45.3 F
Chicago
Saturday, April 26, 2025
Home Blog Page 2540

Adidas Shares Crash Over $1.3 Billion Pile Of Unsold Yeezy Shoes

0
Adidas Shares Crash Over $1.3 Billion Pile Of Unsold Yeezy Shoes

Adidas AG shares trading in Germany crashed after it published its financial guidance for 2023 and warned it’s sitting on a 1.2 billion euros ($1.3 billion) pile of unsold Yeezy product. 

The German sportswear company said it’s ‘reviewing’ all options for utilizing its Yeezy inventory. It said, “this guidance already accounts for the significant adverse impact from not selling the existing stock.” 

Operating profit will decline by 500 million euros if the company fails to sell the products and expects sales to decline at a high-single-digit rate this year. The company might write off its remaining products if the inventory isn’t repurposed. 

In December, we first pointed out Adidas was sitting on a half billion dollars of Yeezy products. Today’s report doubles that number to a staggering $1.3 billion. 

“The numbers speak for themselves. We are currently not performing the way we should,” CEO Bjørn Gulden wrote in a statement. 

Gulden said this “will be a year of transition to set the base to again be a growing and profitable company.” 

In October, Adidas terminated its partnership with Kanye West, who now goes by Ye, after antisemitic comments. 

Gulden added: 

“We need to put the pieces back together again, but I am convinced that over time we will make adidas shine again. But we need some time.”  

Adidas shares crashed 12% on today’s horrible 2023 outlook. 

Here’s what Wall Street analysts are saying about Adidas (courtesy of Bloomberg): 

Jefferies (cut to hold from buy, PT to €150 from €140) 

  • The confirmation of an even-deeper earnings trough for 2023, though needed for a quicker rebuild in profit, “will spook many,” analyst James Grzinic says 
  • The disconnect between the operational delivery at Adidas and the exceptional cash returns will likely see the company end 2022 with a slight net-debt position 
  • As such, assume no dividend proposal for 2022 or 2023 and cut rating given the rebound for the stock set agains a difficult medium-term profit outlook

Oddo (cuts to underperform from neutral, PT to €120 from €124) 

  • “Massive” warning on both Yeezy and other problems within the business, with market seemingly too-optimistic on inventory clearing and promotional volumes, analyst Andreas Riemann says
  • Not selling more Yeezy is not a surprise, but the magnitude is and given this cannot explain the shortfall entirely, believe there are additional problems which may take years to resolve

Morgan Stanley (underweight, PT to €110 from 115)

  • “Material reset” for Adidas in 2023, driven by the combination of losing any profit contribution from the highly-profitable Yeezy line and from weaker underlying performance, analyst Edouard Aubin says 
  • Bulls will say this is a classic “kitchen-sinking” by the new CEO, who is know to guide conservatively 
  • Yet this report confirms what the broker has been hearing in the trade, that Adidas has an unattractive profit line, it is losing market share in a number of categories and has a bigger inventory issue than peers

UBS (neutral, PT €150) 

  • Based on the tone of the press release, see a high likelihood that the Yeezy business will be “scrapped entirely” going forward, analyst Zuzanna Pusz says
  • The update may provide a “reality check” for the market given the re-rating in Adidas shares recently

Credit Suisse (underperform, PT €103) 

  • The warning underlines the weakness of the Adidas brand and damage to the margin structure of the company, analyst Simon Irwin says 
  • Assume the cut to guidance driven by weaker gross margins and operating de-leverage, which means much of the margin rebound will have to come from the cost lines

RBC (sector perform, PT to €110 from €130) 

  • Had been anticipating Adidas would book one-offs in FY23 but the lower underlying guidance has resulted in a “materially worse” outlook than expected, analyst Piral Dadhania says 
  • See much work to do for Adidas across its corporate culture, on products, on lower sell-through rates, inventory and digesting the Yeezy exit, which can all be achieved but which will take time
  • Materially cutting FY23 estimates and continue to prefer Puma and Nike

Baader (reduce, PT €133) 

  • Outlook is “horrible” and and the cut to the sales and earnings guidance is “much deeper than anybody projected,” analyst Volker Bosse says

Senior leaders at the German sportswear company have learned a valuable lesson not to concentrate large segments of the business on one relationship. 

Let’s not forget Beyoncé’s clothing line with Adidas is another flop. The Germans sure know how to pick influencers…

Tyler Durden
Fri, 02/10/2023 – 08:20

Futures Extend Slump To 3rd Day As Tech Rout Accelerates, Yields Rise, Oil Surges

0
Futures Extend Slump To 3rd Day As Tech Rout Accelerates, Yields Rise, Oil Surges

Global markets dropped, US futures extended their slump into a third day and the Nasdaq 100 was on course for its first weekly loss of 2023, while Treasuries extended a selloff as wagers for more hawkish monetary policy mounted. Oil rose after Russia said it will cut output. Nasdaq futures were down 1.1% by 730 a.m. ET after the tech-heavy index lost 0.9% during the previous session, bringing this week’s declines to 1.5%. Nasdaq futs have broken below the support level of the rising channel since the start of the year.

The tech benchmark is still up over 13% year-to-date, but expectations of interest rates staying higher for longer – at least for a few more days – after a blowout US payrolls report and concerns about inflation pressures are weighing on sentiment. Investors will be closely watching the US inflation report next Tuesday for clues on the Fed’s monetary policy outlook.

S&P futures were also down, off by 0.6% and trading near session lows, and at the lowest level since the Golden Cross earlier this week. Treasury yields held gains across the curve after investors inverted the TSY yield curve by the most since the early 1980s, a sign of flagging confidence in the economy’s ability to withstand additional Federal Reserve hikes. The dollar reversed earlier losses when the yen surged after a report that Japan’s Prime Minister Fumio Kishida had picked the hawkish Kazuo Ueda as the next head of the BOJ.

In premarket trading, Lyft tumbled as much as 35% after the ride-hailing company said it would prioritize lower prices to attract more customers, a move it expects to shrink future profits. Expedia Group was lower in premarket trading after reporting a fourth-quarter miss driven by bad weather. Here are some other notable premarket movers”

  • BuzzFeed and SoundHound AI lead fellow artificial intelligence-related stocks lower in US premarket trading. The group is poised to extend losses from Thursday. AI-related stocks falling in premarket trading: BuzzFeed -10%, SoundHound AI -6%, BigBear.ai -3.5% and C3.ai Inc. -4%
  • Expedia Group dips 2.3% after the US online travel agency reported a fourth-quarter miss, driven by bad weather. That said, a surge in January bookings sparks optimism around recovery in 2023, with some analysts raising price targets.
  • PayPal shares slip 0.4%, erasing earlier gains, as analysts weighed the payment company’s miss on fourth-quarter total payment volume against better-than-expected EPS guidance, with some looking for more evidence of growth to justify further gains in the stock.
  • Cloudflare rises 7.3% after the infrastructure software company gave a 2023 revenue forecast that beat the average analyst estimate. Analysts raised their price targets and said that the guidance will allay some investor concerns.
  • Bloom Energy shares jumped 7.4% as analysts nudged their price targets higher on the power generation equipment maker, noting the company’s fourth-quarter revenue beat estimates.
  • News Corp. shares drop 2.8% in US postmarket on Thursday after the media company reported adjusted earnings per share for the second quarter that missed the average analyst estimate and said it will cut 5% of its staff this year, or about 1,250 positions.

