Amazon employees will soon be able to pledge company shares when purchasing a home, under a new deal with digital lender Better.com, according to WSJ. 

Better announced a new program for Amazon employees called “Equity Locker,” allowing them to use stock as collateral for a down payment without selling. Previously, Amazon employees had to sell their equity to purchase a home. 

“At Better, our mission is to make homeownership cheaper, faster and easier for all Americans.

“Today, we are very excited to announce that we have created Equity Unlocker to help Amazon employees unlock their equity, their homes and their futures,” Better CEO and founder Vishal Garg said in a statement. 

Equity Locker is open to current and former Amazon employees in Florida, New York, and Washington state.

Garg said the homeownership process is “opaque and stressful.” Homeownership is challenging for many people with student debt, maxed-out credit cards, and limited savings. He said many companies provide their employees with equity over cash, adding to this problem.

“The status quo is broken.

 “Even though equity is a valuable asset, it is considered ineligible by most banks and financial institutions when calculating the necessary down payment on a home,” Garg said.

Better said, Equity Unlocker is non-mark-to-market and non-recourse, meaning the loan terms aren’t impacted by stock market volatility.

To account for the risk of the Amazon stock price falling, Better is going to charge between 25 and 250 basis points over the market rate for mortgages, depending on how a person’s down payment is structured. 

Nick Taylor, head of real estate at Better, said: 

“What we then do is we look at that pledge and we value the equity at 50% of the current share price. We look at the date that an offer is made on the home and we calculate what the share price is for Amazon that day.” 

… and what does this remind us of? Well, the return of “creative financing.” 

Recall high-net-worth individuals leveraging their stocks for personal loans when interest rates were at the zero lower bound. And in some cases, that was a bad idea. 

Take, for example, John Foley, the co-founder and former CEO of Peloton, who pledged his stock as collateral for personal loans during the Covid stock mania. As soon as the Federal Reserve lifted rates last year, growth stocks crashed, and Foley was slapped with repeated margin calls by Goldman Sachs. 

Lenders accepting stock as collateral for purchasing a home isn’t exactly what the Fed wants to see while trying to cool the housing market. 

Authored by Steve Watson via Summit News,

Senator Rand Paul has demanded that the Biden Administration declassify documents purporting to show that The Energy Department concluded that the likely cause of the coronavirus pandemic was a lab leak in Wuhan.

“Classified documents leaked (they should be declassified!) showing scientists at DOE believe COVID leaked from Wuhan Lab,” Paul, who is now the ranking member of Senate Homeland Security Committee, tweeted along with a link to the Wall Street Journal story on the documents.

Classified documents leaked (they should be declassified!) showing scientists at DOE believe COVID leaked from Wuhan Lab https://t.co/glETIVPe5z

— Rand Paul (@RandPaul) February 27, 2023

The revelation came in an update to a 2021 document by Director of National Intelligence Avril Haines’s office.

The Energy Department conclusion adds to the State Department, the National Intelligence Council, and the FBI’s apparent agreement that the bio lab in Wuhan was the likeliest source of the outbreak.

Senator Josh Hawley also said Sunday that he intends to introduce legislation to declassify intelligence findings about the likely origin of the outbreak.

“The American people deserve the full truth about #COVID origins. No more whitewash. I will again introduce legislation to make the U.S. government’s intelligence reports on COVID more open to the public,” Hawley tweeted.  

The American people deserve the full truth about #covid origins. No more whitewash. I will again introduce legislation to make the US government’s intelligence reports on covid open to the people https://t.co/6rKqPzPKO2

— Josh Hawley (@HawleyMO) February 26, 2023

Other Republicans have also called for a renewed focus on the origins of the pandemic.

Re. China’s lab leak, being proven right doesn’t matter.

What matters is holding the Chinese Communist Party accountable so this doesn’t happen again.

— Tom Cotton (@TomCottonAR) February 26, 2023

The Senate already passed my bill with @HawleyMO to make every bit of evidence we know about the COVID lab leak declassified for the American people to see the facts without corporate or government censors. President Biden needs to declassify everything we know today.

— Senator Mike Braun (@SenatorBraun) February 27, 2023

Big Tech censored the truth.

Legacy media denied the truth.

Government officials hid the truth.

Americans deserve accountability. pic.twitter.com/uKb4UGithk

— Rep. Andrew Clyde (@Rep_Clyde) February 26, 2023

We were right.

🦠COVID origins
🔒lockdowns
😷mask effectiveness
💉vaccine mandates.

Accountability is coming… pic.twitter.com/sUjwlmm7NM

— Congressman Nick Langworthy (@RepLangworthy) February 27, 2023

The Administration is finally admitting what Republicans said 2 years ago👇 Chinese Communist Party’s Wuhan Lab is likely COVID source. Fauci called theory a “shiny object” & the scientist who funneled our tax dollars to lab called it a “conspiracy theory”https://t.co/R1EI2pOgA6

— Office of Rep. Nicole Malliotakis (@RepMalliotakis) February 27, 2023

Meanwhile, White House Press Secretary Karine Jean-Pierre on Monday refused to say if the Biden administration will release an “unclassified version” of the Chinese lab leak assessment:

NSC spokesman John Kirby also refused to give direct answers:

JACQUI TIME: “On the Dept of Energy’s findings the lab leak mostly likely caused the pandemic, how should Americans understand China’s response…swatting down this information?”

Kirby insists COVID origins is “a priority” for Biden, but there’s “not a consensus” in the U.S. yet pic.twitter.com/dVnXBaBOvw

— Curtis Houck (@CurtisHouck) February 27, 2023

AP’s @ChrisMegerian: What caused the DOE assessment and was the President himself briefed on that?

John Kirby: Again, I’m not going to confirm the press reporting.” pic.twitter.com/Ve6fYYCJxw

— Curtis Houck (@CurtisHouck) February 27, 2023

After Philly’s Fed business outlook survey collapsed, the string of regional ‘soft data’ has continued to weaken.

Chicago’s PMI disappointed, printing 43.6 (weakest since Nov), down from 44.3, and below expectations of a rebound to 45.5 with employment falling at a faster rate, new orders contracting, production’s slowdown accelerating, and prices still rising.

This is the 6th straight month of contraction (sub-50) for the Chicago PMI.

The Richmond Fed Manufacturing survey notably missed expectations, tumbling from -11 to -16 (vs expectations of a rebound to -5) with shipments tumbling, new orders deep in contraction, number of employees and wages weakened, and capacity utilization weakening.

Additionally prices paid were flat while prices received slowed, signaling margin pressures and/or an inability pass on costs to consumers. We do note that Richmond Fed Services did pick up in Feb but remains in contraction for the 12th straight month.

Finally, The Dallas Fed Services Sector outlook improved modestly but remains in contraction for a 10th straight month.

