House Speaker Mike Johnson (R-LA) is banning transgender individuals from bathrooms on the House side of the Capitol Complex regardless of their gender identity.

The move comes after the election of Rep-elect Sarah McBride (D-DE), who will become the first transgender member of Congress.

“All single-sex facilities in the Capitol and House Office Buildings (like restrooms, changing rooms, and locker rooms) are reserved only for individuals of that biological sex,” Johnson said of women with johnsons, adding “Like all policies, it’s enforceable. We have single-sex facilities for a reason. Women deserve women’s only spaces.”

“We’re not anti-anyone. We’re pro-woman. I think it’s an important policy for us to continue. It’s always been, I guess, an unwritten policy, but now it’s in writing,” Johnson continued.

The move comes after Rep. Nancy Mace (R-SC) introduced a resolution to ban transgender women from women’s bathrooms in the House.

As Axios notes, Mace pushed Johnson to include her measure, which charges the House sergeant-at-arms with enforcing the ban.

Biological men do not belong in private women’s spaces. Period. Full stop. End of story. pic.twitter.com/IhR7kExkBU

— Rep. Nancy Mace (@RepNancyMace) November 18, 2024

Meanwhile, Rep. Marjorie Taylor Greene (R-GA) told colleagues at a Tuesday closed-door GOP conference meeting that she might get into a “physical altercation” if she’s forced to share the bathroom with a trans woman.

In a Monday statement, McBride, a woman with a penis, said “This is a blatant attempt from far right-wing extremists to distract from the fact that they have no real solutions to what Americans are facing.”

lol what?

If anyone was hoping that today’s 20Y auction would be even remotely successful, they can not put those to bed: the just concluded sale of $16BN in 20Y paper was a disaster.

Pricing at a high yield of 4.680%, the auction tailed the When Issued 4.650% by 3.0bps. Not only was this the third tail in a row, it was the 2nd biggest tail on record.

The bid to cover was even worse: sliding from 2.59 to 2.34, the btc was the lowest going back all the way to August 2022.

The internals were perhaps the only silver lining to the auction: indirects took down  69.5%, up from 67.9%, below the six auction average of 71.6%. But while Indirect demand was ok, the Direct award plunged to just 7.9% from 17.6%, the lowest on record. This mean that Dealers had to step in big time and so they did, taking down 22.6%, up from 14.5% and the highest since May 2021.

In light of just how ugly the auction was, it is probably not a surprise that yields spiked after the result, with the 10Y rising 2bps from 4.39 to 4.41, and hammered risk assets.

Commenting on the auction, UBS said that it looks like the prior well-demanded 10y and 30y auctions were just fast money profit-taking on shorts, and that “real money hasn’t started to buy bonds.” Well, the real money better step in soon or it will get ugly fast.

Ukraine’s armed forces fired British cruise missiles at military targets inside Russia for the first time, a Western official familiar with the matter said.

As Bloomberg reports, the strikes using Storm Shadow missiles were approved in response to Russia deploying North Korean troops in its war against Ukraine, a move by Moscow that the UK government considered to be an escalation of the conflict, according to the person who spoke on condition of anonymity because of the sensitivity of the matter.

The Telegraph reports that residents in the village of Marino, Kursk, found fragments from a Storm Shadow missile on Wednesday.

As a reminder, Storm Shadow missiles have been used by Ukraine inside its own territory for some time but Kiev now appears to have been given permission to strike targets inside Russia.

The missiles carry a bunker-busting warhead, and flies low and fast to evade air defenses.

British Storm Shadow missiles have a range of 150 miles.

The reaction across markets is less notable than yesterday’s with stocks seeing the biggest impact (lower)…

Treasury yields are down a little, gold up a little and bitcoin extending gains.

Reuters is reporting that Ukrainian President Volodymyr Zelenskiy has said his country will not rest until every last Russian soldier is ejected from its territory – based on the borders it gained after the 1991 fall of the Soviet Union.

This will not end well…

The current consumer environment is very dire for households making less than $100k a year, with the surge in the trade-down phenomenon—driven by both wealthy and low-income consumers grappling with record credit card debt and sliding personal savings—solidifying Walmart’s dominance as ‘America’s low-cost budget retailer,’ quickly eroding market share from competitors like Target and Dollar General into the end of the year.

Target reported a disappointing margin performance for the fiscal third quarter on Wednseday and slashed the annual EPS forecast over market share losses. 

It reported higher digital fulfillment and supply chain costs, resulting from elevated inventory levels and increased digital sales volumes.

“We saw several strengths across the business, including a 2.4% increase in traffic, nearly 11% growth in the digital channel, and continued growth in beauty and frequency categories,” Chief Executive Brian Cornell wrote in a statement, adding, “We encountered some unique challenges and cost pressures that impacted our bottom-line performance.” 

Here’s a snapshot of third-quarter results (courtesy of Bloomberg): 

Comparable sales +0.3% vs. -4.9% y/y, estimate +1.48%

• Comp digital sales +10.8%, estimate +4.69%

Sales $25.23 billion, +0.9% y/y, estimate $25.74 billion

Gross margin 27.2%, estimate 28.7%

Ebit $1.20 billion, -11% y/y

Ebitda $1.95 billion, -5.5% y/y, estimate $2.16 billion

Customer transactions +2.4%

Average transaction amount -2%, estimate -1.08%

Digital sales as share of total sales 18.5%

Total stores 1,978, estimate 1,972

Operating margin 4.6%, estimate 5.63%

Store comparable sales -1.9%, estimate +1.49%

Stores originated sales 81.5%, estimate 82.7%

Adjusted EPS $1.85 vs. $2.10 y/y, estimate $2.30

Operating income $1.17 billion, -11% y/y, estimate $1.46 billion

Target expects fourth-quarter adjusted EPS of $1.85 to $2.45, versus the current Bloomberg Consensus of $2.65

• Sees adjusted EPS $1.85 to $2.45, estimate $2.65

Several months after Target executives raised financial targets, these rosy outlooks have reversed into the holiday shopping season amid weak consumer trends: 

• Sees adjusted EPS $8.30 to $8.90, saw $9 to $9.70, estimate $9.57 (Bloomberg Consensus)

“It’s disappointing that a deceleration and discretionary demand combined with some cost pressures have caused us to take our guidance back down after raising it last quarter,” Michael Fiddelke, Target’s chief operating officer and former chief financial officer, told investors on the earnings call, adding, “We believe it’s prudent to take this conservative approach.”

The quarter’s dismal earnings and revised outlook spooked investors, prompting some to question whether Walmart’s ‘rollback deals’ are eroding Target’s market share in the consumer space.

Target shares crashed 18% in premarket trading in New York. 

Commenting on Target’s earnings report, Goldman’s Eric Mihelc and Scott Feiler told clients this morning:

TGT (-18%) the clear focus this morning which is weighing on other general merch names too (DG, FIVE, DLTR -3%)…though it’s not all bad for consumer; witness WMT comps +5% yest, DAL saying premium consumer is ‘thriving’ and TJX +0.5% on earnings this morning. Some helpful takeaways from Scott here: link. Elsewhere, GIR updates MF and HF positioning post 13F filings. Most active high touch yesterday: UAA, CELH, SKX, KHC, WMT, AS, WRBY, FND, GIS, SBUX, MLCO, KO, CCL, GAP, KMB.

