by +3.4% in March (vs. +0.4% expected), reaching a 13-month high.

To the day ahead now, and data releases include US PCE inflation for March, along with personal income and personal spending. In addition, there the University of Michigan’s final consumer sentiment index for April, and in the Euro Area, we’ll get the M3 money supply for March. Finally, earnings releases include Exxon Mobil and Chevron.

Tyler Durden Fri, 04/26/2024 - 08:18

"Our Enemy, The Fed"

"Our Enemy, The Fed"

Authored by George Ford Smith via The Mises Institute,

The first thing to know about Dr. Thomas E. Woods, Jr.’s’ book Our Enemy, the Fed is he’s giving it away. Click the link, get your copy and read the whole book. Clearly, such intellectual charity is not only rare but in the educational spirit of Mises.org. The subject matter is light-heavy but Woods, author of the bestseller Meltdown (reviewed here), navigates it with the smooth skill of a master, making the reader experience satisfying from beginning to end.

The title reflects another insight, paralleling as it does Albert Jay Nock’s Our Enemy, the State. Most of us were raised to believe government and its agencies serve our best interests. As libertarian scholarship has shown the truth is the exact opposite, particularly with government’s sleazy relationship with money and banking.

Admittedly, it’s a hard idea to accept since it involves a pernicious breach of trust, but Woods makes it abundantly clear. To our overlords we are easily-duped chattel.

Until Ron Paul decided to run for president and his End the Fed came along in 2009, the general public was mostly blind to the Fed’s existence. Austrians aside, the few who knew something about it — mostly university-trained economists on the take from the Fed — considered it a vital part of an advanced industrial economy. Yet the Fed had been around for 96 years when Dr. Paul’s book emerged. Given that it’s in charge of the money we use how did it remain in the shadows for tax-burdened citizens for nearly a century? What’s up with that?

The Federal Reserve Bank of St. Louis tells us the Fed’s congressional assignment is “to promote maximum employment and price stability.” (Bold in original) For these it talks about interest rates, and its aim is to increase the money supply so that prices rise gently at or around a 2 percent rate. 

How gentle is a two percent rate? After 10 years of two percent monetary inflation, it would take $121.90 to buy what $100 bought in year one. But that’s over a decade, and you might not notice it unless you’re one of the hungry poor not on welfare. The Fed’s inflation of the money supply has been ongoing since it began operations in 1914, draining 96 percent of the dollar’s purchasing power.

On what planet is a 96 percent devaluation considered stability? Its real purpose is to inflate then assure us it makes good sense. Never mind the boom - bust cycle it creates along with the debauchery of our currency. We’re being gaslighted. Where did all the newly-created money go? 

Dr. Paul, who had a long career in Congress whose confrontations with Fed Chairmen Alan Greenspan and Ben Bernanke have become legendary in libertarian circles, tells us:

Law permits this highly secretive, private bank to create credit at will and distribute it as it sees fit.

The chairman of the Federal Reserve can blatantly inject in a public hearing that he has no intention of revealing where the newly created credit goes and who benefits. When asked, he essentially answered, “It’s none of your business,” saying that it would be “counterproductive” to do so. [My italics]

The picture I get is of people in a hideout somewhere — in this case, the FOMC meeting in the Eccles building in Washington, D.C. — cranking out money then injecting it into the economy in some mysterious manner, while telling us in Keynesian doublespeak their operations keep us safe and prosperous.

Is it really hard to fathom that those in charge might be up to no good?

Woods comes out swinging

After defining the Federal Reserve System — the Fed — as the American central bank enjoying “a government-granted monopoly on the creation of legal-tender money,” Woods proceeds to evaluate the Fed from a broad or macro perspective. 

What exactly did the Fed fix? Christina Romer who served under Obama as Chair of his Council of Economic Advisors found that “recessions were in fact not more frequent in the pre-Fed than the post-Fed period.” Even comparing the periods of 1796-1915 to post-WW II — thus omitting the Great Depression of 1930-1945 — “economist Joseph Davis finds no appreciable difference between the length and duration of recessions as compared to the period of the Fed.”

