US equity futures and global markets extended their decline on Wednesday after central bankers continued their push-back against market bets for interest rate cuts, deepening a global selloff across stocks and bonds. At 8:00am ET, S&P futures fall 0.4% and Nasdaq contracts ease about 0.5% suggesting another weak day ahead for US equities after ECB President Christine Lagarde and Governing Council member Klaas Knot warned on Wednesday that aggressive bets on interest-rate cuts aren’t helping policymakers in the battle against lingering price pressures, echoing hawkish comments from the Fed’s Waller on Tuesday who urged caution on the pace of easing. The VIX rose to 14.60, the highest leve since mid-November. The Bloomberg Dollar Spot Index extended its rally to a fourth day while the 2Y Treasury yields climbed six basis points to 4.29% and 10-year yields rose 2bps to 4.08%. Oil dropped again with Brent sliding to $77 as gold also eases to near $2,025.

Meanwhile, fresh concerns about China’s economy added another headwind for equities. US-listed Chinese stocks fell in premarket trading as disappointing economic data and a lack of major stimulus deter investors, with the exchange-traded KraneShares CSI China Internet Fund, which holds over 30 US- and Hong Kong-listed Chinese tech firms, trading more than 3% lower. Here are some other notable premarket movers:

• Allakos drops 10% and appears set to extend Tuesday’s 60% plunge after the drug developer was downgraded to hold at Jefferies following two mid-stage trials that failed to meet their main goals.
• Donald Trump-tied stocks fall and appear set to give back some of Tuesday’s double-digit gains after the former president scored a big win at the Iowa caucuses. Digital World (DWAC) -8%, Phunware (PHUN) -60%
• Fisker (FSR) drops 3% after TD Cowen downgrades to market perform, saying the electric-vehicle maker’s growing pains are continuing to accumulate.
• Interactive Brokers (IBKR) falls 4% after the firm reported fourth-quarter total net interest income that missed estimates.
• Mattel (MAT) falls 3% after Morgan Stanley downgrades the toymaker to equal-weight, citing a tougher category outlook in 2024 and limited growth drivers.
• Morgan Stanley (MS) slips 1% after being downgraded to neutral at JPMorgan, which said the bank is now fairly valued, with limited near-term catalysts to propel shares higher.
• Plexus (PLXS) falls 1.7% after the company reported preliminary first-quarter revenue that missed the average analyst estimate.
• Polaris (PII) gains 1% as Morgan Stanley upgrades its rating to overweight, saying the risk/reward for shares in the maker of off-road vehicles is “too attractive to ignore.”
• Spirit Airlines (SAVE) declines 15% after a federal judge blocked JetBlue’s $3.8 billion acquisition of the budget airline.

Following the recent hawkish comments from central bankers, swaps market pricing for a Fed rate cut in March has dropped to around 65% from 80% on Friday, while money markets pushed back bets on the timing of the ECB’s first quarter-point cut to June, from April.

“Inflation was never going to be a straight line down, as we have seen in the US and Europe,” said Luke Hickmore, investment director at abrdn. “Rates will fall this year but market expectations around when and how much are going to be very volatile.”

Still more evidence that the battle against inflation isn’t over came from the UK, where price increases accelerated unexpectedly for the first time in 10-months, prompting traders to scale back their expectations for rate cuts from the Bank of England this year. Gilts tumbled and the pound gained as traders aggressively trimmed expectations for monetary-policy easing this year.

Basic resources and luxury-goods stocks were among the biggest decliners in Europe amid worries about slackening demand in China, a key market. The Stoxx Europe 600 index slumped more than 1%. All industry sectors were in the red, with real estate and retailers among the hardest hit. German two-year yields rose five basis points to 2.65%. Here are the biggest European movers Wednesday:

• IMI rises as much as 3.9% and is the top gainer in the Stoxx Europe 600 index in early trade after being upgraded to buy from neutral by Goldman Sachs, which sees scope for the engineering firm’s shares to outperform over the next year
• Telecom Italia shares rise as much as 3% in Milan trading, the most in two weeks, as the Italian government cleared the sale of the company’s landline network to KKR & Co. after a review process for an asset deemed to be of strategic interest to the state
• IAG was raised to buy from neutral at Goldman Sachs, with analysts expecting the British Airways parent to see earnings growth this year and sustain higher margins. Shares rise as much as 0.9%
• Basic-Fit shares rises as much as 3.5% after the health and fitness club operator received a double upgrade to buy from underperform from Jefferies, which says its valuation has fallen too low
• BP shares fall as much as 1.5%, , to its lowest intraday level since Oct. after the oil giant said interim Chief Executive Officer Murray Auchincloss will take up the role permanently
• Antofagasta declined as much as 4.9%, the most since July, after costs increased in the fourth quarter. Peers with copper exposure also edged lower
• Pearson shares fall as much as 2.5%, retreating further from recent 13-month highs, after the education publishing firm said adjusted operating profit for 2023 will slightly undershoot forecasts due to pound-dollar exchange-rate fluctuations
• 888 drops as much as 15%, the most since September, after the online gambling group reported lower 4Q revenue. Though analysts across the board cut their Ebitda forecasts for 2023 and 2024
• Meyer Burger shares slump as much as 46%, the most ever, after the Swiss solar panel maker announced it could shift focus to the US, shut one of its European production sites, and possibly raise more equity

Earlier in the session, Asian equities suffered broad losses for a second day with Hong Kong leading the selloff after Chinese economic data failed to moderate bearish momentum. Hang Seng Tech index slumped almost 4% and H shares plunged 3%. Shanghai Composite drops 0.6%, ChiNext dropped 1.2%, and the CSI 300 mainland Chinese benchmark also fell 2.2%. The losses came after official figures showed while China reached its 2023 economic goal, the country’s housing slump has worsened and domestic demand remained listless. South Korean stocks are also sharply lower, while Japanese shares extend 2024 outperformance by staying narrowly in the green thanks to the renewed implosion of the yen.

The Bloomberg Dollar Spot Index steadied around a one-month high while the yen extended its recent tumble, sending the USDJPY hovering around 147.6. Traders awaited the release of the central bank’s beige book and US retail sales, after the Fed’s Waller warned rates are unlikely to come down as quickly as they have done in the past

• GBP/USD rose as much as 0.5% to 1.2694 leading G-10 gains against the dollar; UK inflation unexpectedly picked up in December as CPI rose 4% from a year earlier
• EUR/USD pared losses to trade around 1.0880 after dropping 0.2% to 1.0856, the lowest level since Dec. 13; ECB President Christine Lagarde told Bloomberg it’s likely interest rates will be cut in the summer in a push back to current market pricing
• AUD/USD fell 0.7% to 0.6535 as the Australian dollar led G-10 losses on disappointing Chinese economic data; China’s 4Q GDP rose 5.2% from a year ago, compared with a 5.3% estimate, home prices fell the most in almost nine years
• The loonie is set to drop for a fifth day as growing fears of inflation following UK data undermines investor sentiment, sending bonds and stocks lower. 