The analysts continued:

TGT -20%…Expectations were muted, which is why short interest was near 4 year highs. However, the low bar was on the comp sales, which were not much worse vs expectations. Bar was not low for a big EPS issue, which they ended up having one. Gross margins 100 bps light for 3Q and 4Q margins are also implied to be well below. The stock is down 20% in the premarket on an 8% FY EPS cut, so it does feel extreme. Having said that, almost nobody I spoke to had this big of an earnings miss/cut as their base expectation. Details: 3Q EPS of $1.85 vs Consensus $2.30 on comp sales +0.3% vs Consensus +1.5% (we think bogey was +0.5%). The issue of course is EPS/margins miss, with gross margins 130 bps light (SG&A was in-line, so gross margin drove all the downside). 4Q EPS well below at $2.15 (mid) vs Consensus $2.65 on comps of flat vs Consensus +1.3%.

Peer read? TGT did have +2.4% traffic growth vs +3% last quarter, so traffic is ok. As a result, Scott does not think all of Retail needs to get aggressively sold. However, when a name like TGT is down 20% and has 60% discretionary exposure, the natural reaction will be for other discretionary general merchandise names to see some underperformance. Would expect an elevated focus on DLTR, DG, FIVE, TJX (reports this morning also), ROST, BURL, etc…

On a separate note, Goldman’s Feiler explained to clients that the current consumer environment is a “winner-take-all” situation. So far, Walmart appears to be the king of deals (see: latest WMT earnings beat), and cash-strapped consumers are responding to deals by flooding the big box retailer’s stores nationwide.

Here are Feiler’s six points on the current consumer environment:

• Takeaway # 1: We are in a Consumer environment that is steady enough that winners can continue to outperform (see WMT yesterday with +5.3% Walmart US comp sales and stock was +3% to new all-time highs, despite the elevated multiple to history).

• Takeaway #2:  However, we are not in a Consumer environment that is good enough that it is a rising tide lifts all boats. There will be winners (WMT) and there will be share donors (see TGT this morning).

• Takeaway #3: Dispersion is the name of the game and the current consumer environment supports a winners/losers environment.  I would expect that to continue into the rest of EPS season and 1H25.  We are seeing it in COST/WMT vs TGT. We are likely to see it in grocers and big box discounters vs dollar stores. We have seen it in footwear with ONON/DECK vs NKE, in MCD vs peers and in many other end markets as well.

• What Happened This Morning?: TGT is down 20% in the premarket. Expectations were muted, which is why short interest was near 4 year highs. However, the low bar was on the comp sales line, which was not much worse vs expectations (+0.3% vs Consensus +1.5% and the bogey for +0.5%). The bar was not for a big EPS issue, which ended up being the big surprise here($1.85 vs Consensus $2.30). Gross margins are 100 bps light for 3Q and 4Q margins are also implied to be well below.

• What to Do Here? The stock is down 20% in the premarket on an 8% FY EPS cut, so we are seeing some further multiple compression, despite 4-year high short interest. Having said that, almost nobody I spoke to had this big of an earnings miss/cut as their base expectation.  I would expect to see some short covers, but do not think long buyers will be quick to step in and take a more constructive view.

• Peer read? TGT did have +2.4% traffic growth vs +3% last quarter, so traffic is ok. As a result, I do not think all of Retail needs to get aggressively sold. However, when a name like TGT is down 20% and has 60% discretionary exposure, the natural reaction will be for other discretionary general merchandise names to see some underperformance. Would expect an elevated focus on DLTR, DG, FIVE, TJX (reports this morning also), ROST, BURL, etc.

Other Wall Street analysts offered their take on TGT ER (courtesy of Bloomberg):

Citi (neutral from buy, PT $130 from $188), Paul Lejuez

• “Very poor” 3Q results and an “uninspiring” 4Q outlook show Target is probably losing market share to Walmart, Lejuez writes

• With Walmart’s share gains coming “largely from higher income consumers,” Target is at risk of losing additional share

• “We believe TGT is likely to need to be more promotional to drive traffic/sales, which we believe makes F25 much more uncertain, especially because in 3Q TGT did not show an ability to adjust SG&A to offset the sales/gross margin weakness,” he says

Oppenheimer (outperform), Rupesh Parikh

• Parikh said in his Target earnings preview note that he expected comparable sales and earnings for 3Q to show a “material” shortfall compared with Street estimates, but the actual bottom line miss is even “deeper” than he anticipated

• Awaits the conference call to “better understand margin dynamics for the balance of the year and into FY25”

• The stock pullback this morning is “much greater” than the possible downside in the mid-$130s/low $140s he envisaged with the preview note

Stifel (hold), Mark Astrachan

• “We view results as disappointing, with comp. [sales] worsening sequentially y/y and on a 2-year basis,” Astrachan writes

• This suggests that Target is underperforming compared with larger peers, and is losing market share in key categories, which probably is also hurting gross margin

• Expects shares to decline by more than the anticipated ~10% reduction in the annual consensus EPS

Bernstein (market perform), Zhihan Ma

• “Disappointing quarter calls Target’s ability to generate profitable growth into question,” Ma writes, adding that she wonders if the company can “exceed both sales and profitability expectations at the same time over the long term”

• Target needs to invest in pricing and drive e-commerce growth to support top-line growth, but both of these actions are “margin dilutive”

• She believes Target is less likely to turn profitable in e- commerce than Walmart due to its “smaller scale and limited investment in automated e-commerce fulfillment capabilities”

RBC (outperform), Steven Shemesh

• “The conclusion investors seem to be drawing is that there aren’t a ton of margin levers left to pull if top line remains on the weaker side throughout 2025,” Shemesh writes

• “Back of the envelope math suggests that ~flat to +1% comp in 2025 and ~flat op margin would yield EPS around $9.50, which at ~15x gets us to somewhere around $140-145, roughly ~10% upside from where shares are trading pre-market ($128)”

• Premarket share reaction (down around 18%) probably fades throughout the day, but with visibility into a sales recovery limited, he wouldn’t advise shorter-term investors to chase the stock here

• For longer-term investors, $10.50-$11.00 in EPS seems achievable in 2026

Vital Knowledge, Adam Crisafulli

• “This weak TGT print underscores how a big part of Walmart’s strength is market share gains while the consumer overall continues to witness headwinds,” Crisafulli writes

• Results likely don’t bode well for the likes of Kohl’s and the dollar stores

Considering the current challenging consumer environment…

…let’s remember that in July, we cited Goldman as saying…

Attention Cash-Strapped Americans: Goldman Finds Top Supermarket Offering The Best Grocery Deals https://t.co/0WSTOWex5J

— zerohedge (@zerohedge) June 15, 2024

And in October. 

Walmart Wins: Best Grocery Deals Out There!

👉 Walmart offers groceries 14% cheaper than average, per Goldman analysts.
👉 Whole Foods is the priciest, with +10.1% compared to peers.
👉 Dairy deal alert: Walmart at -18.1%, while Whole Foods’ prices soar +11.3%.
‼️ Economically… pic.twitter.com/CgB0nImpXP

— ZeroHedge Notes (@ZeroHedgeNotes) October 24, 2024

A more recent note by Goldman analysts found the “trade-down phenomenon” has occurred across “high-end and low-end consumers.” 

The last time “trading down” mentions spiked on earnings calls, it was GFC.

Bidenomics has transformed American households into a nation of Walmart customers …

Washington appears fully aware it has poked the Russian bear, after President Biden greenlighted Ukraine striking Russian territory with long-range missiles.

US officials have warned Wednesday that “potential significant air attack” on Kiev is likely coming, and have announced the closure of the US Embassy in the capital “out of an abundance of caution”. This follows immediately on the heels of Ukrainian forces having struck an arms depot inside Russia with U.S.-supplied weapons, specifically the Army Tactical Missile System (ATACMS), on Tuesday.

