The market ‘action’ today is watching US midterm votes be counted, which even emerging markets do more smoothly; and US celebrities roll out on Twitter to back or decry conspiracies about why it is evidently incapable of doing the same.
Apart from that, markets will be echoing a Peanuts cartoon I recall vividly from my childhood (although I sadly failed to find it with a Google search this morning): changing the subject when proved wrong by facts. In said comic strip, Charlie Brown finally shows that some of opinionated Lucy’s statements are unequivocally wrong. Her reply, after a pause, is: “I know a girl who belongs to two book clubs.” A total non-sequitur as denial and shut down.
It’s deeply tragic that what made a 10-year-old laugh is, some four decades later, still the modus operandi for vast swathes of financial markets; but experience across the buy and sell side shows me it is absolutely the case.
Here are some not-too exaggerated Charlie Brown simple questions to markets and many Lucies’ diamond responses:
Charlie Brown: “Did you read that ‘China Downgrades Priority of Economy for Future Legislation’? Future legislation is no longer to revolve around economic development and adhere to “reform and opening up”, but instead now “to the leadership of the CCP,… to the guidance of Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the Theory of Three Represents, the Theory of Scientific Development, and Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, to develop a system of socialist rule of law with Chinese characteristics.”
Lucy in equities: “Did you try cronuts? They’re so good they make me feel bullish.”
Charlie Brown: “Did you hear the rumour China might introduce wealth and inheritance taxes –as the UK may now raise the top rate of income tax, not cut it– and the tax authorities may focus on high net worth individuals (net worth RMB 10m and up) for special audits, and they might even have to pay a de facto ‘exit tax’ if they look like they are decamping abroad?”
Lucy in wealth management: “Wild Wonder is the colour of the year 2023. That makes me bullish.”
Charlie Brown: “Did you see that China is sliding back into deflation even as the rest of the world see high inflation? PPI was -1.3% y-o-y and CPI down to just 2.1%. Doesn’t that imply a much lower CNY to try to export its way out? Isn’t that negative for US dollar valuations of Chinese earnings? Won’t other EM exporter FX get dragged down too? Won’t that make paying for dollar-priced commodity imports harder? Doesn’t that also mean the West faces an imminent choice between deepening reliance on Chinese supply chains again, or putting up tariffs in response slash accelerating friend-shoring? Will they prioritise near-term lower inflation over geoeconomic resilience/security despite rising geopolitical tensions?”
Lucy in markets: “How do you feel about the World Cup being in Qatar? I see it as bullish EM.”
Lucy in a Western corporation in China: “Car sales in October were up. I remain bullish.”
Charlie Brown: “Japan is now having to sell Treasuries to fund the FX intervention keeping its yields low. Doesn’t that mean more upward pressure on yields in other parts of other curves? Isn’t there a risk inflation goes down from here but stays around 3-4% for years due to structural supply-side issues?”
Lucy in fixed income: “Star Trek III is better than Star Trek II because it’s got Klingons. That, and this being transitory, makes me bullish.”
Charlie Brown: “Did you see that the French Minister of Economy has stated a “strong response” is required against American green policy to ensure Europe keeps industrial production? That must mean WTO-defying protectionism, and so going green will also mean going more mercantilist. It also therefore means an EU-US trade war when Europe is the net exporter, and as the EU relies on US gas and US guns. How does this add up?”
Lucy in Europe: “Strategic autonomy slash free markets slash Europe slash ESG. I remain bullish.”
Charlie Brown: “FTX is blowing up, and Binance is buying them, and crypto is collapsing again. Didn’t they just run a Super Bowl ad? If they can go, who is next?”
Lucy in Crypto: “I eat one protein bar daily, but on Saturday I have two. That makes me bullish.”
Okay, not all of these are diamonds, but you get the idea on how much so many Lucies’ heads are up in the sky right now.
Now back to watching Americans struggle to count lots of small pieces of paper as a precursor to more ‘Lucy-ness’ to come .
Cryptos Tumble On Reports Binance ‘Highly Likely’ To Scrap FTX Deal
Update (1050ET): Following earlier comments from Binance boss CZ, CoinDesk is reporting the crypto exchange is highly unlikley to go through with its proposed rescue of FTX…
That headline sparked a new leg down in Bitcoin to a $16k handle..
FTX Token (FTT) is trading back to the lows…
Roughly half a day into the process of reviewing FTX’s internal data and loan commitments has led Binance to strongly lean against completing the transaction, according to a person familiar with the matter.
* * *
With all eyes on what the most powerful man in crypto, Binance CEO Changpeng “CZ” Zhao, will do next now that Sam Bankman-Fried (or rather Bankrun-Fraud) has been exposed as just another Ponzi-running fraudster (read this thread for details on how FTX did everything it could to delay the inevitable implosion of his trading group Alameda), and how long until his “non-binding” agreement to acquire FTX collapses, Bloomberg reports that in a memo to employees, CZ said that there wasn’t a “master plan” to take over FTX.com and the collapse of the rival crypto exchange “is not good for anyone in the industry” (of course he would say that).
“We did not master plan this or anything related to it… It was less than 24 hrs ago that SBF called me. And before that, I had very little knowledge of the internal state of things at FTX,” Zhao wrote in the memo sent Wednesday, which of course is false since Binance – as an existing major investors – had every insight into what was going on and knew precisely what to do to spark a bank run… which it did. Which is also why CZ hedged: “I could do some mental calculations with our revenues to guess theirs, but it would never be very accurate.” In retrospect, they were accurate enough.
Still, knowing that regulators will scrutinize his every decision and comment, CZ continued to plead ignorance: “I was surprised when he wanted to talk. My first reaction was, he wants to do an OTC deal… But here we are.”
Zhao noted that “due diligence for the deal is on-going,” and reminded employees not to trade the FTT token. He also told employees not to comment on the transaction.
“Never use a token you created as collateral . . . Don’t borrow if you run a crypto business. Don’t use capital ‘efficiently’. Have a large reserve,” Zhao tweeted.
Two big lessons:
1: Never use a token you created as collateral.
2: Don’t borrow if you run a crypto business. Don’t use capital “efficiently”. Have a large reserve.
Binance has never used BNB for collateral, and we have never taken on debt.
Zhao also said that the proposed – if hardly completed – bailout, which consolidated Binance’s position as the world’s biggest crypto trading venue, was not “a win for us” adding that “user confidence is severely shaken. Regulators will scrutinize exchanges even more. Licenses around the globe will be harder to get.”
The message also laid out the speed of the deal he agreed with his counterpart Sam Bankman-Fried to prevent the total collapse of FTX, which had been valued at $32bn earlier this year.
The two men shocked the crypto industry when they announced on Tuesday that Binance had agreed to rescue FTX after a surge in customer withdrawals sparked a liquidity crisis after Zhao announced that he was selling a $530 million holding of FTX’s native token. The letter of intent signed is a non-binding agreement. Terms haven’t been disclosed.
In the aftermath of FTX’s near collapse, Binance and other larger exchanges have pledged to publish more proof that they hold their customers’ funds in secure reserves that are readily available to meet withdrawals.
“We must significantly increase our transparency, proof-of-reserves, insurance funds, etc. A lot more to come in this area. We have a lot of tough work ahead of us. Not to mention prices swinging wildly,” he wrote to staff.
The Binance chief also acknowledged that a takeover of FTX, creating by far the largest crypto exchange in the world, would paint a target on the company’s back.
“People now think we are the biggest and will attack us more,” he said.
After it was leaked by the press, CZ posted his full letter on twitter:
Gold rallied by over $50 an ounce last Friday and the rally has extended into this week with the yellow metal moving back above $1,700 an ounce. In his podcast, Peter Schiff explained why he thinks that gold has bottomed and this is a significant reversal.
Commodity prices in general have been rallying over the last several days. News that China might be close to ending its zero-COVID policies sparked the rally. Industrial metals and oil both saw big gains.
This is bad news for the Federal Reserve.
It’s going to see inflation being pushed higher even as the economy continues to soften.”
Increased Chinese demand as the country’s economy reopens could also be a problem for the Fed. The central bank focuses on fighting inflation by lowering demand. But as Peter pointed out, demand is global, not just domestic.
I always talk about how we can have higher inflation during a recession because I realize that prices are not just determined by the ability of Americans to pay, but it’s the ability of everybody all around the world to pay. Americans are competing with foreigners for the same goods. And, it’s also not simply a function of demand, but it’s a function of supply. Even if demand in America goes down, supply in America could go down even more because demand outside America goes up, and supply is diverted from the United States abroad. So, even if American consumers are buying less, there are even fewer goods available for them to buy. And so, what ends up happening is fewer goods get bought, but the ones that do get bought are bought at ever-increasing prices.”
I think as it becomes more obvious that the dollar has seen its highs and is headed lower, I think you are going to get a rush to liquidate long dollar positions. So many people have been piling into the dollar as the only safe haven, as the least-dirty shirt in the hamper, the dollar milkshake theory — whatever it is, a lot of people have been buying dollars, and they are long dollars. The assumption was that the dollar would keep on rising. But the minute that momentum is lost, there is tremendous downside as everybody looks to unwind those positions.”
Peter said another signal that the dollar has reached its high is gold has reached its low.
Of all the big moves in the market during the week, I think the most significant move was the one made by gold.”
Gold made a new 52-week low interday last Thursday (Nov. 3). But on Friday, gold rallied with the price rising by $52.
If you look at the trading pattern for gold, it was an outside reversal week, where during the week, gold took out the low from the prior week, it took out the high from the prior week, and then it closed above the prior week’s high.”
