Authored by Daniel Lacalle,

The year is ending with a significant level of optimism among investors, focusing on an expected string of rate cuts from the Fed and an estimated economic soft landing.

However, a soft landing is a very rare event.

Since 1975, there have been nine rate hike cycles, and seven of them ended in a recession.

Why? We must understand that the concept of “landing” that the Federal Reserve repeats constantly is exactly that: a recession. A soft landing is a significant decline in the aggregate money supply, which entails lower credit and access to capital for families and businesses. There is no other way to lower inflation, which the extraordinary and unnecessary increase in the money supply in 2020 caused.

Why did we have no inflation between 2008 and 2019? Richard Burdekin explained it in his paper, “The US Money Explosion of 2020: Monetarism and Inflation (Scientific Research, Modern Economy, Vol. 11, Nov. 2020)”.

“The lack of inflation after 2008 certainly cannot be taken as proof that money no longer matters. Although a declining velocity of circulation did play some role, the key point is that the decline in the money multiplier largely offset the enormous increase in base money.”

Burdekin goes on to explain that:

“inflationary consequences remained minimal, however, owing to the soaring excess reserve ratios that greatly constrained the overall money supply increase at this time. By contrast, absent such extraordinary increases in bank reserve holdings, the initial consequences of the 2020 expansion differ markedly from the 2008–2009 case. Between February 2020 and September 2020, the monetary base rose from $3454.5 billion to $4880.4 billion, while M2 rose from $15,446.9 billion to $18,647.9 billion.”

The increase in money supply (M2) reached a massive 20.7% between February and September 2020.

Since then, accumulated inflation in the United States has exceeded 20%, and rate hikes, added to a reduction of the balance sheet of the major central banks, have been the answer to containing the rise in prices.

Inflation is coming down, but not as fast as it would have done considering the decline in money supply added to the increase in rates. The main reason is that fiscal policy, for the first time in decades, is moving in the opposite direction of monetary policy. And this is likely to create significant problems in the future.

Money-supply growth has been negative for twelve months, and the year-to-date decline stands at -4.5%. The reason why the economy is not showing significant negative effects from the first decline in money supply since the 1930s is because the amount of liquidity injected in 2020–21 was so enormous that there is a lag effect as savings are consumed, and the accumulated money growth effect keeps credit conditions relatively loose.

The problem is that inflation remains elevated. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) in October rose 3.2% over the previous 12 months, while the core CPI rose 4.0% over the year. With the continued decline in monetary aggregates, the CPI’s measure of inflation should already be below 2.0%. Government spending and massive consumption of newly created units of currency are keeping inflation above where it should be.

If next year we see rate cuts and money supply growth, accumulated inflation from 2019 will likely surpass 23%, when it stands at 20.3% in the latest figure.

The massive destruction of the purchasing power of the currency continues.

Gold is now the only real defense against the loss of the purchasing power of fiat currencies. Bitcoin may have risen in 2023, but it is uncomfortably correlated with equities and bonds. However, anyway we look at it, the market understands that 2024 will bring some form of additional destruction of the value of our currency. Considering that risk, it is not a surprise to see that central banks have reached a record figure of purchases of gold in the first three quarters of 2023, surpassing the 800-tonne level. This record figure of gold purchases by central banks, a 14% increase from the 2022 level, reflects the need to strengthen and diversify their reserve base, reducing the exposure to sovereign debt, which has created net losses in the past two years, and increasing the holdings of an asset, gold, that guarantees stability and rising purchasing power over time.

Bitcoin, stocks, and bonds are all directly correlated with the expectations of a larger money supply and lower rates, but none of them are effective ways to offset the constant and inevitable destruction of currencies. Considering that central banks are looking to impose their own digital currencies, gold proves again that it is an essential asset in a portfolio where investors try to escape the collapse of money as we know it.

2023 has not been a sign of the success of central bank policies but a confirmation of their failure. Central banks have failed to comply with their target of price stability, while investors seem to find 3-4% acceptable if they receive the dose of monetary laughing gas they want.

The problem in 2024 is that soft landings are rare, that monetary contraction and rate hikes will show their true impact with the typical lag of twelve to fourteen months since the last hike, and that the federal government’s fiscal policy will continue to drive deficits and debt higher, which means consuming more newly created units of currency and debasing our salaries and savings. If the threat of central bank digital currencies is confirmed, gold will prove again its quality as a reserve of value and means of payment, but it is also likely to show that it is one of the few assets that protects investors in a recession.

2023 has proven that inflation is the biggest threat to citizens. 2024 is likely to show that monetary debasement is the top risk that investors should consider.

Usually the week after US payrolls is pretty quiet on the news and events front, but not this one, because as DB’s Jim Reid writes it’s hard to see how the week could be much busier given we have the following highlights.

• Today we get a 3yr and 10yr US Treasury auction plus the NY Fed’s Survey of Consumer Expectations.
• Tomorrow sees the all-important US CPI and a 30yr Treasury auction (after a very bad one last month).
• Wednesday sees a fascinating FOMC meeting and US PPI.
• Thursday sees US Retail Sales and policy meetings from the ECB, SNB and BoE.
• Finally, Friday brings the latest global flash PMIs and China’s main monthly data dump.

There are plenty of other releases but these are likely to be the primary market moving events. For a full list, see the day-by-day calendar of events at the end as usual.

As Reid adds, it’s a toss up as to whether the FOMC or the US CPI will be the most important event of the week. Given that CPI tomorrow could shape the FOMC, let’s start there. For headline, the consensus thinks we’ll be flat MoM, the same as last month, helped by gas prices being down -8% since October. For core, the consensus is at +0.3% MoM (last month +0.23%). All these estimates would lead YoY to be 3.1% (-0.1pp) for the headline and 4.0% (unch) for core. For core, that would push the 3m and 6m annualized rate down one-tenth and three-tenths respectively to 3.3% and 2.8%. If accurate, this would be the first time that the 6m measure has been below 3% for since March 2021 .

That will then set up the FOMC the following day and it will be interesting to see how Powell and the committee play it. Markets have got way ahead of the Fed in terms of pricing cuts for next year, so do they try to rein them in or acknowledge the direction of travel? The Fed is still likely to be more of a slow oil tanker than a speedboat but will probably acknowledge that barring a unexpected surprise, the hiking cycle is over but will conclude that it’s premature to talk about cuts at the moment. The dot plot will likely show 50bps of cuts by YE 24, which would leave the end-2024 dot 25bps lower than it was in September. In its revised Fed preview published late on Sunday, Goldman notes that it too expects the FOMC’s median projection to likewise show two cuts next year, as it did in September, and to show the same 125bp of cuts in 2025 and another 100bp of cuts in 2026 (full note available to pro subs in the usual place).

Central banks will stay in focus on Thursday, since the ECB will be making their latest policy decision that day. DB economists expect them to hold rates, but their preview highlights several factors that might tilt the ECB in a more dovish direction going forward. They now see the central bank cutting rates from April, with a risk of an earlier cut in March. They currently expect 150bps of cuts in 2024. The BoE are also expected to hold on Thursday; ahead of the decision, there will be the labor market data (tomorrow) and the monthly UK GDP report (Wednesday). Finally, DB sees the SNB shifting to a dovish policy bias and expect the first rate cut in March.

Over the weekend, Chinese CPI came in at -0.5% for November, which was below the -0.2% expected and is the biggest year-on-year decline in the CPI for three years. PPI also fell to -3% (vs. -2.8% expected). As a result, Chinese equities are struggling this morning, with the CSI 300 (-0.59%) and the Shanghai Comp (-0.26%) both losing ground. Moreover, the Hang Seng (-1.72%) has continued to underperform, and is currently at a 13-month low, having now lost -18.84% on a YTD basis. That said, other equity indices in Asia have managed to advance, with the KOSPI (+0.12%) posting a modest increase, whilst the Nikkei (+1.47%) has seen a strong bounceback. That comes as investors have downgraded the likelihood of a policy adjustment from the BoJ at next week’s meeting following the previously mentioned BBG report, with markets only pricing an 8% chance that they end their negative interest rate policy (down from a peak of 45% last Thursday) .