“Embassy employees are being instructed to shelter in place,” a new alert on the embassy website said. “The U.S. Embassy recommends U.S. citizens be prepared to immediately shelter in the event an air alert is announced.”

Embassy diplomats and all staff are being asked to observe the following precautions:

• Monitor local media for updates
• Identify shelter locations in advance of any air alert
• Immediately take shelter if an air alert is announced
• Follow the directions of Ukrainian officials and first responders in the event of an emergency

The embassy closure is also happening the day after Putin signed a decree which updates and expands Russia’s nuclear doctrine, which effectively lowers the threshold for nuclear weapons use. “As we said earlier this month, we were not surprised by Russia’s announcement that it would update its nuclear doctrine; Russia had been signaling its intent to update its doctrine for several weeks,” the White House National Security Council responded in a statement.

Other Western embassies have also shuttered their operations amid air raid warnings in Kiev and other regions, including Italy, Spain, and Greece.

Al Jazeera notes that “Germany’s embassy in Kyiv remains open in a limited capacity and can still be contacted by German nationals who are in the country, a German Foreign Ministry official has said.”

“We are in constant contact with our colleagues on the ground so that we can take appropriate measures if the situation changes,” the official said.

Ukraine’s military has since said that warnings of a large-scale missile attack from Moscow forces are likely a “psychological operation” carried out by Russia, precisely in order to instill fear and cause further embassy closures. According to the military statement:

It said Russia is conducting a “psychological attack against Ukraine”, warning of fake messages circulating on social media on alleged increased missile threats that it said were part of a “psychological operation”.

It appears Russia may bomb the US embassy in Kyiv today. The state dept response will be to provide additional arms, funding and longer range missile strikes inside of Russia. This is the escalatory trap we’ve all been warning about. Congress needs to hear from us: No more funds. https://t.co/Z6foXbc6EW

— Clint Russell (@LibertyLockPod) November 20, 2024

With merely two months to go until Trump is sworn into office, many Republicans have blasted the Biden administration and his national security officials for risking World War 3, and at least assuring major escalation, by at the last minute greenlighting long-range strikes on Russia–even knowing full well the Trump administration plans to pursue peace negotiations. 

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

• Mark Cuban Says Trump’s Tariff Proposals Will Ramp Up Prices- Business Insider

• Fed’s Kashkari Says Trump Tariffs Could Reheat Inflation If They Provoke Global Trade War- CNBC

• Blanket Tariffs Would Be Incredibly Inflationary, Says Strategist- CNBC

• Treasury Secretary Janet Yellen Warns “Sweeping Untargeted Tariffs” Would Reaccelerate Inflation- CBS News

• Trump Tariffs Expected To Spike Inflation, Interest Rates- Business Insider

The headlines regarding Trump’s proposed tariffs and their inflationary consequences are undoubtedly worrying, but will they prove correct?

Instead of taking the “experts” word, let’s consider how tariffs may affect the prices of all goods and services, not just the items subject to tariffs. Furthermore, it’s worth discussing how tariffs could impact the economy, as economic activity greatly influences inflation. Lastly, we lean on historical precedence, capitalism, and the dollar to further evaluate how tariffs might impact inflation and economic growth.

Higher Prices And The Substitution Affect

Price changes of a good or service are primarily a function of supply and/or demand variations. However, price indexes, the basis for which economists measure inflation, are constructed on the prices of a basket of goods and services. The goods and services within the basket are weighted by the consumption of said items.

Considering the difference between the price of one good and the inflation index for an economy, let’s think about how consumers react to higher prices.

If the price of an imported good increases due to a tariff and the company selling the good commensurately increases the price, consumers respond in three ways.

• Some consumers will decide not to pay the higher price and purchase a substitute good.

• Others decide not to pay the higher price or buy competing goods and save their money.

• Another group of consumers will pay the higher price, leaving them with less money to buy other goods.

Consumers buying a substitute good at a lower price will shift the composition of the inflation basket of goods, minimizing the impact of the tariff. 

Saving, thus not spending, will reduce economic activity, which is deflationary, as we will discuss when we consider how sellers might react to tariffs.  

Some consumers will pay higher prices. While this is inflationary for the tariffed item, the consumers have less money for other items, which is deflationary for those goods.

While the prices of the tariffed item and substitute items may change with demand preferences, the net effect after re-weighting the inflation basket and accounting for any broad economic impact will be minimal.

The demand for goods and the prices within the inflation pie will shift with a tariff. However, the aggregate supply and demand should be largely unaffected unless new money is injected into the economic system.

Business Owners Reaction

The prior section focused on consumers’ reactions to business owners passing on 100% of the tariff through higher prices. Typically, that does not happen unless demand is inelastic, meaning consumers have no choice but to buy a good or service.

Despite the price of the tariffed good increasing, the sellers’ profit margin does not change. However, as noted, the seller will likely lose some sales to substitute goods or savings. Accordingly, in many cases, sellers decide to eat some of the tariff costs to avoid losing sales. Doing so reduces their profit margin.

Sellers, faced with reduced profit margins and lost sales, will try to reduce expenses to offset the loss from the tariff. This means they might lay off employees, reduce capital expenditures, or choose other cost-saving methods.

The bottom line is that reduced profit margins, diminished spending, and layoffs will reduce economic activity. The economy will suffer, and demand for more than just the tariffed goods will decline. The result would be lower inflation and growth.

Retaliatory Tariffs

It’s equally important to consider that countries may not readily accept tariffs on their exports to the US. Many countries will retaliate with tariffs on US imports into their country. Such tariffs would make US-made exports more expensive and, thus, less desirable to foreign consumers.

As a result, US exports would decline, thus reducing economic growth and resulting in potential job losses and less inflation. 

With an appreciation for how tariffs can impact the economy and prices, let’s review the history books.

Smoot Hawley Tariff Act

In 1930, Herbert Hoover signed the Smoot-Hawley Tariff Act into law. The timing could not have been worse as the world was entering the Great Depression. Smoot-Hawley was intended to protect American jobs and farmers. The reaction from our trade partners was retaliatory tariffs on exported US goods.

US imports and exports were reduced by more than 50% within four years of the Act’s passage. Many Great Depression scholars blame the tariffs for playing a substantial role in amplifying the scope and duration of the Great Depression. The US paid a steep price for trying to protect its workforce through short-sighted political expedience.

While it’s hard to isolate the effect of the tariffs on the economy, GDP fell by an estimated 15% from 1930 to 1932. As a result, the unemployment rate rose to over 25%. From 1930 to 1932, the CPI index fell by 24%. The following table and graph, courtesy of Inflationdata.com, show the stunning deflation experienced in the early 1930s.

Trump 1.0 Tariffs

In 2018, Trump levied tariffs primarily aimed at China for a select group of goods. It is estimated the tariffs covered a little over $300 billion in imports. That accounted for about 12% of all imported goods. The tables below, courtesy of the Peterson Institute, show the share of the tariffs by country.

The following paragraph comes from The Impact of the 2018 Tariffs on Prices and Welfare, courtesy of the Journal of Economic Perspectives:

The figure shows a big surge in imports in the wave 1 products, washing machines and solar panels, prior to the imposition of tariffs, which was likely caused by importers moving forward import orders in order to obtain products before the imposition of the tariffs. For the remaining goods, it appears that on average their import levels were rising a little faster than for unaffected goods in the months prior to the imposition of the tariffs. In all cases, import values declined sharply after the imposition of the tariffs, typically falling 25 to 30 percent after the imposition of the tariffs. This drop is particularly striking given that imports for unaffected sectors and countries rose by about 10 percent over the same period, where this rise could in part reflect some import substitution from affected to unaffected countries and products in response to tariff changes.

