Almost exactly 10 years ago, billionaire corporate raider Carl Icahn dueled wih fellow billionaire and hedge fund manager Bill Ackman as the latter unveiled a massive short in Herbalife which the former mocked, loaded up on longs and squeezed Ackman for millions in losses.

Icahn remarked at the time:

“If you’re short, you go short and hey, if it goes down you make money. You don’t go out and get a roomful of people to badmouth the company. If you want to be in that business, why don’t you go out and join the SEC?”

Adding that Ackman could face “the mother of all short squeezes” by announcing his major short position, giving other traders something to shoot against.

10 years later, Bloomberg reports that, according to people familiar with the matter, Icahn began shorting GameStop Corp. during the height of the meme-stock frenzy around January 2021 and still holds a large position in the video-game retailer.

Of course, GameStop is different as it was at the center of the massive short-squeeze in early 2021 that left various major (short) hedge fund managers bleeding heavily…

The last few months have seen GME short interest rising modestly (as GME prices have declined)…

The early response to Icahn’s short on social media was relatively measured. News of the wager was shared on Reddit in at least two threads, including in the popular WallStreetBets forum, garnering more than 250 comments as of 9:54 a.m. in Singapore. That pales in comparison to the thousands of responses to GameStop posts during the height of meme mania.

Nevertheless, GME is trading higher overnight (squeeze beginning) after a bloodbath of a day yesterday…

More than one-fifth of GameStop’s shares available for trading are currently sold short, according to data compiled by S3 Partners, more than double the level seen this time last year. That compares to a peak of more than 140% in January 2021 when the retail trading crowd flooded chatrooms on Stocktwits and used memes and GIFs to pump bets on forums like Reddit’s WallStreetBets.

We wonder if Bill Ackman will take a shot?

After trading in the red for much of the overnight session, US futures inched higher shortly after the European open after a volatile session in Asia marked by rising Covid cases in China, while a Fed president turned dovish and showed openness to slowing the path of rate hikes. Futures on the S&P 500 traded near session highs, up 0.4% to 3,972 by 8:00 a.m. in New York, while Nasdaq 100 futures gained 0.1% after struggling for direction. 

Stocks in Hong Kong and Mainland China slipped as China’s daily virus infections climbed to near the highest on record, although a bounce in Japanese stocks pushed overall Asian markets higher. Europe’s Stoxx 600 Index rose, led by energy shares. The dollar weakened against all major currencies and Treasury yields declined. Crude oil prices rose after Saudi Arabia pushed back against reports of a potential OPEC+ production increase. Bitcoin’s gradual, methodic slide continued interrupted by occasional bouts of ungradual, unmethodic panic liquidations.

In premarket trading, Zoom Video dropped after the firm reported its slowest quarterly sales growth on record and trimmed full-year revenue forecasts. Chinese stocks listed in US fell after a ramp-up in Covid restrictions to curb a spike in virus cases across China. Pinduoduo -2.4%, Trip.com -0.6%, Bilibili -2.8%, Nio -2.5%, Li Auto -3.9%. Here are some other notable premarket movers:

• Blackstone shares fall 2.5% in US premarket trading as Credit Suisse cut its rating to underperform from neutral and said that it is awaiting a better entry point for US alternative asset manager stocks.
• Alibaba shares pare losses in US premarket trading after Reuters reported that Chinese authorities are set to hand down a fine of over $1 billion for Jack Ma’s Ant Group, an event market watchers see as an end to Beijing’s prolonged investigation into the fintech firm and a first step to restarting its IPO.
• GameStop shares swing between slight gains and losses in US premarket trading, following a Bloomberg report that billionaire investor Carl Icahn was said to hold a large short position in the video-game retailer.
• Dell Technologies stock slipped 2% in postmarket trading on Monday as the computer company’s revenue forecasts for the current quarter missed estimates, as economic uncertainty begins to affect information technology customers.
• Keep an eye on Amazon.com after its price target was cut at Piper Sandler as AWS revenue decelerates along with an industry-wide slowdown at major cloud computing firms. The brokerage notes, however, that while “industry growth ticks down, AWS leadership remains.”
• Watch Activision Blizzard as Baird raised the recommendation on the stock to outperform from neutral, while downgrading Airbnb, Carvana and Vroom all to neutral since these companies are exposed to pullbacks in discretionary “high ticket” purchases.
• Keep an eye on software stocks, including Workday and Coupa Software as Morgan Stanley cuts price targets across the sector, with analyst saying that consensus estimates for 2023 are likely too high while customer IT budgets are set to be reduced.

“Market sentiment remains toneless for the second trading day of the week as most investors are still struggling to assess the short- to mid-term outlook for risky assets,” said Pierre Veyret, technical analyst at ActivTrades. “Despite the market starting to price in a potential slowing in rate hikes, some Fed officials have moved to temper these anticipations by reiterating their will to tackle inflation, and that this goal was far from being achieved.”