Here is a day-by-day calendar of events, courtesy of Deutsche Bank

Monday December 11

• Data: US November NY Fed 1-yr inflation expectations, Japan November PPI, machine tool orders
• Earnings: Oracle
• Auctions: US 3-y ($50bn) and 10-y ($37bn, reopening) Notes

Tuesday December 12

• Data: US November CPI, NFIB small business optimism, monthly budget statement, UK October weekly earnings, November jobless claims change, Japan Q4 Tankan survey, Germany December Zew survey, November wholesale price index, Eurozone December Zew survey
• Central banks: ECB’s Villeroy speaks
• Auctions: US 30-y ($21bn, reopening) Notes

Wednesday December 13

• Data: US November PPI, UK October monthly GDP, trade balance, industrial production, index of services, construction output, Japan October core machine orders, Italy Q3 unemployment rate, Germany October current account balance, Eurozone October industrial production
• Central banks: Fed decision
• Earnings: Adobe, Inditex

Thursday December 14

• Data: US November retail sales, import and export price index, October business inventories, initial jobless claims, Japan October capacity utilization, Canada November existing home sales, October manufacturing sales
• Central banks: ECB decision, BoE decision, SNB decision
• Earnings: Costco, Lennar

Friday December 15

• Data: US, UK, Japan, Germany, France and Eurozone December PMIs, US November industrial production, capacity utilization, December Empire manufacturing index, October total net TIC flows, China November retail sales, industrial production, new home prices, UK December GfK consumer confidence, Japan October Tertiary industry index, Italy October trade balance, general government debt, Eurozone Q3 labour costs, October trade balance, Canada November housing starts, October international securities transactions
• Central banks: China 1-yr MLF rate, ECB’s Vasle, Kazimir, Muller, Scicluna, Simkus and Vujcic speak, BoE’s Ramsden speaks

* * *

Finally, focusing on just the US, Goldman writes that the key releases this week are the CPI report on Tuesday, the PPI report on Wednesday, and the retail sales report on Thursday. The December FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM.

Monday, December 11

• 11:00 AM New York Fed 1-year inflation expectations, November (last 3.6%)

Tuesday, December 12

06:00 AM NFIB Small business optimism, November (consensus 90.7, last 90.7)

• 08:30 AM CPI (mom), November (GS +0.03%, consensus +0.0%, last +0.0%); Core CPI (mom), November (GS +0.27%, consensus +0.3%, last +0.2%); CPI (yoy), November (GS +3.06%, consensus +3.1%, last +3.2%); Core CPI (yoy), November (GS +3.99%, consensus +4.0%, last +4.0%): We estimate a 0.27% increase in November core CPI (mom sa), which would leave the year-on-year rate unchanged at 4.0%. Our forecast reflects a 0.5% drop in apparel prices due to an earlier start to holiday promotions and the weakness in online prices indicated by Adobe’s customer base. We also assume a drop in auto prices (new -0.3%, used -0.9%), as dealer incentives more than fully rebounded post the UAW strike and used car auction prices have continued to decline. We also look for deceleration in car insurance rates (we assume +1.1%), as premiums have nearly caught up to repair and replacement costs. On the positive side, we estimate a 4% rebound in airfares based on higher webfares ahead of the holidays. We expect a similar pace of shelter inflation as in October (we estimate +0.46% for rent and +0.42% for OER), reflecting a slowdown in rent growth and a more normal rent-OER gap, following recent volatility. We estimate a 0.03% rise in headline CPI, reflecting lower energy (-3.2%) and higher food (+0.3%) prices.

Wednesday, December 13

• 08:30 AM PPI final demand, November (GS +0.2%, consensus flat, last -0.5%); PPI ex-food and energy, November (GS +0.2%, consensus +0.2%, last flat); PPI ex-food, energy, and trade, November (GS +0.2%, consensus +0.2%, last +0.1%)
• 02:00 PM FOMC statement, December 12-13 meeting: As discussed in our FOMC preview, we expect the FOMC’s median projection to show two cuts next year and to show the same 125bp of cuts in 2025 and another 100bp of cuts in 2026. We expect the neutral rate dot to rise from 2.5% to 2.56% (the midpoint of 2.5% and 2.625%), in part because even those participants who think that neutral is now higher might in some cases express that view not by raising their longer-run dot but by concluding that the short-run neutral rate is higher than the longer-run rate, as Chair Powell suggested in September. We expect the economic projections to reflect the better inflation news and continued resilience of the economy, with a small upward revision to 2024 GDP growth (+0.1pp to 1.6%), a small downward revision to the peak unemployment rate (-0.1pp to 4.0%), and a slightly lower core PCE inflation path (-0.1pp to 2.5% in 2024 and 2.2% in 2025).

Thursday, December 14

• 08:30 AM Retail sales, November (GS -0.5%, consensus -0.1%, last -0.1%); Retail sales ex-auto, November (GS -0.5%, consensus -0.1%, last +0.1%); Retail sales ex-auto & gas, November (GS -0.1%, consensus +0.2%, last +0.1%); Core retail sales, November (GS -0.1%, consensus +0.2%, last +0.2%): We estimate core retail sales declined 0.1% in November (ex-autos, gasoline, and building materials; mom sa). Our forecast reflects a 0.4% rise in nonstore sales based on solid online spending across Adobe’s customer base. However, we expect this sequential increase to be more than offset by weakness in brick and mortar categories (70% of retail control), based on Fiserv credit card and Redbook department store data. We also assume a 0.1pp drag on retail control growth from the winddown of covid vaccine boosters (one tenth of the population received shots in September and October). We also view seasonality as a negative factor this month, as discussed in more detail here. We estimate a 0.5% drop in headline retail sales, reflecting lower gas prices and a drop in auto and restaurant sales.
• 08:30 AM Initial jobless claims, week ended December 9 (GS 215k, consensus 221k, last 220k); Continuing jobless claims, week ended December 2 (GS 1,890k, consensus 1,876k, last 1,861k): We estimate that initial jobless claims declined to 215k. We estimate that continuing claims rebounded to 1,890k, reflecting continued upward pressure from seasonal distortions.
• 08:30 AM Import price index, November (consensus -1.0%, last -0.8%); Export price index, November (consensus -0.8%, last -1.1%)
• 10:00 AM Business inventories, October (consensus flat, last +0.4%)

Friday, December 15

• 08:30 AM Empire manufacturing index, December (consensus 2.0, last 9.1)
• 09:15 AM Industrial production, November (GS flat, consensus +0.3%, last -0.6%); Manufacturing production, November (GS +0.1%, consensus +0.5%, last -0.7%); Capacity utilization, November (GS 78.8%, consensus 79.1%, last 78.9%): We estimate industrial production was flat, as strong natural gas and electricity production balanced weak mining production. We estimate capacity utilization declined to 78.8%.
• 09:45 AM S&P Global US manufacturing PMI, December preliminary (consensus 49.3, last 49.4): S&P Global US services PMI, December preliminary (consensus 50.7, last 50.8)

Source: DB, Goldman, BofA

Via SchiffGold.com,

According to the latest non-farm payroll report from the Bureau of Labor Statistics (BLS) the US economy added 199,000 new jobs in November and the unemployment rate dropped to 3.7%. This was widely viewed as a “strong” jobs report. According to one mainstream analyst, the November employment data “portrays an economy that is easing toward a soft landing and is not on the brink of a recession.”

Peter Schiff wasn’t as impressed. He called it “just another hyped-up jobs report.”

The mainstream is treating this as a “just right” jobs report. It wasn’t strong enough to scare the Federal Reserve into hiking rates. On the other hand, it was not weak enough to raise recession worries. Peter called it a “Goldilocks fairytale.”

Wall Street likes to pretend that everything is Goldilocks, but they forget how the story ends when the bears come back. But the bears are going to come and they’re going to eat Goldilocks’s porridge or Goldilocks.”

Despite all the hype, Peter said, “This is not a good number.”

But there was plenty of hype. The stock market closed up. The dollar ended up on the week. About the only thing that got whacked was gold. It got hammered down to just under $2,000 before recovering to slightly above that level. As Peter mentioned in his previous podcast, $2,000 appears to be the new support level, but he said gold could slide a little further on Monday and Tuesday.

Now, we might not. We might jump up. I don’t think there’s enough downside risk here for anybody to be concerned. … I would be more concerned about missing the upside than trying to buy the absolute bottom of a correction.”

Peter pointed out that the ADP private payroll data released earlier in the week came out worse than expected. So, who are you going to believe?

The estimate for the ADP report was 123,000 new private sector jobs and the number came in at 103,000. Inside that number, the economy lost 15,000 manufacturing jobs.

Those are good jobs. Those are the productive jobs that we need, and they have higher pay. Probably, the people who lost those manufacturing jobs, well, maybe they got a couple of part-time jobs working in a restaurant or in a hotel, or doing something to replace the paycheck that they lost. But they need two or three jobs, and that’s the story of this so-called strong labor market — people replacing good jobs with multiple bad jobs.”

The ADP report also showed a drop in leisure and hospitality jobs. That sector has driven recent job growth.

That set the stage for the BLS report and probably made people think it was going to be disappointing.

It’s important to point out that the BLS revised down the prior two months by about 35,000 jobs. In fact, the agency has revised every report this year down after the fact except for one.

So, to take this month at face value, because we beat by 19,000 jobs, and say, ‘Hey look! We created more jobs than we thought.’ — It’s very likely that by next month, they’re going to revise this month’s number lower. And so, it wouldn’t have been a beat. It would have been a miss. But no one’s going to care because they’re going to be focusing on the December number, which may be another beat that gets revised to a miss in January that nobody cares about because everybody forgot about December and now they’re looking at January.”