Peter called it “a very significant reversal.”
And it continued this week with gold rallying back above $1,700 an ounce on Tuesday (Nov. 8).
Silver charted a similar rally. The difference was that silver did not make a new 52-week low last week.
When you see gold making a new low, but that new low not being confirmed by silver, that is an indication of a bottom because silver is normally weaker than gold until you get to the end of the bear market, and then silver starts to have some relative strength in relation to gold.”
Peter said gold mining stocks also confirmed the bottom. As a group, miners also failed to make a 52-week low even as gold did.
What makes me more confident in this call is the fact that even though gold itself made a new 52-week low on Thursday, the gold stocks did not. And then we had the explosive move up on Friday where both the GDX and the GDXJ rose better than 10% on the day. It is very rare that you see gold stocks up 10% in a single day.”
While both $50 up-moves in the price of gold and 10% rallies in mining stocks are rare, Peter said he thinks it will become less so in the coming months.
I figure, before too long, we’re going to finally see the price of gold rally by $100 in one day.”
You can already see the demand in physical gold and silver, where demand is skyrocketing. Central bank demand is skyrocketing.”
In fact, central bank demand set a Q3 record with a huge increase in unreported buying. Many speculate that the mystery buyer was China.
That makes a lot of sense to me. I think China is really trying to stockpile its gold, especially if China is thinking of doing something, maybe making a move against Taiwan. They’re not going to do that until they’ve really shored up their gold holdings. They want to divest themselves of US dollars and US Treasuries and be loaded up with gold before they do anything that may invoke sanctions.”
Peter said it’s only a matter of time before investors realize that the price of gold is not only going to rise commensurate with the cost of producing it, but it’s going to rise more.
Because as investors lose confidence in the ability of the Fed and other central banks to rein in inflation, now they’re more motivated to hedge against inflation because they can no longer count on the central banks to protect them. They have to look for their own protection, and they can find it in gold.”
In this podcast, Peter also talks about the continued decline in tech stocks, and the decline labor force participation rate.
Over the summer, I was stunned when a friend of mine sent me an interview with FTX CEO and crypto billionaire Sam Bankman-Fried that I had never seen before. In the interview, Sam, who I recently noted knows more about the inner bowels of the defi/crypto space than anybody, basically came out and admitted that crypto lending was one giant Ponzi scheme.
Of course, many of us knew that the space was a ponzi scheme already – as I have been adamantly outspoken about – but it was the sheer, unadulterated, matter-of-fact-style, bald-faced admissions by Bankman-Fried that caused my jaw to drop when I read it and listened to it this week.
Now, looking back on it after FTX’s collapse this week, it’s even more stunning that nobody saw it coming.
3 months before the collapse of crypto lending firms, it was literally just…out there…in the public, from the man who knows the space best, that such companies were, in essence, total Ponzi schemes. First, here’s a video of SBF explaining how DeFi works like a ponzi scheme.
Then, there were Bankman-Fried’s comments on the Odd Lots podcast with Matt Levine.
While Mashinsky ducked the answer, at least Bankman-Fried tried to describe it, though he did so as a “black box” where new investor money pays back old investor money. Also known as a Ponzi scheme.
“Can you give me an intuitive understanding of farming? I mean, like to me, farming is like you sell some structured puts and collect premium, but perhaps there’s a more sophisticated understanding than that,” Levine asks Bankman-Fried, per a Bloomberg transcript of the interview.
Bankman-Fried responds:
“You start with a company that builds a box and in practice this box, they probably dress it up to look like a life-changing, you know, world-altering protocol that’s gonna replace all the big banks in 38 days or whatever. Maybe for now actually ignore what it does or pretend it does literally nothing. It’s just a box. So what this protocol is, it’s called ‘Protocol X,’ it’s a box, and you take a token. You can take ethereum, you can put it in the box and you take it out of the box. Alright so, you put it into the box and you get like, you know, an IOU for having put it in the box and then you can redeem that IOU back out for the token.”
Later in the interview, when pressed on where the actual generated value comes from to pay the yields by Levine, Bankman-Fried expounds on his statements:
“Describe it this way, you might think, for instance, that in like five minutes with an internet connection, you could create such a box and such a token, and that it should reflect like, you know, it should be worth like $180 or something market cap for like that, you know, that effort that you put into it.”
He continues:
“In the world that we’re in, if you do this, everyone’s gonna be like, ‘Ooh, box token. Maybe it’s cool. If you buy in box token,’ you know, that’s gonna appear on Twitter and it’ll have a $20 million market cap. And of course, one thing that you could do is you could like make the float very low and whatever, you know, maybe there haven’t been $20 million dollars that have flowed into it yet.
“Maybe that’s sort of like, is it, you know, mark to market fully diluted valuation or something, but I acknowledge that it’s not totally clear that this thing should have market cap, but empirically I claim it would have market cap.”
One host responds cynically:
“It shouldn’t have any market cap in theory, but it practice, they always do. Okay.”
Bankman-Fried confirms this and continues, calling the box “magic” and explaining further:
“That’s right. So, and obviously already we’re sort of hiding some of the magic impact, right? Like some of the magic is in like, how do you get that market cap to start with, but, you know, whatever we’re gonna move on from that for a second.
So, you know, X tokens [are] being given out each day, all these like sophisticated firms are like, huh, that’s interesting. Like if the total amount of money in the box is a hundred million dollars, then it’s going to yield $16 million this year in X tokens being given out for it. That’s a 16% return. That’s pretty good. We’ll put a little bit more in, right?
And maybe that happens until there are $200 million dollars in the box. So, you know, sophisticated traders and/or people on Crypto Twitter, or other sort of similar parties, go and put $200 million in the box collectively and they start getting these X tokens for it.
And now all of a sudden everyone’s like, wow, people just decide to put $200 million in the box. This is a pretty cool box, right? Like this is a valuable box as demonstrated by all the money that people have apparently decided should be in the box. And who are we to say that they’re wrong about that? Like, you know, this is, I mean boxes can be great. Look, I love boxes as much as the next guy. And so what happens now?
All of a sudden people are kind of recalibrating like, well, $20 million, that’s it? Like that market cap for this box? And it’s been like 48 hours and it already is $200 million, including from like sophisticated players in it. They’re like, come on, that’s too low. And they look at these ratios, TVL, total value locked in the box, you know, as a ratio to market cap of the box’s token.
And they’re like ‘10X’ that’s insane. 1X is the norm.’ And so then, you know, X token price goes way up. And now it’s $130 million market cap token because of, you know, the bullishness of people’s usage of the box. And now all of a sudden of course, the smart money’s like, oh, wow, this thing’s now yielding like 60% a year in X tokens.
Of course I’ll take my 60% yield, right? So they go and pour another $300 million in the box and you get a psych and then it goes to infinity. And then everyone makes money.”
Bloomberg’s Matt Levine then sums it up at the end of Bankman-Fried’s comments:
“I think of myself as like a fairly cynical person. And that was so much more cynical than how I would’ve described farming. You’re just like, well, I’m in the Ponzi business and it’s pretty good.”
Over the summer, I wrote about how these statements reaffirmed my belief that there are more blowups taking place behind the scenes than we knew about in crypto, as I pointed out in a piece. Today, in November, it still remains a harbinger of bad news for the space, in my opinion.
Stock Rally Fizzles As Red Wave Downgraded To Red Ripple
Futures and yields are flat, both recovering from a dip earlier in the session, as investors kept an eye on midterm election results ahead of key inflation data later in the week. To the disappointment of bulls, a Red Wave failed to emerge in Congress as voters delivered a mixed verdict in elections shaped by inflation and split around social issues, with Republicans headed toward control of the US House, but by smaller margins than forecast, while the Senate majority remains a toss-up.
In the House, official results have Republicans on 196 and Democrats on 168. Projections from the New York Times (seats either already won by a party or projected to win) put the Republicans on 219 and Democrats on 207 with 9 seats viewed as “tossups”. In the Senate, official results have Republicans on 47 and Democrats on 48. Democrats won in PA (where a brain-damaged Fetterman managed to flip a critical seat which even liberal pollsters said was set to go to republican Challenger Dr. Oz ) and NH; GOP is leading in NV and WI; Democrats leading in AZ and GA. Three key battleground states which are yet to be called are Arizona, Nevada and Georgia. The Georgia seat could end up having to be decided via an election run-off which would be held on December 6th. As such, the outcome of the election might not be known for weeks.
“It is clear that any Republican majority is likely to be extremely narrow. From a market perspective, that would certainly be attractive,” said DWS Global Chief Investment Officer Bjoern Jesch. “On the one hand, this would remove corporate tax increases or other spending packages that would have threatened both houses if the Democrats marched through. On the other hand, the Republicans would probably be too divided to set their own strong accents in legislation.”
Back to markets, where Nasdaq 100 futures were down -0.5%, while S&P 500 futs slipped 0.4% at 7:30 am ET after fluctuating between gains and losses one day after stocks capped a three-day rally.
In premarket trading, News Corp. and Disney both tumbled at least 8% after posting disappointing results. A selloff in cryptocurrencies deepened, sending Bitcoin toward the biggest four-day slump since June. Oil slid on the now daily sluggish demand outlook from China. The dollar rose while yields were flat. Affirm Holdings shares tumbled 16% as analysts said the buy-now-pay-later firm’s guidance cut and ongoing credit deterioration overshadowed a solid quarter. Meta Platforms Inc. gained after confirming job cuts of about 13% and let more than 11,000 of employees go. Here are some of the biggest US movers today:
Amyris shares slump 22% in US premarket trading after the chemical products distributor reported third-quarter revenue that missed the average analyst estimate. Piper Sandler said more clarity was given on the outlook, but thought there was still some uncertainty.
