Authored by Lance Roberts via RealInvestmentAdvice.com,

I previously discussed a slate of recessionary indicators with high correlations to recessionary onsets. However, as we head into 2024, many Wall Street economists predict a “soft landing” or “no recession” outcome for the economy. Are these recessionary indicators with near-flawless track records wrong this time? Will it be a soft landing in the economy or something worse?

We must start our recessionary indicator review with the “Godfather” of them all – “Yield Curve Inversions.”

Bonds are essential for their predictive qualities, so analysts pay enormous attention to U.S. government bonds, specifically the difference in their interest rates. As such, there is a high correlation between the yield curve’s slope and where the economy, stock, and bond markets generally head longer term. Such is because everything from volatile oil prices, trade tensions, political uncertainty, the dollar’s strength, credit risk, earnings strength, etc., reflects in the bond market and, ultimately, the yield curve.

Regarding yield curve inversions, the media always assumes this time is different because a recession didn’t occur immediately upon the inversion. There are two problems with this way of thinking.

1. The National Bureau Of Economic Research (NBER) is the official recession dating arbiter. They wait for data revisions by the Bureau of Economic Analysis (BEA) before announcing a recession’s official start. Therefore, the NBER is always 6-12 months late, dating the recession.

2. It is not the inversion of the yield curve that denotes the recession. The inversion is the “warning sign,” whereas the un-inversion marks the start of the recession, which the NBER will recognize later.

As discussed in “BTFD Or STFR,” if you wait for the official announcement by the NBER to confirm a recession, it will be too late. To wit:

“Each of those dots is the peak of the market PRIOR to the onset of a recession. In 9 of 10 instances, the S&P 500 peaked and turned lower prior to the recognition of a recession.“

Here is the analysis in table form. It is worth noting that the market’s lead to the economic recession has shrunk markedly since 1980. As such, given the rally in the market this year, it is not surprising a recession has not been recognized as of yet.

Which Yield Curve Matters

Which yield curve matters mostly depends on whom you ask.

DoubleLine Capital’s Jeffrey Gundlach watches the 2-year vs. 5-year spreads. Michael Darda, the chief economist at MKM Partners, says it’s the 10-year and the 1-year spread. Others say the 3-month and 10-year yields matter most. The most-watched is the 10-year versus the 2-year spread.

While most mainstream economists focus on a specific yield curve, we track ten different economically important spreads from short-term consumption to long-term investments. Most yield spreads we monitor, shown below, are inverted, which is historically the best recessionary indicator. However, technically, the UN-inversion of the yield curve is the recessionary indicator.

Notably, when numerous yield spreads turn negative, the media will discount the risk of a recession and suggest the yield curve is wrong this time. However, the bond market is already discounting weaker economic growth, earnings risk, elevated valuations, and a reversal of monetary support. As such, a recession followed when 50% or more of the tracked yield curves became inverted. Every time. (Read this for a complete history.)

But it isn’t just the yield curve as a recessionary indicator that we are watching.

Are Leading Indicators Wrong?

We wrote “Economic Cycles Will Recover” in July after a significant drop in many leading economic indicators. To wit:

“As with market cycles, the economy cycles as well. There is little argument that the current economic data is fragile, whether you look at the Leading Economic Index (LEI) or the Institute Of Supply Management (ISM) measures. As with the market cycle, long periods of slowing economic activity will eventually bottom and turn higher. The Economic Composite Index, comprised of 100 hard and soft economic data points, clearly shows the economic cycles. I have overlaid the composite index with the 6-month rate of change of the LEI index, which has a very high correlation to economic expansions and contractions.”

As shown, the data has bottomed since July and has started to improve. Notably, these economic measures are at levels that previously marked the bottoms of economic contractions outside financial crises or economic shutdown events. As noted in July, the improvement in economic activity seen in Q3 and Q4 was expected. That improvement also supports the earnings cycle we have seen as of late.

While there are reasons to remain suspect of an upturn in the current economic and market cycles, it is difficult to discount the historical evidence completely. Yes, the Federal Reserve has hiked rates aggressively, which weighs on economic activity by reducing personal consumption. However, the government continues to increase spending levels sharply, i.e., the Inflation Reduction Act and the CHIPs Act, which support economic activity.

We see that same support to economic activity in the monetary supply (M2) as a percentage of the economy. While those monetary and fiscal supports are reversing following the “pandemic-related” spending spree, both are reversing.

Eventually, the support provided by those massive infusions into the economy will fade. The hope is that the economy will return to normal functioning by then. The only issue is that we have no historical precedent to base those hopes on.

Soft Landing Or Recession?

The question of a “soft landing” or an outright “recession” is difficult to answer. It is certainly possible that all of the tell-tale signs of economic recession may be wrong this time. There is another possibility. Given the massive increase in activity due to a shuttered economy and massive fiscal stimulus, the reversion may take longer than expected. Both scenarios support the rising optimism of Wall Street economists in the near term. However, such also brings to mind Bob Farrell’s Rule #9:

“When all experts agree something else tends to happen.”

As noted previously, we would already be in a recession if we had entered this current period at previous growth rates below 4%. The difference is the contraction began from a peak in nominal GDP of nearly 12%. As noted above, a bounce in activity is not surprising after a significant contraction in the economic data. The question is whether that bounce is sustainable. Unfortunately, we won’t know the answer for quite some time.

We know that Federal Reserve actions regarding hiking rates have about a 6-quarter lead over changes to economic growth. Given the last Fed rate hike was in Q2 of this year, such would suggest a further slowing in economic activity into the end of 2024.

Investor Implications

As noted above, the massive surge in monetary stimulus (as a percentage of GDP) remains highly elevated, which gives the illusion the economy is more robust than it likely is. As the lag effect of monetary tightening continues to weigh on consumption, the reversion to economic strength may surprise most economists.

For investors, the implications of reversing monetary stimulus on prices are not bullish. As shown, the contraction in liquidity, measured by subtracting GDP from M2, correlates to changes in asset prices. Given that there is significantly more reversion in monetary stimulus to come, this suggests that lower asset prices will likely follow. However, the markets have recently been betting that a reversal of liquidity is coming. Given the inflationary implications of providing monetary accommodation, i.e., rate cuts and quantitative easing, it seems unlikely the Federal Reserve will act before the onset of a recession. If that assumption is correct, investors may set themselves up for disappointment.

As we update our recessionary indicators, there is still no clear visibility regarding the certainty of a recession. Yes, this “time could be different.” The problem is that, historically, such has not been the case.

Therefore, given this uncertainty, we must continue to weigh the possibility that Wall Street economists are correct in their more optimistic predictions. However, we must remain open to the probabilities that still lie with the indicators.

No one knows what the future holds with any degree of certainty. Therefore, we must remain nimble in our investment approach and trade the market for what it is rather than what we wish it to be.

X has been attacked by activist organizations such as Media Matters and legacy corporate media. These groups view the platform as a threat to their ideological agenda and the interests of their financial backers and thus aim to sabotage it by misleading companies to pull ad spending.

At The New York Times’ DealBook Summit on Wednesday, Elon Musk silenced a room full of liberal elites as he proclaimed that: “…if someone wants to blackmail me with advertising, they can go f*ck themselves.”

NYTimes noted this morning that at least half-dozen marketing agencies said they would keep their clients off X. Others have spoken with clients about reducing ad spending. 

“There is no advertising value that would offset the reputational risk of going back on the platform,” Lou Paskalis, the founder and CEO of AJL Advisory, a marketing consultancy, told NYTimes. 

Over the years, ZeroHedge has also gone through similar ad monetization hell, having lost most of our advertisers because they did not approve content on this website, and as a result, they – together with such members of the Censorship Industrial Complex such as Newsguard, Sleeping Giants and CheckMyAds and various three-letter US government agencies – did everything in their power to attempt to kill the site. Still, thankfully, we survived because of our premium subscribers.

Commenting on the advertiser boycott of X, billionaire Bill Ackman posted on X that Musk “is entirely correct that he and @X are treated unfairly and inconsistently by advertisers.” 

Ackman pointed out that other social media platforms like TikTok, Instagram, Facebook, and others have “enormous amounts of problematic content, antisemitic and otherwise, but the advertisers don’t boycott those platforms.” 

Weird, right? 

“Musk is targeted because the other media organizations view @X as a competitor and any time his name is in an article about controversies, it draws clicks. MSM is incentivized to attack him as it actually drives attention to their sites and therefore more revenues. It is these attack articles by other media organizations that put pressure on the @Disney’s of the world to stop advertising on X,” the billionaire said. 

As Ackman explained, perhaps Disney’s Bob Iger should “carefully examine the facts” and not cave to public pressure. He said, “Meanwhile, Disney invests heavily on TikTok, likely alongside videos of kids teaching other teenagers to be anorexic and worse.” 

He added: “I am sure Nelson Peltz can fix this when he joins the Disney board.” 

Ackman said his investment in the “Twitter privatization” was about “free speech,” adding, “Whether we make a profit on our investment is not important to us as we never intend to sell our interest.” 

I thought @elonmusk’s interview with @andrewrsorkin was one of the great interviews ever. Musk is a free speech absolutist which I respect. I think he is entirely correct that he and @X are treated unfairly and inconsistently by advertisers. @tiktok_us @instagram @facebook and… https://t.co/Rtrv4WgEoK

— Bill Ackman (@BillAckman) December 1, 2023

Suppose Musk is successful with X in the long run and can weather constant bombardments by corporate media and rogue activist groups. In that case, he will break the information matrix that the industrial-corporate media complex has held for decades. 

