As of this morning, shares of Tesla (which are now currently up by 5.3% to $212 on the session) have more than doubled in value from their intraday low barely a month ago, on January 6, 2023.

It marks a stunning move higher in a short amount of time when both Elon Musk’s financial solvency and Tesla demand were popular talking points among the skeptics. 

The pop in shares has come as a result of Tesla finding success in driving more demand by cutting its prices. Heading into the company’s Q4 2022 earnings report, there were looming questions not only about whether or not the price cuts would work, but also whether or not they would drive down margins too much.

But just last weekend we noted that the company’s price cuts were helping spur demand in China that was so robust, it was bucking the national trend for EVs for the month of January. 

TSLA gamma squeeze go brrr

— zerohedge (@zerohedge) January 30, 2023

The company’s China segment shipped 66,051 vehicles in January, according to Bloomberg, citing preliminary data released by China’s Passenger Car Association. In December, that number stood at 55,800.

The figure is up 18% from December, while China’s new energy passenger vehicles, in total, are seen down 45% month over month from December to January. 

The company is now reportedly planning to increase output at its Shanghai plant – bringing its run rate back toward where it was in September 2022 – in order to continue meeting the demand from price cuts on its best selling models. 

Tesla had suspended operations at its Shanghai plant for a portion of December. The EV maker was expected to halt production – as we noted in a previous article – but continued swirling questions about demand had surfaced after the company shut down operations at the key location earlier than expected. Back on December 9th we wrote that the company was shutting down operations due to upgrades at the plant and waning consumer demand.

Meanwhile, looking at the broader scope of EV sales in China, domestic names like Nio, Xpeng and Li Auto all recorded monthly and YOY sales declines in January, per Jalopnik. 

“Apparently, Tesla’s huge discounts [on its Model 3 and Model Y vehicles] siphoned off drivers’ buying interest in the Chinese-developed smart EVs. Overall, demand for expensive EVs appears to be weak, which could lead to price wars in the premium EV segment this year, “Gao Shen, an independent analyst in Shanghai, told SCMP.

And as we detailed days ago, Visual Capitalist’s Marcus Lu says that Tesla’s price cuts are an attempt to protect its market share, but they’re not exactly the desperation move some media outlets have claimed them to be.

Recent data compiled by Reuters shows that Tesla’s margins are significantly higher than those of its rivals, both in terms of gross and net profit.

Our graphic only illustrates the net figures, but gross profits are also included in the table below.

Price cutting has its drawbacks, but one could argue that the benefits for Tesla are worth it based on this data—especially in a critical market like China.

The stock certainly seems to agree…

Authored by Jonathan Turley,

Yesterday’s hearing of the House Oversight Committee featured three former Twitter executives who are at the center of the growing censorship scandal involving the company: Twitter’s former chief legal officer Vijaya Gadde, former deputy general counsel James Baker and former head of trust and safety Yoel Roth.

However, it was the testimony of the only witness called by the Democrats that proved the most enlightening and chilling.

Former executive Twitter Anika Collier Navaroli testified on what she repeatedly called the “nuanced” standard used by her and her staff on censorship.

Toward the end of the hearing, she was asked about that standard by Rep. Melanie Ann Stansbury (D., NM). Her answer captured precisely why Twitter’s censorship system proved a nightmare for free expression. Stansbury’s agreement with her take on censorship only magnified the concerns over the protection of free speech on social media.

Even before Stansbury’s question, the hearing had troubling moments. Ranking Member Rep. Jamie Raskin (D., Md) opened up the hearing that insisting that Twitter has not censored enough and suggested that it was still fueling violence by allowing disinformation to be posted on the platform.

Navaroli then testified how she felt that there should have been much more censorship and how she fought with the company to remove more material that she and her staff considered “dog whistles” and “coded” messaging.

Rep. Stansbury asked what Twitter has done and is doing to combat hate speech on its platform. Navaroli correctly declined to address current policies since she has not been at the company for some time. However, she then said that they balanced free speech against safety and explained that they sought a different approach:

“Instead of asking just free speech versus safety to say free speech for whom and public safety for whom. So whose free expression are we protecting at the expense of whose safety and whose safety are we willing to allow to go the winds so that people can speak freely.”

Rep. Stansbury responded by saying  “Exactly.”

The statement was reminiscent to the statement of the former CEO Parag Agrawal. After taking over as CEO, Agrawal pledged to regulate content as “reflective of things that we believe lead to a healthier public conversation.” Agrawal said the company would “focus less on thinking about free speech” because “speech is easy on the internet. Most people can speak. Where our role is particularly emphasized is who can be heard.”

Navaroli was saying that it is not enough to simply balance free speech against public safety (a standard that most free speech advocates would oppose as ill-defined and fluid). Instead, Navaroli and her staff would decide “free speech for whom and public safety for whom.”

The suggestion is that free speech protections would differ with the speakers or who was deemed at risk from the exercise of free speech.

It takes a subjective balancing test and makes it even more ambiguous and illusory. Free speech demands bright lines to avoid the chilling effect of uncertainty for citizens.

The Twitter standard described by Navaroli defies definition, let alone understanding, for anyone posting controversial or dissenting views.

In the hearing, the Democratic members and witnesses repeatedly returned to the statement of Holmes on “shouting fire in a crowded theater.” The hearing shows how this statement has been grossly misused as a justification for censorship. From statements on the pandemic to climate change, anti-free speech advocates are claiming that opponents are screaming “fire” and causing panic.

The line comes from Schenck v. United States, a case that discarded the free speech rights of citizens opposing the draft. Charles Schenck and Elizabeth Baer were leading socialists in Philadelphia who opposed the draft in World War I. Fliers were distributed that encouraged men to “assert your rights” and stand up for their right to refuse such conscription as a form of involuntary servitude. Writing for the Court, Justice Oliver Wendell Holmes dismissed the free speech interests in protecting the war and the draft.

