Oil traders were stunned this morning, when – in a huge reversal to its prior plans – the Saudi state ordered Aramco to stop work on expanding its maximum sustainable capacity to 13 million barrels daily, instead keeping it at 12 million bpd, ensuring that peak capacity will remain lower than projected rising demand for years to come, effectively pressuring oil prices much higher over the long run (unless of course the world figures out cold fusion in the next few years).

The company said in a statement today that its maximum sustainable capacity is determined by the state under a law from 2017. Aramco added that it would update its capital spending plans for the year in accordance with the new government directive in March when it announces its 2023 financial results.

Saudi Arabia currently has capacity for 12 million and is producing about 9 million a day, after it curbed output as part of OPEC+ efforts to revive the global oil market and prevent a surplus. Back in 2021, Saudi Arabia’s state oil company said it was working to boost its production capacity to 13 million barrels daily, a capacity expansion it predicted would come fully online by 2027 and in chunks, chief executive Amin Nasser said at the time.

The surprise move comes after the world’s biggest oil exporter had said in November that it was progressing “very well” with the multibillion-dollar project to boost capacity to 13 million barrels a day by 2027 as demand in China and India continues to grow.

The Saudi giant, the world’s biggest oil firm and the largest oil exporter globally, was working as fast as it could to reach that production capacity expansion, the executive said, noting that upstream investment has a long lead time.

According to Bloomberg, the change in the investment plan ordered by the Saudi government comes at a time when Aramco has significantly increased dividend payments to the state, its primary owner. The kingdom is running a fiscal deficit as it spends tens of billions of dollars on efforts to diversify the economy into areas such as sports and tourism.

The decision will take out a significant portion of the supply buffer that traders were expecting for later this decade, a gap that may be hard to fill by others. Maintaining additional spare capacity is expensive, especially when the country is already producing well below its maximum rate and demand growth is likely to slow with the energy transition.    

Ironically, Aramco’s CEO has often warned the market that the industry is underinvesting in new oil supply, which, regardless of many scenarios, will continue to be needed for decades. Well, as of today the biggest underinvestor is none other than Aramco, whose move is seen as either a draconian attempt to contain supply capacity in the face of growing Indian and Chinese demand, or – according to the bears – a signal that said demand will simply not materialize.

“There is likely to be much speculation on the potential implications on global oil demand over the medium and long term,” RBC Capital Markets analyst Biraj Borkhataria said in a note. “This also marks a change in tone from one of the world’s largest oil producers at the government level.”

Borkhataria also expects the capex budget to be lowered by about $5b per year over the coming years relative to the prior guidance. Aramco will update its capital spending guidance when it announces annual results in March.

To be sure, despite extended and sizeable production cuts effected by Saudi Arabia and some of its fellow OPEC+ members, prices have remained stubbornly range-bound. This may be the reason for the new order. Alternatively, as noted above, the long-term outlook for oil demand in Riyadh may have changed.

Oil prices inched higher this week, following the latest news from the Middle East, which included a fuel tanker attack by the Yemeni Houthis and a deadly drone attack on U.S. troops. However, their gains were pared after the latest drop in Chinese stocks dented hopes that Beijing was finally getting serious about kickstarting its imploding market and economy.

The Saudi announcement will add to the list of uncertainties confronting traders. There’s no sign to the end of Israel’s war on Hamas, Houthi militants are menacing global shipping in the Red Sea, and there’s an increasing risk of Iran being dragged into the wider turmoil in the region.

Saudi Arabia’s latest move will likely have long term implications for the oil market. Curbing its growth plans would leave the kingdom with a thinner production buffer in the future in the event of supply shocks, especially in a volatile Middle East. Overall, it guarantees not only a much more volatile price but a much higher one as well, especially once the current production thrust (driven by relentless M&A) by US shale finally peaks.

European and Saudi drilling services stocks tumbled after the news of the Saudi expansion halt: Saudi-based Arabian Drilling and Ades Holding each fall as much as 10%, the most since their respective IPOs; both count Aramco among their main customers.  In Europe, Saipem shares lose as much as 9.3; %Subsea 7 -4.4%; Borr Drilling -11%; Shelf Drilling -10%.

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A former partner of President Joe Biden’s son has told members of Congress that members of the Biden family were not paid by China until after the Obama administration ended.

Hunter Biden and associates started working with CEFC, a Chinese firm linked to the ruling communist party, in 2015.

But payments for the work did not start flowing until after President Biden in January 2017 departed as vice president, Rob Walker, the former partner of Hunter Biden, was said to have told members.

“Today’s interview confirmed Hunter Biden and his associates’ work with the Chinese government-linked energy company began over a year before Joe Biden left the vice presidency, but the Bidens and their associates held off being paid by the Chinese while Joe Biden was in office,” Rep. James Comer (R-Ky.), chairman of the U.S. House of Representatives Oversight Committee, said in a Jan. 26 statement.

President Biden was vice president from 2009 to 2017.

Mr. Walker, who testified behind closed doors, could not be reached.

In a prepared opening statement, Mr. Walker said that he spent years pursuing “legitimate business” with Mr. Biden and that President Biden “was never involved in any of the business activities we pursued.”

“Hunter made sure there was always a clear boundary between any business and his father,” Mr. Walker said.

The White House said that Mr. Walker’s testimony had refuted Republican claims about President Biden.

Rep. Jamie Raskin (D-Md.), ranking member of the House Oversight Committee, said that “Mr. Walker reaffirmed today what we already know by now: Joe Biden was not involved in, did not profit from, and took no official actions in relation to his family’s business dealings.”

Republicans in the House are interviewing former associates of Mr. Biden as part of an impeachment inquiry. Mr. Biden has not yet sat for questions in the probe.

Mr. Walker told FBI agents in 2020 that President Biden stopped in while Mr. Walker, Mr. Biden, and Chinese businessmen were eating lunch at the Four Seasons, according to a transcript given to Congress by IRS whistleblowers. Mr. Walker also said President Biden met with CEFC officials while still vice president.

The interview with Mr. Walker confirmed that the meeting happened, Mr. Comer said in a summary. A transcript of the interview is expected to be released at a later date.

Shortly after the Obama administration ended, a Chinese company paid Mr. Biden and associates $3 million “as a ‘thank you’ for the work they did while Joe Biden was in office,” Mr. Comer added. “Members of the Biden family received payments from the Chinese deal even though they did not work on it. This is the type of swampy influence peddling the American people want us to end.”

A spokesman for Mr. Comer did not respond when asked for more details about what Mr. Walker told members.

According to records obtained by Republicans that were released before, the $3 million payment came from State Energy HK Limited, a CEFC-linked company, in March 2017.

Of the $3 million, about $1 million was transferred to different bank accounts owned by Bidens, including accounts owned by Mr. Biden and Hallie Biden, Mr. Biden’s sister-in-law, the records show.

Mr. Biden sent some of the money to President Biden’s brother, and the president’s brother and his wife sent a portion of the funds to President Biden, labeling the payment as a loan repayment, according to a timeline compiled by Republicans.

The White House and an attorney for the president’s brother have defended the money transfers, saying they were legal.

Devon Archer, a former associate of Mr. Biden, told Congress in 2023 that President Biden joined multiple calls and meetings that involved foreign business persons, including Chinese ones, although he maintained business was not discussed in President Biden’s presence.

In messages given to the FBI by Tony Bobulinski, another former associate of Mr. Hunter Biden, and made public by the group Marco Polo, Mr. Biden referred to his father as “chairman,” according to Mr. Walker. Mr. Biden wrote at one point that “my chairman gave an emphatic NO” on a business proposal.