Stocks are heading for their first weekly decline in three after a chorus of Fed speakers reinforced the need to keep raising rates for longer, following a strong payrolls report, quashing the optimism that spurred a powerful rally in January. Next week’s inflation update from the US offers a relevant potential inflection point in the Treasury yield curve, according to Benjamin Jeffery and Ian Lyngen, strategists at BMO Capital Markets  “Our expectations are that the market takes away sufficient angst regarding the prevailing inflation trend to press the inversion trade even further,” they wrote in a note.

Investors have become increasingly jittery about a hawkish policy tilt are paying close attention to official comments and economic data for clues on the rates trajectory. In Japan, reports of a surprise nomination for Kazuo Ueda to take helm at the Bank of Japan sparked a jump in the yen. It pared gains later as Ueda said the BOJ’s stimulus should stay in place.

“The momentum this week is building towards realizing that Powell’s last speech is actually not dovish and that translates on Treasuries yield and the Nasdaq,” said John Plassard, investment specialist at Mirabaud, confirming once again that price action sets the daily narrative. Investors initially brushed off the Fed chief’s warning on Tuesday that borrowing costs may need to peak higher than previously expected, and instead focused on his outlook that 2023 will be a year of significant declines in inflation.

And speaking of deflation, next week’s CPI data will mark a turning point for the equity rally at a time when investors are swapping stocks for bonds amid the specter of a recession, according to Bank of America strategists. US equity funds saw their first redemptions in three weeks, according to BofA’s note citing EPFR Global data. Bank of America strategist Michael Hartnett said that while it was “so very tempting” to believe that last week’s blowout US jobs report for January indicated the economy could avoid a contraction, the consumer-price data on Tuesday will be “vital” for clues on when the Federal Reserve would start easing up on monetary policy. Hartnett reiterated his 4,200 “sell” level.

In Europe, stocks were also lower with the Stoxx 600 down 1.1% and on course to snap a three day winning streak. Retailers, travel and consumer products are the worst-performing sectors. Here are some of the biggest European movers.

  • Adidas shares drop as much as 12%, the most since March 2020, after the sportswear group warned that the fallout from the dispute with rapper and former partner Ye might lead to a €700 million operating loss in 2023
  • Roche voting shares fall as much as 7.9% on news that an unnamed shareholder plans to sell a 2.5% stake in the Swiss pharmaceutical company
  • HelloFresh falls as much as 8.9% as the meal-kit delivery firm is cut to underweight from neutral at JPMorgan
  • Standard Chartered declines as much as 7% after First Abu Dhabi Bank reiterates that it’s not evaluating a possible offer for the London-based lender
  • Schibsted slides as much as 5.7% after results, trimming a recent rally, after the Norwegian firm failed to offer Ebitda guidance at a group level
  • Thule falls as much as 18%, the most since September, after the Swedish outdoor and bicycle equipment maker said it would replace its CEO
  • Enel shares gain as much as 3.5%, the most since Jan. 4, after the Italian utility reported full-year revenue and adjusted Ebitda that beat estimates
  • Saab jumps as much as 11% to a record after reporting a strong full-year performance
  • Neobo Fastigheter AB rises as much as 56% on its first day of trading, bucking a trend in the real estate market that’s recently been in the limelight for its struggles
  • Nobia gains as much as 5.6% after the Swedish kitchen interiors manufacturer reported in-line numbers in its 4Q report
  • Iveco soars as much as 15%, the steepest gain on record, after the company reported 4Q results that Mediobanca (neutral) said are strong and “far above” consensus across the board

Earlier in the session, Asian stocks were poised for a second weekly decline as worries about a more hawkish Federal Reserve weighed on sentiment, while a pullback in China’s reopening rally also dragged the region’s equities.  The MSCI Asia Pacific Index fell as much as 1.1% on Friday, with losses driven by consumer discretionary and communication service shares. The Hang Seng Index declined the most among benchmarks, led by Chinese technology stocks, while gauges for South Korea and Australia also fell. Onshore Chinese shares continued to retreat from their highs as traders await fresh impetus, with a mild pick-up in inflation — seen as reflecting improving demand — doing little to support share prices.  Meanwhile, Japanese stocks edged higher as strong earnings from chipmakers providing a boost. However, Nikkei futures slipped after a report said Kazuo Ueda will be nominated as the Bank of Japan’s next governor. The Asian stock benchmark was poised to drop more than 1% this week, extending its slide from a late-January high. Global investors are starting to price in the prospect of higher interest rates, following a strong US jobs report last week and a string of hawkish comments by Fed officials. “Some investors are ramping up bets that we could see a whole lot more Fed tightening, but overnight index swaps are still pricing in easing by the end of the year,” said Edward Moya, senior market analyst at Oanda. “If inflation ends up being hotter-than-expected, the Fed will most likely go back to the hawkish playbook and signal more work needs to be done.”

Stocks in India declined for a second week in three amid rising wagers for further rate hikes by the global central banks, while an extension of a selloff in Adani Group shares weighed on investor sentiment.   The S&P BSE Sensex fell 0.2% to 60,682.70 in Mumbai on Friday, stretching its weekly decline to 0.3%, while the NSE Nifty 50 Index declined by by a similar measure. The Reserve Bank of India raised its key lending rate by 25 basis points as expected to 6.50% earlier this week. The rate-setting panel said it remains open to further hikes if the inflation accelerates. US Federal Reserve as well as the Reserve Bank of India seem to be using a “firmer tone” regarding inflation containment, and “both sounded quite determined to hike rates again if data points favor the same,” according to Joseph Thomas, head of research at Emkay Wealth Management.  Nine out of BSE Ltd.’s 20 sector-gauges fell on Friday, led by metal companies, which were also among worst performers for the week as worries over global growth and monetary tightening hurt stocks across Asia.  Reliance Industries contributed the most to the Sensex’s decline on Friday, decreasing 0.8%. Out of 30 shares in the Sensex index, 14 rose, while 16 fell. Adani Group stocks capped another week of losses as a review by MSCI Inc. spurred concern about passive outflows from shares already reeling from the rout triggered by US short seller Hindenburg Research’s scathing report.

In FX, the dollar edged higher against its Group-of-10 peers as traders awaited Tuesday’s key inflation data to assess the outlook for Federal Reserve rate hikes. The gauge is set for a 0.3% gain this week as traders lifted bets on peak Federal Reserve policy rate after a slew of officials reiterated the need to hike rates further to quash inflation. In Japan, the yen initially jumped on media reports of a surprise nomination for Kazuo Ueda to take helm at the Bank of Japan — suggesting investors saw the move as hawkish. The currency later pared gains after Ueda said it’s important to keep BOJ easing for now

In rates, US treasuries extended losses over the London session, following wider selloff in bunds and gilts as money markets ramped up expectations that the ECB will raise the deposit rate to 3.75% by September. Front-end-led selloff in core rates pushed German 2-year yield 8bps higher to 2.77%, the highest since 2008. US yields cheaper by 3bp to 4.5bp across the curve with losses led by intermediates, cheapening the 2s5s10s spread by 1.5bp on the day; 10-year yields up to around 3.70% are near cheapest levels of the day with bunds and gilts lagging by 3bp and 4.5bp in the sector. Bear-flattening move in German curves have knocked 2s10s, 5s30s spreads tighter by 1bp and 2.5bp vs Thursday’s close.

