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Leverage And Speculation Are At Extremes

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Leverage And Speculation Are At Extremes

Authored by Lance Roberts via RealInvestmentAdvice.com,

Financial markets often move in cycles where enthusiasm drives prices higher, sometimes far beyond what fundamentals justify. As discussed in last week’s #BullBearReport, leverage and speculation are at the heart of many such cycles. These two powerful forces support the amplification of gains during upswings but can accelerate losses in downturns. Today’s market environment shows growing signs of these behaviors, particularly in options trading and leveraged single-stock ETFs.

While leverage and speculation are not new to the financial markets, they manifest investor exuberance. We made this point in a recent post on “Exuberance,” as consumer confidence in higher stock prices has reached the highest level since President Trump enacted sweeping tax cuts in 2018. However, that was before his re-election in November; since then, investor confidence has soared to record levels.

Notably, confidence and the desire to increase leverage and speculation in the markets are represented in current valuations.

Of course, the rise in investor confidence should be unsurprising, given nearly 15 years of abnormally high market returns. The chart below shows the average annual inflation-adjusted return of the S&P 500 over different periods. Note that since 1900, the average real market return has been 7.25%. However, since 2009, that annual real return has increased by more than 50%, even more so since President Trump enacted the TCJA in 2017, reducing corporate tax rates.

Given the level of high consistent returns, combined with an extended period of low volatility, and continued monetary and fiscal interventions, it is unsurprising there has been an explosion in speculation and leverage. That activity is seen in options trading, especially short-dated call options, and the surge in single-stock levered ETFs.

The question for investors is what this means for future market returns, and the risk of when, not if, something goes wrong.

Speculation in Today’s Markets: A Closer Look

In March 2021, I wrote an article titled “Long On Confidence And Short On Experience” about how retail investors flooded the market.

“In a “market mania,” retail investors are generally “long confidence” and “short experience” as the bubble inflates. While we often believe each ‘time’ is different, it rarely is. It is only the outcomes that are inevitably the same. A recent UBS survey revealed some fascinating insights about retail traders and the current speculation level in the market. The number of individuals searching “google” for how to “trade stocks has spiked since the pandemic lows.”

For anyone who has lived through two “real” bear markets, the imagery of people trying to learn how to “daytrade” their way to riches is familiar. From E*Trade commercials to “day trading companies,” people left their jobs to trade stocks. Of course, about 9-months later, it ended rather badly as we wrote in detail in “Retail Traders Go Bust.”

What is interesting is that after that painful lesson, just 24-months later, retail investors are again “long on confidence.” The painful lesson of losing large amounts of money has morphed into the “fear of missing out” on further gains. It is quite remarkable, but the signs are undeniable.

One sign of leverage and speculation we are watching are options. Options provide a leveraged way to bet on stock movements, requiring relatively little capital for potentially outsized returns. In November, US stock options volume hit nearly 70 million contracts on average per day; that is the second-highest on record, and trading activity has DOUBLED over the last two years.

As long as the market rises, those bets will pay off handsomely. The problem is that leverage works excellently on the way up but quickly turns into massive losses when markets decline.

Options trading has become a focal point for modern speculation. The accessibility of trading platforms and low costs have made it easier than ever for retail investors to engage in speculative bets. Short-dated call options, also known as “zero-day” options, which expire in less than 24 hours, are attractive for speculators hoping to capitalize on short-term stock price movements. These contracts allow investors to control large positions for a fraction of the cost of owning the underlying shares outright, effectively providing leverage.

For example, the surge in options volume on tech giants like Nvidia and Tesla has coincided with sharp moves in their stock prices. This speculative activity feeds into a cycle where dealer hedging magnifies stock volatility, detaching prices from fundamental values.

Don’t understand how to trade options? No problem, as Wall Street has got your back, or rather, your wallet. The newest speculation and leverage tool of choice is leveraged single-stock ETFs. These funds, designed to amplify the daily performance of a single stock, were developed to meet investor demand for an easy-to-understand product. For example, GraniteShares’ NVDL offers 2x exposure to Nvidia and has seen soaring trading activity. While the ETF can double the returns of Nvidia on any given day, it also doubles the losses. Such instruments are inherently risky, especially in volatile market conditions. Their popularity reflects an increasing appetite for speculative investments, often at the expense of prudent, long-term decision-making.

These trends are not unprecedented. Historically, periods of excessive leverage and speculation have driven markets to dizzying heights before sharp corrections followed. Investors today must understand these dynamics, learn from history, and adopt strategies to safeguard their portfolios.

Lessons from History: What Excessive Leverage Teaches Us

Periods of extreme leverage and speculation are not new, and the outcomes have consistently been painful for unprepared investors. The late 1990s dot-com bubble serves as a prime example. Speculative bets on internet stocks drove valuations to extraordinary levels, with investors leveraging margin accounts and options to chase gains. When the bubble burst, the Nasdaq lost nearly 80% of its value, leaving leveraged traders especially vulnerable to devastating losses.

Similarly, the 2008 financial crisis highlighted the dangers of leverage on a systemic scale. Banks, hedge funds, and individuals had layered debt onto overvalued housing assets, creating a fragile structure that crumbled when housing prices fell. What began as a localized issue in the U.S. housing market cascaded into a global financial meltdown.

More recently, the GameStop frenzy of 2021 showcased how speculative trading, often fueled by leverage, could drive wild price swings.

“Young investors are taking on personal debt to invest in stocks. I have not personally witnessed such a thing since late 1999. At that time, ‘day traders’ tapped credit cards and home equity loans to leverage their investment portfolios. For anyone who has lived through two ‘real’ bear markets, the imagery of people trying to  ‘daytrade’ their way to riches is familiar. The recent surge in ‘Meme’ stocks like AMC and Gamestop as the ‘retail trader sticks it to Wall Street’ is not new.“

Retail traders on platforms like Reddit’s WallStreetBets used call options to amplify their bets, forcing institutional investors to cover short positions. While some traders enjoyed massive gains, the stock’s eventual collapse left many with significant losses.

While this time certainly “feels’ different, particularly with Wall Street analysts ramping up market predictions for 2025, several warning signs warrant caution. First, valuation metrics, particularly in the technology sector, have reached more extreme levels. Stocks like Nvidia and Tesla are priced for perfection, with their valuations reflecting speculative enthusiasm rather than underlying fundamentals.

Second, the widespread use of leveraged products amplifies market volatility. Options trading and leveraged ETFs can cause rapid price swings, especially when market sentiment shifts. For example, a sharp decline in Nvidia’s stock could force a cascade of selling in instruments like NVDL, exacerbating broader market declines.

Finally, the systemic risks of leverage should not be overlooked. While today’s risks may not resemble the subprime mortgage crisis, the interconnectedness of financial markets means that unwinding leveraged positions in one area can ripple through the system, creating broader instability.

What Investors Should Do Now

Prudent risk management is essential in a market increasingly driven by speculation. Investors should begin by reassessing their portfolios to ensure they align with long-term goals and risk tolerance. High-risk assets, particularly those with stretched valuations or heavy reliance on speculative flows, may warrant trimming.

