The most important US air base west of Hawaii, Andersen, situated in Guam, is in the crosshairs of a Category 4-strength typhoon. US military personnel and residents have been told to brace for impact as the storm is set to make landfall in the coming hours. 

Typhoon Mawar was downgraded earlier from a super-typhoon and is swamping the US territory with storm surges and heavy rainfall. Deadly winds in excess of 145 mph have been recorded. The storm’s core is expected to make landfall around 6 pm local time, or about 4 am EST. 

“The typhoon could be the strongest storm to hit the Pacific island in decades,” CNN meteorologists stated. 

Guam Gov. Lou Leon Guerrero issued an evacuation order for all coastal areas across the island. 

“When sea levels rise, residents will have merely minutes to evacuate and respond. Thus, we must prepare now and anticipate the worst,” the governor’s office said in a release.

Flash Flood Warning including Dededo GU, Yigo GU and Tamuning GU until 5:45 AM ChST pic.twitter.com/xTHTMPv7HU

— NWS Guam 🇬🇺 (@NWSGuam) May 24, 2023

President Biden declared a state of emergency and ordered the Department of Homeland Security and Federal Emergency Management Agency to lead disaster relief efforts on the island that the US military occupies about a third of. 

Andersen is critical for the US military’s dominance in the Indo-Pacific region. It serves as a forward operating base for strategic bombers. There’s no word if the bombers are riding out the storm or if they were flown elsewhere. 

One primary concern is if the forward operating base sustains damage. 

Typhoon is hitting Northern Guam where all the US military bases are at right now. Thankfully I am south. The winds sounds like it’s trying to tear into my house. Houses in Guam are made with reinforced steel and concrete so it won’t be so easy. pic.twitter.com/K8CHVlZzNR

— sinwaves (@PEACE1004) May 24, 2023

We’re sure China is closely watching…  

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

Most people think the nation’s money supply is the sole cause of inflation. They fail to realize inflation has two equal dance partners. The money supply and the velocity of the money supply dance hand in hand to determine the rate of inflation.

The money supply is shrinking for the first time since at least 1960. Yet, despite the most significant decline in the money supply in sixty years, inflation remains sticky. How can that be?

Given the importance of monetary velocity and its relationship with money supply, let’s better understand velocity and ponder how it may change in the coming months.

The strong correlation between bond yields, inflation, and monetary policy gives us more reason to understand and predict velocity.

Key Takeaways

• The Fed seriously erred in 2021, focusing too much on supply and not enough on demand.

• What is Monetary Velocity?

• The Fed can slow velocity, but it requires job losses and or eroding consumer confidence.

• Forecasting the money supply and velocity leads to a complete inflation forecast.

• Lacy Hunt of Hoisington Investment Management guides where velocity may be headed and what it means for bonds.

The Fed’s Big Error in 2021

In Mid-April 2021, the BLS reported that monthly CPI was +0.66%. That equates to a nearly 8% annualized rate or four times the Fed’s 2% target. Two weeks after that April CPI report, the Fed stated:

With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved.

There was nary a concern at the Fed or on Wall Street that the recent uptick in inflation was a problem. Believing it was “transitory,” the Fed kept interest rates at zero and continued increasing their bond holdings by $120 bn a month (QE). Such dovish monetary policy would continue through the year, as shown below, despite the highest inflation in forty years.

The word “transitory” was relentlessly spoken by Powell and other Fed members to describe an expected short burst higher in prices.

We suppose the Fed reasoned that the Pandemic-related supply chain issues would ease as the vaccine took hold. At the same time, they must have thought consumer spending from the barrage of fiscal stimulus would fade, and demand would quickly fall back toward normal levels. Therefore, normalizing supply and demand would bring prices back to pre-pandemic levels. 

The Fed was dead wrong!

Supply chain issues and inventory levels did normalize, but demand stayed strong. Demand remains strong despite the Fed hiking Fed Funds by 5% in little more than a year and reducing their Treasury and Mortgage holdings by $700 billion.

The Fed grossly failed to forecast monetary velocity.

What is Monetary Velocity?

Per the St. Louis Fed:

The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.

Most financial pundits assume it’s the money supply that drives inflation. However, velocity, measuring how often the money supply circulates through the economy, is equally important. As the graph below shows, the money supply is falling but being offset by increasing monetary velocity.

To grasp how the supply and velocity of money dictate prices, ask yourself how inflation would be impacted if the Fed printed a gazillion dollars tomorrow.

Is the answer the same if we instead asked, what if the Fed printed a gazillion dollars but immediately locked it up in a vault and sent it into outer space?

We can parse Fed speeches and transcripts and know they now acknowledge that velocity matters.

Slowing Velocity Requires Pain

The only way to slow velocity is to weaken the economy and reduce consumer confidence. Unfortunately, higher interest rates and QT are not helping this time. Often the most prominent factor causing consumer confidence and increasing one’s propensity to spend is a person’s employment situation.

A tight labor market, as we have, creates job security and higher wages and incentivizes workers to seek new jobs with better salaries. The graph below shows the number of job openings, and the Quits Rate soared after the pandemic but is finally moderating. Consumer confidence is falling as the labor market normalizes.

The Fed has significant control over the money supply via its balance sheet. They indirectly control consumer and corporate confidence and demand via interest rates and narratives.

For the first time in our memory, the Fed predicted a recession. The minutes from the March 22, 2023, Fed meeting stated:

“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years.”

For a complete understanding of the interplay between the money supply, velocity, economic activity, and inflation, we recommend reading our 2018 article Stoking the Embers of Inflation.

How Will Money Supply and Velocity Change Going Forward?

The money supply is relatively easy to forecast. The graph below shows that the change in the size of the Fed’s balance sheet has a statistically significant relationship with the money supply. The Fed expects QT to reduce the Fed’s balance sheet by $95 billion a month for the foreseeable future.

The other primary determinant is credit growth. With financial standards tightening and banks likely to lend less, along with QT, the money supply will likely continue to shrink.

And Velocity

Velocity is a function of the money supply and economic activity. To help better assess how it may change going forward, we summarize Hoisington Investment Management’s First Quarter Review. Click HERE for the entire article.  

Hoisington writes that velocity “is determined by the marginal revenue product of debt and the loan to deposit ratio (L/D).”

• The marginal revenue product of debt, or effectiveness of debt, will undoubtedly turn lower as over $20 trillion of U.S. debt matures in the next two years and must be reissued at higher interest rates. Having to allocate more capital toward interest payments from productive investment weakens productivity, a key driver of economic growth. For equity analysts, think of this figure as the return on capital.

• Loan growth will slow considerably in conjunction with weakening economic activity. While not mentioned in their report, the regional banking crisis further ensures that loan growth will slow.

• As a result of both points, velocity and, therefore, inflation should turn down. Also, given the Fed’s desire to firmly squash inflation, the Fed may have limitations in its ability to lower rates or use QE to combat weaker growth. Such will only provide more impetus for inflation to fall. 