Axon Enterprise reported strong quarterly results and the outlook for the taser and body cameras maker remains strong, analysts say. Axon shares rose 7.7% in extended trading following the results.
CarGurus shares drop 22% in premarket trading after the car retailer reported weak 3Q results and gave disappointing guidance, with analysts unsure how long it will take the firm to fix the challenges it faces.
Keep an eye on News Corp (NWSA US) after the company reported first-quarter revenue that came ahead of Guggenheim’s estimates, though the broker notes management’s comments on headwinds stemming from factors such as exchange rates persisting into the next quarter.
Kroger stock gains 1.3% in premarket trading as Evercore ISI upgraded it to outperform, saying that risk/reward appears favorable with food inflation likely to stay higher for longer.
Shares in cryptocurrency- exposed companies dropped in US premarket trading as digital currencies extended their losses, with Binance’s potential takeover of troubled rival exchange FTX stoking worries over the fragility of the industry.Riot Blockchain (RIOT US) -3.8%, Marathon Digital (MARA US) -5%, MicroStrategy (MSTR US) -7%, Coinbase (COIN US) -5%
Tesla shares rise as much as 1.9% in US premarket trading following three days of losses and lowest level since June 2021; CEO Elon Musk sold $3.95 billion of shares in the electric-vehicle maker.
Upstart slumps about 26% in US premarket trading and is set to hit the lowest level since its IPO in 2020. The AI lending platform’s 3Q results are well below expectations as it deals with significant pressure on its core business from a weakening macro backdrop, analysts say.
Investors had hoped for a Republican “Red Wave” in Congress, with the best outcome seen as GOP control of both the House of Representatives and Senate. Optimism for shares has been helped by a history of robust performance following midterm results. Stocks have tended to flourish during times when government is constrained and polls suggest Republicans could make gains, placing a check on Democratic policies. But voters – and the USPS – delivered a mixed verdict, with Republicans heading for control of the House by smaller margins than forecast and the race for Senate still wide open. The final outcome may not be known for days or even weeks if the results are as close as polls have suggested and if losers challenge results.
“The Republican aim of controlling both houses hangs by a thread,” Chris Beauchamp, the chief markets analyst at IG Group in London, wrote in a note. “A divided House might mean the partisan battles over spending and the debt ceiling are not quite as dramatic or vitriolic, but this is unlikely to brighten the policy outlook markedly. Instead, the focus will likely return to the Federal Reserve and the US economy.”
That left Thursday’s inflation report the next catalyst for markets. Economists are expecting the figures to show consumer prices cooled slightly compared with the previous month. The data could provide crucial clues on how the Federal Reserve is likely to proceed with tightening monetary policy.
“Tension is high and investors won’t want to be burnt by jumping the wrong way ahead of that inflation data, because in the past expectation has proved a little off the mark,” said Danni Hewson, a financial analyst at AJ Bell.
In Europe, the equity benchmark fell for the first time in four days, dragged by tech, real estate, travel- and automotive-industry shares. Euro Stoxx 50 falls 0.7%. IBEX is flat but outperforms peers, DAX lags, dropping 0.8%. Here are some of the biggest European movers today:
Vantage Towers shares jump as much as 11% after Vodafone said in a statement that it will deconsolidate its 81.7% interest in the tower business by creating a joint venture with KKR and Global Infrastructure Partners to hold the stake.
Smiths Group rises as much as 5.4%, hitting the highest since Feb. 2020, with analysts saying the industrial group delivered a strong start to its fiscal year.
Recordati shares rise as much as 4.8%, hitting the highest since Sept. 19 and extending gains after its results in the prior session, as Banca Akros upgrades its rating on the drugmaker.
Scor shares reversed earlier declines on the back of its third quarterly loss in a row and climbed as much as 4.5%, as analysts focused on their deep value and noted that a cost- cutting plan marked a pivotal moment for the French reinsurer.
Commerzbank shares decline despite the German lender delivering a beat on its quarterly earnings, with Deutsche Bank flagging what looks like conservative guidance for 2024. Shares fall as much as 7.6%.
Evotec falls as much as 12%, the most in three months, after analysts said the German biotech missed quarterly estimates, with investments in the Just-Evotec Biologics arm hurting profits.
ITV shares drop as much as 6.6% after the broadcaster said rising costs will be an issue in 2023. Barclays notes this is the first time ITV has mentioned that inflation may hit its costs and earnings. While 3Q results largely met expectations, analysts say the 4Q advertising outlook fell short amid growing economic uncertainty.
Marks & Spencer falls as much as 7%, the most since Sep. 29, after the UK retailer’s trading update is seen as offering little reassurance in the face of demand headwinds and cost inflation.
Earlier in the session, Asian shares were little changed after three straight gains of more than 1%, as a rally in tech stocks offset losses in Chinese shares and investor worries about US midterm election results. The MSCI Asia Pacific Index was up 0.01% as of 6:04 p.m. in Singapore, with chipmakers TSMC and Samsung Electronics among the biggest boosters, while Chinese internet names fell amid concerns over Singles Day sales. With Republicans headed toward control over the US House of Representatives — albeit by a smaller margin than forecast –some investors say it portends difficulty in passing legislation during a trying economic period, while others see political gridlock as preserving status quo. “This could be a dysfunctional political situation at a time of economic crisis,” said Gary Dugan, chief executive officer at the Global CIO Office. However, there may be some positive impact on Asia stocks if the dollar tops out, he added.
Meanwhile, tech shares extended a rebound on cheaper valuations, boosting benchmarks in Taiwan and South Korea. Key gauges in China and Hong Kong, however, dropped for a second straight day after a recent rebound. The decliners were influenced as Chinese producer prices fell into deflation for the first time in nearly two years amid lockdowns and new Covid cases in Beijing jumped. While Asia’s benchmark index has rebounded more than 7% from a recent trough, all eyes are on US consumer price inflation data due Thursday for a sense of the Federal Reserve’s next policy step. Growing lockdowns in China are also weighing on sentiment. “We don’t think the worst is over for Asian equities even though the markets have bounced back about 7% from the late October bottom and flows have picked up,” said Manishi Raychaudhuri, a strategist at BNP Paribas. “The Fed’s hawkish stance on inflation shall sustain till there are clear signs of core inflation peaking out.”
Japanese stocks fells: the Topix dropped 0.4% to 1,949.49 at the 3 p.m. close in Tokyo, while the Nikkei 225 declined 0.6% to 27,716.43. Nintendo contributed the most to the Topix’s loss, decreasing 7.1%. Out of 2,165 stocks in the index, 1,020 rose and 1,022 fell, while 123 were unchanged.
In India, stocks fell from their near-record levels as investors booked profits in recent outperformers such as ICICI Bank and Hindustan Unilever. Stocks across Asia were mixed as investors await midterm poll results in the US. The S&P BSE Sensex fell 0.3% to 61,033.55 in Mumbai, while the NSE Nifty 50 Index eased by an equal margin. Both indexes still trade about 1% short of their record levels seen in October last year. Fifteen of BSE Ltd.’s 19 sector sub-gauges dropped, led by consumer durable companies as trading resumed after a holiday on Tuesday. Tata Motors, the owner of Jaguar Land Rover, reported smaller-than-expected loss for September quarter, adding to Indian companies’ stronger show for the earnings season. Of the 44 Nifty firms that have announced results so far, 31 have met or beaten analysts’ estimates, while 10 missed. ICICI Bank contributed the most to the Sensex’s decline, decreasing 0.6%. Out of 30 shares in the index, 8 rose and 22 fell.
Australian stocks rallied for a 4th day: the S&P/ASX 200 index rose 0.6% to close at 6,999.30, boosted by gains in mining and real estate shares. A gauge of mining shares hit the highest since Aug. 26 after metal prices increased. Shares of gold miners, including St Barbara, were the benchmark’s best performers after the metal advanced on a slide in the US dollar. In New Zealand, the S&P/NZX 50 index was little changed at 11,143.48.
In FX, the Bloomberg Dollar Index rebounded and the greenback rose versus all of its Group-of-10 peers as risk assets turned lower. One-day hedging costs rallied across the major currencies, modestly higher than what the roll suggested, as focus shifts to Thursday’s US inflation report. Risk sensitive currencies, such as the kiwi and pound fell by around 1% against the greenback. The euro fell, but remained above parity.