As we wrote earlier, higher prices reduced the amount of imports of the tariffed goods and increased consumption of those goods not impacted by the tariffs. To this end, we just read the following headline: New York retailers stock up, switch suppliers as Trump tariffs loom

Furthermore, the article states:

Therefore, the full incidence of the tariffs has fallen on domestic consumers and importers so far, and our estimates imply a reduction in aggregate US real income of $1.4 billion per month by the end of 2018. We see similar patterns for foreign countries that have retaliated with their own tariffs against the United States, which suggests that the trade war has also reduced the real income of these other countries.

The graph below shows that US import prices fell from 2018 until the price surge due to the pandemic in late 2020.

Trump’s tariffs were designed to boost American industry. However, despite good intentions, the broader impact was reduced economic activity, with specific sectors facing deflationary pressures.

What About The Currency?

The reaction of the US dollar versus the currency of tariffed nations is also worth considering. For this, we lean on Hudson Bay Capital.

While in principle tariffs can be noninflationary, how likely is it? In the macroeconomic data from the 2018-2019 experience, the tariffs operated pretty much as described above. The effective tariff rate on Chinese imports increased by 17.9 percentage points from the start of the trade war in 2018 to the maximum tariff rate in 2019 (see Brown, 2023). As the financial markets digested the news, the Chinese renminbi depreciated against the dollar over this period by 13.7%, so that the after-tariff USD import price rose by 4.1%. In other words, the currency move offset more than three-fourths of the tariff, explaining the negligible upward pressure on inflation. Measured from currency peak to trough (who knows exactly when the market begins to price in the news?), the move in the currency was 15%, suggesting even more offset.

Measured CPI inflation moved from slightly above 2% before the start of the trade war to roughly 2% by the armistice. Measured PCE inflation went from slightly below the Fed’s target to further below the Fed’s target. Of course, there were crosscurrents like the Fed’s tightening cycle at the time, but any inflation from this trade war was small enough that it was overwhelmed by these cross-currents. This explains the Trump camp’s view that the first U.S.-China trade war was noninflationary.

Only 11% of Chinese goods are subject to tariffs. The prices of the other 89% of non-tariffed goods fell for Americans due to the depreciation of the Chinese yuan versus the dollar. The net currency effect of prices of all goods imported from China was negative. If we could, we would edit the last line in the comments above and say the US- China trade war was deflationary.

Let Capitalism Work

The US is one of the world’s most productive and wealthiest countries. Consider that our poorest state, Mississippi, has a higher GDP per capita than France. Our prosperity is the result of many factors, most of which are beyond the scope of this article. However, one key factor is that we generally have less government economic interference than most other countries.

While adding tariffs to level the playing field may win votes and sound like a good idea, they are government interference. This is not to say that discussions with our trade partners shouldn’t occur or actions shouldn’t be taken, but it is to say that tariffs tend to bode poorly for the economy and result in lower prices.

Taxes, regulations, and other domestic or international governmental actions are not a recipe for more robust growth.  

Summary

Economic theory and experience tell us tariffs are not inflationary. It’s correct to claim that a tariff on a good will raise its price. However, the claim fails to consider how consumers and sellers of the goods will react to higher prices.

Once all the economic, price, behavioral, and currency impacts net out, another round of tariffs will likely prove deflationary and harmful to economic growth.

US equity futures are higher as traders hoped earnings from Nvidia after the close would unleash fresh buying momentum and wash away the bitter taste from Target’s catastrophic earnings this morning. As of 8:00am S&P futures rose 0.2% as small caps lagged after Wall Street benchmarks recovered from a bout of volatility following the escalation in Russia’s war against Ukraine; Nasdaq futures also rose 0.2% with Mag 7 stock mixed premarket and led by MSFT (+0.6%) and NVDA (+0.5%). Sentiment was also boosted after Putin said he was open to discussing a ceasefire deal with Trump, but is ruling out any territorial concessions (Moscow would freeze the conflict along the present battlelines) and wants a guarantee that Ukraine won’t join NATO. Bloomberg’s dollar gauge rose 0.3%, rebounding from a three-day drop. The 10-year US Treasury yield climbed three basis points after falling yesterday as investors fled to haven assets. On Commodities, oil and base metals are higher while precious metals are lower; Bitcoin is back to all time highs just around $94,000. All eyes on NVDA earnings after market close. Expectations remain higher with crowding positioning (more in our preview later). JPM’s TMT specialist Josh Meyers says that that “a nice beat seems widely anticipated tomorrow, with expectations for the guide starting at $38b and going up a bit from there”, but Goldman’s trading desk is more cautious warning that all the good news may already be in the priced-to-perfection stock.

In premarket trading, retailer Target promptly reversed all the goodwill from yesterday’s blowout Walmart earnings and crashed as much as 20% after the it trimmed its full-year outlook due to flat sales and an inventory buildup. Company executives said US consumers spent less on nonessential items such as clothes and home products – a weaker third-quarter picture than the one provided by Walmart Inc. on Tuesday. Here are some other notable premarket movers:

• AppLovin (APP) shares rise 2.4% after Piper Sandler initiated coverage on the mobile technology company with an overweight recommendation.
• EVgo Inc (EVGO) shares gain 3.8% after JPMorgan placed the electric vehicle charging company on a positive catalyst watch on expectation that the stock will rally on news of the closing of the Department of Energy loan.
• Global-e Online (GLBE) shares gain 9.6% after the application software company boosted its full-year revenue forecast. Additionally, the company reported third-quarter revenue that came ahead of estimates.
• Keysight Technologies (KEYS) shares rise 9.1% after the measurement instruments company reported fourth-quarter adjusted earnings per share that came ahead of estimates.
• Kingsoft Cloud ADRs (KC) soar 22% after the company reported third-quarter revenue that met consensus estimates. The company said it will achieve accelerated revenue growth in the fourth quarter.
• Lemonade (LMND) shares advance 6.3% after Morgan Stanley upgraded the online insurance company to equal-weight from underweight after an investor day event. The broker also increased its price target to a Street high of $42.
• Newell Brands (NWL) shares gain 4.3% after Barclays upgraded the consumer-goods company to overweight from equal-weight.
• Powell Industries (POWL) shares fall as much as 14% after fourth-quarter revenue from the electrical infrastructure company missed the average analyst estimate.
• Wix.com (WIX) shares jump 12% after the web-platform company boosted its full-year revenue forecast. Analysts said third-quarter results showed continued momentum.

Investors will scrutinize Nvidia’s quarterly results to gauge if the world’s most valuable company can continue its remarkable run fueled by spending on artificial intelligence hardware, with the chipmaker edging higher in premarket trading after rising 4.9% in the previous session. Trading in options signals the results will be the most important catalyst left this year — more than the Federal Reserve’s December meeting, according to Barclays Plc strategists.

“The health of the market being driven by results of individual companies in itself points to a certain element of fragility,” said Subitha Subramaniam, chief economist at Sarasin & Partners. “Is it sufficient that they beat, is it sufficient that they beat by a big margin? We are hanging on every statement of the CEO.”

Traders will also monitor Donald Trump’s administration picks, especially his selection for the Treasury secretary role. Former Federal Reserve Governor Kevin Warsh and Apollo Global Management’s Marc Rowan are in contention, with the FT reporting that the Apollo boss has emerged as the top contender. Meanwhile, Trump tapped Cantor Fitzgerald CEO Howard Lutnick to lead the Commerce Department, a key role to facilitate his tariff and trade policies.