Of the 199,000 jobs the BLS claims the economy created, about 24% were auto workers and motion picture workers returning to their jobs after strikes.

Were these jobs really created? No. The jobs were there. It’s just that the people who had the jobs were on the picket lines instead of the production lines or whatever they’re doing in motion pictures.”

Of the rest of the jobs, 82% were in the healthcare and government sectors.

We don’t want government jobs! First of all, where is the government getting the money to pay all of these workers? They’re borrowing it! … These are not productive jobs. What are these government workers going to do with their paychecks? Well, thet’re going to buy stuff that they didn’t help produce and push up the price.

And there is a limit on how many healthcare workers the economy can support.

Healthcare is already bloated. We already spend way too much money. You know, a lot of the health care workers are just handling paperwork that has to do with insurance. And we have an excess amount of insurance because we have an excess amount of government involvement.”

The manufacturing sector reported a 28,000 job gain. But 30,000 auto workers returned to work. In other words, the economy shed 2,000 manufacturing jobs.

The government numbers reported an additional 40,000 jobs in leisure and hospitality. The ADP reported a loss in this job category.

They’re talking about the same month. They can’t both be right. And neither of them are probably right. That’s why these numbers don’t even mean anything. That is the whole point.”

And yet so many people spend so much time and energy obsessing over these numbers.

Of course, the government wants to give you good news. So, it’s not a big surprise when the government gives you good news. The whole thing is rigged anyway. The media, the government, it’s all a bunch of propaganda.”

Peter pointed out that most of the people fixated on the jobs numbers don’t understand what’s going in in the broader economy.

None of these numbers are going to matter when we have a huge crisis and all of a sudden it hits the fan. We basically started a financial crisis in March. And if the Fed hadn’t made the mistake of backstopping the whole thing and kicking the can down the road, who knows where we’d be right now.

US equity futures are flat while global markets posted only modest moves at the start of a busy week of economic data and central bank meetings that will test optimism among investors that interest rates will soon head lower. As of 7:55am ET, S&P500 futures contracts fell just under 0.1%, off the session’s lows, while Nasdaq futures were also modestly lower. The dollar is higher, while 10Y yields are rapidly reversing all recent declines and up again on Monday, hitting a 1-week high of 4.28%; in commodities oil is recovering from the market’s longest weekly losing streak in five years while crypto tokens are swinging violently as Bitcoin drops back toward $40,000. Keep an eye on retailers following the weekend news of an LBO bid for Macy’s: XRT is up almost 16% from its Oct lows and sits about 11% from its 52-week high. Today’s macro data focus is the Fed’s 1-year inflation expectation; it may reflect similar optimism as the Univ of Michigan data which saw 1-year expectations fall from 4.5% to 3.1%.

In premarket trading, cryptocurrency-linked stocks fall on Monday as Bitcoin extends losses for a third consecutive session, its longest losing streak this month. Hive Digital Technologies -7.6%, Cipher Mining -4.1%, Terawulf -7.1%, Bitfarms -6.6%, Cleanspark -5.0%, Marathon Digital -5.0%, Riot Platforms -4.7%, Hut 8 Mining -4.8%, Coinbase Global -3.3% and MicroStrategy -3.2%. Macy’s jumped 22% on reports it had receives a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management. Occidental Petroleum dropped after reaching a deal to acquire Texas shale driller CrownRock for about $12 billion. Nike, Snap and Pinterest all rose after analyst upgrades. Here are some other notable premarket movers:

• Cigna shares rise 12% after the US insurer’s plans of an additional $10 billion in buyback after calling off its pursuit of Humana Inc. Analysts were positive on Cigna’s decision and Jefferies upgraded its rating on the stock.
• DoorDash and MongoDB shares rise as the stocks are set to be added to the tech-heavy benchmark Nasdaq 100 Index, among other names. DoorDash +2.0%, MongoDB +1.8%
• HP Inc. shares jump 1.8% as Evercore ISI lifts its recommendation on the computer maker to outperform from inline, citing an expected recovery in the PC market in 2024.
• Pinterest shares rise 3.5% after the social media company is upgraded to outperform from sector perform at RBC Capital Markets on its potential to benefit as it develops ways to better capture the impulse spending chunk of digital advertising.
• Sea ADRs slump 8.9% after ByteDance’s TikTok agreed to combine its Indonesian e-commerce business with GoTo’s Tokopedia and take control of the merged operation, fueling concerns over increased competition for the online market place.
• Alibaba ADRs fall 2.0%; the Chinese internet company owns Lazada, another e-commerce platform that operates in Indonesia. Alibaba’s international e-commerce arm, which includes Lazada, was the company’s fastest-growing unit in quarter ending September.
• Snap shares rise 5.1% after the maker of the Snapchat app is upgraded to overweight from equal-weight at Wells Fargo, with a new Street-high price target. Analysts see a positive growth inflection for Snap as efforts to revamp its advertising business bear fruit.
• Stellantis shares fall 0.3% after the company received its only sell-equivalent rating as Wells Fargo starts coverage of the automaker at underweight, reflecting its cautious sector stance heading into 2024.

The biggest mover in an otherwise quiet Monday came out of Japan, where the currency plunged 1% as traders dialed back bets that the negative-rate holdout would go into positive territory any time soon. That’s after Bloomberg reported citing “people familiar with the matter” that Bank of Japan officials have yet to see enough evidence of wage growth that would support sustainable inflation, just as we said would happen.

Of course, it will come storming right back after the Nikkei leaks that there will be no BOJ rate hike. https://t.co/GWxBlDSsmf

— zerohedge (@zerohedge) December 7, 2023

The Japanese yen has become the worst performing G10 currency this year. Meanwhile, over in China, much of the conversation has been around the weekend’s worse-than-expected deflation numbers, which have deepened fears around whether Beijing can revive demand in the economy. That’s weighing on the outlook for iron ore. Meanwhile,

As mentioned above, Macy’s received a $5.8 billion buyout offer from Arkhouse Management and Brigade Capital Management. The take-private offer of $21 a share is a bet that the troubled retailer can execute its turnaround better away from the scrutiny of public markets. The shares are surging as much 22% in pre-market trading. One deal that’s fallen apart is Cigna’s mega combination with Humana — a deal that would have been one of the largest of the decade. Cigna is walking away from talks after struggling to agree on a price, particularly after a drop in Cigna’s shares. The insurer now plans  a “significant” increase of its stock buybacks, according to a statement on Sunday where it refrained from mentioning the talks with Humana.

Deals aside, it is shaping up as a busy week with traders looking ahead to US inflation figures on Tuesday, a Federal Reserve policy decision Wednesday and retail sales numbers Thursday. Policy decisions at the European Central Bank and Bank of England add to a crowded calendar.

“This should also be the last busy week for the year after which we enter into the holiday illiquidity period,” said Mohit Kumar, chief European economist at Jefferies International. “Even though central banks are likely to push back on rate cuts, we do not see a sharp rise in rates which would derail the upward momentum.”

Oppenheimer CIO John Stoltzfus on Monday joined Fundstrat Global Advisors LLC’s Tom Lee in making the most bullish forecast, predicting a record high of 5,200 points for the US benchmark by the end of 2024. That’s about 13% higher than current levels. A Citigroup Inc. team led by Scott Chronert sees the gauge climbing to around 5,100.

Mark Haefele, chief investment officer at UBS Global Wealth Management, is among those who are more cautious. “US economic data will need to walk a fine line in the coming months to sustain the recent rally,” he said. “While we expect stocks to sustain recent gains and advance modestly higher in 2024, equity markets are already pricing in plenty of good news.” He sees the S&P 500 ending 2024 at 4,700. As a reminder, Wall Street analysts’ forecasts for the coming year are virtually always wrong.

European stocks are little changed, hovering near their highest since February 2022. Industrial, construction and media shares outperform while food & beverage names fall. Here are some of the biggest movers on Monday:

• Schibsted gains as much as 17% after the Norwegian classified advertising and media firm entered a non-binding agreement to sell its news operations to its largest shareholder, a deal described by an analyst as “healthy financially”
• BioArctic rises as much as 16%, hitting a two-month high, after Goldman Sachs initiated coverage on the Swedish biopharma company with a buy rating, calling it “very strongly positioned”
• MorphoSys gains as much as 15% after the German biotech firm said a late-stage study showed its pelabresib drug in combination with ruxolitinib improved all four hallmarks of myelofibrosis
• Ionos shares gain as much as 5.3% after JPMorgan raised its rating on the webhosting firm to overweight, citing signs of stabilization in the cloud industry and potential pricing upside
• ITM Power rises as much as 7.5% after signing a capacity reservation agreement with a subsidiary of Shell. Analysts welcomed the news and said it validates ITM’s technology
• Encavis shares fall as much as 7.1% after Morgan Stanley cut the utilities firm to underweight within its relative rating system.
• Lonza shares fall as much as 4.1% as RBC double-downgraded the Swiss pharmaceutical supplier to underperform, giving the stock its only negative analyst rating. The lack of growth guidance at Lonza’s recent CMD means the broker’s “confidence is knocked”
• Encavis falls as much as 7.1%, ERG drops as much as 4.6% and Endesa slides as much as 1% as Morgan Stanley cuts the European utilities to underweight within its relative rating system

Earlier in the session,  Asian stocks extended declines led by weakness in China following Friday’s Politburo meeting and deflation fears. Japanese stocks rallied, tracking gains in the US last week. The MSCI Asia Pacific Index fell as much as 0.4%, with Alibaba, Tencent and Meituan among the biggest drags. Hong Kong-listed China stocks led the declines, followed by those in the mainland after worse-than-expected inflation data over the weekend and some disappointment over a Politburo meeting. The Philippines benchmark also declined.