The pound plunged by as much as 1.1% after three days of gains, while gilts twist flattened. Bank of England monetary policy committee members Jon Cunliffe and Jonathan Haskel are due to speak later, a day after Chief Economist Huw Pill suggested that the stimulus program through the pandemic was a mistake and contributed to inflation
Australian sovereign bonds extended opening gains after data showed that China’s producer prices fell into deflation for the first time in nearly two years. The producer price index declined 1.3% in October from a year earlier after gaining 0.9% the previous month
Japanese government bonds rose after a solid sale of 30-year bonds alleviated concerns about demand for super-long debt. The yen was steady
In rates, Treasuries were mixed with the curve flatter, pivoting around a little-changed 10-year sector. Bunds outperform, bull-flattening sharply, while stocks hover near top of Tuesday’s range. US yields richer by nearly 2bp across long-end of the curve and cheaper by ~1bp across front-end, leaving 2s10s, 5s30s spreads flatter by 1bp and 2bp on the day, while 10-year at around 4.125% is little changed from Tuesday’s close. Bunds outperform by 4.5bp in the 10-year sector, gilts by 1.2bp. Focal points of US session focus include 10-year note auction and a couple of Fed speakers ahead of Thursday’s inflation data: the US auction cycle resumes with $35b 10-year at 1pm, followed by $21b 30-year Thursday; Tuesday’s 3-year note sale was strong, drawing a yield 1.2bp below the WI at the bidding deadline. Two-year German and Italian government bond yields inched up while falling further out. One trader has placed a large bet using options on German 10-year futures, targeting the yield to fall to 1.55% for maximum profit, down from about 2.25% currently
In commodities, WTI drifts lower to trade near $88. WTI and Brent futures are softer intraday as the Dollar claws back some recently lost ground and sentiment remain tilted to the downside, while China’s COVID situation remains an overhang for the complex. Spot gold fell roughly $7 to trade near $1,705/oz, swayed from gains to losses after testing resistance at its 100 DMA (1,715/oz) in early European hours, before a turn in risk sentiment spurred the Dollar and hit the yellow metal. Base metals are pressured by the downbeat risk tone and the firmer Dollar, but 3M LME copper holds onto a USD 8,000/t handle after testing USD 8,100/t to the upside overnight.
Cryptocurrencies slipped further as Binance’s potential takeover of embattled rival exchange FTX.com highlighted how strains in the digital-asset industry are buffeting some of its top players. Bitcoin traded as much as 7.7% lower.
To the day ahead now, and although investors will be digesting the midterm results, there are a few central bank speakers to look out for as well, including the Fed’s Williams and Barkin, the ECB’s Elderson, and the BoE’s Haskel and Cunliffe.
Market Snapshot
S&P 500 futures down 0.4% to 3,820.50
STOXX Europe 600 down 0.8% to 418.34
MXAP up 0.2% to 144.17
MXAPJ up 0.5% to 464.43
Nikkei down 0.6% to 27,716.43
Topix down 0.4% to 1,949.49
Hang Seng Index down 1.2% to 16,358.52
Shanghai Composite down 0.5% to 3,048.17
Sensex down 0.2% to 61,067.52
Australia S&P/ASX 200 up 0.6% to 6,999.30
Kospi up 1.1% to 2,424.41
German 10Y yield down 0.9% to 2.26%
Euro down 0.2% tp $1.0051
Brent Futures down 0.7% to $94.71/bbl
Gold spot down 0.3% to $1,707.98
U.S. Dollar Index up 0.1% to 109.79
Top Overnight News from Bloomberg
US voters delivered a mixed verdict in elections shaped by inflation and splits around social issues, with Republicans headed toward control of the US House, but by smaller margins than forecast
Consumers’ expectations for inflation over the next 12 months rose to 5.1% in September from 5% in August, European Central Bank says in statement summarizing the results of its monthly survey
Euro-area wage growth has jumped, with most occupations seeing raises of at least 3%, according to an analysis of job ads that also suggests the pace of increases may be flattening
Two key indicators of Chinese interbank borrowing costs have hit a three-month high, as the nation’s central bank faces a crucial decision on what to do with a massive amount of policy loans due next week
Hungary’s annual price growth increased by a full percentage point in October to 21.1%, data published Wednesday showed. The nation is closing in on the three Baltic states that have the fastest inflation in the EU
A more detailed summary of global markets courtesy of Newsquawk
Asia-Pac stocks traded cautiously and US equity futures were indecisive as attention focused on the trickling results from the US Midterm Elections where a red wave has so far not yet materialised although Republicans are in a strong position to take control of the House, while the Senate race is still widely viewed as a toss-up. ASX 200 was led higher by strength in the mining-related sectors although upside was capped as financials are subdued following results from National Australia Bank which posted an increase in FY profit but warned of a significant slowdown in lending growth for the current fiscal year. Nikkei 225 faded its initial gains with price action lacklustre amid a slew of earnings and despite Japan’s Cabinet approving a JPY 29.1tln extra budget to fund the stimulus package. Hang Seng and Shanghai Comp swung between gains and losses with early strength in property names after China’s state planner asked large banks to step up lending for manufacturing infrastructure and developers, with China to provide initial support of around CNY 250bln in bond financing to private firms, although COVID-related headwinds persisted following a further increase in China’s daily infections and participants also reflected on the mixed-to-soft inflation data. Chinese developers jumped the most in eight months as a regulator expanded financing support for the sector.
Top Asian News
China’s Guangzhou reportedly locked down a second district due to coronavirus. However, it was separately reported that China lifted the lockdown in the area around Foxconn’s Apple (AAPL) iPhone plant as planned, according to Bloomberg.
China’s Guangzhou locks down another district amid COVID, according to Bloomberg.
China reported 1,346 (prev. 890) new coronavirus cases in the mainland for November 8th, 1,294 (prev. 843) new local cases and 6,989 (prev. 6,801) new asymptomatic cases, according to Reuters.
US President Biden will highlight a commitment to rules-based international order in the South China Sea during the ASEAN summit and will talk about the need for peace and stability throughout the Indo-Pacific region and across the Taiwan Strait, according to a senior administration official cited by Reuters.
RBA’s Bullock reiterated that further rate hikes will be needed. Wage growth is a bit stronger than thought three months ago. Good reason to think approaching peak of the inflation cycle, via Reuters.
In Europe, major bourses hold a downside bias after seeing some choppiness at the cash open and following a somewhat mixed APAC handover. Sectors are all in the red with a clear defensive bias as Telecoms, Utilities, Healthcare, Food & Beverages post the shallowest losses, whilst Tech, Travel & Leisure, Real Estate and Retail reside at the other end of the spectrum. US equity futures traded sideways on either side of breakeven overnight and in early European hours but have since drifted under the overnight lows.
Top European News
UK PM Sunak could raise the top rate of income tax, according to The Telegraph. Options being discussed include raising the 45% top rate, or lowering the GBP 150k annual income threshold at which it kicks in.
UK Chancellor Hunt is set to scrap former PM Truss’ plan for investment zones, according to FT.
EU is mulling Eurobonds for Ukraine fund, Politico reported – will propose a new EU instrument to finance EUR 18bln.
ECB Says 12-Month Consumer Inflation Expectations Rose Slightly
Adidas Cuts Margin Forecast After Ending Yeezy Partnership
M&S Falls Amid Concerns Over Demand, Cost Inflation For Retail
Top Sunak Ally Williamson Resigns Amid Bullying Allegations
Commerzbank’s New Targets Disappoint Investors as Charges Mount
FX
DXY attempted to stop the rot and nurse some losses awaiting the remaining and potentially game-changing Midterm Election results, with the index now on either side of 110.00.
The NZD and GBP underperform and more ground than other majors as the Buck bounced, with nothing obvious in terms of negative NZ or UK factors.
Traditional havens JPY and CHF are off best levels, but retained a safety premium as the rout in crypto currencies raged on and the ripples reverberated across to stocks.
Fixed Income
US Treasuries are braced for the long bond sale that wraps up this week’s rather mixed Quarterly Refunding.
Gilts remain in the green having digested an average Green offering.
Bunds saw a lack of positive reaction despite a very well received 2032 German auction.
Commodities
WTI and Brent futures are softer intraday as the Dollar claws back some recently lost ground and sentiment remain tilted to the downside, whilst China’s COVID situation remains an overhang for the complex.
US Energy Inventory Data (bbls): Crude +5.6mln (exp. +1.4mln), Cushing -1.8mln, Gasoline +2.6mln (exp. -1.1mln), and Distillate -1.8mln (exp. -0.9mln).
IEA’s Birol said OPEC+ might need to rethink its output cut decision, according to Bloomberg
Spot gold swayed from gains to losses after testing resistance at its 100 DMA (1,715/oz) in early European hours, before a turn in risk sentiment spurred the Dollar and hit the yellow metal
Base metals are pressured by the downbeat risk tone and the firmer Dollar, but 3M LME copper holds onto a USD 8,000/t handle after testing USD 8,100/t to the upside overnight.
Geopolitics
North Korea fired a missile, according to South Korean military; could be a ballistic missile, according to Japanese Coast Guard; projectile has fallen outside of Japan’s EEZ.
German cabinet has agreed to block the prospective Chinese takeover of Elmos chip factory and ERS electronics, according to government sources cited by Reuters.
US Event Calendar
07:00: Nov. MBA Mortgage Applications, prior -0.5%
10:00: Sept. Wholesale Trade Sales MoM, est. 0.5%, prior 0.1%
10:00: Sept. Wholesale Inventories MoM, est. 0.8%, prior 0.8%
Central Banks
03:00: Fed’s Williams Discuss Risk and Uncertainty at Event in Zurich
11:00: Fed’s Barkin Discusses the Economic Outlook
20:00: Fed’s Kashkari Discusses Inflation and the Economy
DB’s Jim Reid concludes the overnight wrap
As has been anticipated, it will take a few days to unpack the full results of the US midterms. What is clear at this hour though is that neither major party is running away with the election in a ‘wave’ and it appears that Republicans are still on track to achieve a majority in the House of Representatives, a combo that should put a pin in any new fiscal stimulus for the next few years. The New York Times model is currently showing that the Senate will likely finish with 50 seats each. So overall maybe Democrats slightly outperforming but it’s not too far away from expectations. The mix also seems to not be surprising markets too much, as S&P 500 futures (-0.07%) are oscillating between gains and losses as we go to press. Our US team will be hosting a webinar later today to unpack the implications with the link to register here.