Perceptions of broader business conditions continued to worsen in January, though pessimism waned. The general business activity index posted an eighth consecutive negative reading but moved up six points to -15.0. The company outlook index also improved from -11.0 to -8.3, while the outlook uncertainty index remained elevated at 20.0, above its series average of 13.4.

Price and wage pressures remained elevated, though there was some moderation in input price growth.

Respondents had some interesting things to say…

• “The constant speculation of a recession is becoming a psychologically self-fulfilling prophecy.”

• “The labor market is still very tight.”

• “With the rising interest rates, cost of goods and inflation, our business has experienced a fall in revenue.”

• “Interest rates and inflation are killing us.”

• “The feckless leadership from the White House, the damaging energy policies and the electrical vehicle push are causing unneeded chaos in all parts of the economy. What will happen to the automobile manufacturers that have totally remade themselves if electrical vehicles are proven not to be the answer? And what about all the battery-making facilities that won’t be needed?”

• “[We are] not really seeing any business activity pickup.”

• “All our costs have increased significantly. Yet, selling prices have dropped significantly.”

• “Retail activity is slowing at an accelerated pace.”

Mission Accomplished, Mr.Powell?

By Peter Tchir, head of strategy at Academy Securities

I was created or “born” this morning! I will expire or “die” at 4:00pm ET today. My lifespan isn’t quite as long as your mayfly (and they’ve been following this schedule for 100 million years), so I can’t complain. As opposed to the mayfly, it’s unlikely that procreation is in my future (but one can dream), and I still have a lot to do in my 8 hours!

I was lucky to be born as the February 27, 401 SPY Call.

It is too early for trading to begin, but S&P futures are higher and SPY is trading around 398.5 in the pre-market, up from Friday’s close of 396.4. Additionally, I am hearing throughout the ward that Mondays are typically good for calls! I’m excited because I should be very popular today!

Maybe that is why one of my siblings (the SPY 390 Put) looks so despondent. But, I think I’d prefer spending the time ahead of the open (when they unleash us on the world) with 390P (I’ll use our code names, since saying the expiration date over and over is redundant, and quite frankly, a bit depressing). Anyways, let’s move on.

BTW, I’m already annoyed by 400C. Literally it is out there strutting around knowing that it will probably be the most popular one of us right out of the gates. It’s almost embarrassing, at least to me, that there is literally an entourage of 0DTE hanging around 400C sharing in its spotlight!

The waiting for the open is getting a bit tedious!

Also, I’ve got to admit, I’m getting a little freaked out by some of the noises coming from the next room. We don’t know for sure, but supposedly there are some things called “weekly” options being born over there! I’m more scared than jealous because who wants to live a week in obscurity, which most of them will do, when you can have it all in one glorious day! I’m really getting excited for my potential today!

There are rumblings that something called a TSLA March 3rd 200 Call is a real bully! Pushing and shoving the rest of the weekly’s out of the way along with their little gang of 200 Puts/210 Calls (which apparently hang out in every new generation). The only group over there that even seems willing to stand up to the TSLA gang, at least consistently, is the VIX Call group. I’m not even sure what a VIX Call is or does (it isn’t a stock ticker that I know of), but supposedly it could provide some stiff competition for me – though mostly on down days and today looks like an up day!

Ding, ding, ding!

There is the bell, we are off and running!

Hmmm, a disappointing start for me. Seeing a bunch of puts crop up in the “most active” section to start the day. 390P is actually the second most active contract out there. Wow, good thing I was friendly before the open! It is also very early and I am seeing things like XLE and even HYG high on the list. Whatever you think about the high yield bond market, HYG is NOT likely to stay that active (especially since it contains longer-dated options) and the 0DTE family will rule the day!

Take that!

I’m up to the number 10 most traded! Yeehaw, I’m POPULAR!

Yeah, yeah, “Mr. Fancy Pants” 400C is number one, but what can I do about that! You know what seems crazy is that option, which started this morning around 50 cents, is already worth $1.3! What a return! And open interest is only 13,500 contracts compared to a traded volume of 77,000. On Bloomberg you can find vega, delta, and other “Greeks” for this option, which is cute, but largely irrelevant! Theta, or “time decay” is 0, since we expire today! Kind of funny to see N.A. beside such an important option metric, but we are more like betting chits than options!

Ugh, don’t look now, but looks like someone just bought a lot of 0DTE puts!

The 390P is now trading at 1 cent, down from 23 cents! But, let’s be honest, who is buying or selling that here? Yet it is now the 2nd most active contract.

Are the put buyers going to drag down the market or is an upside gamma squeeze still in the cards?

It’s 11am ET, right around the time everyone gets excited about how the market will behave when “Europe goes home”.
The top 8 options traded, by volume, are all SPY Puts and Calls. I’m sitting at number 4, and anything could happen. The “leaderboard” is 399P, 400P, 400C (it would be better for markets if this was leading, but I really don’t like this 0DTE for some reason – must have been the pre-market arrogance), 401C (yours truly!), 402C, 398P, 403C, and 397P.

Yawn.

Things have stagnated (bouncing back and forth) so let’s do a “family portrait”!

My nemesis is at the top of the leader board, but I’m 5th and am convinced that I can make a run for it. If anything, I’d watch that sneaky little 401C because something tells me that one is a “gamer” and could make a strong charge at the end. Also, poor little 390P has all but disappeared.

Personally, I’m a little miffed that AMC, QQQ, and a couple of “tomorrow options” are in there! Seriously, “tomorrow” options, are they just showing off? Ooh, look at me, you are gone today, but I’ll still be here tomorrow and might even move overnight! Ugh, such jerks.

Rumor Has It

Apparently, there are a lot of questions about us and our impact.

• Did it make the spike starting at 9:45am ET bigger than it should have been?

• Did we help drag the market down after that spike (whether or not the spike had anything to do with us)?

• Are we leading the market? Are we following the market? Are we coinciding with it?

• Do we drive stock market volumes?

The answer to any and all of these questions seems to be yes, no, or maybe, depending on who you talk to (except for the volume question which seems to be an unequivocal yes). Maybe if we stuck around for a few days, we’d have a better sense, but that defeats the purpose!

I’ll let you in on a little secret. There is a club right next door that plays Sweet Dreams on a perma-loop:

Some of them want to use you.

Some of them want to get used by you.

Some of them want to abuse you.

Some of them want to be abused.

Maybe that should be our theme song? Or maybe our “walk on” song! Right as the bell rings and we start our lives, they should play that chorus! If nothing else, it should add some intrigue to our lives!

Fade into the Close?

Just a few minutes ago it looked like the 3pm ET ramp was in play. Now I fade into the close?

Poof I’m Gone

Well, looks like I (and most of my brothers and sisters) expired worthless, as usual.

Have no fear, an entire new clan of 0DTE will be created tomorrow, and we can do it all again

Authored by Simon White, Bloomberg macro strategist,

The US stock market continues to be overvalued on several measures, exposing equities to further downside.

