The future fate and leadership of PMC Wagner has become clearer on Friday, following the Aug. 23 death of Yevgeny Prigozhin and much of his senior leadership when their private plane went down outside Moscow while en route to St. Petersburg. It is believed that either a bomb was detonated, or it was shot down by an anti-aircraft missile.

The lingering question since then has centered on who will take command of Wagner, and whether it will remain a private entity, or possibly be broken apart. Those questions appear to have been at least partially answered with Putin’s Friday Kremlin meeting with Andrei Troshev, among the most senior ex-commanders of the Wagner mercenary group and former aide to Prigozhin.

“President Putin asked Mr Troshev to oversee volunteer fighter units in Ukraine,” the Kremlin said, in the clearest indicator to date that Wagner fighters will be returning to the Ukraine battlefield in large numbers.

Importantly, the Kremlin also confirmed that Troshev now works for the defense ministry, according to spokesman Dmitry Peskov, and will coordinate reintegration of Wagner fighters with Russia’s armed forces on a voluntary basis.

Putin has additionally told Troshev he could “volunteer units that can perform various combat tasks, above all, of course, in the zone of a special military operation” – referring to Ukraine.

“You know about the issues that need to be resolved in advance so that the combat work goes in the best and most successful way,” Putin added. 

There were indicators even before Prigozhin’s death, but following the June mutiny, that Troshev would be given control of Wagner under defense ministry oversight. At the time, the following backgrounder was released by US media: 

Sedoy is the call sign of Andrey Troshev, a retired Russian colonel and a founding member and Executive Director of the Wagner Group, according to sanctions documents published by the European Union and France.

European Union sanctions concerning the situation in Syria detail Troshev’s position as the chief of staff of the Wagner Group operations in Syria, which supported the Syrian regime.

Troshev was born in April 1953 in Leningrad, in the former Soviet Union, according to the EU sanctions from December 2021.

“Andrey Troshev is directly involved in the military operations of the Wagner Group in Syria. He was particularly involved in the area of Deir ez-Zor,” it added. “As such, he provides a crucial contribution to Bashar al-Assad’s war effort and therefore supports and benefits from the Syrian regime.”

Russian President Vladimir Putin was shown meeting one of the most senior former commanders of the Wagner mercenary group and discussing how best to use ‘volunteer units’ in the Ukraine war https://t.co/9RftwZkH5z pic.twitter.com/ih2EBr2N5V

— Reuters (@Reuters) September 29, 2023

Earlier this week, CNN had cited Ukrainian military sources to say that Wagner fighters have been redeployed to the battlefield in Ukraine, but this time under the regular Russian military command. 

Hundreds of Wagner fighters have reportedly already appeared in the east, according to the Ukrainian sources. The last time the Ukrainians had seen them in significant numbers was after Wagner units had handed control of Bakhmut in the east over to the Russian regular armed forces. 

Authored by Michael Snyder via TheMostImportantNews.com,

Our standard of living is being systematically destroyed, but for a lot of years many Americans didn’t fully understand what was taking place because it was happening so slowly.  But now we have reached a stage where the purchasing power of our money is collapsing and the cost of living has become exceedingly painful.  Thanks to our rapidly rising cost of living, the middle class is becoming “the impoverished class”, and the poor are increasingly being pushed out into the streets.  If we do not find a way to turn these trends around, it won’t be too long before we have tremendous societal turmoil on our hands.

Earlier today, I came across an article about a woman that found a receipt from Burger King that was dated August 10, 1986.

At that time you could buy a Whopper for just $1.54.

Today, that same Whopper will cost you $6.79…

A woman has been left stunned after discovering a retro Burger King receipt from the 1980s which reveals the staggering price increases that the fast food chain has implemented over the past four decades.

US-based Liza took to social media to share the receipt after her mother found it in a box in the garage while remodeling her home.

The faded paper from the fast food chain dates back to August 10, 1986, and lists three Whopper burgers purchased for $4.62 – which works out at $1.54 each.

A single Whopper burger currently costs $6.79 in today’s money – over four times the price listed on the vintage receipt.

In other words, if you had $6.79 back then, you could buy four whoppers and you would still have money left over.

This is what inflation does.

It destroys our purchasing power.

Another woman named Melanie that makes 34 dollars an hour is so stressed financially that she literally tries to make one loaf of rye bread last her for the entire week…

“What I’ve started doing is I buy a loaf of rye bread, and I work really hard to keep that one loaf of rye bread lasting me the whole week. And I eat peanut butter, so I’ll eat peanut butter toast whenever I’m hungry.”

In the old days, if you were making 34 dollars an hour you were living the high life.

But now most people making 34 dollars an hour are just barely scraping by from month to month.

Of course it isn’t just food that has become absurdly expensive.

At this point, homes in the U.S. have never been more unaffordable than they are right now.

The following was recently posted on Twitter by The Kobeissi Letter…

Inflation adjusted home prices are now 85% above their average dating back to 1900.

Even after accounting for inflation, home prices have never been more expensive than they are now.

In fact, inflation adjusted home prices are now 20% above their 2008 peak, the previous all time high.

The median home now sells for an alarming 530% of the median annual income.

Meanwhile, the median house payment is now a record 49% of median PRE-TAX income.

Affordability has never been worse.

We have never seen anything like this in the entire history of our country.

Since the beginning of 2019, the median price of a home in the U.S. has risen by more than a hundred thousand dollars…

In fact, comparing present prices to levels before the virus panic, St. Louis Fed numbers show a median priced U.S. home rose from $313,000 in the beginning of 2019 to $416,000 today.

Rental prices have gone completely nuts as well.

As I discussed last week, the median asking rent in the United States is now over $2,000 a month.

Over the past couple of years we have seen unprecedented rent hikes, and vast numbers of renters have been getting the boot.

In fact, we are seeing a tsunami of evictions in the Los Angeles area right now…

With COVID-era protections gone, the number of renters facing eviction in Los Angeles continues to climb by the thousands each month.

From February through the end of August, approximately 50,000 eviction notices were filed by landlords in the city, according to figures released on Monday by the L.A. Controller’s Office.

A spokesperson said 96% of them involve non-payment of rent, and landlords were owed $186.5 million collectively.

So where will all these people go?

If they are young enough, perhaps they can live with their parents.

But many will not have that option.

Up to this point in 2023, homelessness in the United States has been rising at the fastest pace ever recorded, and a lot more Americans will find themselves without a home between now and the end of the year.

Meanwhile, those that are still scraping by will find it harder and harder to make ends meet.

The average rate of interest on our credit card balances has risen from about 16 percent in February 2022 to more than 22 percent today.

As a result, an increasing number of Americans find themselves unable to keep up with their payments, and it is being reported that credit card losses are rising at the quickest rate since the last financial crisis…

Credit card companies are racking up losses at the fastest pace in almost 30 years, outside of the Great Financial Crisis, according to Goldman Sachs.

Credit card losses bottomed in September 2021, and while initial increases were likely reversals from stimulus, they have been rapidly rising since the first quarter of 2022. Since that time, it’s an increasing rate of losses only seen in recent history during the recession of 2008.

It is far from over, the firm predicts.

More Americans are going bankrupt as well.

In fact, the number of bankruptcy cases in August 2023 was 18 percent higher than it was in August 2022.

Millions upon millions of Americans have been turning to debt in order to keep up with the cost of living, but as economic conditions deteriorate financial institutions are starting to get much tighter with their money.