In rates, the treasuries curve was aggressively flatter on the day, with front-end underperforming following a wider bear flattening move in gilts after data showed UK inflation picked up unexpectedly for the first time in 10 months. The 10Y TSY yield rose to session highs of 4.08%, reversing earlier losses; long-end Treasury yields were slightly richer on the day while front-end of the curve is cheaper by around 6bp vs Tuesday close; curve subsequently shifts flatter, following move in gilts with US 2s10s, 5s30s spreads tighter by 6bp and 4.5bp, remains near lows into early US session. On outright basis, UK 2-year yields remain cheaper by around 14bp on the day into early US session, which includes retail sales and a 20-year bond auction. US economic data includes January NY services business activity, December retail sales, import/export prices (8:30am), industrial production (9:15am), November business inventories and January NAHB housing market index (10am). Federal Reserve members scheduled to speak include Barr, Bowman (9am) and Williams (3pm); Fed release Beige book at 2pm

In commodities, oil fell again as a broad risk-off tone across markets coupled with a stronger US dollar offset concerns over Middle East tensions, including continued attacks on ships in the Red Sea by Iran-backed Houthi rebels. WTI crude futures paused around $71.80 while Brent traded down to $77. In other news, BP Plc appointed Murray Auchincloss as its permanent chief executive officer, four months after the shock resignation of his predecessor.

Elsewhere, gold was steady after a Tuesday decline of more than 1% to trade around $2,028 per ounce and Bitcoin dropped below $43,000 while Ether is also lower, sliding 2%. A new rule requiring US businesses to report cryptocurrency transactions over USD 10k has been postponed until the IRS issues new regulations on digital asset reporting, according to Cointelegraph.

Looking the day ahead now, and data releases include UK CPI for December, US retail sales, industrial production and capacity utilisation for December, along with the NAHB’s housing market index for January. From central banks, we’ll hear from ECB President Lagarde, the ECB’s Cipollone, Vasle, Simkus, Villeroy, Vujcic, Knot and Nagel, as well as the Fed’s Barr, Bowman and Williams. The Fed will also be releasing their Beige Book.

Market Snapshot

• S&P 500 futures down 0.5% to 4,776.25
• STOXX Europe 600 down 1.2% to 467.23
• MXAP down 1.7% to 162.13
• MXAPJ down 2.2% to 491.66
• Nikkei down 0.4% to 35,477.75
• Topix down 0.3% to 2,496.38
• Hang Seng Index down 3.7% to 15,276.90
• Shanghai Composite down 2.1% to 2,833.62
• Sensex down 2.2% to 71,506.16
• Australia S&P/ASX 200 down 0.3% to 7,393.08
• Kospi down 2.5% to 2,435.90
• German 10Y yield little changed at 2.28%
• Euro little changed at $1.0869
• Brent Futures down 1.9% to $76.84/bbl
• Gold spot down 0.4% to $2,021.15
• U.S. Dollar Index little changed at 103.44

Top Overnight News

• China’s Q4 GDP numbers were largely inline with expectations (which isn’t a surprise since Premier Li preannounced GDP at Davos Tues morning) and industrial production for Dec was a bit better than anticipated (+6.8% vs. the Street +6.6%), but the GDP deflator shows the country still grappling with deflation while retail sales fell short in Dec (+7.4% vs. the Street +8%), the population decline accelerated, and property investment stayed weak. FT
• Aramco’s CEO said global oil markets can cope with Red Sea disruptions in the short-term, but prolonged attacks could create a problem. RTRS
• The ECB is “likely” to cut rates by or in the summer, Christine Lagarde said in response to a question on whether there’s majority support among officials for such a move. Policy makers are “on the right path” in curbing inflation, she said, adding that overoptimistic rate-cut bets in the market don’t help. BBG
• UK CPI runs hotter than anticipated, with headline +4% in Dec (up from +3.9% in Nov and firmer than the Street’s +3.8% forecast) and core +5.1% (flat vs. Nov and firmer than the Street’s +4.9% forecast). FT  
• Qatar brokered a deal to permit medications to reach Israeli hostages in exchange for additional aid and medicine for Palestinian civilians. NYT
• The US is stepping up efforts to broker a diplomatic solution to the intensifying hostilities between Israel and Lebanon’s Hizbollah, as fears grow in Washington that the window is narrowing to avert a full-blown war erupting on the shared border. FT
• Biden has invited Congressional leaders to the White House for a meeting on Wed to discuss Ukraine aid and other fiscal matters (this will be the first face-to-face discussion between Biden and the congressional leadership in months). NYT
• Iran isn’t yet restocking Houthi rebels with weapons by sea after US and UK air strikes last week, Western officials said, signaling cautious optimism that the military action was successful in disrupting arms supplies. BBG
• JPMorgan plans to add to its headcount this year, President Daniel Pinto said. The bank sees opportunities in investment banking, international retail and US wealth management. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly pressured after the recent upside in yields and tapering of Fed rate cut expectations, while participants also digested mixed Chinese economic releases including GDP and activity data. ASX 200 declined as losses in the commodity-related sectors overshadowed the gains in defensives and tech. Nikkei 225 was initially boosted at the open on the back of a weaker currency and briefly climbed back above 36,000 but then pulled back from fresh three-decade highs and wiped out all of its gains as it succumbed to the risk-off mood. Hang Seng and Shanghai Comp retreated amid the mixed data releases from China and with Hong Kong significantly underperforming amid hefty losses in tech and property, with the latter pressured by the decline in Chinese home prices.

Top Asian News

• China’s stats bureau head said the economy faces a complex external environment and insufficient demand in 2024, as well as noted that low consumer prices reflect insufficient effective demand and expects a modest consumer price rise in 2024. NBS head stated China’s economy is at a crucial stage of recovery and its property market is showing some positive changes, while he added there is still relatively big room for China’s property sector to develop and there is still room to unveil more policy steps to support growth.
• China has drafted guideline on formatting standards for AI sector; details light
• China’s BYD (1211 HK) to stop making pouch-type batteries for its hybrid EVs on concerns they may leak; plans to completely stop using pouch cells by 2025, via Reuters citing sources.
• Former BoJ official Maeda says that the BoJ could end NIRP in April, but will likely move slowly in any additional normalisation steps, via Reuters.

European bourses are lower, with over 90% of the Stoxx600 (-1.1%) in the red, amid a negative risk tone following mixed Chinese data overnight, initial hawkish-tone and hotter-than-expected UK CPI; the FTSE 100 (-1.7%) lags, dragged down by miners. European sectors are entirely in the red; Real Estate suffers from the higher yield environment, Basic Resources and Energy are dragged lower by broader weakness in the commodity markets. US equity futures are trading on the backfoot, in tandem with losses seen in the European session. The RTY (-1.3%) significantly underperforms, continuing to extend on yesterday’s hefty losses. ES/NQ (-0.4%), into Retail Sales, Fed speak and a handful of earnings. Headline US Specifics: JPM will increase headcount this year; IBKR down after results; TSLA reduces Model Y prices in Germany.