Woods takes us back through American history to see how banking and credit developed. Government, which has no money of its own, befriends ones that have it. During the period between the expiration of the first Bank of the US and the creation of the Second Bank of the US — 1811-1817 — the government granted banks the privilege of expanding credit unsecured by deposits while allowing them to tell depositors attempting to withdraw their money to “come back in a couple of years.” While banks could be charged with legal counterfeiting and embezzlement, Woods does not use the terms. In fact, nowhere in the book does he use the words “counterfeit” or “embezzle.”

When the Second Bank of the US started inflating in 1817 it created the Panic of 1819. He writes:

The lesson of that sorry episode — namely, that the economy gets taken on a wild and unhealthy ride when the money supply is dramatically and artificially increased and then suddenly reduced — was so obvious that even the political class managed to figure it out.

Many inflationists before the panic became hard-money believers after. Condy Raguet and Daniel Raymond, a disciple of Alexander Hamilton, became hard-money advocates and wrote books on economics. John Quincy Adams cited the hard-money Bank of Amsterdam “as a a model to emulate.”

But the inflationists persisted and pushed for more government intervention, and Unit banking in particular:

In the nineteenth century, nearly all American states instituted a regulation known as unit banking, which limited all banks to a single office. No branch banking was allowed, whether intrastate or interstate. The obvious result was a very fragile and undiversified banking system in which banks could be brought to ruin if local conditions turned sour.

Fractional-reserve banking is a major cause of bank panics. But the US went further. Other countries did not “cripple their banking systems” with unit banking laws. Canada, in particular, had no unit banking laws and no banking panics. The Bank of Canada did not emerge until 1934:

As Milton Friedman was fond of pointing out, although the Great Depression claimed over 9,000 American banks, the number of banks that failed in Canada at that time was zero. American bank panics, it turns out, were in large part the result of government intervention — in the form of unit banking — in the first place.

Yet it was the market and the imposed pseudo-gold standard that took the blame, and Americans got Hoover’s meddling then FDR’s New Deal.

Later in the book Woods mentions the hands-off approach to the depression of 1920-1921, “which saw unemployment shoot up to 12.4 percent and production decline by 17 percent. Wholesale prices fell by 56 percent.” And the Fed kept its printing press quiet. According to the National Bureau of Economic Research the depression was over by the summer of 1921.

Falling prices are bad?

One of the strongest parts of Woods’ book is his treatment of deflation — falling prices. It is only in the inflationary world of larcenous economics that falling prices are the “It” to be avoided.

A few of the points he makes:

  • Increasing the money supply to support increased production is a fallacy. “Any supply of money can facilitate any number of transactions.”

  • The money supply under a hard money system grows “relatively slowly, and the supply of other goods and services increases more rapidly. With these goods and services more abundant with respect to money, their prices fall.”

  • The claim that people would stop buying things if they knew prices would fall ignores the fact that people “value goods in the present more highly than they do the same goods in the future. This factor offsets the desire to wait indefinitely for a lower price.”

  • If deflation is anticipated entrepreneurs and the firms they deal with would adjust their bids accordingly.

  • With the increase in money’s purchasing power people could save simply by hoarding.

  • Who’s hurt the most by deflation? The power centers in society — government and Wall Street. We hear hysteria over deflation because it hurts the establishment the most, “and only the mildest concern about inflation, which hurts everyone else.”

Conclusion

Tom Woods has published another gem and is giving it away. The war we’re fighting now depends for its outcome on sound information and, as always, personal integrity. Never forget, the Fed must go. His book provides much of the intellectual ammunition needed to neutralize the enemy and avoid repeating the mistakes that brought us this mess in the first place.