The coming fracture of the corporate media bubble will be epic, and we have already seen billionaires such as Ackman and those associated with 1789 Capital invest in alternative forms of media. 

Live Feed:

Update (11:00am ET): Powell’s prepared remarks are out and, as expected, they lean on the hawkish side. Here are the highlights:

• *FED’S POWELL: PREMATURE TO SPECULATE ON WHEN POLICY MAY EASE
• *POWELL: FED PREPARED TO TIGHTEN MORE IF IT BECOMES APPROPRIATE
• *POWELL: FOMC MOVING CAREFULLY AS RISKS BECOMING MORE BALANCED
• *POWELL: FED POLICY RATE IS ‘WELL INTO RESTRICTIVE TERRITORY’

The bottom line, Powell is a mix of hawkish and dovish, On one hand, he leans hawkish:

“It would be premature to conclude with confidence that we have  achieved a sufficiently restrictive stance, or to speculate on when  policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so.”

But on the other, he counters dovishly:

“The strong actions we have taken have moved our policy rate well into restrictive territory, meaning that tight monetary policy is putting downward pressure on economic activity and inflation. Monetary policy is thought to affect economic conditions with a lag, and the full effects of our tightening have likely not yet been felt.”

Or as Bloomberg notes:

“Powell points to how the Fed’s past tightening moves will continue to have an impact on the economy — the full impact hasn’t been felt yet. If anybody thought the Fed wasn’t finished raising rates, his prepared remarks today sure put a fork in it. They are done.”

And adds:

“Powell’s prepared remarks sounded pretty balanced to us — perhaps not as hawkish as some have feared. The market seems to latch on to one or two phrases from speeches and not take speeches in totality. The Q&A portion may be more market-driving than the modest market reaction we’ve seen since the release of the prepared remarks.”

The only outstanding question is when do cuts begin now (we and Bill Ackman said March).

* * *

Here are Powell ‘s full prepared remarks:

Thank you, President Gayle, and thank you for the invitation to visit today. I am fortunate to have been accompanied from Washington by a very distinguished graduate of Spelman College, Class of 1986 and member of Delta Sigma Theta, my Federal Reserve colleague Governor Lisa Cook. There is no greater testament to Spelman’s historic legacy than the achievements of outstanding women like Governor Cook. One part of that legacy is Spelman’s tradition of promoting education in STEM (science, technology, engineering, and mathematics). Governor Cook’s research highlights the key role of such education in preparing individuals to be inventors and innovators who can generate ideas that will add to our body of knowledge, increase productivity, and generate higher living standards.¹ Her work is just one example of how Spelman women continue to make historic contributions in science, the arts, technology, medicine, and other fields.

I look forward to our conversation, and I thought I might frame it by talking about the Federal Reserve’s actions to promote a healthy economy, and how those actions relate to questions students in this audience may be asking about the future. For example, I am sure that students are wondering what kind of a job market and economy you will be entering when you complete your education.

Congress assigned the Fed the dual mandate goals of maximum employment and price stability. Both goals are essential aspects of a healthy economy. Congress also gave the Fed a precious grant of independence from direct political control to allow us to pursue those goals without consideration of political matters. Other major central banks in democratic societies have similar grants of independence, and this institutional arrangement has a strong track record of producing better policy outcomes for the benefit of the public.

To begin with our maximum employment goal, I am glad to say that, by many measures, conditions in the labor market are very strong. A couple of years ago, as the pandemic receded and the economy reopened, the number of job openings grew to greatly exceed the supply of people available to work, leaving a widespread shortage of workers. Today, labor market conditions remain very strong, and the economy is returning to a better balance between the demand for and supply of workers. The pace at which the economy is creating new jobs remains strong, and has been slowing toward a more sustainable level. That gradual slowing has come in part due to the efforts of the Fed to slow the growth of the economy to help reduce inflation. After declining sharply during the pandemic, the supply of workers has bounced back, as people have come back into the labor force and as immigration has returned to pre-pandemic levels. Partly because of that labor force growth, the unemployment rate has edged up over the second half of the year, though it remains historically low at 3.9 percent. The increase in participation has been particularly strong among women in the prime working ages of 25 to 54, which surged to an all-time high earlier this year, and which remains well above pre-pandemic levels. Wage growth remains high but has been gradually moving toward levels that would be more consistent with 2 percent price inflation over time, and real wages are growing again as inflation declines.

As for price stability, the Federal Open Market Committee (FOMC) has a longer-run goal of 2 percent inflation.² After running below 2 percent for over a decade, inflation increased sharply in 2021, in the United States and in many other countries around the world. High inflation imposes a significant hardship on all households and is especially painful for those least able to meet the higher costs of essentials like food, housing, and transportation. Beginning in early 2022, we reacted forcefully, raising our policy interest rate and decreasing the size of our balance sheet to help slow the economy and bring down inflation. Inflation has declined to 3 percent over the 12 months ending in October, but after factoring out energy and food prices, which tend to be volatile, what we call “core” inflation is still 3.5 percent, well above our 2 percent objective.

Over the six months ending in October, core inflation ran at an annual rate of 2.5 percent, and while the lower inflation readings of the past few months are welcome, that progress must continue if we are to reach our 2 percent objective. High inflation initially emerged from a collision between very strong demand and pandemic-constrained supply. The normalization of supply and demand conditions has played a critical role in the disinflation so far, as has the substantial tightening of monetary policy and overall financial conditions over the past two years.³ The strong actions we have taken have moved our policy rate well into restrictive territory, meaning that tight monetary policy is putting downward pressure on economic activity and inflation. Monetary policy is thought to affect economic conditions with a lag, and the full effects of our tightening have likely not yet been felt. The forcefulness of our response to inflation also helped maintain the Fed’s hard-won credibility, ensuring that the public’s expectations of future inflation remain well-anchored. Having come so far so quickly, the FOMC is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced.⁴

As the demand- and supply-related effects of the pandemic continue to unwind, uncertainty about the outlook for the economy is unusually elevated. Like most forecasters, my colleagues and I anticipate that growth in spending and output will slow over the next year, as the effects of the pandemic and the reopening fade and as restrictive monetary policy weighs on aggregate demand.⁵ The FOMC is strongly committed to bringing inflation down to 2 percent over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective. It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so.

We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks.

That is an overview of what my colleagues and I at the Fed are trying to accomplish. The bottom line, if you are a student, is that we have made considerable progress in reducing high inflation while maintaining a strong labor market, with a lot of opportunity for new graduates. The unemployment rate has risen a bit, but it is still very low by historical standards, and by many measures it is a great time to start your career. You will face challenging decisions soon about what professions to enter, and what companies and institutions to work for. Some of you will become entrepreneurs. You have already made one really good decision, and that is coming to Spelman. Whatever opportunities and challenges emerge, education will continue to be a key to success. Higher education is an investment, and not just of money. You are investing your time and great effort to gain knowledge and skills that are preparing you for successful careers. Your success will make for a stronger economy. For our part, at the Fed we are doing our best to foster an economy that gives you the best opportunity to succeed. With that, I will hand it back to you, President Gayle.

* *  *

As noted earlier, November was a scorching blockbuster month for markets after a run of three fairly weak ones, which has led to a big turnaround in some of the YTD numbers for 2023. In fact, it was the best month for global bonds since December 2008, the best month for US bonds since May 1985, as well as the strongest month for the S&P 500 this year and the second best November for US stocks since 1980 (only the insane 2020 was better).

There is a reason for that: as the chart below shows, November saws the biggest easing in financial conditions in history.

This is how Goldman’s Tony Pasquariello described the action:

• Beneath the hood, it was a clean sweep, and of significant magnitude: stocks up, rates down, dollar weaker, credit tighter.  
• While there’s always a chicken-or-egg dynamic here — and, perhaps the Fed chair will temper some of this impulse — the fact is this: the markets have moved a lot, and they have done so in a way that is supportive of US growth.
• To put a line under the piece of the FCI equation that is comprised by equities, November was a ripper by any measure.  
• To illustrate the point: S&P was up in 16 of 21 trading days and had its best month of the year (to say nothing of — ahem — the 11% rally in NDX).
• In many ways, it was one of those rolls where what could have gone right … mostly went right.  

Ok that was November, what now? Well, according to DB’s Jim Reid, whether the trends of November continue into year-end will in part depend on Powell’s speech later today, or rather two speechs, which take place just before the FOMC blackout (ahead of the Dec 13 FOMC statement).

According to Reid, “market moves have been so great since he suggested that tight financial conditions were doing some of the Fed’s job for them (November 1st) that you have to think he will address the subsequent moves and either push back or endorse.” On balance the DB strategist thinks he may take a similar tone to Williams yesterday and push back a little while acknowledging the progress that has seemingly been made.

On that theme, NY Fed President Williams’ remarks yesterday helped the month end on a soggier tone, especially for bonds. He said he expects “it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance and to bring inflation back to our 2% longer-run goal on a sustained basis .” Separately, San Francisco President Daly said that “I’m not thinking about rate cuts at all right now”.

So going back to Powell’s not one but two appearances today, first, at 11am ET, the Fed Chair is scheduled to sit down for a fireside chat with Helene D. Gayle, the president of Spelman College in Atlanta, in which they address the challenges of our post-COVID economy.