In commodities, oil prices surged after Russian Deputy Prime Minister Alexander Novak said the country will cut output in March by 500,000 barrels per day. Russia did not consult with OPEC+ on its March oil production reduction, it was an independent decision, according to a source cited by Reuters. Subsequently, Russia’s Kremlin says Russia held talks with some OPEC+ members on its decision to cut its oil output. OPEC+ will not boost supply in reaction to the Russian cut, according to delegates cited by Reuters. Brent crude futures have added 2.6% to trade around $86.70.  Spot gold is little changed around $1,864.

To the day ahead now, and data releases include UK GDP for Q4, Italian industrial production for December, and in the US there’s the University of Michigan’s preliminary consumer sentiment index for February. From central banks, we’ll hear from the Fed’s Waller and Harker, the ECB’s Schnabel and de Cos, and BoE chief economist Pill.

Market Snapshot

  • S&P 500 futures down 0.7% to 4,062.25
  • MXAP down 0.8% to 166.52
  • MXAPJ down 1.1% to 542.42
  • Nikkei up 0.3% to 27,670.98
  • Topix little changed at 1,986.96
  • Hang Seng Index down 2.0% to 21,190.42
  • Shanghai Composite down 0.3% to 3,260.67
  • Sensex down 0.2% to 60,701.20
  • Australia S&P/ASX 200 down 0.8% to 7,433.66
  • Kospi down 0.5% to 2,469.73
  • STOXX Europe 600 down 0.6% to 459.65
  • German 10Y yield little changed at 2.36%
  • Euro down 0.2% to $1.0718
  • Brent Futures up 2.8% to $86.83/bbl
  • Gold spot up 0.1% to $1,863.42
  • U.S. Dollar Index little changed at 103.29

Top Overnight News from Bloomberg

  • Japanese Prime Minister Fumio Kishida will nominate Kazuo Ueda, a professor and former Bank of Japan board member, to take the helm of the BOJ from April, according to local media reports, in a surprise move that sparked a jump in the yen
  • Russia’s partners in the OPEC+ oil coalition signaled they won’t boost output to fill in for cutbacks announced by Moscow
  • The UK avoided a recession last year by the narrowest of margins after the cost- of-living crisis and industrial action hit the economy during December
  • The UK’s trade deficit with the European Union widened to a record in the final quarter of 2022 as imports from the bloc jumped
  • Banks in the euro zone will return another €36.6 billion ($39.2 billion) in long-term funding to the European Central Bank after the terms of the programs were toughened to help the fight against inflation

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly negative after the losses on Wall St where the major indices wiped out initial gains and virtually spent the entire session on the back foot with sentiment hampered and recession fears stoked amid the deepest 2s/10s yield inversion since the 1980s. ASX 200 was dragged lower as underperformance in tech led the declines seen in almost all sectors and after the latest RBA Statement on Monetary Policy reaffirmed that further rate hikes will be needed. Nikkei 225 bucked the trend amid an overload of earnings releases and softer PPI data, although advances were capped as participants second-guess who will succeed BoJ Governor Kuroda. Hang Seng and Shanghai Comp. were lower with Hong Kong pressured by weakness in the property and tech industries, while frictions lingered as the US seeks to take action against Chinese entities linked to the surveillance balloon and reportedly aims to curtail technology investment in China.

Top Asian News

  • RBA Statement on Monetary Policy noted that the board’s priority is to return inflation to the target and that the board expects further increases in rates will be needed, while it is mindful that a considerable adjustment to interest rates has already been made and that monetary policy affects activity and inflation with a lag and through different channels. RBA also stated there are considerable uncertainties surrounding the outlook, and so around the level of interest rates needed to achieve the Board’s objectives.
  • Singapore Backtracks on Grab’s Lawmaker Hire After Outcry
  • Adani Stocks Decline as MSCI Action Raises Concern Over Outflows

European bourses are under pressure, Euro Stoxx 50 -1.2%, in a continuation of APAC/US trade that was exacerbated by the latest geopolitical developments re. Romanian airspace. Sectors are predominantly in the red with the exception of Energy given benchmark pricing while Retail names post marked underperformance amid heavy losses in Adidas. Stateside, futures are directionally in-fitting with Europe given broader geopolitics-induced action though with marked NQ -1.0% underperformance as yields pick up globally.

Top European News

  • UK Treasury officials are in discussions to speed up Solvency II reforms and are considering whether to pursue a two-stage implementation, according to FT.
  • ECB’s Vujcic says core inflation is too high and ECB needs to see a sustained decline in the core rate. Not the time to discuss terminal, once the peak is reached will need to hold there for some time. Even if headline inflation fell below core, policy would need to remain restrictive.
  • ECB TLTRO.III February 10th window repayment figure (EUR): 36.6bln vs exp. 60-320bln (prev. 62.75bln).
  • Russian Federation Central Bank Key Rate (Feb) 7.50% vs. Exp. 7.5% (Prev. 7.5%); if pro-inflationary risks intensify will consider the necessity of hikes.
  • Roche Foundation Buys Shares as Family Voting Stake Falls to 65%
  • Jupiter’s Mid-Cap Fund Sinks Below £1 Billion AUM After 62% Fall
  • UK Trade Deficit With EU Hits Record as Brexit Curtails Exports
  • Russia to Cut Oil Output in Retaliation for West’s Sanctions
  • Brent Oil Jumps Above $86 After Russia Says It Plans Output Cut

BOJ

  • Japanese gov’t is reportedly likely to nominate Kazuo Ueda as the new BoJ Governor, via Nikkei; to nominate Himino as the new Deputy. Japanese gov’t initially approached BoJ deputy Amamiya as a possible successor but was met with a firm refusal. Click here for more detail.
  • Touted BoJ Governor nominee Ueda said the BoJ’s monetary policy is appropriate and they need to continue easy policy, speaking on NTV; when asked if he will be nominated as the next BoJ Governor, says nothing has been decided. Adds, it is important to make decisions logically and explain them clearly.
  • Japan’s government is to present the nominees for the BoJ leadership on February 14th at 02:00GMT/21:00EST, while the ruling and opposition parties are considering holding a hearing on the nominees in the lower house on February 24th, according to officials cited by Reuters. Subsequently confirmed by PM Kishida

Geopolitics

  • “Ukrainian commander in chief Zaluzhny says 2 Russian kalibr missiles entered Moldovan and NATO-member Romanian airspace on their way to targets in Ukraine”, via The Economists’ Carroll; subsequently, Romania says it cannot confirm at this point that a Russian missile crossed its airspace though Moldova confirms it entered Moldovan airspace.
  • Most recently, Romania’s Defence Ministry says Russian missile did not reach Romanian airspace, but crossed Moldovan airspace.
  • Ukrainian Energy Minister says Russian attacks hit power facilities in six regions, emergency shutdowns reported in many regions.
  • French President Macron said he doesn’t rule out sending fighter jets to Ukraine but added that it is not a priority for now, according to Reuters.
  • Brazil reportedly bowed to US pressure and agreed to delay Iranian warships from docking in Rio de Janeiro until after President Lula meets with US President Biden, according to sources cited by Reuters.