Tyler Durden Fri, 04/26/2024 - 07:20

UK Defense Chief Says Ukraine To Increase Long-Range Strikes In Russia

UK Defense Chief Says Ukraine To Increase Long-Range Strikes In Russia

Just as President Biden was signing into effect the newly approved foreign defense package which includes $60 billion for Ukraine, the United Kingdom also rolled out its own massive aid package (though paling in comparison), first unveiled Tuesday.

Britain announced its single largest aid package for Ukraine yet, at the equivalent of $620 million (£500 million). According to UK NATO officials, the arms include Storm Shadow missiles among a total of 1,600 strike and air defense missiles, four million rounds of ammo, 60 boats, and over 400 vehicles.

Even though the White House is busy cautioning that in the coming months Russia is likely to make more gains on the front lines, according to fresh words of Jake Sullivan, British leadership is still talking about "winning".

Head of the UK military, Admiral Sir Tony Radakin, Via The Telegram

Defense Minister Grant Shapps, for example, had this to say about new aid: "This record package of military aid will give President Zelensky and his brave nation more of the kit they need to kick Putin out and restore peace and stability in Europe."

"The UK was the first to provide NLAW missiles, the first to give modern tanks, and the first to send long-range missiles," he added. "Now, we are going even further. We will never let the world forget the existential battle Ukraine is fighting, and with our enduring support, they will win."

Britain's military leadership is also echoing this optimism, with UK defense chief, Admiral Sir Tony Radakin, telling Financial Times that the West's new infusion of military aid will help Ukraine increase its long-range strikes on Russian territory:

Ukraine is set to increase long-range attacks inside Russia as an influx of western military aid aims to help Kyiv shape the war “in much stronger ways”, the head of the UK military has said.

Admiral Sir Tony Radakin acknowledged the downbeat mood surrounding Ukraine’s defence in an interview with the Financial Times, admitting the country was facing a “difficult” fight to repel advancing Russian forces.

But Britain’s chief of defence, a key figure in the west’s military support for Kyiv, stressed that such a gloomy “snapshot” of the war failed to recognise longer trends more in Kyiv’s favour.

Adm. Radakin continued, "As Ukraine gains more capabilities for the long-range fight . . . its ability to continue deep operations will [increasingly] become a feature" of the war. He emphasized of new weapons systems, "they definitely have an effect."

UK leadership has of late put the country's defense industry on a "war footing" in preparation to support Kiev for the long haul. More of Radakin's words point to escalation (and not negotiations) in the following...

"Don’t expect anyone to say publicly ‘this is the plan’ and A, B and C are now going to happen," he told FT. Some aspect of Ukraine's strategy and operations "will be hidden . . . some will be dictated by a tactical or operational advantage, and some also depends on more foundational aspects," he added.

Nowhere in the UK defense chief's interview was acknowledgement that these policies could lead to runaway escalation, and an eventual direct confrontation between nuclear-armed powers. The Kremlin has in response vowed that it will take more territory in Ukraine in order to counteract the longer range of NATO missiles.

Tyler Durden Fri, 04/26/2024 - 06:55

Polish President Admits That Major Infrastructure Project Has Dual Military Purposes

Polish President Admits That Major Infrastructure Project Has Dual Military Purposes

Authored by Andrew Korybko via Substack,

Polish President Andrzej Duda revealed in an interview that the Central Communication Port (CPK by its Polish abbreviation) transportation megaproject outside of Warsaw has dual military purposes.

He represents Poland’s prior conservative-nationalist government but remains in office despite the liberal-globalist opposition’s victory at the polls last fall since his term doesn’t expire till next year.

Duda’s latest claim makes Prime Minister Donald Tusk’s decision to pause and audit the CPK even more scandalous.

It was analyzed here at the time that he was economically subordinating Poland to Germany after having already done so on the political and military fronts, which lent credence to conservative-nationalist chieftain Jaroslaw Kaczynski’s warning late last year that Tusk is actually a “German agent”. Tusk then subordinated his country to its neighbor on the educational, judicial, and diplomatic fronts, all of which is being done on the pretext of implementing various “reforms”.