As we awaited the results of the midterm elections, risk assets continued to put in a decent performance yesterday, with the S&P 500 (+0.56%) advancing for a 3rd consecutive session. A reminder that if history’s any guide that could prove to be just the start however, since in all 19 post-war midterm elections, the S&P 500 has closed above its levels on the day of the election after a year. We highlighted this a couple of months ago and in yesterday’s CoTD we showed how the 3 quarters from midterms have been the top 3 quarters for the S&P 500 since 1949 across the 4 year presidential cycle. However as I’ve eluded for a while, although I’ve thought midterms would be a short-term positive catalyst I suspect we won’t see this record spell stretch into a 20th successive positive outcome 12 months on. I’m going to take a stab at why we should ignore history today in my CoTD.
Back to yesterday and gains were pretty broad-based for a relatively modest index-level increase, with over 70% of the index moving higher on the day, and only the consumer discretionary sector in the red (-0.30%) on the day thanks to Tesla’s (-2.93%) decline. The Nasdaq flitted around zero, trading as much as +1.70% higher and -0.87% lower before splitting the difference to finish up +0.49%. After the close, Mark Zuckerberg confirmed that layoffs would start at Meta tomorrow, which won’t help tech sentiment. The sentiment wasn’t any better following Disney’s after-hours earnings, which came in below consensus and had the company ready to find “meaningful efficiencies” in light of rising costs. Disney’s shares were -6.83% lower after the close.
The S&P 500 had a bit of a wild swing after Europe went home moving from +1.35% to -0.55% in the space of an hour before closing higher (+0.56%) as Bitcoin (long time no mention) plunged to $17,187 having been as high as $20,655 as European equity markets closed. It bounced back into the close and is at similar levels as we type this morning at $18,430. Crypto exchange FTX.com had been suffering from a liquidity crunch before rival Binance agreed to buy it yesterday and the associated story created a fair amount of noise, some of it creeping into equities. This morning in Asia there are a few concerns the deal isn’t binding so one to keep an eye on. Before the late US vol, the STOXX 600 (+0.78%) hit its highest level in nearly two months, whilst the DAX (+1.15%) hit its highest level in nearly three months.
For sovereign bonds, the main focus is still on tomorrow’s US CPI report, but there was a decent rally ahead of that as investors modestly dialled back their expectations of future central bank rate hikes. For instance, the futures-implied rate for the Fed in December 2023 came down -6.1bps to 4.80%, having traded as high as 4.88% earlier in the European morning. In turn, that prompted a rally in Treasuries across the curve, with the 10yr yield down -9.0bps on the day to 4.12%, with roughly half of the decline in real yields, which fell -5.2bps. In the meantime, the 2s10s yield curve flattened -1.7bps to -53.1bps, remaining just above its post-1982 closing low of -57.3bps from last week. Meanwhile, in Asia, 2 and 10yr yields are back up a basis point.
Over in Europe, there was a similar sovereign bond rally, with yields on 10yr bunds (-6.3bps), OATs (-6.6bps) and gilts (-9.0bps) all lower on the day. At the front end however, UK gilts underperformed, with the 2yr yield up +5.3bps after BoE chief economist Pill said that “there is more to come” on rates following their 75bp hike last week. Overnight index swaps are currently pricing a nearly even split between a 50bps or 75bps hike at the next meeting in December.
This morning in Asia, equities are mostly trading lower led by the Hang Seng (-1.52%) with the CSI (-0.75%), the Shanghai Composite (-0.35%) and the Nikkei (-0.54%) all trading in negative territory. Elsewhere, the KOSPI (+1.00%) is bucking the trend.
We’ve had softer price data coming out of China as the nation’s producer price index (-1.3% y/y) in October fell for the first time in two years, down from +0.9% growth in September as strict Covid restrictions coupled with a sluggish property sector amid global recession risks dented the economy. Meanwhile, consumer inflation in October (+2.1% y/y) moderated from September’s 29-month high of +2.8% (v/s +2.4% expected) pointing towards underlying domestic price pressures remaining modest.
Staying on China, the Chinese yuan extended its decline for a third day, weakening past the 7.25 level against the dollar after the data. The subdued inflation figures suggests that the PBOC policy divergence against its global peers will continue.
There wasn’t much in the way of data releases yesterday, with Euro Area retail sales growing by +0.4% in September, in line with expectations. That said, there was a positive revision to August which showed that retail sales were unchanged, as opposed to the -0.3% contraction previously released. Otherwise in the US, the NFIB’s small business optimism index for October fell for the first time since June, coming in at 91.3 (vs. 91.4 expected).
To the day ahead now, and although investors will be digesting the midterm results, there are a few central bank speakers to look out for as well, including the Fed’s Williams and Barkin, the ECB’s Elderson, and the BoE’s Haskel and Cunliffe.
Tesla Pops For First Time In 3 Days After Musk Reports $4 Billion In Stock Sales
Tesla shares are higher this morning after Tesla CEO Elon Musk, in the midst of the mid-term election fray last night, filed a Form 4 showing billions of dollars in stock sales. It marks the first time Tesla shares are higher in three days.
Investors are likely betting that the selling pressure of the last three days is set to subside, though we won’t know until the cash session opens today whether or not that will be the case. Last night it was reported on a Form 4 that Musk had sold 19.5 million shares of stock for about $4 billion over the last three days.
It has been speculated that Musk needs to consummate the sales in order to support his $44 billion takeover of Twitter, a platform that has seen an advertiser (and revenue) exodus in the days following Musk taking the helm. Musk has also leaned on financing from Binance, Ron Baron’s BAMCO, Andreessen Horowitz, Twitter’s former CEO Jack Dorsey and Prince Alwaleed bin Talal bin Abdulaziz of Saudi Arabia, CNBC wrote.
These sales are on top of the nearly $22 billion Musk sold in 2021, according to CNBC. So far this year he sold over $8 billion in stock in April and about $7 billion in August.
It is unclear if Musk has more stock to sell. In the past he has taken to Twitter to assure investors that he is finished selling, but we’ve seen no such Tweet this time. Yesterday’s Form 4 would have been filed near the time limit for Musk to have to disclose the share sales.
Short seller and perpetual Musk critic Jim Chanos also made a good point on Twitter last night, pointing out that Musk had already told his followers that he was done selling Tesla stock for the Twitter deal back in August.
“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk wrote.
Republicans See Gains In Midterms, But ‘Red Wave’ Hopes Fade As Democrats Outperform
Republican candidates have managed to push ahead of Democrats in the midterms, but the predicted red wave appears to have turned out to be little more than a ripple…
As of the time of writing, Petr Svab reports at The Epoch Times that the GOP is still on track to take over the House of Representatives but may eke out only a razor-thin majority.
In the Senate, the balance of power is likely to remain unchanged with Democrats on an easier path to shore in at least 50 seats with Vice President Kamala Harris casting the tie-breaker to keep them in control.
Republicans recorded the most striking success in Florida, where Gov. Ron DeSantis fortified his mandate, swiping nearly 60 percent of the vote, up from less than 50 percent in 2018, when he secured victory by 0.4 percent.
“We made promises to the people of Florida and we have delivered on those promises. And so today, after four years, the people have delivered their verdict. Freedom is here to stay,” DeSantis said in his victory speech to a roaring crowd of supporters at the Tampa Convention Center on Nov. 8.
The governor contrasted conditions in the Sunshine State with that of the other parts of the country under Democratic control.
“We set out a vision we executed on that vision. And we produced historic results and the people of this state have responded in record fashion,” he said.
“Now, while our country flounders due to failed leadership in Washington, Florida is on the right track.”
Gov. Ron DeSantis gives his victory speech after being the projected winner over Democrat Charlie Crist:
“We chose facts over fear. Education over indoctrination … Today, after 4 years, the people have delivered their verdict: Freedom is here to stay.”pic.twitter.com/j13BIuQnrS
In Ohio, JD Vance beat Rep. Tim Ryan (D-Ohio) for an open U.S. Senate seat. “I am overwhelmed with gratitude,” Vance told supporters in Columbus. “I cannot express possibly in words how grateful I am.”
“We need better leadership in Washington, D.C., and that’s exactly what I promise to fight for every single day,” he added.
In the rest of the country, however, it was largely Democrats overperforming.
Democrat Josh Shapiro defeated Republican Doug Mastriano by more than 11 points in the Pennsylvania gubernatorial race.
Shapiro’s four-year term will lengthen Democrat rule in the executive office to 12 years. Current Democrat Gov. Tom Wolf is completing his second term. Eight years is the limit in Pennsylvania.
Shapiro, who is currently state Attorney General, will likely keep many of the policies Wolf has championed such as the Regional Greenhouse Gas Initiative, a cap-and-trade program that consumers are starting to notice through their higher energy bills.
Josh Shapiro speaks to supporters at the Greater Philadelphia Expo Center in Oaks, Pennsylvania, on Nov. 8, 2022. (Mark Makela/Getty Images)
Democrats have also flipped governorships in Maryland and Massachusetts, though both states generally lean blue, making those seats ripe for an upset.
In Arizona, Republican Kari Lake is still holding on to the hope of closing the 11-point gap between her and Democrat Katie Hobbs as much of the vote remains to be counted.
With the race too close to call, Lake took the stage at 10 p.m. and told watch partygoers that she was ready to “fight to win,” and, even if it takes hours or days, she’s confident about her chances. She also said her campaign is getting results that in-person voting favored her.