FX

  • JPY soared on reports that Ueda will be the gov’ts nomination for BoJ Governor, with USD/JPY dropping to 129.82 from 131.55; however, Ueda announcing he is happy with easy policy saw this unwind back towards 131.00.
  • Amidst this, the DXY was pushed down to 102.89 though has since been revitalised by the above Ueda commentary and geopolitics, taking the index to a session peak of 103.50.
  • More broadly, GBP and EUR initially benefitted from the above gyrations, but have since succumbed to the USD’s strength and thus have been below 1.21 and 1.07 respectively.
  • SEK continues to extend post-Riksbank while NOK benefited from very hot CPI which adds to conviction to the calls for more policy tightening than flagged by Governor Bache at the last gathering.
  • PBoC set USD/CNY mid-point at 6.7884 vs exp. 6.7885 (prev. 6.7905)
  • Banxico hiked rates by 50bps in a unanimous decision (exp. 25bps hike) and said for the next policy meeting, the upward adjustment to the reference rate could be of a lower magnitude.

Fixed Income

  • Core benchmarks came under JGB-led pressure on the initial Ueda reports, sending Bunds, Gilts and USTs to 135.88, 104.07 and 112.29+ lows.
  • However, this pressure has since eased a touch for EGBs given risk gyrations though USTs remain at session lows as the initial JGB-induced move was less pronounced stateside.

Commodities

  • WTI and Brent are bolstered following Novak announcing that Russia is to cut oil production by 500k BPD in March.
  • Currently, the benchmarks are firmer by circa. USD 2/bbl, though they have eased slightly from best levels as the USD lifts alongside the risk tone slipping somewhat.
  • MMG (1208 HK) said the Las Bambas copper mine in Peru secured critical supplies that have enabled production to continue at a reduced rate and the property remains secure but transport disruptions continue and critical supplies remain low. Furthermore, it warned that if the situation of critical supplies persists, it would be forced to commence a period of care and maintenance.
  • Damage assessment and repairs are taking place in Turkey’s Ceyhan oil terminal and exports from BTC could begin on Sunday, according to a Turkish official and industry source cited by Reuters.
  • Spot gold is modestly firmer and seemingly torn between geopolitical-induced haven appeal, though perhaps impacted by JPY action, and the associated pick up in the USD, as such the yellow metal is at the mid-point of USD 1852-1877/oz parameters.

US Event Calendar

  • 10:00: Feb. U. of Mich. 5-10 Yr Inflation, est. 2.9%, prior 2.9%
  • 10:00: Feb. U. of Mich. 1 Yr Inflation, est. 4.0%, prior 3.9%
  • 10:00: Feb. U. of Mich. Expectations, est. 63.1, prior 62.7
  • 10:00: Feb. U. of Mich. Current Conditions, est. 68.5, prior 68.4
  • 10:00: Feb. U. of Mich. Sentiment, est. 65.0, prior 64.9
  • 14:00: Jan. Monthly Budget Statement, est. -$55b, prior $118.7b

DB’s Jim Reid concludes the overnight wrap

Although the S&P 500 is still above where it was before the FOMC last Wednesday, it does feel like more challenging markets for both risk and rates have been developing since the payrolls number two days later.

After the strong 10yr auction on Wednesday, a weak 30-yr auction last night pushed yields higher across the curve in the last few hours of the session. US 30yr UST yields were up +5.5bps on the day and around 10bps off their pre-auction lows. This pulled up 10yr Treasury yields, which prior to the auction were down slightly, to close +4.8bps higher on the day at 3.658% and slightly up (+0.76 bps) this morning in Asia. There were bigger moves at the front end, with the 2yr yield up +6.1bps to 4.482%, and came as investors modestly raised their estimates of the Fed’s terminal rate. For instance, Fed funds futures are now expecting a 5.153% rate in July, up +1.5bps from the previous day, although still -0.05bps beneath its recent closing high on Monday.

The only silver lining from the poor 30 year auction was that it prevented the 2s10s curve from closing at its most inverted for 42 years. It moved as low as -87.2bps at one point before closing at -82.8bps as the back end got dragged up by the weak auction. Regardless of the brief respite, these curve levels are very extreme and at levels where a recession has always followed within months. Long-time readers will know that the 2s10s is my favourite US recession lead indicator. Critics might argue that some cycles have taken a lot longer to roll over than others after the initial inversion which means you can’t rely on the curve for timings.

However, the lead time tightens up considerably when we only count it as a signal when the yield curve inverts for 3 months. In this cycle it first (briefly) inverted at the end of March last year but then only inverted on a sustained basis since the start of last July. After the 3 months rule has been triggered in the last 70 years, 8 out of 9 recessions have occurred between 8-19 months later. In this cycle that would take us to a range between March 2023 and February 2024.

The deeper curve inversion hurt US equities after a bright start in the first half of the session but the market didn’t recover any poise in the last few hours of trading even as we steepened back. In the end, over 77% of the S&P 500 finished lower as the index posted a -0.88% loss. The large move higher in long-term yields weighed on tech stocks, which was one of the sectors that was keeping the index afloat in the morning. It was the first back-to-back -1.0% days for the S&P 500 since mid-December. Tesla remained an outperformer (+3.0%). Its share price now stands at nearly double its intraday low back on January 6, albeit down -49.98% from its all-time peak on November 4th. On the other hand, Alphabet fell a further -4.39% yesterday, following on from its -7.68% decline on Wednesday. Outside of Tesla and BorgWarner keeping the Autos sector above water (+2.44%), defensives like Food & Beverage (+0.01%) were the only industry group higher on the day.

Whilst US markets were fairly soft, European assets had a much stronger day thanks to some good news on the inflation side. First, we had the delayed German CPI figures for January, which showed inflation unexpectedly falling to 9.2% (vs. 10.0% expected) on the EU-harmonised definition. That’s a 5-month low, and is also the third consecutive decline since its peak of 11.6% back in October. The data might need to settle down a bit after the benchmark revisions though for economists to get the best view on trends. Second, European natural gas futures fell to a fresh 17-month low yesterday of €52.77 per megawatt-hour, which is another positive story for European consumers and should help sustain the recent downturn in inflation.

Against that backdrop, Euro sovereigns outperformed their counterparts elsewhere, with yields on 10yr bunds (-5.9bps), OATs (-6.1bps) and BTPs (-11.2bps) all seeing a decent decline on the day. It was a similar story for equities too, with the STOXX 600 (+0.62%) hitting a 10-month high and Germany’s DAX (+0.72%) reaching a one-year high.