He then wrote the most regrettable and misunderstood judicial soundbites in history:  “the character of every act depends on the circumstances in which it is done . . . The most stringent protection of free speech would not protect a man in falsely shouting fire in a theater and causing a panic.” “Shouting fire in a crowded theater” quickly became a mantra for every effort to curtail free speech.

Holmes sought to narrow his clear and present danger test in his dissent in Abrams v. United States. He warned that “we should be eternally vigilant against attempts to check the expression of opinions that we loath and believe to be frought (sic) with death, unless they so imminently threaten immediate interference with the lawful and pressing purposes of the law that at an immediate check is required to save the country.”

Holmes’ reframing of his view would foreshadow the standard in In Brandenburg v. Ohio, the Supreme Court ruled in 1969 that even calling for violence is protected under the First Amendment unless there is a threat of “imminent lawless action and is likely to incite or produce such action.”

However, Navaroli, Stansbury, and others are still channeling the standard from Schenck, which is a curious choice for most Democrats in using a standard used against socialists and anti-war protesters.

Yet, Navaroli’s standard from Twitter makes the Schenck standard look like the model of clarity. Essentially, she adds that you also have to consider the theater, movie, and audience to decide what speech to allow. What could be treated as crying “Fire!” by any given person or in any given circumstances would change according to their “nuanced” judgment.

According to Navaroli, she and her staff would not allow the “safety [of others] to go the winds so that people can speak freely.” It is the classic defense of censorship in history and the touchstone of every authoritarian regime today.

Today’s hearing will address the question of when corporate censorship programs become an extension of the government.

However, while it is unclear how Twitter’s censorship made us more safe, Twitter’s “nuanced” standard certainly allowed free speech “go to the winds” of censorship.

You can find the Stansbury-Navaroli exchange around the 5:00 mark below:

Shares of Salesforce Inc. are trading marginally higher in premarket on a Wall Street Journal report that a fifth activist investor, Dan Loeb’s Third Point Hedge fund, has taken a stake in the software company. 

Third Point’s stake was reported Wednesday evening, which builds on the increasing number of activist investors taking positions in Salesforce. So far, Elliott Investment Management LP, Starboard Value LP, ValueAct Capital Partners LP, and Jeff Ubben’s Inclusive Capital have taken stakes. 

WSJ couldn’t confirm Third Point’s size of the position or future plans to overhaul the software company. They noted, “it’s possible the firm will stay quiet and not launch a campaign.” 

Third Point has been known for pushing significant corporate change at the blue-chip level. They’ve done this with Campbell Soup Co., Shell PLC, and Walt Disney Co. 

The swarm of activists encircling Salesforce comes as the company has lost $134 billion in market cap, down from $303 billion in November of 2021. 

Last month, Salesforce announced a broad restructuring plan “intended to reduce operating costs, improve operating margins, and continue advancing the Company’s ongoing commitment to profitable growth.” Included in that plan was a reduction of 10% of its workforce. The latest SEC filings show the company has 73,541 employees. 

The chart below shows Salesforce’s hiring binge has peaked. 

“Activism is clearly now circling the Salesforce name in droves as the massive cloud installed base, free-cash flow potential, under performing margin story, headache Slack deal, and rotating C-level suite has created the perfect storm for Benioff,” said Wedbush analyst Dan Ives, who has a ‘outperform’ rating with a $200 price target on the stock. 

“Ultimately we view this all as a much needed positive for the story to put pressure on under performing assets and strategically look at possible spin-offs over the next 6-12 months depending on outside strategic interests as well as further cost cuts,” Ives added.

Salesforce shares in the premarket were about 2% higher. 

How many more activist will join the party?

Initial and Continuing jobless claims rose last week (from 183k to 196k and from 1.65mm to 1.688mm respectively), although the trend of initial claims continues to trend down despite the layoffs…

Both adjusted and unadjusted initial claims data rose last week…

Source: Bloomberg

Initial claims actually shifted higher on a YoY basis last week…

Source: Bloomberg

California was by far the state with the largest increase in claims while Georgia, New Jersey, and Texas saw initial claims decline…

Regular State rolls increased by the most…

Leaving total jobless claims near one-year highs…

But, for some context, here is the labor market macro data surprise index relative to industrial macro data surprise index…

Source: Bloomberg

One of these things is not like the other!?

Authored by Simon White, Bloomberg macro strategist,

Optically flattering economic data, a still-positive real-yield curve and contracting liquidity together show that stocks remain entrenched in a bear market.

“Let no man boast that he has got through the perils of Winter until at least the 7th of May,” said the writer Anthony Trollope. Yet it is only early February and the market is seeing green shoots everywhere.

Last week’s payrolls and services ISM were taken uncritically at face value. But when so many other reliable recession indicators are sounding the alarm, it pays to apply a little more scrutiny.

ISM Services rebounded from 49.6 in December to 55.2 in January to much fanfare. But at the same time we got S&P’s Services PMI, which stayed stuck below 50 at 46.8.

The problem here is that each survey covers different industries. The ISM report used to be known as the ISM Non-Manufacturing report but was renamed ISM Services in 2020. This table from S&P Global shows the differences.

Source: S&P Global

The ISM has trended persistently higher than the PMI over the last decade, but it was the ISM that proved to be considerably more optimistic than the PMI before the pandemic hit, and had to correct rapidly.

It is probably no coincidence that last month the ISM bounced and the PMI did not due to the strong performance of commodities such as gold and copper, with mining a notable component of the ISM but not the PMI. Another extra component is retail, which has also got off to a strong start, but will face growing headwinds as credit continues to tighten.