Top European News

• Tesla Cuts Model Y Prices in Europe: Investor’s Business Daily
• Bank of Italy’s Panetta Sees Growth Under 1% in 2024: Radiocor
• Oil in Retreat as Risk-Off Mood Swamps Impact of Mideast Crisis
• Basic-Fit Climbs on Double Upgrade To Buy From Jefferies
• Frankfurt Airport Cancels Flights Amid Icy Winter Weather

FX

• USD continues to gain as Waller tempers the pace of rate cut expectations. DXY has advanced to a high of 103.58 with not much resistance until 104.
• EUR is one of the better performers vs. the USD today amid hawkish ECB speak. That said, EUR/USD saw a hefty decline from yesterday’s 1.0951 high. Further downside could bring its 200DMA at 1.0845 into play.
• The Pound is the only G10 currency firmer vs. USD amid hawkish inflation metrics; Cable hit a high just shy of the 1.27 mark but remains some way off yesterday’s best of 1.2729.
• Antipodeans both remain battered by risk environment with AUD lagging on account of Chinese sell-off overnight; AUD/USD next target is a Dec 7th low at 0.6525 with NZD/USD selling putting a test of 0.61 on the cards.
• PBoC set USD/CNY mid-point at 7.1168 vs exp. 7.1986 (prev. 7.1134).

Fixed Income

• USTs are contained, but with a modest bearish-bias given a hotter than expected UK CPI print and additional hawkish commentary from ECB speakers. Yields continue to bear-flatten a touch as participants digest Waller before Retail Sales and thereafter Bowman, Barr & Williams
• Bunds started the session on the backfoot and felt additional pressure on UK CPI which saw the 134.37 trough print (matches 8/12 low); since, benchmarks have found some reprieve though still remain in negative territory.
• Gilts are the clear laggard after an unexpected rise in UK CPI for December, which led benchmarks to fall to a 98.82 trough; levels to the downside include 98.29, Dec 12th low.

Commodities

• Crude is at lows, Brent (-2.1%), amid a concoction of bearish factors including the firmer Dollar, soured risk tone, hotter-than-expected UK CPI data, and the mixed Chinese GDP data overnight; Brent Mar is back under USD 77.00/bbl and markets await OPEC MOMR at 12:45GMT/07:45EST.
• Gold is subdued amid the firmer Dollar, but losses in the yellow metal are cushioned, potentially amid haven flows coupled with technical support; XAU resides around USD 2,025/oz.
• Base metals are softer across the board, in-fitting with the broader market mood, and in the aftermath of the mixed Chinese GDP data overnight.
• China is to cut gasoline price by CNY 50/t starting Jan 18th, according to the NDRC
• Saudi Aramco CEO says Red Sea attacks are manageable in the short-term, may create tanker shortage and weigh on market if it lasts longer
• Pemex reports that it is carrying out work activity which could result in flaring at the Deer Park, Texas facility (340k BPD)
• Exxon’s (XOM) 250k BPD Joliet Illinois refinery reports flaring, according to Reuters
• Antofagasta (ANTO LN) reports FY23 copper production at 661kt (vs guided 640-670kt)

ECB Speak

• ECB President Lagarde (Neutral) says inflation is not where the ECB wants it to be; confident the ECB will get inflation to the 2% target; Will stay restrictive for as long as necessary. Too optimistic markets do not help the ECB in its inflation fight. Cannot should victory until inflation is sustainably at 2%. Watching wages, profit margins, energy and supply chains. Second-round effects would be a cause for concern. ECB has reached peak rates, short of a major shock.
• ECB President Lagarde (Neutral) says it is likely that the ECB will cut rates by the summer, according to Bloomberg.
• ECB’s Knot (Hawk) says markets are getting ahead of themselves on rate cuts; a lot must go well to hit the 2% inflation in 2025; rate path priced by markets can be self-defeating, via CNBC; “rate hike in the first half is rather unlikely”.
• ECB’s Vasle (Neutral) says his rate expectations are significantly different to the market; says it is absolutely premature to expect rate cuts at the start of Q2.
• ECB’s Panetta (Dove) says disinflation is happening, and is strong and will continue; says risks are emerging for raw material costs; adds that monetary conditions should adjust; awaiting data first to confirm the disinflation outlook.
• ECB’s Villeroy (Neutral) says the job of monetary policy is not finished yet; premature to say when the ECB will reduce rates this year

Geopolitics

• Maersk CEO sees Red Sea disruptions “lasting a few months at least”
• US President Biden’s administration is expected to announce plans to designate Yemen’s Houthi rebel group as a global terrorist organisation, according to an official cited by CBS News.
• US National Security Council spokesperson said the US welcomed the announcement by Qatar that an agreement was reached to have medicine delivered to hostages in Gaza, according to Reuters.
• Iran’s Defense Minister said the country is engaged in talks with Russia over concluding an MoU on respect for national sovereignty, territorial integrity and regional interests, according to journalist Aslani.
• China’s Taiwan Affairs Office said Taiwan’s election result cannot stop the trend towards reunification and China is willing to create the widest space for peaceful reunification, while it added that Taiwan has never been a country and China will never leave any space for Taiwan independence, according to Reuters.

US Event Calendar

• 07:00: Jan. MBA Mortgage Applications 10.4%, prior 9.9%
• 08:30: Jan. New York Fed Services Business, prior -14.6
• 08:30: Dec. Import Price Index MoM, est. -0.5%, prior -0.4%
  • 08:30: Dec. Import Price Index YoY, est. -2.0%, prior -1.4%
  • 08:30: Dec. Export Price Index YoY, est. -0.7%, prior -5.2%
  • 08:30: Dec. Export Price Index MoM, est. -0.6%, prior -0.9%
• 08:30: Dec. Retail Sales Advance MoM, est. 0.4%, prior 0.3%
  • 08:30: Dec. Retail Sales Ex Auto MoM, est. 0.2%, prior 0.2%
  • 08:30: Dec. Retail Sales Control Group, est. 0.2%, prior 0.4%
  • 08:30: Dec. Retail Sales Ex Auto and Gas, est. 0.3%, prior 0.6%
• 09:15: Dec. Industrial Production MoM, est. -0.1%, prior 0.2%
  • 09:15: Dec. Capacity Utilization, est. 78.7%, prior 78.8%
• 10:00: Nov. Business Inventories, est. -0.1%, prior -0.1%
• 10:00: Jan. NAHB Housing Market Index, est. 39, prior 37
• 14:00: Federal Reserve Releases Beige Book

Central Bank Speakers

• 09:00: Fed’s Barr Speaks at Conference on Cyber Risk
• 09:00: Fed’s Bowman Speaks About Future of Bank Capital Reform
• 14:00: Federal Reserve Releases Beige Book
• 15:00: Fed’s Williams Speaks at NY Fed Event

DB’s Jim Reid concludes the overnight wrap

After all the comparisons with the 1970s over the last few years, Henry pointed out yesterday that actually the late-1960s are becoming an increasingly good parallel. That was another period of low unemployment, rising deficits, and growing geopolitical risks. But it also saw inflation rebound, as the Fed cut rates just as fiscal spending rose because of the Vietnam War. Although markets are encouraging and hoping for significant rate cuts this year, today’s policymakers are cautious about a repeat. Interestingly since the ECB’s Lane spoke over the weekend, the central bank speak has certainly turned a little more cautious about endorsing the amount of cuts currently priced in by markets. Our view is that the pricing is very aggressive versus history absent a recession so for it to be correct you have to believe in the immaculate soft landing scenario or a recession. We will see. Back to Henry’s note and overall the late 1960s shows that with tight labour markets, fiscal stimulus and geopolitical shocks, that’s the sort of environment where inflation can return if policy errors are made. See the report here.