“As I look at the Treasury secretary race, I want to see exactly who is in that role because the tax policies, the debt limit all come back,” Ed Mills, Washington policy analyst at Raymond James, told Bloomberg TV. “We need to see exactly how that person has a relationship with the Federal Reserve, because monetary policy will quickly figure into all of this.”

Europe’s Stoxx 600 reversed Tuesday’s fall with the Stoxx 600 up 0.6% as reports suggest Putin is willing to talk with US President-elect Trump about a cease-fire deal in Ukraine; mining, technology and construction shares lead gains. The UK’s FTSE 100 underperformed after the latest inflation reading came in hotter than anticipated, with traders paring back expectations for Bank of England rate cuts. Among individual movers in Europe, Sage Group Plc was up as much as 22%, the biggest intraday gain on record, after the software firm announced a £400 million ($507 million) buyback and reported stronger revenues. La Française de Jeux SAEM shares fell as much as 6.9%, the biggest drop in seven weeks, after a shareholder sold 4.7 million shares in the gaming equipment company at a discount. Here are all the notable European movers:

• Sage shares soar as much as 22%, the biggest intraday gain on record, after results and the announcement of a £400m buyback program.
• Severn Trent shares gain as much as 4.3% after the UK utility reported an EPS beat, lower net debt and a reduced interest charge for the full year.
• Rotork shares rise as much as 5.5% after the valve manufacturer reported broad-based growth in order intake across its divisions, which analysts said marked an improvement from what was delivered in the first half.
• Dormakaba shares gain as much as 3.4% after the Swiss security company confirmed its targets, showing that the simplification of its complex structure is on track.
• Edenred gains as much as 4.4% as Jefferies upgrades to hold from underperform, writing in note that the French payment-service provider’s shares seem to already reflect growing headwinds.
• Cement stocks gain as JPMorgan sees further upside ahead for European heavyside building materials companies, upgrading Holcim to overweight, Buzzi to neutral and adding Heidelberg Materials to its Analyst Focus List as new top pick.
• Avolta rises as much as 3.1% after Berenberg initiated coverage of the world’s largest duty-free operator with a recommendation of buy, saying it can continue to win market share.
• Helios Towers shares slide as much as 6.7% after a shareholder sold a stake in the telecommunications tower operator at a discount.
• Elior shares plunge as much as 20% after results, with analysts at Oddo BHF saying the commercial catering company is still lagging behind key competitors on some key metrics, noting a worse retention rate and drop in net new business during the recently-ended financial year.

Earlier in the session, Asian equities retreated as traders awaited Nvidia’s earnings and forecasts to gauge if spending on artificial intelligence hardware will remain strong. The MSCI Asia Pacific Index dipped 0.5% after advancing 1% in the previous session. Gains in Hong Kong, mainland China and South Korea were offset by weakness in Taiwan and Japan. Across the region, technology stocks weighed on the benchmark most, followed by financial shares.

In FX, the pound erased its post-CPI gains as dollar strength takes over. The Bloomberg Dollar Spot Index rises 0.4%. The yen is the weakest of the G-10 currencies, falling 0.7% to around 155.80 against the greenback.

“The pound was last week’s underperformer, so it does at least have some scope to reverse some of that move” with the dollar having lost momentum, said Stuart Bennett, head of G10 currency strategy at Santander CIB. “If risk improves and the market gets carried away by the data alone, last Wednesday’s high at 1.2768 looks possible for cable, but it will depend on the US dollar and risk”

In rates, treasury futures held losses accumulated during London morning, led by gilts after UK inflation quickened more than expected in October. Meanwhile, haven demand that supported Treasuries Tuesday has ebbed since reports that Russia’s Putin is open to discussing a cease-fire in Ukraine with US President-elect Trump. US yields are 2bp-3bp cheaper across a slightly steeper curve; 10-year around 4.425%, about 2.5bp higher on the day, outperforms gilts in the sector by 3bp, bunds by 1.5bp. Gilts lead a selloff in European government bonds after UK inflation accelerated more than forecast in October, prompting traders to trim bets on the Bank of England’s interest-rate cuts path. UK 10-year yields rise 5 bps to 4.49%. US session includes 20-year bond auction at 1pm New York time; the new issue has a WI yield around 4.68%, about 9bp cheaper than last month’s auction result

In commodities, oil prices rise for a third day. Spot gold falls $6 to $2,626/oz. Bitcoin rises 1% to above $93,000.

Bitcoin rises to another all-time high, rising more than 2% above $94,000 supported by a series of developments highlighting the deepening embrace of the digital-asset industry in the US under crypto cheerleader Trump.

The US economic data calendar is blank, while Fed speaker slate includes Barr (10am), Cook (11am), Bowman (12:15pm) and Collins (4pm).

Market Snapshot

• S&P 500 futures up 0.2% to 5,950.50
• STOXX Europe 600 up 0.5% to 503.25
• MXAP down 0.7% to 182.62
• MXAPJ down 0.3% to 580.53
• Nikkei down 0.2% to 38,352.34
• Topix down 0.4% to 2,698.29
• Hang Seng Index up 0.2% to 19,705.01
• Shanghai Composite up 0.7% to 3,367.99
• Sensex up 0.3% to 77,578.38
• Australia S&P/ASX 200 down 0.6% to 8,326.29
• Kospi up 0.4% to 2,482.29
• German 10Y yield little changed at 2.36%
• Euro down 0.4% to $1.0554
• Brent Futures up 0.4% to $73.62/bbl
• Gold spot down 0.4% to $2,622.55
• US Dollar Index up 0.37% to 106.60

Top Overnight News

• US companies are stocking up on inventory from China in anticipation of Trump tariffs. Already, exports from China surged last month with outbound shipments from China rising nearly 13% in October from a year earlier, well above consensus expectations and up sharply from 2.4% growth in September. WSJ
• Japan’s exports gained 3.1% year on year in October, beating estimates. Imports posted a surprise gain and trade deficit widened. BBG
• Putin is open to discussing a ceasefire deal w/Trump, but is ruling out any territorial concessions (Moscow would freeze the conflict along the present battlelines) and wants a guarantee that Ukraine won’t join NATO. Reuters
• The US embassy in Kyiv closed after it was informed of a “potential significant air attack” today. BBG
• A senior U.S. mediator said on Tuesday there was a “real opportunity” to end the conflict between Israel and Hezbollah and that gaps were narrowing, signaling progress in Washington’s efforts to clinch a ceasefire. Reuters
• Euro-zone wages jumped 5.4% from a year ago, the biggest increase since the euro was introduced. The data may complicate the ECB’s easing plans. BBG
• Apollo’s Marc Rowan has emerged as a top contender for the Treasury Sec role, and will meet with Trump on Wednesday to discuss the position (other names being considered include Bessent, Warsh, and Hagerty). FT
• Republicans in Congress are pushing back against the idea of paying for a giant tax bill with a massive wave of tariffs. Semafor
• Retailers warn they will be forced to hike prices if Trump enacts an aggressive wave of tariffs. Axios
• Economists expect Trump to impose 38% tariffs on Chinese goods early next year. Trump’s proposed tariffs may cut China’s 2025 growth by around 0.5-1%. China are likely to roll our more stimulus to counter these tariffs: Reuters

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following the price swings seen across global markets on Tuesday in which the US indices staged a recovery from the initial risk-off conditions triggered by the Ukraine-Russia escalation, while participants now await NVIDIA’s earnings. ASX 200 pulled back from recent record highs but with losses contained by a quiet calendar and light macro newsflow. Nikkei 225 traded indecisively despite the mostly better-than-expected Japanese trade data, while there were firm gains seen in Seven & I Holdings and media powerhouse Kadokawa following respective M&A-related headlines. Hang Seng and Shanghai Comp swung between gains and losses with price action indecisive following the lack of fresh major catalysts in the region, while there were also no surprises from the PBoC’s announcement of the benchmark Loan Prime Rates which were maintained at their current levels following last month’s 25bp cuts.

