The market drifted lower on a combination of 1) disappointing tech prints (MSFT -6% & META -4%), 2) Poor liquidity (according to Goldman Sachs trading desk), and 3) Core PCE posting its biggest monthly gain since April.

Not exactly ‘goldilocks’!!

Inflation surprises are picking up post rate-cut…

Source: Bloomberg

…bolstering the case for a slower pace of rate cuts…

Source: Bloomberg

Goldman’s trading desk noted that market volumes continue to be strong, +14% vs the 20dma, although S&P top of book poor compared to the start of the week.

We are better to buy as a floor (~1B net demand) led by HFs buying pockets of Tech & Industrials (net to buy across almost all sectors) + LOs buying Comms Svcs. LOs stand out as sellers of Macro Products.

A very ugly end to the month for Nasdaq smashed it into the red for October along all the other majors…

Source: Bloomberg

Should we really be surprised by the decline given that EPS expectations have been guided lower for the last six months?

Source: Bloomberg

Hedge funds had a fun day with losses on their VIP Longs offset by gains on their biggest shorts…

Source: Bloomberg

All the MAG7 stocks were lower today led by MSFT, META, and NVDA…

Source: Bloomberg

The basket of MAG7 stocks erased most of the month’s gains today…

Source: Bloomberg

…and Most Shorted stocks shit the bed…

Source: Bloomberg

While the major indices ended red, buying “Trump” and selling “Kamala” was a huge winner in October…

Source: Bloomberg

The weakness in stocks should not come as a huge shock given the massive surge in Treasury yields we have seen this month. The belly is up almost 60bps on the month and almost 70bps since The Fed cut by 50bps…

Source: Bloomberg

The yield curve flattened significantly in October and has been flattening sicne The Fed cut, suggesting for anyone who wants to listen that fears of a policy error are very real…

Source: Bloomberg

And in the mean time, mortgage rates have soared back above 7.00% in October since The Fed cut…

Source: Bloomberg

The dollar also soared in October (its biggest monthly rise since Sept 2022) having touched unchanged on the year at the end of Sept (after the rate cut)…

Source: Bloomberg

Despite the dollar strength , gold also exploded higher in October (up for the 8th month of the last 9 ) to a new record high (albeit with some weakness today). Since The fed cut rates, gold has been off to the races…

Source: Bloomberg

Quite a decoupling between the dollar and gold this year…

Source: Bloomberg

Despite a puke today, Bitcoin had a huge month (best month since May), rallying up to record highs yesterday near $74,000…

Source: Bloomberg

BTC ETF inflows have been huge in October…

Source: Bloomberg

Oil prices rebounded on Israel-Iran retaliation headlines once again and that lifted WTI into the green for the month…

Source: Bloomberg

Finally, bigger picture, since The Fed cut rates, USA Sovereign risk has exploded higher…

Source: Bloomberg

Not exactly resounding support from the market.

…and brace for a structurally higher VIX…

Source: Bloomberg

…not just past next week.

Authored by Jonathan Turley,

Recently, I spoke at an event about my book, “The Indispensable Right,” at the National Constitution Center in Philadelphia. Appearing on the panel with me was a New York University professor and one of the Facebook board members directing “content moderation.” We had a sharp disagreement over the record of Meta/Facebook on censorship, which I described as partisan and anti-free speech.

Now, Congress has released the internal communications at Facebook, showing an express effort to appease Biden officials by censoring the Hunter Biden laptop story before the election.

In a new report released by the House Judiciary Committee’s Subcommittee on the Weaponization of Government, Facebook executives are shown following the lead of the FBI, which gave them prior warnings to prepare to spike such stories before the election.

The FBI knew that the laptop was authentic. They had possession of the laptop, and American intelligence concluded that it was not Russian disinformation.

One Microsoft employee wrote, “FBI tipped us all off last week that this Burisma story was likely to emerge,”

However, these communications also show a knowing effort to appease Biden and Harris and effectively assist them in their election efforts. Facebook’s then-Vice President of Global Affairs Nick Clegg reportedly wrote to Vice President of Global Public Policy Joel Kaplan, “[o]bviously, our calls on this could colour the way an incoming Biden administration views us more than almost anything else.”