On this theme, markets have struggled over the last 24 hours, with bonds and equities selling off after Fed Governor Waller pushed back on market expectations for rapid rate cuts. His November 28th speech was a big part of the rates and risk repricing towards the end of the year but this time his comments were more balanced but perhaps that was as much due to how far markets have come in terms of Fed pricing. What was dovish back then may look more hawkish now.

Yesterday’s speech had several important lines, but when it came to the market reaction, the key point was that he saw “no reason to move as quickly or cut as rapidly as in the past”. So that was an explicit pushback on market pricing, which had been expecting 165bps of rate cuts in 2024 before the speech, and it meant that 10yr Treasury yields (+11.8bps) saw their largest daily increase in over two months (albeit with some catch-up needed after the holiday), ending the day at 4.06%. Other assets also saw significant moves, with the Dollar Index (+0.93%) seeing its biggest daily increase since last March, whilst the S&P 500 shed -0.37%. China risk is slumping overnight as we’ll see below. Today’s highlights are US retail sales, UK CPI as we go to print, and lots of ECB speakers.

In terms of the rest of Waller’s speech, it did look towards rate cuts in 2024, saying that if “inflation doesn’t rebound and stay elevated, I believe the FOMC will be able to lower the target range for the federal funds rate this year.” But his view was that cuts should proceed “methodically and carefully”, and that he’d also be focusing on the CPI revisions scheduled for February 9. Readers may recall that last year, the revisions showed that inflation was declining slower than previously thought, so that’ll be a crucial update affecting the timing of any potential rate cuts.

However, even with Waller’s speech, it was striking that investors remained pretty confident that the Fed will be cutting rates by March, and fairly rapidly over 2024 as a whole. This echoes what we saw after the CPI last week, when the upside surprise didn’t seem to affect investor conviction much about future rate cuts. In fact by the close, the pricing for a cut by March was only down slightly to 69%, having been at 74% the previous day. Likewise for 2024 as a whole, the amount of cuts priced in by the December meeting came down from 165bps intraday just before the speech, to 157bps by the end, so still a rapid pace by historical standards. That means there’s still a tension between what Fed officials are saying and market pricing, since Waller was openly discussing a pace of cuts that were slower than previous cycles. Moreover, officials only have until Friday before the blackout period starts ahead of the next meeting, so after that the next scheduled remarks won’t be until Chair Powell’s press conference on January 31.

As noted at the top, this hawkish backdrop meant that US Treasuries struggled, with the 2yr yield up +7.7bps to 4.22%, whilst the 10yr yield was up +11.8bps to 4.06%. And in Canada, there was an even larger move for the 10yr yield (+13.8bps) after their latest inflation print for December showed that core CPI was proving stickier than anticipated. Looking at the measures followed by the Bank of Canada, the trim core rate was up to +3.7% (vs. +3.4% expected), and the median core rate remained at +3.6% (vs. +3.3% expected). And in turn, that saw investors push back the timing of future rate cuts, and the likelihood of a cut by March came down from 35% to 23%.

Over in Europe, we had several pieces of ECB commentary, with pushback against near-term pricing of cuts again evident. Among the hawks, Germany’s Nagel repeated his comments that market discussion of rate cuts had come too soon, while Lithuania’s Simkus said he was “far less optimistic” than markets on rate cuts. France’s Villeroy suggested it was premature to speak of when in 2024 rate cuts are likely to come. Pricing of a March cut inched lower again from 29% to 25% yesterday (it was 43% on Friday). In bonds, the 2yr bund yield (+0.2bps) was little changed after the sizeable sell-off on Monday, but the 10yr yield rose by +2.5bps to 2.26%, its highest since December 11. We have another busy day of ECB speakers ahead today so watch out for them in what has been a more hawkish week to date.

For equities, it was also a fairly negative session, with the S&P 500 (-0.37%) declining as US markets returned after Monday’s holiday. In addition, the decline was broader than the headline loss suggested, as the index was dragged up by the outperformance of the Magnificent 7, which were flat on the day. The latter was supported by a +3.06% gain for chipmaker Nvidia. Within the S&P 500, energy (-2.40%) and materials (-1.19%) stocks led the declines. Otherwise, the small-cap Russell 2000 (-1.21%) fell for a 3rd consecutive session, reaching its lowest level in over a month. And there were also declines in Europe, where the STOXX 600 (-0.24%) lost ground for a second day running.

In Asia the Hang Seng (-2.81%) is sharply lower led by real estate and consumer non-cyclical stocks. The KOSPI (-2.43%) is not far behind. Mainland Chinese stocks are also trading in the red with the CSI (-0.73%) and the Shanghai Composite (-0.64%) down. S&P 500 (-0.19%) and NASDAQ 100 (-0.27%) futures are also slipping.

Coming back to China, the economy expanded by +5.2% in 2023, hitting the government’s official target after the previous year’s miss but the outlook for 2024 remains uncertain as the world’s second-biggest economy is still contending with the ongoing property crisis, deflationary pressures and sluggish consumer and business confidence. On a quarterly basis, the economy grew +1.0% (+1.1% expected) in Q4, slowing from a revised +1.5% pace in the previous quarter. The fact that the deflator fell -1.5% in the quarter is also gaining a lot of attention as deflation continues.

Retail sales advanced +7.4% y/y in December (v/s +8.0% expected), slowing from a +10.1% increase in November. At the same time, production rose by +6.8% y/y in December, slightly higher than the previous month’s +6.6%, and meeting market forecasts. Housing data was also soft overnight.

Elsewhere yesterday, UK gilts outperformed (with the 10yr yield flat at 3.80%) after data showed wage growth was running slower than expected. For instance, averageweekly earnings were up by +6.5% over the three months to November compared with the previous year, beneath the +6.8% reading expected. We also found out that the number of payrolled employees was down by -24k in December (vs. -13k expected). Shortly after we go to press this morning, we’ll get the CPI release for December as well, so keep an eye out for that in terms of the timing of any potential rate cut.

Lastly, there were also a few other data releases out yesterday. In the US, the Empire State manufacturing survey fell to -43.7 in January (vs. -5.0 expected), which is the lowest since the first Covid wave in spring 2020, and otherwise the lowest since the start of the series in 2001. We also had the ECB’s latest Consumer Expectations Survey for November, which showed 1yr inflation expectations were down to 3.2%, and 3yr expectations were down to 2.2%. In both cases, that was the lowest reading since February 2022. That said, our European economists’ own dbDIG survey, which is one month ahead (for December), suggests that inflation expectations may be stabilising at still slightly elevated levels.