Stock pickers love bear markets. Suddenly many companies on their watch lists begin to look attractive. But despite the protracted equity market downturn, valuations – almost no matter how you slice or dice them – continue to look rich.

It’s true the S&P’s P/E ratio has fallen precipitously over the last two years, but that was from nosebleed levels, and it is now only back to its long-term mean. Valuations cannot be said to be unambiguously cheap at an index level. The Nasdaq’s P/E fell sharply too, but it is only just below its long-term average.

Long-term returns are what that matters to most investors, and on that basis disappointment is likely to await anyone buying stocks. The most popular measure of long-term valuation is the cyclically-adjusted P/E (CAPE). Buying the index when this is historically cheap typically leads to well above-average 10-year returns, and vice-versa.

The CAPE has fallen, but still remains in the top 90% of all its readings. This is the same for other measures of long-term value, such as Tobin’s Q (the ratio between a firm’s market cap and the replacement cost of its assets), and the price-to-sales ratio. Buffet’s famed, favorite measure – the market cap of US equities versus GDP – also remains elevated.

Even with the equity market down over 17% from its highs, these measures remain in the top 85-90% of all their readings. This is a market far from screaming “buying opportunity of a lifetime”.

As a stock picker, you are less interested in the index averages, which can be overly influenced by the valuations of a few mega-cap stocks. As long as there are plenty of lower-valued stocks to choose from you should be happy. But that has distinctly failed to transpire so far in this bear market.

If it had, we would have seen a pronounced shift in the distribution of the P/Es of S&P500 stocks. But it is little changed to that seen at the 2022 peak. This stands in stark contrast to the 2009 bottom, when there was an unequivocal and significant shift lower in companies’ valuations, leading to a bonanza for stock pickers.

It’s hard to make the case that the stock market has bottomed until we see a broad-based and noteworthy decline in P/E ratios. And stocks are unlikely to cheapen significantly until they adequately price two major risks: inflation (and therefore rates), and earnings.

We can think about how these relate to equity prices by looking at the “Rule of 20”, which states that over the long term, the P/E ratio and the inflation rate should sum to 20. When that sum is over 20, the market is said to be overvalued, and undervalued when it is below 20.

When inflation is high, as it was in the 1970s, nominal earnings rise, so P/Es should adjust lower to take account of this. Today the Rule of 20 implies an S&P 25% lower than its current price.

That implied value is destined to fall further as inflation begins to rise again, as it looks set to do, and also as earnings fall. It bears repeating that earnings are a lagging indicator, and they will only begin to decline after the recession – which continues to look odds on, even as early as the summer – has begun.

This is not supposed to be a hard forecast for the S&P, but when the gap between the rule-implied and the actual index level is as large as it is today, it gives a strong indication of the market’s direction of travel.

Despite risks from inflation and recession, investors are being offered scant margin to hold stocks, with the equity risk premium near the lows it reached in the aftermath of the GFC.

Still, the value sector has had one its best runs for fifteen years, outperforming the hitherto go-go growth sector for most of the last two-and-a-half years.

It should continue to do well, especially due to the generally low duration of value stocks, a sine qua non in an inflationary world. But until there is a re-rating lower in stocks across the board, it will be tougher to build portfolios of cheap, quality companies that have the potential to post strong, long-term returns. Stock pickers should bide their time for cheaper valuations ahead.

US stock futures rebounded on the last day of a turbulent month for stocks which saw much of the January gains wiped out, and even with S&P futures inching above 4000 the S&P 500 was on course to post a monthly decline as investor fears about a hawkish Fed response to sticky inflation prevailed. Contracts on the Nasdaq 100 and the S&P 500 rose 0.4% at 7:45 a.m. ET; the S&P 500 is set for a drop of more than 2% in February, trimming a sharp rally last month. Bonds sank in the wake of reports that showed accelerating inflation in France and Spain. The dollar reversed earlier gains and crypto rose.

Among notable movers in premarket trading, Zoom jumped after the video-conferencing software company issued an outlook for adjusted earnings that was much stronger than expected. Workday Inc. dropped after results, with analysts saying that the payroll software company’s outlook for subscription growth was cautious. Target rose after results beat expectations and Chevron expanded its stock buyback plans. Here are all the notable premarket movers:

• Chevron shares gain 1.3% as the company increased its annual rate of share buybacks in a show of confidence in its cash-generation goals.
• Dish Network Corp. shares are down 4.5% after BofA downgraded the satellite television company by two notches.
• Hims & Hers Health gains 9.1% after the health-care software solutions company posted 4Q results and 2023 guidance that beat estimates.
• Norwegian Cruise shares tumble about 6% after the company’s adjusted loss per share and adjusted Ebitda loss were worse than analysts expected in the fourth quarter. Peers Royal Caribbean (RCL) and Carnival (CCL) are trading about 1% lower.
• Olaplex falls 15% after the maker of hair-care products issued weaker-than-expected forecasts for net sales and adjusted Ebitda for the current year, projecting that 2023 will be a “reset year.”
• Progyny jumps 16% after forecasting 1Q revenue that beat the average of analysts’ estimates.
• Tesla shares gain 2.2% as the electric carmaker closes in on the market capitalization of Berkshire Hathaway Inc. — the fifth most-valuable company in the S&P 500.
• Target Corp. rises 1.3% after turning in a strong fourth-quarter performance, but the company offered a cautious financial forecast for this year as the retailer contends with shaky demand for discretionary goods.
• Workday shares decline 2.4%, with analysts noting the payroll software company’s cautious outlook for subscription growth, defying expectations for a stronger outlook.
• Zoom Video shares gain nearly 7% after the video-conferencing software company reported fourth-quarter results that beat expectations and gave an outlook for adjusted earnings that was much stronger than expected.

After a strong start to the year, demand for US stocks has tapered in February as data showed inflation remained elevated, raising fears that the Fed would keep interest rates higher for longer. The first quarterly decline in corporate earnings since 2020 has also hit risk sentiment. “The more upbeat sentiment that kicked off the week is ebbing away, with investors refocusing on risks ahead for the global economy,” said Susannah Streeter, head of markets at Hargreaves Lansdown.

Both US and European stocks ended last week with their biggest five-day drop this year on concern that central banks will ramp up their battle on inflation seemingly invulnerable to aggressive policy. Positioning data shows investors becoming more pessimistic as they amass short bets in both US and European equity futures, according to Citigroup strategist Chris Montagu who said investor sentiment toward stocks was starting to become pessimistic as they built short bets on S&P 500 futures last week. Other market strategists including Michael Wilson at Morgan Stanley have also warned that equities could see pressure in March from faltering earnings and higher valuations.