One of the most interesting communications came from a Facebook employee who recognized that they would be accused of seeking to influence the election:

“When we get hauled up to [Capitol] [H]ill to testify on why we influenced the 2020 elections, we can say we have been meeting for YEARS with USG [the U.S. government] to plan for it.”

The Facebook files go beyond influencing the election.

 At one point, Nick Clegg, the company’s president of global affairs, asked, “Can someone quickly remind me why we were removing—rather than demoting/labeling—claims that Covid is man made.”

The Vice President in charge of content policy responded, “We were under pressure from the administration and others to do more. We shouldn’t have done it.”

Notably, Democrats opposed every effort to seek this information, and Facebook only recently relented in turning over its files years after Elon Musk ordered the release of the “Twitter files.” I raised this issue during the NCC event to counter the glowing self-appraisal of Meta over its record. Despite its claims of transparency, it refused calls from many of us for years to release these files.

When finally forced by the House to do so,  CEO Mark Zuckerberg made a perfunctory apology and moved on.

As shown at the NCC event, it is now spinning its record as a defense of free speech.

*  *  *

Jonathan Turley is the Shapiro professor of public interest law at George Washington University and the author of “The Indispensable Right: Free Speech in an Age of Rage.”

We will provide a more detailed jobs report preview tonight, but following a catastrophic JOLTS report yesterday and a stellar weekly jobs report today, there appears to be a crescendo of confusion over what to expect tomorrow, with some saying a blowout number is coming while others are bracing for a negative print. So here is a quick take on what may be coming.

October’s US non-farm payrolls will hit the wires tomorrow morning, just 4 days days ahead of the US presidential election. As SocGen’s Albert Edwards notes, amid scepticism about the recent strength of the data, a shockingly weak ‘payback’ month will make news headlines and likely affect the election outcome.

It all started with Fed Governor Waller who two weeks ago first warned of a huge one-time drop in this month’s jobs report:

I will be looking for more evidence to support this outlook in the weeks and months to come. But, unfortunately, it won’t be easy to interpret the October jobs report to be released just before the next FOMC meeting. This report will most likely show a significant but temporary loss of jobs from the two recent hurricanes and the strike at Boeing. I expect these factors may reduce employment growth by more than 100,000 this month, and there may be a small effect on the unemployment rate, but I’m not sure it will be that visible. Since the jobs report will come during the usual blackout period for policymakers commenting on the economy, you won’t have any of us trying to put this low reading into perspective, though I hope others will.

The baton of a payroll plunge preannouncement was then handed over to the Biden admin’s favorite house economist Claudia Sahm – who is invoke to call “Sahm Rule” (which she stole from fromer Goldman economist Ed McKelvey) recessions when a Republican is in the White House… just not a Democrat –  thinks an outright decline in October payrolls is plausible because of the impact of recent hurricanes and the Boeing strike.This is how she explains it:

Let’s start by assuming that the underlying pace of payroll gains is back to its 2017-19 average of 183,000 per month. (The dark blue bar on the left below). Setting aside the hurricanes and Boeing strike, the initial estimates are always imprecise. The 90% confidence interval based on survey sampling error is +/- 130,000. (The light blue bars.) So, even if payrolls were on trend, the estimate range could be large.

The orange bars to the right subtract 100,000 off the trend for Hurricanes Helene and Milton and the Boeing strike. When the confidence interval is added, the 90% lower bound is almost -50,000. A negative print would ruffle some feathers, but at least in this example, it could be consistent with a solidly growing labor market.

And then there is the White House itself: yesterday, Biden’s top economic adviser Lael Brainard, explicitly warned that the White House is expecting a lower US non-farm payroll reading on Friday, covering October, because of disruptive strikes and hurricane impact (consensus expects only a 110k gain after September’s unexpectedly high 254k).