Diversification remains a cornerstone of effective risk management. Allocating across a mix of asset classes, sectors, and geographies can reduce the impact of a sharp downturn in any single area. Investors should also focus on quality, prioritizing companies with solid fundamentals, strong cash flows, and sustainable growth prospects.

Hedging can be a valuable tool in speculative markets. Simply increasing bonds or cash allocations can protect against downside risk. While these strategies may dampen potential near-term upside, they can mitigate risk during an unexpected reversion.

Finally, staying informed about market dynamics is critical. Monitoring speculative indicators, such as options volume and leveraged ETF flows, can provide early warning signs of frothy conditions. As discussed recently, pay attention to “Junk Bond To Treasury Spreads,” which have consistently been a leading indicator of financial risk.

“As investors, we suggest monitoring the high-yield spread closely because it tends to be one of the earliest signals that credit markets are beginning to price in higher risks. Unlike stock markets, which can often remain buoyant due to short-term optimism or speculative trading, the credit market is more sensitive to fundamental shifts in economic conditions.”

Conclusion

The market remains extremely bullish, and leverage and speculation continue to play a crucial role in driving extraordinary gains. However, as with everything, good times do not last forever. The current speculative environment is leaving investors exposed to significant risks when this current trend eventually reverses. The surge in options trading and leveraged single-stock ETFs reflects a speculative environment that requires vigilance. While markets may continue climbing in the near term, history shows that excesses often end with sharp corrections.

Investors can navigate these challenging conditions. A focus on fundamentals, managing risk, and maintaining a disciplined approach without succumbing to speculative temptations are required.

Those steps sound easy, but are difficult in a rising and speculative bull market where gains are easy to make. However, the benefit avoiding a bulk of the losses helps win the long game.

For more actionable insights on protecting and growing your portfolio, visit RealInvestmentAdvice.com.

Tyler Durden
Tue, 12/03/2024 – 11:25

South Korea Ends Shortest Martial Law In History

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South Korea Ends Shortest Martial Law In History

Update (1115ET): 

Well, that was exciting—some midnight political infighting in South Korea. As we noted earlier: “There is no actual emergency.” 

Now, the shortest emergency martial law in history appears to be over: 

  • S. KOREA LAWMAKERS TO VOTE ON MARTIAL LAW LIFT

Followed by:

  • S. KOREA PARLIAMENT PASSES REQUEST OF MARTIAL LAW LIFT

  • SOUTH KOREAN PARLIAMENT VOTES TO BLOCK PRESIDENT’S MARTIAL LAW DECLARATION

*   *   * 

Moments ago, South Korean President Yoon Suk Yeol declared emergency martial law, accusing the opposition party of engaging in anti-state activities. This is not a headline you see every day.

Here are the headlines via AFP News:

  • SOUTH KOREA’S YOON SAYS GOVERNMENT ADMINISTRATION HAS BEEN PARALYZED BECAUSE OF OPPOSITION PARTY CONDUCTS

  • SOUTH KOREA’S YOON SAYS THROUGH MARTIAL LAW HE WILL REBUILD FREE AND DEMOCRATIC COUNTRY

AP News sheds more color on the situation: 

President Yoon Suk Yeol made the announcement during a televised briefing, vowing to “eradicate pro-North Korean forces and protect the constitutional democratic order.” It wasn’t immediately clear how the steps would affect the country’s governance and democracy.

Yoon — whose approval rating has dipped in recent months — has struggled to push his agenda against an opposition-controlled parliament since taking office in 2022.

Yoon’s conservative People Power Party had been locked in an impasse with the liberal opposition Democratic Party over next year’s budget bill. He has also been dismissing calls for independent investigations into scandals involving his wife and top officials, drawing quick, strong rebukes from his political rivals.

All of this is unfolding as President Yoon Suk Yeol’s approval rating continues to slide… 

More saber rattling from President Yoon Suk Yeol, as per the Philippines news outlet Rappler:

“Yoon said he had no choice but to resort to such a measure in order to safeguard free and constitutional order, saying opposition parties have taken hostage of the parliamentary process to throw the country into a crisis.

“I declare martial law to protect the free Republic of Korea from the threat of North Korean communist forces, to eradicate the despicable pro-North Korean anti-state forces that are plundering the freedom and happiness of our people, and to protect the free constitutional order,” Yoon said.

South Korean news agency Yonhap News Agency said, “The [South Korean] defense minister has ordered a meeting of key commanders and called for tightened vigilance…after President Yoon Suk Yeol declared emergency martial law. The minister has also ordered the military to stay on emergency guard”

Police buses have blocked the National Assembly. 

Another view. 

South Korean soldiers are stationed outside Parliament. 

Armored personnel carriers were apparently on the streets. 

Ruling People Power Party Chair Han Dong-hoon criticized President Yoon Suk Yeol’s emergency martial law, calling the decision “wrong,” adding that he plans to stop the president’s emergency action “alongside the people.”

Our take…

For some context, the Korean newspaper Chosun Daily pointed out, “Martial law has been declared 16 times since the Republic of Korea’s establishment, including 12 instances of emergency martial law.” 

In a recent Korea Times op-ed, Chun In-bum, a retired ROK Lieutenant General, stated: 

Recent comments and accusations suggesting that the Yoon Suk Yeol administration may be creating a situation to declare martial law have reignited interest in the topic within South Korea.

…

Martial law is divided into two types:

  • emergency martial law, and

  • security martial law.

Emergency martial law grants the government sweeping powers, such as suspending the warrant system, restricting freedom of the press, curbing publication rights and limiting assembly and association, as well as overriding the authority of civilian courts and government agencies. When martial law is declared, the president must notify the National Assembly immediately. If the National Assembly demands its termination by a majority vote, the president is legally obligated to comply. While the National Assembly retains legislative authority, there are exceptional circumstances under which a military regime can temporarily assume control, particularly in the event of a coup that disrupts the normal constitutional order.

Martial law has a troubled history in South Korea. It was first declared on Oct. 21, 1948, in response to the Yeosu-Suncheon Incident, a rebellion by South Korean soldiers who refused to suppress a left-wing uprising. Since then, it has been used by various regimes as a mechanism to maintain power, often at the expense of civil liberties. One of the most infamous instances occurred in 1979, following the assassination of President Park Chung-hee. Martial law was declared nationwide, leading to the suppression of pro-democracy movements and widespread human rights abuses.

These historical abuses of martial law have left a deep imprint on South Korean society, creating a strong public aversion to any suggestion of its reimplementation. The memories of authoritarian rule, censorship and political persecution are still fresh for many citizens, particularly for those who lived through the turbulent decades of the 1960s to 1980s. The last declaration of martial law, in 1979, marked a period of intense social and political repression and the eventual rise of a democratic movement that culminated in the democratic reforms of the late 1980s.

In markets, South Korea’s won dropped 1% to a two-year low of 1419.28 versus the dollar. 

Ishares Msci South Korea ETF (EWY) falls 2.5% in premarket trading. 

Commenting on EWY trading, Goldman’s Chris Lucas told clients that “block sellers were active in South Korea (EWY) – notable headlines regarding South Korea this morning.”