• Hang Seng and Shanghai Comp were pressured amid weakness in tech and property, while the data over the weekend showed a larger-than-expected decline in China’s consumer inflation and factory gate prices which suggests weak domestic demand.
• Nikkei 225 gained following a pushback on recent BoJ speculation in which a source report on Friday noted recent comments by BoJ Governor Ueda were taken out of context and there was no intention to signal anything about the timing for a policy change.
• Australia’s ASX 200 just about kept afloat as outperformance in the energy sector atoned for the lacklustre mood in metal miners and tech.
• India stocks closed at a new high as sentiment remained upbeat amid buying from foreign investors and strong economic growth. The S&P BSE Sensex rose 0.1% to 69,928.53 in Mumbai, while the NSE Nifty 50 Index advanced by a similar magnitude. The MSCI Asia Pacific Index was down 0.1%. Gains in the benchmarks were driven by index heavyweights ICICI Bank, ITC and TCS. Resumptions of buying by global funds since beginning of November have driven local shares to record high with net purchases by the cohort surging to over $5 billion in that period.

“Downward momentum is still intact, because there is a gap between the policy and the execution, which is hindering its efficacy, thus no helping to turnaround confidence,” said Raymond Chen, fund manager at ZiZhou Investment Asset management. “With the pessimism prevailing, any negative such as the CPI drop will lead to further losses.”

In FX, the Japanese yen extended declines on reports the Bank of Japan see little need to rush into scrapping negative rates. USD/JPY rises over 1% to trade around 146.50. The Bloomberg Dollar Spot Index rose 0.1%.

In rates, treasuries declined, pushing US 10-year yields up 4bp to 4.27%, extending an 8 bps rise Friday on a stronger-than-expected US jobs report. Swaps traders scaled back bets on how much the Fed will cut rates next year, pricing in about 110 bps of easing, down from more than 120 bps. US inflation data is due Tuesday followed by the Federal Reserve’s policy meeting Wednesday and retail sales numbers Thursday.

In commodities, oil prices reversed an earlier gain to trade lower. WTI falls 0.8% to trade near $70.60. Spot gold is down 0.6%. Bitcoin drops 3.2%.

It is a busy week, with several central banks announcing their last decision for 2023 as well as CPI and retail sales data in the US, not to mention a triple witching opex this friday, but the US Calendar is relatively quiet to start the week with just the NY Fed consumer survey’s 1-Yr Inflation Expectations on deck.

Market Snapshot

• S&P 500 futures little changed at 4,608.50
• MXAP down 0.1% to 160.91
• MXAPJ down 0.3% to 499.39
• Nikkei up 1.5% to 32,791.80
• Topix up 1.5% to 2,358.55
• Hang Seng Index down 0.8% to 16,201.49
• Shanghai Composite up 0.7% to 2,991.44
• Sensex up 0.2% to 69,942.05
• Australia S&P/ASX 200 little changed at 7,199.04
• Kospi up 0.3% to 2,525.36
• STOXX Europe 600 little changed at 472.70
• German 10Y yield little changed at 2.26%
• Euro little changed at $1.0763
• Brent Futures little changed at $75.85/bbl
• Gold spot down 0.5% to $1,994.02
• US Dollar Index little changed at 104.10

Top Overnight News

• China’s consumer prices fell 0.5% year on year in November, the sharpest decline in three years as the world’s second-largest economy grapples with worsening deflation. Consumer prices dropped by more than the 0.2% decline forecast by a Bloomberg survey of economists and exceeded October’s fall of 0.2%. FT
• China’s state health insurance system has lost tens of millions of subscribers, as higher costs have put one of the world’s largest healthcare schemes out of reach for many people already struggling in a post-pandemic economic downturn. FT
• BOJ officials see little need to rush into scrapping the world’s last negative interest rate this month as they have yet to see enough evidence of wage growth that would support sustainable inflation, according to people familiar with the matter. BBG
• Israel’s national security adviser has warned that Israel “can no longer accept” the presence of Hizbollah forces on its northern border, and said it will have to “act” if they continue to pose a threat. Tensions between Israel and the powerful Iran-backed Lebanese militant group have been running high since the war between Israel and Hamas erupted two months ago, with repeated bouts of cross-border fire. FT
• Supply-chain constraints have eased and manufacturers’ staffing has improved, executives and economists say, helping get production lines humming again and helping push down prices. Overall, prices for durable goods—long-lasting items such as consumer electronics—have fallen on a year-over-year basis for five straight months, according to the Commerce Department. For some product categories such as televisions, prices are lower now than before the pandemic, according to Circana, a firm that tracks consumer goods. Grocery and clothing prices have continued to move higher, the Commerce Department data show. WSJ
• Recent inflation data have been an encouraging surprise even to our optimistic expectations, and our forecast path for year-on-year core PCE inflation has fallen somewhat as a result. Healthy growth and labor market data suggest that insurance cuts are not imminent, and with core CPI likely to print near 27bp on Tuesday and wage growth still too high we do not think that normalization cuts in response to a decline in inflation are either. But the better inflation news does suggest that normalization cuts could come a bit earlier than our previous forecast of 2024Q4. We are therefore pulling our forecast of the first cut forward to 2024Q3. GIR
• OpenAI leaders warned of abusive behavior before Sam Altman’s ouster. The senior employees described Altman as psychologically abusive, creating chaos at the artificial-intelligence start-up — complaints that were a major factor in the board’s abrupt decision to fire the CEO. WaPo
• Google’s new Gemini AI model is getting a mixed reception after its big debut, but users may have less confidence in the company’s tech or integrity after finding out that the most impressive demo of Gemini was pretty much faked. Tech Crunch
• Cigna abandoned its pursuit of a tie-up with Humana that would have created a roughly $140 billion giant in the health-insurance industry (CI instead will add $10B to its buyback authorization, taking the total to $11.3B). WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed after recent data releases including stronger-than-expected jobs data from the US and worsening deflation in China, while this week’s upcoming risk events, including US CPI data and a slew of central bank updates, added to the cautious mood. ASX 200 just about kept afloat as outperformance in the energy sector atoned for the lacklustre mood in metal miners and tech. Nikkei 225 gained following a pushback on recent BoJ speculation in which a source report on Friday noted recent comments by BoJ Governor Ueda were taken out of context and there was  no intention to signal anything about the timing for a policy change. Hang Seng and Shanghai Comp were pressured amid weakness in tech and property, while the data over the weekend showed a larger-than-expected decline in China’s consumer inflation and factory gate prices which suggests weak domestic demand. US equity futures were lacklustre was participants braced for the looming risk events. European equity futures are indicative of a flat/firmer open with Euro Stoxx 50 future +0.1% after the cash market closed up 1.1% on Friday.

Top Asian News

• China’s Industry Minister met with the Saudi Investment Minister and said that China is willing to cooperate with Saudi Arabia on new energy vehicles, aviation, photovoltaics and AI, according to Reuters.
• Japanese PM Kishida plans to replace Industry Minister Nishimura, Chief Cabinet Secretary Matsuno and ruling party policy chief Haguida, while it was later reported that PM Kishida said he wants to consider appropriate measures at an appropriate time when asked about a cabinet reshuffle, according to Reuters.
• China’s Industry Ministry says over 90% of existing NEV models would continue to enjoy purchase tax breaks as part of new technical requirements

European equities are mixed, Eurostoxx50 (U/C) with the FTSE 100 (-0.4%) the clear underperformer, hampered by losses in Basic Resources after Chinese inflation metrics on Saturday, which showed deeper deflation in both CPI and PPI. European sectors are mixed with the breadth of the market to the upside fairly narrow. Healthcare is lifted by Roche (+3.2%). US equity futures are flat/mixed, with markets ultimately lacking direction as markets await US CPI tomorrow ahead of the FOMC meeting on Wednesday; NQ (-0.2%) marginally lags with fresh fundamentals light.