In another set of emails obtained by House Republicans, during a discussion in 2017 of who would receive money from the CEFC deal, one associate wrote, “10 held by H for the big guy?” Mr. Bobulinski said the “big guy” referred to President Biden. Another former associate wrote to Mr. Bobulinski in a message a week later, “don’t mention Joe being involved,” adding, “it’s only when u are face to face, I know u know that but they are paranoid.”

After Q3’s 0.1% decline, the euro-zone was expected to see a similar economic growth (contraction) of -0.1% in Q4, crystallizing the ‘technical’ recession, giving The ECB the ‘all-clear’ for rate-cuts.

But thanks to surprising gains in Spain (and an improvement in Italy) – which offset Germany’s ugliness and France’s stagnation – the Eurozone economy was unchanged in Q4, technically – and miraculously – avoiding recession.

Spain’s gains,however, had a double-edged sword as Spain’s statistics office also said higher electricity prices, reflecting a phasing out of tax breaks, caused inflation to unexpectedly pick up from 3.3 per cent in December in January to 3.5 per cent. Economists had expected a slowdown to 3.1 per cent.

Germany was joined by Ireland and Lithuania in economic contraction in Q4…

That left the bloc trailing the US, which last week established itself as the world’s fastest-growing advanced economy in 2023 with annual growth of 3.1%.

China’s government recently estimated its economy grew 5.2%last year.

“Europe is still recovering from a lingering energy shock and has not experienced the same degree of fiscal stimulus as the more resilient US economy in recent years,” said Nicola Mai, a sovereign credit analyst at investor Pimco.

Finally, this surprise non-recessionary print prompted traders to modestly reduce the odds of a rate-cut in April…

…but, as is clear, expectations are still very high for Lagarde and her pals to pull the trigger – even she keeps telling the market that they’re not ready (until the summer). Forward-looking service indicators signal “a pickup in further growth ahead,” she said.

But, governments are withdrawing many of the energy and food subsidies they introduced to cushion the impact of the recent surge in the cost of living that followed Russia’s full-scale invasion of Ukraine, which could weigh on any rebound.

Authored by Lance Roberts via RealInvestmentAdvice.com,

I received an email this past week concerning George Soros’ “Theory Of Reflexivity.”

“I am not a fan of Soros, but this market has the look and feel of the dot com bust of 2000. In a few short words, the AI investment phenomenon is feeding on itself just as the internet and fiber did in 1999.”

It’s an interesting question, and I have previously written about the “Theory of Reflexivity.” Notably, this theory begins to resurface whenever markets become exuberant. However, concerning the email, there seems to be a similarity between the current “A.I.” driven speculation and what was seen in the late 90s.

There is, of course, a significant difference between the companies surging higher today versus those in the late 90s. That difference is that those companies involved in the “A.I.” race have revenues and earnings versus many Dot.com darlings that didn’t. Nonetheless, the valuations paid for many companies today, in terms of price-to-sales, are certainly not justifiable. The table below shows all the companies in the S&P 500 index with a price-to-sales ratio above 10x. Do you recognize any you own?

I picked 10x price-to-sales because of what Scott McNeely, then CEO of Sun Microsystems, said in a circa 1999 interview.

“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. It assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are?”

This is an important point. At a Price-to-Sales ratio of TWO (2), a company needs to grow sales by roughly 20% annually. That growth rate will only maintain a normalized price appreciation required to maintain that ratio. At 10x sales, the sales growth rate needed to maintain that valuation is astronomical.

While 41 companies in the S&P 500 are trading above 10x price-to-sales, 131 companies (26% of the S&P) trade above 5x sales and must grow sales by more than 100% yearly to maintain that valuation. The problem is that some companies, like Apple (AAPL), have declining revenue growth rates.

While it is believed that “A.I.” is a game changer, this is not the first time we have seen such a “revolution” in the markets.

As shown, there is an end to these cycles, as valuations ultimately matter.

So, what does this have to do with the “Theory of Reflexivity.”

The “Theory Of Reflexivity” – A Rudimentary Theory Of Bubbles

For investors, in the “heat of the moment,” silly notions like “valuations,” “equity risk premiums,” and “revenue growth” matter very little. Such is because, in the very short term, all that matters is momentum. However, over extended periods, valuations are a direct determinant of returns.

Despite one selloff after another leading to increased volatility, the markets are currently hitting all-time highs as the speculative chase for return heats up. However, the current market mentality reminds me much of what Alan Greenspan said about this behavior.

Thus, this vast increase in the market value of asset claims is, in part, the indirect result of investors accepting lower compensation for risk. Market participants too often view such an increase in market value as structural and permanent. To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low-risk premiums.

Alan Greenspan, August 25th, 2005.

A decline in perceived risk is often self-reinforcing in that it encourages presumptions of prolonged stability and thus a willingness to reach over an ever-more extended time period. But, because people are inherently risk averse, risk premiums cannot decline indefinitely. Whatever the reason ‎ for narrowing credit spreads, and they differ from episode to episode, history caution’s that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets. Such developments apparently reflect not only market dynamics but also the all-too-evident alternating and infectious bouts of human euphoria and distress and the instability they engender.

Alan Greenspan, September 27th, 2005.

Once again, investors accept a low equity risk premium for market exposure. (Data courtesy of Aswath Damodaran, Stern University)

Such brings us to George Soros’ “Theory Of Reflexivity.”

“First, financial markets, far from accurately reflecting all the available knowledge, always provide a distorted view of reality. The degree of distortion may vary from time to time. Sometimes it’s quite insignificant, at other times, it is quite pronounced. When there is a significant divergence between market prices and the underlying reality, there is a lack of equilibrium conditions.

I have developed a rudimentary theory of bubbles along these lines. Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend. When a positive feedback develops between the trend and the misconception, a boom-bust process is set in motion. The process is liable to be tested by negative feedback along the way, and if it is strong enough to survive these tests, both the trend and the misconception will be reinforced. Eventually, market expectations become so far removed from reality that people are forced to recognize that a misconception is involved. A twilight period ensues during which doubts grow and more and more people lose faith, but the prevailing trend is sustained by inertia. As Chuck Prince, former head of Citigroup, said, ‘As long as the music is playing, you’ve got to get up and dance. We are still dancing.’ Eventually, a tipping point is reached when the trend is reversed; it then becomes self-reinforcing in the opposite direction.

Typically bubbles have an asymmetric shape. The boom is long and slow to start. It accelerates gradually until it flattens out again during the twilight period. The bust is short and steep because it involves the forced liquidation of unsound positions.”

The chart below is an example of asymmetric bubbles.

Soros’ view on the pattern of bubbles is interesting because it changes the argument from a fundamental to a technical view. Let me explain.

Bubbles And Exuberance

Prices reflect the psychology of the market, which can create a feedback loop between the markets and fundamentals. As Soros stated:

“Financial markets do not play a purely passive role; they can also affect the so-called fundamentals they are supposed to reflect. These two functions, that financial markets perform, work in opposite directions. In the passive or cognitive function, the fundamentals are supposed to determine market prices. In the active or manipulative function market, prices find ways of influencing the fundamentals. When both functions operate at the same time, they interfere with each other. The supposedly independent variable of one function is the dependent variable of the other, so that neither function has a truly independent variable. As a result, neither market prices nor the underlying reality is fully determined. Both suffer from an element of uncertainty that cannot be quantified.”

The chart below utilizes Dr. Robert Shiller’s stock market data going back to 1900 on an inflation-adjusted basis. I then looked at the markets before each significant market correction and overlaid the asymmetrical bubble shape, as discussed by George Soros.