Bloomberg’s Sebastian Boyd said the turmoil in South Korea “should be limited as crisis is domestic…” 

Here’s more from Boyd: 

None of this need impact US stocks or US risk appetite, except insofar as holders of South Korean assets seek safe havens amid the evident rise in political risk there. It’s natural that bonds should gain as Korean traders buy Treasuries, but there’s no apparent need for traders elsewhere to do so — other than front-running that demand.

*Developing…

Tyler Durden
Tue, 12/03/2024 – 11:15

Lebanon Ceasefire On Brink Of Collapse As Tit-For-Tat Fire Intensifies

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Lebanon Ceasefire On Brink Of Collapse As Tit-For-Tat Fire Intensifies

The Lebanon ceasefire which went into effect on November 27 is now hanging by a thread, amid an increasing intensity of of tit-for-tat exchanges of gunfire between the Israel Defense Forces (IDF) and Hezbollah.

In response to reports of Israeli fire, Hezbollah on Monday fired back as a “warning” shot into northern Israel, causing no casualties, according to regional reporting. Since then there have been several rockets fired.

Via Reuters

Israeli Prime Minister Benjamin Netanyahu immediately blasted what he called a serious violation of the fragile ceasefire. “Hezbollah’s firing at Mount Dov constitutes a serious violation of the ceasefire, and Israel will respond forcefully,” he said.

‘”We are determined to continue enforcing the ceasefire, and to respond to any violation by Hezbollah — a minor one will be treated like a major one.”

The IDF then proceeded to mount a series of large airstrikes on south Lebanon, which left at least five people dead. Nearly a dozen fatalities have been recorded due to Israeli attacks since last week’s ceasefire went into effect, per Al Jazeera:

Israel has killed eleven people, including a State Security officer, in separate attacks in Lebanon as it continues its assaults on the country since the ceasefire with Hezbollah came into effect last week.

Surprisingly, CNN has laid the blame for the crumbling ceasefire on Israel’s continued strikes, which have been much greater in number and intensity…

The attacks have reportedly involved artillery and small arms fire along with the airstrikes. Hezbollah has since escalated with rocket fire which the group has called “defensive” in nature.

This is supposed to be the period a 60-day transition where UN peacekeeping forces and the Lebanese national army takes control of Hezbollah positions in south Lebanon.

“The Israelis have been playing a dangerous game in recent days,” a US official told Axios. The Axios report further stresses that the ceasefire could collapse at any moment, also after Israel flew several drones over Beirut on Sunday.

The Biden administration is not officially laying blame on Israel, however. John Kirby has said some degree of limited exchange of fire was expended. “There has been dramatic reduction in the violence. The monitoring mechanism is in full force and is working … largely speaking the ceasefire is holding,” he told reporters at the start of the week.

On Monday a Pentagon spokesman also described that despite some incidents, the ceasefire between Israel and Hezbollah is holding. 

Netanyahu is meanwhile warning that if the ceasefire isn’t adhered to, and if it unravels, Lebanon can expect nothing less than a full-scale ground assault on the south to continue, and an all-out war. Israeli officials say that all of Lebanon will be fair-game for attacks.

Tyler Durden
Tue, 12/03/2024 – 11:05

BBC Includes Male ‘Trans Woman’ On Top 100 Women List

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BBC Includes Male ‘Trans Woman’ On Top 100 Women List

Via dailysceptic.org,

The BBC has included a male ‘trans woman’ Colombian scientist in its annual list of 100 inspiring women, just days after sparking controversy over its choice for women’s footballer of the year.

The Telegraph has the story:

Every year, the broadcaster compiles a list of women who have achieved great things in public life.

Its nominees include transgender biologist Brigitte Baptiste, described in the citation as a “trans woman” who “explores the common patterns between biodiversity and gender identity”.

The BBC says the scientist uses a “queer lens to analyse landscapes and species in a bid to expand the notion of ‘nature’ to better protect ecosystems”.

In a 2018 TED talk, Baptiste claimed scientists had discovered “transsexual” palm trees and stated that the “change of sex and gender has been reported regularly in science”.

On this basis, she argued that it was wise to do away with ideas of “naturalness” in nature, stating: “There is nothing more queer than nature.”

The broadcaster said: “BBC 100 Women acknowledges the toll this year has taken on women by celebrating those who – through their resilience – are pushing for change, as the world changes around them.” …

Zambian footballer Barbra Banda was honoured by the corporation despite being withdrawn from Women’s Africa Cup of Nations for high testosterone levels.

The BBC named Banda as its women’s footballer of the year for 2024.

Worth reading in full.

Fiona Crack, founder of BBC 100 Women and co-controller of BBC World Service languages and deputy global director, said:

“At the BBC, we are proud to shine a spotlight on these extraordinary women, from high-profile figures to those whose remarkable contributions often go unrecognised.”

‘Women’ – You keep using that word; we do not think it means what you think it means…

Tyler Durden
Tue, 12/03/2024 – 09:05

South Korea Declares Emergency Martial Law

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South Korea Declares Emergency Martial Law

Moments ago, South Korean President Yoon Suk Yeol declared emergency martial law, accusing the opposition party of engaging in anti-state activities. This is not a headline you see every day.

Here are the headlines via AFP News:

  • SOUTH KOREA’S YOON SAYS GOVERNMENT ADMINISTRATION HAS BEEN PARALYZED BECAUSE OF OPPOSITION PARTY CONDUCTS

  • SOUTH KOREA’S YOON SAYS THROUGH MARTIAL LAW HE WILL REBUILD FREE AND DEMOCRATIC COUNTRY

AP News sheds more color on the situation: 

President Yoon Suk Yeol made the announcement during a televised briefing, vowing to “eradicate pro-North Korean forces and protect the constitutional democratic order.” It wasn’t immediately clear how the steps would affect the country’s governance and democracy.

Yoon — whose approval rating has dipped in recent months — has struggled to push his agenda against an opposition-controlled parliament since taking office in 2022.

Yoon’s conservative People Power Party had been locked in an impasse with the liberal opposition Democratic Party over next year’s budget bill. He has also been dismissing calls for independent investigations into scandals involving his wife and top officials, drawing quick, strong rebukes from his political rivals.

More saber rattling from President Yoon Suk Yeol, as per the Philippines news outlet Rappler:

“Yoon said he had no choice but to resort to such a measure in order to safeguard free and constitutional order, saying opposition parties have taken hostage of the parliamentary process to throw the country into a crisis.

“I declare martial law to protect the free Republic of Korea from the threat of North Korean communist forces, to eradicate the despicable pro-North Korean anti-state forces that are plundering the freedom and happiness of our people, and to protect the free constitutional order,” Yoon said.

Our take…

In a recent Korea Times op-ed, Chun In-bum, a retired ROK Lieutenant General, stated: 

Recent comments and accusations suggesting that the Yoon Suk Yeol administration may be creating a situation to declare martial law have reignited interest in the topic within South Korea.

…

Martial law is divided into two types:

  • emergency martial law, and

  • security martial law.