Top European News

• A split within the UK government regarding migration policy widened as PM Sunak braces for a crucial week ahead which includes a vote on the Rwanda bill and a grilling in the UK Covid inquiry, according to FT.
• Goldman Sachs sees the first BoE rate cut in August 2024, with the pace of reductions faster than previously forecast, according to Bloomberg.
• Public sector workers in Germany’s federal states agreed on a wage deal with employers, according to Reuters citing the Verdi union.
• German government spokesperson says budget talks are at an advance stage, have cleared many issues

FX

• DXY is off to a strong start to the week, with the index holding above 104.00 for most of the European session after edging higher from a 103.92 APAC low, before seeing a boost via JPY weakness following BoJ sources.
• The JPY is the marked laggard this morning following reports that the BoJ is said to see little need to end negative rates in December, according to Bloomberg citing sources; which took USD/JPY to a 146.45 peak.
• GBP & EUR stand as the very modest G10 outperformers, with specifics light ahead of their policy announcements on Thursday.
• AUD, NZD, CAD are also modestly softer but to varying degrees amid the overall cautious mood in markets, whilst the Antipodeans feel some headwinds from Chinese inflation data.
• BoJ said to see little need to end negative rates in December, via Bloomberg citing sources; intends to come to a decision based on data up to the last minute. Lacks proof of sustainable inflation. Not yet seen sufficient evidence of wage growth which would support sustainable inflation; officials view the potential cost of waiting for more data as not very high.
• PBoC set USD/CNY mid-point at 7.1163 vs exp. 7.1690 (prev. 7.1123).

Fixed Income

• Core benchmarks began the morning under modest pressure, with catalysts in European hours somewhat limited initially and the follow-through from Chinese deflation dissipating and only a short-lived boost from BoJ sources.
• USTs are contained, but with a slight negative bias and modest upside at the short end of the curve – action which occurs without US-specific catalysts, but with participants cognisant of early US supply given Wednesday’s FOMC.
• Bunds are holding around 134.70 with nothing specific on the agenda today but domestic participants are focused on German fiscal talks as weekend negotiations on the 2024 budget ended without agreement.
• Once again, Gilts are the standout laggard as expectations continue to trim from dovish extremes ahead of Thursday’s BoE announcement.

Commodities

• WTI and Brent futures edged higher overnight with the momentum somewhat petering out in early European hours, despite a lack of pertinent newsflow. As such, benchmarks are now in the red by circa. USD 0.50/bbl, but well within recent parameters.
• Spot gold is on a softer footing amid a firmer Dollar and in a week littered with G10 central bank events; base metals are mixed amid the broader cautious tone coupled with the downbeat Chinese inflation data over the weekend.
• OPEC Secretary General Al-Ghais said at COP28 that they need an all-energies and all-technologies approach, while he added that realistic approaches are needed to tackle emissions, according to Reuters.
• UN climate chief Stiell said at COP28 that the areas where options need negotiating have narrowed and they must clear blockages to get a deal, while Stiell added everything is on the table and everyone is focused on getting an outcome in the next 24 hours.
• Sellers of sanctioned oil from Iran and Russia are said to be hiking prices to China after Venezuelan crude spiked following the suspension of US sanctions, according to trade sources cited by Reuters

Geopolitics: Israel/Hamas/Middle East

• Israeli PM Netanyahu said Israel will continue the war to eliminate Hamas and achieve its objectives, while he added that countries cannot both support Israel’s elimination of Hamas whilst pressing it to end the Gaza war prematurely, according to Reuters.
• Israeli PM Netanyahu spoke with Russian President Putin on Sunday and voiced disapproval of Russian statements against Israel at the UN and Russia’s dangerous cooperation with Iran, while he also told Putin that any country would have responded as Israel has to the Hamas attack, according to Reuters.
• Israel’s National Security Adviser Hanegbi suggested Israel may have to go to war against Hezbollah once Hamas is defeated and said it could no longer dare to tolerate the danger of the prevailing situation in the north with Hezbollah’s forces at the border, according to The Times of Israel.
• Al Jazeera reported heavy Israeli raids and artillery shelling on Khan Younis in the southern Gaza Strip, via social media platform X.
• Israeli national security advisor says the country ‘can no longer accept’ Hezbollah’s presence on the northern border, according to The Spectator Index.
• Hezbollah lawmaker Fadallah said Israeli air strikes in south Lebanon mark a new escalation and Israeli escalation will not deter Hezbollah from continuing to defend Lebanon and supporting Gaza. Furthermore, Hezbollah is said to be responding to Israeli escalation with new types of attacks whether in the nature of weapons or targeted sites, according to Reuters.
• US Secretary of State Blinken said it is imperative that Israeli military operations protect Palestinian civilians and that durable, sustainable peace must follow the military operations. Blinken also said durable peace must lead to a Palestinian state, according to CNN.
• Qatar’s PM said talks for a fresh Gaza pause are ongoing and Qatar will continue to pressure Israel and Hamas to continue a truce despite narrowing chances, while he added that the entire generation in the Middle East is at risk of being radicalised because of the Gaza war.
• Yemen’s Houthi military spokesman said they warn all shipping companies against cooperating with Israel and said if Gaza does not receive the food and medicine it needs, all ships in the Red Sea bound for Israel ports will become a target for their armed forces regardless of their nationality, according to Reuters.
• Jordan’s Foreign Minister said Israel is implementing a systematic policy to push Gazans out of the enclave beyond eliminating Hamas, while an Israeli government spokesperson called Jordan’s allegation that Israel wants to expel Gazans ’outrageous and false’.
• UN General Assembly is likely to vote on Tuesday on demanding an immediate humanitarian ceasefire in Gaza, according to diplomats cited by Reuters.
• Iraqi Kataeb Hezbollah militia said jihad operations against US forces will continue until the last US soldiers exit Iraq, while the Iran-aligned group added that an attack on US interests on Friday was just the beginning of a new engagement although they didn’t claim responsibility for the attack.
• Syria’s air defence intercepted Israeli rockets fired on Damascus surroundings, according to state media.
• A Swede jailed in Iran faces charges of acts against national security and spying for Israel, while the Swede also faces the charge of corruption on earth which can carry the death penalty, according to ISNA news agency.

Geopolitics: Other

• US President Biden invited Ukrainian President Zelensky to the White House for a meeting on Tuesday and Zelensky was also invited to address US Senators on Tuesday at 14:00GMT/09:00EST, while Zelensky’s office said he will concentrate on defence cooperation and unity in his US visit, according to Reuters.
• Russian Foreign Minister Lavrov said the West’s 500-year domination of the world is coming to an and that the West has ignored everything that happened in Ukraine before February 2022, while he added that Russia has become stronger due to the conflict in Ukraine.
• Philippines Coast Guard said supply vessels were water cannoned and rammed by Chinese Coast Guard vessels in the South China Sea. Furthermore, Philippines President Marcos said aggression and provocations by China’s coastguard and maritime militia have only further steeled determination to defend and protect the nation’s sovereignty, while Philippines Foreign Ministry spokesperson said they are utilising all forms of diplomatic actions available and the Chinese ambassador had been summoned, according to Reuters.
• US State Department said China interfered with lawful Philippine maritime operations and China has no lawful maritime claims to waters around the Second Thomas Shoal. US State Department said it stands with Philippine allies in the face of these dangerous and unlawful actions, as well as reaffirmed Article IV of the 1951 US-Philippines Defense Treaty.
• China’s Coast Guard said Japanese ships intruded into the territorial waters of the Senkaku/Diaoyu Islands on December 9th.
• White House National Security Adviser Sullivan travelled to South Korea to meet with Japanese and South Korean counterparts and had an extended discussion on deepening ties between Russia and North Korea, while the US has confidence shared by Japan and South Korea that North Korea is supplying weapons to Russia being used in the battlefield in Ukraine. Sullivan also commented that North Korea is irresponsible to walk away from the inter-Korean agreement and that the US and South Korea are preparing for all scenarios. Furthermore, it was reported that the US, Japan and South Korea reached an agreement on expanding their security partnership, according to Reuters.
• A US fighter jet crashed in South Korea during drills, while North Korea denounced South Korea and the US for staging joint military drills and called it a “futile” provocative act that will only hasten the South’s destruction, according to Yonhap.

US Event Calendar

• 11:00: Nov. NY Fed 1-Yr Inflation Expectations, prior 3.57%

DB’s Jim Reid concludes the overnight wrap

In the first half of my career, this week would have been a full week of client Xmas lunches that would have started around midday and with no fixed end point. That really does feel like a different lifetime ago now. Anyway, I wouldn’t have been very good company this week as I’m currently suffering from ear infections in both ears and I can’t hear a thing out of either side. I’m almost totally deaf. It’s been a bit of a brutal few days with no signs that it’s over yet.