Fed officials continued to highlight the need to curb inflation but hinted that a slower pace of hikes could be possible. On Monday, San Fran Fed President Mary Daly said officials need to be mindful of the lags with which monetary policy works, while repeating that she sees interest rates rising to at least 5%. Separately, Cleveland Fed President Loretta Mester said she has no problem with slowing down the central bank’s rapid rate increases when officials meet next month.

“Markets get jittery whenever the Federal Reserve is due to speak or issue important information,” said Russ Mould, investment director at AJ Bell. “With the central bank set to publish the minutes from its November meeting tomorrow, equity investors need to brace themselves for the Fed to say it is likely to keep raising rates to tame inflation, even though October’s consumer prices figure was below expectations.”

After this quarter’s 10% rally in the S&P 500, Goldman strategists expressed skepticism about US stocks returns next year, setting a 4000 points target for the benchmark by Dec. 2023 as earnings growth stalls. “Zero earnings growth will match zero appreciation in the S&P 500,” strategists led by David Kostin wrote in a note on Tuesday. Then again, the same David Kostin said excatly one year ago that the S&P would close 2022 at 5,100 so expect him to be dead wrong again.

In Europe,  Stoxx Europe 600 Index climbed 0.2%, with energy stocks the best-performing sector as crude advanced after Saudi Arabia denied report of discussion about OPEC+ oil-output hike. BP rose 5.3% and Repsol was 6% higher after both stocks got analyst upgrades. Hong Kong stocks slid as China’s daily virus infections climbed to near the highest on record. Covid-control restrictions now affect a fifth of China’s economy. Still, the eventual easing by China of its curbs to counter the virus are likely to mean that European profits will hold up relatively well because of the benefits to luxury and mining companies, according to strategists at Goldman Sachs. Here are some of the notable European movers:

• AO World shares jumped as much as 17%, to the highest since early July, after the online appliances retailer raised its FY adjusted Ebitda forecast.
• Verbund rose as much as 8.2% after Stifel upgraded the utility company to buy from hold, saying conditions of Austria’s price cap are “much better” than had been anticipated.
• Allfunds shares fell as much as 11% after a discounted share offering by holders LHC3 and BNP Paribas in the mutual-fund distributor.
• Shares in digital price-tag maker SES- imagotag fell as much as 6%, before paring the drop, after majority shareholder BOE Smart Retail offered 1.5 million shares at a 7.3% discount to the last close.
• ThyssenKrupp declined as much as 5.9% after holder Cevian offered ~23.4m shares via UBS with price guidance of €5.15 apiece, representing a 4.7% discount to last close.
• Vodafone shares fell as much as 3.4% after the telecoms group was double-downgraded to underperform from outperform at Credit Suisse, which cited a growing risk to the dividend and elevated costs weighing on its outlook.

Earlier in the session, Asian stocks advanced as the yen’s recent weakness boosted Japanese exporters, offsetting losses in Chinese tech shares. The MSCI Asia Pacific Index gained as much as 0.7%, with Japanese firms Toyota, Sony and Mitsubishi helping lift the gauge along with Taiwan’s TSMC. Up more than 10% this month, the MSCI Asian stock benchmark has outperformed its US or European peers in November thanks to China’s rally.  Among sectors, energy and industrials advanced the most, while communication services and consumer discretionary shares edged lower. Chinese stocks in Hong Kong fell for another day, as a worsening outbreak on the mainland raised doubts as to whether authorities can hold on to their softer Covid Zero stance. A rally this month fueled by reopening hopes has now come to a halt as investors come to terms with China’s Covid reality.  “As we’ve seen in the Covid issues in China, it’s going to be stop-go sort of news flow in terms of the lockdowns et cetera and that’s going to add volatility to markets,” Lorraine Tan, director of equity research at Morningstar, said in an interview with Bloomberg TV.

Japan equities climbed as the yen’s retreat over the past four days supported exporters’ shares in the face of concerns over China’s Covid Zero policy and the Federal Reserve’s hawkish stance.   The Topix rose 1.1% to 1,994.75 as of the market close in Tokyo, while the Nikkei 225 advanced 0.6% to 28,115.74. Toyota Motor contributed the most to the Topix’s gain, increasing 2.3%. Out of 2,165 stocks in the index, 1,737 rose and 366 fell, while 62 were unchanged. “There is an impression that the market will be quiet with no major selloffs ahead of the Japanese and US holidays,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities. “In some aspects, it is difficult for the stock market to fall as investors find it hard to make a move.” 