So we are moving into a time when U.S. consumers will find it much more difficult to take on new debt…

Nearly 60% of the respondents in a New York Fed consumer expectations survey said it’s harder to get credit cards, mortgages and other loans than it was a year ago. It was the highest level since the New York Fed started the data series back in 2013.

Another Fed survey of loan officers reveals their fears aren’t unfounded. Banks reported that lending standards tightened across all consumer loan categories and all categories of residential real estate (RRE) loans. Meanwhile, the number of banks reporting tighter standards for credit cards rose by 36%.

Banks have also significantly tightened standards for business loans.

This is a recipe for disaster.

That is definitely true.

Without a doubt, this is certainly a recipe for disaster.

But there is no going back now.

In fact, the rising price of oil is going to cause enormous inflationary pressures throughout our entire economic system in the months ahead.

On Tuesday, a senior market analyst at OANDA warned that it appears that “nothing is going to get in the way of this oil price rally”…

“It looks like nothing is going to get in the way of this oil price rally,” said Edward Moya, senior market analyst at OANDA, in emailed comments on Tuesday. “Energy traders know a bullish trend when they see one and it will take a lot more than a strong dollar, softer Russian ban, and weakening demand, to disrupt this rally.”

When the price of oil reaches 100 dollars a barrel, that will be painful, but we can handle that.

But the chief executive of Continental Resources is projecting that the price of oil could eventually reach 150 dollars a barrel…

That’s Doug Lawler, chief executive of Continental Resources, the shale-drilling giant controlled by billionaire Harold Hamm, telling Bloomberg News on Monday that crude prices are set to remain elevated and could press to the $120- to $150-a-barrel range without new production.

More price pressure is coming, he said, unless policies are put in place to encourage more output.

If the price of oil reaches 150 dollars a barrel and stays there, it will be an unmitigated disaster for our economy, and the cost of just about everything will jump substantially.

That is because just about everything that we buy and sell has to be transported.

We need cheap energy in order to have a high standard of living, but unfortunately the era of cheap energy is coming to an abrupt ending, and that means that none of our lives will ever be the same again.

I kept warning my readers that a lot of the long-term trends that I have been writing about would catch up with us eventually, and now that time has arrived.

So enjoy the current economic conditions while you still can, because they will soon go from bad to worse.

*  *  *

Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

Locals are telling Nikkei that Kuala Lumpur’s semiconductor industry is bustling in a way it hasn’t in 34 years.

Speaking to Ng Kok Tiong, a senior vice president at Infineon, it’s becoming clear that the semiconductor industry in Malaysia is attempting to ramp up. As one example, Ng told Nikkei he is experiencing daily traffic jams that he’s never seen before

Ng would have his finger on the pulse of the industry in the country. He is also chairman of the Semiconductor Fabrication Association of Malaysia, the report notes. His company, Infineon, is in the process of building a $7 billion facility that’ll be used as a production site for silicon carbide chips. 

He told Nikkei this week: “Malaysia benefited quite a bit from this diversification of the supply chain. Traffic increased a lot because of so many factories coming. The government is now widening the road, and that will likely be complete by next year.”. 

Once a forerunner in Asian semiconductor production, Malaysia garnered the epithet “the Silicon Valley of the East” in the 1970s. However, it ceded its leadership position to South Korea and Taiwan due to the meteoric rise of native firms like Samsung Electronics and Taiwan Semiconductor Manufacturing Co. during the 1990s. Amid escalating U.S.-China tensions, Malaysia now eyes resurgence as the sector seeks to broaden its production base.

Boosting this aspiration are significant foreign investments: U.S.-based Intel intends to invest $7 billion in Malaysia, making it the focal point of the company’s Asian operations. Furthermore, in the Bayan Lepas industrial park, southeast of Penang Island, Intel is constructing its most extensive facility focused on state-of-the-art 3D chip packaging—a critical frontier in the race for more potent chips.

Intel’s vice president of manufacturing and supply chain, AK Chong, commented: “There is a saying that goes, ‘A rising tide lifts all boats’. You’re bringing in a lot of ecosystem suppliers. Like our advanced packaging — you need a new chemical solution and new equipment. So you expect a lot of these investments coming in. It’s like a chain effect.”

Nikkei writes that Foreign direct investment in Malaysia soared to an all-time high in Q1 2023, reaching $15.25 billion, more than doubling the entire amount for 2019.

Primarily driven by global tech and semiconductor firms, Malaysia holds a 13% share in the global market for chip packaging, assembly, and testing. However, the country’s chip industry is overwhelmingly reliant on foreign giants like Intel and NXP, with domestic firms playing a minor role. Additionally, the sector faced a bottleneck in 2020 due to COVID-19 restrictions.

Post-pandemic, Malaysia is promoting its stable geopolitics and low natural disaster risk to attract foreign investment. Companies like Jabil, Micron, and Bosch are expanding their operations in the Penang region, while DHL Express is adding logistics centers. Lam’s CEO identified Malaysia as one of Asia’s three key chip production hubs, alongside Taiwan and South Korea. Intel’s local head emphasized Malaysia’s strategic location and the English proficiency of its workforce.

“We are now finalizing a project to build new production sites soon in either Malaysia or Vietnam because of demands from clients. No matter whether the cost is higher, that’s a trend we have to follow,” concluded Scott Lin, president of Marketech International Corp., a leading chipmaking facility builder and equipment supplier to TSMC, ASML and Applied Materials. 

By Teeuwe Mevissen, Senior Macro Strategist at Rabobank

The Federal Reserve’s ability to influence the economy depends on whether “people understand what we are saying,” according to Fed Chair Jerome Powell. So did market participants not understand what the Fed was saying for quite some time? Or, more likely, did markets simply not believe the Fed’s narrative for a long time? Looking at yesterday’s sharp movements that seems to be pointing more in that direction. Indeed, yesterday saw markets being confronted with nothing less than a bond sell off. This all despite data that showed that inflation in Europe decreased further and even came out lower than expected. Many reasons for yesterday’s moves were given.

Some pointed towards the oil market where dwindling stockpiles and fears of falling crude supplies globally fanned inflation fears. Others mentioned the looming government shutdown in the US, which our US and Fed strategist Philip Marey has covered for you in his latest special and which can be found here. For those who want the very brief summary. It looks like the government is going into a government shutdown on Sunday. The main reason for that being divisions within the GOP between the House Freedom Caucus and the rest of the Republicans. Then some ‘blamed’ hawkish central bankers like Kashkari and Nagel who clearly left open the possibility for more rate hikes. Yet others claim that the market has finally woken up to the idea that rates are likely to stay higher for longer. In other words they might finally understand what the Fed has been saying. While all of the above likely had some influence on yesterday’s movements, considering the fact that the fed funds future for December 2024 declined last month, the recent moves can also point to a rise in the term premium, which -unfortunately- is a technical construct and could reflect anything, from liquidity premiums to inflation risk premiums AND uncertainty about future policy rates (which, again, may also include a ‘higher for longer’ acknowledgement by market participants, albeit at a longer projection horizon).

Japan has also been hit  by a selloff of its government bonds and those bonds are set for the worst quarterly selloff in two decades. But while these securities have lost about 3% during the third quarter, non-Japanese government bonds have slumped no less than 4.6%. Still, the yield on a 10-year Japanese government bond reached the highest level in 10-years at 0.755%. An important reason is that the Bank of Japan did not raise interest rates yet but this also means that, should the BoJ start raising rates next year, Japanese bonds will be under more pressure.