Of course, what each of those previous periods had in common were three things:

1. High valuation levels (chart 1)

2. Large deviations from the long-term exponential growth trend of the market. (chart 2)

3. High levels of investor exuberance which drive chart 1 and 2.

The S&P 500 trades in the upper 90% of its historical valuation levels.

However, since stock market “bubbles” reflect speculation, greed, and emotional biases, valuations only reflect those emotions. As such, price becomes more reflective of psychology. From a “price perspective,” the level of “greed” is on full display as the S&P 500 trades at one of the most significant deviations on record from its long-term exponential trend. (Such is hard to reconcile, given a 35% correction in March 2020 and a 20% decline in 2022.)

Historically, all market crashes have resulted from things unrelated to valuation levels. Issues such as liquidity, government actions, monetary policy mistakes, recessions, or inflationary spikes are the culprits that trigger the “reversion in sentiment.”

Notably, the “bubbles” and “busts” are never the same.

Comparing the current market to any previous period is rather pointless. Is the current market like 1995, 1999, or 2007? No. Valuations, economics, drivers, etc., all differ from one cycle to the next.

Critically, the financial markets adapt to the cause of the previous “fatal crashes.” However, that adaptation won’t prevent the next one.

Conclusion

There is currently much debate about the health of financial markets. Can prices remain detached from the fundamentals long enough for the economic/earnings recession to catch up with prices?

Maybe. It has just never happened.

The speculative appetite for “yield,” fostered by the Fed’s ongoing interventions and suppressed interest rates, remains a powerful force in the short term. Furthermore, investors have now been successfully “trained” by the markets to “stay invested” for “fear of missing out.”

The speculative risks and excess leverage increase leave the markets vulnerable to a sizable correction. The only missing ingredient for such a correction is the catalyst that starts the “panic for the exit.” 

It is all reminiscent of the 1929 market peak when Dr. Irving Fisher uttered his famous words: “Stocks have now reached a permanently high plateau.” The clamoring of voices proclaiming the bull market still has plenty of room to run tells the same story. History is replete with market crashes that occurred just as the mainstream belief made heretics out of anyone who dared to contradict the bullish bias.

When will Soros’ “Theory of Reflexivity” affect the market? No one knows with any certainty. But what we do know with certainty is that markets are affected by gravity. Eventually, for whatever reason, what goes up will come down.

Make sure to manage your portfolio risk accordingly.

Home prices in America’s 20 largest cities rose for the 10th straight month in November (the latest data released by S&P Global Case-Shiller today), up 0.15% MoM (considerably slower than the 0.50% MoM expected and 0.63% prior).

That is the weakest MoM rise since Jan 2023.

Source: Bloomberg

That pushed the YoY price up to +5.40% (but well below the +5.8% exp)…

“November’s year-over-year gain saw the largest growth in U.S. home prices in 2023, with our National Composite rising 5.1% and the 10-city index rising 6.2%,” says Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P DJI.

Six cities registered a new all-time high price in November – Miami, Tampa, Atlanta, Charlotte, New York, and Cleveland.

Portland is the only city with prices dropping YoY – who could have seen that coming?

Is this really what Jay and his pals were expecting when they embarked on an unprecedented tightening of monetary policy?

But, judging by the resumption of the rise of mortgage rates since the Case-Shiller data was created, we would expect prices to also resume their decline in the short-term…

Are prices set to shrink again (as the lag on Case-Shiller data and human’s response to rates) before re-accelerating later this year?

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

President Joe Biden’s call for a bipartisan Senate deal to tackle the border crisis drew criticism from Tesla CEO Elon Musk, who said the president was overlooking—or refusing to see—simple fixes that don’t require new laws to address the problem.

On Friday, President Biden posted a statement on X calling for Congress to pass legislation giving him new emergency authority to shut down the border when it becomes overwhelmed.

“If given that authority, I would use it the day I sign the bill into law,” the president insisted while reiterating his call for Congress to approve more money for border security.

“If you’re serious about the border crisis, pass a bipartisan bill, and I will sign it,” he said.

Mr. Musk, who recently argued that the Biden administration was “actively aiding illegal immigration” by suing Arizona and Texas to block state-level efforts to secure the border, posted a critical take on President Biden’s insistence on the deal.

“No laws need to be passed. All that is needed is an executive order to require proof before granting an asylum hearing. That is how it used to be,” Mr. Musk said in his post.

A flurry of other reactions to President Biden’s message featured some supportive messages—but also many critical takes.

The latter included calls for restoring the Trump-era “Remain in Mexico” policy that required asylum-seekers to wait south of the border until their claims were processed. This policy has been credited with having a meaningful reduction of illegal crossings.

The Biden administration moved to suspend “Remain in Mexico” on the president’s first day in the White House in January 2021.

Meanwhile, a purported leaked draft of the deal being pushed by President Biden prompted House Speaker Mike Johnson (R-La.) to remark it would be “dead on arrival” in the lower chamber.

Former President Donald Trump recently urged Republicans to reject anything but a “perfect” deal on border security.

No details are known about the contents of the deal, but it reportedly includes funding for Ukraine and Israel amid ongoing military conflicts.

President Biden’s push for the deal comes as illegal border crossings in December shattered previous records.

Record-Breaking Border Surge

There were a stunning 371,036 encounters in December, new data from U.S. Customs and Border Protection (CBP) show, breaking the previous record of 341,392 set in August 2023.

Encounters along the southwest land border also set a new record, hitting 302,034, per other data released by CBP on Jan. 26

The record-breaking numbers come amid House Republican efforts to impeach Department of Homeland Security (DHS) Secretary Alejandro Mayorkas for his handling of the illegal immigration crisis.

Rep. Mark Green (R-Tenn.) is expected to introduce articles of impeachment against Mr. Mayorkas next week.

“Secretary Mayorkas has outdone himself yet again—never have we seen such catastrophic numbers, even with historically high encounter numbers on his watch,” Mr. Green said in a statement. “December’s numbers serve as more undeniable proof that Secretary Mayorkas must be impeached.”

Intentional Disaster?

Mr. Green said that the record-high numbers are not only a “disaster,” but he alleged they are intentional.

“This staggering number of encounters at our borders only happens by design and a willful refusal to comply with the laws passed by Congress,” Mr. Green said, accusing the DHS chief of having “intentionally opened our borders.”

Mr. Green, like many of his fellow Republicans, has accused the Biden administration of relaxing border policies and flinging open the door to a sharp influx of illegal aliens.

Biden administration officials have rejected such allegations, claiming they’re doing all they can to stem the influx and variously blaming factors like seasonal fluctuations, a broken immigration system—even climate change.

Voters, meanwhile, have grown increasingly concerned about the border crisis, with a recent poll showing that immigration has become the top concern, shunting inflation into second spot.

President Biden, whose approval on immigration sank to 35 percent in the poll, recently admitted that the border is not secure—although he denied his policies have had anything to do with it.

Mr. Mayorkas recently pinned the blame for the influx on Congress, or rather its failure to make legislative changes and provide more money for border security.

After yesterday’s late day meltup, sparked by an overly optimistic forecast of Treasury supply, which sent stocks to a new  all time high, US equity futures drifted lower in a tight range as investors looked ahead to the flood of tech earnings (Alphabet and Microsoft are due after the close) for insights on whether the record-breaking rally in equities can continue, while bracing for key announcements from the Fed and Labor department. Monday’s latest record close pushed the S&P 500’s gains this month to 3.3%, while the Nasdaq 100 has surged 4.6%. Europe’s Stoxx 600 index crept to a new two-year high as autos and banking stocks led gains. Bitcoin is on course to advance for a fifth straight month, after rising 2% in January; The last time the largest digital asset managed a winning streak like this was the October 2020 to March 2021 stretch oiled by pandemic-era easy money. As stocks dropped, both 10Y TSY yields and the US dollar traded largely unchanged. Oil dipped as Biden refuses to retaliate against Iranian proxies, terrified any escalation will send gas prices soaring and crush his reelection chances.