Top Asian News

• Japanese gov’t to invest JPY 200bln in Rapidus (chipmaker) in FY-2025, via Nikkei.
• China’s GDP growth seen at 4.8% in 2024, 4.5% in 2025 (unrevised from October), according to a Reuters Poll
• Chinese Loan Prime Rate 1Y (Nov) 3.10% vs. Exp. 3.10% (Prev. 3.10%); 5Y 3.60% vs. Exp. 3.60% (Prev. 3.60%)
• China’s SCIO is reportedly to hold a briefing on Friday to outline measures for stabilising foreign trade growth, while the Vice Commerce Minister and officials from MOFA, MIIT, PBoC and Customs will attend the briefing, according to source on X.
• US vowed more sanctions on Hong Kong officials after 45 pro-democracy activists were recently jailed, according to SCMP.
• US Democratic Senator Blumenthal said Elon Musk’s China ties are a profound threat to US national security and his business interests could be exploited by Beijing, according to SCMP.
• China’s smartphone sales -9% Y/Y during Singles’ Day 2024, via Counterpoint Research. Huawei sales +7% Y/Y. Apple (AAPL) and Honor both declined by double-digit %.

European bourses opened the session entirely in the green and have generally traversed best levels throughout the morning. European sectors hold a strong positive bias, with only a couple of sectors found in negative territory. The  breadth of the market to the upside is fairly narrow, with no clear outperformer. Construction & Materials tops the pile, joined by Tech and then Basic Resources; the latter pair buoyed by the positive risk tone. Real Estate is found at the foot of the pile, given the relatively higher yield environment. US equity futures (ES +0.2%, NQ +0.2%, RTY +0.2%) are modestly firmer across the board, attempting to build on the prior day’s gains and as traders remain laser-focused on NVIDIA (+0.3% pre-market) results after-hours.

Top European News

• UK PM Starmer is to visit Saudi Arabia and UAE to try to secure investment, according to FT.
• The Resolution Foundation think tank says the UK’s ONS may be underestimating the number of people in employment by almost 1 million and overstating the extent of the country’s inactive workforce problem, according to The Times.
• ECB warns of bubble in AI stocks, low cash buffers at funds.
• ECB’s de Guindos says current low growth scenario has to more with structural policy; monetary policy is not almighty.
• ECB’s Escriva says floods in Spain to impact the Spanish economy by 0.2% in Q4.

FX

• After three sessions of losses, DXY is notably higher as the USD out-muscles all peers alongside a pick-up in US yields. Fed speak today includes Barr, Cook, Bowman & Collins. DXY is currently in touching distance of yesterday’s 106.63 peak.
• EUR is swept up by the broadly firmer USD with EUR/USD’s brief foray above 1.06 overnight very much in the rear-view mirror. The latest EZ wage data saw a jump in Q3 to 5.42% from 3.54% but this had little follow-through for EUR. EUR/USD is currently holding above yesterday’s low at 1.0523. ECB’s Lagarde and de Guindos due to speak later in the session.
• Yesterday’s geopolitically-induced support for JPY has proved to be short-lived with USD/JPY resuming its trend seen since the US election. USD/JPY has printed a fresh WTD peak at 155.84.
• Cable vaulted higher in early trade following across-the-board hotter-than-forecast inflation metrics. GBP/USD rose from sub 1.27 levels to a peak of 1.2714. Note, the Y/Y services print was in-fitting with MPC forecasts.
• Antipodeans are both softer vs. the broadly stronger USD and trimming recent gains with fresh macro drivers on the light side.
• PBoC set USD/CNY mid-point at 7.1935 vs exp. 7.2386 (prev. 7.1911).

Fixed Income

• A softer start for USTs as they continue to unwind Tuesday’s Russia-driven haven bid, taking USTs below Tuesday’s 109-19 base but still over 10 ticks clear of Monday’s 109-04+ base. Benchmark was largely unreactive to UK data or most recently EZ negotiated wages. Fed speak ahead include Barr, Bowman, Collins & Cook.
• Bunds were directionally in-fitting with peers, but magnitudes slightly more contained going into the release of the EZ Negotiated Wage Rates (Q3); a release which saw Bunds slip back to the 132.00 mark but pared almost immediately to pre-release levels. A well received German outing had little impact on Bunds.
• Gilts gapped lower by 48 ticks and then slipped another 23 to a 93.44 trough after hotter than expected inflation data for October. A release which has further reduced the odds of a December cut. It is worth noting that whilst the Services Y/Y figure surpassed the consensus, it matched the BoE’s own forecast.
• Germany sells EUR 0.804bln vs exp. EUR 1bln 1.80% 2053 Bund and EUR 0.818bln vs exp. EUR 1bln 0.00% 2052 Bund.

Commodities

• WTI and Brent are in the green, having climbed to session highs in early European trade; more recently, the complex has edged off worst levels. Reuters reported that President Putin is open to talking about a ceasefire with President-elect Trump; news which ultimately had little impact on price action.
• Gold is in the red though only modestly so, and still comfortably clear of Tuesday’s USD 2610/oz base and by extension significantly above Monday’s USD 2562/oz base.
• Copper is firmer, but only modestly so. Benefitting from the general rebound in risk sentiment. 3M LME copper is in the green but only modestly so holding in a narrow USD 9.12-9.17k band.
• Trading Hub Europe announces the gas storage neutrality charge from January 2025 is EUR 2.99/MWh
• Equinor’s (EQNR NO) Johan Sverdrup oilfield (775k BPD peak) output capacity is fully restored following a power outage. Producing steadily at normal levels.
• Private inventory data (bbls): Crude +4.8mln (exp. +0.1mln), Distillate -0.7mln (exp. -0.02mln), Gasoline -2.5mln (exp. +0.9mln), Cushing -0.3mln.

Geopolitics: Middle East

• Hezbollah’s Qassem to speak in today’s session (time TBC). In response to the announcement that US Envoy Hochstein will arrive in Israel this evening
• Israeli army said Hezbollah fired 75 rockets from Lebanon towards Israel on Tuesday, according to Asharq News.
• US Envoy Hochstein will stay in Lebanon until Wednesday and then go to Israel, while the new wording of the proposal stated that each side has the right to self-defence if attacked, provided the US guarantees that Israel does not carry out pre-emptive strikes. However, Israel’s Channel 13 noted Hochstein’s visit to Tel Aviv may be delayed due to large gaps between Israel and Lebanon, while the main dispute at the moment is Israel’s demand to maintain freedom of military action in southern Lebanon, according to Al Jazeera.
• Saudi representative to the Security Council said they condemn Israeli military actions against Lebanon and reject the threat to its security and stability, according to Asharq News.
• Iranian Foreign Minister Araqchi told French Minister for Europe and Foreign Affairs Barrot that Tehran warns France, Germany and Britain about submitting a resolution against Iran at the IAEA Board of Governor’s meeting, while Araqchi added the European resolution draft contradicts the ‘positive atmosphere’ created between Iran and the UN nuclear watchdog and will complicate matters.