But whatever the reason or reasons, bond holders took a big hit yesterday with long term European and US yields rising 10 basis points or more. Moreover, the spread between 10 year Bunds and 10-year BTP’s also rose to 200 basis points. Today we see a slight reversal in bond yields bringing down both the 10-years EUR swap and the German 10-year bund with 5 basis points at the moment of writing. This brings the yields to 3.40% and 2.87% respectively. Some dovish leaning comments and news about a possible encounter between Biden and Xi seem to have done the trick. Also stocks are recovering a bit today, which is the last trading day of a disappointing third quarter for stock markets.

Today also saw a slew of data coming from Japan. Today’s inflation data showed that inflation was slightly higher in YoY terms than expected (2.8% vs 2.7% expected) while core inflation came out slightly lower than expected. Ex-food inflation stood at 2.5% YoY but ex-food and -energy prices rose 3.8%, meaning that the underlying rate of inflation is still well above 2%.  August retail sales also went up 7% YoY although compared to the previous month of July, retail sales only rose with 0.1%. Industrial production remained unchanged compared to the previous month but on an annual base it still reported a decline of 3.8%.

This morning also saw a lot of data coming in from the United Kingdom. Second estimates regarding economic growth over the second quarter of this year showed some interesting revisions. While QoQ GDP growth was still estimated to be 0.2%, the annual growth figure was revised upwards from 0.40% to 0.60%. And while consumption and government spending where lower than initially reported, business investments showed a surprising acceleration rising 4.1% compared to the first quarter of this year. Finally, Germany saw some disappointing retail sales figures showing that consumers spent 1.2% less compared to last month and 1.09% less compared to a year ago. This all reflecting the difficult economic position that Germany finds itself in, the result of a long era of erroneous policies regarding trade, energy and security.  

The House and the Senate are both rolling out versions of a Continuing Resolution (CR) stopgap which would stave off a government shutdown. The problem is that there’s no chance either chamber will pass the other’s proposal.

The House plan, dubbed the Spending Reduction and Border Security Act, would extend funding through the end of October, but also includes spending cuts of around 30% – with the exemptions of national defense, the Departments of Veterans Affairs and Homeland Security, and for funding designated disaster relief, The Hill reports.

No Democrats are expected to vote for the House measure, meaning Speaker Kevin McCarthy (R-CA) can only lose four Republicans if the full house is in attendance – which McCarthy might not even have, as at least four House Republicans have gone on record opposing any short-term spending measure.

The House Rules Committee will consider the legislation Friday morning before a floor vote.

And if the House bill does pass, it will be dead-on-arrival in the Senate, which will lead to a shutdown.

The House short-term measure also includes a chunk of the party’s signature border bill, known as H.R. 2, which would boost wall construction, hiring of border agents and restrict access to asylum, among other measures.

The bill also calls for the establishment of a fiscal commission that would identify solutions to achieve what it called a “sustainable debt-to-GDP ratio” and to balance the federal budget. It would recommend changes to improve solvency for some programs, such as Medicare and Social Security. -The Hill

The Senate, meanwhile, is expected to pass its own short-term CR, however McCarthy and his colleagues won’t even bring it to the House floor for a vote, according to the report.

On Thursday night, the US government notified federal workers that a shutdown appears imminent, as the Biden administration begins the formal process of preparing much of Washington to come to a halt on Sunday, according to the Washington Post.

The paychecks of millions of federal employees and military service members hang in the balance, while the looming government shutdown also means closed national parks, passport offices, and potentially more dire interruptions in federal housing, food, and health aid for the economically disadvantaged segments of the population.

Departments such as the Department of Housing and Urban Development and the IRS are also poised for significant operational challenges, given the potential furloughing of a significant majority of their workforce.

Members of the military are similarly expected to helm their posts in a shutdown without pay, creating the prospect of a “worst-case scenario” for the Defense Department, said Sabrina Singh, the deputy press secretary for the Pentagon. For each day Congress fails to act, she said the “bills are going to mount up” for troops who still must purchase groceries, cover rent and address other financial needs, adding: “We really shouldn’t be in this position.”

Michael Linden, a former top official at the White House Office of Management and Budget, said the notices reflected a hard political reality: Unlike past spending battles that yielded an 11th-hour deal, “the chances of a shutdown are much higher.” -WaPo

“If you’re 48 hours out from a potential shutdown, but it’s very clear there’s a [deal] on its path, then you might not do that,” said Linden, adding “But if there isn’t, you are going to have to tell agencies to tell their teams, so people can start to plan.”

Gaetz guns for McCarthy

Amid the turmoil, Rep. Matt Gaetz (R-FL) says Kevin’s gotta go.

Gaetz has railed against continuing resolutions that he blames for Washington’s fiscal dysfunction, Politico reports (and as we predicted, throwing the Freedom Caucus under the bus for the shutdown).

“He wants Kevin,” said a Gaetz friend. “That’s it, and everything else revolves around that.”

Gaetz has by no means brought McCarthy to his knees by himself. But he has harnessed the anti-establishment fervor inside the House GOP like no other member, setting trap after trap for a speaker desperate to please his detractors and keep his job.

Past government shutdowns have been organized around a demand — reversing the Affordable Care Act, for instance, or building a border wall. This one, should it come to pass Sunday, is better understood as being centered on a long, nasty grudge.

The tensions spilled out again yesterday, with Gaetz angrily confronting McCarthy in front of the entire GOP conference. The scene rekindled questions about the factors driving Gaetz’s recent behavior.

According to senior GOP aides on the Hill and in Trump’s White House, McCarthy would constantly shut down Gaetz’ ideas which were floated to Trump. For example, during Trump’s first impeachment, Gaetz pressured McCarthy to place Freedom Caucus members on the House Intelligence Committee leading the public hearings. McCarthy instead phoned Gaetz and read him the riot act.

“Gaetz has boxed McCarthy in,” said one senior GOP aide close to McCarthy’s orbit. “People think Gaetz is dumb, but … he’s really smart.“

Authored by Simon White, Bloomberg macro strategist,

Bonds continue to look oversold after the equally-sharpest rise in the global median real yield seen in at least 60 years. More consolidation in the shorter term is anticipated as bonds continue to work off their oversold condition.

Yields across DM have hit cycle highs in recent days. They started to swing lower Thursday afternoon and are following through in the European morning.

Term premium has been rising as bonds’ efficacy as a portfolio and a recession hedge is impaired when the stock-bond correlation is positive. After most of the last two decades being negative, the correlation is positive again as inflation and inflation expectations have a greater influence on markets.

The global real yield of the largest EM and DM countries has increased by the most over one year since 1969, rising by over six percentage points.

After such a rise, bonds are likely due some interim relief or consolidation. They remain oversold on a short and a medium-term basis. The chart below shows that US bonds are still more than one-standard deviation below their long-term mean growth rate.

Positioning is generally long, so there is a risk of more selling if bonds continue to fall, but a stabilization should see positions held on to.

Moreover, +4.5% yields will start to look irresistible to many longer-term buyers of debt, such as liability matchers.

Further, peak global hawkishness is behind us. The Global Financial Tightness Indicator (GFTI) is a diffusion of central-bank rate hikes around the world. When it’s falling, as it is today, it means fewer banks are raising rates.

As the chart below of the GFTI shows, US 10-year yields tend to track its ups and downs. The easing of the GFTI should mean less impetus for higher yields (for now).