To be sure, there is a reason to preannounce a negative print: that way when it does hit, regime and establishment economists can say “we told you so”, and “just ignore it” because it is all one time (they will also tell you to ignore the sudden, 6-sigma collapse in job openings and quits, but that’s another story).

The problem with this is that it may not work. As Edwards writes, “readers with long, baby-boomer memories might recall the 1970 UK general election when the then Labour PM Harold Wilson was expected to win by a landslide, but had the rug pulled out from under him by shockingly poor trade data (which used to matter) – see article here.

The bottom line is that very poor economic data – and in the case of a negative jobs print it would truly be a shock as the last time we got that was back in 2020 – released just ahead of an election can really hurt the incumbent. Indeed, the surprisingly weak September JOLTS data suggests that a very weak payroll report on Friday morning is entirely plausible, even if that probability was somewhat diluted by today’s unexpectedly strong initial jobless claims report.

Authored by Jonathan Turley,

“Something wicked this way comes.” Those words from William Shakespeare’s “Macbeth” capture the approach of Halloween.

Traced to the Celtic festival of Samhain to mark the end of the harvest, pagans would often summon the dead. Halloween today more often summons contingency lawyers by the gross. If there is a holy holiday for personal injury lawyers it is Halloween with its mix of slip-and-falls, food liability, and costume defects.

After all, what can go wrong with a holiday celebrated at night with millions in ill-fitting costumes handing out tons of foodstuffs to strangers?

This year, it is already producing its share of spooky torts.

In Queens, a haunted house was shut down after various people filed lawsuits over being injured. “A Haunting in Hollis” was called “a death trap” by the Fire Department, but not the fun kind. The converted two-family home was accused of such attractions as the ankle shatterer.

Solainne Mancero-Tannis of Jamaica, Queens, says she was at the house with her family when she went down “Satan’s Slope.” The slide in a pitch-black space allegedly hurled her into a concrete wall at the bottom, shattering her ankles.

The FDNY has since allowed the house to re-open with improvements.

Sometimes, Haunted Houses are a bit too haunted, even for the trained eye.

Take the case of Sgt. Eric Janik, 37, who went to a haunted house called the House of Screams when he was confronted by a character dressed as Leatherface with a chainsaw. Janik pulled out his service weapon and pointed it at the man, who dropped character and fled the house.

This year, an employee, Anora Jenkins, was working at a haunted attraction in Tennessee when she jumped up to scare a group, and a frightened man slugged her, sending her to the hospital. AMS Haunted Attractions said that spooked customers assaulted several of its actors.

Some haunted homes can be a tad too improvisational. In Dickson v. Hustonville Haunted House and Greg Walker,  Glenda Dickson, 51, broke four vertebrae in her back when she fell out of the second-story window left open at the Hustonville Haunted House. She was in a room called “The Crying Lady in the Bed” when one of the actors came up behind the group and started screaming. Dickson jumped back through an open window covered with only a sheet.

Halloween can bring out the best and worst of people, even neighbors.

A few years ago in Florida, a woman filed a defamation and emotional distress lawsuit after her neighbor set up decorations that included a fake tombstone that read, “At 48 she had no mate no date/ It’s no debate she looks 88.”

This year, another woman in Ohio took a more direct approach in Toledo. On Oct. 7, the woman went on a rampage in the front yard of the home of the Zeller family with their extensive Halloween decorations.

Over half an hour, she caused roughly $1,000 in damages, including destroying cherished family items. Police arrested 48-year-old Christina Horvath, who is also accused of stealing some items.  Yet, the Zellers are not literally giving up the ghost. They put up a sign reading “She Came in Like A Wreckin’ Ball” next to a skeleton riding a wrecking ball.

Each year, costumes produce a slew of jump scare lawsuits from demon eye contact lenses that can actually blind you to this year’s witch hats that can turn into flaming headwear. In New York a few years ago, Sherri Perper, 56, of Queens, New York, filed a personal injury lawsuit due to defective shoes allegedly acquired from Forum Novelties. The shoes were over-sized clown shoes that she said made her trip and fall because they were . . . well … oversized.