Emergency martial law grants the government sweeping powers, such as suspending the warrant system, restricting freedom of the press, curbing publication rights and limiting assembly and association, as well as overriding the authority of civilian courts and government agencies. When martial law is declared, the president must notify the National Assembly immediately. If the National Assembly demands its termination by a majority vote, the president is legally obligated to comply. While the National Assembly retains legislative authority, there are exceptional circumstances under which a military regime can temporarily assume control, particularly in the event of a coup that disrupts the normal constitutional order.

Martial law has a troubled history in South Korea. It was first declared on Oct. 21, 1948, in response to the Yeosu-Suncheon Incident, a rebellion by South Korean soldiers who refused to suppress a left-wing uprising. Since then, it has been used by various regimes as a mechanism to maintain power, often at the expense of civil liberties. One of the most infamous instances occurred in 1979, following the assassination of President Park Chung-hee. Martial law was declared nationwide, leading to the suppression of pro-democracy movements and widespread human rights abuses.

These historical abuses of martial law have left a deep imprint on South Korean society, creating a strong public aversion to any suggestion of its reimplementation. The memories of authoritarian rule, censorship and political persecution are still fresh for many citizens, particularly for those who lived through the turbulent decades of the 1960s to 1980s. The last declaration of martial law, in 1979, marked a period of intense social and political repression and the eventual rise of a democratic movement that culminated in the democratic reforms of the late 1980s.

In markets, South Korea’s won dropped 1% to a two-year low of 1419.28 versus the dollar. 

Ishares Msci South Korea ETF (EWY) falls 2.5% in premarket trading. 

*Developing…

Tyler Durden
Tue, 12/03/2024 – 08:47

The End Of Fake News? MSNBC Hits New Low In Ratings

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The End Of Fake News? MSNBC Hits New Low In Ratings

Authored by Luis Cornelio via Headline USA,

The leftist “news” channel MSNBC is facing a ratings crisis, with some of its advertiser-coveted viewership dropping to a two-decade low, according to Nielsen data reviewed by Fox News. 

During the week of Nov. 6, MSNBC averaged just 38,000 viewers among adults 25-54, its lowest-rated non-holiday weekday since July 19, 2004.

As reported by Fox News, this demographic is widely prized by advertisers and is crucial for network revenue.

Low viewership impacted shows like The 11th Hour with Stephanie Ruhle and Jose Diaz Balart Reports, both of which saw their smallest audiences ever.  

Other shows—including Chris Jansing Reports, Deadline: White House and Katy Tur Reports—saw their worst days ever among the demos. 

Several shows lost over 50% of their 25-54 audience. Among those shows are The 11th Hour with Stephanie Ruhle, All In with Chris Hayes, Chris Jansing Reports, Inside with Jen Psaki, The Rachel Maddow Show and Joy Reid’s ReidOut.

This slump couldn’t have come at a worse time, as MSNBC’s parent company, Comcast, announced cuts to cable channels, excluding NBC News and Bravo TV. CNN reports that MSNBC will be moved into “SpinCo,” a publicly traded cable programming company. 

Tech mogul Elon Musk has hinted at purchasing MSNBC, while journalist Jack Posobiec says he’s recruiting investors to take control of the left-wing network. 

Podcast host Joe Rogan joked about replacing Rachel Maddow if Musk buys MSNBC: “I will wear the same outfit and glasses, and I will tell the same lies.” 

Along with viewership and Comcast scandals, MSNBC is under the scrutiny of its viewers after Joe Scarborough and Mika Brzezinski met with Donald Trump, despite having previously compared him to dictators. 

Al Sharpton faces ethical scrutiny after his nonprofit quietly took a $500,000 donation from the Harris campaign ahead of his interview with Vice President Kamala Harris.

MSNBC conceded that Sharpton blindsided them with the donation. “MSNBC was unaware of the donations made to the National Action Network,” an MSNBC spokesperson told the Washington Free Beacon.

Tyler Durden
Tue, 12/03/2024 – 08:35

Futures Gain, S&P On Pace For 55th Record Closing High Of 2024

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Futures Gain, S&P On Pace For 55th Record Closing High Of 2024

US equity futures are flat as the yield curve sees slight steepening; for once, the US is not benefiting from the risk-on rally seen in EU/APAC. As of 8:00am ET, S&P futures are fractionally in the green reversing earlier losses as traders await a busy line-up of Fed speakers and data releases after the index notched its 54th closing high of the year on Monday; Nasdaq 100 futures are down 0.1% even though Mag7 names are mostly higher in the premarket and Semis are bid. The USD is lower as the commodity complex catches a bid; WTI, silver, and sugar the outperformers; earlier Bloomberg reported China moved to restrict exports of rare earth metals to the US used in high-tech/military applications (gallium, germanium, antimony, and other superhard materials). Today’s macro focus will be on JOLTS and Vehicle Sales.

In premarket trading, Zscaler shares fall as much as 8.0% after the security software company gave a forecast for adjusted second-quarter earnings that missed expectations. Here are some other notable premarket movers

Anglogold Ashanti shares rise 3.7% after RBC Capital Markets upgraded the mining company to outperform from sector perform.

  • Credo Technology shares jump as much as 35% after the communications equipment company reported second-quarter results that beat expectations.
  • CVS Health gains 1.5% after Deutsche Bank upgrades the pharmacy chain to buy from hold, saying both earnings and the stock’s multiple appear to be near trough levels.
  • Janux Therapeutics shares soar 68% after the biotechnology firm announced positive updated interim clinical data for its oncology lead asset, JANX007.
  • Joby Aviation shares fall as much as 2.3%% after the all-electric vertical take-off and landing aircraft startup said its CFO Matthew Field notified the company he’d be resigning effective Dec. 13 for personal reasons.
  • Kroger shares advance 1% after Jefferies upgraded the retailer to buy from hold, and noted that the company has upside potential whether the acquisition of Albertsons goes through or not.
  • Microchip Technology shares decline 1.3% after the chipmaker said it planned to shut down a plant in Arizona, known as Fab 2. Additionally, the company sees third-quarter revenue being close to the low end of its original guidance.
  • TransMedics Group shares drop 8.0% after the medical-technology company narrowed its full-year revenue forecast. It also named a new chief financial officer.

The notable macro events this week include Friday’s payrolls report, which is expected to show hiring bounced back in November, preceded by Fed Chair Jerome Powell’s scheduled participation in a moderated discussion on Wednesday. Swaps are pricing a more than 70% chance of a quarter-point rate cut at the Fed’s Dec. 17-18 meeting.

“The market still expects the Fed will cut rates,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said on Bloomberg Television. “We will see when the employment data comes through on Friday how brave you have to be. But I think the bias is still there and the market thinks there is still room to do that, given the overall picture.”

Elsewhere, Citi strategists said short sellers are capitulating as the S&P 500 keeps hitting record highs and is set for its best year since 2021, while positioning on European stocks remains bearish, further widening the gap between the two markets. According to Citi’s Chris Montagu, investor positioning in S&P 500 futures is “completely one-sided,” and is “setting new highs for a fourth consecutive week and increasingly the hold-out shorts are capitulating.”