Nonetheless, the secular picture for bonds remains inhospitable. Rising inflation expectations, mounting supply, and bonds’ diminishing hedging utility (these are all sides of the same coin), mean that any rally in bonds would be considered a trade, not an investment.

One of The Fed’s favorite inflation indicators – Core PCE Deflator – slowed to 3.9% YoY in August (its lowest since Sept 2021). Headline PCE jumped up to +3.5% YoY, its highest since May…

Source: Bloomberg

After 3 months of ‘deflation’, Goods prices rebounded strongly in August (up most since June 2022)..

Source: Bloomberg

Even more focused, is the Fed’s view on Services inflation ex-Shelter, and the PCE-equivalent shows that is very much stuck at high levels (ignore the data series, Bloomberg screwed up on revisions)…

Source: Bloomberg

Personal income grew 0.4% MoM and so did Spending…

Source: Bloomberg

But both remain up significantly on a YoY basis…

Source: Bloomberg

Adjusted for inflation, ‘real’ personal spending was higher in August (up 2.3% YoY)…

But Real Disposable Income fell 0.2% MoM (the 3rd monthly decline in Americans’ earnings in a row)…

And Wage growth is slowing:

• August Private worker wage growth down to 4.6%, from 4.9% in July and the lowest since March 21

• August Govt worker wage growth down to 6.8% from 6.9% in July, and the lowest since May

All of which pushed the savings rate lower (amid numerous revisions once again) to 3.9% of DPI – the lowest in a year…

So ‘stickier’ than expected inflation – driven by a re-emergence of goods inflation – and savings rates shrinking again… Bidenomics, bitches!

US equity futures and global stocks rose on the last trading day of the week, month and quarter and global bonds rebounded after dovish comments from Fed officials and signs that European inflation is finally slowing when EU consumer prices rose just 4.3%, down from 5.2% in August, and the lowest since Oct 2021. Ahead of today’s closely watched “Fed’s favorite inflation gauge”, the core PCE due out at 8:30am ET, S&P and Nasdaq 100 futures were up 0.4% as longer-dated bond yields were 2-3bps lower while supportive inflation data in Europe drove European bond yields lower this morning. 30-year TSY yields are down 3bps at 4.68% but still on course for their largest quarterly gain since 2009. The US Dollar dropped and crude oil rebounded. Commodities are mostly higher led by base metals (Aluminum +1.8%; Copper +1.3%), with Brent back over $96 and approaching the 2023 high of $97. Today’s macro focus is on PCE, Personal Income/Spending, Chicago PMI, and U of Mich. survey data. For PCE, consensus sees the PCE deflator printing at 0.5% vs. 0.2% prior and Core PCE deflator rising 0.2%, unchanged from 0.2% prior.

In premarket trading, mega cap tech stocks were broadly higher; Nike rose 8% after the sportswear giant reported earnings per share for the first quarter that beat the average analyst estimate and kept its outlook unchanged for the year. The report was a positive surprise, with the outlook “better than buyside fears,” said Morgan Stanley. OPKO Health rose 8% after its ModeX Therapeutics won a contract from the US to develop antibodies to battle viral infectious disease threats.

Wall Street closed higher on Thursday after comments from Fed rate-setters including Richmond Fed chief Thomas Barkin, who said the US would likely skirt a severe downturn. Meanwhile, his Chicago Fed counterpart Austan Goolsbee said policymakers were at risk of overshooting on interest rates. Adding to positive sentiment, the WSJ reported China’s Vice Premier He Lifeng and Foreign Minister Wang Yi are discussing possible visits to the US to prepare for a potential summit between Xi Jinping and Joe Biden.

Today’s stock rebound signals relief after a quarter that’s put 30-year borrowing costs on track for their steepest increase since 2009. Here are some of the superlatives we’ve seen this quarter:

• US 2s10s inversion dropped to May’s lows
• 5y US yield highest since 2007
• 10y US yield highest since 2007
• 30y US yield highest since 2010
• 10y German yield highest since 2011
• Japan 10y highest since 2013
• Japan 20y highest since 2014
• Japan 30y highest since 2013

Not surprisingly, amid soaring rates, the July-September quarter has been the worst for MSCI’s all-country index since September 2022, as surging oil prices fanned fears over inflation and economic growth.

“We have had a lot of smallish pieces of better news all coming together at the same time,” said Stuart Cole, head macro economist at brokerage Equity Capital, forgotten to add that we have also had a lot of pieces of bad news alongside, which however markets have generally ignored. While the Fed officials’ comments soothed fears of further US rate rises, sentiment received a further boost from Friday’s softer inflation prints, he said. “Taken in conjunction with the softer German numbers yesterday, that has raised hopes that the ECB is done with tightening,” said Cole.  

Investors are now awaiting the core personal consumption expenditures price index, which economists expect will have slowed in August on an annualized basis to 3.9% from 4.2%.

Europe’s Stoxx 600 equity index rose more than 1%, as data showing euro-area inflation at a two-year low boosted expectations that the ECB’s hiking cycle was over and that rates in the EU could stay on hold if not drop. Rate-sensitive sectors, such as real estate and luxury led the gains, with the latter also boosted by a bullish strategy note from Bank of America. The data “increases our conviction that the ECB hiking cycle is done,” said Samuel Zief, head of global FX strategy at JPMorgan Private Bank. Here are the top European movers:

• Luxury stocks including LVMH, Hermes and Richemont all rise at least 2.5% after Bank of America strategists raised their view on the luxury sector to overweight, saying recent underperformance now fully reflects an expected slowdown in global business activity.
• Among other luxury names, Brunello Cucinelli shares rise as much as 8.7% after Goldman double-upgrades the Italian firm to buy from sell, saying it offers underappreciated defensive qualities.
• Commerzbank shares gain as much as 12% after the German lender pre-announced planned capital returns that analysts say suggest significant upside to current consensus numbers.
• Adidas, Puma, JD Sports shares rise after Nike reported a drop in its stockpile of inventory, a sign it’s making progress in moving out older merchandise for newer, more-profitable items.
• Aston Martin shares surge as much as 13% after the carmaker said Executive Chairman Lawrence Stroll’s Yew Tree Consortium agreed to boost its stake in the firm to 26.2%.
• OCI shares rise as much as 8.6% after Jefferies says it offers a “rare corner” of positive earnings momentum within the European chemicals sector and upgrades to buy.
• Future shares rise as much as 21% after a full-year trading update that led Shore Capital to reiterate that the media company is well placed to deliver “attractive growth.” Analysts highlighted the stock’s low valuation.
• Ascential shares rise as much as 7.6% in London after Sky News reports that Apax Partners has entered advanced discussions to buy the company’s consumer trend-spotting unit, WGSN.
• Cellnex shares gain as much as 4.5% after Stonepeak buys 49% stake in Cellnex’s Swedish, Danish units for €730 million, according to a Spanish regulatory filing.
• Fevertree shares rise 4.7% after Nordflint Capital Partners disclosed a 5% stake in the maker of tonics and mixers.
• Alpha Group shares fall as much as 4.6%, to the lowest since March, after holder Morgan Tillbrook sold about 1.8% of its stake in the institutional broker at a price of £19.00 per share.

Earlier in the session, Asian equities also advanced, bolstered by a rally in Hong Kong stocks amid optimism over Golden Week holiday spending. The MSCI Asia Pacific Index climbed as much as 0.4% on Friday, helping trim losses for the quarter to less than 4%. Chinese tech stocks trading in Hong Kong including Tencent and Alibaba offered the largest support.