Stocks in Malaysia fell for a second day after Saturday’s election produced the country’s first-ever hung parliament. Australia’s equity benchmark rose to a five-month high buoyed by miners.The S&P/ASX 200 index rose 0.6% to close at 7,181.30, its highest since June 6, driven by a rebound in mining and energy shares.  In New Zealand, the S&P/NZX 50 index fell 0.2% to 11,420.42. New Zealand’s central bank is poised to raise interest rates by an unprecedented 75 basis points on Wednesday, accelerating its monetary tightening to get inflation under control. Elsewhere, markets were mixed with moderate gains or losses. 

In FX, the Bloomberg Dollar Spot Index fell as the greenback fell against all of its Group-of-10 peers. Risk-sensitive Antipodean currencies and the Norwegian krone were the top performers. CFTC data showed that speculative and institutional traders turned their back to the dollar yet again last week as the currency stayed under pressure. At the same time, one-month risk reversals in the Bloomberg Dollar Spot Index rallied in favor of the topside.

• The euro rose versus the greenback but underperformed most of its major peers. Bunds slipped and Italian bonds inched lower.
• The pound rose against a broadly weaker dollar and was steady against the euro. Data showed UK government borrowing grew less than forecast in October, ahead of a testimony in Parliament by officials from the Office for Budget Responsibility.
• The yen rose for the first time in five days after remarks from some Federal Reserve officials solidified bets for smaller US rate hikes. Japan’s yield curve steepened a tad ahead of a local holiday. One-week risk reversals in dollar-yen traded earlier at 24 basis points in favor of the Japanese currency, which marked the least bearish sentiment for the greenback in more than a month.

In rates, Treasuries ground higher leaving yields near session lows into the early US session with 10-year at around 3.79%. Bunds and gilts both lag Treasuries, trading slightly cheaper over early London session. US session focus is on Fed speakers and conclusion of this week’s auctions with a 7-year sale at 1pm.  Treasury 10-year yields outperforming bunds and gilts by ~5bp on the day. Long-end of the Treasuries curve underperforms, steepening 10s30s spread by 2.5bp on the day.  This week’s auctions conclude with $35b 7-year note sale at 1pm, follows Monday’s double auction of 2- and 5-year notes.

In commodities, it has been a contained session for the crude complex after yesterday’s WSJ fake news-prompted rollercoaster, with benchmarks higher by around 1% amid further pushback to the production increase report. Kuwait Oil Minister has pushed back against reports of any discussions over OPEC+ raising production at its next meeting, according to the State news agency; Iraq’s SOMO says no discussions have taken place over an increase at the next OPEC meeting. China has reportedly paused the purchase of some Russian oil, awaiting details of the price cap to see if it provides a better price. Spot gold and silver are firmer, with the yellow metal at session highs just below the USD 1750/oz mark as risk sentiment struggles to find firm direction and the USD continues to pullback. For reference, the current spot gold peak of USD 1748/oz is shy of the 10-DMA at USD 1755/oz and still some way from the 200-DMA at USD 1801/oz.

Cryptocurrency prices were mixed, with investors braced for more ructions as further digital-asset sector bankruptcies loom following the demise of Sam Bankman-Fried’s FTX empire.

Looking to the day ahead now, and central bank speakers include the Fed’s Mester, George and Bullard, along with the ECB’s Holzmann, Rehn and Nagel. Data releases include Euro Area consumer confidence for November, as well as the US Richmond Fed manufacturing index for November. Lastly, the OECD will be releasing their Economic Outlook.

Market Snapshot

• S&P 500 futures up 0.2% to 3,964.00
• STOXX Europe 600 up 0.6% to 435.56
• MXAP up 0.4% to 151.12
• MXAPJ down 0.1% to 486.08
• Nikkei up 0.6% to 28,115.74
• Topix up 1.1% to 1,994.75
• Hang Seng Index down 1.3% to 17,424.41
• Shanghai Composite up 0.1% to 3,088.94
• Sensex up 0.4% to 61,380.15
• Australia S&P/ASX 200 up 0.6% to 7,181.30
• Kospi down 0.6% to 2,405.27
• German 10Y yield little changed at 1.99%
• Euro up 0.3% to $1.0272
• Brent Futures up 0.7% to $88.04/bbl
• Gold spot up 0.5% to $1,745.92
• U.S. Dollar Index down 0.35% to 107.46