To the day ahead now, and data releases include UK CPI for December, US retail sales, industrial production and capacity utilisation for December, along with the NAHB’s housing market index for January. From central banks, we’ll hear from ECB President Lagarde, the ECB’s Cipollone, Vasle, Simkus, Villeroy, Vujcic, Knot and Nagel, as well as the Fed’s Barr, Bowman and Williams. The Fed will also be releasing their Beige Book.

The Blackstone Real Estate Income Trust (BREIT) recorded its lowest annual return since its inception in 2017, with a .5% loss in 2023. This shows that Blackstone’s flagship real estate trust for high-net wealth investors was not immune to the Federal Reserve’s interest rate hiking cycle and a commercial real estate downturn. 

In a recent shareholder update, Blackstone told investors, “We built BREIT as an all-weather strategy designed to build long-term wealth across market cycles. We are pleased that BREIT has delivered an 11% annualized net return since inception seven years ago (January 1, 2017).” 

Nonetheless, the past year’s sharp increase in interest rates, regional bank meltdowns, and a downturn in the commercial real estate market have ended that era (for now). This shift led to a slight loss (.5%) last year, following returns of 8.4% in 2022 and over 30% in 2021.

BREIT’s performance also severely lagged behind 26% returns of the S&P500. The fund’s net asset value is around $62 billion. 

Meanwhile, Blackstone has limited investor redemption requests for more than a year. It has returned $14.3 billion of investor cash since November 30, 2022, according to a shareholder letter earlier this month. The good news is that a backlog in redemption requests has been easing recently. 

Bloomberg noted, “Blackstone had enlisted interest-rate hedges to mitigate the pain from soaring borrowing costs. The firm said in a memo that even if there might be some immediate sting, sustained lower rates will lift real estate values across the fund’s portfolio.” 

Authored by Simon White, Bloomberg macro strategist,

Animal spirits are regnant in stock world, as net positioning shoots higher this year. 

But the reason for the market’s expectation of imminent interest rate cuts – rising financial-instability risks – is also the reason more caution is warranted.

Stock investors have got off to an assertive start in 2024.

Aggregate positioning of speculators across major US equity indices has rocketed from net short to net long in only a few weeks.

The aggregate number is driven by net positioning for Dow Jones and Nasdaq futures, which are at their highest levels in at least two years. Net positioning in the S&P e-minis remains net short, but is rising.

Stock optimism has been boosted by the Fed’s pivot in December, and the market’s eagerness to out-dove the central bank by pushing for a rate cut as early as March.

[ZH: Fed’s Waller pushed back the hardest yet on the market’s March rate-cut odds expectations]

There have been several hypotheses put forward for this, such as a dovish read of recent economic data, or large yield-curve steepening positions upending short-term rate pricing. But none are particularly convincing.

However, through the prism of a rise in perceived financial-instability risks, pushing for a cut makes a more sense.

If that’s the case though, the zeal for equities could face a rude awakening.

That’s especially the case if the Fed forcefully pushes back on a March rate cut, and there is greater financial instability as quantitative tightening begins to bite harder, leading to potential funding flare-ups.

Stocks in such a situation would find themselves on shaky ground.

By Tsvetana Paraskova of OilPrice.com

U.S.-based Uranium Energy Corp said on Tuesday it would restart uranium production at its fully permitted site in Wyoming as the resurgence in nuclear power has led to a new bull market in uranium.

Uranium Energy will resume 100% unhedged uranium production at its fully permitted, and past producing, Christensen Ranch In-Situ Recovery (ISR) operations in Wyoming. The recovered uranium will be processed at the fully operational Irigaray Central Processing Plant with a current licensed capacity of 2.5 million pounds U3O8 per year, the company said.    

The first uranium production is expected in August 2024 and will be funded with existing cash on the company’s balance sheet. As Uranium Energy’s strategy has been to remain 100% unhedged, produced uranium will be sold at prevailing spot market prices which was $106 per pound U3O8 as of January 15, 2024 as reported by UxC. 

“Uranium market fundamentals are the best the industry has witnessed, and various supply shocks have accelerated the bull market with recent prices eclipsing the $100 per pound level,” Uranium Energy president and CEO Amir Adnani said.

Combined with South Texas Hub and Spoke ISR Platform, Uranium Energy controls the largest S-K 1300 compliant ISR resource base in the United States with over 75,000,000 lbs of measured and indicated resources and 25,000,000 lbs of inferred resources.

At the end of 2023, TerraPower and Uranium announced a memorandum of understanding with objectives of reestablishing domestic supply chains of uranium fuel.

The renewed focus on nuclear energy in many developed economies has created a bull market for uranium in recent months.

Early in January, spot prices for uranium concentrate used in nuclear power generation hit a new 16-year high, climbing to $92.45 per pound.

Uranium prices have further room to rise after Kazatomprom—the largest uranium miner in the world—said last week that sulfuric acid shortages and construction delays at newly discovered deposits could lead to the company missing production targets—challenges that could remain into next year. 

Authored by Jeff Louderbeck via The Epoch Times,

While in Atlanta for a voter rally on the eve of Martin Luther King Jr. Day, Robert F. Kennedy Jr. talked about his family’s relationship with the civil rights leader and said that “there was good reason” for his father, Robert F. Kennedy, to authorize FBI Director J. Edgar Hoover’s to wiretap Dr. King when John F. Kennedy was president.

Before delivering a speech at the event, where he collected signatures to get on the Georgia presidential general election ballot, Mr. Kennedy told Politico that his father, who was attorney general, granted permission for Mr. Hoover to electronically monitor Dr. King’s conversations “because J. Edgar Hoover was out to destroy Martin Luther King and the civil rights movement and Hoover said to them that Martin Luther King’s chief was a communist.”

“My father gave permission to Hoover to wiretap them so he could prove that his suspicions about King were either right or wrong. I think, politically, they had to do it,” Mr. Kennedy said.

Mr. Kennedy noted that his father and his uncle knew that Mr. Hoover was “a racist” and “left no doubt where he stood on those issues” regarding civil rights organizations.

If President Kennedy had been elected to a second term, he would have fired Mr. Hoover, the 2024 independent presidential candidate said, adding that be believes his uncle alerted Dr. King of Mr. Hoover’s wiretaps in a private conversation.

President Kennedy was assassinated in Dallas on Nov. 22, 1963.

Dr. King, who was born and raised in Atlanta, was shot and killed by James Earl Ray in Memphis, Tenn. on April 4, 1968.

After speaking at a campaign event in Los Angeles during his bid to secure the Democrat Party’s presidential nomination, Robert F. Kennedy was shot on June 5, 1968. He died the next day.

On Martin Luther King Jr. Day, Mr. Kennedy posted a video on X, formerly Twitter, sharing stories about the relationship between his father and Dr. King.

In 1967, Dr. King delivered a speech “in which he came out against the Vietnam War,” Mr. Kennedy said in the video.

It was an unpopular stance among other civil rights leaders who thought Dr. King should focus solely on the civil rights movement, Mr. Kennedy explained.