The main exception to this European outperformance came from Sweden, which followed the Riksbank’s latest policy decision. This was the first meeting with the new Governor at the helm, and although the 50bps hike was expected, they also announced that QT would be starting from April and indicated that the policy rate would “probably be raised further during the spring.” That triggered a massive reaction among Swedish assets, with the Krona strengthening +2.36% against the US Dollar, whilst yields on 10yr Swedish government bonds were up by +23.0bps on the day.

Asian equity markets are mostly trading in the red following the second consecutive overnight losses on Wall Street. Across the region, the Hang Seng (-1.79%) is the biggest underperformer with the CSI (-0.72%), the Shanghai Composite (-0.60%) and the KOSPI (-0.59%) slipping in morning trading. Meanwhile, the S&P/ASX 200 (-0.67%) is also losing ground after the Reserve Bank of Australia (RBA) released its quarterly Statement on Monetary Policy (SoMP) in which it indicated that inflation remains high and flagged further interest rate hikes ahead. Elsewhere, the Nikkei (+0.22%) is bucking the regional downward trend. Outside of Asia, US stock futures are printing fresh losses with contracts tied to the S&P 500 (-0.17%) and NASDAQ 100 (-0.26%) both slightly down.

In early morning data, consumer prices in China (+2.1% y/y) rose at the fastest pace in three months in January, in line with market expectations and up from a +1.8% increase seen in December on the back of a spending surge over the Lunar New year festival. At the same time, factory gate prices (-0.8% y/y) dropped more than the anticipated -0.5% decline while extending the -0.7% drop in the preceding month. The mixed data highlights a staggered economic recovery in the world’s second largest economy even as it relaxed its stringent Covid-19 policy earlier this year. Meanwhile, Japan’s producer prices advanced (+9.5% y/y) in January (vs +9.7% expected), lower than the upwardly revised gain of +10.5% in December 2022.

There wasn’t much other data of note yesterday, but we did get the latest weekly initial jobless claims for the US, covering the week ending February 4th. Interestingly, they marked the first time this year that the number had surprised to the upside of consensus with a 196k reading (vs. 190k expected). Even so, the 4-week moving average still fell to its lowest level since April, at just 189.25k.

To the day ahead now, and data releases include UK GDP for Q4, Italian industrial production for December, and in the US there’s the University of Michigan’s preliminary consumer sentiment index for February. From central banks, we’ll hear from the Fed’s Waller and Harker, the ECB’s Schnabel and de Cos, and BoE chief economist Pill.

Tyler Durden
Fri, 02/10/2023 – 08:04

No Matter How You Turn It, The Global System Is Already Doomed: Got Gold?

0
No Matter How You Turn It, The Global System Is Already Doomed: Got Gold?

Authored by Matthew Pipenburg via Gold Switzerland,

Below we look at the interplay of embarrassing debt, dying currencies and failed monetary fantasies masquerading as policies to confirm that no matter how one turns or spins the inflation/deflation, QT/QE or recession/no-recession narratives, the global financial system is already doomed.

Recession: The Elephant in the Room

As I’ve been arguing in report after report, my view has been that the US, with its 125% debt-to-GDP and 7% deficit-to-GDP ratios, was, and already is, in a recession heading into 2023, despite official efforts in DC to re-define the very definition of a recession.

But a recession is still a recession, and an elephant is still an elephant, and both are fairly easy to see at a distance.

As of now, however, the recession has officially been avoided.

How comforting.

As with the inflation data, it’s nice when the folks in Washington can exercise their magical powers to move the goal-posts in mid-game whenever a little “cheating” helps their odds and fictional narrative.

For me, an elephantiac recession is now in the room.

The Empire Manufacturing data in my latest report, for example, supported this recessionary outlook.

In case, however, we still need more recessionary evidence, the dramatic 6 month decline in the Conference Board’s index of leading indicators serves as yet another neon-flashing warning that the recession—if not under our bow—is certainly right off our bow.

Still Hoping for a “Softish” Landing?

Furthermore, and despite Powell’s belief that his office can manage a recession with the precision of a home thermostat, his faith in what he lately described as a “softish landing” is almost as farcical as his prior attempt to describe inflation as “transitory.”

Without wishing to appear “sensational,” as many of us blunt and math-based observers (from Burry to Middelkoop) of late are described, I will stick my tin-foil-covered head out and say candidly that I see nothing “softish” ahead.

Instead, I see either: 1) a financial crisis which will dwarf 2008 and/or, 2) an absolute tanking of the USD, whose unsustainable strength throughout 2022 was indeed “transitory,” as I argued numerous times.

The Simple Math of Liquidity

The simple math and reality of even centralized and central-bank distorted markets is quite simple: These markets rise and fall on liquidity.

Once the monetary “grease” required to maintain the MMT fantasy of mouse-click money as a debt solution “tightens” too tight or runs too dry, the entire house of cards of the post-2008 fairytale comes to a hard rather than “softish” end.

Again, we saw the first signs of this collapse in the “tightening” backdrop of 2022.

Of course, this critical “liquidity” won’t be coming from economic growth, rising tax receipts, a robust Main Street or a fairly-priced market.

Instead, and as expected, it now comes from out of thin air…

Is It a Race to the Bottom for Risk Assets?

The honest but scary numbers rather than fluffy but fictional words of our financial central planners make it all too clear that unless Powell puts his finger on the Eccles-based mouse-clicker to create more fiat money (highly inflationary), US and global credit markets will simply continue their race to the ocean floor (highly deflationary or at least dis-inflationary).

As credit markets sink and bond yields and rates rise, this also means that equity markets, who have been sickly addicted to years of central-bank repressed low rates and cheap debt, will merely join those bonds on the bottom of the dark ocean floor.

In short, bonds (and hence risk parity portfolios) won’t save you. Rather than hedge stocks, they are now correlated to the same.

More Easing Won’t Bring “Ease”

Failing outright and open bond default, it thus seems that an eventual capitulation to more magical “liquidity” and renewed QE is nothing short of inevitable, which means the USD’s fall from its 2022 highs is equally the case, as shown below.

But such “easing,” if realized, will lead to more inflationary-debased Dollars and hence more inflation dis-ease for investors.

This is hard for investors to fully grasp when the Dollar seems “strong,” but even that was an illusion, and one which hardly did any asset class any good in 2022 but for the Dollar itself.

The Damage Already Wrought by the Strong USD

In the interim, the cancerous ripple-effects of the Fed’s strong USD policies, as warned throughout 2022, continue their waves of destruction, as openly evidenced by the earnings reports from our beleaguered S&P.

Already, the early data coming from its listed companies is anything but positive.

As in the July and October earnings seasons of 2022, corporate earnings for 2023 are still drowning under the weight of the USD.

But we must also keep in mind that the DXY (which measures the relative strength of the USD) has fallen 11% (from 113.9 to 101.8) over the last quarter.

If the S&P hit an October bottom during a DXY high, what can we deduce from a now falling DXY?

Will markets rise like Lazarus?