I admit that my house is one of those over-the-top Halloween houses. As a torts professor, I try to walk the line between a fun attraction and an attractive nuisance.

Indeed, I have contemplated the ultimate jump scare of meeting children with a notary, and a waiver form covering everything from slips to nut allergies.  There are simply some scenes that are too scary for the young and old alike.

So welcome to the most hallowed holiday for lawyers. Have fun but it is strictly BYOC, bring your own counsel.

Jonathan Turley is the Shapiro Professor of Public Interest Law at George Washington University and the author of “The Indispensable Right: Free Speech in an Age of Rage.”

Michigan officials have charged a Chinese national for illegally voting in the 2024 US election at an early voting site in Ann Arbor on Oct. 27.

A clerk alerted officials to the voter, a Chinese student, leading to an investigation. They were charged with one count of “unauthorized elector attempting to vote” and one count of perjury for “making a false affidavit for the purpose of securing voter registration.”

“Only U.S. citizens can register and vote in our elections. It is illegal to lie on any registration forms or voting applications about one’s citizenship status. Doing so is a felony,” said the office of Michigan Secretary of State Jocelyn Benson and Washtenaw County Prosecutor Eli Savit on Oct. 30.

This past May, Michigan Secretary of State @JocelynBenson went on camera to tell us that ONLY U.S. Citizens vote in U.S. elections.

In unrelated news, the Detroit News JUST reported TODAY that a Chinese citizen voted in the U.S. election. https://t.co/v6KAjyM3bQ

— Rudy W. Giuliani (@RudyGiuliani) October 30, 2024

Officials insisted that non-citizen voting was “an extremely isolated and rare event.”

“Investigations in multiple states and nationwide have found no evidence of large numbers of noncitizens registering to vote. Even less common is a noncitizen actually casting a ballot. When it does happen, we take it extremely seriously. Our elections are secure and Michigan’s state and local election officials carefully follow the law,” said officials, who noted that voting records are public – and attempts by noncitizens to vote fraudulently will be exposed, and said fraudulent voters prosecuted. (What about mail-in ballots? Eh?)

The Chinese national, 19, had registered to vote on Sunday – using his student ID and other documentation to establish residency. He also signed a document attesting to being a US citizen. The student later contacted the city clerk’s office and attempted to retract the illegal vote, according to Benson’s office – however his ballot had already been processed through the tabulator.

Michigan AG Dana Nessel has also opened an investigation into the matter.

Rep. John Moolenaar (R-MI) called on Benson’s office to announce a plan to “prevent similar election fraud in the next week” and “secure our elections against CCP interference,” the Epoch Times notes. “The University of Michigan should expel this student for violating our laws and our state’s leaders need to take serious action against the Chinese Communist Party’s attempts to influence our state.”

Authored by Michael Shellenberger vai Public substack,

Yesterday, former President Donald Trump drove around Wisconsin in a garbage truck saying, “250 million people are not garbage.”

Trump was referring to President Joe Biden’s comment on a Zoom call on Tuesday, “The only garbage I see floating out there is his [Trump’s] supporters.”

The White House and media say Biden was misunderstood. Biden only “appeared” to call Trump voters “garbage,” said the New York Times.

The Washington Post called the “garbage” reference “disputed.”

The White House told reporters that Biden wasn’t referring to Trump’s supporters but to the comedian who on Saturday made a joke about Puerto Rico’s garbage problem. And in the official White House transcript of Biden’s Zoom call, the sentence reads, “The only garbage I see floating out there is his supporter’s — his — his demonization of Latinos…”

But what Biden said is clear from the video, even progressive news outlets now admit that Biden did, indeed, call Trump’s supporters “garbage,” and, as we were the first to point out yesterday morning, the White House appears to have violated the Presidential Records Act by altering official transcripts. 

By 4:45 pm yesterday, House Republican Conference Chairwoman Elise Stefanik and Oversight Chairman James Comer had sent a letter to the White House demanding that it preserve all communications and documents related to the editing.