Then, three hours later, at 2pm ET, Powell and Federal Reserve Board Governor Lisa Cook will participate in roundtable to hear from local leaders in the tech innovation and entrepreneurship community during visit to Spelman College. It is less likely that he will discuss monetary policy here although one never knows what questions may be lobbed his way.

Authored by Andrew Moran via The Epoch Times,

A word once a badge of honor for President Joe Biden might have turned into a political liability. “Bidenomics,” a term used to describe his economic doctrine, is being used less, and the press is beginning to take notice.

In recent weeks, President Biden has refrained from uttering “Bidenomics.” It has been absent in nearly all of his public appearances this month, from his prepared remarks in Colorado, where he touted the Inflation Reduction Act, to his speeches at the Asia-Pacific Economic Cooperation (APEC) in California.

The last time President Biden touted the term was in a Nov. 1 speech in Minnesota, where he mentioned it four times and compared it to the American Dream.

“Folks, Bidenomics is just another way of saying ‘the American Dream,'” President Biden said then.

But it has not entirely disappeared. Instead, President Biden’s re-election campaign has used the “Bidenomics” branding in subtler forms. During the Colorado event, there were signs with the label. The term is also inserted into the title of President Biden’s events or speeches. His team has used it in social media messages.

“In Colorado, [Biden] highlighted how Bidenomics is creating jobs and opportunities – unleashing over $7 billion in new investments across the state,” the White House wrote on X (previously Twitter) on Nov. 30.

Mainstream media outlets, including NBC News, have noticed that the White House has removed the term when President Biden talks about the economy.

A chorus of prominent Democrats and many of President Biden’s allies and supporters have warned that the “Bidenomics” branding would backfire because many Americans are still financially struggling and might link their challenges with the economic message.

“Whatever stories Americans are told about the strength of the economy under President Joe Biden, they are not going to be persuaded to look past the issue of their own living standards,” liberal economist James Galbraith wrote last month.

A plethora of polls have highlighted the same thing: A majority of U.S. voters do not like “Bidenomics.”

According to a new Gallup poll, 67 percent of Americans disapprove of the way President Biden is handling the economy. A recent Harvard CAPS-Harris Poll found that just 44 percent of respondents approve of President Biden’s handling of the economy. Just 14 percent of U.S. voters say they are better off financially now than when President Biden took office, a new Financial Times-University of Michigan monthly survey learned.

“With less than a year to go until the presidential election, Biden continues to receive tepid ratings from the American public. His overall job approval rating is still at his personal low and is in historically dangerous territory for an incumbent seeking reelection,” Gallup wrote in its summary of the latest polling data.

“In addition, political independents’ record-low rating of Biden is striking. Biden’s even weaker ratings on the economy, foreign affairs and the Middle East suggest that his performance in these areas is dragging down his overall job performance rating.”

The White House insists that the U.S. economy is heading on the right track, alluding to various data points to support these claims.

Treasury Secretary Janet Yellen told reporters in North Carolina on Nov. 30 that “inflation has now come way down” and “now wage gains are really translating into more real income.”

Treasury Secretary Janet Yellen speaks at an event on the Biden administration’s economic strategy toward the Indo-Pacific in Washington on Nov. 2, 2023. (Madalina Vasiliu/The Epoch Times)

“So my hope is that Americans gradually will see that things are getting better,” Ms. Yellen said.

The headline numbers have pointed to a robust economic landscape.

In the third quarter, the GDP growth rate clocked in at a better-than-expected 5.2 percent, although government spending contributed 1.5 percent to the final print.

Despite the Federal Reserve’s rising interest rates, the labor market remains solid, with an unemployment rate below 4 percent and millions of new jobs in 2023.

However, the higher cost of living continues to affect voters’ perception of the economy.

The headline inflation rate remains above 3 percent, down from the June 2022 peak of 9.1 percent. However, cumulative inflation since January 2021 has been more than 17 percent. Plus, there have been many other factors pointing to a struggling population.

Real wage growth has tumbled approximately 3 percent since 2021. In addition, according to the Bureau of Labor Statistics, real (inflation-adjusted) average hourly earnings rose by 0.2 percent in October, but “real average weekly earnings decreased 0.1 percent over the month due to the change in real average hourly earnings combined with a 0.3-percent decrease in the average workweek.”

A new analysis from the U.S. Senate Joint Economic Committee found that Americans require an additional $11,400 today to afford the same living standards they did in January 2021.

Lending Club data found that 60 percent of Americans are living paycheck to paycheck.

Consumers might be tapped out, too. Credit card debt topped $1 trillion in the third quarter, the personal savings rate is below 4 percent, and pandemic-era savings have been exhausted.

President Biden acknowledged that families are still enduring a rough environment.

“We know that prices are still too high for too many things, that times are still too tough for too many families,” President Biden said on Nov 27. “But we’ve made progress.”

[ZH: No… no you haven’t…

…lower INFLATION does not mean lower PRICES…]

The House has finally expelled Rep. George Santos (R-NY) from Congress after two previous attempts failed, amid a laundry list of allegations against him, including campaign finance abuses.

The ouster passed by a vote of 311 to 114, with 105 Republicans joining 206 Democrats in the affirmative. 

BREAKING: House votes to expel GOP Rep. George Santos. He has left the Capitol for the last time. pic.twitter.com/kHBmIsTAPV

— MSNBC (@MSNBC) December 1, 2023

Speaker Johnson announces that Santos has been expelled pic.twitter.com/6ou2ckLLPt

— Aaron Rupar (@atrupar) December 1, 2023

The ouster follows a November report by the House Ethics Committee, which concluded that the New York congressman “sought to fraudulently exploit every aspect of his House candidacy for his own personal financial profit.”

Santos, who did not engage in a years-long influence peddling scheme with America’s leverage-laden adversaries – only to gain the full protection of uniparty loyalists while walking America into two new proxy wars (Having “Biden” for a last name might have helped), announced that he would not seek reelection following the release of the ethics report.

He has separately pleaded not guilty to 23  federal charges, including allegations of COVID-19 unemployment benefits fraud, misusing campaign funds, and lying about his personal finances on House disclosure reports.

Prior to the vote, Rep. Tim Burchett said he would vote against expulsion, telling CNN: “We’re a bunch of sinners.”

Rep. Tim Burchett dismisses concerns about Santos’s conduct and says he will vote against his expulsion: “We’re a bunch of sinners.” pic.twitter.com/kD4j3O0izS

— Aaron Rupar (@atrupar) December 1, 2023

“George Santos is a liar — in fact, he has admitted to many of them — who has used his position of public trust to personally benefit himself from Day 1,” said Rep. Anthony D’Esposito (R-NY), Santos’ arch nemesis within the Republican party.

Who will replace him?

I am prepared to undertake the solemn responsibility of filling the vacancy in New York’s 3rd District.

The people of Long Island deserve nothing less.

— Governor Kathy Hochul (@GovKathyHochul) December 1, 2023

While we seem to be heading for a rematch between Biden and Trump in the 2024 US presidential election, Fox hosted a debate between Governor Gavin Newsom (Democrat, California) and Governor Ron DeSantis (Republican, Florida), which can either be seen as an early presidential debate for 2028 or a debate between two reserve-candidates for 2024.

DeSantis probably hoped to boost his chances in the current Republican primaries, after Nikki Haley’s campaign to be the main challenger to Trump has gained momentum.

And indeed, the Red State vs. Blue State debate between Govs. DeSantis and Newsom was truly a sight to behold.

As Matt Margolis writes at PJMedia.com, it was amusing to see how DeSantis was armed with the facts, and Newsom was so impotent that he simply refused to answer question after question, instead choosing to launch into generic talking points, avoiding the substance of the issues being discussed.

Time after time, he was presented with raw data – facts comparing California and Florida – on migration, crime, jobs, COVID, etc., and Newsom’s response each time was to simply deny the facts and make up his own story.

I don’t think I’ve ever seen a debate where a person evaded questions as much as Gavin Newsom did Thursday evening.

For someone who is routinely hailed as an expert debater and suave politician, he made it clear that he couldn’t defend the indefensible.

While there were a number of good lines, The Epoch Times’ Nathan Worcester and T.J. Muscaro highlight the five key takeaways from the 2028 dress-rehearsal (perhaps):

Interstate Migration

Early in the debate Mr. Newsom and Mr. DeSantis sparred over the rate of migration to and from their respective states.

I was talking to a fella who had made the move from California to Florida. He was telling me that Florida’s much better governed, safer, better budget, lower taxes.

Then he paused and said ‘by the way, I’m Gavin Newsom’s father-in-law.’ pic.twitter.com/OSsYCRTJYo

— Ron DeSantis (@RonDeSantis) December 1, 2023

The exchange began after Mr. Hannity asked about the high rates of outmigration from California and some other blue states. Meanwhile, Florida and some other red states have grown.

“He’s the first governor to ever lose population,” Mr. DeSantis said of Mr. Newsom.

“I think California has more natural advantages than any state in the country. You almost have to try to mess California up,” he said.

The California governor claimed that over the last two years, there were “more Floridians going to California than Californians going to Florida.”

“That’s gonna be fun to fact check,” he added.

But U.S. Census data show that more Californians have moved to Florida than vice-versa in 2021 and 2022.

Some fact-checkers have asserted that California’s state executive was referring to migration per capita rather than the raw numbers.