The end result is that Poland now plays an indispensable role in Germany’s “Fortress Europe” that was elaborated upon here, but Duda’s unexpected revelation about the CPK’s dual military purpose might reverse some of the tempo by putting grassroots and external pressure on Tusk to approve the CPK. Most Poles are in favor of this transport megaproject according to the latest polls that Duda’s interlocutor cited, while the US has an interest in using Poland as an anti-Russian military launchpad.

Here's exactly what Duda said according to Google Translate:

“It is no secret to anyone, and I emphasize this: If a situation of potential danger for Poland were to occur, and the relocation of additional allied forces to Poland would be necessary to defend our territory, we do not currently have an airport that would be able to provide such support for the West to quickly come to Poland.”

This reminder is meant to imply that Tusk is harming NATO’s contingency plans for partisan reasons.

It’s also a dog whistle harkening back to what the former conservative-nationalist government’s Defense Minister claimed about his liberal-globalist predecessors regarding Tusk’s defensive plans during his prior two terms in office. Mariusz Blaszczak alleged that Tusk’s government planned to withdraw west of the Vistula River in the political fantasy that Russia invaded Poland until NATO reinforcements arrived and claimed to have the classified documents to prove it too.

Tusk’s previous time in power was marked by the arguably German-advised Russian-Polish rapprochement that was meant to create a “Europe from Lisbon to Vladivostok” during the halcyon era of Russian-EU relations. Those hopes were obviously dashed as everyone now knows, after which Tusk’s conservative-nationalist successors never wasted an opportunity to speculate that his pragmatic policy at the time was due to secret Russian influence over his government.

Blaszczak’s allegation should be seen in that light just like Duda’s reminder should too. Their conservative-nationalist movement sought to exploit political Russophobia in Polish society ahead of the elections to remain in power, but even though that didn’t work, they haven’t learned their lesson and are now trying to employ it yet again in their attempt to return to power one day. That said, it’s indeed important for Poles to be aware of both facts, after which they can make up their own mind.

Revealing allegedly classified details about outdated Polish national defense policy is one thing, while raising awareness of how possibly canceling the country’s largest megaproject in recent memory could impact national security in theoretical contingencies (not to mention killing lots of jobs) is another.

The first disclosure didn’t succeed in reshaping popular perceptions of the liberal-globalists whereas the second stands a greater chance of success of doing so even though it’s too early to conclude that it will.  

Another point to pay attention to is that this isn’t the first time that Duda dropped a bombshell about a significant issue. Earlier in April, he told Lithuanian media that foreign companies own most of Ukraine’s industrial agriculture, thus confirming what had previously been reported but denied by the West. He therefore has a habit of being very candid about issues that he sincerely believes are of immense importance for Poland’s objective national interests.

Regardless of whatever the reader’s opinion might be about the likelihood of Duda’s scenario unfolding, which concerns Poland relying on the CPK to serve as the port of entry for a large-scale NATO intervention in the event of a Russian invasion, his point about that megaproject is militarily and strategically sound. It’ll be very difficult for Tusk to argue against it after he himself jumped on the Russia-bashing bandwagon since returning to power and continues fearmongering about its intentions.

He even jumped the shark last month by sensationally claiming that “we are in a pre-war era” that he compared to the run-up to World War II, thus suggesting whether sincerely or not that he supposedly believes that it’s possible for Russia to invade Poland in the coming future. If he ultimately decides to cancel the CPK despite Duda reminding him of its dual military purposes, then he’d discredit his previous fearmongering about Russia, which is the pretext for justifying Poland’s subordination to Germany.

Tusk’s hands might be tied, however, since the combination of grassroots and external (US/NATO) pressure might be enough to get him to reconsider weaponizing the CPK as part of his partisan war against his conservative-nationalist opponents under whom this megaproject was initiated. In any case, Duda inadvertently vindicated those Russian observers who long suspected that the CPK had dual military purposes, thus proving that they were right about Poland’s real plans all along.