• Benchmarks in Hong Kong jumped more than 2%, outperforming in the region following further supportive measures by Chinese authorities, while the index was unfazed by the absence of mainland participants and Stock Connect flows due to the Mid-Autumn Festival and next week’s National Day holidays.  Traders cited positive outlook for Chinese consumption during the peak travel season and dip buying as reasons for the rebound. The oil rally taking a breather also supported sentiment. “The bounce in China follows the US tech overnight and may be driven by some easing in the dollar and oil, both of which have been leaving markets anxious,” Marvin Chen, a strategist at Bloomberg Intelligence said. “It looks like a broad relief rally across the region after a week of declines,” Chen said.
• Japan’s Nikkei 225 failed to sustain early gains and pulled back from resistance around the 32,000 level despite several encouraging data releases.
• Hang Seng outperformed as property and tech surged after the recent easing of yields and
• Shares in Australia and New Zealand also gained; the ASX 200 was kept afloat by outperformance in the mining and materials sectors but with trade constricted amid quasi-holiday conditions with Victoria state on a public holiday.
• Indian stocks advanced Friday along with most Asian peers as expectations of higher spending during the upcoming Golden Week holiday in China boosted sentiment. The S&P BSE Sensex ended 0.5% higher at 65,828.41 as of 3:45 p.m. in Mumbai, while the NSE Nifty 50 Index advanced 0.6% to 19,638.30. India’s main benchmarks were up by a percent for the day before a late session selloff saw them come off their highs, as investors lightened positions due to the upcoming long weekend. Stocks closed lower on the week. Sentiment was also boosted by a slide in the dollar and some softness in Brent crude prices that are showing a struggle just under the psychological $100 a barrel mark.

In FX, the kiwi and Norwegian krone are the best performers among the G-10 currencies while the dollar fell for a second day and underperformed all G-10 peers amid quarter-end flows, with the Bloomberg Dollar Spot Index about 0.4% lower; still, the gauge is up about 2.3% this quarter, the most in a year.  “The dollar is trading lower as a much-needed correction takes hold,” said Win Thin, global head of currency strategy at Brown Brothers Harriman. “The fundamental story remains in favor of the greenback as the US economy is in a much stronger position.” EURUSD rose 0.4% to 1.0604 and held its advance after euro area inflation came in below expectations. The yen briefly dipped after the central bank announced an unscheduled bond-buying operation, but later reversed losses to trade as much as 0.5% higher on the day. Meanwhile, Japan’s government bonds are poised for the worst quarterly selloff since 1998

In rates, global bond yields eased after the previous day’s selloff, with 10-year US Treasuries down about 3 basis points and Japanese 10-year yields sliding from decade-highs after an unscheduled bond-buying operation by the central bank. British and euro-area borrowing costs slid more than 5 basis points. French bonds were among the biggest gainers after data showed price growth unexpectedly slowing, a day after Germany reported inflation at the lowest in two years.  Treasuries pushed higher following wider gains seen across core European rates, with yields down by 3bp to 4bp across the curve. US 10-year yields were around 4.55%, down by by 3bp on the day, with bunds and gilts outperforming by 4.5bp and 1bp in the sector, respectively; front-end lags rest of the curve slightly, flattening 2s10s spread by around 1bp on the day, sitting back around 50bp inverted. That said, the session could still see some quarter-end rebalancing flow, while highlights also include packed data slate headed by PCE deflator. Quarter and month-end re-balancing flows may still be in play for the session; Bloomberg indicies project a 0.07y October extension.

In commodities, crude prices reversed much of yesterday’s losses, trading higher in lockstep with broader risk sentiment on month and quarter end, but the range of price action this morning is narrow. Spot gold is modestly firmer amid the pullback in the Dollar after tumbling to a low of USD 1,857.79/oz this week – the lowest since early March – largely due to this week’s rise of the Greenback.

Bitcoin prices trade flat intraday around the USD 27,000 mark following yesterday’s risk-induced rally.

US economic data slate includes August wholesale inventories, personal income/spending, PCE deflator (8:30am), September MNI Chicago PMI (9:45am), University of Michigan sentiment (10am) and Kansas City Fed services activity (11am). Scheduled Fed speakers include Williams at 12:45pm

Market Snapshot

• S&P 500 futures up 0.5% to 4,357.50
• STOXX Europe 600 up 1.0% to 452.79
• MXAP up 0.6% to 157.66
• MXAPJ up 1.3% to 493.22
• Nikkei little changed at 31,857.62
• Topix down 0.9% to 2,323.39
• Hang Seng Index up 2.5% to 17,809.66
• Shanghai Composite up 0.1% to 3,110.48
• Sensex up 0.9% to 66,087.90
• Australia S&P/ASX 200 up 0.3% to 7,048.64
• Kospi little changed at 2,465.07
• German 10Y yield little changed at 2.86%
• Euro up 0.4% to $1.0606
• Brent Futures down 0.3% to $95.10/bbl
• Gold spot up 0.4% to $1,872.18
• U.S. Dollar Index down 0.43% to 105.77

Top Overnight News

• The BOJ announced an unscheduled bond-purchase operation after yields on long and super-long debt climbed to decade highs. The operation is small and probably not strong enough to bring a big reduction in yields, according to Sumitomo Mitsui, but a larger one may weaken the yen toward 150 versus the dollar. BBG
• Japan’s Tokyo CPI ex-food/energy for Sept comes in at +3.8%, down from +4% in Aug and below the Street’s +3.9% forecast (headline was +2.8%, down from +2.9% in Aug but ahead of the Street’s +2.7% forecast). BBG
• A senior executive at American risk advisory firm Kroll has been barred from leaving mainland China, the latest example of Chinese authorities imposing exit bans on the employees of foreign firms. Michael Chan, a Hong Kong-based managing director who specializes in corporate restructuring, is assisting an investigation into a case that dates back a few years, according to people familiar with the matter. Neither Chan nor Kroll is the target of the investigation, the people said. WSJ
• China has proposed relaxing its strict rules on data flows abroad, in its latest move to allay foreign business concerns and revive faltering growth in the world’s second-largest economy. The Cyberspace Administration of China has drafted a set of exemptions to its requirement for approval to send personal data overseas, which applied to cross-border purchases, money transfers and air and hotel reservations. BBG
• Saudi Arabia is determined to secure a military pact requiring the United States to defend the kingdom in return for opening ties with Israel and will not hold up a deal even if Israel does not offer major concessions to Palestinians in their bid for statehood, three regional sources familiar with the talks said. RTRS
• Europe’s CPI sinks to +4.3% on the headline (down from +5.2% in Aug and below the Street’s +4.5% forecast) while core falls to +4.5% (down from +5.3% in Aug and below the Street’s +4.8% forecast). France’s CPI for Sept cools to +5.6%, down from +5.7% in Aug and below the Street’s +5.9% forecast. BBG
• Credit Suisse flagged potential losses of as much as $2.2 billion in the third quarter as it exits more businesses. The losses from loan portfolios won’t affect UBS results as the impact was previously taken into account, said Vontobel analyst Andreas Venditti. UBS shares ticked up. BBG
• The world’s financial stability watchdog is launching a probe of the build-up of debt outside traditional banks, as it seeks to limit hedge funds’ borrowing and boost transparency. Klaas Knot, chair of the Financial Stability Board, told the Financial Times the review was intended to address rising risks from so-called non-banks, which include hedge funds and private capital. FT
• US income and spending data for August may complicate the Fed’s soft-landing optimism, Bloomberg Economics said. Revised data is expected to show prices running hotter than previously thought. Still, core PCE inflation and Jerome Powell’s preferred “supercore” gauge probably came in soft for a third straight month, while spending and income grew at a solid pace. BBG