Indeed, appetite for US equities has shown no sign of abating this year. The S&P 500 has surged 27%, powered by technology shares and a broad preference for US assets. The rally extended after the election of Donald Trump raised hopes of tax cuts and deregulation. By contrast, positioning on Euro Stoxx 50 futures remains net bearish while ETF outflows are accelerating. Investors are shunning the region’s stocks amid sluggish economic and earnings growth and political instability in France and Germany.

Much attention right now remains focused on Paris, where the government faces a vote of no confidence on Wednesday. French far-right leader Marine Le Pen is expected to join forces with a left-wing coalition to topple Michel Barnier’s administration.

And speaking of Europe, stocks there rose, with the Stoxx 600 up 0.4%, as a rally for technology stocks drove a fourth straight day of gains for the benchmark, helping investors look past political risks in France. French stocks traded in line with their European peers on Tuesday, but the crisis has weighed on the CAC 40, causing it to trail neighboring markets like Germany, where the DAX Index rose above 20,000 points for the first time in its history. Here are the biggest movers Tuesday:

  • Hochtief shares rise as much as 5.9% after BofA upgraded its recommendation on the German infrastructure company to buy. The broker is positive about firms with US exposure going into 2025
  • BMW shares gain as much as 2.5% after UBS upgraded the German carmaker to buy from neutral, citing prospects for improved cash returns. Analysts say the firm is now their top OEM pick
  • SSP Group shares soar as much as 14% after the company, which runs food outlets in travel hubs, reported in-line annual results and said strong revenue growth has continued
  • Ceres Power shares rise as much as 3.2% after RBC upgraded the firm to sector perform, saying the British fuel-cell technology company is more insulated from headwinds versus peers
  • Greencore Group shares jump as much as 14% after the food company delivered a beat and raise, sweetened by the return of its dividend and a new share buyback
  • DiscoverIE shares gain as much as 16%, the most in a year, after the electrical component maker reported 1H results, prompting Shore Capital to upgrade its rating to hold from sell
  • Victrex shares jump as much as 17%, the most on record, after the specialty chemicals company reported results, with analysts noting decent trends in fiscal 4Q and reassuring comments about next year
  • Covivio shares drop as much as 11%, the most since April 2020, after Morgan Stanley downgraded the French firm to underweight from equal-weight, saying it may “lag” the real estate sector in 2025
  • Swiss Life shares fall as much as 4.2% after the insurer’s new targets were viewed as “challenging” by some analysts. JPMorgan says the payout ratio and cash remittances disappoint
  • Forvia shares drop as much as 6.1% as UBS downgraded the French car parts firm to neutral and set a Street-low price target, citing record uncertainty around the outlook for Europe’s car industry
  • Nel shares slide as much as 3.7% after RBC cut its recommendation to sector perform from outperform, citing slowing commercial activity with only two contracts announced this year
  • Grenergy shares plunge as much as 6.3% after the Spanish renewable company reported 9-month results impacted by low energy prices and a higher debt level

Earlier in the session, Asian stocks rose, on course for a third-straight daily gain, as semiconductor-related shares rallied after the US announced fresh curbs on technology exports to China. The MSCI Asia Pacific Index rose as much as 1.2%, with chip stocks TSMC and Tokyo Electron among the biggest boosts. Key benchmarks gained more than 1% in South Korea, Japan and Taiwan after the US unveiled measures to limit China’s access to crucial tech but stopped short of earlier proposals. Chinese stocks also reversed earlier losses after news that the country’s top leaders plan to start a key annual economic work conference next Wednesday to map out growth targets and stimulus plans for 2025.

In FX, a drop in the dollar gives relief to G-10 currencies, barring the yen, with a 0.3% decline to around 149.80/USD; the euro rises 0.3%, partly due to dollar weakness, while the CAC 40 climbs 0.6%.

In rates, treasuries are mixed in early US session with the curve steeper as long-end losses lift 30-year yields by ~2bp, steepening 2s10s and 5s30s spreads to day’s wides. US front-end yields are slightly richer on the day, widening 2s10s, 5s30s spreads by 1bp-2bp; 10-year yields around 4.21%, rising 2bps from Monday’s close, and outperforming bunds in the sector by 1.5bp, trails OATs outperforming by 2.5bp. In European bond markets, Germany’s is under pressure while France outperforms; French 10-year bonds are steady after a no-confidence vote was set for Wednesday, with the yield spread to comparable German debt hovering around 85 basis points. OAT-bund spread that widened the most in six months Monday is slightly narrower. German bonds underperform gilts and Treasuries across the curve, with yields rising most at the front end. Peripheral spreads tighten to Germany.

In commodities, oil climbed ahead of an OPEC+ supply meeting on Thursday, with the market supported by hopes China’s leadership will approve more stimulus at a major meeting next week. WTI trades within Monday’s range, adding 0.9% to around $68.73. Spot gold rises roughly $6 to trade near $2,645/oz. Spot silver gains 1.6% near $31.

Looking at today’s US economic data calendar, we get the October JOLTS job openings at 10am. Fed speaker slate includes Daly (12:15pm), Kugler (12:35pm), Goolsbee (1:30pm, 3:45pm)

Market Snapshot

  • S&P 500 futures little changed at 6,062.75
  • STOXX Europe 600 up 0.5% to 516.11
  • MXAP up 1.3% to 187.38
  • MXAPJ up 1.2% to 586.44
  • Nikkei up 1.9% to 39,248.86
  • Topix up 1.4% to 2,753.58
  • Hang Seng Index up 1.0% to 19,746.32
  • Shanghai Composite up 0.4% to 3,378.81
  • Sensex up 0.8% to 80,917.24
  • Australia S&P/ASX 200 up 0.6% to 8,495.22
  • Kospi up 1.9% to 2,500.10
  • German 10Y yield little changed at 2.07%
  • Euro up 0.2% to $1.0520
  • Brent Futures up 1.0% to $72.58/bbl
  • Gold spot up 0.2% to $2,645.15
  • US Dollar Index down 0.18% to 106.26