This will be something worth tracking.

But why?

Strong Dollar or Weak Dollar, No One Wins…

Should earnings and hence stocks continue to decline despite the DXY declines, this would suggest that not even a weakening USD can save these post-08, over-stretched, Fed-addicted and debt-soaked markets.

However, should stocks rise on a weaker Dollar, the percentage gains in price will only be eaten away by the invisible tax of inflation and the increasingly debased value of the very dollars used to measure those so-called “appreciating” stocks.

In short, a no-win scenario…

For now, it seems the stock market only cares about the Fed rather than the DXY, as the Fed is the market.

That is, when QE is the meme, zombie markets rise; when QT is the meme, they fall.

Again, see for yourself:

Yellen, Squawking for a Weaker Dollar?

In fact, it was during those October market lows that the queen of toxic liquidity, former Fed-Chair-turned-Treasury-Secretary (imagine that?) Janet Yellen, was suddenly ringing the bell for more magical money—i.e., “liquidity.”

Specifically, Yellen was wondering who would be buying Uncle Sam’s IOU’s without more mouse-click money from the Eccles Building?

As my latest reports on the UST markets confirmed, the answer was simple: No one.

Instead, foreign central banks were and are selling rather than buying America’s bonds. Just ask the Japanese…

Is Yellen, contrary to Powell, silently suggesting that QT has backfired? Is Yellen, unlike Powell, realizing that there are no buyers for our increasingly issued yet unloved USTs but the Fed itself?

Perhaps these tensions within the Treasury market provide the hidden clues as to why the USD has been sliding rather than rising from the DXY’s October highs?

After all, a weaker USD means less forced need for foreign nations to dump their UST reserves to come up with the money to buy their own dying bonds and strengthen their own dying currencies as a direct response to Powell’s (and originally, Yellen’s) strong USD policy.

In short, perhaps our Treasury Secretary now wants to stop the bleeding in her Treasury market…

Weaker Dollar Ahead?

My current view is therefore this: We are seeing the slow end of the strong USD policy.

Why?

Because as warned throughout 2022, such a strong USD was a massive gut-punch to foreign currencies and hence foreign holders of USD-denominated debt.

Indirectly then, the strong USD was also a gut-punch to the UST market, which saw more sellers than buyers around a crippled globe. Hence Yellen’s backfired and back-stepping fears above…

Furthermore, and returning to the aforementioned topic of recessions, I also argued throughout 2022 that no recession in history has ever been solved with a strong currency.

Given that such a recession is, again, either directly off our bow or already under it, it is likely no coincidence that the USD/DXY is now falling rather than rising.

In short has Uncle Sam’s strong Dollar finally cried, well… “Uncle”?

Or more simply stated, has Yellen realized, in private, what we’ve been arguing in public, namely: That we are already in a recession and thus need a weaker Dollar.

Powell: Ignoring Reality & Yellen?

Meanwhile, however, you have the math-challenged but psychologically tragic Jay Powell wanting to save his legacy as a Paul Volcker rather than as an Arthur Burns.

Like a child wanting to be John Wayne rather than Daffy Duck, Powell and his rate-hiked strong USD refuses to see the $31T debt pile in front of him which makes it impossible to be a reborn Volcker, who in 1980 faced a much smaller debt pile of $900B.

In short, Powell’s America of 2023, unlike Volcker’s America of 1980, can’t stomach rising rates or a strong USD.

Or stated even more simply: Powell can’t be Volcker.

Will someone at the Eccles Building please remind him of this?

Doomed Either Way

Yellen or Powell, QT or QE, strong Dollar or weak Dollar, the global financial system is nevertheless doomed.

We either tighten the bond and hence stock markets into a free fall and economic disaster, or we loosen and ease liquidity into an inflationary nightmare.

As I’ve said so many times: Pick your poison—depression or hyperinflation.

Or perhaps both…namely stagflation.

Either way, of course, Powell, and the American economy, is now doomed. And he has only Greenspan, Bernanke, Yellen, himself and years of mouse-click fantasy to blame.

Supercore (CPI) Lies from On High

Meanwhile, the lies, twisted math and Nobel-Prize level mis-information continues…

Last week, for example, I reminded readers of DC’s latest attempt to mis-report otherwise humanly-felt inflation by tweaking an already-tweaked (i.e., bogus) CPI inflation scale.

But if that comedy wasn’t already comical enough, now welcome none other than Paul Krugman to this stage of open theatrics masquerading as economic data.

According to one of Krugman’s latest neoliberal economist tweets, “3-month ‘supercore’ CPI is below Fed’s 2% inflation target,” which naturally had those equally raggish economic playwriters at the WSJ almost galvanic with theatrical “good news.”

Hmmm.

What neither Krugman nor the WSJ seemed to recognize is that “supercore” CPI excludes food, energy, shelter and the price of used cars, so yes, absolutely, if you take away all the things that actually cost lots of money, inflation is no problem at all… Bravo!

Such shameless misuse of data and headlines, of course, is almost as shameless as the misuse of monetary policy we’ve been enjoying since the Troubled Asset Relief Program…

But as stated last week, such desperate tricks from on high will continue to mount as global financial problems do the same.

An Historical Turning Point

The astounding lack of accountability from the foxes guarding our financial hen house will one day be the stuff of history books, assuming history itself is not cancelled, as it seems the study of economics has already left the room.

The best we can hope for from the very “experts” who have brought the global economy toward a mathematically unavoidable cliff are now empty words and twisted math, as per above.

Such disloyalty from our financial generals on the eve of an unprecedented strategic and tactical economic defeat of their own making reminds me of officers sitting miles from the trenches as investors go “over-the-top” toward a row of cannons pointed straight at their trusting chests.

In short: Sickening.

Gold: A Far More Loyal Lieutenant

Gold was a far more loyal asset than stocks and bonds in the turbulent times of 2022; and given that 2023 portends to be even worse, we can expect better loyalty from this so-called “barbarous relic” of the past.

With inflation ripping and war blazing, many still argue that gold did not do enough.

Hmmm…

But gold in every currency but the USD (see above) would beg to differ.

Furthermore, and as argued so many ways and times, that USD strength will not hold, as gold’s price moves this year have already tracked.

Gold’s future strength and rise is thus easy to foresee, as gold doesn’t rise, currencies just fall.

It’s really that simple.

Got gold?

Tyler Durden
Fri, 02/10/2023 – 06:30

Watch: Viktor Orban Gives Zelensky Icy Reception At EU Summit

0
Watch: Viktor Orban Gives Zelensky Icy Reception At EU Summit

Back in March, Ukraine’s President Zelensky during a virtual address shamed Hungary’s Viktor Orban, calling him out in a speech, saying “Listen, Viktor, do you know what is happening in Mariupol?” – and adding: “I want to be open once and for all you should decide for yourself, who you are for.”

But Friday was Orban’s turn to send the message back, in a bit of a snub at an EU summit in Brussels that has grabbed the attention of some Western media outlets as well as commentators online. Friday marked Zelensky’s third stop on a two-day tour through European capitals, a first since the Russian invasion began. Zelensky was greeted coldly by Orban, seen among the only EU leaders refusing to clap as Ukraine’s president jointed them on stage…

Germany’s Chancellor Scholz had said Wednesday night while alongside Zelensky and Macron in Paris that “It is a sign of solidarity. Ukrainians are part of the European family.”