Dr. King noted that black soldiers represented “half of the paratrooper units in Vietnam” and black soldiers were dying for freedoms in Vietnam that they did not have in their own country,” Mr. Kennedy said.

“He also said that the poverty program which Lyndon Johnson and my uncle had launched was being impoverished itself because of the cause of the Vietnam War.”

President Lyndon B. Johnson shakes the hand of Dr. Martin Luther King Jr. at the signing of the Civil Rights Act while officials look on in Washington on July 2, 1964. (Hulton Archive/Getty Images)

A year after delivering that address, Dr. King was murdered, and Mr. Kennedy said his father broke the news to a crowd in Indianapolis.

“My father was running against the Vietnam War at that time and was going into a ghetto in Indianapolis, Indiana. The sheriff warned him that he shouldn’t go because people didn’t know that Martin Luther King Jr. was dead, and the sheriff and the local police believed they would lose control of the city when the black population learned about his death,” Mr. Kennedy said.

Robert F. Kennedy ignored the sheriff’s warning and climbed on a flatbed truck to deliver an impromptu speech that his son calls one of the best addresses he had delivered.

After telling the audience that Dr. King was shot and killed, Mr. Kennedy “did something that he never had done before, which is he talked publicly about his brother’s death.,” his son said in the video.

“He reminded the crowd that his brother was killed by white men as well. And he called on the crowd to do something that was counterintuitive, which was to react peacefully. Quoting the Greek poet Aeschylus, he said that our job now as Americans was to “tame the savageness of men and make gentle the life of this world.”

More than 100 cities were ravaged by riots that night, but not Indianapolis.

“It was the only major city that avoided rioting that night. People have attributed that to my dad’s speech,” Mr. Kennedy said.

“When my dad died in 1968, two months later, after Dr. King, Coretta King was in the hospital with me and my siblings, [in] Good Samaritan Hospital in Los Angeles. And my father died. And then she was on the airplane with us, which took my father’s casket back to New York, and she was on the train with us when we brought his body on a seven-and-a-half-hour train ride with two and a half million people on the track to Washington DC.”

At the Atlanta voter rally on Jan. 14, Mr. Kennedy was joined by Angela Stanton-King, the goddaughter of Alveda King, who is Dr. King’s niece.

Ms. Stanton-King, who works for Mr. Kennedy’s campaign, was pardoned by President Donald Trump after a conviction in 2006 for conspiracy to defraud the government in connection with a luxury car theft operation.

In 2020, she registered as a Republican and unsuccessfully ran against civil rights leader and incumbent Rep. John Lewis (D-Ga.).

Discussions on collapse often turn to signs and signals – The economy, politics and social tensions have become increasingly unstable for many years now, and much like adding more and more weight to a man standing on a frozen lake, eventually the ice is going to break.  The question is, how do we know when that moment will be?   

As cultural systems begins to dissolve due to political clashes and economic decline the real evil tends to slither out of the woodwork.  It happens slowly at first, then all at once.  A sure sign of accelerating collapse is the growing prevalence of psychopaths and psychopathic behavior in the open.

The US appears to have entered the middle stages of such a collapse with many sociopaths and psychopaths beginning to feel that they might be able to act out their worst impulses without consequences.  They are beginning to test the waters to see what they can get away with.

In the past ten years there has been a dramatic uptick in mass violence and theft.  With the advent of social media it is now easier than ever for spontaneously planned riots to form with little warning, and in most cases these mobs are random in who and what they attack.  They might organize in the name of politics or activism, but they tend to lash out at whatever targets are closest or easiest rather than the people they blame for their travails.

In most cases these events result in simple property destruction in urban areas, but more and more there has been an underlying and aggressive impulse to hurt people.  There will come a time very soon when the the goal is not just to steal or vandalize, but to use instability as a smokescreen; a distraction the provides opportunities to harm others.

Psychopaths like to exploit the chaos of political turmoil to indulge their violent tendencies, or to convince others to do the same.  If no one acts to eliminate the first wave of criminal actions during a social breakdown, then thousands of other criminals will also move to take advantage.  The first wave becomes an avalanche, all because the system no longer provides sufficient incentives to behave.

The root psychology is hard to explain, but look at it this way – Imagine a spoiled toddler is kept in check by his parents in the pristine halls of a delicate museum.  The toddler might throw fits, screaming and shouting because he wants to touch the many fragile items around him, but at least his parents are there to hold him back.  He has not yet learned the responsibility and maturity necessary to have access to these treasures.  Now imagine removing the parents entirely and telling the toddler there are no rules anymore?

The rush of joy he experiences is exhilarating; it is the feeling of sudden and unearned power.  No one is around to stop him, therefore, he is going to test his own limits.  He sees the ordered environment around him and he becomes frustrated.  How dare this place restrict him with boundaries and structure.  His first inclination is to destroy anything that he can get his hands on.  

Now understand that there is a portion of any given adult population that has these same tendencies.  They never grew up.  They want to take or destroy what they cannot have; they are only waiting for the opportunity to do so without repercussions.     

At this phase of a breakdown when the dominoes begin to topple, law enforcement generally folds and retreats, leaving the public with no first line of defense.  Gangs and looters organize quickly and take territory rather than just taking people’s possessions.  Organized crime at the local level leads to large scale death and minimal opposition.  People are so isolated and busy trying to scrape together a meager economic lifeline that they have no time or motivation to fight back.  

The point of no return comes when regular people are afraid to leave their homes.  Organization at the neighborhood level with an aggressive posture must be enacted or the most vicious attacks will be visited on the population.  

Sometimes, though, the psychopaths we have to deal with during a collapse are within the very government that is supposed to protect our liberties.  This is a situation in which the criminals are given license to use violence against the citizenry through the illusion of law.  The populace is then confronted with the inevitable question – Are laws worth following when psychopaths write them?

When corrupt people run government, good becomes evil and evil becomes good.  Consider the extreme double standards in place between the treatment of leftist activist mobs and conservative protesters.  Look at the government and media response to the BLM riots versus their response to the Jan 6 event.  In the case of the capitol “riots”, police fired rubber bullets and tear gas into the otherwise peaceful crowd, then when the protesters reacted violently, they were accused of “insurrection.”  

Is there any example of this kind of setup used against the political left?  No.  Instead, the media and public officials describe the destructive mobs as “fiery but mostly peaceful.”

The double standard is absurd, but then again, it’s meant to be.  Why?  Because the psychopaths among the political left were being rewarded and encouraged.  Conservatives and moderates are supposed to feel defeated, making them unwilling to fight back any longer.  These are the kinds of conditions that fuel unhinged and predatory people, unleashing them on the population.  

When psychopaths feel protected, total upheaval quickly follows. 

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

The State Department has issued a warning to American travelers, urging them not to use dating apps while in Colombia after reports of multiple “suspicious deaths” of U.S. citizens in the South American country.

Colombia has been marked as a “reconsider travel” destination for Americans since Jan. 2, with the State Department citing concerns about crime, terrorism, civil unrest, and kidnapping risks.

“Violent crime, such as homicide, assault, and armed robbery, is widespread,” the State Department states in the advisory. “Organized criminal activities, such as extortion, robbery, and kidnapping, are common in some areas.”