Geopolitics: Ukraine

• Russia’s Kremlin says Putin constantly states that he is ready for contacts and negotiations on Ukraine; also says the option of freezing the conflict will not suit Russia.
• Ukrainian air defence units attempted to repel a Russian air attack on Kyiv, according to Ukraine’s military.
• US State Department said the US embassy in Kyiv received specific information of a potential significant air attack on November 20th, while the Kyiv embassy will be closed and it recommended that US citizens be prepared to immediately shelter in the event an air alert is announced, according to a post on X cited by Reuters.
• North Korean troops participated in some battles as part of Russia’s airborne unit and marines in the Ukraine war, according to News1. It was also reported that North Korea shipped howitzers and multiple rocket launchers to Russia, while a South Korean lawmaker said South Korea’s spy agency is still trying to determine any North Korean troop casualties and surrenders in the Ukraine war, according to Reuters.
• Russian President Putin is reportedly open to talking about a Ukraine ceasefire with US President-elect Trump, via Reuters citing sources; but rules out making any major territorial concessions. Russia could broadly agree to freeze the front-line conflict in any deal; insists Ukraine abandons ambitions to join NATO; could be open to withdrawing from patches of territory in the Kharkiv and Mykolaiv regions. Finally, there could be negotiating room over dividing up Donetsk, Luhansk, Zaporizhzhia and Kherson.

US Event Calendar

• 07:00: Nov. MBA Mortgage Applications 1.7%, prior 0.5%

Central Banks

• 10:00: Fed’s Barr Testifies Before House Financial Services Committee
• 11:00: Fed’s Cook Speaks on Economic Outlook, Policy
• 12:15: Fed’s Bowman Speaks on Agency Policymaking
• 16:00: Fed’s Collins Speaks on Policy, Career

DB’s Jim Reid concludes the overnight wrap

Welcome to Nvidia’s quarterly earnings day. They report after the bell in what is likely to be the biggest event of the week. With a market cap of $3.61tn and nearly as big as the entire DAX and CAC combined, it’s going to be a big event. To give you a scale for their astonishing earnings trajectory over such a short period of time, at the recent lows in Jan 2023 Nvidia earned $4.4bn over the preceded last 12m. However, today the consensus will see them earn $61.4bn over the last 12 months. Then, by the time we hit 2027, they are expected to earn $118.1bn LTM. There has never been a large cap company like it in the history of financial markets. Last quarter, the revenue outperformance was the smallest relative to expectations in six quarters, so it wasn’t the sort of massive beat that Nvidia has often reported over the last couple of years. And in turn, their share price was down -6.38% the following day. However, since then, the share price is up around 20%, so no lasting damage was done.

The anticipation of this event seemed to pull markets up from their early geopolitical worries with the S&P 500 closing +0.40%, after S&P futures were down more than -1% shortly before the US open. It was a similar story for bonds, as the 10yr bund yield was initially down more than -10bps, before paring that back to just -3.4bps by the close.

The initial slump began thanks to fears of an escalation in the Russia-Ukraine conflict. Specifically, Ukraine made its first US-sourced ATACMS strike inside Russia, and President Putin signed a revision to Russia’s nuclear doctrine, allowing for a wider set of conditions under which they could use nuclear weapons.

The escalation news immediately led to a significant move into perceived safe havens, with assets like gold, sovereign bonds and the Japanese Yen all advancing. In addition, European equities were hit across the board, and the DAX was down -1.96% at its intraday low (-0.67% at the close).

But after those early losses, markets began to recover as the focus turned to Nvidia’s results. Leading up to the release, Nvidia (+4.89%) posted a strong gain yesterday, making it the top performer among the Magnificent 7 (+1.76%). That helped to lift equities more broadly, with the S&P 500 (+0.40%) managing to post a decent gain. Nevertheless, many stocks didn’t perform so well, and the equal-weighted S&P 500 was down -0.26%, which showed again how the Magnificent 7 were single-handedly driving the broader market. Meanwhile in Europe, there was a much stronger underperformance given the geopolitical developments. For instance, the STOXX 600 (-0.45%) posted a third consecutive loss, which took the index down to a 3-month low.

For sovereign bonds, there were modest gains on both sides of the Atlantic amid the broader geopolitical fears, though the rally eased off as the day went on. The 2yr Treasury yield traded as much as -7bps lower early on before closing virtually flat on the day (+0.1bps), whilst the 10yr yield fell by -1.8bps to 4.40% after earlier trading as low as 4.34%.

Over in Europe, sovereign bonds rallied across the board, with yields on 10yr bunds (-3.4bps), OATs (-2.0bps) and BTPs (-1.7bps) all moving lower. Alongside the geopolitical fears that drove the initial moves, we also had some dovish comments from the ECB’s Panetta, the Italian central bank governor. He said that “restrictive monetary conditions are no longer necessary”, and that they needed to “normalize our monetary-policy stance and move to neutral – or even expansionary territory, if necessary.”

Elsewhere in the political sphere, there’s still no confirmation of who the next US Treasury Secretary will be. The speculation so far this week has increasingly centred around former Fed Governor Kevin Warsh, although others including Scott Bessent and Apollo CEO Mark Rowan have also been widely reported as candidates with Rowan rapidly moving up the pecking order on Polymarket.com. It’s all changing hour by hour. One name that had reportedly been in contention was Howard Lutnick, but yesterday it was confirmed that Lutnick had been selected as Trump’s nominee for Commerce Secretary.

Asian equity markets are trading in a relatively tight range this morning with the S&P/ASX 200 (-0.57%), the Nikkei (-0.28%) and the Hang Seng (-0.06%) are edging lower while the KOSPI (+0.58%), and the Shanghai Composite (+0.46%) are higher. US stock futures are up around a tenth of a percent.

Early morning data showed that Japan’s exports rebounded +3.1% y/y in October (v/s +1.0% expected), led by strong growth in the shipment of chip making equipment. It followed the prior month’s decline of -1.7%, which marked a 43-month low. Meanwhile, imports climbed +0.4%, compared with a -1.9% decline forecast by economists (v/s +1.8% in September). At the same time, the trade deficit widened to -¥461.2 billion from -¥294.1 billion.

In monetary policy action, the People’s Bank of China (PBOC) kept the 1-yr and 5-yr loan prime rate (LPR) intact at 3.1% and 3.6%, respectively, as Beijing continues to assess the effects of its recent stimulus measures.

There wasn’t too much data yesterday, although Canada’s CPI for October was a bit higher than expected at +2.0% (vs. +1.9% expected). Otherwise, US housing starts and building permits were both somewhat beneath expectations in October, with housing starts at an annualised pace of 1.311m (vs. 1.334m expected).

To the day ahead, and the main highlight will be Nvidia’s earnings results after the US close. Otherwise, data releases include the UK CPI report for October as we go to print. Lastly, central bank speakers include the Fed’s Barr, Cook, Bowman and Collins, the ECB’s de Guindos, Stournaras and Makhlouf, and the BoE’s Ramsden.

The prices of natural gas at the key regional hubs in the U.S. Pacific Northwest and Western Canada have hit this year the lowest level on record, amid rising production in the Western Canadian Sedimentary Basin (WCSB) and high inventory levels in these regions.

Monthly average natural gas spot prices at the northwestern U.S. and western Canada border pricing hubs reached historic lows in the first ten months of 2024, the U.S. Energy Information Administration (EIA) said on Tuesday, citing data from Natural Gas Intelligence.

The Western Canada benchmark, Westcoast Station 2, saw the daily spot natural gas price average $1.04 per million British thermal units (MMBtu) through October, with the lowest monthly average of $0.31 per MMBtu in September.