Whatever the case may be, the Fox News-hosted event allowed refugees from the Golden State to say their piece. At a press conference prior to the Thursday night spectacle, seven new Floridians told reporters why they had departed from the Golden State.

“In 2022 we had had enough,” said Steve Grossi, a law enforcement officer who spent a few years with the Sutter County Sheriff’s Department near Yuba City, California.

“We were fed up. We were angry. We were scared. It was so bad that we can no longer survive here. The California that we once knew no longer existed,” he added.

Taxes

Mr. DeSantis and Mr. Newsom also focused on the difference in their state’s tax policies. Mr. Hannity opened with statistics from the Tax Foundation, which showed Florida’s taxes alongside California’s.

Gavin Newsom had more kids locked out of school for a longer period of time in California than anywhere else in the country. It was working class kids.

His kids were in private school — they were in class in-person.

He is owned by the teacher’s union. pic.twitter.com/cIpesdK8RC

— Ron DeSantis (@RonDeSantis) December 1, 2023

Florida features a lower sales tax (6 percent compared to California’s 7.25 percent), lower gas tax (35.23 cents per gallon compared to California’s 77.9 cents per gallon), and a lower corporate income tax (5.50 percent compared to California’s 8.84 percent). Florida also boasts no individual income tax, while California features a maximum 13.3 percent income tax rate.

The Sunshine State only out-taxes the Golden State in terms of property taxes 0.91 percent on average compared to California’s 0.75 percent.

Mr. Newsom said that his state had the highest income tax rate rather than the highest state income taxes, which was a “foundational, fundamental difference.” He argued that states like Florida tax lower-income earners more than he does in his state.

“How many people wanted to go to California because they pay less taxes,” Mr. DeSantis asked. “I have not seen that.”

They come to Florida, he said, for lower taxes.

Mr. DeSantis also emphasized the fact his state has no state income tax, and the sales tax in place is still lower than that of California.

Pandemic Policy

Mr. Newsom also questioned Mr. DeSantis’s actions in relation to the COVID-19 pandemic.

The Florida governor broached the issue when Mr. Newsom brought up Disney. The corporation, long a cornerstone of the state’s economy, has been at odds with Mr. DeSantis over the Florida Parental Rights in Education Act.

“I think that’s an interesting point with Disney because I had Disney open during COVID, and we made them a fortune, and we saved a lot of jobs. You had Disney closed inexplicably for over a year,” the Florida governor said.

Disneyland, located in Anaheim, California, was shuttered for 13 months.

“In the past year, Anaheim has been through one of the most challenging years in its history,” Anaheim spokesperson Mike Lyster told The Epoch Times in 2021.

Mr. Newsom soon fired back, arguing that the governor’s record was less liberty-oriented than he let on.

“You passed an emergency declaration before the State of California did,” he said.

Mr. DeSantis declared a public health emergency regarding COVID-19 on March 1, 2020. Mr. Newsom proclaimed a State of Emergency over the coronavirus just days later, on March 4, 2020.

Other topics included COVID-19 death rates in the two states as well as the impact of lockdowns on education.

A National Bureau of Economic Research report card found that California had the least in-person learning of any state in the nation during the 2020–2021 school year, at just 19.2 percent. They outpaced the District of Columbia, in which just 5.8 percent of learning was in person that school year.

Parents Rights Bill

The governors also shared their views on parental rights when it comes to education and LGBT influence on kids.

Mr. DeSantis signed the Parental Rights in Education Bill during his first term as governor. It was labeled by dissenters as the “Don’t Say Gay Bill.” The law prevented matters of gender identity and sexual orientation from being taught to kids in kindergarten through third grade and prohibited schools from defying parents and hiding information from them when it comes to affirming a child’s gender identity.

This is a book that’s in some of the schools in California.

This is pornography. It’s cartoons. It’s aimed at children — and it’s wrong.

This should not be in schools. pic.twitter.com/XjM1QMrCJQ

— Ron DeSantis (@RonDeSantis) December 1, 2023

The Florida law was written in response to national concerns about LGBT indoctrination in schools and attempts elsewhere to shut parents out of what happens when their children are in school.

“What we’ve said in Florida is it’s inappropriate to tell a kindergartener that their gender is a choice,” Mr. DeSantis said. “It’s inappropriate to tell second graders that they may have been born in the wrong body. Now California has that. They want to have that injected into the elementary school.”

Mr. DeSantis brought a copy of a page from one of these books showing examples of explicit sexual acts, partly censored for the TV audience.

The Republican then pointed to a California law that allows minors to travel to the state for transgender procedures.

“If you’re a parent in Iowa or New Hampshire or South Carolina, your minor child can go to California without your knowledge or without your consent and get hormone therapy, puberty blockers, and a sex change operation,” Mr. DeSantis said. “That is extreme. That is an assault on parents’ rights.”

Meanwhile, Mr. Newsom accused Mr. DeSantis of being on a “banning binge” and that he “demeans” the LGBT community through his policies.

“What you’re doing is using education as a sword for your cultural purge,” the California governor said.

Crime

Mr. DeSantis and Mr. Newsom also debated crime and shootings.

The quality of life differences between the two states were a constant undercurrent of the debate.  Again – like a San Franciscan using the poop map app – Newsom repeatedly side-stepped the issue, baldly claiming California’s crime and homelessness issues are not really that bad and Florida has a city with a lot of murders, more than “even San Francisco.”

This is a map of San Francisco. There’s a lot of plots on that. You may be asking ‘what is that plotting?’

This is an app where they plot the human feces that are found on the streets of San Francisco.

That is what has happened in one of the previous greatest cities this… pic.twitter.com/otOz7dQxei

— Ron DeSantis (@RonDeSantis) December 1, 2023

Mr. Hannity had asked about the higher rate of violent crime in California as compared to Florida, comparing two figures that combined homicide, rape, and other offenses in a single year.

But Mr. Newsom reframed the topic by narrowing it. He pointed out that Florida has a higher murder rate than California. Indeed, the homicide death rate in Florida was higher than that of California in 2021 according to statistics from the Centers for Disease Control and Prevention.

Experts have questioned the utility of comparisons of murder rates between states.

“State-level data is not very useful. States have both urban and rural areas—and policing is a local decision in cities, which tend to be Democratically controlled even in Republican states,” economist John Lott told The Epoch Times in 2022.

“People are leaving California in droves largely because public safety has collapsed,” Mr. DeSantis asserted, claiming that the state has “basically legalized retail theft.”

In California, stealing items under $950 is just a misdemeanor. The Hoover Institution’s Lee Ohanian has argued that the standard means “shoplifting is now de facto legal in California.”

Mr. Newsom also took issue with Mr. DeSantis’s past talk of pardoning people arrested in connection with the protests and riots in Washington on Jan. 6. While much of his rhetoric seemed to be aimed at a broader audience than liberal Democrats, the California governor and possible future presidential candidate didn’t shy away from more politically charged language when describing those individuals.

“I love this guy talking about ‘Backing the Blue’ when you dangled pardons for January 6th insurrectionists,” Mr. Newsom said.

*  *  *

Donald Trump’s name was only invoked in the debate when Gavin “DeSantis Is Being Mean to People” Newsom used it to ridicule DeSantis. 

Finally, as Paula Bolyard writes at PJMedia.com, when all was said and done, both men performed well, although Newsom frequently relied on lies to make his points.

I admit I’m biased, but Newsom came across as smarmy and artificially enhanced (by Botox and whatnot), even trotting out a fake Southern accent several times during the debate. At certain points, it felt like he was trying to channel Bill Clinton, which was super weird. 

DeSantis looked competent and was confident he was on the right side of every policy issue discussed. He apologized for nothing and was consistent in calling out Newsom’s incompetence and malfeasance. 

In the post-game show, former White House spokesman Ari Fleischer said the debate proved that “Democrats are from Mars and Republicans are from Venus.” 

He said DeSantis was “very practical, very focused on people’s daily lives,” while Newsom’s “whole message was identity politics.” 

“I thought Governor DeSantis did a pretty good job tonight defending his state and his record,” he added. He gave the Florida governor a B+ for his factual performance but a B- because he didn’t look Newsom in the eye enough. He gave Newsom a “D in terms of mangling the facts.” 

Democrat operative Harold Ford gave both a B+ and praised DeSantis’s performance. 

Former Congressman Jason Chaffetz said DeSantis looked “presidential” and “his disposition and demeanor were spot on.”

He predicted that the Florida governor would rise in the polls as a result of his performance. 

Former Trump Press Secretary Kayleigh McEnany said of Newsom, “In terms of being glib, yeah, I would give him an A.”

She gave DeSantis an A but warned that Newsom is “a sharp messenger.” “Watch out, he’s coming,” she added. 

Newsom swears (pinky promise!) that he’s not running a shadow campaign for president, but the only person who believes that whopper is the doddering Joe Biden. 

Philip Marey, Senior US Strategist at Rabobank

Inflation data from the Eurozone and the US were encouraging with declines in headline and core inflation. While inflation is falling, OPEC+ is said to have decided to cut oil production by 1 million barrels a day. This will not be announced by a communique, but individually by each country. This news was not enough to boost oil prices yesterday.