In premarket trading, General Motors jumped 8% after beating profit expectations, while United Parcel Service fell as its revenue guidance missed projections. Here are some of the other notable premarket movers:

• Calix plunges 19% after the communication software company’s first-quarter forecast disappointed.
• Danaher falls 2.5% after the company forecasted core sales for the full year 2024 that disappointed Wall Street.
• General Motors gains 7% after beating Wall Street expectations for the fourth quarter. The automaker expects profits this year to grow on improved sales in the US.
• Johnson Controls slips 2% after cutting its adjusted earnings per share forecast for the full year.
• Spotify rises 1.8% after UBS upgraded its rating to buy, saying the stock has “room to run” as efficiency gains fully play out.
• Super Micro Computer jumps 13% after the server maker beat estimates on second-quarter net sales and raised its revenue forecast for the year.
• Tesla climbs 2%, poised to extend gains for a third consecutive session, as exchange-traded funds managed by Cathie Wood’s Ark Investment Management bought more shares of the EV maker.
• United Parcel Service falls 7% after posting fourth-quarter sales below analysts’ estimates and providing 2024 guidance that missed expectations.
• Whirlpool drops 4.7% after the home appliance manufacturer issued weaker-than-expected projections for revenue and earnings per share for the year.
• Woodward rises 5.8% after boosting its full-year profit and sales outlook. First-quarter profit and sales also beat estimates.

The busiest week so far of this reporting season is about to kick into gear: Microsoft and Alphabet will offer the first evidence later of whether the bullish sentiment around the so-called Magnificent Seven looks sustainable. By the time Apple, Amazon.com and Meta Platforms are done reporting Thursday, five tech giants with a combined market value exceeding $10 trillion will have updated the market.

While earnings will be a key test of the continued market meltup, as will the Fed’s decision tomorrow with bulls hoping for further dovish signals from Chair Jerome Powell, some of Wall Street’s biggest optimists are growing concerned that the good vibes are sending a contrarian signal on the market. Yet even as they issue warnings at the market level, at a sector level banks are turning even more bullish, with  Morgan Stanley analysts turning – surprise – bullish on major US banks (such as Morgan Stanley of course), saying regulatory changes for higher capital levels may be less onerous that current proposals — allowing for more stock buybacks down the road (translation: please buy our stock).

The tech rally, which according to JPM increasingly looks like the dot com bubble, has been fueled by expectations that interest-rate cuts from the Federal Reserve will help boost earnings growth. While the Fed is expected to hold rates this week, investors are keenly awaiting comments from Chair Jerome Powell after Wednesday’s decision for clues on the policy outlook. Traders are assigning roughly even odds to the prospect that the central bank will start lowering borrowing costs at its next meeting in March.

“Everything will play out in the next three days between the Fed meeting and the US tech results,” said Alexandre Baradez, chief market analyst at IG Markets in France. “The market is waiting for Powell to open the door for a rate cut in March, but it could very well be signaled for the second quarter.”

And speaking of another tech bubble, JPM quant Khuram Chaudhry said that the role of a small number of stocks in driving the advance on Wall Street poses a risk to the market and has a lot in common with the dot-com bubble. The share of the top 10 stocks on the MSCI USA Index, including all of the Magnificent Seven — Apple, Microsoft, Nvidia Corp., Alphabet, Amazon, Meta and Tesla — has risen to 29.3% as of the end of December. That’s just moderately below the historical peak share of 33.2%, which occurred in June 2000, the strategists wrote. And just four sectors are represented in the top 10 stocks, against a historical median of six.

“The key takeaway is that extremely concentrated markets present a clear and present risk to equity markets in 2024,” Chaudhry said. “Just as a very limited number of stocks were responsible for the majority of gains in the MSCI USA, drawdowns in the top 10 could pull equity markets down with them.”

Meanwhile, the spotlight continues to be on oil prices – that key catalyst that will determine whether the Fed will be allowed to be dovish or whether prices spike, sparking a hawkish reversal – as the market waits for how the US will respond to the deadly attack on American troops in Jordan, with Iran urging the White House to use diplomacy to ease tensions in the Middle East. A big surprise for oil traders came from Saudi Aramco, which abandoned a plan to boost its oil output capacity in a significant reversal that suggests the kingdom is becoming serious about curbing supply. Bloomberg Economics estimates Saudi Arabia needs an oil price of $108 a barrel to balance its budget and meet domestic spending by the sovereign wealth fund. Crude is steady in London today, trading near $82 a barrel.

European stocks look set to rise for a fifth straight session as data showed the euro zone unexpectedly avoided a recession in the latter half of 2023. The Stoxx 600 rises 0.3% to a fresh two-year high, led by gains in retail, bank and media shares. The Estoxx 50 climbed 0.5%, supported by euro-zone GDP data. Here are some of the most notable European movers:

• Avolta shares rise as much as 7.3%, the most since November, after the world’s largest duty-free operator got upgraded to buy at Stifelwhich says the stock is too cheap to ignore
• Skanska rises as much as 6.9% to lead gains on the Stoxx 600 construction and materials index, as Jefferies double-upgraded to buy from underperform
• DKSH shares rise as much as 4.8% after UBS upgrades its recommendation to buy, saying the Swiss distribution company’s stock is undervalued as execution is improving
• WPP jumps as much as 6.9%, the most intraday since 2022, as analysts embraced the advertising giant’s updated guidance for the medium term and await further details at today’s CMD
• SSP rises as much as much as 4.3% to hit its highest level in over six weeks after the company, which sells food in high-footfall traffic travel destinations, kept up the momentum in 1Q
• Synthomer gains as much as 3.9% as Morgan Stanley highlights a decline in net debt and improvement in free cash flow generation at the firm, offsetting the company’s negative forecasts
• Deliveroo falls as much as 5.7% as Germany’s Delivery Hero exits its stake in the food delivery company at a discount to last close; Delivery Hero meanwhile falls as much 11%
• Diageo drops as much as 4.3% after the spirits maker’s 1H profit and sales missed estimates, with demand remaining weak. Morgan Stanley said they show a continued loss of market share
• European and Saudi drilling services stocks fall after Saudi Aramco, the world’s largest oil company, abandoned plans to boost its output capacity
• Pets at Home drops as much as 6.3% after the pet supplies firm reported 3Q results RBC said were softer than expected, with the retail segment being the main driver of disappointment
• Jungheinrich drops as much as 6.2% as Oddo downgrades to neutral, with Kion Group rising 5% as it is upgraded to outperform and now the broker’s preferred name among the two

Earlier in the session, Asian equities declined, driven by a slump in Hong Kong and mainland China amid renewed concerns over the country’s property sector and as earnings disappoint. The MSCI Asia Pacific Index fell as much as 0.3%, with Tencent, AIA Group and TSMC among the biggest drags. Chinese stocks continued their slide as Evergrande’s liquidation order intensified worries about the embattled real estate sector given the lack of forceful policy support. “Ongoing news flow confirms that the property crisis is still hot and not easy to fix, or else it already would be,” said Kieran Calder, head of Asia equity research at Union Bancaire Privee. “Valuations are clearly cheap, but for good reasons including self-inflicted damage to the tech and real estate sectors,” he said. Hong Kong benchmarks were also weighed by BYD after the EV maker missed earnings forecast.

In FX, the dollar was little changed; the Bloomberg dollar index steadied. The pound is the weakest of the G-10 currencies, falling 0.2% versus the greenback. The Swedish krona is the strongest.