There’ll be no resting place in markets either, as it’s hard to see how the week could be much busier given we have the following highlights. Today sees a 3yr and 10yr US Treasury auction plus the NY Fed’s Survey of Consumer Expectations. Tomorrow sees the all-important US CPI and a 30yr Treasury auction (after a very bad one last month). Wednesday sees a fascinating FOMC meeting and US PPI. Thursday sees US Retail Sales and policy meetings from the ECB, SNB and BoE. Finally, Friday brings the latest global flash PMIs and China’s main monthly data dump. There are plenty of other releases but these are likely to be the primary market moving events. For a full list, see the day-by-day calendar of events at the end as usual.

It’s a toss up as to whether the FOMC or the US CPI will be the most important event of the week. Given that CPI tomorrow could shape the FOMC, let’s start there. For headline, the consensus thinks we’ll be flat MoM, the same as last month (DB expect +0.07%), helped by gas prices being down -8% since October. For core, the consensus is at +0.3% MoM with DB at +0.27% (last month +0.23%). All these estimates would lead YoY to be 3.1% (-0.1pp) for the headline and 4.0% (unch) for core. For core, that would push the 3m and 6m annualised rate down one-tenth and three-tenths respectively to 3.3% and 2.8%. Our economists point out this would be the first time that the 6m measure has been below 3% for since March 2021 .

That will then set up the FOMC the following day and it will be interesting to see how Powell and the committee play it. Markets have got way ahead of the Fed in terms of pricing cuts for next year, so do they try to rein them in or acknowledge the direction of travel? The Fed is still likely to be more of a slow oil tanker than a speedboat but will probably acknowledge that barring a unexpected surprise, the hiking cycle is over but will conclude that it’s premature to talk about cuts at the moment. The dot plot will likely show 50bps of cuts by YE 24, which would leave the end-2024 dot 25bps lower than it was in September. See our US economist’s preview here, where they go through their expectations for the growth, unemployment and inflation forecasts in the SEP as well.

Central banks will stay in focus on Thursday, since the ECB will be making their latest policy decision that day. Our European economics team expect them to hold rates, but their preview note here highlights several factors that might tilt the ECB in a more dovish direction going forward. They now see the central bank cutting rates from April, with a risk of an earlier cut in March. They currently expect 150bps of cuts in 2024. The BoE are also expected to hold on Thursday with our economist’s preview here. Ahead of the decision, there will be the labour market data (tomorrow) and the monthly UK GDP report (Wednesday). Finally, our strategists see the SNB shifting to a dovish policy bias and expect the first rate cut in March (more here).

Over the weekend, Chinese CPI came in at -0.5% for November, which was below the -0.2% expected and is the biggest year-on-year decline in the CPI for three years. PPI also fell to -3% (vs. -2.8% expected). As a result, Chinese equities are struggling this morning, with the CSI 300 (-0.59%) and the Shanghai Comp (-0.26%) both losing ground. Moreover, the Hang Seng (-1.72%) has continued to underperform, and is currently at a 13-month low, having now lost -18.84% on a YTD basis. That said, other equity indices in Asia have managed to advance, with the KOSPI (+0.12%) posting a modest increase, whilst the Nikkei (+1.47%) has seen a strong bounceback. That comes as i nvestors have downgraded the likelihood of a policy adjustment from the BoJ at next week’s meeting, with markets only pricing an 8% chance that they end their negative interest rate policy (down from a peak of 45% last Thursday) .

Elsewhere, US equity futures are indicating a negative start with those on the S&P 500 (-0.09%) and the NASDAQ 100 (-0.30%) both lower. Meanwhile, yields on the 10yr USTs (+1.5bps) have slightly pulled upwards, standing at 4.24% as we go to print.

Looking back at last week, the S&P 500 posted a 6th consecutive weekly gain for the first time since the pandemic, after US jobs report cemented the soft landing narrative, although it did push back on the growing speculation about rate cuts. The headlines showed nonfarm payrolls were up by +199k (vs +185k expected) and the unemployment rate fell back to 3.7% (vs 3.9% expected). The average hourly earnings did rise to a monthly 0.4% (vs 0.3% expected) for the first time since July however, so that’ll be one to keep an eye on in terms of its implications for inflation. Nevertheless, there was more good inflation news on Friday from the University of Michigan’s survey for December. It showed both 1yr and 5-10yr inflation expectations surprising to the downside, falling to 3.1% (vs 4.3% expected) and 2.8% (vs 3.1% expected) respectively.

That resilience in the jobs report was very positive for risk assets, helping the S&P 500 to rise +0.41% on Friday, and leaving the index with a 6th consecutive weekly advance, with a +0.21% gain. The NASADQ just outperformed over the week, up +0.69% (and +0.45% on Friday), led by megacap tech stocks. In the meantime, US HY spreads tightened for a 7th consecutive week, falling -14bps (-4bps Friday) to their tightest level in over 18 months, at 360bps .

One effect of the jobs report was it raised the bar for a dovish pivot by the Fed, and expectations for rate cuts next year were dialled back. For instance, Fed funds futures pared back the cuts expected by the December 2024 meeting to 111bps, down from 134bps at the beginning of the week (and 125bps as of Thursday). In turn, that helped US 10yr Treasury yields jump +7.7bps on Friday, erasing their earlier declines to finish the week up +3.0bps. 2 yr yields saw the larger rise, up +18.2bps on the week (and +12.5bps on Friday), whilst the 30yr yield was up +4.8bps on Friday but were down -8.5bps over the five days. So a sizeable curve inversion playing out as investors remain more sanguine on long-term inflation prospects, but with data questioning the prospects for imminent cuts. And as investors priced out cuts for next year, the US Dollar index also rallied +0.45% on Friday, and +0.72% on the week .

Over in Europe, sovereign bonds followed the US market on Friday, with 10yr bund yields up +8.6bps but down -8.5bps for the week. There were several milestones for equities too, and the German DAX hit another record high, up +2.21% on the week (+0.78% on Friday), as a more sanguine inflation outlook continues to support investor sentiment. The STOXX 600 rose +1.30% last week (+0.74% on Friday).

In Japan, speculation mounted last week that the BoJ could soon be ending its negative interest rate policy following recent comments from central bank officials. That helped the Japanese yen strengthened +1.29% against the US dollar last week, although it trimmed those gains on Friday (-1.16%) as that speculation diminished again. The Nikkei fell -3.36% last week, and -1.68% on Friday, with matters not helped by weak growth data that showed that GDP contracted at an annualised pace of -2.9% in Q3.

Finally in commodities, oil gained on Friday, with the broader risk-on sentiment added to by news of the US government purchasing another 3m barrels for the Strategic Petroleum Reserve and by calls from Russia and Saudi Arabia on all OPEC+ members to join the voluntary cuts announced at the November OPEC+ meeting. Brent climbed +2.42% on Friday to $75.84/bbl, but still posted a 7th consecutive weekly decline (-3.85%) as supply remains strong and scepticism remained over the nature of the OPEC+ voluntary cuts. WTI crude rose +2.73% on Friday to $71.23/bbl (but was -3.83% on the week).

The decade-long nuclear winter is thawing in Japan after the 2011 Fukushima disaster froze the country’s nuclear power industry. Now, government authorities are taking steps to restart nuclear power plants. 

Bloomberg reports Tokyo Electric Power Co. shares jumped 14.6% on Monday, closing at the highest levels since 2015. Shares are up more than 41% since late November. The reason for all this optimism comes as Japan’s Nuclear Regulation Authority recently stated it will make a final decision on restarting the utility’s Kashiwazaki Kariwa nuclear power plant.

Before the nuclear regulatory authority can decide, an on-site inspection by officials and a meeting with Tepco’s president are necessary. The head of the agency said last week that a decision about Kashiwazaki Kariwa could come as early as the end of the year. 

“This is the clearest signal yet that the regulator could soon reverse the order, which it implemented in 2021 after serious security missteps were found at the facility,” Bloomberg said last week. 

As energy costs from fossil fuels surge, Japan’s reassessment of its nuclear power policies, following over a decade of stagnation since the Fukushima incident, has been reassessed: 

• In Stunning Post-Fukushima Shift, Japan To Build More Nuclear Power Plants
• Post-Fukushima Shift: Political And Public Support Rises In Japan For More Nuclear Plants
• Global Energy Crisis Forces Japan To U-Turn On Its Nuclear Policy
• Japan’s Government Adopts Nuclear Energy Policy In Major Turnaround Amid Energy Crisis
• Post-Fukushima Shift: Japan Court Rejects Citizens’ Concerns, Paving Way For Nuclear Power Restart

Meanwhile… 

• US Joins 21 Other Countries In Pledge To Triple Nuclear Energy Capacity By 2050

Also, the price of yellowcake – uranium concentrate used in nuclear generation – recently hit a 15-year high. Demand for a ‘green future’ will only be achievable with a nuclear power generation mix. 

Since we first recommended uranium stocks in December 2020, in a note titled “Buy Uranium: Is This The Beginning Of The Next ESG Craze,” uranium prices have soared 173%.

The future is bright – and if climate change alarmists want to power the new green economies – they must do so with a combination of nuclear because solar and wind are unreliable. 