But apparently PM Orban doesn’t think so, or at least his refusal to laud and celebrate the Ukrainian president as other EU leaders are doing has come through loud and clear. In the above clip, Romania’s President Klaus Iohannis isn’t clapping either, but he does have a smile on his face and appears pleased to see Zelensky.

But Orban hasn’t been shy of late in his warnings that Kiev is dragging Western Europe into a dangerous armed confrontation with nuclear-armed superpower Russia. As one American journalist recorded of Orban’s words given to a group of foreign correspondents at the end of last month

“We are in big, big trouble,” he said, of the West. If Russia’s coming spring offensive proves successful, then the NATO countries are going to be faced with the question of do we send in soldiers to fight for Ukraine? This is not something Orban thinks the American people are considering, but it is front to mind among a growing number of Europeans, whose countries stand to be devastated if war spreads.

Ukraine was of course outraged at such warnings, while it continues to lobby the West for more and more tanks, longer-range missiles, and especially advanced fighter jets.

Zelensky on Thursday continued to urge that his country be fast-tracked into NATO while it is fighting the “most anti-European force” in the world.

But as one observer comments, the whole meeting resulted in little other than symbolism

Reporting from Brussels, FRANCE 24’s Dave Keating said Ukrainian President Zelensky was “hitting the same themes” on European unity and values during the press conference following his European Council meeting.

But the Ukrainian president did get some tough questions from journalists at the end, when he was asked if there were any specific deliverables promised during his meetings in Brussels and in Paris last night, noted Keating.

Keating emphasized that “President Zelensky didn’t want to sound overly negative,” and added: “We always knew there wasn’t going to be a big deliverable. This was very much about symbolism.”

Tyler Durden
Fri, 02/10/2023 – 05:45

UN Warns ‘Very Little’ Earthquake Aid Reaching Syria Amid US Sanctions

0
UN Warns ‘Very Little’ Earthquake Aid Reaching Syria Amid US Sanctions

Via The Cradle,

US-imposed Caesar Act sanctions against the Syrian government have impeded humanitarian efforts in the country following the devastating February 6 earthquake, the UN Resident Coordinator for Syria, Mostafa Benlamlih, said on Wednesday.

Benlamlih also warned against the “politicization” of humanitarian efforts in Syria, referring to claims by western media outlets and certain aid groups that the government ‘prohibits’ aid from reaching opposition-held territory.

Iranian aid packages being unloaded in Aleppo. February 8, 2023. Image: AFP/Getty Images

“The goal of UN organizations is to deliver a message about the suffering of the Syrians as a result of the sanctions imposed on their country … These sanctions have … prevented the arrival of millions of dollars to those affected by the earthquake,” Benlamlih told Syrian news agency SANA in an interview.

“Syria today is suffering from a ‘double crisis’ as a result of the ongoing war since 2011, as well as the earthquake, which made the situation more difficult … before the earthquake, there were 15 million Syrians in dire need of assistance,” he said, adding that now, the numbers have increased significantly.

One day later, UN Special Envoy for Syria, Geir Pederson, warned against the politicization of earthquake aid. “Emergency response must not be politicized … We need to do everything to make sure that there are no impediments whatsoever to the life-saving support that is needed in Syria,” Pedersen said on Thursday.

US Secretary of State Anthony Blinken on Wednesday claimed that Washington was the ‘leading provider of aid to Syria and the Syrian people,’ despite also announcing a refusal to coordinate with the government, whose territory is inhabited by around 70 percent of the Syrian population. On the same day as Blinken’s statement, the UN warned that “very little” aid was reaching government-held territory.

Samuel Werberg, the regional spokesman for the US State Department, claimed on Wednesay during an interview with Saudi television that Washington’s sanctions do not restrict humanitarian aid deliveries in any way. Despite this, Bassam Sabbagh, Syria’s permanent envoy to the UN, said on the same day that international cargo planes “refuse” to land in Syrian airports due to the threat of sanctions.

Coinciding with Werberg’s remarks was a statement by Washington’s permanent envoy to the Organization for the Prohibition of Chemical Weapons (OPCW), Joseph Manso, who said that the US would continue to stand against normalization with the Damascus government.

“Our policy is clear. The American administration … will not normalize relations with Bashar al-Assad’s regime, and we do not support other countries’ move [to do so] unless there is real movement towards a political solution under UN Security Council Resolution 2254.”

This statement comes in the aftermath of the OPCW releasing its third report on the alleged chemical attack in Douma in 2018, which was put out as the US has been attempting in any way it can to obstruct a potential reconciliation of ties between Syria and Turkey, which was in the works under Russian auspices before the massive earthquake ravaged both countries.

Tyler Durden
Fri, 02/10/2023 – 05:00

Elon Musk’s Neuralink Accused Of Potential Illegal Movement Of Hazardous Pathogens

0
Elon Musk’s Neuralink Accused Of Potential Illegal Movement Of Hazardous Pathogens

It isn’t just Tesla that the U.S. Department of Transportation could be investigating relating to Elon Musk…

Believe it or not, it was reported on Thursday that the agency could also be looking into Neuralink, Elon Musk’s budding brain-implant startup, over allegations of potentially “illegal movement of hazardous pathogens.”

The probe was disclosed by a Department of Transportation spokesperson after an animal-welfare advocacy group called Physicians Committee of Responsible Medicine (PCRM) lobbied Secretary of Transportation Pete Buttigieg regarding records it found about the company.

The PCRM said it “obtained emails and other documents that suggest unsafe packaging and movement of implants removed from the brains of monkeys”, according to Reuters, who was first to report on the probe. 

The PCRM claims that the implants may have carried infectious diseases in violation of federal law, the report says. The Department of Transportation said it was taking the allegations “very seriously”. 

Antibiotic-resistant staphylococcus and herpes B virus were both claimed to be potentially transported without proper containment measures. Incidents of improper transportation took place in 2019, the report says, when Neuralink was still reliant on the University of California, Davis to help with its experiments. 

Neuralink’s actions “may pose a serious and ongoing public health risk”, representatives from PCRM wrote in a letter. It continued: “The company’s documented track record of sloppy, unsafe laboratory practices compel DOT to investigate and levy appropriate fines.” 

A DOT spokesperson commented to Reuters: “We are conducting an investigation to ensure that Neuralink is in full compliance with federal regulations and keeping their workers and the public safe from potentially dangerous pathogens.”

Neuralink did not respond to Reuters’ request for comments. As the report notes, Neuralink is already facing scrutiny from Federal regulators regarding “animal welfare violations ” and staff that was reportedly forced to work quickly, causing “needless suffering and deaths” of animals. 