Top Overnight News

  • China imposed an outright ban on the export of crucial chipmaking materials — including gallium and germanium — to the US, citing concerns over military usage and “abuse” of export controls. It comes after the US imposed fresh curbs on the sale of high-bandwidth memory chips to China. BBG
  • China’s Central Economic Work Conference, at which officials will discuss economic targets and stimulus plans for 2025, will commence on Wed 12/11. Mainland stocks rebounded, while the yuan slid to a one-year low despite fresh PBOC support. BBG
  • China’s crude oil imports are on track to peak as soon as next year as transport fuel demand begins to decline for the world’s top crude buyer, ending the country’s decades-long run as the dominant driver of expanding oil consumption. RTRS
  • Israel’s military said it “remains obligated” to a US-backed ceasefire after carrying out airstrikes in Lebanon yesterday in response to Hezbollah’s first attack under the truce. BBG
  • French lawmakers will hold a no-confidence vote Wednesday, with far-right leader Marine Le Pen expected to join forces with a left-wing coalition to topple the government. Prime Minister Michel Barnier used a constitutional mechanism on Monday to force through an unpopular budget, leading to a leftist coalition and Le Pen’s National Rally to call for votes of no confidence. BBG
  • The Fed’s John Williams expects more rate cuts will probably be needed “over time,” though stopped short of saying whether he would back a reduction this month. BBG
  • Donald Trump said he’ll block the Nippon Steel takeover of US Steel, instead pledging to revive it with tariffs and tax incentives. Separately, the president-elect picked investment banker Warren Stephens to be US ambassador to the UK. BBG
  • Intel CEO Pat Gelsinger’s exit may revive previously rejected deal options, including a split of the factory and product design businesses. BBG
  • BlackRock has agreed to buy private credit manager HPS Investment Partners for ~$12B in stock (HPS has ~$150B in AUM). WSJ
  • Fed’s Williams (voter) said he expects more rate cuts to happen over time and that monetary policy remains in a restrictive stance, while he added that what the Fed does with policy depends on incoming data and the outlook for the economy and policy remains ‘highly uncertain’. Furthermore, Williams expects US GDP at 2.5% this year but might be higher, as well as noted that they will need to bring interest rates down over time and it is unclear where the neutral rate is right now.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly positive as the region took impetus from the fresh record highs seen in the S&P 500 and the Nasdaq. ASX 200 rose to a fresh record high with advances led higher by healthcare, tech and consumer discretionary. Nikkei 225 outperformed and reclaimed the 39,000 level with tech companies benefitting from further US export controls on China as restrictions related to advanced chips could spur a scramble for China to secure legacy-generation chip tools. Hang Seng and Shanghai Comp traded indecisively after the US unveiled a new package of chip export controls against China.

Top Asian News

  • China’s Semiconductor association say US chips are no longer “safe and reliable”. Relevant industries will have to be cautious about procuring these US chips.
  • China’s Internet Society call on domestic companies to carefully consider the procurement of US chips and seek to expand cooperation with chipmakers from other countries. US chip export controls have caused substantial harm to stable development of China’s internet industry
  • China’s MOFCOM bans to export of “dual-use items” relating to gallium, germanium, antimony and super-hard materials to the US. Tighter end-user and end-use vetting for graphite dual-use items which are exported to the US. Effective Dec. 3rd. Export of dual-use items to US military users or for military reasons is prohibited.
  • China is reportedly to hold the Central Economic Work Conference on December 11th-12th on 2025 economic growth targets and stimulus plans.

European bourses began the European session mostly in the positive territory, and sentiment continued to improve as the morning progressed, to display a sea of green in Europe. European sectors hold a strong positive bias, with only a handful of industries in negative territory. The top of the pile is populated by Banks, Travel & Leisure and Tech. The latter is buoyed by gains in heavy-weight ASML (+2.1%) after the Co. noted that the impact of export restrictions will fall within its existing outlook and will not have a direct material impact on business in 2024. Real Estate is the laggard. US equity futures are essentially flat and trading on either side of the unchanged mark, and unable to benefit from the positive momentum seen across the pond. RBC S&P 500 outlook: raises Communication Services to Overweight from Marketweight; cuts Healthcare to Marketweight from Overweight; cuts Materials to Marketweight from Overweight. China’s Auto Industry Body says Tesla (TSLA) sold 78,856 China made vehicles in Nov. (82,000 Y/Y).

Top European News

  • ECB’s Kazaks says a data-dependent and gradual approach are still appropriate, the pace and depth of easing will be determined by data and judgement.
  • France to hold no-confidence vote on Wednesday, 4th December. Press report that the vote will take place at 15:00GMT.
  • Barclaycard UK November Consumer Spending fell 0.5% Y/Y in November.

FX

  • USD is softer vs. peers as markets digest comments from the influential Waller at the Fed who stated that he is leaning in favour of a cut for the December meeting. Ahead, JOLTS ahead of speak from Fed’s Daly, Kugler and Goolsbee (twice). DXY is holding above the 106 mark and within yesterday’s 105.78-106.73 range.
  • EUR has been granted some reprieve vs. the USD. Albeit, it remains to be seen how long this will last given French political issues. The latest reports note that a no-confidence vote will take place at 15:00GMT on Wednesday. EUR/USD is back on a 1.05 handle and within yesterday’s 1.0460-1.0587 range.
  • GBP is firmer vs. the broadly softer USD with UK-specific drivers on the light side. As such, it is likely that events stateside will continue to dictate the state-of-play for Cable which is currently sat within yesterday’s 1.2617-1.2742 range.
  • Antipodeans are both near the top of the G10 leaderboard despite AUD facing some soft domestic data overnight and a softer CNY. The uptick in AUD/USD has led the pair back above the 0.65 mark. NZD/USD has been pivoting around the 0.59 mark.
  • CHF is modestly softer vs. the EUR following the latest Swiss inflation metrics which saw the Y/Y rate print at 0.7% vs. exp. 0.8% (prev. 0.6%) and fall short of the SNB’s Q4 average expectation of 1.0%.
  • PBoC set USD/CNY mid-point at 7.1996 vs exp. 7.2702 (prev. 7.1865).

Fixed Income

  • USTs are softer, weighed on by recent strong data which is lifting yields from the belly out. However, short-end debt is bid in the wake of Fed speak overnight with yields at the short-end pressured. Overnight, Waller said he is leaning towards a December cut, though noted one could argue the case for skipping and will be watching the data closely. USTs at the low-end of a 110-31+ to 111-06 band with the curve steeper.
  • OAT-Bund yield spread is narrowing down to 85bps having peaked just shy of 89bps on Monday. The main update in today’s session has been the timing of the no-confidence vote on Barnier, which is provisionally set for 15:00GMT on Wednesday.
  • Bunds are softer, with specifics somewhat light thus far and while ECB speak is in focus the likes of Cipollone haven’t added anything surprising. At the low-end of a 135.14-40 parameter, which is entirely within Monday’s 134.79-135.46 band. A fairly decent Schatz auction had little impact on Bund prices.
  • Gilts were trading in-fitting with peers going into the region’s own auction, in what has been a catalyst thin session thus far, aside from BRC Retail Sales data, which was weak. The auction saw a strong cover though both the price and yield tails were elevated when compared to recent taps, sparking some very modest pressure.
  • Germany sells EUR 3.607bln vs exp. EUR 4.5bln 2.0% 2026 Schatz Auction: b/c 2.3 (prev. 2.20x), average yield 1.94% (prev. 2.11%) & retention 19.84% (prev. 19.62%).
  • UK sells GBP 2.25bln 4.375% 2054 Gilt Auction: b/c 3.0x (prev. 3.08x), average yield 4.747% (prev. 4.735%), tail 0.4bps (prev. 0.3bps).