By Marcel Kasumovich, Deputy CIO, Coinbase Asset Management

Can bitcoin play the role of digital gold in diversification from the US dollar? Absolutely. But it must first overcome image problems – like its carbon footprint. We see bitcoin as a natively green network – part of the solution, not the problem.

* * *

1. Money. “I don’t know what they want from me. It’s like the more money we come across, the more problems we see.” The story is told brilliantly in song. It’s an illusion. The industrialist creates wealth, and the financier money through friction. Gold was an anchor that forced the two to converge. Its success was its failure – hoarding gold in the 1930s led to an untenable monetary tightening. Executive Order 6102 made it illegal, and government paper followed.

2. As the gold shackles on paper money fell away, US dollar dominance emerged tethered only to credible policy. Now, imbalances cast doubt about that dominance. The US took cheap financing from foreigners to propel global growth. All was smooth – until this cycle. The US net international liability is now running at $18 trillion, a staggering sum compared to the $3 trillion of annual exports. It’s untenable, the byproduct of fiscal policy gone bad.

3. The world will adjust. A casual glance at history teaches us the end of the US dollar empire is textbook, not an outlier. Drama is driven by our egos, not the facts. Take the Roman Empire. It was the anchor to global trade until deficits with India became untenable. Pilny the Elder, a Roman polymath, observed that “not a year passed in which India did not take fifty million sesterces [silver coins] away from Rome.” Bad fiscal policies made it worse, like the US today.

4. The US dollar isn’t going anywhere. Obviously. Nor is its demise destiny. Policy can respond. But that requires acknowledging the problem. And balance sheets, especially external ones, just don’t rise to the attention of those hunting for election votes. Central banks are buying gold at an unprecedented pace – the hedge of choice. Bitcoin is showcasing its scarcity features. And the world adjusts slowly and steadily towards a new nominal anchor.

5. Can bitcoin be that anchor? Of course. But bitcoin has an image problem. This, too, is textbook. Every disruptive technology looked unattractive at the start. Now, it’s bitcoin’s turn with money – and climate is one of the biggest image issues. Satoshi addressed climate head-on very early. “Bitcoin generation should end up where it’s cheapest. Maybe that will be in cold climates where there’s electric heat, where it would be essentially free.”

6. That’s the bet – bitcoin is part of the climate solution, not the problem. The image problem is obvious. Bitcoin uses a lot of power to solve an uninteresting problem. That power emits carbon. COP is focused on carbon containment. Bitcoin has no compelling killer application (yet). So why bother? But we should start with the principles of regulatory policy – be agnostic to technology. Bitcoin made its way to the COP28 agenda, a reminder that images evolve.

7. Bitcoin’s evolution is rooted in power markets and its commodity characteristics. What’s the edge for those mining bitcoin? The cheapest feedstock. What is that feedstock? Stranded power. And that’s green energy. Bitcoin mining is flexible to move to any energy source, at any time and any scale. It transforms the narrative of bitcoin from a hazard to a helper. Bitcoin is a figurative battery that transfers energy over time. (No, it won’t run your toaster.)

8. Our carbon-neutral bitcoin shines a bright light on the issue. We evaluate the cross section of energy consumption on the bitcoin network with the geolocation data for power sources to estimate the total carbon emissions. Whether you are active or not, mining provides the security to your holdings and, thus, we neutralize that footprint for each bitcoin. The assumptions are conservative – bitcoin’s migration to green power is far faster than our crude estimates.

9. Transparency is the best disinfectant – and there’s nowhere to hide on the public blockchain. This plays out one of two ways. Power consumption could elevate bitcoin’s carbon footprint at a time when the cost of carbon is surging. It would be a material drag to bitcoin’s carbon-neutral performance because of the negative externality. Or Satoshi could be right and bitcoin miners hunt for the cheapest power, turning the bitcoin into a natively green network.

10. Bitcoin is already marching towards green. Mining has gone from a basement laptop computer consuming power from coal-fired plants to institutional sophistication. Miners use of redundant green power enhances returns on that energy infrastructure. Investment improves. Unlike traditional data centers, bitcoin allows for “controllable loads.” Mining operations can be turned off instantly to provide power back to the grid. It’s not a vision – it’s the standard in Texas.

11. Policy officials heard the message, inviting discussion. We were asked to share our experiences with the carbon market. The identical credit can trade as low as $2 and as high as $50 – growing pains. But the spirit of the carbon market is to price the externality and change behavior, driving power to clean sources. That is only as strong as the cheapest credit to deliver – and a low-cost option is a license to pollute. Regulating supply is the challenge.

12. Our big idea? A global carbon central bank. Policy is attentive to demand for offsets. Best estimates anticipate the voluntary carbon market rising ~15 times by 2030 and ~100 times by 2050 (Figure 1). Regulation of the supply side – that’s the case for a carbon central bank. It’s no different from how a monetary central bank regulates credit. Regional barriers fall away, and operating small projects is practical. Digital rails are ready to execute – a solution to a problem.

A US General Dynamics F-16 fighter jet crashed in the Yellow Sea near South Korea’s southwestern coast on Monday, as reported by officials from the US Air Force. The pilot managed to eject safely and was unharmed. This incident has stoked concerns about the safety of US military aircraft, especially in light of last month’s Bell Boeing V-22 Osprey crash that killed eight US airmen. 

Kunsan Air Base, located in Gunsan, South Korea, released a statement that said the F-16 pilot is “awake and in stable condition.” He was rescued by the Republic of Korea Maritime Forces. 

USAF officials said the F-16 experienced “an in-flight emergency over the Yellow Sea” early Monday morning at approximately 8:43 a.m. local time. 

A F-16 “Fighting Falcon” with the U.S. Air Force reportedly Crashed earlier tonight in the Yellow Sea off the Coast of South Korea during a Training Exercise following a “Serious Mechanical Fault”, the Pilot was able to Safely Eject and was Rescued by Search Teams. pic.twitter.com/DF1RUbcAkx

— OSINTdefender (@sentdefender) December 11, 2023

“We are grateful for the safe recovery of our Airman by our ROK Allies and that the pilot is in good condition,” said Col. Matthew C. Gaetke, 8th FW commander. 

Last month’s crash of the Osprey off Yakushima, a southwestern Japanese island, which resulted in the death of eight airmen, remains fresh in everyone’s minds. 

Following this, the Pentagon issued an order to ground all V-22 tiltrotor aircraft late last week. This decision was made after a preliminary investigation into the crash found a potential mechanical problem.

Authored by Katie Spence via The Epoch Times (emphasis ours),

A woman receives a phone call saying her nephew has been arrested and urgently needs bail money. They arrange for a “bail bondsman” to come to her house to collect $29,000 in cash.

The following day, after another urgent call, the bondsman again turns up at her house, attempting to collect an additional $10,000 in cash for “bail.”

Instead, he’s arrested.

That’s just one incident that occurred in Sykesville, Maryland, in 2020. Michael Odell Anderson, who posed as the bail bondsman, has since pleaded guilty to conspiring to persuade multiple elderly victims to put up thousands of dollars under false pretenses, the Department of Justice (DOJ) said.

In total, Mr. Anderson and his co-conspirators scammed at least 49 victims out of more than $842,000—of which $578,170 hasn’t been recovered. Mr. Anderson is scheduled to be sentenced on March 21, 2024.

Mr. Anderson and his co-conspirators often told victims that the money they handed over would be returned to them at a later date, according to court documents.

They also often told victims that “there had been a ‘gag order’ placed on the case requiring secrecy and that the victim could not share the information with others,” the DOJ stated.

About a year ago, Lindy Wise, a web designer and all-around technology aficionado in her 60s, received a text saying her Social Security payments had changed, and if she wanted to see why, to “click here.”

“It was very well done,” Ms. Wise told The Epoch Times. However, at the last minute, she said that something didn’t feel right, and she decided not to click the link.

“You know, when you walk out your front door and you get in your car to go anywhere, you’re walking downtown, you have to be aware of what’s around you and be alert,” Ms. Wise said.

“Now, we have to be just as alert online. I get messages all the time—usually several times a week. And I’m in the tech industry, so I know what to look for, but wow. These guys know the elderly are vulnerable. We’re less familiar with the technology, and our generation is more trusting. Sometimes, we’re alone, and we’re lonely. So, we’re vulnerable to various types of scams.”

The type of scam attempted on Ms. Wise is called “smishing,” Ally Armeson, executive director of programs for the Cybercrime Support Network (CSN), told The Epoch Times.

CSN is a nonprofit organization that provides training, develops resources, and works within law enforcement and consumer protection ecosystems to help victims recover after they’ve experienced a cybercrime.

“With regard to phone scams … some examples are a robocall (calls delivering a prerecorded message), text messages (smishing), or just a ‘live’ phone call with a person,” Ms. Armeson said.