Tyler Durden
Fri, 02/10/2023 – 04:15

EU Complains Elon Musk’s Twitter Lacks Appetite For Censorship

0
EU Complains Elon Musk’s Twitter Lacks Appetite For Censorship

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

Tesla CEO Elon Musk departs the company’s local office in Washington, on Jan. 27, 2023. (Jonathan Ernst/Reuters)

European Union authorities are complaining that Twitter doesn’t seem to be taking the bloc’s fight against “disinformation” seriously by producing an incomplete report on compliance with its rules on censorship.

Elon Musk’s Twitter lagged the likes of Google, Meta, and TikTok in the fight against “disinformation” over the past six months, the European Commission said on Feb. 9, and it urged Twitter to get in line.

“I am disappointed to see that Twitter’s report lags behind others and I expect a more serious commitment to their obligations,” Vera Jourova, a European Commission vice president for values and transparency, said in a statement.

The bloc on Feb. 8 opened a Transparency Center that contains the various tech platforms’ reports, including Twitter’s.

Thierry Breton, the EU’s internal market commissioner who recently reminded Musk to follow the EU’s rules on policing content, didn’t reference Twitter directly, but said that “it comes as no surprise that the degree of quality vary greatly according to the resources companies have allocated to this project.” There have been significant staffing cuts at Twitter since Musk took over.

Vera Jourova at the European Commission in Brussels on Sept. 20, 2018. (John Thys/AFP/Getty Images)

Six months ago, before Musk bought the social media platform, Twitter was among 34 entities that signed on to an updated EU anti-disinformation pledge called the Code of Practice on Disinformation.

Along with the recently agreed Digital Services Act—which lets regulators fine tech platforms up to 6 percent of their global turnover for violations—and draft rules on political advertising, the code is part of the European Commission’s “toolbox for fighting the spread of disinformation in the EU,” the bloc’s executive said in a June 2022 release.

While the code is nonbinding, companies that take part can ease some of their compliance requirements under the Digital Services Act, which is expected to kick in around September 2023 for tech platforms with more than 45 million users in the EU, with Twitter likely falling into that category.

Signatories were given six months to implement the commitments and issue implementation reports, which the companies did, with reports published on Feb. 8.

The progress reports include data on how much advertising revenue the companies had cut from disinformation actors, instances of manipulative behaviors detected, and how they label political ads.

Twitter’s report was the only one that was singled out for criticism, with the EU saying that it lacked data and didn’t contain information on commitments to empower fact-checkers.

Twitter didn’t respond by press time to a request by The Epoch Times for comment.

Subsequent implementation reports are due in six months.

Read more here…

Tyler Durden
Fri, 02/10/2023 – 03:30

EU’s Aid For Ukraine Is Effectively Public Aid For Itself

0
EU’s Aid For Ukraine Is Effectively Public Aid For Itself

Authored by Tomasz Teluk via ReMix,

Source: Twitter@DenesTorteli.

Let there be light! President of the European Commission Ursula von der Leyen has announced that the EU is to deliver 35 million energy-saving LED light bulbs to Ukraine worth €50 million. They will be made available free of charge at post offices across the country.

She said that Ukraine should be an inspiration to Europe, with thousands of Ukrainians changing to LED bulbs to work towards cleaner energy.

“They are energy-saving, very good,” she says in footage shot during the visit.

The EU once again shows it thinks climate change is more important than anything else. The light bulbs are an even more surreal gift than the 5,000 helmets the Germans gave at the start of the war. 

One of the most important questions is how Ukraine will use the bulbs when it’s suffering power outages as a result of the war?

Finally, we should not have the wool pulled over our eyes. If the EU bought these bulbs from the largest European producers, which come from Germany, the Netherlands, and France, this is nothing more than a way of giving public aid to these companies.

Once again, Germany shows its transactional face. 

Tyler Durden
Fri, 02/10/2023 – 02:00

Rogers Vows To Expel All Chinese Goods From Defense Supply Chains

0
Rogers Vows To Expel All Chinese Goods From Defense Supply Chains

Authored by Andrew Thornebrooke via The Epoch Times (emphasis ours),

Rep. Mike Rogers (R-Ala.), ranking member of the House Armed Services Committee, gestures during committee’s hearing on “Ending the U.S. Military Mission in Afghanistan” in the Rayburn House Office Building in Washington, Sept. 29, 2021. (Rod Lamkey/Pool via Reuters/File Photo)

The Chairman of the House Armed Services Committee is vowing to expel all Chinese goods and materials from the United States’s defense supply chains.

Chairman Mike Rogers (R-Ala.) said that he would lead the effort to expunge China-sourced goods during a Feb. 8 hearing of the committee on the subject of defense-industrial base security.

The greatest concern I have with the defense industrial base is our continued reliance on China as the source of raw materials,” Rogers said.

“I won’t stop until we’ve completely rid the defense supply chain of Chinese goods and materials.”

Rogers said that communist China still inadvertently controlled too many parts of the supply chains required to equip the military and conduct security operations.

He singled out the United States’s continued reliance on China for rare earth minerals and non-advanced semiconductor chips and said that the regime’s grip on such supplies would need to be broken.

“The Chinese Communist Party (CCP) maintains a tight grip on many of our material supply chains including critical minerals and semiconductors,” Rogers said.“We will never prevail in a conflict with China if they’re the source of our military supply.”

US Must Move Dependencies

Committee Ranking Member Adam Smith (D-Wash.) said that the continued role of China in providing elements for the United States’s defense industrial supply chains was part of a greater legacy of irresponsible investment by U.S. corporations seeking to make an easy profit.

“Starting roughly in the late 1990s into the early 2000s, China became the global corporate easy button,” Smith said.

“That’s where you went to make stuff. Huge market, not much in the way of labor costs, certainly not environmental regulations. It was cheap, it was easy, it was the way to go.”

Read more here…

Tyler Durden
Thu, 02/09/2023 – 23:40

US Real Yields Pose Risks To Oil Rally

0
US Real Yields Pose Risks To Oil Rally

By Nour Al Ali, Bloomberg Markets Live reporter and strategist

While there are many reasons to be bullish on oil, a contrarian view signals prices may fall in coming months so long as real interest rates keep rising.

The breakdown in the relationship between crude and real interest rates may result in a decrease in oil prices. Take a look at the correlation between WTI contracts and US 10-year real rates (ie the 10-year yield adjusted for inflation), measured on a 120-day basis. The relationship between the two assets has weakened after it was positive last year, when energy was the main driver of inflation and central banks kept raising rates in an effort to control price pressures.

Investors are now concerned about higher rates impacting demand for energy, leading to a supply surplus that could potentially leave more oil out there than buyers want. While there’s a growing chorus that believes the Fed will pivot, policymakers have kept up their hawkish calls for further rate increases despite a recent moderation in inflation. This is because inflationary pressures have become more ingrained in daily life and are no longer solely driven by temporary factors.

There are plenty of other factors that are influencing oil prices, mainly OPEC+’s control over supplies to maintain market stability, and an increase in expected demand out of China. Although traders have already taken these bullish factors into account, the risk remains that rising oil prices may be vulnerable to rising interest rates. The “don’t fight the Fed” concept may become increasingly relevant in this sector of the market.

Tyler Durden
Thu, 02/09/2023 – 23:20