Summary

Many economic indicators point to weakening economic growth. Further, with excess pandemic-related savings vanishing and credit card debt exploding, the means to spend and keep velocity elevated are eroding.

The labor force is showing some, albeit small, signs of weakening. In addition to the JOLTs graph we shared, initial jobless claims have recently risen above the 2019 pre-pandemic average. The latest University of Michigan consumer confidence, shown below, is declining after increasing over the last 12 months. 

The money supply will continue to decline. Consumer and business confidence is eroding, and loan growth is slowing rapidly. Consequently, monetary velocity will likely reverse in the coming quarters.

Unfortunately, we need the quarterly GDP data to calculate velocity, so while velocity may be declining in the real world, it could take six to eight months to see its decline.

If the money supply and velocity fall, inflation rates will decline. As a result, bonds and other interest rate-sensitive stocks and instruments will likely benefit. 

We leave you with the final sentence of Hoisington’s article:

Therefore, with the historical pattern of the financial, GDP, and price/labor cycles preceding on its well-documented path, this year’s decline in long-term Treasury bond yields is expected to continue.

US equity futures drift drift lower for the second day following a deluge of bad news across global markets driving European stocks to their biggest drop in two months, pushing copper below $8,000 and snuffing out this year’s gains in China equities. As of 730am ET, S&P futures were down 0.4% to 4,143  following Tuesday’s 1.1% drop with Nasdaq futures sliding the same amount. Treasury yields are flat trading around 3.67%, the USD is slightly stronger, and bitcoin got the usual Asian session trapdoor as gold rose. Commodities are mixed: energy rallied (WTI + 2.1%) while metals are falling on concerns about China’s fading recovery. Yesterday, we saw de-risking in crowding stocks with Momentum Winners and MegaCap Tech being the biggest laggards. On debt ceiling negotiation, two parties have not come to an agreement. Today, we will receive the FOMC Minutes at 2pm ET; AI-leader Nviidia reports after the close.

In premarket trading, megacap tech was mixed with MSFT and AMZN recovering, while the rest are lower. Nvidia Corp., a stock at the center of the artificial intelligence frenzy, lost almost 1%.  Regional banks are mostly higher as Pacwest continues to sell more assets to meet liquidity needs (why this is positive remains unclear) while large-cap banks lagging. Here are the most notable premarket movers:

• Palo Alto Networks rose as much as 4.6% in premarket trading, after the network security company reported third- quarter results that beat expectations on key metrics. It also raised the low end of its full-year revenue forecast.
• Agilent shares sink 8.8% in premarket trading after the life sciences company cut its adjusted earnings per share guidance for the year to a level below the average analyst estimate.
• US- listed stocks of Shopify fell as much as 2.1% in premarket trading, after BNP Paribas Exane cut its recommendation on the Canadian e-commerce company to underperform from neutral. It said there are “better opportunities elsewhere,” given the company’s valuation relative to expected sales growth.
• Urban Outfitters gains as much as 12% in US premarket trading after the retailer reported better-than-expected fiscal first-quarter net sales. The results prompted analysts to raise their price targets on the stock as strength at Anthropologie and Free People offset soft sales for its namesake brand.
• PacWest shares rose as much as 9.8% in premarket trading on Wednesday, poised to extend gains for a third session in a row, after the troubled US regional lender agreed to sell its Civic Financial Services unit to real estate lending firm Roc360 as part of efforts to bolster liquidity.
• View shares jumped 15% in postmarket trading after CEO Rao Mulpuri disclosed the purchase of 47,468 shares.
• Intuit shares dropped 5% in extended trading before rebounding in premarket trade after the tax-preparation software company reported third-quarter revenue that was weaker than expected.

There were plenty of reasons for investors to be pessimistic according to Bloomberg: in the US, there was little progress in debt-ceiling talks and investors are increasingly worried about a default. Yields on securities maturing June 6 topped 6% Tuesday, compared with bills maturing May 30 that are yielding about 2%. China’s sputtering economy and worsening geopolitical ties also hurt sentiment, and UK inflation came in higher than all economist predictions setting the stage for painful encounter with stagflation. Meanwhile, as discussed earlier, Europe’s luxury bubble indeed appears to be bursting as Luxury stocks, one of this year’s most popular trades, extended losses, with LVMH and Gucci owner Kering SA sliding about 2%. European real estate and carmakers slumped on concern that UK interest rates are heading higher. 

World’s richest man sees $11 billion in wealth wiped out after stock rout in European luxury goods https://t.co/KSWmJT927b

— Jennifer Ablan (@jennablan) May 24, 2023

“Right now we’re defensively positioned,” said Janet Mui, head of market analysis at RBC Brewin Dolphin, in an interview on Bloomberg TV. “We expect a US recession. We have pushed back the date of that recession to 2024 but we think it’s inevitable. Interest rates will stay high in the US, contrary to what the market is currently pricing, so I think that is negative for the economy and corporate profits. This will drive equity markets lower.”

In Europe stocks are firmly in the red as investors contemplate the prospect of additional monetary policy tightening. The Stoxx 600 Index lost 1.7%, the biggest intraday loss since March 24 as gilts slid, lifting the yield on the 10-year note was up five basis points at 4.21% following a blazing hot UK CPI print; travel, autos and consumer products the worst-performing sectors. Here are the most notable European movers:

• Marks & Spencer rise as much as 12% after the UK retailer reported FY23 earnings and said it plans to reinstate its dividend. The results “positively smashed” expectations, according to Shore Capital
• Sinch gains as much as 6.7% after JPMorgan raised the cloud communications firm to overweight, saying the group now sits at an attractive re-entry point following its selloff since January highs
• Mediobanca jumps as much as 3.6%, making it the best performer on the Stoxx 600 Financial Services Index, after the investment bank unveiled new profitability and remuneration targets
• SSE shares climb as much as 2.7% to the highest in a year, after the utility’s raised guidance exceeded expectations, according to Morgan Stanley
• Deliveroo shares rise as much as 6%, the most in almost 11 weeks, after Morgan Stanley upgraded the firm to overweight, saying it remains “fundamentally bullish” on the food-delivery sector
• Intertek rises as much as 2.9% after the testing and inspection company gave a trading update. The company is the top performer on the Stoxx 600 industrials index, which is down 1.9% on Wednesday
• Embracer shares plunge as much as 44% as the Swedish video-game maker slashed its full-year profit target after a planned partnership worth more than $2 billion in revenue fell through
• LondonMetric shares drop as much as 10% after the UK REIT’s update was not enough to offset broader declines among housebuilders on Wednesday as inflation remained stronger than expected
• UK homebuilders fall on Wednesday, with their shares among the worst performers in the FTSE 100 and FTSE 250, as Britain’s inflation rate remained much stronger than expected

“Inflation continues to dominate – from boardrooms to shop floors – especially after stickier than expected UK inflation cemented bets of more BoE rate hikes ahead,” said Angeline Ong, a financial analyst at IG Group.