“Equity markets are not appreciating the macro challenges ahead,” said Wei Li, global chief investment strategist at BlackRock Inc. “That is not to say we cannot have shorter term bouts of rally, like what we saw in January, driven by technical factors, driven by FOMO.”

European stocks are in the red but off their worst levels with the Stoxx 600 down 0.1%. Healthcare and construction are the worst performing sectors while banks and insurance rise.  European bond yields climbed as investors digested hotter-than-expected inflation prints in France and Spain, prompting traders to crank up wagers for the ECB deposit rate to hit 4% for the first time, sending the yield on two-year German debt to the highest since 2008. Here are the most notable European movers:

• Monte Paschi falls as much as 13% after French insurer Axa launched a private placing of about 100 million shares through an accelerated book-building process at a price of €2.33 per share
• Bayer shares slide 5.2% after the global agriculture and pharmaceutical company’s earnings outlook fell short of estimates due to declining prices for crop products
• Ocado shares drop as much as 10% after the online grocer reported a full-year pretax loss that was bigger than analysts expected
• Adecco shares drop as much as 3.6% following the staffing company’s fourth- quarter results, with analysts highlighting the impact of higher costs and potential for downgrades to consensus estimates
• Travis Perkins shares drop as much as 8.7%, the most intraday since August, after the UK builders’ merchant’s full-year results missed expectations
• Banco Santander shares gain as much as 3.2% after the Spanish lender unveiled a new 2023-2025 plan as it hosts an investor day in London on Tuesday
• Man Group Plc shares surge as much as 11%, their biggest jump since March 2020, after the world’s largest publicly traded hedge fund defied the gloom in the industry
• St James’s Place shares rise as much as 3.8% in early trading after the UK wealth manager’s underlying profit topped expectations
• Worldline shares rise as much as 3.4% as Morgan Stanley raises the French payments company to overweight from equal-weight, saying it offers an “attractive and defensive growth” outlook
• Saipem advances as much as 6.2% before paring some gains as the Italian oil-drilling specialist posted above- consensus guidance for 2023 after fourth-quarter Ebitda beat expectations

Asian stocks were headed for their worst month since September as a repricing of the Federal Reserve’s policy and an evaporating China rally weighed on the region. The MSCI Asia Pacific Index fell as much as 0.5% on Tuesday, driven by consumer discretionary and communication shares. Hong Kong stocks declined the most even as the city said it will end its mask mandate. A late afternoon surge helped Chinese shares close in the green.  The regional stock measure has fallen more than 6% in February, erasing a bulk of January’s advance. Catalysts appear stretched amid concerns over global monetary policy, while China investors await a key meeting of the nation’s political leaders starting this weekend for further clues.

Investors have moved to price in a peak Federal Reserve rate of 5.4% amid elevated US inflation, pressuring riskier assets including those in Asian emerging markets.  “It seems a lot of traders are not confident” as the economy still looks too strong for disinflation trends to resume, Edward Moya, a senior market analyst at Oanda, wrote in a note. ​“The Fed has a lot more work to do and that should be a difficult environment for stocks.”

Japanese equities trimmed earlier gains amid cautious sentiment as investors came to terms with further rate hikes by the Federal Reserve.  The Topix was little changed as of market close Tokyo time, paring most of its 0.4% advance. The Nikkei rose less than 0.1% to 27,445.56.  Services were the biggest boost to the Topix among industry groups. Oriental Land contributed the most to the advance, rising 3.5%.  US Business Equipment Orders Increase by the Most in Five Months “While stocks in Japan rose following US peers, the market is still cautious about the outlook,” said Shogo Maekawa, a global market strategist at JP Morgan Asset Management. “If US economic indicators continue to exceed market expectations and interest rates rise, that will create headwinds for both US and Japanese stocks.”

Australian stocks advanced; the S&P/ASX 200 index rose 0.5% to close at 7,258.40, reclaiming some of Monday’s decline as miners and energy stocks climbed. Even with Tuesday’s advance, the benchmark notched a 2.9% monthly loss. Disappointing earnings results and worries over the Fed’s outlook weighed on the gauge in February. In New Zealand, the S&P/NZX 50 index rose 0.9% to 11,894.58

In FX, the Bloomberg Dollar Spot Index was little changed as the greenback traded mixed against its Group-of-10 peers, and Treasury yields inched up; the British pound is the best performer among the G-10’s, rising 0.1% versus the greenback.  One-month risk reversals in the Bloomberg Dollar Spot Index remain under pressure in the past couple of weeks and point to a bearish correction, yet long-term bets suggest this will be short-lived. Here is the full FX scoreboard:

• The euro swung from a day low of 1.0582 to touch a high of $1.0625 following strong inflation readings from France and Spain. Euro-area bonds slid as traders bet the ECB will raise interest rates to a record high of 4%.
• The pound led G-10 gains, climbing against both the dollar and the euro for a second day as Prime Minister Rishi Sunak’s post-Brexit deal for Northern Ireland provided support. Gilts fell as traders raised tightening bets as much as 5bps, wagering on a 4.89% terminal rate by November.
• The Australian dollar erased Monday’s gain as broad greenback strength outweighed strong local economic data. Australian retail sales rebound, rising 7.5% from a year ago in sign of consumer resilience and keeping pressure on RBA. Bonds held opening gains.
• The yen was among the worst G-10 performers and most Japanese government bonds gained, flattening the yield curve, as concern eased that the BOJ will change its stimulus program any time soon.

In rates, treasuries are slightly cheaper across the curve, following wider losses across core European rates after French and Spanish inflation data surprised to the upside, causing a new wave of hawkish repricing for ECB policy rate. US 10-year yields around 3.95%, cheaper by ~3bp vs Monday’s close, with bunds and gilts underperforming by ~4.5bp and ~1.3bp in the sector; front-end slightly outperforms, steepening 2s10s spread by 1bp on the day. Following France, Spain inflation data, euro-zone front-end repriced for a peak ECB rate of 4% for the first time. Bund futures fell; German 10-year yields are up 6bps on the day while two-year yields climb 8bps.  Focal points of US session include potential for month-end flows and a packed economic data slate.   

In commodities, oil was set for a fourth straight monthly decline as concerns about tighter monetary policy and swelling stockpiles in the US eclipsed optimism about rising demand in China. Crude future advance with WTI rising 1.1% to trade near $76.50; Gold headed for its worst month since the middle of 2021, and on Tuesday fell roughly 0.4% to trade near $1,810.

Looking at today’s calendar, US economic data slate includes January advance goods trade balance and wholesale inventories (8:30am New York time), 4Q house price purchase index and December FHFA house price index and S&P Case- Shiller home prices (9am), February MNI Chicago PMI (9:45am), Richmond Fed manufacturing index, consumer confidence (10am) and Dallas Fed services activity (10:30am). From central banks, we’ll hear from the Fed’s Goolsbee, the ECB’s Vujcic, and the BoE’s Cunliffe, Pill and Mann. Finally, earnings releases include Target.