Plenty of giddiness also greeted the +500k payrolls report. But again caution is required when there are signs we are late-cycle. The birth-death adjustment the BLS uses to take account of the creation of new businesses and the shuttering of old ones, has added 1.3 million jobs since March.

The adjustment is adding more jobs on a structurally higher basis since the pandemic. This is coming from trends in the QCEW (Quarterly Census of Employment and Wages), which revises payrolls from three quarters ago.

Net job gains have been added for 2021 and early 2022, but the QCEW’s model is beginning to factor in significantly higher gross job losses, which may cause the jobs numbers in subsequent quarters to be revised much lower (the QCEW just revised 2Q22’s net employment change 287k lower). The jobs numbers from recent quarters could soon begin to look much less robust.

Further, the disconnect between the establishment and the household survey remains considerable, with many more jobs than employees created, suggesting a rising number of people are requiring more than one job to earn a living.

And it bears repeating: jobs data are coincident-to-lagging and are often revised multiple times long after the fact, with the biggest revisions typically seen at economic turning points.

Still, stocks are staying resolute, even as money markets – now grudgingly paying more attention to hawkish Fed speakers – price in a higher peak in the Fed Funds rate.

But investors should ignore the noise and focus on the signal coming from the real-yield curve and liquidity growth.

The real-yield curve is the best single signal of the Fed’s success in reining in inflation. Specifically we need to see it invert to have confidence the Fed has done enough to permanently stamp out inflation and so allow stocks to stage a durable rally.

In the 1970s the real-yield curve continued to steepen even as the Fed tightened policy, as the market did not believe the Fed would do enough to bring inflation sustainably back down. It took the herculean rate hikes of the Volcker era to crush the real-yield curve and restore the Fed’s credibility.

The curve has been flattening recently, but remains well above zero. The Fed has not yet done enough to fully exorcise the inflation demon, leaving the equity market vulnerable to making new lows.

The curve inversion was a necessary but not sufficient sign the market would make a durable bottom in 1982, a generational buying opportunity. We also need to see a return of positive real liquidity growth.

On that, we still have some way to go.

Global real M1 growth is still negative and falling, which points to weaker stock growth in the coming months.

In the 1980s, it took the real-yield curve inverting together with positive real money growth to signal the 1982 bottom was in.

In general, when the real-yield curve is much steeper than average and real money (M2) growth is negative – as it is today – it leads to significant equity underperformance. (When these conditions are met, the S&P has an average year-on-year nominal return of 2.9% over the next three months, versus the overall average (going back to 1962) of 7.8%. Over the subsequent six months the average nominal return is also lower than 7.8%, at 4.8%).

Downside hedges remain attractive and would help protect portfolios from the worst of winter – the 7th of May is still a long way away.

US stocks were set to rebound following Wednesday’s slide, after Walt Disney announced it would fire 7,000 sending its stock surging (alongside mediocre earnings) as investors assessed corporate earnings reports and awaited the latest US jobless claims data. Contracts on the Nasdaq 100 were up 1.1% at 7:30 a.m. ET while S&P 500 futures added 0.8%. Both underlying indexes slumped more than 1% on Wednesday following a barrage of hawkish commentary by Fed officials. European stocks also advanced after positive earnings updates from heavyweights Siemens and AstraZeneca, although a stinker from Credit Suisse soured the mood. Asia was also solidly in the green. The dollar slid, Treasuries edged higher after a strong rally yesterday and an index of commodities rose.

Among notable movers in premarket trading, Disney shares rose as much as 6.7% after the media company announced restructuring that includes 7,000 job cuts and $5.5 billion in cost savings. It also reported first-quarter sales and profit that beat estimates; streaming subs missed. Analysts noted strength in its Parks business and were optimistic about its Media division’s profitability. ProspectsCorp. surged as the mobile application technology company’s results exceeded estimates. Here are some other notable premarket movers:

• Tesla jumped as much as 3.3% to $208 in US premarket trading, it is poised to double in value from a January low, boosted by a breakneck rally for growth stocks and signs that big price cuts are working to spur a demand rebound for the electric-vehicle maker.
• Robinhood rises 5.1% in premarket trading after the online brokerage reported fourth-quarter adjusted Ebitda that beat estimates. Co- founders of the company also canceled about $500 million of their share-based compensation. Analysts were positive about Robinhood’s focus on achieving lean growth and eventually turning profitable.
• AppLovin shares jump as much as 30% in premarket trading after the mobile application technology company reported fourth-quarter earnings that beat expectations on key metrics. Analysts said the results and the outlook displayed resilience, noting that its next generation AXON platform could drive further growth.
• Digital Turbine sinks 19% in premarket trading after the online growth platform operator’s third-quarter adjusted earnings per share missed estimates. Roth Capital points to a weaker advertising market.
• Guardforce AI and SoundHound AI (SOUN US) lead fellow artificial intelligence-related stocks higher in US premarket trading. On Wednesday, the cohort was boosted by AI- related announcements by Alibaba and NetEase.
• MGM Resorts shares rise 6.2% in US premarket after the the casino operator posted better than expected 4Q adjusted EBITDAR and authorized additional $2 billion for share buybacks, with at least 2 analysts raising their PT as Macau recovers and Las Vegas surprised to the upside.
• Wynn Resorts shares rise 5.7% in premarket trading after the casino operator reported operating revenue that beat the average analyst estimate. “Las Vegas is starting to sizzle,” Jefferies said, while the Macau market is rapidly recovering post-pandemic.
• O’Reilly Automotive’s strong top-line performance should be enough to offset any concerns that arise around the auto parts retailer’s slightly softer margin guidance, analysts say. Shares rose 2.9% in extended trading.
• Sonos (SONO US) rose as much as 15% in premarket trading on Thursday after the audio-products maker reported first-quarter earnings and revenue that beat estimates. Raymond James analysts noted that promotions during the holiday quarter boosted demand for Sonos speakers.