Asian stocks were mostly lower following the negative lead from Wall St where sentiment was weighed on by the ongoing debt limit impasse with just 9 days left to the X-date and amid US-China frictions after the US House China Select Committee Chair called for retaliation against China’s ban on Micron.

• Hang Seng and Shanghai Comp. were lower amid US-China frictions after the White House spoke out against the Micron ban, while a lawmaker called for the Commerce Department to add Changxin Memory Technologies to the entity list and ensure no US export licenses are granted to firms operating in China which are used to backfill Micron.
• Nikkei 225 was pressured after its recent pullback to beneath the 31,000 level despite reports that the government is to consider childcare handouts for those up to 18 years old, while the first positive reading this year in the monthly Reuters Tankan manufacturing survey did little to spur risk appetite.
• NZX 50 was underpinned after a dovish RBNZ rate hike which signalled the end of its rate increases.
• ASX 200 declined with the resilience in the commodity-related sectors offset by weakness across the broader market and after the Westpac Leading Index remained depressed.
• India’s S&P BSE Sensex fell 0.3% to 61,773.78 as of 03:45 p.m. in Mumbai, while the NSE Nifty 50 Index declined by a similar measure. The retreat was their biggest since May 17. All but three of the 10 Adani Group stocks ended with losses on Wednesday with the flagship unit Adani Enterprises falling the most since March 28 on profit taking following recent sharp rally.  HDFC Bank contributed the most to the index’s decline, falling 1.3%. Out of 30 shares in the Sensex index, 16 rose, while 14 fell.

In FX, the Bloomberg dollar index is unchanged erasing an earlier spike. Sterling extends gains in the immediate aftermath after UK CPI came in hotter than the highest estimate, but has since turned lower versus the greenback.  The New Zealand dollar dropped as much as 1.3% after the central bank unexpectedly signaled that no further policy tightening will be needed. Policymakers hiked interest rates to 5.5%, in line with projections. 

• GBP/USD was up by as much as 0.5% to 1.2470, after hitting a one-month low Tuesday, before reversing gains.
• NZD/USD fell as much as 1.9% to 0.6131 after theReserve Bank of New Zealand said it sees rate cuts starting in the third quarter of next year after lifting the policy rate to 5.5% as expected.
• EUR/SEK jumped as much as 0.5% to 11.4966, the highest since March 2009, as global stocks extended an earlier sell off.

In rates, Treasuries were slightly richer across the curve after unwinding early losses that were spurred by selloff in gilts following upside surprise by UK inflation data. Subsequently 2-year UK yields remained higher by around 20bp into early US session, sharply underperforming among core European rates.  US 10-year yields around 3.675%, richer by ~2bps vs Tuesday close and outperforming gilts by 7bp in the sector; long-end slightly outperforms, flattening 5s30s spread by ~1.5bp ahead of belly supply at 1pm New York time. The 10-year UK bond yield jumped as much as 21 basis points to 4.37%, the highest since October, after data showed the UK inflation rate at 8.7% in April, higher than any of the 36 estimates from economists or the 8.4% forecast by the central bank. UK money markets priced in a peak BOE rate of as high as 5.5%, compared with around 5.1% on Tuesday. Back in the US, there is a $43bn 5-year note auction follows strong demand for Tuesday’s 2-year sale, which stopped 1.5bp through the WI level. WI 5-year around 3.702% is ~20bp cheaper than April’ stop- out, which. US session highlights include 5-year note auction and FOMC minutes release.  

In commodities, metals were broadly lower. A new wave of Covid is threatening to set back the country’s economy, and investors have been rattled by Beijing’s move to ban purchases of Micron Technology Inc.’s products. Crude futures meanwhile extended their recent advance with WTI rising 2% to trade near $74.40. Spot gold is little changed around $1,975.

Bitcoin fell 1.6%, back under $27K, under pressure as the risk tone remains downbeat as the clock ticks down to the US X-date.

Looking to the day ahead now, and we’ll get the release of the Fed’s minutes from their last meeting in May. Other central bank speakers will include ECB President Lagarde, BoE Governor Bailey and the Fed’s Waller. Data releases include the UK CPI reading for April and Germany’s Ifo business climate indicator for May.

Market Snapshot

• S&P 500 futures down 0.2% to 4,149.25
• MXAP down 0.7% to 160.95
• MXAPJ down 0.9% to 509.11
• Nikkei down 0.9% to 30,682.68
• Topix down 0.4% to 2,152.40
• Hang Seng Index down 1.6% to 19,115.93
• Shanghai Composite down 1.3% to 3,204.75
• Sensex down 0.2% to 61,841.41
• Australia S&P/ASX 200 down 0.6% to 7,213.80
• Kospi little changed at 2,567.45
• STOXX Europe 600 down 1.5% to 459.11
• German 10Y yield little changed at 2.47%
• Euro up 0.1% to $1.0782
• Brent Futures up 1.1% to $77.68/bbl
• Gold spot down 0.0% to $1,974.48
• U.S. Dollar Index little changed at 103.51

Top Overnight News

• New Zealand’s central bank on Wednesday signaled it was done tightening after raising rates by 25 basis points to the highest in more than 14 years at 5.5%, ending its most aggressive hiking cycle since 1999. RTRS
• US and China will attempt to stabilize relations with a dinner scheduled for Thurs between Commerce Sec Gina Raimondo and her Chinese counterpart. WSJ
• China downplays the Micron ban with the gov’t signaling it’s an isolated incident and not part of a broader crackdown on foreign companies. However, a senior Republican member of the House called on the Commerce Dept. to add Chinese memory maker Changxin Memory to the US blacklist in retaliation for the Micron ban announced Sunday. SCMP / RTRS
• The chief executive of Nvidia, the world’s most valuable semiconductor company, has warned that the US tech industry is at risk of “enormous damage” from the escalating battle over chips between Washington and Beijing. FT
• UK’s inflation overshoots the Street consensus, with headline CPI coming in at +8.7% (down from +10.1% in March, but above the Street’s +8.2% forecast) and core CPI coming in at +6.8% (up from +6.2% in March and above the Street’s +6.2% forecast). RTRS
• Mexico’s President Andrés Manuel López Obrador said his administration is considering buying Citigroup’s local retail-banking unit, Banamex, which the U.S. financial giant put up for sale last year. WSJ
• Speaker Kevin McCarthy left the US Capitol late Tuesday afternoon saying the two parties had yet to reach a deal to avert a first-ever US default, and a top lieutenant said there are no more meetings planned. Republican Representative Garret Graves, one of McCarthy’s chief negotiators, suggested just hours after a two-hour meeting in the Capitol with his White House counterparts that the two sides were at a standoff. BBG
• The Cayman Islands Monetary Authority has engaged lawyers to assess its legal options after deposits at Silicon Valley Bank’s branch in the territory were seized by the Federal Deposit Insurance Corp., a government official told affected depositors. WSJ
• US regional banks are rushing to exploit rules that allow depositors to hold tens of millions of dollars in insured accounts, offering security far exceeding government-backed insurance to soothe clients unnerved by the recent banking turmoil. FT
• US economic surprise index collapsing over the last 3 months… (measures eco data surprises relative to market expectations…positive reading means data releases have been stronger than expected and vice versa)