Top Overnight News from Bloomberg

• More than six years after voting to leave the EU, the UK is facing a prolonged recession, a deep cost-of-living crisis and a shortage of workers. Last week’s Autumn Statement heralded years of higher taxes and cuts to public spending
• The ECB needs to maintain the pace of rate increases at its next meeting on Dec. 15 to demonstrate policy makers are “serious” about taming inflation, Financial Times reports, citing an interview with Robert Holzmann, governor of the National Bank of Austria and member of the ECB’s governing council
• Germany will introduce a cap on gas and electricity prices for companies and households as Europe’s largest economy seeks to contain the fallout from Russia’s moves to slash energy supplies. Large parts of German industry will no longer be able to avoid production cuts if companies need to further reduce natural gas consumption, according to a survey
• Italy has signed off on a €35 billion ($36 billion) budget law for next year which will raise a windfall tax on energy companies in order to expand aid to families and businesses hit by higher prices
• Spain announced a series of steps to shield mortgage-holders on lower incomes from rising costs, stepping up efforts to cushion the economic blow from high inflation and surging interest rates
• The premium investors pay for German two-year bonds over equivalent swaps has dropped to levels last seen in July in recent days, down more than 40 basis points from a record high in September. It comes after the German finance agency and the European Central Bank took steps to increase the supply of debt available to borrow in repo markets
• An FTX Group bankruptcy filing showed that the fallen cryptocurrency exchange and a number of affiliates had a combined cash balance of $1.24 billion
• A new currency trading algorithm developed by a Dutch fund threatens to wrest away millions of euros of fees from investment banks if it gains traction in the pension industry
• China’s overnight repo rate plunged to its lowest level in nearly two years, an indication that a liquidity squeeze seen last week has eased following measures by the central bank

A more detailed look at global markets courtesy of Nesquawk

Asia-Pac stocks were mostly positive as the regional bourses attempted to recover from the recent China COVID woes but with price action contained amid quiet newsflow and a lack of fresh macro drivers. ASX 200 was positive amid strength in the commodity-related sectors in which energy led the advances after oil prices rebounded following Saudi’s denial that it was considering a production increase. Nikkei 225 higher and reclaimed the 28,000 level with early outperformance in Shionogi after its COVID-19 therapeutic drug was presumed effective by Japan’s PMDA. Hang Seng and Shanghai Comp traded mixed with Hong Kong pressured by weakness in the tech sector, while losses in the mainland were reversed after the latest policy support pledges by China including measures to sustain the recovery momentum of the industrial economy and with the PBoC to release CNY 200bln worth of loan support for commercial banks to ensure near-term delivery of homes.

Top Asian News

• US Defence Secretary Austin met with Chinese Defence Minister Wei Fenghe in Cambodia, according to a US official cited by Reuters. US Defence Secretary Austin discussed the need for dialogue on reducing risk and improving communication with his Chinese counterpart, according to a Pentagon spokesperson. Furthermore, Austin raised concern about increasingly dangerous behaviour by Chinese aircraft which increases the risk of an accident and he reiterated that the US remains committed to the longstanding Once China Policy.
• Chinese Defence Ministry spokesman said the main reason for the current situation faced by China and the US is because the US made the wrong strategic judgement. In relevant news, Global Times’ Hu Xijin tweeted that the meeting between the two defence ministers must be supported and that no matter how many frictions, China and the US cannot fight militarily which is the bottom line and the two sides’ due responsibility to the world.
• EU is poised to renew sanctions on Chinese officials accused of human rights violations in Xinjiang for an additional year, according to SCMP.
• RBA’s Lowe say the Bank is not on a pre-set path and could return to 50bps increase or keep rates unchanged for a time. The Board expects to increase interest rates further over the period ahead. Understand that many people are finding the rise in interest rates difficult. It is necessary, though, to ensure that the current period of higher inflation is only temporary.
• Beijing City reports 634 (prev. 274) COVID infections on November 22nd as of 3pm, according to a health official, via Reuters. Subsequently, Beijing will tighten COVID testing requirements as of November 24th, according to an official; COVID tests within 48 hours will be required to enter public venues.

European bourses are modestly firmer, Euro Stoxx 50 +0.2%, though fresh developments have been limited and the upside itself is tentative at best. Sectors are mixed with the likes of Energy outperforming after yesterday’s noted pressure, no overarching bias present in the European morning. Stateside, US futures are near the unchanged mark but have, similar to European peers, been modestly firmer/softer throughout the morning, ES +0.1%. Samsung Electronics (005930 KS) is to jointly develop 3nm chips with five-six fabless clients for large quantity supply as soon as 2023, via Korea Economic Daily citing sources.

Top European News

• ECB’s Centeno sees conditions for rate hikes to be less than 75bps in December and said they “really have to reverse” the trend of rising inflation to have greater visibility on monetary policy, according to Bloomberg.
• ECB’s Holzmann said he supports a 75bps hike in December and noted there are no signs that price pressures are easing, according to FT.
• ECB’s Rehn says they will probably hike rates again, pace depends on how the economy develops.
• ECB’s Nagel says a 50bp rate hike is “strong”, rates are still “relatively far” from restrictive territory, via Reuters; calls for commencing a gradual APP unwind in Q1-2023.
• Italy approved a EUR 35bln budget law for next year which plans to increase an energy windfall tax, according to Bloomberg.