US stocks have oscillated this week as optimism around an easing in central bank policy sparked by Powell’s Tuesday’s remarks was tempered by a string of Federal Reserve speakers who reinforced the idea that interest rates will need to keep rising to tame inflation. Michael Hewson, chief market analyst at CMC Markets UK, said market volatility is expected to remain high amid the debate between “the bullish narrative of an imminent peak in rates and the bearish narrative of a higher terminal rate.”

After a much stronger-than-expected jobs report last week, focus today will be on the latest weekly jobless claims figures. Economists expect a small increase in claims compared with the previous week.

“Investors are shaking off another case of the jitters over how far interest rates will go in the United States, as a raft of better than expected corporate results came in after the bell,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. After this week’s hawkish chorus, Fed-funds futures markets are pricing in higher rates, with some options traders betting the US policy benchmark will reach 6%.

“I don’t think the Fed will cut within this year,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said on Bloomberg Television. “The Fed was behind the curve in terms of putting up their interest rate and they certainly are going to be very slow in cutting the interest rate.”

European stocks advanced for a third session, reaching the highest in almost a year, as investors weighed a slew of corporate earnings and greeted a slowdown in German inflation. The Stoxx 600 Index was up 1%, trading at highest level since February 2022 lifted by better-than-forecast results from firms including Siemens AG and AstraZeneca Plc. Industrials and banking stocks led gains, while the food, beverage and tobacco subindex was the worst performer, weighed down by declines in British American Tobacco Plc after the firm’s decision to end a buyback program disappointed some investors. Adding  to positive sentiment Thursday, data showed that German inflation slowed in January to the lowest level in five months, with consumer-price growth easing to 9.2% from 9.6% in December.

Among other companies that reported earnings today, Delivery Hero SE slumped after the food-delivery company missed estimates for gross merchandise value, while Credit Agricole SA and AstraZeneca Plc both gained after profit beat estimates. Credit Suisse Group AG slid after the Swiss lender reported a fifth-straight quarterly loss, with clients pulling a record amount of funds. Here are the most notable European movers today:

• Standard Chartered jumped as much as 12% after Bloomberg reported that First Abu Dhabi Bank is pressing ahead with a potential offer for the UK lender.
• AstraZeneca gains as much as 5.5% after its 4Q earnings beat estimates and after its Covid-19 treatment Evusheld had stronger-than-expected sales.
• Legrand jumps as much as 8.2% after the French electrical-equipment manufacturer reported solid 2022 results, including adjusted operating margins that beat estimates.
• Unilever shares rise as much as 1.4% after results reassured investors, with the consumer goods giant’s pricing and volumes staying resilient.
• Aegon shares advance as much as 5.8% after the company posted a strong set of numbers and announced a buyback and dividend plan that were well received by the market.
• Ipsen shares rose as much as 5.9% after the French pharmaceuticals group published better-than expected 4Q results.
• KBC Group’s shares rise as much as 5.2% after the Belgian bank and insurer’s guidance for revenue and costs implies a “meaningful” increase to consensus, according to RBC.
• British American Tobacco shares tumbled as much as 6.4%, the most in nearly two years, after the firm’s decision to end a share buyback program disappointed some investors.
• Credit Suisse shares fell as much as 6.9% after the Swiss lender reported a fifth-straight quarterly loss and endured record client outflows that KBW analysts described as “quite staggering.”
• Zurich Insurance shares drop as much as 3.2%, with Morgan Stanley saying that investors could be concerned about a miss for key profit driver Property & Casualty.
• Delivery Hero shares fall as much as 11% after the food delivery firm failed to offer an outlook for gross merchandise value for 2023, adding to investor concerns.

Earlier in the session, Asian stocks edged higher as Chinese shares gave the region a boost, offsetting renewed concerns over the trajectory of US interest rates after hawkish comments made by Federal Reserve officials.  The MSCI Asia Pacific Index erased an earlier loss of 0.4% to rise 0.5%. Shares in China and Hong Kong jumped, fueled by the tech sector, as recent market optimism in AI-related stocks continued despite a warning against speculative trades from an official media.  Concerns on geopolitical tensions eased after President Joe Biden denied that relations with Beijing have suffered a serious blow following a US decision to shoot down an alleged Chinese spy balloon. Meanwhile, benchmarks in Australia and Taiwan fell after the most-recent string of Fed speakers reinforced the idea that US rates will need to keep climbing to quash inflation. Asian equities have lost momentum after a strong start to the year, after a US jobs report last week stoked concerns over borrowing costs.  Shares will likely remain volatile over the next few months, as the “expected softness in the economic outlook for developed markets may weigh on externally exposed sectors and markets,” said Soo Hai Lim, head of Asia ex-China equities at Barings.

Japanese equities closed mixed, as investors assessed hawkish comments from Federal Reserve officials on the need for further rate hikes in the US. The Topix Index rose 0.1% to 1,985.00 as of market close Tokyo time, while the Nikkei declined 0.1% to 27,584.35. Daiichi Sankyo Co. contributed the most to the Topix Index gain, increasing 1.4%. Out of 2,163 stocks in the index, 1,141 rose and 900 fell, while 122 were unchanged. “Growing concerns about monetary tightening and the economy in the US are also affecting Japanese stocks,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management. “Investors are also watching the quarterly earnings results and the uncertainty is increasing amid potential slowdown in US economy.”