Tyler Durden Fri, 04/26/2024 - 06:30

Sceptical Supreme Court Could Hand Trump Partial Victory In Immunity Case

Sceptical Supreme Court Could Hand Trump Partial Victory In Immunity Case

After two and a half hours, the Supreme Court has finished hearing arguments on whether a former president is immune from criminal prosecution.

Reading the tea-leaves of the comments has left most believing that SCOTUS will fail to grant former President Trump the full immunity he is seeking (choosing instead to narrow the protections for former presidents), but are likely to issue a ruling that could further delay his trial on charges of conspiring to overturn the 2020 election.

That would be a partial win for the former President.

As Axios reports, a definitive ruling against Trump - a clear rejection of his theory of immunity that would allow his Jan. 6 trial to promptly resume - seemed to be the least likely outcome.

  • A majority of the justices seemed inclined to rule that former presidents must have at least some protection from criminal charges, but not necessarily the "absolute immunity" Trump is seeking.

  • The core distinction during oral arguments came down to a president's official vs. unofficial actions. — and which of Trump's efforts to overturn the 2020 election results were official vs. unofficial.

  • The most likely outcome might be for the high court to punt, perhaps kicking the case back to lower courts for more nuanced hearings.

That would still be a victory for Trump, as Sam Dorman reports via The Epoch Times that the outcome of this appeal could delay lower court proceedings in President Trump’s Washington trial as well as his cases in Georgia and Florida. It’s unlikely that the Supreme Court, which is expected to release a decision in June, will write an opinion that delays his ongoing criminal “hush money” trial in New York.

The bottom-line is that no clear, concise majority opinion emerged this morning.

But there may be five justices willing to kick the can down the road - and that's enough for Trump, at least for now.

*  *  *

The Supreme Court will hear oral argument today over former President Donald Trump’s claim that he’s immune from criminal prosecution for official acts he undertook while in office.

Listen live here (due to start at 1000ET):

Jonathan Turley is live-blogging the hearing on X:

We are off and running on the oral arguments on immunity with John Sauer, former Scalia clerk, arguing for the former president.

...Chief Justice Roberts asked the most poignant question. What if a president appointed an ambassador (a clearly official act) but does so for a bribe? Sauer offered a nuanced point that the bribe itself would not be an official act...

...Justice Sotomayor just hit Sauer and said that Trump was only acting for personal gain and not in the interests or in a function of his government. She is making the slippery slope argument that such immunity would protect the assassination of a president...

...Justice Jackson said that "every president from the beginning of time" understood that they could be prosecuted but they "have continued to function and do their job."...

...Sauer agrees that a president can be prosecuted for private conduct. His point is only that the motivations of official conduct should not be the inquiry of the court. He is doing a good job in maintaining a more nuanced position before the Court...

...Justice Alito is asking whether the "robust form of immunity" that he is presenting is really necessary. Alito is exploring the middle ground that some of us have previously discussed...

...Sauer responded again about the danger of allowing motivations to be pursued. Alito suggests that they may insist on objective, not subjective, grounds in making the key determination -- on "purely objective grounds" to determine if this is an official function or issue...

...Interestingly, Alito seems to have answered Sotomayor on a hypothetical in dealing with the term "plausible" . . . an early preview of the conference!

... Justice Thomas just asked Sauer if he is challenging the constitutionality of the Special Counsel. Sauer said that they have not come so in this case.

...Sotomayor just referred to the alternative electors as "fake" and Sauer pushed back on the language of the indictment on the record for decision...

...Justice Kagan just asked what would happen if the President order a "coup" and whether it would be an official act. Sauer said that "it would depend." Kagan responded "that sure sounds bad doesn't it?"

Michael Dreeben is now up for Special Counsel...

...Roberts just slammed the lower court "a former president can be prosecuted for his official acts because the fact of the prosecution means that the former president has acted in defiance of the laws."...