FX

• Dollar loses recovery momentum as risk appetite picks up, DXY drifts between 107.810-300 bounds and retests a Fib retracement level just over 107.500
• Kiwi rebounds to top 0.6150 vs Buck irrespective of worrying NZ trade data, as RBNZ looms amidst expectations of a larger 75bp hike in the OCR
• Aussie recovers alongside Yuan and amidst comments from RBA Governor Lowe reaffirming guidance for further tightening, AUD/USD eyes 0.6650 from around 0.6600 at the low
• Loonie regains poise in tandem with oil and probes 1.3400 against its US rival pre-Canadian data and remarks from BoC’s Rogers
• Yen, Franc, Euro and Pound all take advantage of Greenback fade plus yield convergence to Treasuries as USD/JPY reverses from 142.00+ and USD/CHF from almost 0.9600, while EUR/USD eyes 1.0300 and Cable 1.1900 vs sub-1.0250 and 1.0825.

Fixed Income

• Rangebound trade for core fixed income, though intraday boundaries have extended on both sides throughout the European morning as the complex struggles for firm direction.
• Bund unreactive to a well-received Bobl auction while USTs are a handful of ticks firmer ahead of the week’s last US auction, with volumes currently fairly light.
• Note, final orders for the UK’s 0.125% 2073 Gilt I/L exceed GBP 16.8bln, according to a bookrunner, with pricing set 20bp below the 2068 comparable.

Commodities

• Comparably contained session for the crude complex after yesterday’s pronounced OPEC+ related price action; benchmarks currently firmer by around 0.5% amid further pushback to the production increase report.
• White House Press Secretary said President Biden is committed to further lowering gasoline prices.
• Kuwait Oil Minister has pushed back against reports of any discussions over OPEC+ raising production at its next meeting, according to the State news agency; Iraq’s SOMO says no discussions have taken place over an increase at the next OPEC meeting.
• China has reportedly paused the purchase of some Russian oil, awaiting details of the price cap to see if it provides a better price, via Bloomberg citing sources.
• German gas price break will apply retroactively from January, via der Spiegel; reduction in gas and heat prices is not expected to take effect until March 1st.
• European Commission proposes to introduce a gas price correction mechanism for one-year from January 1st 2023, via Reuters citing draft legislation; proposal leaves the actual price cap blank for now. Diplomats say that EU gov’ts want the gas price cap at EUR 159-180/MWh, vs the much higher cap expected to be proposed by the Commission.
• UK officials visited Brazil in October to assess the regions beef standards, via Politico; a visit which has fuelled hopes in Brazil of a future trade deal.
• Spot gold and silver are firmer, with the yellow metal at session highs just below the USD 1750/oz mark as risk sentiment struggles to find firm direction and the USD continues to pullback
• For reference, the current spot gold peak of USD 1748/oz is shy of the 10-DMA at USD 1755/oz and still some way from the 200-DMA at USD 1801/oz.

Geopolitics

• Moscow considers a search necessary for a peaceful solution to the Kurdish issue after Turkey’s strikes in Syria and believes Turkey should restrain from the use of excessive military force, according to RIA citing Moscow’s Syria envoy.
• N. Korea will take an ultra strong response to anyone that interferes with its sovereign rights, via KCNA; US will face a greater security crisis the more it insists on taking hostile actions.

US Event Calendar

• 10am: U.S. Richmond Fed Index, Nov., est. -8, prior -10

Central bank speakers

• 11am: Fed’s Mester Discusses Wages and Inflation
• 11:45am: Bank of Canada’s Carolyn Rogers Speaks on Financial Stability
• 2:15pm: Fed’s George Takes Part in Policy Panel
• 2:45pm: Fed’s Bullard Discusses Heterogeneity in Macroeconomics

DB’s Jim Reid concludes the overnight wrap

A decent slug of yesterday was spent debating whether England’s 6-2 win at the World Cup was a performance to scare the world of football into submission or whether Iran’s 20th spot in the FIFA World rankings may slightly flatter them. As ever, your opinions are welcome! Good luck to all your teams as the WC introduces a few big hitters today!

I’m not sure if it was the World Cup but markets had a rather slow and lacklustre start to the week yesterday. The S&P 500 (-0.39%) fell back amidst concerns about rising Covid cases in China and ongoing fears about a US recession next year. The effects were evident across multiple asset classes, and WTI oil prices fell below their start of 2022 levels briefly intra-day (-6.24% on the day at the lows) as investors grappled with the prospect of lower Chinese demand alongside speculation about an OPEC+ output increase, which was eventually denied. WTI rallied back hard on a Saudi denial of the story to close just -0.44% lower, while Brent futures were -6.06% lower before closing down only -0.19%. In Asia trading, WTI prices (+0.74%) have climbed back above the start of week levels and are trading just above $80/bbl while Brent futures (+0.49%) are fractionally higher as we go to print.