Indian stocks rose for a second session as software exporters continued to surge.  Adani Group stocks resumed decline after a two-day rally as index firm MSCI said it was reviewing the amount of shares linked to the group that were freely tradable in public markets. The S&P BSE Sensex rose 0.2% to 60,806.22 in Mumbai, while the NSE Nifty 50 Index advanced 0.1%. Eight out of BSE 20 sector-gauges rose while rest declined. A gauge of commodities companies was the worst performer, followed by power producers. Infosys contributed the most to the Sensex’s gain, increasing 1.8%. Out of 30 shares in the Sensex index, 17 rose, while 13 fell.

In FX, the Bloomberg Dollar Spot Index fell as the greenback weakened against all of its Group-of-10 peers while the Swedish krone outperformed after the Riskbank hiked rates 50bps and pointed to another increase in the spring. The euro rose for a first day in six and European bonds advanced, snapping a four-day run of declines, after German inflation slowed in January to the lowest level in five months. Consumer-price growth eased to 9.2% from 9.6% in December

• Sweden’s krona led G-10 gains and surged by as much as 1.3% to 11.2070 per euro, while the sovereign yield curve bear- steepened after the Riksbank announced it will begin to sell nominal and real government bonds with longer maturities at a nominal value of SEK3b and SEK0.5b respectively per month, starting in April. The central bank also raised its key policy rate by 50bps, to 3%, as widely expected. The central bank also said that “a stronger krona would be desirable”
• Japanese yen dipped after Bloomberg report suggesting there would likely be division among the country’s ruling party if Hirohide Yamaguchi was to be appointed as next BOJ governor
• Australian and New Zealand currencies both climbed with local yields as talk of a possible rate cut in China fed optimism

In rates, Treasuries were slightly richer across the curve which steepened very modestly, led by core European rates, particularly bunds and gilts, after German inflation slowed more than the median estimate in January. US yields are richer by 1bp-2bp across the curve, new 10-year around 3.59% vs Wednesday’s 3.613% auction stop; bunds, gilts outperform by 9bp and 8bp in the sector following soft German inflation. European bonds are also in the green with German and UK 10-year yields both lower by 7bps. Focal point of the US session focus is conclusion of auction cycle with 30-year bond sale at 1pm New York time.  The week’s refunding auction cycle concludes today with $21BN 30-year new Treasury issue; Wednesday’s 10-year stopped 3bp below the WI level with record low dealer allotment; WI 30-year yield at 3.670% is 8.5bp cheaper than January’ auction, which stopped 2.4bp through.

In commodities, crude futures advance with WTI rising 0.3% to trade near $78.70. Russia’s Kremlin says there could be delays in the Turkish Gas Hub implementation following quakes, but plans will be fulfilled. Spot gold rises roughly 0.3% to trade near $1,882.

Coinbase CEO Armstrong said he’s heard rumours that the US SEC would like to ban cryptocurrency staking, but added that he hopes this is not the case as it would be a terrible path for the US if it happens, according to CoinDesk.

To the day ahead now, and data releases include the delayed German CPI release for January, as well as the US weekly initial jobless claims. From central banks, we’ll hear from BoE Governor Bailey, as well as the ECB’s Vice President de Guindos, Nagel and de Cos. Lastly, an EU leaders’ summit will be taking place in Brussels.

Market Snapshot

• S&P 500 futures up 0.7% to 4,158.25
• MXAP up 0.5% to 167.72
• MXAPJ up 0.5% to 548.10
• Nikkei little changed at 27,584.35
• Topix little changed at 1,985.00
• Hang Seng Index up 1.6% to 21,624.36
• Shanghai Composite up 1.2% to 3,270.38
• Sensex up 0.2% to 60,764.80
• Australia S&P/ASX 200 down 0.5% to 7,490.33
• Kospi little changed at 2,481.52
• STOXX Europe 600 up 0.7% to 462.87
• German 10Y yield little changed at 2.32%
• Euro up 0.4% to $1.0756
• Brent Futures down 0.1% to $84.98/bbl
• Gold spot up 0.3% to $1,880.61
• U.S. Dollar Index down 0.35% to 103.05

Top Overnight News from Bloomberg

• Beijing lashed out at President Joe Biden for saying Chinese leader Xi Jinping faces “enormous problems,” underscoring the renewed tensions between the two nations since the US downing of a balloon in its airspace
• Japan’s LDP Said to Be Divided If Kishida Seeks BOJ Pivot
• Investors are piling into the longer end of the Treasuries market even in the face of increased anticipation that the Federal Reserve will remain hawkish enough to substantially hike its benchmark interest rate in the coming months
• The UK is in the final stages of negotiating a so-called Green Economy Framework agreement with Singapore, seeking to capitalize on its experience with new technologies to boost trade and investment post-Brexit
• Bank of France Governor Francois Villeroy de Galhau said inflation in the euro area’s second- largest economy should peak in the first half and start to ease from the middle of the year
• Italy is ready to support relaxing EU state aid rules to boost investments in green technologies in exchange for more flexibility on how to use EU recovery funds, Finance Minister Giancarlo Giorgetti told Sole 24 Ore
• Some traders in India’s bond market are betting that the central bank may have actually reached the peak of its rate hikes, even as the monetary authority sounded hawkish in its policy

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed with some cautiousness after the losses in the US where risk assets were pressured as markets focused on the hawkish aspects of the recent two-sided remarks from Fed officials. ASX 200 was dragged lower by underperformance in tech and utilities with the latter not helped by a near-10% slump in AGL Energy after H1 generation volumes fell 7% Y/Y and it cut its FY guidance. Nikkei 225 was subdued with individual stock movers influenced by the slew of earnings results. Hang Seng and Shanghai Comp. were initially lacklustre amid the absence of any major catalysts but shrugged off the opening losses and edged higher after the PBoC’s liquidity injection which provided some relief against the rising funding costs from a recent jump in loan demand.