Market Snapshot

• S&P 500 futures down 0.2% to 3,978.75
• STOXX Europe 600 down 0.4% to 460.78
• MXAP down 0.4% to 157.58
• MXAPJ down 0.4% to 510.36
• Nikkei little changed at 27,445.56
• Topix little changed at 1,993.28
• Hang Seng Index down 0.8% to 19,785.94
• Shanghai Composite up 0.7% to 3,279.61
• Sensex down 0.6% to 58,944.15
• Australia S&P/ASX 200 up 0.5% to 7,258.40
• Kospi up 0.4% to 2,412.85
• German 10Y yield little changed at 2.65%
• Euro little changed at $1.0616
• Brent Futures up 0.7% to $83.02/bbl
• Gold spot down 0.3% to $1,811.43
• U.S. Dollar Index little changed at 104.66

Top Overnight News from Bloomberg

• Incoming Bank of Japan (BOJ) Deputy Governor Shinichi Uchida on Tuesday brushed aside the chance of an immediate overhaul of ultra-loose monetary policy, suggesting that any review of its policy framework could take about a year. RTRS
• Investors and traders continue to ramp up their bullish bets on the yen, with one eye firmly fixed on looming Bank of Japan management changes: BBG
• Ukraine’s head of military intelligence downplays talk of China supplying arms to Russia, saying he saw “no signs that such things are even being discussed”. SCMP
• Apple’s suppliers are likely to shift production capacity out of China far faster than many anticipate given deteriorating relations between Washington and Beijing. BBG
• Euro-area bonds slid and traders bet the ECB will raise interest rates to the highest level on record amid signs inflation in some of the region’s biggest economies is not coming under control. Data showed French and Spanish inflation unexpectedly accelerated to an all-time high in February, spurring money-markets traders to fully price a 4% ECB terminal rate, which would exceed a peak in borrowing costs seen more than two decades ago. That compares to 3.5% expected at the start of the year, with traders now betting the ECB will keep raising rates through February 2024. BBG
• Euro zone inflation pressures have begun to ease, including for all-important core prices, but the European Central Bank will not end rate hikes until it is confident price growth is heading back towards 2%, ECB Chief Economist Philip Lane said. RTRS
• The ECB might hold borrowing costs at a high level for some time once they reach their peak, according to Chief Economist Philip Lane: BBG
• Credit Suisse “seriously breached” risk management obligations in the Greensill affair, the Swiss banking regulator said as it opened enforcement proceedings against four unnamed former managers. Remedial measures include regular executive board-level reviews of key relationships for counterparty risks and recording the responsibilities of its 600 highest-ranking employees. BBG
• META’s new AI-driven Advantage+ tool, designed to overcome Apple’s privacy restrictions, is “significantly boosting the performance of advertising campaigns”. FT
• Chevron rose premarket after it raised its annual buyback rate to $17.5 billion beginning in the second quarter, up from a previously planned $15 billion. BBG
• The Swiss economy unexpectedly failed to grow in the final months of 2022 as manufacturing output contracted and exports weighed on momentum. Separately, Switzerland’s KOF Economic Leading Indicator rose more than economists expected in February, to 100 versus estimate 98.0: BBG
• The BOJ should take time over any future review if it undertakes one, according to deputy governor nominee Shinichi Uchida, a key engineer of the central bank’s easing program: BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks eventually traded mixed heading into month-end and despite the early momentum from the positive close on Wall St where risk sentiment benefitted as yields softened amid mixed data. ASX 200 was led by strength in the mining-related industries and after mostly encouraging data releases including a stronger-than-expected rebound in retail sales. Nikkei 225 initially gained amid the upper house confirmation hearings where the BoJ Deputy nominees reiterated the need to continue monetary easing, although the gains were gradually pared as participants also digested mixed data including the largest monthly decline in industrial production in 8 months. Hang Seng and Shanghai Comp. failed to sustain opening advances despite a substantial liquidity injection and reports the White House is scaling back plans to regulate US investments in China.

Top Asian News

• PBoC injected CNY 481bln via 7-day reverse repos at 2.00% for a CNY 331bln net injection.
• White House is scaling back plans to regulate US investments in China with US President Biden expected to forego expansive new restrictions on American investment in China, according to Politico.
• White House gave federal agencies 30 days to ensure they have TikTok bans on federal devices and systems, while it directed federal agencies to adjust contracts to ensure IT vendors keep US data safe by eliminating the use of TikTok on devices and systems, according to Reuters.
• BoJ Deputy Governor nominee Uchida reiterated that the BoJ needs to continue monetary easing for the time being to support the economy and shouldn’t review easy monetary policy just because there are side effects. Uchida added the BoJ will conduct policy flexibly and will firmly continue monetary easing to lay the ground for companies to raise wages, while he added that it is too early to seek an exit from monetary stimulus and that widening the yield target band itself would weaken effects of easing.
• BoJ Deputy Governor nominee Himino said NIRP has negative impacts on financial institutions’ profits and that they must be mindful of the impact to banks from negative rates but the focus now should be on keeping easy policy to support the economy. Himino stated that if conditions fall in place for BoJ to exit easy policy, that would be good for both the public and banks but added that the best approach is to support the economy with easy policy until inflation can achieve the BoJ’s price target excluding the impact of import price increases.

European bourses are mixed/flat, Euro Stoxx 50 +0.1%, as the initial pressure from hot French/Spanish inflation readings has eased through the morning. Sectors, are mixed with Banking/Financial names outperforming as yields lift alongside specific stock updates. Stateside, futures are little changed overall with the morning’s action moving in-tandem with European performance ahead of earnings/Fed speak, ES +0.1% Foxlink, an Apple (AAPL) supplier, will not be able to resume full operations at its India plant for two months following a fire, via Reuters citing sources. Apple could potentially face disruptions in supply chain for iPhones due to Foxlink incident. Chevron (CVX) reaffirms higher returns and lower carbon objectives, lifts share buyback guidance to USD 10-20bln/year; increases targeted annual share buyback rate to USD 17.5bln from Q2. Apple (AAPL) probe by Brussels into the Co.’s restriction of certain apps has been narrowed, according to FT sources. The US is to prevent businesses from using cash for buybacks in the CHIPS Act, according to the Commerce Department; Additionally, cannot make new, high-tech investments in China or other “countries of concern” for at least a decade. A release that is in-fitting with recent press reports.

Top European News

• ECB’s Lane says positive supply shocks since December and rate hikes have curbed inflationary pressures, forward looking indicators for food, energy and goods suggests inflation slowdown. Rate plateau should be held for some time, rates could be in restrictive territory for a number of quarters; hikes to end when it is clear inflation is heading to target.
• Northern Ireland DUP leader Donaldson says the Stormont Break in the Northern Ireland deal at first glance does give Stormont the ability to apply the break. Continue to have some concerns with the deal.
• EIB President proposes a new fund to see off US subsidies, via Der Spiegel; concerned that entire industries will migrate to the US given the subsidies on offer there.