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly lower following the negative lead from Wall St where sentiment was weighed on by the ongoing debt limit impasse with just 9 days left to the X-date and amid US-China frictions after the US House China Select Committee Chair called for retaliation against China’s ban on Micron. ASX 200 declined with the resilience in the commodity-related sectors offset by weakness across the broader  market and after the Westpac Leading Index remained depressed. NZX 50 was underpinned after a dovish RBNZ rate hike which signalled the end of its rate increases. Nikkei 225 was pressured after its recent pullback to beneath the 31,000 level despite reports that the government is to consider childcare handouts for those up to 18 years old, while the first positive reading this year in the monthly Reuters Tankan manufacturing survey did little to spur risk appetite. Hang Seng and Shanghai Comp. were lower amid US-China frictions after the White House spoke out against the Micron ban, while a lawmaker called for the Commerce Department to add Changxin Memory Technologies to the entity list and ensure no US export licenses are granted to firms operating in China which are used to backfill Micron.

Top Asian News

• China’s new ambassador to the US Xie said US-China relations face serious difficulties and hopes the US will get back on the right track, while he added that they will seek to enhance China-US exchanges and cooperation.
• RBNZ hiked the OCR by 25bps to 5.50% as expected, while it maintained the peak rate forecast at 5.50% and noted that the OCR is set to remain restrictive for the foreseeable future. RBNZ said the level of interest rates is constraining spending and inflation and it forecasts negative GDP growth in Q2 and Q3. Furthermore, the rate decision was made by a majority of five votes to two and the Committee discussed the suitability of a pause or a 25bps hike.
• RBNZ Governor Orr said during the press conference that the newest data is satisfactory after a long battle and noted it was the first time the Monetary Policy Committee voted on the decision, while he added that they have seen inflation, core inflation and inflation expectations come down, but as a cautious central bank, they are foreshadowing keeping restrictive monetary policy for some time.
• RBA Official Jacobs says the balance sheet is starting to unwind pandemic bond purchases, around AUD 20bln of purchased bonds have matured, pace will increase to circa. AUD 35-45bln/year. Click here for more detail.

European bourses are pressured as headwinds mount, Euro Stoxx 50 -1.6%; attention on debt talks, UK CPI, poor Ifo, US-China tensions and continued luxury sector downside. Sectors are pressured across the board with Real Estate lagging on hawkish BoE pricing while Luxury names continue to slip with analysts citing an MS luxury conference pointing to relatively more subdued performance in the US. US futures are softer but much more contained as we await more concrete developments on the debt ceiling, ES -0.2%, with updates this morning via multiple journalists skewed to the downside overall on a near-term agreement.

Top European News

• ECB President Lagarde reiterates the ECB will bring rates to sufficiently restrictive levels and keep them at those levels for as long as necessary.
• BoE Governor Bailey says banks are exposed to climate related hazards.
• EU banks are reportedly to sail through early rounds of stress tests, according to Bloomberg.
• German economy is expected to grow modestly on Q2 as a rebound in industry offset stagnating household consumptions, according to the Bundesbank monthly report.

FX

• DXY is firmer and towards highs after spending much of the morning trading on either side of the psychological 103.50 level ahead of the FOMC minutes.
• NZD experienced a significant drop after the RBNZ signalled an end to its tightening cycle in what was a dovish hike.
• AUD slipped and remains soft in tandem with the broader risk tone and losses across base metals.
• GBP was briefly lifted following the hotter-than-expected UK inflation data which solidified the case for a June BoE hike.
• PBoC set USD/CNY mid-point at 7.0560 vs exp. 7.0556 (prev. 7.0326)

Fixed Income

• Gilts gapped lower to sub-95.00 following hotter-than-expected UK CPI, with market pricing now implying 75bp of further tightening.
• Given this, EGBs/USTs spent the morning underwater but have since made their way back into positive territory as attention returns to the US debt ceiling, with USTs and Bunds now incrementally firmer.
• For reference, the morning’s dual-tranche German supply was well received overall, particularly when taking into account that the morning’s marked concession had largely evaporated by the time the auction commenced.

Commodities

• WTI and Brent July futures are firmer intraday with the complex seemingly underpinned following commentary from the Saudi Energy Minister yesterday.
• Spot gold resides around USD 1,975/oz in a near-USD 10/oz range in the run-up to the FOMC.
• Base metals are softer across the board amid the demand implications from a weaker-than-expected Chinese rebound coupled with the state-side jitters on the debt ceiling front.
• US Energy Inventory Data (bbls): Crude -6.8mln (exp. +0.8mln), Cushing +1.7mln, Gasoline -6.4mln (exp. -1.1mln), Distillate -1.7mln (exp. +0.4mln).
• Russian watchdog says it is prepared to support restrictions on petrol exports, via Ifx. Subsequently, Russian Energy Minister says we are considering restriction on gasoline exports and not a ban.

Debt Ceiling headlines

• White House said invoking the 14th Amendment to work around the debt ceiling won’t “fix the current problem” but wouldn’t shut the door entirely on pursuing the strategy if they can’t reach a deal, according to USA Today.
• US GOP Rep. Graves said they don’t have additional meetings set up and noted there are some areas where they are very close although there are still substantial gaps including over the debt limit duration.
• Fox’s Pergram tweets “Unclear where debt ceiling talks stand today. Talks have continued. But there has yet to be a breakthrough”.
• US Democrats have reportedly criticised Republican negotiators for seeking an increase in military spending in debt ceiling discussions, via WSJ citing sources; some in the admin. reportedly struggling to see a path forward in the discussions
• Punchbowl News, on the US debt ceiling talks, says “with no deal imminent, McCarthy has signalled that he’d likely send lawmakers home Thursday evening, anticipating that negotiations will drag into next week.”
• White House and Republicans are expected to resume debt talks today, according to Reuters sources.

Geopolitics

• Russian PM Mishustin, in Beijing, says relations between Russia and China are at an unprecedented high level. Adding, Xi’s Russia visit in March was another confirmation of the “special” nature of bilateral relations. Subsequently echoed by Chinese President Xi.
• Russian Foreign Minister Lavrov (according to a translated tweet) says that increasing Western involvement in Ukraine will lead to nuclear war.
• Russia’s Deputy Foreign Minister says F-16s will be a “legitimate target” for Russia if supplied to Ukraine, according to RIA.