• EUR/USD pared an earlier drop of 0.2% to trade flat at 1.0828, after euro-area GDP data showed the region unexpectedly avoided a recession; Italy and Spain posted surprisingly strong results offsetting German weakness
• GBP/USD slumped as much as 0.3% to a session low of 1.2672, as the pound led G-10 losses against the dollar; Inflation in UK stores fell to the lowest level in more than 18 months
• NZD/USD crept up to its highest level in nearly a week before reversing gains to trade flat at 0.6134; RBNZ chief economist Paul Conway said the central bank has a way to go to get inflation under control, dashing hope for a pivot to rate cuts

Elsewhere, Nigeria’s naira plunged to a record against the dollar following a revision of the methodology used to set the exchange rate, in effect the second devaluation of the currency in seven months. The local unit depreciated 31% to 1,413 naira a dollar on Monday in the official foreign exchange window.

In rates, Treasury yields reversed an earlier drop after a cut in the quarterly borrowing estimate by the US Treasury eased concerns about the flood of debt being issued to cover the federal deficit. US yields were flat, after earlier dropping by as much as 2bp across long-end of the curve with 5s30s spread flatter by 2bp on the day; 10-year yields around 4.07%, slightly richer vs Monday’s close and outperforming bunds by 2.5bp on the day. Dollar swap spreads extend related widening move. Bunds are little changed, having pared gains after Spanish inflation unexpectedly accelerated in January.  US session includes JOLTS job openings data. Dollar issuance slate includes three names already; nine deals priced $19.5b Monday, taking January new issue volume above $188b, a new all time high.

In commodities, oil was steady as the market waited for a US response to the deadly attack on American troops in Jordan, which could risk an escalation of tensions in a region key to global crude production. Spot gold rises 0.2%.

Looking tot he day ahead, US economic data includes November FHFA house price index, S&P CoreLogic home prices (9am), January consumer confidence, December JOLTS job openings (10am) and January Dallas Fed services activity. In Europe, there’s the Q4 GDP data from the Euro Area, along with UK mortgage approvals for December. From central banks, we’ll hear from the ECB’s Vujcic, Lane, Vasle and Nagel. Lastly, today’s earnings releases include Microsoft, Alphabet, Pfizer, UPS, Starbucks and General Motors.(10:30am)

Market Snapshot

• S&P 500 futures down 0.1% to 4,949.25
• STOXX Europe 600 up 0.3% to 486.35
• MXAP down 0.4% to 165.95
• MXAPJ down 0.8% to 505.58
• Nikkei up 0.1% to 36,065.86
• Topix down 0.1% to 2,526.93
• Hang Seng Index down 2.3% to 15,703.45
• Shanghai Composite down 1.8% to 2,830.53
• Sensex down 1.2% to 71,113.89
• Australia S&P/ASX 200 up 0.3% to 7,600.19
• Kospi little changed at 2,498.81
• German 10Y yield little changed at 2.25%
• Euro little changed at $1.0824
• Brent Futures up 0.2% to $82.58/bbl
• Gold spot up 0.2% to $2,037.33
• U.S. Dollar Index little changed at 103.54

Top Overnight News

• China’s 10-year yield briefly broke below 2.5% on Tues, the lowest level in more than two decades as confidence in the country’s growth/inflation backdrop fades (and expectations build for additional stimulus). WSJ
• TikTok said it has spent $1.5 billion building an operation intended to convince U.S. lawmakers that the popular video-sharing app is safe. TikTok executives publicly promised to voluntarily wall-off American user data and bring in engineers and third parties to certify the app’s algorithm delivered content without interference from China, where its parent company, ByteDance, is located. So far, TikTok is struggling to live up to those promises. WSJ
• Aramco abandoned a plan to boost its oil output capacity, a major U-turn that Vanda said suggests Saudi Arabia is moderating its view for global demand growth. BBG
• Spain’s CPI for Jan unexpectedly accelerates, coming in +3.4% Y/Y on the headline (vs. the Street +3% and vs. +3.1% in Dec), although core cooled to +3.6% (down from +3.8% in Dec but ahead of the Street’s +3.3% forecast). DJ  
• The euro-area economy stagnated in the fourth quarter, unexpectedly avoiding further contraction. France’s economy was flat, buoyed by exports. As expected, Germany was the weak spot with GDP falling 0.3%. Spain’s growth came in hot — and so did inflation. Italy also outperformed. BBG
• Antony Blinken, the US secretary of state, has warned that the Middle East faces its most “dangerous” conditions since at least 1973, as Washington considers its response to an attack that killed three service members at the weekend. FT
• White House is weighing three broad options for retaliation against the Jordan attack: strike Iranian territory or waters; strike Iranian proxy groups in the Middle East (but not in Iran itself); or impose significant financial sanctions on the Iranian government/economy. WSJ
• Elon Musk said the first human received a Neuralink brain implant, a potential milestone in the development of “brain-computer interface” technology that could one day help those suffering from debilitating conditions such as paralysis to interact with their surroundings. WSJ
• Supermicro +12% in pre mkt (SMCI) provided very guidance for the Mar Q and raised its revenue forecast for the fiscal year (fdrom $10-11B to $14.3-14.7B). RTRS
• US venture capitalists are sitting on $311bn in unspent cash, as they shy away from risky bets on Silicon Valley start-ups and concentrate on finding ways to return capital to their own backers. American VC groups have deployed just half of a record $435bn they raised from investors during the pandemic-era boom between 2020 and 2022. FT

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed as weakness in China offset the momentum from Wall St’s record highs. ASX 200 finished positive albeit with upside capped after disappointing retail sales data and as financials lagged. Nikkei 225 was initially lifted after a surprise decline in Japan’s unemployment but gradually pared most of its gains. Hang Seng and Shanghai Comp were pressured as the focus turned to earnings releases with underperformance in Hong Kong amid losses in property and tech, while the Hong Kong government also began the process of passing new national security laws.

Top Asian News

• Hong Kong government started the process to pass new national security laws this year with consultations on Article 23 to last until February 28th and some chapters of the new law will include actions that would endanger national security. Furthermore, one chapter is related to treason and actions with seditious intentions and another chapter relates to state secrets and espionage behaviour, while the law will also relate to using computers or electronic systems to conduct actions to endanger national security, according to Reuters.
• Two US lawmakers asked the Biden administration to impose export restrictions on four Chinese companies involved in the planned Ford (F) Michigan battery plant, according to a letter seen by Reuters.
• RBNZ Chief Economist Conway said recent economic data suggests that monetary policy is working with the economy slowing and inflation easing, but they still have a way to go to get inflation back to the target midpoint of 2%.

European bourses, Stoxx600 (+0.3%), are on a modestly firmer footing, albeit contained within recent ranges as markets await impetus from this week’s key events. European sectors hold a positive tilt; Media takes the spotlight, largely helped by gains in WPP (+4.2%) after its trading update whilst Food Beverage & Tobacco is hampered by losses in Diageo (-3.6%), post-earnings. US equity futures trade incrementally in the red and within a tight range which resides towards the prior day’s peak; focus for today will be on US JOLTs and key earnings from Microsoft, Alphabet, Starbucks & AMD. Click here and here for the sessions European pre-market equity newsflow, including earnings from BBVA, Diageo, Hapag Lloyd & more.