Democratic gubernatorial candidate Katie Hobbs (L) and Republican gubernatorial candidate Kari Lake (R). (The Epoch Times)
In a bitter fight to the end, Hobbs and Lake blasted each other on the campaign trail and courted Arizona voters until Election Day. They also ran on wholly opposite views on how best to govern Arizona.
Democrat Governors of Kansas and Wisconsin, Laura Kelly and Tony Evers, have managed to keep their seats, but by less than 3 percentage points. Some votes in those states still remain to be counted.
In the Senate races, the closely watched contest in Pennsylvania has been called by the Associated Press for Democrat John Fetterman, though Republican Mehmet Oz hasn’t conceded. Due to several election rule controversies in the state, the results may still get challenged in court.
In a victory speech before a cheering crowd in Pittsburgh, Fetterman repeated his campaign slogan:
“Every county, every vote.”
Then he said:
“That’s exactly what happened. We jammed them up. We held the line. I never expected that we were going to turn these red counties blue, but we did what we needed.”
Fetterman, who suffered a stroke in May, appeared animated and delivered his victory speech smoothly.
Behind the scenes, a number of vote-counting issues could threaten to tie up the final, official results of the election.
On Election Eve, Fetterman’s campaign filed a federal lawsuit seeking to force officials to count mail-in ballots with improper or missing dates. And on Election Day, officials in Philadelphia made an emergency change to a vote-counting process—a move they said they felt forced to make even though it could delay vote tallies by several days.
Final, unofficial vote tallies are not due until Nov. 15, and final certified results are to be filed by Nov. 28, Acting Secretary of the Commonwealth, Leigh Chapman, told reporters on Election Night.
Democratic Senate candidate John Fetterman speaks to supporters during an election night party in Pittsburgh, Pennsylvania, on Nov. 9, 2022. (Jeff Swensen/Getty Images)
The Georgia race between Sen. Raphael Warnock and Republican Hershel Walker remains too close to call and is likely to head for a December runoff.
As of press time, Warnack has picked up about 1.94 million votes, or 49.4 percent, compared to Walker’s roughly 1.90 million votes, or 48.5 percent, according to Decision Desk HQ. About 98 percent of the votes in Georgia have been counted.
Warnock has remained confident about winning the race. Writing on Twitter at around 3:45 p.m. ET, he said he will have more votes than his opponent.
“And whether we need to work all night, through tomorrow, or for four more weeks, we will do what we need to and bring this home,” Warnock wrote.
On Tuesday night, Walker asked supporters to “hang in there a little bit longer.”
“I’m telling you right now, I am like Ricky Bobby, I don’t come to lose,” Walker said.
If neither Walker nor Warnock surpasses the 50 percent threshold, they will head the Dec. 6 runoff.
Sen. Mark Kelly (D-Ariz.) holds on to a nearly 17-point lead over his Republican challenger Blake Masters.
Sen. Mark Kelly (D-AZ) delivers remarks to supporters at his election night rally at the Rialto Theatre in Tucson, Arizona, on Nov. 08, 2022. (Kevin Dietsch/Getty Images)
Republican challenger Adam Laxalt has taken a considerable lead over Sen. Catherine Cortez Masto (D-Nev.) with 72 percent counted, at 0700ET.
In Wisconsin, Sen. Ron Johnson may just barely save the seat for Republicans with Democrat Mandela Barnes pulling within about 1.5 points.
“We’ve looked very closely at the numbers,” Johnson said. “We feel very confident that there’s no way that they can really make up that gap.
“But I’m not going to declare victory until all the numbers are in, but I just want to give you guys a sense that this race is over.”
Supporters of Sen. Ron Johnson (R-WI) watch election returns during an election night party at the Best Western Premier Bridgewood Resort in Neenah, Wisconsin, on Nov. 08, 2022. (Chip Somodevilla/Getty Images)
In the House, Republicans have so far flipped nine seats and Democrats flipped three. Republicans are projected to squeeze out around 226 seats, securing them a slight majority.
Republican Thomas Kean Jr. was able to flip the 7th District of New Jersey, which used to be solidly red, but was won for Democrats in 2018 by Rep. Tom Malinowski.
Lauren Boebert, now representative-elect, speaks to supporters during a campaign rally in Colona, Colo., on Oct. 10, 2020. (Jason Connolly/AFP via Getty Images)
On the other hand, Republican firebrand Rep. Lauren Boebert could lose her seat in Colorado’s 3rd District to Democrat Adam Frisch.
The bottom line is Republican hopes for a wide House majority were dashed as Democrats held more seats than expected and even flipped a few Republican ones.
Votes are still being counted early Wednesday morning, but current totals indicate that House Republicans will control the chamber by a slim margin, making it more difficult to govern and giving small groups of lawmakers out-sized power.
The race for control of the Senate could very well come down to a Dec. 6 runoff in Georgia.
Democrats picked up a Senate seat in Pennsylvania, and Republicans have a strong chance of flipping a seat in Nevada. Early returns suggest Democrats could keep a seat they have in Arizona and Republicans retain a seat they now have in Wisconsin.
The so-called MAGA Republicans, backed by Trump, did not fare as well as expected.
From the market’s perspective, this means gridlock – just as it wanted:
“It is clear that any Republican majority is likely to be extremely narrow. From a market perspective, that would certainly be attractive,” said DWS Global Chief Investment Officer Bjoern Jesch.
“On the one hand, this would remove corporate tax increases or other spending packages that would have threatened both houses if the Democrats marched through. On the other hand, the Republicans would probably be too divided to set their own strong accents in legislation.”
Following a WSJ report earlier this week that explained Meta Platforms was about to slash thousands of jobs, CEO Mark Zuckerberg confirmed the layoffs in a letter to employees premarket Wednesday.
“I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go,” Zuckerberg told employees in a letter published on the company’s website.
Zuck said, “We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”
He continued: “I want to take accountability for these decisions and for how we got here. I know this is tough for everyone, and I’m especially sorry to those impacted.”
The letter said job reductions would be observed across all its business segments. Meta said it would reduce office space, move to desk sharing for some workers, and extend a hiring freeze through the first quarter of next year.
“This is a sad moment, and there’s no way around that,” Zuck said, adding he misjudged post-Covid online activity. He believed elevated online activity during the virus pandemic would continue, though he was entirely wrong:
“I got this wrong, and I take responsibility for that.”
Shares of Meta are higher on the news, up more than 3% to the $99 handle in the premarket.
As of the last earnings, Meta had over 87,000 employees (and has never seen a quarterly decline in headcount in its 18-year history). That will change in the next quarterly report…
As a reminder, CEO Mark Zuckerberg told employees at a companywide meeting at the end of June:
“Realistically, there are probably a bunch of people at the company who shouldn’t be here.”
Read Zuck’s full letter to employees:
Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.
I want to take accountability for these decisions and for how we got here. I know this is tough for everyone, and I’m especially sorry to those impacted.
How did we get here?
At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that.
In this new environment, we need to become more capital efficient. We’ve shifted more of our resources onto a smaller number of high priority growth areas — like our AI discovery engine, our ads and business platforms, and our long-term vision for the metaverse. We’ve cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We’re restructuring teams to increase our efficiency. But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go.
How will this work?
There is no good way to do a layoff, but we hope to get all the relevant information to you as quickly as possible and then do whatever we can to support you through this.
Everyone will get an email soon letting you know what this layoff means for you. After that, every affected employee will have the opportunity to speak with someone to get their questions answered and join information sessions.
Some of the details in the US include:
Severance. We will pay 16 weeks of base pay plus two additional weeks for every year of service, with no cap.
PTO. We’ll pay for all remaining PTO time.
RSU vesting. Everyone impacted will receive their November 15, 2022 vesting.
Health insurance. We’ll cover the cost of healthcare for people and their families for six months.
Career services. We’ll provide three months of career support with an external vendor, including early access to unpublished job leads.
Immigration support. I know this is especially difficult if you’re here on a visa. There’s a notice period before termination and some visa grace periods, which means everyone will have time to make plans and work through their immigration status. We have dedicated immigration specialists to help guide you based on what you and your family need.
Outside the US, support will be similar, and we’ll follow up soon with separate processes that take into account local employment laws.
We made the decision to remove access to most Meta systems for people leaving today given the amount of access to sensitive information. But we’re keeping email addresses active throughout the day so everyone can say farewell.
While we’re making reductions in every organization across both Family of Apps and Reality Labs, some teams will be affected more than others. Recruiting will be disproportionately affected since we’re planning to hire fewer people next year. We’re also restructuring our business teams more substantially. This is not a reflection of the great work these groups have done, but what we need going forward. The leaders of each group will schedule time to discuss what this means for your team over the next couple of days.
The teammates who will be leaving us are talented and passionate, and have made an important impact on our company and community. Each of you have helped make Meta a success, and I’m grateful for it. I’m sure you’ll go on to do great work at other places.
What other changes are we making?
I view layoffs as a last resort, so we decided to rein in other sources of cost before letting teammates go. Overall, this will add up to a meaningful cultural shift in how we operate. For example, as we shrink our real estate footprint, we’re transitioning to desk sharing for people who already spend most of their time outside the office. We’ll roll out more cost-cutting changes like this in the coming months.
We’re also extending our hiring freeze through Q1 with a small number of exceptions. I’m going to watch our business performance, operational efficiency, and other macroeconomic factors to determine whether and how much we should resume hiring at that point. This will give us the ability to control our cost structure in the event of a continued economic downturn. It will also put us on a path to achieve a more efficient cost structure than we outlined to investors recently.