As our Elwin de Groot put it yesterday, Eurozone inflation data confirm the favorable trend seen in recent data in several member states, such as Germany, France and Spain. Headline inflation dropped more sharply than expected to 3.6 %y/y in November from 4.2% in October but it was a large negative surprise in core inflation that really drew attention. Core inflation fell to 3.6%, 0.3%-points more than the consensus estimate, which is a sizeable negative surprise.

The broad-based decline in inflation when looking at the key components suggests that the weakening economy is increasingly weighing on businesses’ willingness or perhaps even ability to raise prices. Energy, food, industrial goods and services inflation all fell. The question is whether services sector firms can refrain from price hikes when their cost base continues to increase (wages growing at a clip of 4-5% a year), but at least these data suggest that some service sector providers may be taking a ‘wait-and-see’ approach. The big size of the services inflation drop (from 4.6% to 3.9% y/y) may also point at one-off (or transitory) effects, such as from the recreation and culture sector, but lack of details at this point does not allow a firm conclusion there.

US PCE inflation fell to 3.0% headline and 3.5% core in October in year-on-year terms, with headline prices flat between September and October and core prices climbing by 0.2%. This means that both headline and core PCE inflation are now ahead of the FOMC projections made in September, which anticipated 3.3% headline and 3.7% core inflation in the final quarter of this year. Goods inflation has fallen to 0.2% from 0.9% year-on-year and services inflation to 4.4% from 4.7%. Even the component watched most closely by the FOMC improved. Core services ex housing inflation, as calculated by Bloomberg, fell to 3.9% from 4.3% year-on year and to 0.1% from 0.4% month-on-month. This should give the FOMC some confidence that this component, closely related to labor market tightness and wage growth, is easing as well. The PCE inflation data support the FOMC remaining on hold in December. In the remainder of the year, headline PCE inflation is likely to move sideways, while we expect core PCE inflation to continue its gradual decline.

Meanwhile, US personal spending slowed down to 0.2% in October, both in nominal and real terms. This is in line with the Fed’s Beige Book, published on Wednesday, which concluded that sales of discretionary items and durable goods declined on average. Personal income also slowed down to 0.2%, from 0.4% (revised) in September.

Initial jobless claims rebounded modestly to 218K in the week ending on November 25, from 211K (revised) a week before. Continuing claims saw a bigger jump to 1927K in the week ending on November 18, from 1841K (revised) a week earlier. This is the highest level in almost two years, after 1964K in the week ending on November 26. 2021. Note that the unemployment rate has quietly risen to 3.9% from 3.4% this year. An increase of this size in the three month averages of the unemployment rate would signal the start of a recession according to the Sahm rule. We are not there yet, but we continue to expect a US recession in the coming months.

In an interview with a German financial newspaper earlier this month, but published yesterday, San Francisco Fed president Mary Daly, who will be voting in 2024, said it was too soon to say if hikes are finished, that interest rates are in a very good place to control inflation and she’s not thinking about rate cuts. However, she said “We don’t need an insurance mentality now, where we hedge against rising inflation. We should simply be patient and remain vigilant.” So Daly wants the FOMC to remain on hold, but is in no hurry to cut rates.

New York Fed president John Williams, speaking at a conference, said the Fed’s policy rate is at or near its peak level and that rates are “estimated to be the most restrictive in 25 years.” He said he expected it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance to our 2% longer-run goal on a sustainable basis. Williams is a permanent voter on the FOMC and also in no rush to pivot. Markets may be getting ahead of themselves by pricing in an almost 50% chance of a rate cut in March, but even the FOMC’s own projections made in September showed two rate cuts of 25 bps each before the end of 2024.

While we seem to be heading for a rematch between Biden and Trump in the 2024 US presidential election, Fox hosted a debate between Governor Gavin Newsom (Democrat, California) and Governor Ron DeSantis (Republican, Florida), which can either be seen as an early presidential debate for 2028 or a debate between two reserve-candidates for 2024. DeSantis probably hoped to boost his chances in the current Republican primaries, after Nikki Haley’s campaign to be the main challenger to Trump has gained momentum.

The Gaza truce has collapsed and Israel has resumed its bombing campaign of the Strip, following a full week of ceasefire and seven rounds of hostage/prisoner exchanges.

Qatar and Egypt were reportedly pressing to extend the temporary pause in fighting for another two days, but Israel was not satisfied with the list of captives offered. The Israel Defense Forces (IDF) have been looking into Hamas claims that the two young Bibas brothers were killed. “Israeli military has informed Bibas family members it is assessing a Hamas claim that the youngest Israeli hostage, 10-month-old Kfir Bibas, his brother Ariel, 4, and their mother Shiri are no longer alive,” CNN reports.

This grim and tragic revelation is likely what left Israel with less incentive to keep the ceasefire going, also as pressure has mounted from ultra-conservative circles within Netanyahu’s own ruling coalition to take the fight back to Hamas, and to see through the vow of eliminating the terror group. 

Another big factor was Thursday’s terror attack involving a pair of Palestinian gunmen who unleashed M16 and pistol fire on a crowd waiting at a Jerusalem bus stop, killing three Israelis and injuring 16. Shortly after the attack, Hamas claimed responsibility.

It’s likely that negotiators in Doha are still scrambling to get a ceasefire urgently back in place. After all, Israel says there are still 137 hostages in Hamas captivity, which also includes some Americans. In total 110 were returned home over the past week, with hundreds of Palestinian prisoners released as part of the swap. The Times of Israel details of those who remain captive: 

Among those still in captivity after the end of the truce Friday are 115 men, 20 women and two children, government spokesperson Eylon Levy says. Ten of the hostages are 75 and older, he says. The majority, or 126, are Israeli and 11 are foreign nationals, including eight from Thailand.

Levy lists the youngest hostage, 10-month-old Kfir Bibas, his 4-year-old brother Ariel and their mother Shiri as among the hostages. The military has said it is investigating a Hamas claim that the boys and their mother were killed.

Dozens of Palestinians have been reported killed after airstrikes started again Friday morning…

Israel renewed its bombing campaign of the Gaza Strip on Friday morning after talks to extend the truce which went into effect a week ago had failed.

Dozens of Palestinians have been killed by the new bombardments, which hit buildings in Khan Younis, Rafah and northern Gaza. pic.twitter.com/ZGCXSycNaG

— Middle East Eye (@MiddleEastEye) December 1, 2023

Israel and mediators in Qatar were able to secure the release of most of the women and children hostages, as the last days have seen, but still 20 women remain along with the possibly still alive Bibas brothers, fate unknown. Israel as of Thursday welcomed eight more Israelis back from Hamas captivity.

The IDF is meanwhile already dropping leaflets over parts of southern Israel telling civilians to leave their homes and leave the area. Prior to the truce, there were sporadic bombardments of parts of the south. But now it looks like the IDF will take the fight to the southern half too, even after Secretary of State Blinken’s urgings not to, conveyed to PM Netanyahu yesterday.

Blinken flew out of Tel Aviv as IDF warplanes began the renewed bombing campaign…

As Israel resumed its attack on Gaza today, @SecBlinken‘s “motorcade sped out of his hotel in Israel on its way to the Tel Aviv airport… Asked onboard his plane, Blinken declined to comment.”

Reminds me of when Ford and Kissinger visited Indonesia in December 1975 and gave the… pic.twitter.com/HOHe6VHjur

— Aaron Maté (@aaronjmate) December 1, 2023

Rockets have resumed being fired from Gaza, and Israel is again evacuating some southern communities, as both sides could once again be settling in for a ‘long war’. Rockets could also once again be coming from southern Lebanon. Hezbollah is likely to rejoin the fight. On Thursday Blinken had urged Netanyahu to avoid killing civilians and that the soaring Gaza death toll is increasingly turning world opinion against Israel.

US futures reversed some of Thursday’s gains to start the final month of the year after a blowout performance in November, as European stocks gained, and Asia stuttered. US Treasuries and the dollar posted small moves before comments from Fed Chair Jerome Powell at 11am ET that may offer clues on the path of interest rates. Oil rebounded after OPEC+ promised further output cuts but was hazy on details. Israel resumed fighting against Hamas in the Gaza Strip after a weeklong truce ended: Israel’s army said Hamas violated the cease-fire terms by firing toward its territory. Bitcoin soared to its highest price so far this year. Base metals are rallying after the strong China Caixin Mfg. PMI results (50.7 s. 49.6 survey vs. 49.5 prior). Today, we get the November ISM-Mfg. at 10am ET (exp. 47.9, last 46.7) and hear from Powell at a “fireside chat” at Spelman College in Atlanta on Friday at 11am ET ahead of Fed’s blackout period. Focus for Powell events is whether he’ll back dovish comments earlier this week by Fed Governor Waller, which spurred a rally across front-end of the Treasuries curve.

In premarket trading, Pfizer dropped 3.5% after dropping development of its experimental weight-loss pill. Tesla slipped 2.1% as the electric-vehicle maker kicked off deliveries of its Cybertruck. RBC said the vehicle is priced at the higher end of expectations. Here are some other notable premarket movers:

• Marvell Technology slipped 5% after the chipmaker’s fourth-quarter revenue forecast fell short of expectations.
• PagerDuty rose 5% after the company reported third-quarter results that beat expectations and raised its full-year forecast.
• Dell Technologies drops 5.4% after reporting revenue that declined more than expected, buffeted by continued sluggish corporate demand for personal computers.
• Lemonade falls 3.2% after Oppenheimer downgraded the insurance company, noting the outlook for weather patterns to return to normal in 2024 after a relatively quiet 2023.
• Samsara, a provider of GPS fleet tracking, gains 13% after boosting its profit and revenue guidance for the full year.
• UiPath jumps 14% as analysts hike their targets after third-quarter results beat expectations at the robotic process automation software company.
• Ulta Beauty gains 12% after the cosmetics retailer reported forecast-beating comparable sales growth in the third quarter.