US Event Calendar

• 07:00: May MBA Mortgage Applications, prior -5.7%
• 14:00: May FOMC Meeting Minutes

Central bank speakers

• 12:10: Fed’s Waller Discusses the Economic Outlook
• 14:00: May FOMC Meeting Minutes

DB’s Jim Reid concludes the overnight wrap

AI hasn’t yet been able to solve the debt ceiling problem and markets struggled yesterday, with front end bonds and equities selling off together as investors grew increasingly concerned about the debt ceiling. It’s true that both sides are still talking and the mood music sounds (mostly) positive, but we might only be days away from the deadline in early June, and any deal that’s reached is still going to need to be passed through both houses of Congress. So there are real concerns that this could go right down to the wire, and investors are slowly gearing up accordingly. There’s also been talk about whether a short-term extension might now be needed to get this over the line, but for the time being, Speaker McCarthy has continued to downplay the prospect that will happen. So investors continue to wait nervously with no signs of a deal emerging just yet.

When it came to the last 24 hours, it was reported by Punchbowl News that McCarthy had told Republicans in a closed-door meeting that “we are nowhere near a deal yet”. But later on, McCarthy told reporters that a deal could still be reached by June 1. By last night, GOP Representative Graves, who has been one of McCarthy’s lead negotiators, said some progress had been made but then added that “we’re going to have to see some movement or some fundamental change in what they’re doing,” and that there was not an additional meeting currently set up. House Majority Leader Scalise also questioned how the June 1st x-date was calculated, which prompted markets to believe the two sides were still some ways apart. Speaker McCarthy has said he would not waive a rule allowing Congress to review a bill for 3 days before a vote, if he holds that line it will further compress the timetable to get a deal done before early-June.

Those issues surrounding the debt ceiling have put serious pressure on US Treasuries over recent days. At the front end, yesterday a Treasury auction of a 21-day cash management T-bill yielded 6.2%, which is above what last week’s 4W bill received (5.84%). The bill is due June 15 and would fully capture Treasury Secretary Yellen’s projected x-date period of “early-June”, furthermore there is an expected influx of corporate tax revenue around that date and so the risk of default remains very much prior to that point. That said there is typically lower demand for the cash management bills than benchmark issues but the fact remains that we have not seen a 6-handle on US Treasury security since 2000 when 2, 10 and 30yrs traded at that level.

In terms of other benchmarks, the 1M and 3M US T-bills were flat after a late rally with the latter rising marginally (+0.2bps) to a fresh post-2001 high of 5.226% – eclipsing last Thursday’s close. And when it came to longer maturities, rising 10yr Treasury yields ran out of steam after having risen for 7 consecutive session as they fell back -2.3bp, taking them to 3.692%. They did hit 3.75% earlier in the session but risk-off seemed to provide a bid after Europe went home. Overnight, they are -1.2bps lower at 3.68% as I type.

Whilst investors might be worried about a US default, another factor behind those Treasury declines has been growing scepticism that the Fed are actually going to cut rates this year. Indeed, only yesterday we got some better-than-expected data from the US, since the flash composite PMI hit a 13-month high in May of 54.5 (vs. 53.0 expected). Then 15 minutes later, the data on new home sales for April came in 683k on an annualised basis (vs. 665k expected), which was also a 13-month high. So that added to the signs that the economy was proving resilient as we move deeper into Q2, and helped to push back fears of an imminent recession.

With that strong data in hand, investors dialled back their expectations for rate cuts from the Fed over the course of 2023. For instance, the rate priced in by the December meeting was up another +1.2bps to 4.71%, which is its highest level since SVB’s collapse in early March. Bear in mind that on March 15, when the market turmoil was at its height, the rate expected in December hit a closing low of 3.75%, so we’ve now recovered a full 100bps from that point, which shows how the market has increasingly put that turmoil behind it. And although fears about the debt ceiling are rising, the underlying base case for investors is still that a deal or an extension will be agreed as on previous occasions, allowing investors to look through this current crisis too.

For equities, the tone was downbeat yesterday as the S&P 500 finished near the lows of its daily trading range down -1.12%. The NASDAQ largely matched the broader index, falling -1.26% yesterday, with megacap tech stocks giving way in the US afternoon as the FANG+ index (-1.29%) saw its largest pullback in nearly a month. Look out for Nvidia’s (-1.57%) earnings after the bell today. The stock (up +110% in 2023) is the fifth largest in the S&P 500 and now has a market cap of $758.9bn, which for context is double the biggest company in the Stoxx 600 (Nestle – EUR 310bn) and nearly 5x larger than the biggest corporate in the DAX (SAP – EUR 151bn).

The tone was a bit better in Europe given the late selloff in the US, and the STOXX 600 fell -0.60%, whilst the CAC 40 (-1.33%) saw the biggest underperformance as luxury good stocks struggled. That came as the flash PMIs were broadly in line with consensus across the continent, with the composite Euro Area print at 53.3 (vs. 53.5 expected).

Sovereign bonds in Europe broadly followed the US, with yields on 10yr bunds (+1.0bps), OATs (+0.1bps) and BTPs (+0.7bps) rising on the day. The big underperformer were UK gilts however, where 10yr yields (+9.4bps) rose to their highest level since Liz Truss was PM last October, at 4.158%. That followed comments from BoE officials before MPs, including Governor Bailey who said that “there are risks of persistence” on inflation. Meanwhile Catherine Mann, the most hawkish member of the MPC, commented that “tightening and tight are not the same” and said “real rates are still below zero”. That prompted investors to dial up their expectations for rate hikes over the months ahead, with terminal now priced above 5%. Keep an eye out for the April CPI release shortly after this goes to press as well, where the headline reading is expected to come out of double-digits (8.2% expected vs. 10.1% last month) as last year’s spike in energy prices drops out of the annual comparison.

Speaking of inflation, there was some further good news from Europe as natural gas prices fell to their lowest level in nearly 2 years. That was thanks to a -1.97% decline yesterday, taking futures down to €29.13/MWh, which also leaves prices on track for their 8th consecutive weekly decline. It’s true that Brent crude oil prices (+2.17%) hit a 2-week high yesterday of $77.64/bbl. But more broadly the trend for commodities has been continuously lower over recent months, and Bloomberg’s Commodity Spot Index fell to its lowest level since December 2021.

Asian equity markets are tracking overnight losses on Wall Street with the Hang Seng (-1.10%) leading losses followed by the Nikkei (-1.08%), the CSI (-0.56%), the Shanghai Composite (-0.54%) and the KOSPI (-0.23%). In overnight trading, US equity futures are indicating a small rebound though with those tied to the S&P 500 (+0.11%) and NASDAQ 100 (+0.10%) printing mild gains.