In terms of what’s coming out of China, there are growing concerns among investors that there’ll be a return to lockdowns following the weekend news that they’d had their first Covid death in six months. The overall rise in case numbers now makes this the third-largest outbreak of the pandemic so far, behind only the Shanghai lockdowns in Q2 and the Wuhan outbreak in early 2020. Beijing has increased its restrictions, and now requires arrivals to take three PCR tests within the first three days and to stay at home until they get a negative result. In the Haidian district of Beijing, schools have now switched to online learning as well. This has all served to dampen the speculation of recent weeks that China might be moving gradually away from its zero-Covid strategy, and the city of Shijiazhuang has even asked residents to stay at home for 5 days. China recorded 27,307 new local Covid cases nationally yesterday, almost close to the record high of 28k seen in March.

The irony is that the China reopening story has been a big positive driver of China-related risk and overall markets over the last couple of weeks, so we are trading between feast and famine on this story. Both could of course be ultimately right. There might be many more restrictions in the near term but stronger more durable reopenings by the spring. Markets are struggling to price this at the moment though.

For now, the effects were apparent among Chinese stocks listed in the US, with companies like Alibaba (-4.41%), JD.com (-6.37%) and Bilibili (-8.15%) underperforming the broader equity moves. The Chinese Yuan (-0.64%) also weakened against the US Dollar, although to be fair this was partly a function of dollar strength.

Overnight in Asia, China risk has bounced a bit. The Shanghai Composite (+0.75%) and the CSI (+0.77%) are both up alongside the Nikkei (+0.72%). The Hang Seng (-0.39%) and KOSPI (-0.35%) are both lower. US equity futures are just above flat as we type.

Staying with equities, the earlier plunge in oil prices was bad news for energy stocks, which were among the biggest sectoral underperformers on both sides of the Atlantic. By the close of trade, the S&P 500 was down -0.39%, with energy down -1.39%, rallying midday from -4.64% to beat out consumer discretionary shares which were -1.41% lower. A number of other cyclical industries underperformed as well, and the NASDAQ fell -1.09% on the day, whilst the small-cap Russell 2000 fell -0.57%. In Europe, the performance was marginally better, but that still wasn’t enough to stop the STOXX 600 posting a very marginal -0.06% decline, with energy (-3.02%) far and away the underperformer as shares closed near the nadir of Brent and WTI futures pricing. There clearly should be a bounce this morning.

The more negative tone out of China yesterday has only added to existing fears about a US recession over the coming months, which the latest moves in the Treasury yield curve did little to dispel. The 2s10s yield curve flattened another -2.2bps to -73bps taking it beneath the 1982 low of -71.65bps to a level unseen since 1981. This came as the 10yr tracked intraday pricing in oil as well, having fallen as much as -7.1bps intraday before finishing the day more or less unchanged. This morning in Asia, 10yr UST yields (-1.12 bps) are slightly lower, trading at 3.82%.

There have been a few Fed speakers over the last 24 hours to impact treasury pricing. SF Fed President Daly warned against the two-sided risks of over-tightening, but hinted that her estimate of terminal may have risen to around 5.1% since the November meeting. Meanwhile, Cleveland Fed President Mester supported downshifting to a 50bps hike in December, but noted the Fed was not “anywhere near to stopping”, echoing Chair Powell’s tone from the November FOMC presser. There’s quite a bit of Fed speak today as you’ll see in the day ahead at the end.

Whilst it’s widely expected that the Fed will slow down the pace of hikes to 50bps in December, there’s somewhat more doubt about the ECB’s next move the following day, who it seems are still weighing up another 75bps hike or slowing down to 50bps. Yesterday, we heard from Austria’s Holzmann (a hawk), who said he’d only favour a 50bps hike if there was a “major reduction” in inflation this month. But Portugal’s Centeno (a dove) said that the conditions were in place for a hike beneath 75bps next month. Separately, Slovenia’s Vasle talked about the need for restrictive policy, saying that the ECB needs to “keep gradually raising rates, even into the territory where monetary policy won’t be just neutral, but will become more restrictive.”

European sovereigns seemed unfazed by this debate, trading in line with the broader global moves. Yields on 10yr bunds (-2.1bps) and OATs (-1.8bps) moved lower, but there was an underperformance among southern European countries, with yields on Italian BTPs up +4.3bps. Interestingly, there was a notable downside surprise in the latest German PPI reading, which came in at +34.5% in October (vs. +42.1% expected). Now it’s worth noting that the decline was driven by energy, but at -4.2% on the month, that was the first monthly decline in the index since mid-2020.