After we predicted one month ago to brace for a face-ripping rally in November…

1. Dealer gamma turns deeply positive
2. $5BN in daily buybacks until mid-Dec
3. CTAs buying up to $200BN in global stocks over next month
4. Hedge Funds least net long since 2011
5. Seasonals pic.twitter.com/Rv3U1HLGHx

— zerohedge (@zerohedge) November 3, 2023

… that’s precisely what happened, as US stocks posted their best month in close to a year-and-a-half and had their second-best November since 1980s, defying the skeptical calls and fueling hopes that more gains are to come, while the MSCI All Country World Index saw its third-largest monthly gain in the past decade. The Bloomberg Dollar Spot Index dropped by the most in a year, while US Treasury yields tumbled about 60 basis points in the month. This was mostly down to plunging bond yields amid mounting signs that the Federal Reserve is managing to tame inflation without breaking the economy. Money-market fund assets surged to a fresh all-time high and Cathie Wood got in on the action too, with her ARKK Innovation ETF racking up a 31% gain for the month.

“Almost everyone was offsides coming into November,” said Ryan Detrick, chief market strategist at Carson Group. Everyone except for our raders that is. “There’s still a big opportunity for traders to chase gains in December, too.”

This morning, investors were trying to assess if November’s scorching gains across asset classes can go further. Yesterday’s core PCE data showed that the Fed’s favorite measure of inflation eased in October, adding to the case for an end to the Fed’s tightening and bolstering the narrative that lifted markets globally last month. Some suggest optimistic market wagers on the timing of interest-rate cuts next year read too much into recent comments by Fed officials. Powell is set to speak at Spelman College in Atlanta on Friday.

“The market is wondering whether it has gone ahead of itself in expecting US rate cuts next year,” said Sébastien Barbé, head of emerging-market research and strategy at Credit Agricole. “From Powell’s point of view, it may be tempting to warn the market against excess optimism about possible rate cuts in order to keep monetary conditions tight enough to make sure disinflation is sustainable.”

Meanwhile, oil prices steadied after the drop suffered yesterday following an OPEC+ meeting which sewed confusion among traders. The cartel promised further cuts to output but was hazy on the details, with the lack of a concluding press conference and final communiques leaving the market puzzled. Notably, the cuts agreed are voluntary, so whether the additional supply cuts that were announced will be delivered remains to be seen. Part of the rebound was driven by news Israel resumed fighting against Hamas in the Gaza Strip after a weeklong truce ended. Israel’s army said Hamas violated the cease-fire terms by firing toward its territory. Jets started striking Gaza soon after the deadline passed. Israel dropped leaflets telling people to leave some parts of southern Gaza. Qatar said truce negotiations continue

European stocks gain in early Friday trading, with the advance led by the Stoxx 600 Basic Resources index, as mining stocks outperform after broker upgrades, with the Automotive and Food, Beverage & Tobacco sectors the worst performing. Anglo American and Rio Tinto led gains in the Stoxx 600 Index after China’s manufacturing data beat estimates. The Euro Stoxx 50 rose 0.7% with the FTSE 100 outperforming regional peers. Here are the biggest movers Friday:

• Mining shares outperform in Europe on Friday as Anglo American and Rio Tinto are upgraded to buy at UBS and Liberum, respectively, with Anglo American gaining as much as 7.6%, the most since September
• Signify shares rise as much as 6.6% after the lighting maker announced a new divisional structure and said it will implement measures to reduce non-manufacturing costs by more than €200 million
• Jenoptik rises as much as 5.8% after the optical systems technology firm upgraded its Ebitda margin target for 2025, citing better-than-expected organic development in its semiconductors and electronics businesses
• Technogym gains as much as 11% after NIF Holding bought about 8.8 million ordinary shares of the fitness-equipment maker at €9.20 apiece in a reverse accelerated bookbuilding
• Leonteq shares tumble as much as 18% to the lowest level since 2020 after the Swiss technology and service provider revised down its FY2023 forecast. ZKB flags that the dividend could be reduced
• LVMH shares fall as much as 1.9% after the luxury goods maker is downgraded to equal-weight at Morgan Stanley given the likelihood of a further deterioration in demand for the industry in the fourth quarter
• Viaplay shares plunge as much as 83%, the most on record, in early Friday trading. Analysts said shareholders can expect to see their holdings reduced to almost nothing under a new recapitalization plan
• Ceres Power shares plunge as much as 27%, the most since 2012, after the UK-based energy generator and distributor said it hasn’t been able to conclude a new license partnership in this financial year
• ITV shares fall as much as 2.9% after Deutsche Bank downgraded rating on the broadcaster to hold from buy, citing headwinds from a continued slump in advertising revenue
• Swiss Re shares fall as much as 2% as investors focus on its new reserving allowance, which is expected to have a “negative impact” of approximately $500 million on profit after tax

Earlier in the session, Asian stocks fell as concerns about China’s economy persisted, with sentiment cautious ahead of comments from Federal Reserve Chair Jerome Powell later on Friday. The MSCI Asia Pacific Index dropped as much as 0.4%, led by technology shares, as some Fed officials remained wary of interest rate cuts next year. Tech-heavy markets such as South Korea and Taiwan also fell. Stocks in Japan gained as a stall in yen strength boosted exporters. Chinese shares declined, extending their recent underperformance versus global peers, with the CSI 300 Index set for its lowest close since 2019. Investors remained concerned about the weak economic recovery even as a private survey of China’s manufacturing activity unexpectedly expanded. The decline in home sales also accelerated in November despite more funding support for developers. Chinese’s losses were almost erased, however, after the China Securities Journal reported that the “National Team” was back as an unidentified Chinese state institution bought exchange-traded funds whose underlying assets are A-shares issued by central state-owned enterprises in the domestic stock market Friday.

• Hang Seng and Shanghai Comp were gradually pressured following the PBoC’s substantial net liquidity drain, whilst the latter eventually moved into the green amid reports China state-owned capital operating Co. reportedly bought ETFs on Friday, whilst the session also saw a surprise return to expansion territory for the Chinese Caixin Manufacturing PMI.
• Japan’s Nikkei 225 traded indecisively as encouraging data releases offset the headwinds from early currency strength.
• Australia’s ASX 200 was dragged lower by underperformance in tech and consumer-related sectors amid higher yields.

In FX, US equity futures are steady, while the dollar was slightly down ahead of speeches by the Fed’s Powell and Goolsbee. US ISM manufacturing data is also due. DKK and EUR are the weakest performers in G-10 FX, NOK and SEK outperform.

In rates, Treasuries were slightly cheaper across the curve with losses led by long-end, moving inverted 2s10s spread back toward top of Thursday’s range. TSY yields are cheaper by up to 2bp across long-end of the curve with 2s10s spread wider by 0.5bp on the day; 10-year yields around 4.345% with bunds outperforming by 3.5bp in the sector, Italian 10-year by 5bp. Focus for Powell events is whether he’ll back dovish comments earlier this week by Fed Governor Waller, which spurred a rally across front-end of the Treasuries curve. Fed-dated OIS currently price in a 25bp rate cut in May and a total of 112bp cuts by the December FOMC meeting. US economic data includes November S&P Global manufacturing PMI (9:45am New York time), October construction spending and November ISM manufacturing (10am). In Europe, Italian bonds outperform following surprise drop in Italy’s manufacturing PMI for November; bund 10-year yields are down some 2 bps, outperforming comparable USTs and gilts. US session includes manufacturing data and two scheduled appearances by Fed Chair Powell.

In commodities, oil pared some post-OPEC+ losses. WTI trades within Thursday’s range, adding 0.3% to trade near $76.20. Spot gold was on track for a third weekly gain, rising roughly $8 to trade near $2,045/oz as it inches toward its all-time high after Israel resumed its war against Hamas; it was then summarily smacked down by some central bank amid fears a new all time high will lead to a surge in gold to $2500 and higher and destabilize the fiat system. Most base metals trade in the green after China’s Caixin Mfg PMI unexpectedly entered expansion, rising to 50.7 from 49.5, and beating estimates of 49.8; LME tin rose 1.3%, outperforming peers.

To the day ahead now, and central bank speakers include Fed Chair Powell, the Fed’s Barr, Goolsbee and Cook, ECB President Lagarde, and the ECB’s Elderson and De Cos. Data releases include the global manufacturing PMIs, along with the ISM manufacturing reading from the US.