In terms of monetary policy action, the Reserve Bank of New Zealand (RBNZ) raised its benchmark rate by 25bps to the highest in more than 14 years to 5.5%, in line with expectations, but signalled it may be done with tightening. Following the decision, the New Zealand dollar slumped more than -1%, to a three-week low of $0.617 as the central bank decided not to keep the door open for further policy tightening. Meanwhile, benchmark 2yr yields fell sharply (-32.1 bps) to 4.78%, dropping the most in 6 months with 10yr yields dropping (-15.3 bps) to 4.30% as we go to print.

To the day ahead now, and we’ll get the release of the Fed’s minutes from their last meeting in May. Other central bank speakers will include ECB President Lagarde, BoE Governor Bailey and the Fed’s Waller. Data releases include the UK CPI reading for April and Germany’s Ifo business climate indicator for May.

By Michael Msika, Bloomberg Markets Live reporter and strategist

A better-than-feared earnings season and optimistic company guidance have prompted analysts to review their estimates and pushed European profit forecasts to a record high. That’s left wary investors and strategists wondering just when weakness in corporate bottom lines will finally materialize.

The latest batch of results surprised positively, triggering a salvo of upgrades and pushing the 12-month blended forward EPS for the Stoxx 600 index to a record high and supporting the benchmark’s 10% advance this year.

“Outstanding but unsustainable,” is the verdict of Morgan Stanley strategists including Giorgio Magagnotti. The stream of stellar EPS beats just witnessed is unlikely to be replicated because momentum in European macro-economic data seems to be fading. The region now has the lowest economic surprise index globally, which points to weaker earnings ahead. Preliminary PMI numbers Tuesday may offer more clues of the economy’s resilience.

According to Morgan Stanley, there were 36% more EPS beats than misses this quarter, the fourth-highest success rate since they started compiling the data in 2007. Separately, earnings for the median stock came in 8.5% ahead of consensus.

European benchmarks spent the last month consolidating their year-to-date gains, but have started to resume their climb in recent days, despite some broad pessimism about the economy and bearishness from investors and strategists. Sell-side analysts are more upbeat, with their consensus forecast for the Stoxx 600 heading higher again as they predict the index will rise 15% in the next year.

Share-price reaction to the earnings beats has been moderate and suggests caution among investors, despite a rare case where all sectors delivered stronger-than-expected profits, according to Bloomberg Intelligence  strategists Laurent Douillet and Kaidi Meng. They also warn of looming headwinds as companies’ pricing power diminishes while higher costs persist.

Meanwhile, with stocks and earnings forecasts rising in concert, the forward P/E for the Stoxx 600 hasn’t budged and is bang-on average. By contrast, more moderate earnings upgrades in the US have prompted some re-rating of valuations on the S&P 500, thereby widening the relative discount on European stocks. The Stoxx 600 is now 35% less expensive than its US counterpart.

For Barclays strategist Emmanuel Cau, even if a lot of the positive catalysts have already played out for Europe, the region remains attractive on a relative basis.

“Europe has some value in terms of diversification,” Cau says. “What we’ve been writing about is what seems to be a very polarized US equity market with a narrow leadership. Only 30% of the stocks have outperformed in the US and look quite stretched and expensive. Europe, on the other hand has a broader leadership, more diversified sector composition and better valuations.”

Via SchiffGold.com,

Poland is buying gold again.

The  National Bank of Poland added nearly 15 tons of gold to its reserves in April, according to data published by the bank last week. It was the largest increase in the country’s reserves since June 2019 when the bank boosted reserves by almost 100 tons.

The purchase increased the value of Poland’s gold reserves from $14.55 billion to $15.52 billion.

Poland’s official gold holdings rank as the 22nd largest in the world. Gold makes up about 8.5% of the Bank of Poland’s total reserves.

In the fall of 2021, Bank of Poland President Adam Glapiński said the central bank planned to add 100 tons of gold to its reserves in 2022. It’s unclear why the bank didn’t follow through. This recent purchase could signal the beginning of another round of buying to reach that 100-ton goal.

In 2021, Glapiński said holding gold was a matter of financial security and stability.

Gold will retain its value even when someone cuts off the power to the global financial system, destroying traditional assets based on electronic accounting records. Of course, we do not assume that this will happen. But as the saying goes – forewarned is always insured. And the central bank is required to be prepared for even the most unfavorable circumstances. That is why we see a special place for gold in our foreign exchange management process.”

He went on to discuss some of the benefits of gold as a monetary asset.

After all, gold is free from credit risk and cannot be devalued by any country’s economic policy. Besides, it is extremely durable, virtually indestructible.”

Glapiński also hinted that worries about the stability of the US dollar were driving the decision to increase the country’s gold reserves.

Gold is characterized by a relatively low correlation with the main asset classes – especially the US dollar dominating the NBP reserve portfolio – which means that including gold in the reserves reduces the financial risk in the process of investing them.”

The trend toward de-dollarization has only accelerated since Glapiński made these comments.

Poland also repatriated 100 tons of gold from England in 2019.

“The gold symbolizes the strength of the country,” Glapiński told reporters at the time.

Central banks around the world have been piling up gold over the last two years. After a record-setting 2022, central bank gold reserves increased by 228 tons through the first three months of 2023, a Q1 record. This was 38% higher than the previous first-quarter record set in 2013.

Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971. It was the 13th straight year of net central bank gold purchases.

According to the World Gold Council, there are two main drivers behind central bank gold buying — its performance during times of crisis and its role as a long-term store of value.

It’s hardly surprising then that in a year scarred by geopolitical uncertainty and rampant inflation, central banks opted to continue adding gold to their coffers and at an accelerated pace.”

The US has its market leading “Big 7 Tech” basket (a play on AI hype but really just an excuse to buy the former market leaders Apple, Microsoft, Google, Amazon, Nvidia, Meta, Tesla), which is trading on 30x PE vs 17x for rest of S&P and is single-handedly responsible for all market gains in 2023; Europe on the other hand, has its “Big 7 European Luxury” aspirational basket  (LVMH, L’Oreal, Hermes, Christian Dior, Richemont, Kering, Ferrari) which is trading at an even more ridiculous 36x vs rest of Stoxx 600 trading on 12x PE.

But what goes up (in an almost straight line) must come down, and the blistering rally in European luxury goods stocks this year powered by international demand particularly from China took a painful hit today, wiping out more than $30 billion from the sector.

Shares in Hermes International slumped as much as 5.5%, while LVMH Moet Hennessy Louis Vuitton SE dropped around 4% and Gucci owner Kering SA saw its stock decline more than 2%.

As BofA’s Michael Hartnett discussed over the weekend, in the past year this high-flying sector had become to European stocks what Big Tech was to the US: a collection of dominant businesses whose explosive growth was unquestioned even as the economy shrank.

But the questions are finally starting to emerge as confidence in that view has been dented, with attendees at a luxury conference in Paris organized by Morgan Stanley flagging a “relatively more subdued” performance in the US (and China), according to Edouard Aubin, an analyst at the bank. That reflects “weakness in the aspirational consumer in particular.”