A more detailed look at global market courtesy of newquawk

APAC stocks mostly took impetus from Wall St’s positive lead after risk appetite was spurred as yields and oil prices declined from recent peaks but with some of the gains in the region capped heading into quarter-end and amid several holiday closures. ASX 200 was kept afloat by outperformance in the mining and materials sectors but with trade constricted amid quasi-holiday conditions with Victoria state on a public holiday. Nikkei 225 failed to sustain early gains and pulled back from resistance around the 32,000 level despite several encouraging data releases. Hang Seng outperformed as property and tech surged after the recent easing of yields and following further supportive  measures by Chinese authorities, while the index was unfazed by the absence of mainland participants and Stock Connect flows due to the Mid-Autumn Festival and next week’s National Day holidays.

Top Asian News

• Japanese Finance Minister Suzuki said don’t have a defence line in dealing with FX moves and that current FX moves suggest the Yen’s weakness has progressed, according to Reuters.

European bourses are trading higher across the board with the Stoxx 600 now virtually flat week-to-date after yesterday’s positive session helped erase losses earlier in the week, while EZ inflation metrics this morning printed below expectations. Sectors in Europe are mostly firmer with Consumer Products & Services top of the leaderboard as luxury names benefit from broker action. Other gainers include Tech, Real Estate and Basic Resources, whilst Insurance and Energy are the only sectors in the red. US futures are trading firmer as they continue to advance on yesterday’s gains, owing to a generally more positive risk tone and as yields see some downside over the past couple of sessions.

Top European News

• LVMH (MC FP) CEO Bernard Arnault and Russian oligarch Nikolai Sarkisov are under investigation for alleged money laundering, via Yahoo Finance.
• ECB’s Vasle said headline inflation is on a declining trend; growth is slowing but the labour market remains strong; transmission of ECB policy to the banking sector is strong, according to Bloomberg.
• ECB’s Vujcic said he is confident that inflation will slow in the coming months, according to Bloomberg.

FX

• DXY succumbs to more intense selling pressure and retreats to 105.660 amid softer US Treasury yields and renewed risk appetite.
• Euro bounced from around 1.0559 to 1.0616 irrespective of weaker than consensus German retail sales, French and pan-Eurozone inflation metrics that exacerbated the revival in EGBs.
• Pound secured a firmer grip of the 1.2200 handle against the Dollar, even before better-than-expected BoE consumer credit, mortgage approvals and lending, but stalled just ahead of the 10 DMA that came in at 1.2259.
• Antipodeans sit as the top G10 performers amid the constructive risk tone while the Yen benefits from the pullback in yields.

Fixed Income

• EGBs were already clawing back some of their heavy losses before below-forecast German retail sales provided a bit more impetus, but weaker than expected French CPI offered more incentive and the ensuing softer-than-consensus pan-Eurozone readings further bolstered the benchmarks.
• Bunds extended their rebound to exactly 100 ticks from Eurex low to 128.46 high, OATs probed 123.00 at 123.05 from 121.98 at worst and even BTPs got close to 110.00 from sub-109.00 irrespective of mixed Italian inflation metrics.
• Gilts reached 94.18 compared to their early 93.62 Liffe base and the T-note is hovering close to the top of a 108-8+/107-26 range.

Commodities

• Crude prices have been relatively flat throughout the European morning, but the contracts have been tilting higher in lockstep with broader risk sentiment on month and quarter end, but the range of price action this morning is narrow.
• Spot gold is modestly firmer amid the pullback in the Dollar after tumbling to a low of USD 1,857.79/oz this week – the lowest since early March – largely due to this week’s rise of the Greenback.
• Base metals are also on a firmer footing amid the Dollar pull-back and the broader constructive risk profile.
• UK treasury minister Penn said the efficacy of the Russian oil price cap must be kept under review.
• US President Biden administration’s 5-year offshore oil plan will be released on Friday but does not include any sales for 2024 and will have no more than 1 auction in each of the final four years, according to Reuters sources.
• Russia may introduce quotas on overseas fuel exports if the complete export ban (imposed last week) does not bring down high domestic gasoline and diesel prices, according to Russian Deputy PM Novak cited by Reuters.

Geopolitics

• Saudi Arabia is reportedly determined to secure a military pact requiring the US to defend the kingdom in return for opening ties with Israel, and will not hold up a deal even if Israel does not offer major concessions to Palestinians, via Reuters citing sources A pact might fall short of the NATO-style defence guarantees the kingdom initially sought when the issue was first discussed between MBS and US President Biden during the Biden’s visit to Saudi Arabia in July 2022. Washington could also sweeten any deal by designating Saudi Arabia a Major Non-NATO Ally, a status already given to Israel, according to the source.
• US Assistant Secretary of State Kritenbrink met with China’s Vice Foreign Minister in Washington and the two sides held candid, in-depth and constructive consultations on regional issues. Furthermore, Kritenbrink reaffirmed the importance of maintaining peace and stability across the Taiwan Strait and the sides discussed regional issues including Myanmar, North Korea and maritime matters.
• US Treasury Secretary Yellen is to use improved communications with China to discuss contentious issues and gain new insights into China’s economy, via Axios.

US Event Calendar

• 08:30: Aug. Personal Income, est. 0.4%, prior 0.2%
• 08:30: Aug. Personal Spending, est. 0.5%, prior 0.8%
• 08:30: Aug. Real Personal Spending, est. 0%, prior 0.6%
• 08:30: Aug. PCE Core Deflator YoY, est. 3.9%, prior 4.2%
• 08:30: Aug. PCE Core Deflator MoM, est. 0.2%, prior 0.2%
• 08:30: Aug. PCE Deflator YoY, est. 3.5%, prior 3.3%
• 08:30: Aug. PCE Deflator MoM, est. 0.5%, prior 0.2%
• 08:30: Aug. Advance Goods Trade Balance, est. -$91.4b, prior -$91.2b, revised -$90.9b
• 08:30: Aug. Wholesale Inventories MoM, est. -0.2%, prior -0.2%
• 09:45: Sept. MNI Chicago PMI, est. 47.6, prior 48.7
• 10:00: Sept. U. of Mich. Sentiment, est. 67.7, prior 67.7
• 10:00: Sept. U. of Mich. Current Conditions, est. 69.8, prior 69.8
• 10:00: Sept. U. of Mich. Expectations, est. 66.4, prior 66.3
• 10:00: Sept. U. of Mich. 1 Yr Inflation, est. 3.2%, prior 3.1%
• 10:00: Sept. U. of Mich. 5-10 Yr Inflation, est. 2.8%, prior 2.7%
• 11:00: Sept. Kansas City Fed Services Activ, prior -1

DB’s Jim Reid concludes the overnight wrap

As we arrive at the last business day of the month, it’s fair to say that September has lived up to its reputation as the worst month of the year for markets. The sour mood dominated the early part of yesterday, with yields hitting new highs for the cycle on both sides of the Atlantic. For instance, 10yr bund yields rose +9.1bps to a post-2011 high of 2.93%, whilst 10yr Treasury yields hit an intraday high of 4.69%, before a sharp turn that took them down over 10bps intraday to 4.57% by the close. We’ve pointed out recently that a 10yr Treasury yield at 4.5% is actually in line with the long-term historical average, but as markets got increasingly used to a decade-and-a-half of historically low rates since the GFC, this is coming as a big adjustment to lots of investors. Indeed, it was only three-and-a-half years ago that the 10yr Treasury yield hit an all-time intraday low of 0.31%. But since then we’ve seen an astonishing turnaround, and it’s worth remembering that the annual rise in the 10yr yield of 236bps over 2022 was already the biggest annual increase since 1788. So even though yesterday saw a breather by the end of the session, it’s no exaggeration to say we’re in the midst of a historic sell-off.