Top European News

• Ifo says the German economy is expected to contract by 0.2% in Q1.
• UK Kantar supermarket data: Grocery price inflation fell slightly to 6.8% in January, down from 6.9% in December 2023.
• Government advisers says German debt brake is “too rigid” and “restrict the fiscal space for future oriented expenditure”, according to the FT.
• Northern Ireland DUP leader Donaldson said the party executive endorsed proposals from negotiations with the UK government and the package of measures provides a basis to return to a devolved government, while the measures including new legislation will be published by the UK government in due course. Donaldson said he believes the package safeguards Northern Ireland’s place in the UK and it will remove checks for goods moving with the UK and remaining in Northern Ireland, according to Reuters.

FX

• Once again, DXY continues to pivot around the 103.50 mark with the index awaiting fresh catalysts. Yesterday’s best of 103.82 was the highest since Dec 13th (FOMC day).
• EUR is supported by hotter Spanish GDP and CPI metrics as attention then turned to the EZ-wide data which showed that the EZ just about avoided a recession; EUR/USD is contained within yesterday’s 1.0796-1.0851 range.
• Cable has slipped back from the 1.27 handle with UK-specific drivers light ahead of BoE on Thursday; currently trades in a 1.2672-1.2721 range with yesterday’s low at 1.2662.
• AUD the weaker of the Antipodes post-soft Retail Sales data overnight. AUD/USD remains in close proximity to 0.66 level whilst NZD/USD remains supported above the 0.61 mark.
• PBoC set USD/CNY mid-point at 7.1055 vs exp. 7.1763 (prev. 7.1097).
• SNB’s Chair Jordan said his expectation is inflation will again rise a little but noted the situation regarding inflation has improved and looks relatively good. Jordan also said that inflation should be below 2% in 2024 and that it probably accelerated in January.

Fixed Income

• USTs are firmer after Monday’s Treasury Financing Estimates implied a lower net issuance amount than forecast for Wednesday’s Quarterly Refunding; the accompanying yield is yet to approach 4.0% to the downside.
• Bunds initial bullish bias from Treasury estimates faded quickly as supply-side pressure emerged via Greece (10yr) and German (30yr) syndications. Further pressure occurred on the firmer Spanish GDP & HICP figures and upward revision to Germany’s Q3 figure; currently holds just below the 135.00 mark.
• Gilt price action is in-fitting with EGBs directionally but remain in the green alongside USTs and were unreactive to their own data points via the BoE.
• UK sells GBP 900mln 0.125% 2051 I/L: b/c 3.10x (prev. 3.18x), real yield 1.333% (prev. 1.314%)
• Italy sells EUR 7bln vs exp. EUR 5.5-7bln 4.10% 2029, 4.35% 2033, 3.35% 2035 BTP & sells EUR 2bln vs exp. EUR 1.5-2bln 2031 CCTeu.
• New German 30yr EUR-denominated benchmark guided +5.5bps, set to price today, via IFR
• Germany sees over EUR 51bln of demand for syndicated 30-year bond sale, via Reuters citing lead managers

Commodities

• Crude benchmarks are modestly firmer given the Aramco update, but overall remain towards the low-end of Monday’s parameters as newsflow has been somewhat light; Brent futures holds just below the USD 82/bbl mark.
• Spot gold is a touch firmer, holding above the technical levels eclipsed on Monday but yet to advance towards a test of USD 2050/oz, current peak of USD 2040/oz.
• Base metals are mixed in-fitting with the risk tone seen in APAC trade overnight; LME copper was unreactive to EZ and regional data.
• Brazilian miner Vale reported Q4 iron ore production of 89.4mln tons (prev. 80.85mln tons Y/Y) and nickel production of 44.9k tons (prev. 47.4k tons Y/Y).
• Saudi Aramco received a directive to maintain maximum sustainable capacity at 12mln BPD and not to continue increasing it to 13mln BPD, according to Reuters.

Geopolitics: Middle-East

• US President Biden asked advisers for options to respond that would deter any further attacks against US forces, while the Pentagon’s response options include striking Iranian personnel in Iraq and Syria or Iranian naval assets in Gulf waters. Furthermore, a response is likely to come in waves against a range of targets and will likely be initiated in a couple of days after President Biden gives the green light, according to sources cited by Politico.
• US Secretary of State Blinken said response against Iran could be multi-levered, come in stages and be sustained over time, while he added that work on Gaza hostage talks has been important and hopeful with the proposal on the table is strong and compelling.
• Hamas Chief says has received the Paris ceasefire proposal and will study it

Geopolitics: Other

• North Korea fired cruise missiles towards the sea off its west coast, according to South Korea’s military.
• Chinese Vice Foreign Minister Sun met with Ukraine’s Ambassador to China and said that China and Ukraine should promote stability and long-term development of bilateral ties, while they exchanged views on issues of common concern including the Ukraine crisis, according to Reuters.
• Russian Former President Medvedev says Russia plans to deploy new weapons on Kuril Islands, via Tass

US Event Calendar

• 09:00: Nov. S&P CS Composite-20 YoY, est. 5.80%, prior 4.87%
  • Nov. S&P/CS 20 City MoM SA, est. 0.50%, prior 0.64%
• 09:00: Nov. FHFA House Price Index MoM, est. 0.3%, prior 0.3%
• 10:00: Jan. Conf. Board Consumer Confidenc, est. 114.5, prior 110.7
  • Conf. Board Present Situation, prior 148.5
  • Conf. Board Expectations, prior 85.6
• 10:00: Dec. JOLTs Job Openings, est. 8.75m, prior 8.79m
• 10:30: Jan. Dallas Fed Services Activity, prior -8.7

DB’s Jim Reid concludes the overnight wrap

Yesterday we released our latest chartbook, which is called “When central banks cuts rates… what happens next?” It looks at what happens to markets as central banks cut, how inaccurate markets are around turning points in the rate cycle, and some other historical trends. So with markets pricing rate cuts this year across lots of central banks, it’s a topical pack for the coming months. See the full chartbook here.

In addition, today I’m hosting Adrian Cox in a webinar on the outlook for AI in 2024. It’s at 2pm London time and you can register here. This could be timely ahead of a 48-hour period from tonight where 2 4% of the S&P 500 report across only five companies worth $10.5tn with Microsoft and Alphabet today and Apple, Amazon and Meta on Thursday. So in a week with the FOMC tomorrow and payrolls on Friday these earnings could have more of an influence on where the S&P 500 and global sentiment actually finishes on Friday.

One other topic bubbling under surface at the moment is the tension in the Red Sea. Adrian Cox has brought together experts from across DB Research to publish a “Red Sea red alert 101”. This is the latest in our series of guides for generalists and reviews how the Red Sea crisis came about, why the conflict in Gaza is spilling into the wider region, and what it means for global oil supplies and trade. It builds on his report from last year on the Five weak links in the globalised economy. You can read the Red Sea 101 here.

In terms of markets, we were in a holding pattern ahead of the big events to come this week until an adrenaline shot came through in the last hour of US trading last night as the US Treasury announced lower-than-expected borrowing estimates for Q1 and Q2 2024. 1 0yr Treasuries saw their strongest day of the year so far (-6.3bps) and are another -2.3bps lower overnight at 4.05%. Meanwhile, the S&P 500 posted another solid gain (+0.76%) and another all-time high. Earlier in the day, there was a significant sovereign bond rally in Europe as investors priced in a growing likelihood the ECB would be cutting rates shortly.

Starting with the borrowing announcement, the US Treasury lowered its quarterly borrowing estimate for Jan-Mar from $816bn to $760bn, a larger decline than expected by the market and our US rates strategists. It also announced a modest $202bn borrowing estimate for the Apr-Jun period. These estimates suggest an improvement in the Treasury’s expectation of the budget deficit path. The market will next be watching the details of the Treasury’s coupon auction sizes in tomorrow’s refunding statement. Recall that the last quarterly refunding announcement on 1 November marked the start of the dramatic bond rally into year-end.