Commodities

  • A slightly choppy morning for crude benchmarks but underlying action is firmly bullish with WTI & Brent at the top-end of parameters and within proximity to yesterday’s USD 69.11/bbl and USD 72.89/bbl best. Complex benefitting from both reports that OPEC is likely to extend its latest output cuts and tensions around the Lebanon ceasefire.
  • Gold is trading at the top-end of a relatively narrow c. USD 15/oz range, peaked at USD 2650/oz overnight and while XAU remains firmer on the session it is yet to re-test the above high.
  • Base metals traded lacklustre overnight, but did catch a slight bid in tandem with the broader risk tone and the softer Dollar. 3M LME Copper probing USD 9.1k to the upside, a marked rebound from Monday’s USD 8.91k trough.
  • OPEC is likely to extend its latest oil output cuts until the end of Q1 2025 during its meeting on Thursday, according to OPEC+ sources cited by Reuters.
  • Premiums for Russia’s espo blend reach 2yr record of USD 1.30-1.50/bbl to brent, according to Reuters sources.
  • JPMorgan says Brent crude oil price is projected to average USD 80/bbl in 2024; says US Nat Gas 2025 price expected to average USD 3.50/MMBtu.
  • JPMorgan expects gold to rise towards USD 3,000/oz in 2025 with an average price of USD 2,950/oz in Q4 2025; says catch up trade later in 2025 could push silver prices towards USD 38/oz whilst platinum rallies to USD 1200/oz. Sees copper price towards USD 10,400/MT by Q4’25 and average USD 11,000/MT in 2026. Sees aluminium prices towards USD 2850/MT over H2’25.

Geopolitics

  • Israeli Defense Minister says if ceasefire collapses “we will no longer differentiate between Lebanon and Hezbollah”
  • Israeli forces blew up residential buildings in the Al-Geneina neighbourhood, east of Rafah in the southern Gaza Strip.
  • US Secretary of State Blinken met with Israel’s Strategic Affairs Minister Dermer and reiterated the importance of ending the Gaza war.
  • Syrian Armed Opposition Operations Department said they took control of Halfaya, Maardis and Taiba al-Imam in the northern countryside of Hama, according to Al Jazeera.

US Event Calendar

  • 10:00: Oct. JOLTs Job Openings, est. 7.52m, prior 7.44m

Fed speakers

  • 12:15: Fed’s Daly Is Interviewed Live on Fox Business
  • 12:35: Fed’s Kugler Gives Speech on Labor Market, Policy
  • 15:45: Fed’s Goolsbee Gives Closing Remarks

DB’s Jim Reid concludes the overnight wrap

Morning from Zurich where the DB Outlook roadshows roll on. There were lots of questions yesterday about the latest French situation as it became apparent that a French government collapse was increasingly likely. The situation went back and forth as the day went on, but ultimately, Marine Le Pen’s National Rally announced that they would support a motion of no confidence in the government of PM Michel Barnier. So along with the left-wing parties who are also backing the no-confidence motion, they have a majority in the National Assembly capable of bringing the government down, and this has led to a pretty serious market reaction. In fact, the Franco-German 10yr spread (+7.5bps) hit its widest level since 2012 yesterday, which was just before Mario Draghi pledged to do “whatever it takes” to save the euro. And the euro itself weakened by -0.75% against the US Dollar, marking its biggest daily decline since the week of Trump’s victory in the US election.

In terms of how the situation evolved yesterday, the prospects for the French government had looked pretty weak from the get-go. Indeed, the National Rally’s President Jordan Bardella said on RTL radio that “The National Rally will activate the censure vote unless of course there is a last minute miracle”. But around lunchtime, it was confirmed by the government that there’d be no change to the medication reimbursement system. So that pointed to a potential compromise with the National Rally’s demands, and the spread began to tighten again as it looked as though the government might survive. However, shortly after, Barnier announced that he’d push through the budget using special constitutional powers without a vote. So that saw the announcement of a no-confidence motion, which Marine Le Pen said she’d back after their demands weren’t met.

In terms of what happens next, we’re in territory that hasn’t been seen in a long time, as the last successful no-confidence motion was in 1962. That vote is likely to take place this week, possibly as soon as Wednesday, and assuming it’s successful, that would force the government’s resignation. In the short term, the government can remain in office as a caretaker government. But snap elections can’t happen again until the summer, as the French Constitution requires a one-year wait until another dissolution can take place, meaning that isn’t an option. So President Macron would have to propose a new PM, which could in theory be Barnier again, but there’s no reason to think a new government would be any more stable, given how fractured the National Assembly is. In terms of passing a budget, lawmakers could approve a special law authorising the government to collect existing taxes, and after that the government could allocate public spending by decree. However, this would only permit public spending that was part of the 2024 budget, rather than additional expenditures.

The likelihood of an imminent government collapse immediately led to fresh losses among French assets. For instance, the 10yr Franco-German spread ended the day at 88.1bps, the widest since 2012. Indeed, it also meant that the French 10yr yield (2.918%) closed only just below the Greek 10yr yield (2.927%), which just goes to show how investors’ assessment of sovereign risk has shifted over the last decade. For equities, the CAC 40 did manage to eke out a +0.02% gain, but that made it the worst performer of the big European indices, well behind the STOXX 600 that posted a +0.66% advance. Banks were hit in particular, with fresh losses for Société Générale (-2.61%), BNP Paribas (-1.24%) and Crédit Agricole (-0.87%), which built on their declines of the last two weeks.

Unlike the Euro crisis, there were no obvious signs of broader contagion to other countries yesterday. In fact, the 10yr Italian yield (-1.0bps) actually fell to a two-year low of 3.266%, and Spain’s 10yr yield (-2.4bps) fell to 2.768%, its lowest level in almost two years as well. Moreover, the push into safe assets meant yields on 10yr bunds (-5.4bps) saw the biggest declines, falling to its lowest since January at 2.034%. In the UK, the spread of 10yr gilt yields over bunds hit its widest since Liz Truss was PM, closing at 221.5bps yesterday. Matters weren’t helped there after the final UK manufacturing PMI for November was revised down six-tenths from the flash reading to 48.0, which is the weakest it’s been since February. So it continues the recent run where UK data has kept underwhelming expectations.

Outside of Europe, markets actually put in a decent performance yesterday, with the S&P 500 (+0.24%) moving up to yet another record high. One supportive factor was an upside surprise in the ISM manufacturing for November, which came in at 48.4 (vs. 47.5 expected). So even though it was still in contractionary territory, it was the strongest since June, and the new orders subcomponent (50.4) was in expansionary territory for the first time since March. That’s lifted up other growth estimates as well, with the Atlanta Fed’s GDPNow tracker for Q4 pointing to an annualised pace of +3.2%, which is its highest level to date.

That equity rally was led by further strength among big tech stocks, and the NASDAQ (+0.97%) and Magnificent 7 (+1.41%) moved up to record highs of their own. So it was a fairly narrow rally over the last 24 hours, and the equal-weighted S&P 500 actually saw a decent fall of -0.27%, moving off the all-time high it achieved last Friday.