That rates sell-off dominated in Europe, with the UK seeing the biggest declines. At one point intraday, the 1 0yr gilt yield was even on track to close more than +20bps higher, which would have been the biggest daily increase since the aftermath of the mini-budget last year. But it then pared back those moves to “only” close up by +12.9bps. It was the same story elsewhere in Europe, with yields on 10yr bunds (+9.1bps), OATs (+8.8bps) and BTPs (+7.7bps) all rising significantly. What was also striking was that higher real yields drove those moves, and the German 10yr real yield closed at a post-2011 high of 0.50%.

Those bond losses occurred despite some downside surprises in the latest inflation data. For instance, the September flash CPI release for Germany fell to a two-year low of +4.3% on the EU-harmonised measure (vs. +4.5% expected). Meanwhile in Spain, we did see CPI move up by eight-tenths to +3.2%, but that was still beneath the +3.3% reading expected by the consensus. So both were less than expected. All eyes will now be on the CPI release for the entire Euro Area today, which is out at 10am London time.

We also got several data releases from the US yesterday, but for now the biggest question surrounds the potential government shutdown, which could happen over the weekend. As it stands, there’s still no sign that the House and Senate will be able to agree on a new funding package, with current funding set to expire this Sunday, October 1. For the economy, the main issue is that federal employees would be furloughed, which would act as a drag on growth. And for markets, there’s the added point that we could miss out on some upcoming data releases, including the jobs report next Friday. So if a shutdown does happen, markets may well have to rely more on alternative survey indicators that will still come out like the ISM manufacturing and service prints. See Brett Ryan’s piece here on how previous shutdowns have impacted the economy and data releases.

Another ongoing issue for the US economy is the autoworkers strike, and several outlets including CNN have reported that the United Auto Workers union could announce an expansion of strikes today if progress isn’t made. On that topic, Olga Cotaga and Luke Templeman on our team have published a report which argues that, regardless of inflation, this is just the beginning of greater labour demands. Large corporates stand to have their margins squeezed as a result. Their report can be found here.

As we await developments on a potential shutdown and the strikes, the US labour market still appeared resilient, with the weekly jobless claims coming in at 204k (vs. 215k expected) over the week ending September 23. That takes the 4-week moving average down to 211k, which is the lowest it’s been since February. Separately, we got the latest benchmark GDP revisions from the US, which showed the economy growing a bit faster than previously thought. For example, over 2017-22, it showed GDP grew by 2.2% on average, a tenth higher than before. For Q1 2023, growth was revi sed up to 2.2% on an annualised basis (vs. 2.0% before), and Q2 2023 was left unchanged at an annualised +2.1%. There was some less encouraging news on the housing front, however, with monthly pending home sales for August showing their sharpest fall in 11 months, down -7.1% .

The claims and GDP revisions data initially gave more steam to the Treasuries sell-off, with 10yr Treasury yields reaching a high 4.69% shortly after. But yields saw a steady turn lower during the rest of the session, with 10yr closing -3.3bps lower at 4.57% and the 2yr down -7.8bps to 5.06%. So once again, there was a big steepening in the yield curve, with the 2s10s curve up +4.6bps to -48.5bps, which is the least inverted it’s been since May. And despite yesterday’s reversal, 10yr yields have since moved up +1.9bps overnight to 4.59%, are still up +16.0bps since last Friday – which means they’re on course for the biggest rise in yields since early July.

Despite a volatile rates backdrop, equities rebounded yesterday and the S&P 500 (+0.59%) posted its strongest day in two weeks. The advance was fairly broad-based, and tech stocks were an outperformer with the NASDAQ (+0.83%) and the FANG+ index (+1.18%) both seeing even bigger gains. Nevertheless, even with yesterday’s recovery, the S&P 500 remains on track for its worst monthly performance of 2023 so far, having shed -4.61% since the start of the month. Furthermore, it’s on course for a 4th consecutive weekly loss for the first time since December. Over in Europe, both the STOXX 600 (+0.36%) and the DAX (+0.70%) ended a run of 5 consecutive declines .

Overnight in Asia, there’s been a pretty mixed performance from the major indices. On the one hand, the Hang Seng (+2.71%) is currently on course for its best day since July, whereas the Nikkei (-0.12%) has posted a modest decline this morning. Otherwise, markets in mainland China are closed today and into next week, and they’re also closed in South Korea. Looking forward, European and US equity futures are trading modestly higher, with those on the DAX (+0.30%) and the S&P 500 (+0.06%) in positive territory.

Otherwise overnight, the Bank of Japan announced an unscheduled bond-purchase operation, which came as the 10yr yield has hit its highest level in a decade overnight, at 0.77%. They’ve since fallen back to 0.76%, although that would still be their highest closing level in the last decade. At the same time, we’ve had several data releases from Japan overnight. That included the unemployment rate for August, which held at 2.7% (vs. 2.6% expected), as well as the Tokyo CPI reading for September, where core-core inflation slowed to +3.8% (vs. +3.9% expected) .

To the day ahead, and the main data highlight will be the Euro Area flash CPI release for September. Alongside that we’ll get German unemployment for September, UK mortgage approvals for August. Over in the US, we’ll get PCE inflation for August, along with personal income and spending data, as well as the University of Michigan’s final consumer sentiment index for September, and the MNI Chicago PMI for September. Central bank speakers include ECB President Lagarde, the ECB’s Kazaks and Visco, and the Fed’s Williams.

Authored by Techno Fog via The Reactionary (emphasis ours),

Yesterday began what we might unofficially call the start of the impeachment of President Joe Biden. Or, as announced by the House Oversight Committee: the hearing on The Basis for an Impeachment Inquiry of President Joseph R. Biden, Jr.

For the more zealous among us, there is pressure to get on with it already. Start the proceedings, get the votes, and see what happens. A fair position, but we’re not there yet. The evidentiary record is not yet complete.

Thus, the “impeachment inquiry” is an essential investigative step, one which will require the testimony of scores of witnesses and numerous subpoenas for travel records, business and shell company records, bank records, and communications targeted at the Biden family and their business associates. Representative James Comer already has at least some of the investigation already planned; today he announced he is issuing subpoenas for Hunter Biden’s and James Biden’s personal and business bank records.

That wasn’t an empty promise. Yesterday evening, Comer “issued three subpoenas for Hunter and James Biden’s personal and business bank records.”

That’s where it should get juicy. The Biden family and their shell companies received over $15 million from 2014-2019. Their business associates, many of whom served as pass-throughs for the Biden family’s profits, received over $9 million. Where did all that money go?

To answer that question, there is perhaps the most important category of records investigators still need to obtain: the financial records of Joe Biden. Undoubtedly the Republicans will obtain those records as the investigation proceeds.