This news really helped markets into the close with the S&P 500 gaining nearly half a percent in the final hour of trading, with a +0.76% rise on the day leaving the index above 4900 for the first time. Small caps outperformed with the Russell 2000 up +1.67% on the day (gaining nearly one percent after the Treasury’s announcement). Other major indices also posted solid gains, including the Dow Jones (+0.59%) and the NASDAQ (+1.12%). The Magnificent 7 (+1.59%) also outperformed, led by a +4.19% gain for Tesla. Equities had been more subdued during the European session, though the STOXX 600 (+0.21%) did post a 4th consecutive gain for the first time since November, which took the index up to a 2-year high.

Over in the bond market, US Treasuries had already seen a moderate rally prior to the 3pm EST announcement, and yields then fell by c. 3bps in its immediate aftermath. They did reverse a portion of this decline late on, but the 10-year yield still closed -6.3bps lower at 4.075%. The rally was more modest at the front end, with the 2yr yield down -3.0bps.

Over in Europe, rates also rallied, aided by comments from several ECB officials, who collectively pointed in a dovish direction. For instance, as we reported yesterday, France’s Villeroy said over the weekend that “everything will be open at our next meetings”, and yesterday morning saw ECB Vice President Luis de Guindos point out that the good news on inflation “will end up being reflected in the monetary policy”. Later on, Portugal’s Centeno then said in an interview that “We don’t need to wait for May wage data to get an idea about the inflation trajectory”.

These overpowered Knot’s more hawkish comments over the weekend and comments by Slovakia’s Kazimir who saw a June cut as more likely than April. Investors dialled up the likelihood of rate cuts from the ECB, with a move now fully priced in by April again. Moreover, investors have even been open to the idea of a cut as soon as the next meeting in March, with the probability up from 18% at the close on Friday to 28% yesterday, so that will heighten the attention on this week’s flash CPI release for January. These growing expectations of a rate cut meant sovereign bonds rallied across the continent, with yields on 10yr bunds (-6.4bps), OATs (-6.9bps) and BTPs (-9.0bps) all seeing noticeable declines.

In oil markets, after reaching their highest level in nearly three months on Friday, Brent traded above $84.50 early on Monday (up +1.5% at the peak) amid increased concerns over Middle East tensions. But this supply risk sentiment eased during the day, also helped by an industry report suggesting that OPEC+ supply cuts this month might have been smaller than scheduled. Brent closed -1.38% lower on the day at $82.40/bbl, while WTI was -1.58% to $76.78/bbl. Both are back up around half a percent this morning.

Asian equity markets are mixed this morning with Chinese stocks resuming losses as Evergrande’s liquidation order has kept a lid on risk appetite. As I check my screens, the Hang Seng (-1.95%) is leading losses across the region with the CSI (-0.79%) and the Shanghai Composite (-0.62%) also falling while the Nikkei (+0.30%) and the KOSPI (+0.15%) are marching to a different beat. US equity futures are broadly flat.

Early morning data showed that Japan ’s labour market showed further signs of tightness as the jobless rate unexpectedly dropped to 2.4% in December from 2.5%. Also, the job availability ratio edged down 0.01 from November to 1.27 in December (v/s 1.28 expected). Meanwhile, Australian retail sales contracted -2.7% m/m in December (v/s -1.7% expected) as against a downwardly revised increase of +1.6% last month.

Elsewhere, China’s benchmark 10yr yield dropped to 2.47%, its lowest in over two decades on rising expectations of additional monetary easing.

There was very little DM data to speak of yesterday, although we did get the Dallas Fed’s manufacturing outlook survey for January. That fell to an 8-month low of -27.4 (vs. -11.0 expected), whilst the employment component fell to -9.7, which is the lowest reading since May 2020 at the height of the pandemic. The market has seemingly grown immune to these very bad manufacturing surveys that have punctuated through over the last year or so, so this was largely ignored.

To the day ahead now, and US data releases include the Conference Board’s consumer confidence reading for January and the JOLTS job openings for December. Meanwhile in Europe, there’s the Q4 GDP data from the Euro Area, along with UK mortgage approvals for December. From central banks, we’ll hear from the ECB’s Vujcic, Lane, Vasle and Nagel. Lastly, today’s earnings releases include Microsoft, Alphabet, Pfizer, UPS, Starbucks and General Motors.

Authored by Paul Joseph Watson via Modernity.news,

An exhibition celebrating ‘diversity’ in London laughably claims that the first Britons were black and that “Britain was black for 7,000 years before” white people arrived.

Yes, really.

The Brilliant Black British History exhibition held at Black Cultural Archives in Brixton, south London, received taxpayer funding to spout patently false nonsense.

The very first display panel in the exhibition states, “By testing DNA, scientists made an amazing discovery – the first migrants to Britain around 12,000 years ago had black skin. Yes, that’s right, the very first Britons were black!”

Fact check: Nope.

This is all based on the infamous Cheddar Man hoax, the oldest set of human remains to have been found in Briton, who researchers initially claimed had possible skin pigmentations from “dark to black”.

🔴 The first Britons were Black, exhibition on diverse history claims.

The exhibit claims that 11 percent of Roman York was ‘Black’, possibly based on a 2009 study https://t.co/wEu41XserI

— The Telegraph (@Telegraph) January 27, 2024

“Susan Walsh, clarified that Cheddar Man’s appearance was uncertain, while a separate 2017 study from geneticist Sarah Tishkoff found that predicting likely pigmentation based on “giveaway” genes was inaccurate,” notes the Telegraph.

The exhibition also falsely claims that AD Roman Emperor Septimius Severus was “a Black Roman ruler,” when in reality he had Italian and Middle Eastern descent.

“The exhibit claims that 11 per cent of Roman York was “Black”, possibly based on a 2009 study, which suggested 11 per cent of one set of human remains may have been migrants who “mainly originated from northern Africa (modern Egypt, Morocco, Algeria, Tunisia, and Libya),” reports the Telegraph.

The exhibition was blasted by Cambridge historian Professor David Abulafia.

“The presence of a very small number of Africans in this country over the two millennia up to the 19th century is exaggerated out of all proportion. And most of these ‘Africans’ were from the north of the continent and white or light brown,” he asserted.

It’s little surprise that the exhibition is so absurdly inaccurate given that is is based on Bloomsbury children’s book Brilliant Black British History, by Atinuke, the Nigerian-born poet and author.

The book claims that black people built Stonehenge, despite there being absolutely no evidence of this at all.

We wuz Mesolithic hunter-gatherers n’ shieet!

As we document in the video below, the BBC also produces TV shows for children pushing the lie that a whole raft of British historical figures were sub-Saharan African, which is a total fallacy.

As we previously highlighted, children at schools in the UK are being taught that St Hadrian, an abbot who played a pivotal role in the early history of the English Church, was black, despite the fact that there is no record of him being black at all.

The Telegraph reported, “The Dark Age abbot St Hadrian of Canterbury has been referred to as a ‘black scholar’ in primary school teaching material, despite the holy man being of north African origin and not black.”

In another similar case, the BBC had to remove a plaque it had installed celebrating the “first black Briton” after scientific evidence revealed the person was not African, but from Cyprus.

“BBC plaque to mark earliest black Briton removed because she ‘was from Cyprus’

“New DNA analysis suggests BBC programme’s claims about the origins of ‘Beachy Head Lady’ were wrong”https://t.co/hriOgF95X8

— Tony Dowson (@TonyDowson5) October 25, 2023

Again, race activists will seize upon any indication that a historical figure didn’t have porcelain white skin and claim they came from sub-Sahara Africa to push diversity propaganda and attack the heritage of native white Britons.