“White House staff cannot re-write the words of the President of the United States to be more politically on message,” they wrote.

The Washington Post, whose owner Jeff Bezos on Tuesday recommitted his newspaper to balanced coverage, reported that what Biden said was just part of his “record of verbal gaffes,” whereas “Trump has for years vilified his political opponents with vicious… attacks…”

Such spin shows that the newspaper has a long way to go to achieving the balance Bezos seeks.

While Trump has said harsh things about his political opponents, he has never labeled the Americans who voted for his opponents as garbage.

And Biden’s remark is consistent with the contempt Democratic leaders have shown for Trump voters. Barack Obama faulted voters who “cling” to their religion by voting for his opponents. Hillary Clinton called Trump voters “deplorables.” And both Barack and Michelle Obama recently claimed black men who voted for Trump were sexist.

These events suggest we could be in for a rough ride between now and election day. What could happen?

*  *  *

Read more here at Michael’s substack…

In the end, we’re all just suckers for lower prices and higher quality…almost as if that’s how and why free markets work…

On that note it looks like the EU is starting to cave on preventing Chinese EV makers from doing business in Europe. Previously, the EU had sought to implement devastating tariffs on Chinese companies for supposedly skewing the European market with more supply and lower prices. 

In fact, the European Union is sending officials to Beijing for further talks to explore alternatives to tariffs on Chinese electric vehicles, according to a new report from Bloomberg. 

Reaching a deal to replace the new tariffs remains complex, with plans still in development but the two sides are examining a “price undertakings” agreement to regulate export prices and volumes as an alternative to tariffs.

Bloomberg writes that after eight rounds of talks, the proposals on the table still fall short of EU standards, including WTO compliance and enforceability requirements.

Negotiators have recently made progress, considering ways to simplify terms for potential price undertakings, particularly for new EV models not yet exported. One focus is preventing cross-compensation, where EV pricing deals might be offset by sales of hybrids or other goods.

However, another challenge is China’s insistence on a single umbrella deal for all manufacturers, managed by a national trade group representing key exporters, like SAIC Motor and BMW Brilliance.

Recall, we wrote just days ago that Chinese EV makers were having a bang-up end of the year regardless. China’s major EV makers ended Q3 stronger than last year, with solid deliveries reducing the need for discounts. 

Now, analysts predict a sales surge in Q4. EV and hybrid sales are booming, driven by expanded subsidies, boosting stock prices and Tesla’s best Chinese quarter. In September, EVs and hybrids made up about 53% of new car sales.

Bloomberg Intelligence analyst Joanna Chen commented: “Industry demand has been better than expected since the third quarter following China’s beefed-up subsidies but many automakers still need a major push in the fourth quarter to hit their annual sales targets.”

She continued: “The first nine months usually contribute 70% of annual car sales and automakers below that threshold are under greater pressure to step up discounts in the quarter.”

Chinese EV sales are expected to rise further following a recent directive for government agencies to increase purchases of new energy vehicles. For example, Zhejiang Leapmotor, Nio, and Zeekr are thriving through major deals and brand expansions. Top-sellers BYD and Geely are on course to hit ambitious sales targets of 4 million and 2 million, respectively. BYD’s earlier pricing strategies triggered months of market-wide discounting, we noted. 

Yale Zhang, managing director at Shanghai-based consultancy AutoForesight, added: 

“I do not see a need to launch another price war. Most of them are in pretty good shape. The majority of these NEV or carmakers will reach their volumes.”

By Michael Every of Rabobank

There’s a lot of garbage in this US election. There were two recent examples from the Republican stage, then from the White House; now Trump is driving a garbage truck wearing a hi-vis orange vest.

We also can’t fail to notice hi-vis rhetoric from the media. Not just Whoopi Goldberg on The View; the Financial Times’s US national editor Edward Luce (son of Baron Luce), and the paper’s Editor-in-Chief Martin Wolf, are openly calling Trump “fascistic”, the former saying Americans aren’t bothered by it so the republic may be in danger, the latter implying Trump won’t leave the White House if he wins. These are extraordinary claims from a paper that takes itself extraordinarily seriously; and even as everyone agrees we are heading for a moment of extraordinary volatility, that requires extraordinary clarity of thought and speech.