To the day ahead now, and central bank speakers include the Fed’s Mester, George and Bullard, along with the ECB’s Holzmann, Rehn and Nagel. Data releases include Euro Area consumer confidence for November, as well as the US Richmond Fed manufacturing index for November. Lastly, the OECD will be releasing their Economic Outlook.

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,

Last week the world stood on the very edge of a nuclear war, as Ukraine’s US-funded president, Vladimir Zelensky, urged NATO military action over a missile that landed on Polish soil. “This is a Russian missile attack on collective security! This is a really significant escalation. Action is needed,” said Zelensky immediately after the missile landed.

But there was a problem. The missile was fired from Ukraine – likely an accident in the fog of war. Was it actually a Russian missile, of course, that might mean World War III. But Zelensky didn’t seem to be bothered by the prospect of the world blown up, judging from his reckless rhetoric.

While Zelensky has been treated as a saint by the US media, the Biden Administration, and both parties in Congress, something unprecedented happened this time: the Biden Administration pushed back. According to press reports, several Zelensky calls to Biden or senior Biden Staff went unanswered.

When US National Security Advisor Jake Sullivan finally returned Zelensky’s call, he is reported to have said, “tread carefully” on claims Russia was behind the missiles landing in Poland. The Biden Administration went on to publicly dispute Zelensky’s continued insistence that Russia shot missiles into NATO-Member Poland. After two days of Washington opposition to his claims, Zelensky finally, sort of, backed down.

We’ve heard rumors of President Biden’s frustration over Zelensky’s endless begging and ingratitude for the 60 or so billion dollars doled out to him by the US government, but this is the clearest public example of the Biden Administration’s acceptance that it has a “Zelensky problem.”

Zelensky must have understood that Washington and Brussels knew it was not a Russian missile. Considering the vast intelligence capabilities of the US in that war zone, it is likely the US government knew in real time that the missiles were not Russian. For Zelensky to claim otherwise seemed almost unhinged. And for what seems like the first time, Washington noticed.

As a result, there has been a minor – but hopefully growing – revolt among conservatives in Washington over this dangerous episode. Georgia Rep. Marjorie Taylor-Greene introduced legislation demanding an audit of the tens of billions of dollars shipped to Ukraine – with perhaps $50 billion more in the pipeline. The resolution currently has eleven co-sponsors.

Rep. Matt Gaetz has publicly stated that he would not vote for one more dollar for Ukraine. Others, like US Rep. Paul Gosar (R-AZ), have gone even further. In a recent Tweet Rep. Gosar called US support for Ukraine a “corrupt money-laundering operation.” As the fallout from the recent collapse of the FTX crypto exchange points to possible political corruption, his claims may prove to be accurate.

When Sen. Paul introduced an amendment to the massive aid package to Ukraine calling for someone to audit the funds, he was ridiculed and attacked. Some seven months later, his position appears far more accepted. And that’s a good thing.

When the Ukraine war hysteria finally dies down – as the Covid hysteria died down before it – it will become obvious to vastly more Americans what an absolute fiasco this whole thing has been.

Hopefully Republicans will accelerate that process when they take the House in January. It cannot come too soon!

Authored by Paul Joseph Watson via Summit News,

During a speech at the Apec summit in Bangkok, where world leaders gathered, French President Emmanuel Macron called for a “single global order.”

Macron made the comments while discussing the power interests of Russia and China and the threat of war.

“We are in a jungle and we have two big elephants trying to become more and more nervous,” he said.

“If they become very nervous and start a war, it will be a big problem for the rest of the jungle. You need the cooperation of a lot of other animals, tigers, monkeys and so on,” added Macron.

In case you still think it’s a conspiracy theory that our elites want a world order, here’s French President @EmmanuelMacron yesterday at the APEC summit:

‘We need a single global order’. pic.twitter.com/CFTMXUPy1R

— Eva Vlaardingerbroek (@EvaVlaar) November 19, 2022

“Are you on the U.S. or the Chinese side? Because now, progressively, a lot of people would like to see that there are two orders in this world. This is a huge mistake, even for both the U.S. and China.”

“We need a single global order,” he concluded.

Macron’s words are sure to confuse the ‘fact checker’ industry, which continues to insist that claims about the ‘New World Order’ or one world government are a baseless conspiracy theory.

Indeed, much hilarity ensued last week when it was revealed that Google-owned YouTube had effectively fact-checked a video published by ‘The World Government Summit 2022’.

In the video, the host of a panel discussion asks H.E. Dr. Anwar bin Mohammed Gargash, Diplomatic Advisor to the UAE President, “Are you ready for a new world order?”