Top Asian News

• PBoC injected CNY 453bln via 7-day reverse repos at a rate of 2.00% for a CNY 387bln net injection.
• US President Biden answered no when asked if relations with China have taken a big hit, while he added that the US is going to compete fully with China but is not looking for conflict which has been the case so far, according to a PBS interview.
• White House said Chinese balloons have been spotted over countries across five continents and the US has been in touch with allies on this issue, while Japanese Chief Cabinet Secretary Matsuno said Japan is exchanging information with the US on China’s spy balloon, according to Reuters.
• China’s Foreign Ministry regarding Australia ordering checks on China-made cameras within defence offices, says they hope Australia provides a fair environment for Chinese Cos.; welcomes US Treasury Secretary Yellen’s willingness to visit China.
• Chinese Defence Ministry says it declined a proposed phone call with the US because the US side did not create an appropriate atmosphere.

European bourses are firmer across the board, Euro Stoxx 50 +1.5%, with the region benefitting from a particularly heavy earnings docket with heavyweights including Siemens and AstraZeneca particularly well received. As such, sectors are in the green and feature outperformance in Industrial and Healthcare names. Stateside, futures are firmer across the board as the region recovers from Wednesday’s Fed speak induced downside, NQ +1.2% modestly outperforms as yields ease.

Top European News

• UK Chancellor Hunt is under pressure from the CBI to provide tax breaks in the budget to avert a recession, according to The Times.
• Germany’s DIHK expects the German economy to stagnate this year vs. prev. forecast of a 3% contraction; firms are also more optimistic about the outlook.
• Leonteq Drops as ZKB Expects 2023 to Be More Difficult
• Ukraine Latest: Zelenskiy Tours Europe With Calls for More Aid
• Unilever Sees Consumer Backlash Worsening on Inflation

Central Banks

• Riksbank raises its Policy Rate by 50bps vs exp. 50bps to 3.00%; decided to reduce Riksbank asset holding at a faster pace, effective from April; The policy rate will probably be raised further during the spring. Peak 3.33% (prev. 2.84%). adding, a stronger SEK would be desirable.
• Riksbank’s Governor Thedeen says the rate path indicates either a 25bps or 50bps hike in April, recent weakness in the SEK is hard to explain.
• BoE Governor Bailey says expects inflation to come down rapidly this year, very tight labour market. Current high level of inflation reflects the very high level of first-round effects, not second-round effects. Base effects will provide powerful negative trajectory on UK inflation in 2023.
• BoE Chief Economist Pill says we are now seeing some signs of loosening in labour market data; expect some margin of economic slack to emerge. There is substantial monetary policy tightening still to come through as a result of lags in transmission; that said, there is no room for complacency. Inflation remains unacceptably high.
• BoE’s Tenreyro says in her views rates are currently too high.
• BoE’s Haskel says he finds his expectations for inflation to be towards the upper part of that distribution. Economic theory suggests that uncertainty around the persistence of inflation should be met with more forceful action, and so shall remain alert to indications that inflation is more persistent than we expected, and act forcefully if necessary.
• Japan’s ruling LDP is said to be divided if PM Kishida seeks a BoJ pivot. Reports notes that people say Yamaguchi as BoJ head choice would be controversial. Elsewhere, the Japanese government plans to present nominees for new BoJ governor and officials with parliament early next week, according to NHK; TBS suggest February 14th.

FX

• Swedish Crown flies following hawkish Riksbank hike and comments from the new Governor, EUR/SEK breaches tech and psych supports on the way down from 11.3510 to sub-11.1600.
• Dollar suffers fallout as DXY slips through 103.000 with additional loss of safety premium amidst buoyant risk appetite; down to 102.80 at worst.
• Kiwi, Aussie and Pound post strong gains due to high beta and cyclical properties, NZD/USD scales 0.6350, AUD/USD above 0.6975 and Cable over 1.2150.
• PBoC set USD/CNY mid-point at 6.7905 vs exp. 6.7900 (prev. 6.7752)

Fixed Income

• Core benchmarks are bid and at the top-end of the session’s ranges following the delayed release of sub-consensus German Prelim. CPI.
• Specifically, Bunds have tested 137.00 at best while Gilts are just above 105.50 and USTs at the top-end of 113.23 to 113.13+ parameters.
• Stateside, yields are lower across the curve after Wednesday’s upside following hawkish Fed speak and ahead of IJC and a 30yr outing.

Commodities

• Crude benchmarks are consolidating in relatively narrow sub-USD 1/bbl parameters after yesterday’s stronger settlement and amid a weaker USD and improving broader risk sentiment.
• Spot gold has been meandering higher as the USD continues to retreat, though the yellow metals remains someway from USD 1900/oz near Wednesday’s USD 1886/oz peak.
• Russia’s Kremlin says there could be delays in the Turkish Gas Hub implementation following quakes, but plans will be fulfilled.

Geopolitics

• German Chancellor Scholz said will continue to support Ukraine as long as necessary, while he added Russia must not win the war and that Ukraine belongs to the European family, according to Reuters.
• Russian Kremlin, on Ukraine’s request for UK fighter planes, says this will draw out the conflict.
• North Korea unveiled a potentially new solid-fuel ICBM during a night-time parade, according to analysts citing commercial satellite imagery. Yonhap reported that North Korean leader Kim oversaw the military parade and North Korean state media later confirmed that a military parade was held in Pyongyang which displayed ICBMs and demonstrated the greatest nuclear strike capability, as well as featured tactical nuclear operations units, according to KCNA

US Event Calendar

• 08:30: Jan. Continuing Claims, est. 1.66m, prior 1.66m
• 08:30: Feb. Initial Jobless Claims, est. 190,000, prior 183,000

DB’s Jim Ried concludes the overnight wrap

Readers from yesterday’s EMR will be pleased to know the glamour of business travel is back after three very nice meals in Paris over the last 24 hours after a disastrous late-night trawl of the back streets for food the night before. I had to go to the gym at 5am and 6pm to offset it though. I suspect intake still exceeded output! We had a big DB macro dinner last night and the view I found most interesting was the bearishness on Euro government rates. A vast majority of the table voted for higher Euro rates over lower as the next move. It was a bit more neutral to slightly bullish for Treasuries. Our co-head of Euro rates sales warned that the retail flows we’re seeing in Euro Government bonds were relatively small in ticket size but relentless this year and maybe caution against the European trade a little.