...He said that he is "concerned" because it sounds like "a former president can be prosecuted because he is being prosecuted."...

...Roberts just laid low the appellate decision and Dreeben struggled in defense of it. Roberts responded that, if the Special Counsel does not subscribe to the sweeping decision, why shouldn't the court send it back?

...Roberts said that the D.C. Circuit failed to do a "focused" analysis on these act by adopting a "tautological" standard...

...Gorsuch returned to whether Dreeben is suggesting that immunity questions turn on motivations. Dreeben insists that it is the objection of the conduct rather than the motives...

...Dreeben just conceded that he is not sure if motivations would be relevant in determining immunity in relation in core powers...

...Gorsuch noted however that all presidents use their powers in part out of a desire to get reelected. Dreeben insisted that this all just falls under a different category. Gorsuch is clearly frustrated the lack of clarity if motive are relevant...

...Dreeben just dealt with the drone strikes and said Obama fell in an exception from the murder statute. 

...Barrett noted that that sounds a lot like a public versus private distinction...

...This "public authority defense" sounds a lot like arguing a question of motives, again, as raised by the other justices. Dreeben could only say that it was based on "objective" facts.

...Justice Barrett just asked if any immunity would also bar state prosecutions. She suggested that immunity may also protect a president from standing for trial on the state or local levels...

As The Epoch Times' Sam Dorman reports, besides altering longstanding precedent, the decision could bear heavily on, and delay the criminal prosecutions President Trump is facing before the election.

An appeals court in Washington rejected his attempt to claim immunity in the Justice Department’s prosecution of his activity on Jan. 6 and in response to the 2020 presidential election.

The Supreme Court is set to review that decision and potentially establish a broader definition of presidential immunity.

The Supreme Court here has three main options:

  1. to uphold the appeal court’s rejection of President Trump’s immunity claims,

  2. to accept his claims,

  3. or remand the matter back to U.S. District Court Judge Tanya Chutkan with a refined test on what presidential acts are immune from prosecution.

Nixon v. Fitzgerald, a Supreme Court case from 1973, established that presidents enjoy absolute immunity from civil liability for actions that fell within the “outer perimeter” of their official duties.

Experts speculated to The Epoch Times that the justices could extend that same framework to criminal liability.

This is the second major oral argument the justices are hearing about attempts to punish President Trump for his conduct following the 2020 presidential election.

They heard oral argument in February over Colorado’s attempt to disqualify him from the state’s ballot, and issued a unanimous judgment in opposition.

A week before President Trump’s appeal is reaching the Supreme Court, the justices also heard oral argument over how the DOJ applied a financial reform law to Jan. 6 defendants. That same law forms part of DOJ’s indictment against President Trump.

Separation of Powers is a major issue that will likely loom large in both the oral argument and eventual opinion.

President Trump has argued that judicial review of his official acts would be inappropriate, while Special Counsel Jack Smith said granting criminal immunity would upset the balance of power and allow presidents to get away with egregious wrongdoing.

Tyler Durden Fri, 04/26/2024 - 06:01

Chipotle Tells Workers To "Preserve" Chicken Supply As Demand Soars

Chipotle Tells Workers To "Preserve" Chicken Supply As Demand Soars

A surge in restaurant traffic boosted Chipotle Mexican Grill's first-quarter earnings and revenue, topping the average estimate of Wall Street analysts tracked by Bloomberg on Wednesday.

Shares are higher by more than 5% in the cash session on Thursday. However, this note will not expand on earnings. Instead, we will focus on a letter from the company to employees stating: Stop eating chicken during lunch and dinner meals because soaring demand has collided with dwindling poultry supply—and the need to preserve supply urgently. 

Bloomberg obtained the letter Chief Restaurant Officer Scott Boatwright sent employees last week. He told them:

"Due to its sustained strong sales we need your help to keep up with our guests' demand for this popular protein option." 