More recently, the State Department issued a warning of a new threat—with the use of dating apps being a common denominator.

Suspicious Deaths

The U.S. Embassy in Bogota, the capital of Colombia, was made aware of eight “suspicious deaths” of private U.S. citizens in Medellín between Nov. 1 and Dec. 31, 2023, according to a Jan. 10 advisory.

“The deaths appear to involve either involuntary drugging overdose or are suspected homicides,” the advisory states.

While it’s not believed that the deaths are directly linked as each involved “distinct circumstances,” a number of them involved the use of online dating apps, along with possible drugging, overdose, and robbery.

Disturbing Trends in Crime Against Foreign Visitors

Local authorities in Medellín have noted a significant increase in crimes against foreign visitors.

Observatory of the District Personnel of Medellín reports that the number of thefts committed against foreigners (with the exception of Venezuelans) jumped 200 percent in the latter part of last year.

Additionally, violent deaths of visitors from other countries have jumped 29 percent—with a notable majority of the victims being U.S. citizens.

Dating Apps as Tools for Criminal Activities

Criminals in Colombia are reportedly using dating apps to lure victims, particularly foreigners, to meet them in places like hotels, restaurants, and bars—with the aim of robbing them.

“Numerous U.S. citizens in Colombia have been drugged, robbed, and even killed by their Colombian dates,” the advisory warns.

The U.S. Embassy notes that these incidents are on the rise, with major cities like Medellín, Cartagena, and Bogotá being hotspots for such crimes.

While such incidents are reported regularly to the U.S. Embassy in Colombia, it’s likely that the scale of the problem is greater than it seems as these types of crimes “routinely go underreported” because victims are often embarrassed and reluctant to pursue legal action.

Precautionary Measures

Some key actions to take include being cautious when using online dating apps and meeting strangers only in public places.

Travelers to Colombia are also advised to avoid isolated locations when meeting people who they found through dating apps, and informing friends or family members about plans for the meeting.

The advisory also suggests taking extra security measures when meeting new acquaintances and not physically resisting any robbery attempt.

“Victims of crime who resist robbery are more likely to be killed,” the advisory states.

The Colombia travel advisory—and the warning about criminals using dating apps to lure victims—comes after the State Department issued a worldwide caution alert for Americans traveling abroad after the outbreak of the Israel–Hamas war last October.

Worldwide Caution Alert

The State Department’s worldwide caution alert cites increased tensions globally and the potential for terrorist attacks, demonstrations, or violent actions against U.S. citizens and interests.

The latest alert was prompted by the ongoing conflict in the Middle East, which came after Hamas (a designated terror group) attacked parts of Israel, killing hundreds of civilians and leading to an extensive Israeli bombing campaign targeting Gaza, the area Hamas controls.

This caution alert comes after the last worldwide advisory in 2022, which followed a U.S. strike that killed al-Qaeda chief Ayman al-Zawahiri.

Authored by Naveen Athrappully via The Epoch Times (emphasis ours),

House Speaker Mike Johnson (R-La.) criticized federal employees reportedly planning a walkout over America’s support for Israel in its war against Hamas and called for terminating their employment.

“Any government worker who walks off the job to protest U.S. support for our ally Israel is ignoring their responsibility and abusing the trust of taxpayers. They deserve to be fired,” Mr. Johnson said in a Jan. 14 post on X (formerly Twiter). “Oversight Chairman Comer and I will be working together to ensure that each federal agency initiates appropriate disciplinary proceedings against any person who walks out on their job,” he added, referring to Rep. James Comer (R-Ky.).

The House Speaker’s comments came in response to a tweet by Joyce Karam, the senior news editor at Al-Monitor, saying that “hundreds of U.S. gov. employees plan walkout on Tuesday over Biden’s Gaza policies.” In total, workers from 22 government agencies are expected to be involved in the walkout, she said in a Jan. 13 post.

A list obtained by Al-Monitor showed that departments involved in the walkout include the National Security Agency, the Executive Office of the President, the Naval Research Laboratory, U.S. Citizenship and Immigration Services, and the Departments of State, Defense, Homeland Security, and Veterans Affairs.

A walkout by federal employees could count as a strike, which is prohibited per law.

Title 5 Section 7311 of the U.S. Code states: “An individual may not accept or hold a position in the Government of the United States or the government of the District of Columbia if he … participates in a strike, or asserts the right to strike, against the Government of the United States or the government of the District of Columbia.”

Further, Title 18 Section 1918 prescribes the punishment for such an action. Violators of Section 7311 “shall be fined under this title or imprisoned not more than one year and a day, or both.”

A major strike by federal employees over four decades ago triggered government action. In 1981, around 13,000 air traffic controllers took part in a strike over pay and work schedules.

At the time, President Reagan declared the strike to be a “peril to national safety,” fired 11,000 workers, and barred them from ever joining the federal government again.

‘Day of Mourning’

The walkout is being organized by a group called “Feds United for Peace” who claim that they will mark 100 days of Israel’s operations in Gaza by observing a “day of mourning.” The organizers remained anonymous.

One of the organizers of the walkout told Al-Monitor that their initiative “grew out of a collective desire to do what we could to influence the Biden administration’s policy on this issue … What you’re seeing with this effort is something very unusual, and that is for dissent to be manifested via a physical act.”

Hamas’ attack in Israel on Oct. 7 had killed around 1,200 individuals and led to the kidnapping of roughly 240 people. It is this attack that triggered the current Israel-Gaza conflict. In October, Israel launched a ground offensive in Gaza.

South Africa has accused Israel of committing state-led genocide against Palestinians, claiming at the International Court of Justice (ICJ) that the offensive has led to the deaths of almost 24,000 people.

In a Jan. 11 X post, Lior Haiat, a spokesperson for the Israeli Foreign Ministry, called South Africa’s claims “one of the greatest shows of hypocrisy in history, compounded by a series of false and baseless claims.”

South Africa “completely ignored the fact that Hamas terrorists infiltrated Israel, murdered, executed, massacred, raped, and abducted Israeli citizens, simply because they were Israelis, in an attempt to carry out genocide,” he wrote.

“Hamas’ representatives in the court, the South African lawyers, are also ignoring the fact that Hamas uses the civilian population in Gaza as human shields and operates from within hospitals, schools, UN shelters, mosques, and churches with the intention of endangering the lives of the residents of the Gaza Strip.”

Pro-Hamas Stance

This isn’t the first time that federal employees have been entangled in a controversy over the Israel-Hamas conflict.

On Nov. 28, Sen. Marco Rubio (R-Fla.) wrote a letter to cabinet-level inspector generals asking for a full investigation into reports that over 500 federal employees representing the Biden administration signed an open letter asking the president to demand a ceasefire.

Such a demand “only stands to benefit Hamas,” Mr. Rubio argued. As the letter claimed to have been signed by workers from several government agencies and political appointees who were confirmed by the Senate, there is “ample opportunity for the signers to abuse their positions to carry out their self-declared goal,” he warned.