Separately, the lack of a powerful rebound in China has sparked doubt if the rally will continue. Both Asia and the US are important markets for European luxury companies. Asia excluding Japan accounted for 30% of LVMH’s sales in 2022, while the US made up 27%, according to the company’s annual report.

At the same time, Deutsche Bank analysts also said that a slowdown in the US is now a growing concern. While the rebound in Chinese demand has been among the key drivers of strong sales, investors are likely to be picky from here on, they said.

“The luxury sector remains a crowded long for many investors, with the sector’s premium to the market at historically high levels,” Deutsche Bank analyst Matt Garland said in a note. The rally has seen LVMH balloon in size, with its market value breaching the $500 billion level last month, becoming the first European company to hit that milestone.

Despite today’s hiccup, luxury stocks have been outperforming by a large margin this year: LVMH is up 25% and Hermes has added 34%, both outperforming a 10% rise in the broader Stoxx Europe 600 Index, roughly the same as the S&P500.

These gains, like those by US AI stocks, have flown in the face of a broader economic slowdown, as investors have bet that Chinese shoppers will be keen to spend after emerging from one of the world’s strictest lockdowns (so far they haven’t with the latest Chinese data dump a uniform disappointment across the board). Still, Bloomberg reminds us that last month, LVMH’s shares hit a record after reporting a surge in sales, while Hermes also saw quarterly sales jump as Chinese consumers snapped up its pricey scarves and Kelly handbags.

However, early warning signs have emerged, with LVMH noting that it is seeing a slowdown in US growth, while British fashion brand Burberry said that it is seeing demand for sneakers and entry-level products softening among younger Americans.

More in the full cautionary note from DB and Morgan Stanley Day 1 luxury conf recap, both available to pro subs.

Authored by Tsvetana Paraskova via OilPrice.com,

The European Union will proceed with plans to establish joint purchases of critical energy transition minerals and hydrogen after the successful outcome of the first joint gas purchases on a new EU platform, the Financial Times reported on Monday.

Last week, the EU announced the successful outcome of the first-ever international tender for joint purchasing of EU gas supplies. During this tender, the EU managed to attract bids from 25 supplying companies equivalent to more than 13.4 billion cubic meters of gas (bcm) – surpassing the 11.6 bcm of joint demand that EU companies submitted through the recently established AggregateEU mechanism.

“EU companies will now be able to negotiate the terms of the supply contracts directly with the supplying companies, with no involvement of the Commission,” the EU said.

European Commission Vice President for Interinstitutional Relations and Foresight, Maros Sefcovic, said, commenting on the tender,

“This is a remarkable success for an instrument that did not exist some five months ago. The Commission has played its role as aggregator and matchmaker, and now it is for the respective parties to conclude their agreements. It is a win-win for all parties.”

The EU has more than 110 companies subscribed to the so-called AggregateEU joint gas purchase mechanism and more firms subscribe every day, he noted.

The EU plans the second round of demand aggregation and tendering for the second half of June, while three more rounds of joint gas purchases will follow before the end of this year, Sefcovic said.

The joint gas purchase mechanism could be used as a “blueprint” for joint purchases of key critical minerals and hydrogen, he said, as quoted by FT. Companies from the Middle East have expressed interest in selling hydrogen in the EU, the Commission Vice President added.

The EU is looking to ditch Russian gas supply by 2027 and diversify its supply chain of the minerals critical to the energy transition.

A slump in the use of private jets in the US could suggest that wealthy individuals are reducing their spending in response to the rising threat of recession in the next 12 months. 

Bloomberg data shows private jet flights across the US peaked in early 2022 and have been sliding ever since. Takeoffs and landings fell 4.5% in the first quarter compared with the same quarter last year. The drop accelerated to 9.3% in April compared with an 8.6% decline in March, possibly a sign demand is crumbling. 

With the industry under pressure and capital markets in a volatile state, Flexjet, the second-largest US operator of private jets behind NetJets Inc., was forced to shelve its SPAC last month. 

Even though private jet demand is still above 2019 levels — many wealthy individuals have yet to return to commercial airlines in a post-pandemic era. Still, with all the new demand, the rich are cutting back in the first half of 2023 as recession risks rise. 

Some industry insiders welcome the end of the private jet boom that took off during Covid. 

Kenn Ricci, chairman of Flexjet, told Bloomberg: 

“Thank God it’s not what it was last year.” He said his company saw annual flight hours jump to 145,000 from 90,000 before the pandemic. 

Sliding private jet demand comes as recent debit and credit card data published by the Bank of America Institute shows wealthy folks are pulling back on spending. 

Besides waning demand, a recent JPMorgan Chase report showed average asking price for private jets fell 1.2% in March from February to $12.8 million. There’s some easing of prices after the boom over the last few years. Still, the average asking price was 7% above prices from last year due to tight inventory. 

A combination of wealthy folks reducing private jet flights and pulling back on spending comes as Bloomberg data shows recession probabilities for the next 12 months have reached 100%. 

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

In Bakhmut/Artyomovsk, all of NATO, all 31 member nations, were defeated by a restaurant owner and a bunch of convicts, is how I saw someone describe it. That of course caricatures the situation somewhat (Wagner is well-organized), but it’s not that far off. And that spells a serious problem for NATO.

All of those 31 members may have lots of control over their media, but in the end you can’t endlessly deny being defeated.

So what will NATO do now? They will double down, and then again. And at the end of the “doubling down road” lie nuclear weapons. Not Russian nukes, because as my friend Wayne wrote the other day, their high-precision hypersonic missiles make nukes look crude and primitive, Middle Ages territory. But NATO/US never developed such weapons. They spent 10+ times as much money on weapons, still do, and -comparatively – ended up with bows and arrows.

Nuclear bombs are good only to create widespread panic and destruction. But that includes your own destruction, because of Mutually Assured Destruction protocols. Which also go back almost as far as the bow and arrow. If you fire a nuclear missile, one very much like it will land on your head a few minutes later. End of story, end of you.

US/NATO, the “collective west”, the hegemon, has lost. And has missed the moment when that occurred. Because hegemon equals hubris. Look at what they’ve all still been saying, and you notice they can’t see, and can’t acknowledge, that -and how- the world has changed. Not just this weekend, and the 9 months before, in Artyomovsk. It’s the entire story of Ukraine: it illustrates how the West “lost it”.

The US plotted a coup and moved NATO’s borders east, and Russia reacted exactly how they said they would. No nukes, no nazis, no NATO. They got the last two, and know they can expect the first too. But still the west maintains Russia’s special operation was entirely unprovoked. Look, they’re not even listening anymore. They would like to negotiate and end all this, but negotiate about what? Putting AZOV back on the borders of the Donbass, so they can kill more Russians there? Not going to happen.