Boatwright told store managers and hot-side and cold-side kitchen employees not to order chicken or chicken al pastor with their free or discounted employee meals. Even white-collar Chipotle workers were told not to order chicken. 

The message read, "Let's Conserve Our Fan-Favorite Chicken." Execs did not give a timeline for boosting the chicken supply. The letter aimed to "preserve our supply of Adobo Chicken for our guests." 

Chief Corporate Affairs and Food Safety Officer Laurie Schalow told Bloomberg in an emailed statement:

"Due to the high demand for chicken in our restaurants and sustained success of our limited-time offer chicken al pastor, we temporarily asked all of our employees at corporate and in-restaurants to select another protein option for their meals to preserve our supply." 

The Chipotle mobile app shows no disruptions to any protein option on the menu. 

Harper McNamara, an employee in Michigan at the only unionized Chipotle US store, was quoted by Bloomberg as saying the company's move was a slap in the face to its workforce: "It's disrespectful, just on a personal level." 

Tyler Durden Fri, 04/26/2024 - 05:45

EU Prepares To Tighten Screws On Russian LNG Imports

EU Prepares To Tighten Screws On Russian LNG Imports

By Julianne Geiger of OilPrice.com

In a move that could reshape Europe's energy landscape, the European Commission is poised to propose new sanctions targeting Russian liquefied natural gas (LNG) imports.

According to Reuters sources close to the matter, the proposed measures will include a ban on shipments within the EU and sanctions on three Russian LNG projects.

The European Commission's decision comes amid growing concerns over Europe's reliance on Russian energy, particularly in the wake of the ongoing conflict in Ukraine. While the EU imposed a ban on Russian seaborne oil imports earlier this year, it has thus far refrained from taking similar action against LNG imports. However, with imports of Russian LNG surging since the start of the war, accounting for around 15% of EU gas supply, pressure has been mounting on Brussels to act.

The proposed ban on trans-shipments within the EU is aimed at preventing the diversion of Russian LNG cargoes to other destinations. Currently, Belgium, France, and Spain are the largest importers of Russian LNG, with many of these imports being re-exported to other countries, including China. By imposing restrictions on trans-shipments, the EU hopes to ensure that Russian LNG does not find its way to markets outside of Europe.

In addition to the ban on trans-shipments, the European Commission is also considering sanctions on three Russian LNG projects - Arctic LNG 2, Ust Luga, and Murmansk. While the details of these sanctions are still being discussed, they are expected to target projects that are not yet operational, further complicating Russia's efforts to expand its LNG exports.

The move by the European Commission reflects growing unease within the EU over its dependence on Russian energy. With tensions between Russia and the West showing no signs of abating, European policymakers are increasingly looking for ways to reduce Europe's exposure to Russian energy supplies. By targeting Russian LNG imports, the EU hopes to send a clear message to Moscow that its actions in Ukraine will not go unpunished.

However, the proposed sanctions are likely to face resistance from some EU member states, particularly those that are heavily reliant on Russian energy. Nevertheless, with pressure mounting on Brussels to take action, it seems increasingly likely that Europe's energy landscape could be in for a significant shake-up in the coming months.

Tyler Durden Fri, 04/26/2024 - 05:00

Russia Will Target US Nuclear Weapons In Poland If They Appear

Russia Will Target US Nuclear Weapons In Poland If They Appear

Russia has warned that Poland will make itself a 'priority target' if it hosts NATO nuclear weapons on its territory. In a Thursday statement Russian Deputy Foreign Minister Sergei Ryabkov said "Moves in this direction will not provide greater security (for Poland or other nations that host such weapons)." He was further quoted in Russian media as saying: 

Moscow considers any expansion of NATO’s nuclear-sharing arrangement as “deeply destabilizing” in nature, “and in fact threatening” Russia, Ryabkov was quoted as saying by TASS on Thursday. This applies to joint missions, where non-nuclear members of the US-led bloc are trained to use American hardware, and even more so to the permanent stationing of such weapons “which hotheads in Warsaw are talking about,” he said.