FX

• The DXY is firmer on the session, though remains closer to its 104.57 trough then the 104.90 high, a low that printed in wake of shortlived EUR upside following February flash CPI metrics from France/Spain.
• Specifically, the price points lifted EUR/USD to a 1.0625 peak, though this has proved shortlived as the USD remains resilient and given unfavourable EUR/GBP action as the mood-music re. N. Ireland remains positive, on balance.
• As such, GBP is the G10 outperformer with Cable testing the 1.21 mark vs a 1.2028 base following a favourable face-value take from DUP’s Donaldson; though, sources indicate the parties’ review could potentially take weeks.
• JPY is the G10 laggard given unfavourable yield action and more dovish remarks from the BoJ deputy nominees; USD/JPY at the top-end of 136.12-84 parameters.
• PBoC set USD/CNY mid-point at 6.9519 vs exp. 6.9515 (prev. 6.9572)

Fixed Income

• Debt futures fade after the latest dead cat bounce and curves re-steepen.
• Bunds hit a fresh 132.51 cycle low, Gilts down to 99.38 and T-note retreats within 111-21+/10 range, solid 2025 German auction, albeit after heavy concession helps Schatz pare some losses between 115.52-114.95 parameters.
• JGBs outperform after more dovish testimony from BoJ nominees and decent 2 year sale.

Commodities

• WTI and Brent are firmer on the session and currently reside at the top-end of narrow circa. USD 1/bbl parameters which are just about within Monday’s range, with newsflow limited and the complex seemingly continuing to consolidate.
• Japan plans to emphasise the importance of investments into natgas, LNG, hydrogen and ammonia during its G7 presidency, according to a METI official.
• LME announces immediate suspension of warranting, applicable to LME-listed warehouses located in the US of any new primary aluminium, copper, lead, nickel or aluminium alloy (in form of NASAAC). Currently Russian NASAAC on warrant, 400/T, in LME-listed warehouses within the US. Suspending use of such warrants for use in settlement of LME NASAAC futures.
• Spot gold is a touch softer on the session as initial USD-induced upside has faded as the index moves back into positive territory, albeit only modestly so; more broadly, base metals are mixed given the USD’s resilience and inflation metrics weighing.

Geopolitics

• Kremlin spokesperson Peskov said Russia will not resume participation in START talks until Washington listens to Moscow’s position, while he added that NATO no longer acts as Russia’s conditional opponent but as an enemy.
• Russian Defence Ministry said the US is planning provocation in Ukraine using toxic chemicals, according to TASS.
• Russian domestic flights heading for St Petersburg are reportedly turning around, via Reuters citing a flight radar tracking site; Pulkovo airport has been closed to air traffic, due to an unidentified object with fighter jets responding, via BAZA. Airspace around the airport has subsequently reopened.
• Russian Defence Ministry says Ukraine attempted to attack two Russian regions with drones overnight, via Ria.

US Event Calendar

• 08:30: Jan. Wholesale Inventories MoM, est. 0.1%, prior 0.1%
  • Jan. Retail Inventories MoM, est. 0.1%, prior 0.5%
• 08:30: Jan. Advance Goods Trade Balance, est. -$91b, prior -$90.3b, revised -$89.7b
• 09:00: Dec. S&P CS Composite-20 YoY, est. 4.75%, prior 6.77%
  • Dec. S&P/CS 20 City MoM SA, est. -0.40%, prior -0.54%
  • Dec. FHFA House Price Index MoM, est. -0.2%, prior -0.1%
• 09:45: Feb. MNI Chicago PMI, est. 45.5, prior 44.3
• 10:00: Feb. Richmond Fed Business Conditions, prior -10
  • Feb. Richmond Fed Index, est. -5, prior -11
• 10:00: Feb. Conf. Board Consumer Confidence, est. 108.5, prior 107.1
  • Feb. Conf. Board Present Situation, prior 150.9
  • Feb. Conf. Board Expectations, prior 77.8

Central Bank Speakers

• 14:30: Fed’s Goolsbee Speaks at Community College

DB’s Jim Reid concludes the overnight wrap

Regular readers won’t be surprised to learn that I have a new injury. As soon as I was fit to resume normal activities after my recent back operation I went back to weights. I only do this to be better at golf. In my first couple of sessions back 2 weeks ago, I overdid the bench press and to cut a long story short I now have a rhomboid muscle strain or tear. I’ve stupidly tried to continue playing golf with it and have made it worse. I’m now in a lot of pain and probably out from golf for a few weeks. I come away from it wishing that my mid-life crisis was more skewed towards fast cars, tattoos, or a hair transplant rather than golfing ambitions.

After a rough three weeks for equities, bonds and my shoulder, markets have started this one off in a better mood so far as we hit the last day of the month today. That’s a sixth of the year nearly gone! They have edged higher thanks to a positive round of US data, whilst pricing for the Fed’s terminal rate remained stable after a sustained stretch higher over recent days. This in turn gave markets a clearer run to positively respond to the data across bonds and equities.

Things had looked quite different earlier in the day. In fact, at one point the 10yr Treasury yield reached its highest intraday level since November at 3.977%, before moving lower in the US morning, and ultimately closing -2.9bps lower at 3.914%. In the meantime, expectations of the terminal rate had likewise been on track to hit a new closing high and moved as high as 5.43% intraday, before ending the session little changed at 5.404%.

In risk markets, positive US data without a rates repricing helped, with core capital goods orders up by +0.8% in January (vs. unch expected). On top of that, there was further evidence that housing activity might have bottomed, since pending home sales were up +8.1% in January (vs. +1.0% expected), which leaves the index at its highest level since August. However note that mortgage rates have gone back up in February so we’ll see how strong the nascent housing recovery is.

For equities, the S&P 500 (+0.31%) posted a steady advance led by cyclical and growth sectors. The NASDAQ (+0.63%) outperformed, and the FANG+ index (+1.51%) saw an even larger advance thanks to a solid gain from Tesla (+5.46%) which ended the day as the 4th best performer in the entire S&P 500. Defensives lagged, as bond-proxies such as utilities (-0.77%) and food staples (-0.54%) were the worst performing industries. Meanwhile in Europe, the STOXX 600 (+1.07%) posted a decent broad-based recovery. Every sector of the index was higher, but like with the US, defensives lagged their more cyclical peers.