It’s not only about weaponry, though that plays a major role: the hegemon can no longer make its demands based on military might. It’s been surpassed.

Nor can it make demands based on the dollar’s reserve currency status, and it caused that itself. Weaponization of the currency has backfired to the extent that de-dollarization has become a process that can no longer be halted.

The moment that Saudi prince MbS turned his back on “Joe Biden” is a milestone. Because once he did that, it was obvious many would follow. In central Asia, if you are Kazachstan or Uzbekistan, why on earth would you opt to go with G7/US/NATO instead of BRICS? Why go with the power that is waning, and not the one in ascendancy? Russia is your biggest neighbor, strongly connected to China which is building its BRI network in your region, and the nearby Arab states are about to join that network. Why would you link yourself to the G7? When you know all your neighbors do not?

Then there are the voices that say the US will push for a bigger and wider war, perhaps including American troops. First, because NATO is losing, and second, because it could mean American boots on the ground, and presidents don’t lose elections in wartime. I’ve said before, I would expect them to go with Polish troops first, possibly on Polish territory too. But the Polish don’t appear all that eager anymore. And neither would any other European NATO country. German and French and Dutch troops are in no shape for war, and in the US over 70% of potential troops are grossly overweight and/or handicapped in some other way.

Ukraine had perhaps the best boots on the ground force in Europe, financed and trained since 2014 by NATO, and they lost to a caterer and a loose group of hired hands. You’re not going to win that. Your only option is long distance weapons, missiles, planes, you name it. But NATO has no advantage in that over Russia. To put it mildly.

The sole thing that’s in your favor is that Russia doesn’t seek to destroy you. They want to live in peace and trade with you. Same thing for China. NATO equals unipolar. But the world has moved towards multipolar. Ergo, NATO is obsolete. Ukraine will never reconquer its “lost” territories, and Zelensky will move to some property in Italy or Florida, never to be heard from again, unless perhaps in his obituary. The deaths of some 300,000 of his countrymen will be on his conscience.

But also on that of all the “leaders” who have sent their second-hand armory to Kiev. They are just as responsible for all those deaths. The world has changed a lot in the past few years, and ignorance is no excuse if you are a “leader”, or a “Joe Biden”. Not even if you’re “just” a voter or reader. Those deaths will be on your head when you go see St. Peter at the gate.

PS: Don’t be surprised if “Joe Biden” sends US boots on the ground anyway. No hegemon has ever given up power lightly. That part of the road is yours, US and EU voters. You may have to fill up the streets like you’ve never seen. The rest, the majority, of the world will be waiting to see if you do or not. They’re prepared for either of the two options

*  *  *

Support the Automatic Earth via Patreon.

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A woman who suffered severe nerve damage after receiving a COVID-19 vaccination and four others with confirmed or suspected COVID-19 vaccine injuries launched a lawsuit against President Joe Biden and his administration on May 22.

Top government officials violated the plaintiffs’ rights to free speech and peaceful assembly when they pressured Big Tech companies to crack down on people sharing their experience after receiving the COVID-19 vaccines, Brianne Dressen, the woman, and the other plaintiffs say.

“Through threats, pressure, inducement, and coercion, Defendants now work in concert with social media companies to censor content the government deems ‘disinformation,’ ‘misinformation,’ and ‘malinformation’—a feat that the government could never lawfully accomplish alone,” the 124-page suit, filed in U.S. court in southern Texas, states.

In addition to Biden, defendants include Rob Flaherty, a top adviser to Biden; White House press secretary Karine Jean-Pierre; the Department of Homeland Security; the Centers for Disease Control and Prevention; and Surgeon General Vivek Murthy.

Defendants did not immediately respond to requests for comment, or could not be reached.

Dressen hailed the lawsuit as a major development for those reporting to be suffering from vaccine injuries.

“People injured by the COVID vaccines in the United States have not been able to file suit anywhere, under any circumstance,” she told The Epoch Times. “So this is a landmark case for Americans injured by the COVID vaccine.”

COVID-19 vaccine manufacturers are largely immune from litigation in the United States due to the Public Readiness and Emergency Preparedness Act declaration entered by the Trump administration in early 2020. Most other vaccine manufacturers are also shielded from liability under the National Childhood Vaccine Injury Act.

Censorship

The five people who experienced serious problems following vaccination are joined by Ernest Ramirez, whose son died after receiving a COVID-19 vaccine. They’ve repeatedly been censored by platforms like Twitter and Instagram as they tried to  share their stories.

Ramirez, for instance, saw a GoFundMe that sought to raise funds for him to travel to Washington to share his son’s story taken down. GoFundMe claimed the account was removed for violating conduct the company prohibits. GoFundMe did not immediately respond to a request for comment.

Another plaintiff, Nikki Holland, meanwhile, posted videos on TikTok regarding her experiences after being vaccinated, including the injuries she suffered. TikTok said the videos violated guidelines such as one against posting “violent and graphic content.”

“When I really started to share and open up about things, I started to notice that a lot of stuff was being taken down and censored,” Holland told The Epoch Times. “That adds a whole new world of questioning to motive and what’s really going on because … why would you censor something you might need to look into to protect millions of others?”

TikTok did not immediately return a query.

The other plaintiffs are Shaun Barcavage, a former nurse who has been on disability leave since suffering medical problems after receiving Pfizer’s COVID-19 vaccine; Kristi Dobbs, a dental hygienist who suffered “debilitating medical injuries” after a shot of Pfizer’s vaccine; and Suzanna Newell, who is also on disability leave due to problems following vaccination.

The right to peacefully assemble was also violated when Facebook and other big tech platforms disbanded groups where those with suspected or confirmed adverse reactions following vaccination gathered, according to the suit.

One Facebook group called “A Wee Sprinkle of Hope” was shut down after a group member posted an infographic of symptoms people have experienced following COVID-19 vaccination and Dressen shared a link to a press conference at which she had shared about her symptoms.

Facebook’s message to Dressen was that the group violated the company’s “Community Standards on misinformation that could cause physical harm.” Facebook did not immediately respond to a request for an explanation from the group.

The removal of the groups robbed those suffering injuries after a COVID-19 vaccine of key gathering places for the exchange of information as they sought to figure out how to treat their often-debilitating conditions. Dressen said she is aware of multiple suicides as a result, because the censorship sparked feelings of helplessness amid the suffering.

The deplatforming was “devastating, especially when you’re being censored and no one’s listening to you,” Holland said.

Evidence

Evidence unearthed in an ongoing case against the government, as well as internal Twitter documents, underpin the new case.

Discovery in Missouri v. Biden litigation, lodged by the attorneys general of Missouri and Louisiana against the Biden administration, has revealed that officials pressured WhatsApp, Facebook, and other technology companies to censor users talking about problems following COVID-19 vaccination, including posts that accurately outlined the lack of evidence for COVID-19 vaccines among certain populations.

Read more here…