From there we might finally get confirmation to the admission of Burisma’s founder and CEO, who admitted to paying millions to Hunter Biden and Joe Biden – while Joe was the Vice President of the United States: “it cost 5 (million) to pay one Biden, and 5 (million) to another Biden.”

More broadly, the intensification of the investigation relates to the need to further prove the conspiracy and criminal access-operation among the Bidens – Joe, Jim, and Hunter. Not that the evidence isn’t there. It certainly is. But impeachment is about getting votes from politicians hostile to accountability and convincing an American public of its necessity.

In other words, the inquiry must be deliberate and exhaustive, pursuing every investigative lead and interviewing every witness and getting every document. Think of the House as a type of special grand jury, assigned to investigate a matter of paramount importance. After all, this is one of the most important public corruption cases in American history.

Onto today’s House Oversight hearing, which featured three witnesses on behalf of the House Majority. The testimony of each is briefly summarized below.

Bruce Dubinsky, CPA, a forensic accountant and certified fraud examiner. Dubinsky is a world-class expert in complex financial fraud, especially where – as is the case with the Bidens – the perpetrators utilize shell companies and otherwise complex structures used to mask the source and distribution of funds. He has “investigated some of the world’s largest frauds.” This included the investigation of Bernie Madoff’s $65 billion Ponzi scheme (the largest in history), where he testified for the US government.

Dubinsky helped lay-out some of the most important questions that need further evidentiary support: why the Bidens were receiving million from foreign entities and individuals; why the Bidens used a complex web of shell companies; whether the money was fair market value for the alleged services rendered; and whether political favors were disguised as services. We note that the answers to many of these questions are in the public records released via the Hunter Biden laptop and Congressional investigations, there is no doubt there is significantly more to uncover.

Eileen J. O’Connor, Esq. led the DOJ’s Tax Division from 2001-2007 and has decades of working with tax administration and enforcement. She testified during the Hunter Biden investigation, “leads and procedures that would have been followed in any other case were thwarted. These included:

• The denial of searches requested by IRS criminal investigators of Joe Bidens’ Delaware guest house and Hunter Biden’s storage facility, where probable cause existed to believe documents relevant to the criminal investigation existed.

• The denial of interview requests of Hunter Biden family members and associates, including those which would have explained “10% held by H (Hunter) for the big guy.”

• The sabotage of investigative steps to determine Joe Bidens’ presence – allegedly next to Hunter – while Hunter shook down a Chinese businessman.

O’Connor further detailed the necessity to investigate the investigators – those who allowed the statute of limitations on Hunter’s financial crimes to expire and why other criminal charges were not pursued.

Finally, Jonathan Turley testified to the public allegations of Joe Biden’s corruption that warranted a full investigation: (1) his lies about foreign dealings with his family; (2) the fact that he was the target (if not a cooperating figure) “of a multimillion-dollar influence peddling scheme”; and (3) that Joe Biden “may have benefitted from this corruption through millions of dollars sent to his family as well as more direct possible benefits.”

More Insight into the Biden Family’s Corruption

Accompanying the impeachment inquiry has been the release of newly public documents that further prove the corruption of the Biden family and bolster the purpose of this investigation. For example, a large set of records were provided yesterday by the House Ways and Means Committee, including transcripts of witness interviews (including Hunter’s business associates and prostitutes), summaries of the recommended tax charges against Hunter Biden, and e-mails and documents proving the obstructive steps taken by the DOJ.

BREAKING: Let me try to simplify Biden corruption scheme to the American people, Republican Congressman William @RepTimmons says in EXPLOSIVELY DETAILED remarks. WATCH pic.twitter.com/NLIrc4GH3P

— Simon Ateba (@simonateba) September 28, 2023

While much of it confirms what has already been reported, or provides context or proof of allegations of DOJ misconduct with respect to the Hunter investigation, of note from those records was this 2018 text from Hunter Biden to Jim Biden. In the message, Hunter says Jim was “drawn into something purely for the purpose of protecting Dad.”

Why former Vice President Biden needed protection, and why Hunter and James were drawn into providing that protection, are good questions.

Here’s the answer.

In March of 2018, James Biden was seeking access to the $1 million retainer that Hunter was owed for providing “legal services” to corrupt Chinese businessman Patrick Ho. (Note: Hunter did not, in fact, provide legal services.)

On March 21, 2018 – the same date as the text – James Biden “wrote to CEFC [China Energy] officials with ‘wiring instructions,’ providing the address and routing numbers for how to transfer” the $1 million to an account linked to Hunter Biden.

The next day, on March 22, 2018, the money was wired.

But wait, there’s much, much more…

Global equity markets have nearly tripled in size since 2003, climbing to $109 trillion in total market capitalization.

Over the last several decades, the growth in money supply and ultra-low interest rates have underpinned rising asset values across economies.

Given this backdrop, Visual Capitalist’s Dorothy Neufeld created the graphic below to show the size of the global stock market in 2023, based on data from the World Federation of Exchanges (WFE) and the Securities Industry and Financial Markets Association (SIFMA).

The Global Stock Market, by Share

With the world’s deepest capital markets, the U.S. makes up 42.5% of global equity market capitalization, outpacing the next closest economy, the European Union by a significant margin.

Here are the world’s major equity markets based on global market cap share as of Q2 2023:

Data as of Q2 2023. Numbers may not total 100 due to rounding..

Today, U.S. equity markets total over $46.2 trillion in market capitalization.

Compared to other rich nations, U.S. stocks have often outperformed over the last several decades. If an investor put $100 in the S&P 500 in 1990 this investment would have grown to about $2,000 in 2023, or four-fold the returns seen in other developed countries.

The second-largest equity market is the European Union at 11.1% of global share, followed by China, at 10.6%.

In the last 20 years, China’s economy has increased by roughly 12-fold, reaching $19.4 trillion this year. China’s equity markets have also grown considerably, fueled by the incorporation of Chinese domestic stocks into the MSCI Emerging Market Index in 2018, and earlier, with the internationalization of its equity markets in 2002.

Japan’s equity markets account for 5.4% of the global share, followed by Hong Kong, at 4%.

The Future Investment Landscape

Goldman Sachs projects that U.S. equity market capitalization will fall to 35% of the overall global market by 2030.

Meanwhile, emerging markets, including China and India, are collectively forecast to reach the 35% mark in the same timeframe. By 2050, the EM share is anticipated to far surpass the U.S., rising to 47% of global stock markets.

Numbers may not total 100 due to rounding.

The first factor underscoring this shift is the rapid growth projected for emerging economies.

Historically, as GDP per capita grows, capital markets in an economy become more sophisticated. We can see this in richer countries, which tend to have higher equitization of their markets.

India is projected to rise the fastest globally. By 2030, it is projected to account for 4.1% of global equity market cap. Furthermore, by 2050, this share is projected to outrank the euro area due to strong GDP per capita growth and demographic drivers.

The second factor, although to a lesser extent, is emerging market rising valuation multiples driven by higher GDP per capita. Richer countries, as seen in the U.S., often trade at higher earnings multiples because they are viewed to have lower risk.

Implications for Investors

What does this mean from an investment standpoint?

While the U.S. has outperformed in recent decades, it may not mean that it will continue on this trend, according to Goldman Sachs. Given the structural shifts stemming from growing populations and GDP growth, investors may consider diversifying their portfolios geographically looking ahead.