Yes, Trump offends a great many people; as does this kind of rhetoric – such escalation does not deescalate anything. Assume the FT is right: if Trump wins, will the paper scream to get out of US assets, or how to make money under “fascism”? Assume the FT is wrong: how are we supposed to take them seriously if they drop the ‘F’ bomb (or ‘H’ bomb) then say “Oops”?

As some worry about The-Boys-From-Brazil-ification of the US, more cogent financial criticism flows from pointing out the inherent contradiction between a “Peronist” Trump populism (i.e., “economic independence”, “social justice”, and “political sovereignty”) and Milei-style slash-and-burn $2 trillion cuts to government being flagged by Elon Musk. Answers, anyone?

Relatedly, 2WAY (whose objective election analysis makes both sides see half the country disagrees with them, and they all have to live together) just interviewed Trump economic policy advisor Bessent, who has taught economic history at Yale. He argues US debt was out of control due to government spending, threatening “European-style malaise”, and at the 80th anniversary of Bretton Woods, “we are on the verge of a major international realignment,” involving “trade, currency, defence, and values”. He adds his personal motivation is to build a system that works for a multiracial working-class party previously left behind by the global economy. You might not believe him, but as electoral schtick Trump is literally driving around in a garbage truck.

Bessent thinks the US must grow its way out of debt (which the last GDP print would back if it wasn’t driven by it), requiring deregulation – and, logically, a better net export position. He wants the fiscal deficit back to 3% by 2028. His favorite central banker is Volker (not Schacht). He also called 60% tariffs on China “maximalist” while stressing something I flagged in 2016: if you impose high tariffs for a future date (e.g., January 2027), you get a surge in supply-side capex, then tariffs have little effect as you don’t import those goods. Yes, the US would still import many goods with a 10% tariff, but Bessent expects this to be partly offset by dollar appreciation. That’s still inflationary with tight labor markets and deportations of undocumented workers: but it’s also higher US growth/lower world growth, higher dollar/weaker everything else. Or is this all garbage?

As some pointed out yesterday, markets are expecting the Fed to cut rates again next week with GDP at 2.8%, ADP employment at 233K, consumer confidence up, stocks, home prices, gold, bitcoin, and the national debt all at record highs, and core CPI over 3% for 41 months, the longest stretch since the early 1990s. But this isn’t garbage, or any kind of paradigm that can eventually lead to political extremism. No, it’s a carefully calibrated global system designed by deeply moral experts and operated by geniuses.

Looking globally, yesterday’s UK budget, reviewed here in detail by Stefan Koopman, saw big tax increases (not for workers, but to employ workers) and big fiddling with fiscal rules to ensure the government can invest bigly. If the state uses those funds productively, we have one set of macro and sociopolitical outcomes. If it doesn’t, we have another. It will also be interesting to contrast whatever our base case of a Trump presidency might bring with what a Starmer premiership does for the UK. The world will be watching Les Anglos to see which approach works better.

The BOJ left rates unchanged at 0.25% today, with the instability in local politics providing another good reason to pause. That applies all over, it seems – yet doesn’t re: the Fed.

In geopolitics, the thought of a Trump White House is seeing escalation to ensure when inevitable calls for de-escalation come, each side is in a better position.

In Ukraine, The Economist puts it that, “Ukraine is fighting for survival, not for victory”, as the US can no longer keep supplying arms at the pace needed – no need to ask if Europe can nearly three years in. This isn’t Trump, but Biden, and Harris would face the same constraints; the supply-side is all that matters in a West dominated by economic advisors who only see the demand side. In the East, South Korea is offering to bridge that gap with its missiles if North Korean troops appear in Ukraine. That risks widening the war to Asia, indirectly at least.