The Westcoast Station 2 pricing hub is near Fort St. John, British Columbia, close to natural gas production activities in the Western Canadian Sedimentary Basin.

At the key pricing hub for the U.S. Pacific Northwest, Northwest Sumas, the daily spot price averaged $1.87 per MMBtu in 2024 through October and reached its lowest monthly average this year of $0.97 per MMBtu in May. The monthly average price at Northwest Sumas for the first 10 months of this year was the lowest for this period of any year since the EIA began collecting data for this hub in 1998.

As Charles Kennedy writes at OilPrice.com,  the key reasons for the low regional gas prices were the high natural gas production in the WCSB since the end of 2022 and relatively high natural gas exports into the western United States.

To compare, the monthly average of the U.S. benchmark, Henry Hub, daily spot price was at $2.20 per MMBtu in October 2024, the EIA’s latest Short-Term Energy Outlook (STEO) showed earlier this month.

The U.S. administration expects the Henry Hub price to average around $2.90 per MMBtu in 2025, as global demand for U.S. LNG exports, a component of U.S. natural gas demand, continues to increase.

Authored by Sam Faddis via AND Magazine,

As the mainstream press in the United States continues to obsess with imaginary threats from Trump’s army of “fascist” supporters, the Europeans are focused on the very real possibility that the Biden–Harris administration is going to start World War III on its way out the door. All over the continent, military and civilian authorities are working hard on civil defense preparations and planning for armed conflict with Russia.

Sweden is sending out five million pamphlets to its citizens telling them how to prepare. The pamphlets include instructions on stockpiling food and finding shelter during a nuclear attack. Excerpts from the document include:

“An insecure world requires preparedness. The military threat to Sweden has increased and we must prepare for the worst – an armed attack.”

“The global security situation increases the risks that nuclear weapons could be used. In the event of an attack with nuclear, biological, or chemical weapons, take cover in the same way as in an air attack.”

“Shelter provides the best protection. After a couple of days, the radiation has decreased significantly.”

“If Sweden is attacked by another country, we will never give up. All information to the effect that resistance is to cease is false.”

The Swedes are not alone. Norway and Finland are doing the same thing, preparing their populations for nuclear war.

Finland has launched a new website advising people on how to prepare, and the Norwegians recently mailed out their own booklet giving people tips on how to prepare for the end of the world. The Norwegian booklet includes advice on how citizens should prepare themselves to live self-sufficiently for a week, with a list of long-life items to keep such as cans of beans, energy bars and pasta, and medicines in case of a nuclear event.

The Finnish website includes detailed instructions on how Finns should react in the event of war:

“The warning signal is a regularly rising and falling sound that lasts for one minute used to warn people of an immediate outdoor hazard.

In the event of a war, the signal is used to alert people about incidents as well as air strikes, for example.

In case of a military attack, you must immediately seek shelter in the nearest civil defence shelter or the best available shelter.”

The website also provides detailed guidance on how to try to continue to live in an area that has been irradiated.

“Prepare for a radiation hazard as follows:

• Learn the steps to seek shelter indoors and how to carry them out at home. Also learn them together with family members.

• Learn how to switch off ventilation at home.

• Make sure you have durable tape at home that you can use to seal off windows, doors and other areas with air flow.

• Know which communication channels are used: the 112 application, television, radio and the websites of the authorities

• Buy medicine iodine tablets at home according to the recommendation.”

The Germans are making their own preparations for the coming apocalypse. The German military is now advising companies on something called Operations Plan Germany. The paper is a thousand pages long and classified, but details have begun to leak publicly. For example, it lists all buildings and infrastructure facilities to be protected for national security reasons. It also provides significant detail on how Germany will transport hundreds of thousands of soldiers east to engage with Russian forces.

In Prague, a network of Cold War-era bunkers has now seen renewed interest. A spokeswoman from the Czech Republic’s Fire Rescue Service told RFE/RL recently that, beginning in 2023, the service began updating “requirements for the shelter system and the shelters themselves.” She did not elaborate on what those updates were.

Meanwhile, wasting no time after Biden’s approval of the use of American-made ballistic missiles against targets deep into Russian territory, Ukraine attacked a military installation in Russia’s western Bryansk region. “For the first time, Ukraine’s Defense Forces struck Russian territory with ATACMS ballistic missiles.” 

Putin, for his part, made good on his pledge to respond. He signed a decree updating and expanding Moscow’s nuclear doctrine to allow for the use of atomic weapons in case of an attack on Russia by a nonnuclear actor that is backed by a nuclear power. The updated doctrine says Russia would consider using nuclear weapons after receiving “reliable information about the launching of a massive attack against it and missiles crossing the Russian border.”

Lest anyone think that the prospect of a Russian nuclear attack on Europe is purely the stuff of science fiction, we should recall that secret documents obtained earlier this year by the Financial Times revealed an extensive Russian plan to target strategic sites deep inside Europe with nuclear missiles. This plan was part of a broader strategy to overwhelm NATO forces and win a conflict with the alliance. The documents included maps of targets in countries such as the United Kingdom and France.

The Europeans understand exactly what is happening and are bracing for what may now be inevitable. Joe and Kamala, and whoever advises them, are shoveling more fuel on the fire and doing their level best to start a world war as they head for the door.

Authored by John Konrad of gCaptain,

A day after the C-Lion1 and BCS subsea data cables in the Baltic Sea, connecting Finland and Germany as well as Sweden and Lithuania, were damaged, specifics of the incident remain unconfirmed.

The incident is reminiscent of a similar event in 2023 when the Balticonnector between Finland and Estonia was damaged. Hong Kong-registered container vessel NewNew Polar Bear was later found to have dragged its anchor across the pipeline.

Danish authorities appear to have narrowed down a possible culprit to Chinese bulker Yi Peng 3, which traveled over the reported incident site at the time of the failure. Its AIS track shows the vessel drifting back and forth for around an hour the morning of November 18.

By the time Yi Peng 3 reached Danish waters the country’s Navy had dispatched several vessels shadowing the vessel. Online reports suggest that a Danish pilot was placed onboard the vessel during the afternoon of November 19 as it continued passing through Danish Straits.

AIS data show several Danish patrol vessels in the vicinity of Yi Peng 3 and shorebased webcams confirm Navy vessels loosely following in its wake.

The foreign ministers of Germany and Finland issued a joint statement expressing concern about the incident. “The fact that such an incident immediately raises suspicions of intentional damage speaks volumes about the volatility of our times,” the statement reads.

“A thorough investigation is underway. Our European security is not only under threat from Russia’s war of aggression against Ukraine, but also from hybrid warfare by malicious actors. Safeguarding our shared critical infrastructure is vital to our security and the resilience of our societies,” the statement continued.

Incidents with damage to subsea cables and pipelines across Europe have increased in recent years, including in the Arctic. In 2022 Norway reported that an undersea fiber optic cable connecting a satellite ground station on Svalbard to the Norwegian mainland was severed. Norwegian media reported a Russian vessel traveling back and forth several times over the damaged section.

The Finnish investigation of the NewNew Polar Bear incident concluded that the vessel dropped its anchor during a storm dragging it over the Balticonnector pipeline. The vessel had been spotted with a missing anchor during its first port call following the incident.

After initial stonewalling by Chinese authorities Finnish counterparts launched their own investigation and eventually admitted that the pipeline’s damage was caused by NewNew Polar Bear. Like Yi Peng 3, NewNew Polar Bear had departed from a Russian port prior to the incident.