So consistent inflows versus hawkishness seems to be sizing up to be a decent battle at the moment and over the last 24 hours the hawkish drumbeat from central bankers continued and a rise in yields and terminal was the prevailing theme for most of the day. As Europe went home, 10yr Treasuries hit 3.69% and US terminal 5.18% – a level that would have marked the highest close of the cycle had it held. However, after a surprisingly strong 10yr US auction, 10yr yields rallied -8bps into the bell and closed down -6.4bps on the day to 3.61%. The rally would have been bigger if not for higher inflation breakevens, with the 10yr breakeven up to a 2-month high of 2.356%, whilst the 2yr breakeven hit its highest level in nearly 3 months at 2.629%. So that fits into a picture of growing doubt over recent days about whether inflation will remain as calm as previously hoped, particularly given a few indicators like higher used car prices which we talked about in yesterday’s EMR and in our CoTD (link here).

Interesting the S&P 500 barely budged from European closing level even with the c.+8bps rally in 10yr US yields from that point. The damage from the earlier hawkish commentary held and we closed -1.11%. But even with this decline, it’s worth noting that the index is still just above the levels before Fed Chair Powell started speaking on Tuesday, so this is only bringing us back to that point. Even with the late rally in rates, the NASDAQ (-1.68%) also closed at around its European levels. US markets weren’t helped by Alphabet closing -7.68% after its new AI tool Bard showed inaccuracies in a demo. The company lost around $100bn of market cap in the process which shows the high stakes and competitive pressures of the new technology.

Back in Europe, equities here were an outperformer with the STOXX 600 hitting its highest intraday level since April before losing a bit of ground into the close to finish up just +0.28%.

In terms of the hawkish remarks themselves, New York Fed President Williams opened the day, saying that he thought a terminal rate of 5-5.25% was still a reasonable view. But he also commented the wage growth was still “well above” levels consistent with the Fed’s inflation target, and acknowledged that “there’s definitely scenarios where inflation ends up being more persistent for various reasons”. Then Fed Governor Cook struck a similar tone to Fed Chair Powell last week, and said “I think we are not done yet with raising interest rates”. Later on in the day, Governor Waller joined the chorus and further noted that “It might be a long fight, with interest rates higher for longer than some are currently expecting.” Lastly, Minneapolis Fed President Kashkari (FOMC voter this year) told the Boston Economic Club that “There’s not yet much evidence, in my judgment, that the rate hikes that we’ve done so far are having much effect on the labor market…we need to do more”. He also stated that he needed to see wage growth around 3% to feel confident that inflation was coming back to trend.

Before the late US rally, yields on 10yr bunds (+1.4bps) and OATs (+2.2bps) both hit a one-month high. That followed a similar round of comments from ECB officials, including Vice President de Guindos who said that “it might well be that financial markets are too optimistic with regard to inflation and our monetary-policy response”. That was followed up with comments from the ECB’s Knot, who said that “if underlying inflation pressures do not materially abate, maintaining the current (50bps) pace of hikes into May could well remain warranted.” Watch out for the delayed German inflation numbers this morning just after we go to press.

The overnight losses on Wall Street are weighing on Asian equity markets this morning. As I type, the Nikkei (-0.32%) and the KOSPI (-0.15%) are in the red while the S&P/ASX 200 (-0.56%) is also trading in negative territory. Bucking the negative trend are Chinese stocks with the CSI (+0.75%), the Shanghai Composite (+0.62%) and the Hang Seng (+0.34%) all edging higher, after reversing initial losses. Outside of Asia, US stock futures are showing a bit of a rebound with those on the S&P 500 (+0.22%) and NASDAQ 100 (+0.27%) trading higher.

On the oil front, prices have somewhat stabilised overnight after advancing more than +6% over the last three trading sessions with Brent futures (-0.04%) trading at $85.06/bbl as we go to print.

Elsewhere, financial markets in Turkey have continued to slump following the devastating earthquake on Monday. Yesterday saw the BIST 100 index shed a further -7.09%, before trading on the stock exchange was suspended until February 15, marking the first time in 24 years that trading has been stopped. Furthermore, all trades executed yesterday before the closure were cancelled. Up until the closure, the index had been down -16.24% since the start of the week.

To the day ahead now, and data releases include the delayed German CPI release for January, as well as the US weekly initial jobless claims. From central banks, we’ll hear from BoE Governor Bailey, as well as the ECB’s Vice President de Guindos, Nagel and de Cos. Lastly, an EU leaders’ summit will be taking place in Brussels.

Amid a major price and volume spike in Cosmos Health on Dec. 16, a “processing error” at Robinhood led to a torrent of short sales that cost the firm a whopping $57 million, the firm disclosed on Wednesday as it reported its fourth quarter results.

On the firm’s earnings call, Robinhood CFO Jason Warnick explained that “a processing error caused us to sell shares short into the market, and although it was detected quickly, it resulted in a loss of $57 million as we bought back the shares against a rising stock price.” 

CEO Vlad Tenev called the episode “really disappointing.” Indeed: At Barron’s, Avi Salzman notes the breakdown cost Robinhood 7 cents a share — “the difference between beating and missing expectations.” Analysts expected a 15-cent loss, but the company instead lost 19 cents a share.  