Market Snapshot

• S&P 500 futures up 0.2% to 4,583.75
• MXAP down 0.3% to 161.81
• MXAPJ down 0.6% to 503.36
• Nikkei down 0.2% to 33,431.51
• Topix up 0.3% to 2,382.52
• Hang Seng Index down 1.2% to 16,830.30
• Shanghai Composite little changed at 3,031.64
• Sensex up 0.7% to 67,464.96
• Australia S&P/ASX 200 down 0.2% to 7,073.18
• Kospi down 1.2% to 2,505.01
• STOXX Europe 600 up 0.7% to 464.87
• German 10Y yield little changed at 2.42%
• Euro little changed at $1.0898
• Brent Futures down 0.4% to $80.51/bbl
• Gold spot up 0.6% to $2,048.93
• U.S. Dollar Index down 0.17% to 103.32

Top overnight news

• China’s Caixin manufacturing PMI for Nov came in ahead of plan at 50.7, up from 49.5 in Oct and above the Street’s 49.6 forecast (this follows the NBS PMIs Wed night falling short of expectations). RTRS
• Europe’s final manufacturing PMI for Nov came in at 44.2, up from the flash reading of 43.8. BBG
• Ukraine president Volodymyr Zelenskyy has pushed to “accelerate” the construction of military fortifications at key points along the frontline in the east of the country where Russian forces have stepped up attacks in recent weeks. FT
• Israel resumed fighting against Hamas in the Gaza Strip after a weeklong truce ended. Israel’s army said Hamas violated the cease-fire terms by firing toward its territory. Jets started striking Gaza soon after the deadline passed. Israel dropped leaflets telling people to leave some parts of southern Gaza. Qatar said truce negotiations continue. BBG
• Washington aims to slash Russia’s oil and gas revenue by 50% by the end of the decade to ensure Putin doesn’t have the funds to attack his neighbors. FT
• Caracas has for over 200 years claimed rights over Essequibo, a vast swath of the territory of neighbouring Guyana. But only now has it opted to hold a referendum among Venezuelans on taking over the 160,000 sq km of land. FT
• PFE announces a setback in its GLP1 anti-obesity ambitions. Its twice-daily danuglipron formulation will NOT advance into P3 studies.  The drug achieved weight reductions of 8-13% over 32 weeks and 5-9.5% at 26 weeks, less than the 14-15% many thought would be needed to compete in the market. More significantly (and negatively), there were high rates of adverse side effects (up to 73% nausea; up to 47% vomiting; up to 25% diarrhea) and high discontinuation rates (greater than 50%). RTRS
• Apple and Paramount Global have discussed bundling their streaming services at a discount, the latest attempt by rival entertainment giants to team up as they look to make their offerings more affordable and attractive. WSJ
• BPCE is exploring options for its $1.2 trillion Natixis asset management business, including selling a majority stake, people familiar said. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the new month with price action rangebound as markets paused following the November rally amid another busy day of economic releases, while the conflict in Gaza also resumed. ASX 200 was dragged lower by underperformance in tech and consumer-related sectors amid higher yields. Nikkei 225 traded indecisively as encouraging data releases offset the headwinds from early currency strength. Hang Seng and Shanghai Comp were gradually pressured following the PBoC’s substantial net liquidity drain, whilst the latter eventually moved into the green amid reports China state-owned capital operating Co. reportedly bought ETFs on Friday, whilst the session also saw a surprise return to expansion territory for the Chinese Caixin Manufacturing PMI.

Top Asian news

• China state-owned capital operating Co. reportedly bought ETFs on Friday, according to Bloomberg.
• US judge blocked the Montana state ban on Tiktok from taking effect, according to a court order.
• US lawmakers seek a Biden administration investigation into Chinese drone maker Autel Robotics due to national security concerns.
• Japan’s largest trade union RENGO said it formally agreed on a 2024 pay hike demand of 5% or more, according to Reuters.

European equities, Eurostoxx50, +0.5%, are extending gains; FTSE100, +0.8%, which has been lifted by mining-related stocks. European sectors are mostly in the green, with significant outperformance in Basic Resources, being propped up by mining stocks following broker upgrades at Anglo American, +6.4%, and Antofagasta, +4.7%; Optimised Personal Care & Grocery is marginally hampered by a Tesco, -1.3%, downgrade. US Futures are trading on the front foot, albeit to a lesser extent in comparison to their European counterparts ahead of ISM & Powell; RTY, +0.3%, slightly outperforms.

Top European news

• ECB’s Nagel said recent inflation developments are encouraging but the ECB cannot be satisfied yet and inflation risks are still on the upside so a further rate hike cannot be ruled out. Nagel also stated that longer-term inflation expectations are still some way from 2% and that a leaner ECB balance sheet is desirable and the reduction can accelerate, while he added it is far too early to discuss rate cuts.
• EU weighs concessions in the US steel feud amid concerns over a Trump return, according to Bloomberg sources.
• German government spokesperson, re. budget talks, says they are aware of the urgency and there is a lot of momentum to solve this as soon as possible

FX

• Dollar drifts after month-end revival awaiting US manufacturing ISM for interim impetus before guidance from Fed Chair Powell; DXY dithering within 103.45-26 range.
• Kiwi back in sight of 0.6200 vs Greenback after hawkish RBNZ rhetoric from Hawkesby.
• Aussie encouraged by China’s Caixin manufacturing PMI rebound to 50.0+ level as AUD/USD hold above 0.6600.
• Loonie underpinned ahead of Canadian LFS with USD/CAD sub-1.3550.
• Cable firm on 1.2600 handle after upward revision to final UK manufacturing PMI.
• Euro tethered to 1.0900 vs Dollar amidst nearby option expiries and post-mostly better than flash or forecast Eurozone manufacturing PMIs.
• PBoC set USD/CNY mid-point at 7.1104 vs exp. 7.1458 (prev. 7.1018).

Fixed Income

• Debt futures back on a firmer footing, on balance, after steep month end retracement.
• Bunds bounce further from sub-132.00 towards 133.00 again.
• Gilts towards top of 96.80-25 range, but still lagging in run up to Fitch UK rating review.
• T-note hovering around 110-00 within 110-04/109-27+ confines awaiting US manufacturing ISM and Fed speakers headlined by Chair Powell twice.

Commodities

• WTI and Brent are modestly firmer intraday in the aftermath of the OPEC+ confab on Thursday which ultimately underwhelmed the market given that output cuts are voluntary; as it stands, benchmarks are holding incrementally above the unchanged mark in narrow ranges around the prior session’s trough.
• Spot gold holds an upward bias as the Dollar remains subdued; Base metals are firmer across the board amid upbeat Chinese data overnight, and upward bias in risk sentiment in Europe.
• OPEC Secretariat announced several OPEC+ countries will conduct additional voluntary cuts to the total of 2.2mln BPD (exp. 2.0mln). It was confirmed that Brazil will join OPEC+ from January 2024.
• Saudi Arabia will extend its voluntary cut of 1mln BPD to the end of Q1 2024 with its production to be approx. 9mln BPD and Russia is also to extend its voluntary cut in oil supplies until the end of Q1 2024 with its voluntary supply cut to reach 500k BPD. Kuwait is to make a further 135k BPD OPEC+ oil output cut, while the UAE is to make an additional 160k BPD OPEC+ output cut and Iraq is said to cut its production by 220k BPD in Q1. Conversely, Angola rejected its OPEC quota for 1.11mln BPD and said it will produce 1.18mln BPD, according to Bloomberg. Click here for the detailed headline.
• US is purchasing 2.73mln bbls of oil for the strategic reserve, according to a document cited by Reuters.
• US aims to halve Russia’s energy revenue by 2030, while Assistant Secretary of State for Energy Resources Pyatt said Western sanctions will continue for years to come to curb Moscow’s war machine, according to FT.
• US President Biden and Angola’s President welcomed the launch of a US-Angola energy security dialogue in 2024 during a meeting on Thursday, according to the White House
• US State Department said the US reiterated its pledge to ‘reconsider’ the steps it took to ease sanctions on Venezuela if the latter fails to comply with certain commitments by the end-November deadline, while it added that Venezuela must define steps for lifting bans on opposition candidates and begin the release of Venezuelan political prisoners and wrongfully detained Americans. It was later reported that banned Venezuelan candidates would be allowed to take their cases to a tribunal.
• Morgan Stanley says commitment to new OPEC+ cuts appears to be uncertain, expect compliance to only be partial, Foresees Saudi Arabia ultimately extending the cuts to Q2-2024. Maintain Brent forecast at USD 85/bb and flat throughout 2024. Lowered OPEC+ production forecast for Q1-2024 by 0.6mln BPD, still see the oil market turning into a small surplus again in Q2 & Q3.
• Russia’s Kremlin says OPEC+ contributes to stabilisation of energy markets and creation of conditions for supporting energy prices at a balanced level; Russia is interested in continuing working with OPEC+.
• First Quantum is suspending production guidance for Cobre Panama for the current year

Geopolitics

• Israel’s military said that Hamas violated the truce and fired towards Israeli territory, while it has resumed combat against Hamas in Gaza
• Initial reports suggested Israel and Hamas agreed to extend the truce for an eighth day, according to Egyptian officials cited by WSJ. However, there was no official statement made by Israel, Hamas or mediator Qatar.
• Rocket sirens sounded in Israeli areas near the Gaza border and the Israeli military said one launch was detected from Gaza which was intercepted, while Hamas-affiliated media reported that explosions and gunfire were heard in the northern Gaza Strip. Furthermore, Israeli planes were reportedly flying over Gaza and Israeli army vehicles are firing in the northwest of the Gaza Strip, according to a correspondent cited by Al Jazeera.
• The Israeli army raises the alert on the border with Lebanon, according to Al Arabiya
• Qatari and Egyptian mediators have been in contact with Hamas and Israel since fighting resumed in Gaza on Friday, according to Reuters citing sources; negotiations between both sides is continuing
• Senior Hezbollah member says Lebanon remain ready to confront any danger from Israel, adds Gaza developments can still affect the Lebanon situation
• US Treasury Department issued new North Korean sanctions targeting 8 individuals and the hacking group Kimsuky, while South Korea imposed sanctions on 11 North Korean individuals, according to the Foreign Ministry.