The exception to the pattern of positive data came from the Dallas Fed’s manufacturing index for February, which came in at -13.5 (vs. -9.3 expected). Notably, there were also increases in the prices paid and prices received components, with both hitting a 5-month high. That topic of inflationary pressures in February is likely to stay in the spotlight today, since this morning we’ve got the flash releases from France, Spain and Portugal, ahead of the Euro Area-wide release on Thursday. Remember that our European economists expect Euro Area core inflation to hit a new record of +5.5%, although they see headline inflation coming down a bit further to +8.4%, which would be a 4th decline since the +10.6% peak back in October.

This concern about inflation meant that European markets performed a bit differently to the US yesterday, with sovereign bond yields rising to fresh highs in several countries. For instance, the 10yr bund yield (+4.5bps) closed at its highest level since 2011, ending the day at 2.582%. And in the UK, the 10yr gilt yields was up +14.6bps to 3.805%, marking its highest level since Liz Truss was still PM back in October. Those moves came as investors continued to price in a more hawkish policy path for the ECB, building on the shift over recent weeks. Indeed, overnight index swaps are now pricing in no rate cuts at all in 2023, and by the December meeting they’re now pricing in +137bps of further hikes.

That repricing of the ECB’s rate path was seemingly endorsed by Croatia’s Vujcic yesterday, who said that the repricing reflected the ECB’s moves, and that markets were right to price in 50bps next time as they’d indicated. He also said that as long as core inflation persisted, then the ECB must persevere. Meanwhile at the Fed, the only major speaker was Governor Jefferson (who previously spoke on Friday), but he offered little new information on the policy side. One thing he did say was that raising the Fed’s inflation target could hurt their credibility, and pointed out that the outlook for core services ex housing inflation (which Chair Powell has said they are following) remained uncertain. Yet in spite of his reiteration of the 2% goal, short-term US inflation expectations continued to move higher yesterday, with the 2yr breakeven (+3.4bps) hitting a fresh 6-month high of 3.088%. In a WSJ interview published yesterday, Cleveland Fed President Mester seemed to imply that the threshold to go back to 50bps hikes would be high. She noted that “this is a different situation now. We’ve already reduced it to 25 (basis points). That’s going to be part of the consideration.” However, she noted that the more pertinent discussion for the FOMC in March will be just how much further the policy rate needs to go.

Overnight in Asia, major benchmarks are trying to catch up with yesterday’s price action in the US, with the Kospi (+0.64%) and the Hang Seng (+0.41%) outpacing the Nikkei (+0.13%) and the Shanghai Composite (+0.07%). US futures are also in the green, led by the Nasdaq 100 (+0.18%) while the S&P 500 is flat (+0.01%). The 10y yield is marginally higher (+1.2bps), mirroring the move in the 2y (+1.5bps).

Back here in the UK, sterling strengthened (+1.00%) after the government reached a deal with the EU over the Northern Ireland Protocol, which has been the most contentious part of the original Brexit deal. In essence, the Protocol was designed to avoid a hard border between Northern Ireland and the Republic of Ireland, but in doing so placed checks on goods moving into Northern Ireland from the rest of the UK, whilst Northern Ireland also remained aligned with the EU single market for goods. This has been opposed by unionists in Northern Ireland, who see the Protocol as placing an economic border with the UK, and the DUP (the largest unionist party there) have refused to enter a power-sharing agreement in Northern Ireland because of it.

When it comes to the new agreement, it removes checks on goods that move from Great Britain into Northern Ireland that remain within the UK. It also enables VAT and excise changes to apply on a UK-wide basis in future, including to Northern Ireland. And a new mechanism was introduced that will allow the devolved Northern Ireland Assembly to decide whether or not changes to EU goods rules affecting Northern Ireland should apply. If this brake is pulled, the UK government would have a veto over the application of a new EU rule. Leader of the DUP, Jeffery Donaldson said his party needed to go over the finer points of the agreement over the next few days, but that “in broad terms it is clear that significant progress has been secured across a number of areas.”

To the day ahead now, and data releases include French CPI for February, Canada’s Q4 GDP, and in the US there’s the FHFA house price index for December, the Conference Board’s consumer confidence index for February, the MNI Chicago PMI for February, and the Richmond Fed’s manufacturing index for February. From central banks, we’ll hear from the Fed’s Goolsbee, the ECB’s Vujcic, and the BoE’s Cunliffe, Pill and Mann. Finally, earnings releases include Target.

A South Carolina state Senator wants to hit new residents with a $500 “Yankee Tax” for moving to the Palmetto state.

The bill, proposed by Sen. Stephen Goldfinch (R), would require those moving to South Carolina from out-of-state to pay two one-time fees; $250 for vehicle registrations and $250 for a new driver’s license. Half of the new fee would go toward the state’s infrastructure – including roads, bridges and common community areas, according to Fox Business.

“I’m not trying to build a wall and this is not a fee against new residents, it’s a fee for people to catch up with the rest of us,” Goldfinch told Fox News Digital. “I think there’s a rational basis for requiring newcomers to catch up with the rest of us and contribute to the roads, bridges, schools and green spaces that we’ve [residents] always contributed to.”

His proposal comes after droves of people from the Northeast have moved to South Carolina in recent years. According to the U.S. Census, nearly half a million people moved to the Palmetto State in the past decade.

People flocked to the Southeast during the pandemic and stayed due to a host of reasons, including work flexibility, lower taxes and warmer weather.

Goldfinch points to South Carolina residents as inspiration for the bill. -Fox Business

“Our quality of life has been diminished by the almost 4 million people that have moved here in the last decade,” said Goldfinch. “And we anticipate another million people moving here in the next decade. Everybody is concerned about their quality of life.”

The new fees will be available for debate next week on the South Carolina Senate floor.

As Fox Business points out, South Carolina isn’t the only state trying to slap people with moving taxes – as California and New York have both proposed legislation to tax people leaving their state.

“If you can charge people to leave, I don’t see any reason why you can’t charge somebody to come in the door,” said Goldfinch.

By Sagarika Jaisinghani, Bloomberg Markets Live reporter and strategist

The strong stock gains that have marked the early months of 2023 are likely to fizzle out if Russia’s war in Ukraine escalates.

While the region’s equities have recovered from declines seen in the immediate aftermath of Russia’s invasion that began a year ago, they are now more vulnerable to shocks after this year’s almost 8% bounce. Any escalation in the crisis will not only stoke geopolitical uncertainty, but also amp up pressure on energy and food prices and weigh on corporate profits.

“It’s clear the market views the risks as lower compared to the beginning of the war, and while elements of the rally are understandable, the margin of safety in European stocks has now been eroded,” says Hargreaves Lansdown lead equity analyst Sophie Lund-Yates. “That means any unexpected escalations or volatility is likely to result in a sharp market reaction.”

Although the optimism this year has been driven by cooling inflation and better-than-expected earnings, the war isn’t far from investors’ minds. Fund managers in a Bank of America Corp. survey see worsening geopolitical concerns as the second-biggest threat to markets, after sticky inflation. Most don’t expect a peace treaty this year.