In follow-up, Foreign Ministry spokeswoman Maria Zakharova stipulated that "any nuclear weapons deployed to Poland would be legitimate targets in the event of war with the alliance." Russian media translations said Moscow would see this as a "priority target".

All of this was in response to words issued by Polish President Andrzej Duda in a Monday interview. He said his country is "ready" to host nuclear weapons should NATO decide to do so as reinforcement of its eastern flank. It remains that the United States chiefly supplies and oversees NATO's nuclear-sharing program, thus any possible future nukes in Poland would be supplied by Washington.

"Russia is increasingly militarizing the Königsberg oblast (Kaliningrad). Recently, it has been relocating its nuclear weapons to Belarus," Duda continued, apparently wanting to match and mirror Russian moves. Indeed Belarus is now believed to host possibly dozens of Russian tactical nukes.

via infobrics.org

"If our allies decide to deploy nuclear weapons as part of nuclear sharing on our territory as well, in order to strengthen the security of NATO's eastern flank, we are ready for it," the Polish president had added.

Duda additionally said while discussing the topic of NATO's nuclear sharing program in the interview that Warsaw and Washington have been in talks "for some time." He emphasized: "I've already talked about it several times. I must admit that when asked about it, I declared our readiness."

But the reality is Brussels and Washington are likely to be deeply hesitant based on the nuclear threats emanating from Moscow of late. Moving NATO warheads to Polish soil would most certainly greatly intensify the already somewhat high nuclear tensions, and at a moment the proxy war in Ukraine shows no sings of abating.

While three NATO members are officially nuclear weapons states - the United States, France and the United Kingdom – others are authorized to host nukes (typically 'tactical' nuclear weapons). They are Belgium, Germany, Italy, the Netherlands and Turkey.

Apparently Poland is now throwing its name in the hat for NATO's nuclear-sharing program, which would expand Western nuke placement right up to Russia's backyard. The Kremlin would no doubt deploy more of its strategic assets near Eastern Europe in such a scenario.

Tyler Durden Fri, 04/26/2024 - 04:15

European ESG Funds Witness Heavy Decline In Inflows

European ESG Funds Witness Heavy Decline In Inflows

Authored by Irina Slav via OilPrice.com,

European exchange-traded funds with a focus on ESG investing saw a substantial decline in inflows in the first quarter amid what Morningstar called “an existential crisis”.

According to the Financial Times, net inflows into these funds totaled 7.1 billion euros, or $7.62 billion, in the first three months of the year. This was down from 13.8 billion euros in the final three months of 2023, equal to $14.8 billion.

As a result, the portion of ESG fund inflows during the period fell to 16% of total net flows into exchange-traded funds, down from 29% in November to December 2023.

The trend is the latest sign of trouble in energy transition industries as wind, solar, and EV companies struggle with persistently high interest rates, rising raw material costs, and growing competition from low-cost Chinese producers.

“This means further deceleration from the highs of 2022 when close to 65 percent of all flows into the European ETF market were directed to ESG-themed strategies,” Morningstar associate director of passive strategies Jose Garcia-Zarate said.

The news follows a revelation in March that a total of 70% of passive funds passed off as “sustainable” by five of the largest asset managers in the U.S. and Europe were exposed to companies developing new oil and gas projects, according to a report by environmental organization Reclaim Finance.

Reclaim Finance has examined 430 “sustainable” passive funds managed by five of the biggest passive fund managers – Amundi, BlackRock, DWS, Legal & General Investment Management (LGIM), and UBS AM – and found that 70% of the passive funds are exposed to companies developing new fossil fuel projects.

These giant asset managers “are turning a blind eye to the climate impact of their passive investments, with funds invested in oil giants including TotalEnergies, Shell and ExxonMobil, and coal developers such as Glencore and Adani,” Reclaim Finance said in the report.

Tyler Durden Fri, 04/26/2024 - 03:30

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