Robinhood’s earnings announcement provided a more detailed breakdown of the fiasco: 

“Delays in notification from third parties and process failures within Robinhood’s brokerage systems and operations in connection with the handling of a 1-for-25 reverse stock split transaction of Cosmos Health, Inc. (COSM)…allowed customers, for a limited time, to execute trades selling more shares than they held in their accounts.

This caused a temporary short position…which Robinhood covered out of corporate cash within the same trading day. The resulting loss of $57 million is recorded within brokerage and transaction in the consolidated statement of operations.”

Cosmos Health is a pharmaceutical company. As its shares nearly tripled to $23 that day on record volume, “online traders looking for heavily shorted companies accused exchanges of not allowing them to sell their shares into the updraft,” recounts MarketWatch‘s Jeremy Owens.  

The stock then collapsed, closing at $7.59 the next day. On Wednesday, it traded around $5. Robinhood’s $57 million loss on the disaster was $4 million more than Cosmos Health’s current market cap. 

This guy’s fired up, though!

$COSM starting to see a lot of buzz around the forums and twitter regarding Cosmos Health, after the $HOOD Robinhood fiasco. I’m thinking today was the last day we saw it trade in the 4’s. Onwards and upwards!

— T-Dot (@_AutomationGuru) February 9, 2023

Separately, Robinhood disclosed it is negotiating with the Department of Justice to buy $575 million worth of its own stock that had been purchased by disgraced FTX founder Sam Bankman-Fried, and then seized by the U.S. authorities. The 55 million shares represent 7.6% of the firm’s equity. 

Robinhood shares rose about 4.8% in Wednesday’s after-hours trading, closing near $11. In the past year, it’s traded between $6.81 and $16.49.   

Did you know that EVs need up to six times more minerals than conventional cars?

EVs are mineral-intensive and are pushing up demand for critical battery metals. According to the International Energy Agency (IEA), lithium, nickel, and cobalt demand is expected to grow from 10%-20% to over 80% by 2030.

As countries around the world pledge to go all-electric by 2035 and 2040, Visual Capitalist’s Tessa Di Grandi and Zack Aboulazm discuss whether we have enough mineral supply for EV demand?

Factors such as geopolitical concentration of resources, quality of materials, mining industry lead times, and environmental factors will together determine whether we have the minerals we need.

Let’s take a look at how critical minerals are affected.

Recycling is a partial solution to alleviate critical mineral supply but will fall short of meeting the high levels of demand until around the 2030s.

The EV Supply Chain

Currently, the resources for EV batteries are concentrated in very few countries. This concentration is an increasing concern for supply chain distribution.

China is home to more than half of the world’s lithium, cobalt, and graphite processing and refining capacity, as well as three-quarters of all lithium-ion battery production capacity.

Europe accounts for more than one-quarter of worldwide EV assembly, but home to very little of the supply chain, with the region’s cobalt processing share accounting for 20% of the mix.

Meanwhile, both Korea and Japan control a sizable portion of the downstream supply chain after raw material processing. Korea accounts for 15% of worldwide cathode material production capacity. Japan produces 14% of cathode and 11% of anode material.

The United States accounts for just 10% of EV production and 7% of battery production capacity.

Suggested Solutions

To reduce setbacks surrounding resource demand, KGP Auto’s new report recommends that material supply is accessed and matched to a broader fuel energy mix.

In this scenario, platinum group metals (PGMs) continue to play a leading role in the auto industry by assisting in building cleaner emission vehicles.

These vehicles support more sustainable fuels such as hydrogen, filling the gaps to net-zero targets by allowing EVs to catch up with material supply.

Read KGP Auto’s Powertrain Outlook Report to learn more.

Authored by BTCCasey via BitcoinMagazine.com,

The Bank of England and the UK Treasury have released a consultation paper outlining their case for a retail central bank digital currency (CBDC) or “digital pound.”

The paper has been reviewed by the Bank-Treasury CBDC Taskforce, which was established in April 2021.

Although the bank is still considering whether to introduce the digital pound, it believes that the preparatory work is justified. If introduced, the digital pound would be a form of sterling that would be used by households and businesses for their daily payments. The Bank of England and the UK Treasury will engage with stakeholders across the country to seek their views on the proposed model, according to the announcement.

Simultaneously, a roadmap unveiled by Governor Andrew Bailey and Chancellor Jeremy Hunt detailed their aim to prevent a run on banks.

According to a Telegraph report, the two officials have said that consumers will be prevented from hoarding the new digital pounds issued by the Bank of England. To prevent large and rapid outflows from traditional banks, Britons will be limited to transferring a few thousand digital pounds into their accounts. The frictionless nature of digital money is seemingly seen as a potential risk to the stability of the traditional banking system. The previously mentioned consultation paper indicated that this limit could potentially be £10,000.

Just as these developments are taking place, bank CEOs in the UK are blocking customers’ access to cryptocurrencies due to concerns over fraud and volatility, according to reports. Executives appeared before the Treasury Select Committee to discuss the issue.

Alison Rose, CEO of NatWest Group, told the committee that the bank had taken a “pretty hard line” on cryptocurrency due to the stability and volatility of the platforms and the risk of fraud. Social media and technology platforms were cited as the primary source of fraud, but the executives also expressed their support for the new regulations proposed by the UK Treasury.

All of these events indicate the capacity for the government of the United Kingdom, with the help of major companies, to lock their citizens into financial obedience with strict regulation regarding the usage of each private citizens’ money. The UK continues to make further strides towards the confinement and restriction of the bitcoin and cryptocurrency industry, while pursuing a CBDC system that would realize the worst projections of that technology.