In the meantime, US Treasury yields inched higher, with the 2yr yield up +2.9bps to 4.18%, whilst the 10yr yield rose +2.1bps to 4.19% (4.21% this morning). So that just about pushed the 2s10s curve back into inversion territory. The weakness on the 2yr might be pointing to a higher terminal rate, but investors yesterday priced in a greater chance of a rate cut this month. The chance of a cut closed at 76%, up 10pp from Friday, and the highest we have observed since US CPI data was released over 2 weeks ago. The uptick came after Fed Governor Waller spoke at the American Institute for Economic Research (AIER) Monetary Conference in Washington, D.C. last night. He said that “I am leaning toward continuing the work we have started in returning monetary policy to a more neutral setting,” signaling further cuts ahead, while adding that “an additional cut at our next meeting will not dramatically change the stance of monetary policy and allow ample scope to later slow the pace of rate cuts, if needed.” On the path of inflation he noted, “I believe the evidence is strong that policy continues to be significantly restrictive and that cutting again will only mean that we aren’t pressing on the brake pedal quite as hard.”

In Asia the Nikkei (+2.24%) is trading sharply higher and is leading gains in the region while the KOSPI (+1.75%) is also trading noticeably higher with the S&P/ASX 200 (+0.75%) also trading in positive territory. Elsewhere, Chinese stocks are mixed with the Hang Seng (+0.08%) slight up but with the Shanghai Composite (-0.86%) turning sharply lower as I type. US equity futures are flat. seeing slight gains while the CSI (-0.02%) is struggling to gain traction in early trade.

In FX, the Chinese yuan (-0.25%) is weakening for the third consecutive day, trading at a one-year low of 7.2913 against the dollar despite PBOC’s efforts to support sentiment as the central bank has been setting stronger-than-expected fixes since November.
To the day ahead now, and central bank speakers include the ECB’s Cipollone and Panetta, along with the Fed’s Kugler and Goolsbee. Otherwise, US data releases include the JOLTS report of job openings for October.

Tyler Durden
Tue, 12/03/2024 – 08:24

Telecoms Cable Between Sweden & Finland Damaged In Two Separate Places 

survivalnomics
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Telecoms Cable Between Sweden & Finland Damaged In Two Separate Places 

A land-based fiber-optics cable running across the border between Sweden and Finland was damaged in two separate locations on Monday. This incident comes weeks after EU investigators probed a Chinese-flagged vessel suspected of sabotaging undersea cables in the Baltic Sea. 

Internet provider Global Connect told AP News that the telecommunications cable was severed in two places in southern Finland. 

“The first damage has been repaired, and internet access has been mostly restored,” said Global Connect’s spokesman in Sweden, Niklas Ekström, adding that thousands of customers were briefly knocked offline. 

Ekström said, “We are still working on fixing the second damage.”

He noted that the first incident was related to construction work but provided no further details about what caused the second incident, stating: “We have no analysis on this so far.”

“The authorities are investigating the matter together with the company. We take the situation seriously,” Finland’s minister of transportation and communications, Lulu Ranne, wrote on X.

Euronews said, “Swedish media reported that Finnish police suspect a criminal offence in connection to the damaged cable.”

The incident comes weeks after two undersea fiber optic cables connecting Finland, Germany, Sweden, and Lithuania across the Baltic Sea were severed by what EU investigators believe was an act of sabotage by a 225-meter Chinese bulk carrier. NATO warships have since surrounded the vessel.

With wars ongoing in Eastern Europe and parts of the Middle East, spillover risks remain elevated, as terror groups, rogue nations, and or just plain bad actors may be intensifying sabotage efforts targeting infrastructure. 

Tyler Durden
Tue, 12/03/2024 – 07:45

“Already Pretty Far Down The Line”: The Container Store Could File For Bankruptcy As Soon As Next Year

survivalnomics
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“Already Pretty Far Down The Line”: The Container Store Could File For Bankruptcy As Soon As Next Year

As the retail apocalypse that started with Amazon and e-commerce continues, the latest victim is The Container Store.

The retail giant could file for bankruptcy as soon as next year, according to the New York Post, who said the retailer is blaming its recent descent on “a weak housing market and inflated prices” hurting sales.

The chain, based in Coppell, Texas, saw a pandemic-driven surge in 2020 and 2021 as homebound consumers, inspired by Marie Kondo’s Netflix show, embraced decluttering.

However, a sluggish housing market and persistent inflation have curbed moves, home renovations, and discretionary spending, shrinking demand for storage products. Or, in other words, people simply have less money for crap nowadays. 

The Post reported that the Container Store faces a “high probability” of bankruptcy next year, according to Tim Hynes, global head of credit research at Debtwire, following the path of retailers like Big Lots and LL Flooring.

Amid a record wave of store closures predicted this year by Coresight Research, The Container Store has shown signs of distress. In May, it suspended its earnings outlook and began a strategic review to address declining performance. In its latest quarter ending September 28, sales dropped 10.5%, with losses totaling $30.8 million.

A potential $40 million lifeline from Beyond, owner of Bed Bath & Beyond and Overstock.com, to stock Bed Bath & Beyond products appears in jeopardy. Last week, Bed Bath & Beyond hinted the deal might collapse, citing The Container Store’s inability to meet financing conditions.

Hynes said: “I don’t see any dramatic increase in holiday sales that will change the situation. They are already pretty far down the line.”

Incidentally, this also means a lot of bored housewives could be looking for new ‘projects’ heading into the New Year, so stay out of their way…

Tyler Durden
Tue, 12/03/2024 – 06:55

As Many As 200,000 Ukrainian Soldiers Have Deserted: Lawmaker

survivalnomics
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As Many As 200,000 Ukrainian Soldiers Have Deserted: Lawmaker

Authored by Kyle Anzalone via The Libertarian Institute,

Ukrainian soldiers refusing to report for duty or walking away from their front-line positions are becoming an increasing problem for Kiev. One Ukrainian lawmaker said that there have been as many as 200,000 desertions. 

Ukrainian officials and soldiers told the AP that “Facing every imaginable shortage, tens of thousands of Ukrainian troops, tired and bereft, have walked away from combat and front-line positions to slide into anonymity.”

Ukrainian ground forces, via Reuters

The report adds, “Entire units have abandoned their posts, leaving defensive lines vulnerable and accelerating territorial losses, according to military commanders and soldiers.”

“Some take medical leave and never return, haunted by the traumas of war and demoralized by bleak prospects for victory,” writes The Associated Press. 

“Others clash with commanders and refuse to carry out orders, sometimes in the middle of firefights.”

Soldiers failing to report to their posts are a rapidly worsening problem for Kiev. In 2022, only 9,000 Ukrainians were prosecuted for desertion.

That number increased to 24,000 in 2023. Ukrainian government data showed prosecutions skyrocketed to 50,000 during the first nine months of 2024. 

The prosecutions do not capture the whole picture as one Ukrainian lawmaker told AP the number “could be as high as 200,000.”

The growing problem is likely a result of war fatigue.

“It is clear that now, frankly speaking, we have already squeezed the maximum out of our people,” said one military officer. 

Between casualties and desertions, Kiev is facing a massive manpower shortage. The AP noted Kiev lost a net 4,000 soldiers along the front lines in September. The White House is pushing Ukraine to lower its consumption age to 18 to help fill shortages.

Tyler Durden
Tue, 12/03/2024 – 06:30

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