“As far as smishing, all of us get those supposed texts from Amazon, or a bank, etc., telling us about suspicious activity that will result in our accounts closing unless we reset our password at the provided link.

“Most of the time, we can tell the link is not official, but if a person is in a hurry or distracted, they may click on the fake link and give their login credentials away. Distraction can really get us into trouble. Scammers know we all get distracted—and those smishing texts are an easy, low-effort way to get people’s information and steal money.”

Ms. Armeson said that while smishing scams are prevalent and often effective, the scams that consumers fall for most often are “imposter scams.”

They’re also some of the most traumatic for victims.

“With enough research and preparation, cybercriminals can very convincingly pretend to be anyone—someone from a government agency, a family member or friend, a potential love interest—especially now that they have generative Artificial Intelligence at their disposal,” Ms. Armeson said.

“We had a romance scam victim who, after reporting the incident, was threatened by the scammer in multiple phone conversations. The scammer said he was going to come to her house to harm her.

“What made this more frightening was that the victim lived alone and was legally deaf. While the police assured the scam victim that the cybercriminal was located outside of the United States and that the victim was not in harm’s way, the victim couldn’t help but be frightened, especially at night.

“The individual became so stressed that they considered giving up their independent living situation.”

The Rise of Phone Scams

The Federal Trade Commission (FTC) received 1.2 million complaints about robocalls in fiscal year 2023.

In 2022, adults older than 60 reported more than 88,000 complaints to the FBI’s Internet Crime Complaint Center (IC3), with losses totaling more than $3.1 billion—an 84 percent increase compared to 2021, the FBI reported.

Victims ages 50 to 59 reported losses totaling a little more than $1.8 billion, and nearly 95,000 victims ages 30 to 39 reported more than $1.2 billion in losses.

A separate report by the American Association of Retired Persons, which included data from more agencies, found that elder financial exploitation costs victims ages 60 and older more than $28.3 billion, annually.

“The reality is that older adults usually have more money saved [for] retirement, and so they are more ‘profitable’ targets,” Ms. Armeson said.

“A scammer will put more time and effort into a scam if they think they will get more money, so our older population may be hit with more thoughtful or elaborate scams.

“Some of these scams can get pretty complex, and the scammers are good at getting people anxious or scared by saying things like, ‘Your account has been hacked/compromised,’ ‘You owe money,’ ‘You will lose benefits.'”

Ms. Armeson cautioned that while the elderly are increasingly targeted, so are younger generations.

“Access to personal information through social media is helping scammers target everyone,” she said. The FTC says young people are losing money to scams at a higher rate than those older than 70.

Cathy Wilson, a licensed professional counselor at LifePaths Counseling Center and author of the book, “The Emotional Impact of Being Scammed and How to Recover,” concurred.

“Perhaps a good way to think about who scammers target is that they target people with some kind of vulnerability,” she told The Epoch Times.

“Many scams target older people who haven’t had the experience with technology that younger populations have. That’s a vulnerability. Other age groups have different vulnerabilities.“

Ms. Wilson pointed to a report by the Better Business Bureau, which shows that scammers often target adults ages 18 to 24 in “fake check scams.” That’s when an “employer” gets the victim to deposit a check and transfer the funds.

Once the victim realizes that the check isn’t real, they already owe the transferred funds to their bank, and the scammer has their money.

Such was the case for Karl, no last name given, who jumped at the chance at what he thought was a legitimate job—evaluating customer service at retail stores.

“They wanted me to be a ‘mystery shopper,'” Karl told the Financial Industry Regulatory Authority (FINRA).

“You get this check for $2,950, you text them saying ‘assignment received.’ And then you go ahead and deposit the check in your bank, and you send them [the scam employer] a text saying ‘funds are deposited.’

“You wait until the check is cleared before you go do any shopping—so I figured, well, OK, this is not a scam.”

FINRA said the scammers told Karl to then “quickly go to a series of stores to send money orders totaling $2,600 to specific addresses provided by the company” and to provide feedback.

“Karl’s new employer stressed that he needed to fulfill the assignment as quickly as possible. He was told to keep the remaining $350 for completing the task,” FINRA stated.

However, the check was fraudulent, resulting in Karl wiring $2,600 of his money to the scammer.

The Better Business Bureau says employment scams are the “riskiest scams for ages 18–24,” followed by online purchase scams and cryptocurrency scams.

In November, the DOJ seized almost $9 million worth of Tether, a cryptocurrency that had been used to scam more than 70 victims via romance scams and cryptocurrency confidence scams.

Read the rest here…

Authored by Paul Joseph Watson via Modernity.news,

South Korea may be about to embrace mass migration, with the country’s Justice Minister claiming it faces a “demographic catastrophe” otherwise.

Han Dong-hoon told a parliamentary meeting in Seoul, “When it comes to immigration policies, we have passed the stage of deliberating whether to implement them or not. Because if we don’t, we cannot escape the fate of extinction due to the demographic catastrophe.”

Current trends show that South Korea faces a population decline similar to how the Black Death impacted Europe in the 14th century if fertility levels don’t rapidly improve.

“Deaths have surpassed births for more than three years in South Korea amid a steady decline in the country’s total fertility rate, the average number of children a woman bears in her lifetime,” reports the Telegraph.

“The rate hit another record low of 0.7 in the second quarter of 2023 – much lower than the replacement level of 2.1 that would keep its population stable at 51 million – stoking further alarm about the social and economic impact of such a rapidly ageing population.”

🔴 South Korea on brink of ‘extinction’ unless embraces immigration, says minister
https://t.co/YwwYHvBRMO

— The Telegraph (@Telegraph) December 7, 2023

However, Mr. Han suggested that his government would take a selective approach on admitting migrants and that the plan “is not aimed at bringing in as many foreigners as possible.”

That seems to contradict Han’s alarmist claims about “extinction,” and his suggestion that the situation is so dire that only adding huge numbers to the population will reverse the decline.

Han’s desire to see South Korea imitate how Europe has opened the floodgates for vast numbers of migrants over the last 20 years somehow isn’t tempered by the reality of what that has done to crime levels, social cohesion and the complete obliteration of national identity in many major cities across the continent.

Although Japan is in a similar situation to South Korea, they have so far refused to compromise their homogeneity for mass migration, presumably enjoying the fact that Tokyo is the safest city in the world, followed by Singapore and Osaka.

Seoul is currently ranked the 9th safest city in the world according to the Economist Intelligence Unit’s Safe Cities Index (SCI).

That may be about to change.

*  *  *

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Hamas says it’s ready and willing for another temporary truce and hostage/prisoner deal exchange with Israel, while issuing a new warning Sunday saying that if its demands aren’t met, no hostage would leave the Gaza Strip alive.

“Neither the fascist enemy and its arrogant leadership… nor its supporters… can take their prisoners alive without an exchange and negotiation and meeting the demands of the resistance,” Hamas spokesman Abu Obeida said in a televised broadcast.

Hamas wants more Palestinians held in Israeli prisons to be freed, after it gained the release of 240 Palestinian prisoners and in exchange released 105 captives during the prior week-long truce.

There are believed to still be 137 hostages held somewhere in the Gaza Strip, at a moment fighting rages in both northern and southern urban areas.

“We have no choice but to fight this barbaric occupier in every neighborhood, street and alley,” Obeida said further while boasting that Hamas has taken out 180 Israeli personnel carriers, tanks and bulldozers. “The enemy’s holocaust aims to break the strength of our resistance… but we are fighting on our land in a holy battle.”

But holding out the possibility of another deal, Obeida also said that the “temporary truce proved our credibility.” The death toll has soared since the end of the truce. The Hamas-run Gaza health ministry now says that at least 17,700 people – most of them civilians – have been killed since Oct.7.

Meanwhile, Israeli tanks are reported to have reached the center of the major southern city of Khan Younis, amid reports of some of the heaviest overnight fighting ever seen in this southern area of the Strip. 

A senior Israeli defense official has told Axios that the military expects that it will take three to four more weeks to completely secure Khan Younis and wrap up fighting there:

A senior Israeli official said Israeli Defense Forces “have made significant progress” in the northern part of the Gaza Strip, but that the operation in the southern city of Khan Younis, where Israel believes Hamas leadership is located, “has just started.”

Even as world pressure grows, and with the United States being the lone dissenter voting down a Friday UN Security Council draft resolution calling for ceasefire, the Biden administration has refrained from criticism of Israel’s seeming indiscriminate bombing campaign. 

Hamas publishes new ground view war video in Khan Younis…

#Hamas has released a new video showing the Al-Qassam Brigades targeting Israeli soldiers and military vehicles in Khan Yunis. pic.twitter.com/evbmDJJqhG

— EHA News (@eha_news) December 10, 2023

White House deputy national security adviser Jon Finer said days ago there the US is not giving Israel any firm deadline. “This is their conflict. That said, we do have influence, even if we don’t have ultimate control over what happens on the ground in Gaza,” Finer said.