I’m currently in the middle of a thorough review of our infrastructure spending. As we build our AI infrastructure, we’re focused on becoming even more efficient with our capacity. Our infrastructure will continue to be an important advantage for Meta, and I believe we can achieve this while spending less.
Fundamentally, we’re making all these changes for two reasons: our revenue outlook is lower than we expected at the beginning of this year, and we want to make sure we’re operating efficiently across both Family of Apps and Reality Labs.
How do we move forward?
This is a sad moment, and there’s no way around that. To those who are leaving, I want to thank you again for everything you’ve put into this place. We would not be where we are today without your hard work, and I’m grateful for your contributions.
To those who are staying, I know this is a difficult time for you too. Not only are we saying goodbye to people we’ve worked closely with, but many of you also feel uncertainty about the future. I want you to know that we’re making these decisions to make sure our future is strong.
I believe we are deeply underestimated as a company today. Billions of people use our services to connect, and our communities keep growing. Our core business is among the most profitable ever built with huge potential ahead. And we’re leading in developing the technology to define the future of social connection and the next computing platform. We do historically important work. I’m confident that if we work efficiently, we’ll come out of this downturn stronger and more resilient than ever.
We’ll share more on how we’ll operate as a streamlined organization to achieve our priorities in the weeks ahead. For now, I’ll say one more time how thankful I am to those of you who are leaving for everything you’ve done to advance our mission.
This week, the World Gold Council (WGC), which is a gold market development organization representing 32 of the world’s gold mining companies, published the latest quarterly edition of it’s well-known “Gold Demand Trends” research publication.
In the latest edition, which is titled “Gold Demand Trends Q3 2022”, the World Gold Council claims that during Q3 2022, “central banks continued to accumulate gold, with purchases estimated at a quarterly record of nearly 400 tonnes.”
“Global central bank purchases leapt to almost 400 tonnes in Q3 (+115% q-o-q). This is the largest single quarter of demand from this sector in our records back to 2000 and almost double the previous record of 241t in Q3 2018.
It also marks the eighth consecutive quarter of net purchases and lifts the y-t-d total to 673 tonnes, higher than any other full year total since 1967.”
Specifically, the World Gold Council claims that Q3 2022 central bank gold demand was 399.3 tonnes, which is a massive 340% higher than Q3 2021.
Until that is, you read a bit further and see that the World Gold Council added a caveat for Q 3 2022 central bank gold demand, saying that for “Q3 net demand includes a substantial estimate for unreported purchases”.
Wait, what was that? The Q3 gold buying from central banks includes “a substantial estimate for unreported purchases”? At first glance, and at subsequent glances, this sentence doesn’t add up. Some purchases went unreported, but were somehow estimated? By who? If unreported, how were they estimated? If the estimate was a substantial estimate, does this mean that there were substantial unreported purchases?
The World Gold Council report continues:
“The level of official sector demand in Q3 is the combination of steady reported purchases by central banksanda substantial estimate for unreported buying.”
‘Data’ was only a ‘Suggestion’
So the 399.3 tonnes number in the WGC report is made up of some purchases which were reported by central banks, and also someone estimated a large quantity of buying which was not reported anywhere. What kind of scientific methodology is this, you may ask? Confused? You will be.
The WGC report tries to explain it’s numbers, but arguably digs itself deeper into a hole:
“This is not uncommon as not all official institutions publicly report their gold holdings or may do so with a lag.
It’s also worth noting that while Metals Focus suggests purchases occurred during Q3, it’s possible they may have started earlier in the year. In turn, this may result in future revisions as more information becomes available.”
Wait a minute! Metals Focus ‘suggests’ that unreported purchases occurred in Q3, but possibly these weren’t from Q3. And who is “Metals Focus” anyway? And why is the WGC replying on a methodology based on mere suggestions? i.e. ‘suggesting purchases occurred in Q3’?
Before looking at who Metals Focus is, and why they are involved in the World Gold Council reports, let’s see what else the World Gold Council said about Q3 2022 central bank gold buying.
Reported gold buying – Emerging Market central banks
Given that the elephant in the room is “a substantial estimate for unreported buying”, the World Gold Council report plays it safe and does not address this point further, and limits itself to only addressing central bank gold transactions that were reported at a country level, stating that these were “confined to a relatively small number of emerging market banks.”
These emerging market central bank gold purchases included the Turkish central bank, which accumulated another 31 tonnes of gold during the third quarter, the Central Bank of Uzbekistan which bought 26 tonnes of gold in Q3, the Reserve Bank of India which bought 17 tonnes of gold in Q3, and the central banks of Mozambique (2 tonnes), the Philippines (2 tonnes) and Mongolia (1 tonne).
On the sell side, during Q3 Kazakhstan sold a net 2 tonnes, while the UAE sold a net 1 tonne.
A summary of most of the main country level central bank gold purchases and sales during Q3 can be seen on this WGC website page here.
Qatar – An Inconvenient Fact
Importantly, the WGC report also refers to the Qatar Central Bank, saying that the Qataris bought 15 tonnes of gold in July, but then at the same time the WGC refuses to recognise that the Qatar Central Bank bought an additional 15.75 tonnes of gold between August and September, saying that the Qatar Central Bank “seemingly added more in both August and September, but we are awaiting IMF data to confirm the exact level of buying”, because “early data from the IMF is patchy”.
As readers of BullionStar will know, after buying 15 tonnes of gold during July, the Qatar Central Bank then bought another 4.73 tonnes of gold in August (see here), and then purchased an additional 11 tonnes of gold during September.
Qatar’s Central Bank (QCB) appears to have bought an additional 11 tonnes of gold during September, bringing its total gold holdings to 88 tonnes. Latest QCB International Reserves data here🏅 https://t.co/cKAGvOidYw#WorldCup@KrishanGopaul
The full country level central bank gold purchases and sales which the WGC data includes can be seen in a WGC Excel spreadsheet at this link. Tallying all the monthly changes of every country over July, August and September 2022 (and taking out the double counting of Turkey’s central banks and commercial banks) gives a net purchase total of only about 89.5 tonnes over Q3, which is a far cry from the 399.3 tonnes which the WGC (and Metals Focus) claim central banks bought during the third quarter.
In fact, there are an astounding 310 tonnes of purchases attributed to unreported buying, which is an incredible 77.6% of total claimed central bank gold purchases during Q3 2022.
In other words, only 22.4% of the Q3 total of 400 tonnes of claimed central bank gold purchases can be attributed to reported purchases by central banks.
So hang on a minute? The World Gold Council won’t acknowledge that the Qatar Central Bank bought 15.75 tonnes of gold in August and September (even though it’s clearly stated on the Qatar Central Bank international reserves reports on the Bank’s website here), but the World Gold Council is, at the same time, willing to accept mere “suggestions” from Metals Focus that other central banks bought a massive 310 tonnes of gold during Q3? What kind of double standards are these?
And what kind of methodology is it that uses ‘suggestions’ from a third party – i.e. Metals Focus? Turning to the “notes and definitions” page of the WGC’s Gold Demand Trends Q3 2022, central Bank gold buying is merely defined as:
“Net purchases (i.e. gross purchases less gross sales) by central banks and other official sector institutions, including supra national entities such as the IMF. Swaps and the effects of delta hedging are excluded.”
The Puppet Master – Metals Focus
There is no mention of Metals Focus. Nor does the World Gold Council’s ‘Central Bank data Methodology‘ pdf mention Metals Focus either.
The Q3 Gold Demand Trends report (the full pdf version of which is here also provides no clues on who Metals Focus is, only mentioning Metals Focus as a source in a few of the charts in the report, and also in a footnote mentioning Metals Focus as follows:
“Country-level gross sales and purchases based on the most recent IMF IFS and respective central bank data available at the time of writing.
This may not match the net central bank demand figures published in this report as Metals Focus uses additional sources of information to obtain its estimates.”
(page 12 – footnote 4)
But to see any explanation of who Metals Focus is, we need to go to the WGC’s Gold Demand Trends “Supply and demand data methodology note” (pdf) which is linked from this WGC page here.
In section 1 of this note, titled “Demand & supply data provider”, we find that:
“Our core demand and supply data are provided by Metals Focus, a leading independent precious metals consultancy.
Metals Focus meets our strict criteria for the provision of demand and supply data, which includes the need for an extensive global network, an experienced team, and a robust methodology.
These elements combine to create a framework for collecting accurate, granular and transparent estimates for gold demand and supply.”
Hold on another minute? Transparent? And a robust methodology?
Section 3 of the same note, titled “Data collection process”, has the following to say about how Metals Focus collects central bank gold demand data:
“Central bank demand is calculated using information from three different sources.
Monthly International Financial Statistics (IFS) produced by the IMF serve as an initial check for central bank transactions, but it is important to be aware that not all changes will reflect an outright sale or purchase – for example, swap activity can appear as a change to central bank holdings.
A second vital source is confidential information regarding unrecorded sales and purchases.
The final element in calculated net central bank purchases is analysis of trade flow data.”
In the case of this of 310 tonnes of unreported gold buying in Q3, this was by definition not in the IMF IFS data, since it wasn’t reported in any country level reporting to the IMF IFS database.
Also the 310 tonnes can’t have been in ‘trade flow data’ since monetary gold HS Code 71082000), as Metals Focus well knows, is globally exempt from being reported in any trade flows.
London Confidential
So that leaves “confidential information regarding unrecorded sales and purchases”.