In the Middle East, Israel told Lebanese to leave the Hezbollah heartland city of Baalbek, but is considering a ceasefire on the proviso the militia retreats north over the Litani river, the Lebanese army takes control of south Lebanon, which Hezbollah rules, the flow of arms from Syria is stopped so it cannot rearm, and UN peacekeepers keep the peace. The odds of this being adhered to are low, but that doesn’t mean a piece of paper can’t be signed ahead. Yet Iran is threatening a “definitive and painful” response to Israel before the US election for its recent attack (the one they said didn’t do any damage): and Israel is making it clear they can hit lots more targets at will if Iran wants to play that game again. The fat tail risk here remains that this isn’t just rhetoric; and in Gaza, Hamas has again rejected a ceasefire offer because it still sees more strategic benefits from trying to whip up a regional conflagration it can take advantage of.

Meanwhile, a US drone-maker has been sanctioned by China for supplying Ukraine’s army: it now can’t use Chinese suppliers for tech inputs or critical components, batteries being a particular issue. This is a huge issue. Until now, it has been the West which has dominated sanctions through the power of their consumer markets and the global role of the US dollar: now, China is showing it can do the same to turn off supply of goods as required. The only logical Western response is surely a very rapid, very large diversification of global supply chains away from China: because what/who might be next, and regarding which geopolitical flashpoint? As the Financial Times bewailing the rise of authoritarianism will nonetheless tell us, this shouldn’t involve any moves towards tariffs or such nastiness.

However, in the supply-side BRICS, it’s not all sunshine either. On their planned grains exchange, key buyer Saudi Arabia is planning to try and grow more itself. Russia has stopped publishing detailed inflation data in an over-heating war economy, which if sustained joins a long list of data series now national security, so off limits; and Russian media states Moscow has been unable to pay its dues to the Shanghai Cooperation Organisation because they want it in dollars, which it can’t do because of US financial sanctions. When the SCO takes payments in Chinese goods, this all goes away. At the end of the day, is it better to control the financial side of things or the physical? And which of the two is a better platform for a rapid shift to then have the best of both?

One really needs to sift through a lot of garbage to find the key questions, if not answers, in all the current market chatter and pearl-clutching.

As we warned yesterday in our review of the just announced UK Budget (see “UK Gilt Yields Soar After Reeves Reveals Budget: Market Braces For Inflationary Debt Surge“), debt has always been the UK’s Achilles’ heel. That’s because “while the US has the world’s reserve currency, the UK doesn’t have that privilege, only an ability to print as much of a currency that fewer and fewer people want. That’s potentially very inflationary in the longer term, and that’s precisely why the market is reacting the way it is.”

Our bottom line was that with markets once again waking up to the likelihood that rates in the UK aren’t likely to fall as much previously expected, or the BOE would want, and should the blow out in yields continue, we may be just days away from another emergency QE action by the BOE in the past two years as the world is reminded that the only reason why the US can and continues to borrow like a drunken sailor, is because it still has the world’s reserve currency, although judging by the explosion in gold and bitcoin in recent days, that won’t last long.

This morning we are getting confirmation that we may have been right once more, because both 2Y and 10Y Gilt yields are blowing out, and trading literally on top of each other as the entire gilt curve pancakes. The 10Y is trading at the highest level since Oct 2023, while the 2Y is back to May levels.

The sudden blowout is not just confined to gilts however: as UBS trader Leo He notes, as the UK 2y yield is spiking, GBPUSD is selling off sharply.

“It looks like a VaR shock to me”, He warns, and adds that “the US 2y yield is following the sharp rise in the UK 2 yield.”

No wonder why we used a lettuce for teaser image for our budget review post.

Commenting on the huger move in gilts, DB’s Jim Reid agrees with our take and writes this morning that “the main catalyst was that markets realized the true scale of the fiscal easing, as the UK Debt Management Office’s (DMO) revised gross financing needs were twice (c.£146bn) what DB expected between 2025-2029.”

As DB’s economist Sanjay Raja noted in his review here, “today’s budget marks one of the largest fiscal loosening of any fiscal event in decades”.