“These range from officials at the U.S. Department of State insisting on prolonging the review periods of arms sales to Israel to supervisors denying promotion and salary increases to employees that support Israel.”

“Therefore, I urge you to conduct a full investigation to determine which employees signed the letter, publicize their names, and assess to what extent they have used their positions to work counter to the policies of the president,” Mr. Rubio said.

Confirming Premier Li’s earlier leak, China’s economy grew at 5.2% YoY – comfortably and miraculously beating the all-knowing official target of ‘around 5%’ (which is the lowest target in decades), as industrial production and investment climbed in the final stretch of the year.

However, thew GDP print at +5.2% was weaker than the +5.3% consensus estimate.

While GDP accelerated, other indicators were mixed in the final month of 2023:

• Industrial output rose 6.8% in December from a year ago, better than a 6.6% increase projected by economists

• Retail sales grew 7.4%, weaker/worse than the forecast for an 8% gain

• Fixed-asset investment climbed 3% in the year, slightly better than a predicted 2.9% rise

• The urban jobless rate was 5.1% last month, up/worse from 5% in November

“China’s economy withstood external pressures and overcame domestic challenges to rebound and improve in 2023,” the NBS said in a statement accompanying the data.

The agency warned, though, that economic development “still faces some difficulties and challenges.”

China released its jobless rate among young people (which it decided to stop issuing once it hit a record high above 20%) – but in the wonderfully Chinese way, the new series (at 14.9%) is entirely incomparable as it ‘excludes students’.

A bigger problem for liquidity-hypers was that Li explicitly pointed out that China’s growth rate last year – a rise from the figure of 3% in 2022 when the country was hit by its arcane Zero-COVID policies – was achieved without resorting to “massive stimulus” and the economy was making “steady progress”.

“We did not seek short-term growth while accumulating long-term risks, rather we focused on strengthening the internal drivers,” he said.

“Just as a healthy person often has a strong immune system, the Chinese economy can handle ups and downs in its performance. The overall trend of long-term growth will not change.”

The biggest threat to the economy remains the housing sector and China’s property crisis is not getting any better at all as the number of cities seeing home price increases continues to collapse…

Finally, China’s population shrank faster last year, falling by 2 million people.

The 9 million births was the lowest total since at least the start of the People’s Republic of China in 1949, and 11 million people died.

That number was probably boosted by the COVID pandemic, but there’s no detail in today’s data about cause of death.

And that’s a big problem – because you can’t print people… and dependents are soaring.

By Ted Dabrowski and John Klingner of Wirepoints

A glance at the news coverage of the recent Inspector General report on financial and sexual misconduct at Chicago Public Schools shows it’s the fiscal mismanagement that’s getting all the attention. The media is highlighting more than $23 million in missing laptops among other material fraud.

But it’s the more urgent issue of sexual abuse in CPS that should dominate the headlines. The IG reported a total of 446 sexual allegations made in 2023, ranging from misconduct and sexual harassment to nonsexual conduct that raises “the appearance of impropriety or possible grooming concerns.” That’s similar to 2022’s 470 allegations.

The IG also substantiated eight cases of adult-on-student sexual abuse.

Instances of abuse continue despite the Chicago Tribune’s exposure in 2018 of the school district’s sexual abuse crisis, when the newspaper found police had investigated more than 520 cases of juvenile sexual assault and abuse in Chicago’s public schools from 2008 to 2017.

Some things have improved since the publication, like the passage of Faith’s Law and the creation of the OIG’s Sexual Allegations Unit, but until CPS is subject to massive outside scrutiny and public outcry – much like the Catholic Church rightfully received for its own abuse scandals – count on cases of abuse to continue.

A lack of management and accountability

The problem at CPS is a lack of control and oversight, something the OIG office openly admits:

“Among cases closed by the agency’s general investigations unit from July 2022 through June 2023, Inspector General Will Fletcher said there’s a consistent theme: ‘Where you find vulnerabilities in management controls (and) exercising oversight — you will find fraud.’”

Those same vulnerabilities allow for continued instances of sexual abuse. 

What’s worse, sexual abuse is harder to detect than stolen laptops or missing funds. There’s nothing “missing” for a manager to notice. The prevalence of texting and video also makes abuse easier to perpetrate and harder to detect.

There are also likely many cases that go unreported and undiscovered due to shame or fear of retribution. That was certainly the case for the Catholic Church, which saw most accusations take years or decades to emerge.

And then there’s the CTU and its collective bargaining agreement. Their “myriad” and “tedious” rules are more about protecting the union and its members than they are about protecting children.

In sum, the deck is already stacked against parents and their children when it comes to abuse. The system’s continued mismanagement only makes things worse.

Needed reforms

The Chicago Tribune’s “Betrayed” series should have opened the door to massive changes and extreme transparency. It should have spurred the creation policies mirroring the Catholic Church’s own reforms, including:

• A strict “one strike and you’re out” zero tolerance policy, as established in the Church’s Dallas Charter.

• Removal of accused employees from school until an investigation is completed.

• A public and easily accessible website that lists all offenders, their histories and their whereabouts, so these teachers don’t become tutors or get hired by another school system.

• A rigorous screening process obsessed with a hiree’s character.

• Robust and mandatory “safe environment” training for all employees and vendors.

And it should have spurred State Attorney General Kwame Raoul to open an investigation of his own. 

Instead, Raoul’s office dedicated itself to a multi-year reinvestigation of the Catholic Archdiocese, decades after the Church’s strict controls and safety processes had already been put in place.

Bureaucratic blocking

Not only has CPS failed to implement best practices for its own investigations, but its processes make it nearly impossible for private groups and citizens to conduct their own inquiries.

A report by KidsToo, a Chicago-based nonprofit dedicated to child protection, recently outlined its attempt at investigative reporting needed to get to the truth about the depths of sexual abuse at CPS.

It’s vital work because the OIG is always overwhelmed: “Every year, the OIG receives more credible allegations than it has the resources to investigate, so the investigations that are opened are the result of an assessment of the severity of the allegations and the potential impact or deterrent effect of investigating certain subject matter.”

Unsurprisingly, KidsToo’s efforts were often thwarted for a host of reasons, which they laid out in detail in their “In Loco Parentis” report, including:

• A FOIA process designed to “limit and filter information” rather than freely provide it.

• Difficulty in gaining access to appropriate teacher data, including license information.

• The teachers’ collective bargaining agreement allows CTU representatives to be part of the investigative process, creating a “myriad of steps” and “tedious” processes.

• Other contract rules, including “grievance” and “mediation” processes, create even more investigative delays.

• The revocation or suspension of teaching licenses is hampered by the State Superintendent having ultimate control over the process.

To be clear, these investigations involve serious allegations and so should be treated seriously, but the process should not be so labyrinthine for those trying to gather information.

*  *  *

That CPS is such a poor steward of taxpayer dollars is bad enough, but the failure to catch fraud and theft pales in comparison to the continual harm done to Chicago’s children. Not only are a vast number pushed out of the system without the basic skills they need to succeed in life, but some also end up victims of sexual abuse.

It’s a sad reminder of how inept, corrupt and morally bankrupt CPS really is.