So basically, as you can see, the World Gold Council’s claim of central banks buying over 310 tonnes of unreported purchases in Q3 is based on a suggestion from Metals Focus, which is based on ‘confidential information’. And since no one knows what this ‘confidential information’ is, nor where it came from, there is no way to verify it.
How’s that for “granular and transparent estimates for gold demand”?
So now you can see the problem. Apart from undermining any sense of confidence in the data that the World Gold Council and Metals Focus have seemingly pulled out of the ether, there is also the problem that the major financial news outlets all ran with the 400 tonnes number for Q3 central bank gold demand, and didn’t point out the obvious issues with the data. And this reporting was everywhere this week, in multiple articles all over the world and across the web.
Bloomberg – What exactly do they do?
Furthermore, not one of the major financial news companies such as Bloomberg and Reuters, which have thousands of employees and investigative resources, even bothered to question the validity of this number, let alone devote journalistic resources to try to verify it using independent sources. How’s that for lack of professionalism in journalistic standards from Bloomberg and Reuters?
Qatar’s Central Bank (QCB) appears to have bought an additional 11 tonnes of gold during September, bringing its total gold holdings to 88 tonnes. Latest QCB International Reserves data here🏅 https://t.co/cKAGvOidYw#WorldCup@KrishanGopaul
I have been to Bloomberg’s London headquarters, and indeed it is impressive, with hundreds and hundreds of reporters and data analytics staff located on every floor, and even TV studios. Up to 4000 staff says the official Bloomberg London website.
So are we to believe that Bloomberg can’t find any staff to independently verify the data of the Metals Focus consultancy, or even visit the Metals Focus office? Or maybe they don’t want to.
Because Metals Focus has it’s head office in London at 74/76 St John St, London EC1M 4DT. And Bloomberg has it’s European headquarters office in London at 3 Queen Victoria St, London EC4N 4TQ. And these buildings are less than 1 mile away from each other, as you can see on the map below:
So instead of questioning the data and using some of it’s 4000 London staff to go out and investigate the identity of the central banks in question, Bloomberg is content to run with the World Gold Council / Metal Focus ‘substantial estimate’ that is based on non-verifiable ‘confidential information’, and to write shallow clickbait articles such as “Mystery Whales Baffle Gold Market After Central Bank Purchases” and “Who Are The Mystery Buyers Responsible For Central Bank Gold Boom?” referring to a secretive bunch of unidentified sovereign buyers. All Bloomberg can do is speculate that it might be China or Russia or India or some of the middle eastern nations:
“Central banks bought 399 tons of bullion in the third quarter, almost double the previous record, according to the World Gold Council. Just under a quarter went to publicly identified institutions, stoking speculation about mystery buyers.”
A normally dry research report jolted the gold market this week, when it pointed to massive but so far unidentified sovereign buyers https://t.co/xjCVGqAv2l
If at this stage, you’re thinking why didn’t I ask Metals Focus to explain it’s sources for unreported central bank gold buying, I did. But they didn’t answer.
@MetalsFocus You make a substantial estimate of about 310 tonnes of unreported gold buying by central banks during Q3. What are your sources? https://t.co/rbG3GZZubO
When looking at physical gold demand and supply, Metals Focus and the World Gold Council use a supply – demand model where total gold supply in any year or quarter has to equal total gold demand in that same year or quarter. Here,
‘Gold supply’ = The total of mine production, net producer hedging and recycling, and
‘Gold demand’ = The total of jewellery fabrication, technology fabrication, investment and net purchases by central banks”
But could it be that this quarter, that the only way for the model to balance was to plug in a figure for central bank gold demand and claim that the data is a substantial estimate due to unreported buying? As the data is based on ‘confidential information’, no one would be able to verify it or confirm or deny it.
This is something that ‘Macro Tourist’ on Twitter suggested, where he used the 399 tonnes but used both sets of Turkish gold additions, and got unreported purchases of 280 tonnes (and not 310 tonnes). He says “I have a feeling they made this number up to balance Q3 supply and demand“:
The WGC number of 399t is made up of 119t reported purchases and 280t their own estimate of “unreported purchases”. I have a feeling they made this number up to balance Q3 supply and demand
If this is the case, that would explain why the World Gold Council is so eager to taken on board all the ‘suggestions’ of Metals Focus as regards estimates of unreported buying, since the WGC has even revised it’s 2022 full year estimate for central bank gold purchases, saying that:
“We can’t rule out further unreported buying so have revised our forecast higher for FY 2022.” (page 3 of the report)
Conclusion
So what are we to make of the fact that more than three-quarters of the claimed central bank gold purchases have been estimated by Metals Focus due to Metals Focus saying that they are ‘unreported purchases’? Because if they are unreported, how does Metals Focus know about the purchases, but no one else knows? Did they overhear it down the pub in the City of London where the gold traders hang out? And who were the sellers? Because for every buyer, there’s a seller.
At the end of the day, it’s very unscientific and un-transparent of Metals Focus and the World Gold Council to expect people to just consume these claims, and unprofessional of Bloomberg, Reuters and others to run with the number without doing their own investigations.
The main question really is, why does the Gold Establishment not want a light shone on the central bank gold world and why are they protecting the secrecy. Equally, why do the large financial media organisations such as Bloomberg, never want to investigate the central bank gold market. If this was the international oil market, they’d be all over OPEC and the producers and the industry with a huge number of reporters and journalists doing an extensive investigation.
Could it be that none of them want to rock the boat and irritate the central banks so they never look to investigate the central bank gold market?
On it’s website, the World Gold Council claims that it’s people are “the global experts on gold”, as well as “the authority on gold”, and some of the Council’s stated aims are to “facilitate greater market efficiency”, and “improve trust”.
“Trust is earned when words and actions meet. In conjunction with our members and other market participants, we build confidence in the gold market by creating and upholding standards for transparency and integrity across the gold value chain.”
But how can publishing an opaque figure of 310 tonnes of unreported central bank gold buying be in any way “upholding standards for transparency”? It’s not.
“dedicated to providing world-class statistics, analysis and forecasts to the global precious metals market.”
Except that these world-class statistics and analyses don’t extend to explaining how Metals Focus came up with the massive figure of 310 tonnes of central bank gold demand during Q3. The figure was just quietly slipped into the “largest single quarter of demand from this sector since records began” back in 2000.
On Bloomberg’s official London headquarters website, there is a quote from founder Michael Bloomberg stating that:
“This building is designed to encourage cooperation and collaboration, and that’s what makes for a successful business.”
Sadly, when it comes to the central bank gold market, Bloomberg, in not encouraging cooperation and collaboration in devoting some of it’s massive resources to establishing facts and investigating sources, but is instead running with unverified data.
But maybe that’s what they want. To protect central bank secrecy in the gold market instead of exposing it.
FedEx Parks Planes, Maersk Cancels Sails: World Trade Appears To Be Rapidly Deteriorating
Economic storm clouds are gathering worldwide as some of the largest shipping companies warn about sliding global trade. US shipper FedEx and Danish shipping giant A.P. Moller-Maersk A/S have been vocal about emerging signs of a global slowdown. Both of these companies are widely seen as a barometer for international trade.
The latest to warn about weakening economic growth is FedEx CFO Michael Lenz telling an audience Tuesday at the Robert W Baird Global Industrial Conference that the company has reduced flights and parked planes to cut costs in response to soft demand for package delivery.
Look, we absolutely will realize more of the structural cost savings in the second half of the year. That’s where you get more of the benefits start to roll in principally from — at Express, the flight reductions.
When you park the aircraft, particularly the older airplanes that we’re packing, you’re deferring a maintenance event, which is a significant expense. While at the same time, you have relatively low ownership costs on those.
So it’s an operationally and financially flexible way to manage capacity there. So as I said, we’re projecting a lower demand outlook for the foreseeable future here.
I don’t have a perfect crystal ball to say what the overall macro environment will be. Don’t have a full year earnings outlook for FY ’23. So I don’t have any specific projection to give you there, but rest assured, as some of these specifics that I was highlighting illustrate, we are fully committed to continuing to take the actions we need for changed expectations of what the operating environment is.”
Lenz provided more details about how many domestic and international flights were reduced:
We’ve eliminated roughly 8 or 9 international frequencies, about 23 domestic frequencies thus far that were — came into the schedule change we did in October. We’ve got another 8 or 9 domestic frequencies that will go in, in November.
The cost-cutting measures align with the firm’s surprise earnings pre-announcement in mid-September about macroeconomic weakness worldwide. At the time, it said it was withdrawing its fiscal year 2023 earnings forecast.
FedEx CEO Raj Subramaniam then went on CNBC’s Jim Cramer’s evening show and warned Wall Street analysts and investors about a global slowdown, indicating a global recession was ahead.
And it’s not FedEx. Maersk, the world’s largest owner of container ships, lowered its outlook for the growth of 2022 global container demand, forecasting 2023 could be worse. There are even reports that the company is canceling sails.
“There are plenty of dark clouds on the horizon,” the company wrote in its latest earnings report, adding, “this weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.”
The latest from the IMF’s World Economic Outlook and World Bank’s Economic Prospects is a downshift in global economic growth with high inflation, i.e., stagflation.
Then the UN Conference on Trade and Development warned global central banks are hiking interest rates too aggressively, which could trigger an economic crisis.
Keep an eye on JP Morgan’s consolidated global manufacturing PMIs that just went into a contraction.
All the rate hikes by global central banks this year have a 9-12 month lag before hitting world trade. So this all may indicate 2023 could be a disastrous year for the global economy.