Surprising it took the market one full day to figure it out.

Anyeay, the chart below from DB’s Sanjay shows that the only bigger fiscal loosening in the last decade-and-a-half was the pandemic easing.

As Reid notes, it is interesting that 10yr Gilts are now only 10bps lower than the closing peak two business days after the ill-fated “mini-budget” under PM Liz Truss back in September 2022. On the day of that budget, they climbed around 42bps and then 26bps the following day. In terms of comparing the two budgets, in 2022 there were £45bn of unfunded tax giveaways, whereas yesterday’s had £32bn of unfunded commitments. One could argue the credibility of yesterday’s is enhanced by around 1/3rd of increased government spending being targeted for investment in the economy rather than the tax cuts of two years ago.

As Reid further reminds us, the Truss mini-budget would have been a complete reversal of economic policy in the UK, with a massive package of tax cuts, just as the Fed was still raising rates by 75bps while inflation remained high. They’d also just announced a significant energy price guarantee a couple of weeks earlier. So it was fuel to a fire, and then the LDI pension crisis occurred and the Bank of England intervened, with Truss standing down as PM shortly after.

The market reaction to yesterday’s budget probably wasn’t helped by strong European data pushing up yields on the continent and with general upward pressure on US yields as Trump looks to have generally improved his standing in the polls in recent weeks.

Still, let’s put this all in perspective: the UK budget deficit between 2025 and 2029 is expected to average around 2.5% of GDP. In the US, it could be 7-9% without offsetting measures to the campaign promises of the two candidates. This, Reid echoes our note from yesterday, “helps highlight the exorbitant privilege of the US in having the world’s reserve currency.”

After all, other countries with smaller deficits are starting to hit debt and deficit levels where markets are now raising their eyebrows (and term premia) as a minimum and concern (in the case of 2022) at the extremes. The continuing French budget issues are another example of this.

So in conclusion, yesterday’s budget was probably two-thirds of the Truss mini-budget, in terms of a fiscal easing but rather than biased towards tax cuts the bulk of the higher borrowing is due to a lot more investment, albeit ones that aren’t expected to bear fruit in growth terms until after the 5yr time horizon.

Shares of autonomous truck maker Aurora tumbled in New York this morning after management revealed during an earnings call on Wednseday that the commercial launch of its driverless trucks would be delayed by four months.

Aurora CEO Chris Urmson told investors on its third-quarter earnings call that safety improvements have been made before the commercial launch.

Urmson said some of the remaining obstacles are “primarily in the areas of some elements of surface street driving and some elements of construction that we see on the freeway.” He added, “We want to have extremely high confidence in the system as we as we go forward.”

“We feel good about our progress and are confident in our ability to close the Safety Case for driverless operations on our launch lane. With additional visibility on the time needed to complete the aforementioned remaining validation, we now expect to launch commercially in April 2025. While this is modestly later than we had intended, this timing remains within the margin of error we have anticipated and conveyed throughout 2024,” Urmson told investors. 

The fourth-month delay was disappointing to Wall Street analysts (list courtesy of Bloomberg):

Analyst Jeff Osborne

• Flags that Aurora’s earnings call highlighted a modest delay to the commercial launch of its autonomous trucking service to April 2025, which postpones revenue generation
• However, the company’s financial stability is supported by its recent capital raise

Evercore ISI (in line)

• Four-month delay of AV commercial launch, as has become standard in AV timelines, is no major surprise, writes analyst Chris McNally, adding that he always thought that Aurora’s commercial launch would be slow
• Notes strong run in shares since the summer

Urmson noted in the conversation with investors that about ten autonomous tractor-trailers would be on US highways hauling freight in the second half of 2025. By the end of next year, this number will move higher into the dozens. 

In markets, the fourth-month delay sent shares down 17% in the early US cash session. As of Wednseday’s close, shares were up 52% on the year. 

In August, the startup raised about $500 million to support the scaling up of driverless trucks on America’s highways.