The polarization between stock winners and losers, coupled with a weaker euro, suggest not all risks have been priced out, says Barclays Plc strategist Emmanuel Cau. The difference between the best and worst-performing groups in the Stoxx 600 is stark: energy shares have soared 20% in the past year, while rate-sensitive real estate companies have slumped 29%.

Among the big risks from here on is a potential energy crunch. While a mild winter helped Europe avert a crisis this time around, stockpiles could dwindle again if the war drags on into the colder months. “The need to replace a historically cheap energy source will remain a challenge,” says Charlotte Ryland, co-head of investments at CCLA.

With the war forcing a shift in governments’ long-term investments, spending on renewables and defense firms may get a boost. UBS Global Wealth Management strategists see opportunities in areas including commodities, green tech, energy efficiency and cybersecurity.

Another sector likely to be disproportionately affected is food and drinks, where supplies of some items have been disrupted in the past year. Bloomberg Intelligence strategists Tim Craighead and Laurent Douillet say profitability of the food industry “faces a potentially long-term test” as restricted supplies of key Ukrainian sunflower, oil, corn and wheat add to a rise in prices.

Economically sensitive sectors are also at risk of reversing an outperformance against so-called defensive peers if the war escalates. All in all, the outlook for European stocks is getting dimmer, with strategists in a Bloomberg poll expecting the Stoxx 600 to end the year below current levels on deteriorating economic momentum.

Citigroup strategist Beata Manthey expects geopolitical risks to keep a lid on European equity valuations as the boost from lower gas prices, a weaker dollar and China’s reopening is now priced in. “As for the rally, we wouldn’t be chasing it from here,” she says.

Environmental, social, and governance (ESG) has been a hotly debated topic over the last few years.

The seemingly unquestioned march towards corporate utopia has met with resistance among those who oppose the idea that government oligarchs should dictate the affairs of private business firms. The long-term effects of the ESG movement are largely ignored by the mainstream.

As Tom Czitron previously commented, ESG is largely justified on the basis that corporations and financial institutions should be socially responsible. They should work obsessively to address the perceived menaces of climate change, racism, sexism, and a host of subjects. Our benevolent political and economic elite define what is virtuous and what is not for a grateful public.

But, as of late, there are some naysayers that dare to stand up to the socialism-by-stealth promoters with Tim Buckley, chief executive at Vanguard, perhaps the biggest name yet to buck the ESG orthodoxy.

“Our research indicates that ESG investing does not have any advantage over broad-based investing,” Mr. Buckley said in a recent interview with the Financial Times.

Matching word to deed, his comments came after he had withdrawn his firm from the $59 trillion Net Zero Asset Managers initiative, an organization that is part of the $150 trillion United Nations-affiliated Glasgow Financial Alliance for Net Zero.

“We don’t believe that we should dictate company strategy,” he said, in his first public comments about the decision.

“It would be hubris to presume that we know the right strategy for the thousands of companies that Vanguard invests with. We just want to make sure that risks are being appropriately disclosed and that every company is playing by the rules.”

As The Wall Street Journal reports, Mr. Buckley effectively claims that ESG managers are playing the fool and taking their clients’ money with them.

Fewer than 1 in 7 active equity managers outperform the broad market in any five-year period. Over the past five years, not one relied exclusively on a net-zero investment methodology. 

Betting his clients’ money on politicians and regulators consistently doing the “right” thing would be irresponsible.

There is a receding chance the globe will be at net zero by 2050. No one should promise to base his entire investment strategy on such odds.

The Vanguard boss also warned investors not to expect superior returns from ploughing money into ESG funds and alternative assets – two of the fastest growing parts of the asset management industry – rather than the index-trackers championed by his firm.

“We cannot state that [environmental, social and governance] investing is better performance wise than broad index-based investing,” said Buckley.

“Our research indicates that ESG investing does not have any advantage over broad-based investing.”

The decision to withdraw from the coalition has sparked fury among environmental activists, with Al Gore calling Mr. Buckley’s decision “irresponsible and shortsighted.”

Buckley, however, said, as The FT reports, that Vanguard was “not in the game of politics”.

“Politicians and regulators have a central role to play in setting the ground rules to achieve a just transition to a lower carbon economy,” he said, when asked about the increasing politicisation of ESG investing.

As Terrence Keeley writes in an op-ed via WSJ, freeing the asset-management industry from a prevailing orthodoxy that promises wealth and environmental sanctity while delivering neither requires monumental fortitude.

Authored by Tsvetana Paraskova via OilPrice.com,

• The new head of Offshore Energies UK has warned that the higher tax rates are already hitting offshore companies hard.

• Last autumn, the UK raised the windfall tax for oil and gas operators to 35%, bringing the oil and gas sector’s total tax rate to 75%.

• Companies are already slashing investment in the UK energy system, which could leave the UK increasingly dependent on imports.

The windfall tax on UK North Sea producers is hitting all companies operating on the UK Continental Shelf with firms already announcing lower investments and deferring drilling plans, the new head of trade body Offshore Energies UK (OEUK) has warned.

Last autumn, the UK raised the windfall tax on the profits of oil and gas operators by 10 percentage points to 35% from January 1, 2023.

The UK also extended the so-called Energy Profits Levy to the end of March 2028, from December 31, 2025, as originally planned when the levy was 25%.

The total tax rate on the oil and gas sector has thus increased to a massive 75%, the highest of any UK sector, OEUK says.

The “super tax is hitting all offshore companies hard, large and small, not just those who make headlines,” OEUK’s new chief executive David Whitehouse told the Financial Times.

Operators in the UK are already looking to invest elsewhere which would leave the country increasingly reliant on fossil fuel imports, Whitehouse noted.

After the windfall tax was raised, Harbour Energy, the biggest oil and gas producer in the UK North Sea, backed out of the ongoing licensing round aimed at awarding more than 100 new licenses. Shell has said it would be re-evaluating each project comprising its $30.5 billion (£25 billion) planned investment in the UK energy system, and TotalEnergies has said it would slash its investment in the UK by 25%.

In its latest operational update, Harbour Energy said in January that its total UK capital expenditure was reduced compared to previous expectations with certain opportunities no longer being pursued following the changes to the Energy Profit Levy (EPL).

“While oil and gas prices have reverted to more normal levels we still face a tax rate of 75 per cent in the UK due to the recent tax changes, making investment in the country less competitive,” Harbour Energy’s CEO Linda Cook said.

“As a result, the EPL necessitated a review of our future activity levels in the UK and reinforced our ambition to grow and diversify internationally.” 

Commenting on calls for more taxes after Big Oil’s record profits for 2022, Mike Tholen, OEUK’s director of sustainability, said early this month, “That rate of UK tax is already so high it risks driving companies out of UK waters. All parties have acknowledged that we will need oil and gas for decades to come. So why risk damaging our own secure supplies from the North Sea?”