US Event Calendar

• 09:45: Nov. S&P Global US Manufacturing PM, est. 49.5, prior 49.4
• 10:00: Oct. Construction Spending MoM, est. 0.3%, prior 0.4%
• 10:00: Nov. ISM Employment, est. 47.2, prior 46.8
• 10:00: Nov. ISM New Orders, est. 46.7, prior 45.5
• 10:00: Nov. ISM Prices Paid, est. 45.9, prior 45.1
• 10:00: Nov. ISM Manufacturing, est. 47.8, prior 46.7

Central Banks

• 03:00: Fed’s Barr Speaks on Bank Supervision and Regulation
• 10:00: Fed’s Goolsbee Participates in Moderated Discussion
• 11:00: Fed’s Powell Speaks in Fireside Chat
• 14:00: Fed’s Powell, Cook Participate in Roundtable Discussion

DB’s Jim Reid concludes the overnight wrap

Happy December. My wife is organizing Santa’s Grotto at the kids’ school tomorrow and until yesterday was missing one key thing. A Santa! A call over the last few weeks for a volunteer amongst all parents and grandparents had fallen upon deaf ears so my wife rung a couple of agencies and found the cheapest Santa was £600 for 90mins work. So that’s a great business to get into, although I accept the work might have a seasonal bias!

Since it’s the start of December this morning, we’ll shortly be releasing our monthly performance review for November. Overall, it was a great month for markets after a run of three fairly weak ones, which has led to a big turnaround in some of the YTD numbers for 2023. In fact, it was the best month for global bonds since December 2008, the best month for US bonds since May 1985, as well as the strongest month for the S&P 500 this year. The full report will be in your inboxes shortly.

Whether the trends of November continue into Xmas might in part depend on Powell’s speech later today (4pm GMT), just before the FOMC blackout. Market moves have been so great since he suggested that tight financial conditions were doing some of the Fed’s job for them (November 1st) that you have to think he will address the subsequent moves and either push back or endorse. On balance I think he may take a similar tone to Williams yesterday and push back a little while acknowledging the progress that has seemingly been made .

On that theme, NY Fed President Williams’ remarks yesterday helped the month end on a soggier tone, especially for bonds. He said he expects “it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance and to bring inflation back to our 2% longer-run goal on a sustained basis .” Separately, San Francisco President Daly said that “I’m not thinking about rate cuts at all right now”.

Those developments had a notable impact on sovereign bonds, which pared back some of their recent gains on both sides of the Atlantic. For instance, the 10yr Treasury yield bounced back +7.1bps to 4.33%. Over in Europe there were slightly smaller moves for 10yr bunds (+1.5bps), OATs (+2.3bps) and BTPs (+5.5bps), while Gilts underperformed (+8.0bps) .

This came even as the data generally pointed in a dovish direction. In particular, we had the latest PCE inflation data for October yesterday, which is the measure the Fed officially targets. That showed headline PCE at a monthly 0.0% (vs. +0.1% expected), which brought the year-on-year number down to +3.0%, and the lowest since March 2021. It also brings us closer to the sort of numbers where the Fed has historically pivoted towards rate cuts in the past. Core PCE was still a bit higher at +3.5%, but to be fair, the more recent figures have been better, and if you just look at the last 6 months alone, core PCE is now down to an annualised +2.5% .

Over in the Euro Area, there was similarly good news from the flash CPI reading for November. It showed headline annual inflation was down to +2.4% (vs +2.7% expected) , the lowest since July 2021, and almost back at the ECB’s 2% target. This was partly down to a big negative impetus from energy prices, which are currently down -11.5% year-on-year. Core inflation remained more elevated at +3.6% but this also surprised clearly on the downside (+3.9% exp) with a marked slowdown in the past three months, down from +5.3% as recently as August.

Amidst the better news on inflation, the bigger concern came from the labour market, where the latest data showed things were continuing to soften. For example, US continuing jobless claims were up to their highest level in almost two years, at 1.927m (vs. 1.865m expected). Seasonals seem to be a little all over the place this year so some caution is required. Meanwhile in Germany, the r egistered unemployment rate climbed to a two-and-a-half year high of 5.9%, so this wasn’t just a US theme. As it happens, we’re now just a week away from the final US jobs report of the year, and it was last month that the unemployment rate hit its highest since January 2022. So if it does show any further softening, that’ll only ramp up the H1 2024 rate cut speculation as we get closer to the Fed’s December meeting just a few days later .

With the data softening, US equities continued their pretty flat performance this week. But a sizeable rally in the final 30 minutes of US trading, probably reflecting month-end flows, left the S&P 500 posting a decent rise (+0.38%). Bank stocks outperformed for the second day in a row (+1.03%), while a strong day for industrials led the Dow Jones index to a +1.47% gain. Tech stocks underperformed, with the NASDAQ (-0.23%) and the FANG+ index (-0.27%) dipping. Meanwhile in Europe, the STOXX 600 (+0.55%) continued its recent outperformance, closing at a two-month high .

This morning Asian equity markets are drifting lower at the start of the last month of the year despite the late-day rebound on Wall Street overnight. As I check my screens, the KOSPI (-1.03%) is the biggest underperformer across the region with the CSI (-0.91%), the Hang Seng (-0.69%) and the Shanghai Composite (-0.32%) also trading in the red amid mixed economic signals from China (more on this below). Elsewhere, the Nikkei (+0.03%) is flickering between gains and losses this morning. In overnight trading, US stock futures are indicating a negative start with those on the S&P 500 (-0.06%) just below flat while those on the NASDAQ 100 (-0.19%) inching lower.

Coming back to China, the Caixin PMI measure of the manufacturing sector unexpectedly expanded in November, hitting 50.7 (v/s 49.6 expected). That was the fastest expansion in three months and up from 49.5 in October. Of course, the Caixin PMI stands in contrast to the latest official PMI which dropped to 49.4, highlighting that mores stimulus will likely be required to reinvigorate growth in the world’s second biggest economy.

Elsewhere, Japan’s unemployment rate edged down to 2.5% in October (v/s 2.6% expected) while the job-to-application ratio slightly went up to 1.30 after having stayed at 1.29 in the preceding three months. In a separate report, capital spending in 3Q23 advanced +3.4% y/y as expected after a +4.5% gain in the previous quarter.

Elsewhere yesterday, oil prices gave up their earlier gains following the conclusion of the OPEC+ meeting. T he group agreed additional supply cuts totalling about 900kb/d on top of an existing reduction of 1,300kb/d by Saudi Arabia and Russia . However, the move was in the form of “voluntary cuts” by several OPEC+ countries rather than a more typical agreement on reduced production quotas, leaving questions over how disciplined the implementation of the supply curbs will be. WTI crude had been trading c. 2% higher on the day prior to the news but fell by more than 5% intra-day and was down -2.44% by the close at $75.96/bbl. Brent crude saw more modest swings, and was down -0.32% to $82.83/bbl yesterday. Overnight, Brent crude prices are under pressure, trading -2.61% lower to trade at $80.67/bbl on softer output cuts .

To the day ahead now, and central bank speakers include Fed Chair Powell, the Fed’s Barr, Goolsbee and Cook, ECB President Lagarde, and the ECB’s Elderson and De Cos. Data releases include the global manufacturing PMIs, along with the ISM manufacturing reading from the US.

Authored by Simon White, Bloomberg macro strategist,

A significant miss in the November manufacturing ISM, released later today, leaves stocks open to downside, as overboughtness and less favorable liquidity conditions meet hard-landing fears.

The US manufacturing ISM is one of the most consequential pieces of macro-economic data for markets.

It is the single largest explanatory factor for the performance of global stock markets, it is leading, and it is minimally revised. Last month it surprised to the downside, coming in at 46.7 versus 49 expected.

It’s a volatile number, and last month’s print could just be noise.

Moreover, short-term leading indicators for the ISM, such as the new orders-to-inventory ratio (see chart below), point to a continued rise in the headline index. Also the manufacturing PMI is more stable, and came in for November at 49.4.

Nonetheless, ISM could surprise negatively again. Stocks would be exposed to more downside this time, as it would happen when they are significantly more overbought – after one of the best November performances on record – and when liquidity conditions are becoming less favorable.

As discussed fully earlier this week, liquidity has been buoyant over the last month, principally due to the ~$200 billion rise in central bank reserves. Money market funds (MMFs) de facto funding the fiscal deficit via the purchase of T-bills, and the government withdrawing funds from the Treasury’s account at the Federal Reserve, combined to boost high-powered liquidity, driving a rally in stocks and bonds.

But that impulse from reserves has started to fade.

The one-month change of the one-month change of Fed reserves is now falling (blue line in chart below), which translates as the absence of a tailwind for stocks.

Thus far, the stock market has been greeting data with a soft-landing lens.

The expectation is the Fed will be able to cut rates a little as inflation softens – a typically Panglossian outlook for stocks – which have rallied as bond yields have fallen.

But a big drop in the ISM would (with some credence) amplify hard-landing fears. Stocks in this case would be likely to sell off as falling bond yields start to reflect a Fed cutting rates to try to stem a recession, which stocks are very much not discounting.