This all points to the fact that sub-Sahara Africa has actually produced next to nothing in terms of important historical figures, culture, or anything of value, which is why they have to lie so profusely about it via government-funded fake museum exhibitions.

https://t.co/Tfpbdn45im pic.twitter.com/SBAfzmazlE

— Morgoth (@MorgothsReview) January 27, 2024

*  *  *

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Update(1908ET): Public outrage and massive pushback has ensued after in a Monday interview White House press secretary Karine Jean-Pierre asserted that the three US troops killed by the drone strike in Jordan had died “fighting on behalf of this administration”…that is Biden, rather than America.

“Our deepest, obviously our deepest condolences go out, and our heartfelt condolences go out to the families who lost, uh, three, three brave, uh, three brave, uh, three brave, three folks who are military folks, who are brave, who are always fighting, who are fighting on behalf of, uh, this administration…,” Jean-Pierre told MSNBC’s “Morning Joe”. She had in the moment tried to quickly correct by adding after “administration”… the words “of the American people, obviously more so, more importantly.” Still, it reveals the apparent thinking and approach of this administration. Watch:

Karine Jean-Pierre gives condolences to “three folks who are military folks who are brave who are always fighting, who were fighting on behalf of this administration…” pic.twitter.com/b5ka9hMjR2

— RNC Research (@RNCResearch) January 29, 2024

The three soldiers who gave their lives are simply and casually “folks” – as referenced in the interview. Also, we don’t even really have to point this out, but one can only imagine the rage and chaos if the Trump administration had ever claimed that fallen Americans had died for his administration.

Jeremy Redfern, press secretary for Florida Gov. Ron DeSantis, was one among many who slammed her statements as “disgusting”. He tweeted, “Say what you will about this word salad, but the idea that anyone in the military is fighting on behalf of any administration is precisely what is wrong with the DC ruling class.”

Below are the identifies of the three Americans who tragically lost their lives, who were all serving in the same Army unit based out of Georgia: Sgt. William Rivers, 46, of Carrollton, Spc. Kennedy Ladon Sanders, 24, of Waycross, Spc. Brianna Moffatt, 23, of Savannah.

* * *

Update(1114ET): Some surprising details and admissions have emerged out of the Pentagon on Monday connected to the drone attack on Jordanian base Tower 22, related to the question of how the base’s anti-air defenses could have failed so badly. First, in our prior reporting (below), we linked to Moon of Alabama which asked some key questions not being addressed amid the frenzy of international reporting and growing speculation [emphasis ZH]: 

The reporting so far does not answer many arising questions. Tower 22 is on the Jordanian side of the boarder but Jordan insists that no attack had happened on its grounds.

Another anomaly are the high rate of wounded from the alleged drone strike. Drones are used in mass in the Ukraine war but the casualties they cause are usually less than a handful per drone.

The highly automated short and medium range air-defenses (C-RAMs, the equivalent of naval Phalanx guns) at the base should be able to shoot down any drone. Why didn’t they work?

Later in the day Monday, some of these questions are being answered. The Wall Street Journal cited US officials who spoke to the failure of the base’s anti-air defenses:

The U.S. failed to stop a deadly attack on an American military outpost in Jordan because the enemy drone approached its target at the same time a U.S. drone was also returning to base, U.S. officials said Monday. 

The return of the U.S. drone led to some confusion over whether the incoming drone was friend or foe, officials have concluded so far. 

The enemy drone was launched from Iraq by a militia backed by Tehran, U.S. officials said. The outpost, Tower 22, sits in Jordan, hard on the borders of Iraq and Syria.

In total three US service members died and at least 34 were injured, with eight of these having been medically evacuated to a hospital in Germany.

At a moment some US Congressional hawks are clamoring to start a war with Iran, WSJ writes further, “The U.S. has yet to find evidence thus far that Iran directed the attack, a U.S. defense official said Monday.”

Below is an example of a C-RAM in action… this is what ideally should have happened as the inbound enemy drone got closer to the Tower 22 base:

* * *

Iran has vehemently denied that it was behind the weekend drone attack on a Jordanian base near the Syrian border which killed three American troops, and according to a revised figure injured 34. A one-way drone reportedly slammed into a tent which was housing soldiers at the base, which is why casualties are so high, but questions remain.

Tehran has called the accusations that it was behind the attack “baseless” after President Biden on Sunday vowed “We shall respond”. Within the hours after news of the attack on Jordan’s Tower 22 base there were widespread reports that Iranian allied groups in Iraq and Syria were temporarily evacuating their bases, expending retaliatory airstrikes.

Iranian allies are now bracing for a major US response to the deadly attack on the Jordanian outpost, according to the Wall Street Journal. Already there’s been an apparent Israeli airstrike on a Damascus suburb, resulting in the deaths of two people, said to be targeting an “Iranian-backed group”. 

Even as Iran has denied involvement, an Iranian-linked group called “Islamic Resistance of Iraq” has taken responsibility for the Jordanian base attack. The core of the ‘resistance’ coalition in Iraq continues to be Kateeb Hizballah however, as Washington Post explains further of the details:

“Tower 22”, the U.S. base in NE Jordan where three American troops were just killed, overlooks a Syrian refugee camp called Rukban, where 15,000 people have been living for years. It is also near the Al-Tanf Garrison, where a couple hundred U.S. troops are based.

This is a crucial node between Iraq and Syria that Iranian militias have long sought to control. There have been several drone attacks on Tanf since Oct. 7. This is a brazen escalation.

The group that will claim responsibility calls themselves the “Islamic Resistance of Iraq,” but that’s really a post Oct 7 umbrella group of IRGC sponsored militias. The actual attackers were likely Kateeb Hizballah with support of Harakat Hezbollah al-Nujab and Asa’ib Ahl al-Haq.

The Washington Post analysis goes on to claim that Islamic Resistance of Iraq has direct IRGC backing and was formed in order to “target Americans” – also at a moment the Iraqi government has made clear that it wants US troops out of the country.

Iran appears to be seeking to cool tensions while bracing for potential strikes…

#Iran‘s ambassador to #Syria is now interestingly distancing himself from the Reuters report which suggests an #IRGCterrorists command center was targeted by #Israel today near Sayyidah Zaynab. Avoiding pressure to have to respond. pic.twitter.com/GciUhDFE61

— Jason Brodsky (@JasonMBrodsky) January 29, 2024

The three US troop deaths constitute the first American military fatalities since Oct.7 and the war in Gaza began, though there have been over 150 attacks targeting US bases and outposts in Iraq and Syria. While the initial assumption has been that the drone was launched from Syria, this has ultimately yet to be determined pending a Pentagon investigation.

Meanwhile, Axios reports that Biden’s national security team convened several times on Sunday. Biden and his top officials say that a “significant military response” against pro-Iranian militias is coming. “We don’t want war but those who are behind this attack need to feel our response,” one unnamed admin official told Axios on Sunday evening.

What remains clear is that the US has once again backed itself into a corner in the Middle East. Sporadic ‘deterrent’ strikes either on militant camps or Houthi positions related to the Red Sea crisis have not done anything, and yet bigger American military intervention would inevitably lead to another all-out US war in the Middle East and thus a new endless quagmire.

“We don’t want a wider war with Iran, we don’t want a wider war in the region, but we gotta to do what we gotta to do,” National security (NSC) spokesman John Kirby said Monday. “We certainly know Iran is backing these groups … we are taking it very seriously.” It’s never a good sign when the NSC, which is absolutely the most ‘insider’ of the deep state, shrugs and says “we gotta do what we gotta do…” when it comes to matters of war (which once upon a time required the authorization of the people’s direct representatives in Congress).