Underneath the video is a fact check box about the ‘New World Order’ which links to a Wikipedia article that states, “The New World Order (NWO) is a conspiracy theory which hypothesizes a secretly emerging totalitarian world government.”

The tone of the article debunks the notion that there is a move towards a ‘New World Order’, despite the panelists at the World Government Summit openly discussing that very agenda.

https://t.co/nS8h7JJs8E

— Tim Pool (@Timcast) November 16, 2022

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Europe has had the luxury this fall of warmer-than-average temperatures, but that could all be changing as cold weather begins to pour into the energy-stricken continent. 

Short to medium-range outlooks from forecaster Maxar Technologies LLC indicates a cold snap for Europe early this week — average temperatures will rebound in the second half of the week, but frigid weather will return by early December. 

Average temperatures across Central Europe were around freezing to start the week. By the end of the week, average temperatures will rise to a 30-year trendline of about 36 degrees Fahrenheit but then start heading lower into early December.

For East Europe, a significant cold snap is shaping up for early December. Temperatures are expected to average 15 degrees Fahrenheit by Dec 6 versus an average of around 25 degrees. 

A similar drop in average temperatures is expected early next month for Nort West Europe. 

The good news is that EU countries have reached a Nov 1 target to fill natural gas storage sites by 80%. As of Monday, current levels stand at 95% due to unseasonably warm weather squashing heating demand, along with a push by EU countries to curb demand through conservation measures. 

On a seasonal basis, EU NatGas levels are well above a 12-year mean, though the drawing period has begun. 

Bloomberg noted the new weather forecasts boosted power contracts for December for France and Germany, up more than 16% and 13%, respectively, on Monday. After months of decline, power prices in both countries could be set for an incline as cold weather sets in. 

EU NatGas prices were slightly higher and have shown signs of a potential bottom after plunging by more than 63% since the August high.

Carlo Buontempo, director of the Copernicus Climate Change Service at the European Centre for Mid-Range Weather Forecasts (ECMWF), told Politico in mid-October that the probability was rising of a cold spell this year — most likely in December — remains “very real.”

Some on Twitter are pointing out that winter is just ahead. 

“By Dec 6, Europe is submerged in deep cold air down to Spain and North Africa. Something we have not seen in decades,” one Twitter user said. 

#natgas
By Dec 6 Europe is submerged in deep cold air down to Spain and North Africa. Something we have not seen in decades. pic.twitter.com/KnifLysqlQ

— Heinrich Leopold (@LeopoldHeinrich) November 21, 2022

Another user said winter and recession could be a toxic combination for the continent. 

🇪🇺 Markets forecast a short and shallow #recession in #Europe.

Needless to say, these forecasts hinge on feeble assumptions of mild #winter temperatures.

Indeed, the looming recession will be as deep as the incoming winter gets cold.

And the winter can be nothing but freezing! pic.twitter.com/perULWhWq8

— Fatih Aydemir (@fthydmr) November 21, 2022

However, someone else said the cold spell is not that unusual for this time of year. 

I spent my career producing these charts, interpreting these charts and advising the emergency response community what these charts mean. You are wrong. These temps are not unusual have happened recently and you cannot make a deterministic statement from a probabilistic forecast

— Northstar (@NorthstarCharts) November 21, 2022

The new forecasts are a bullish development for EU NatGas prices as heating demand ramps up. 

Authored by Steve Watson via Summit News,

Following Elon Musk’s decision to reinstate President Trump to Twitter, The Mayor Of London Sadiq Khan declared that it is time for “new regulations” to police online speech.

Khan, who seems to spend more time worrying about American politics than the safety of people living in London, issued a diatribe reacting to Musk turning Trump’s Twitter account back on.

He labeled Trump “a dangerous far right politician who has a history of inciting violence,” and proclaimed that “he must not be allowed to use social media,” before calling for more general regulation of “online speech.”

In the same sentence, Khan declared that “freedom of speech is vital, but it must be balanced.”

Trump is a dangerous, far-right politician who has a history of inciting violence.

He must not be allowed to use social media to preach hate and further fuel the politics of division. pic.twitter.com/YxEpppvaT4

— Sadiq Khan (@SadiqKhan) November 20, 2022

This is the same guy who boxed up Winston Churchill’s statue outside the British parliament, and World War II Memorials when BLM extremists decided they were racist.

Khan then convened an uber woke panel of ‘cultural diversity experts’ to decide which statues and landmarks to target next, and replace with culturally ‘better’ ones.

The reactions say it all:

Khan is dangerous, a far-left position who has a history of turning a blind eye to street violence on his watch.

He must not be allowed to use social media to preach hate and further fuel the politics of division.

🤷‍♂️

— Graham Kemp (@accountingetc) November 20, 2022

Shut up you tyrannical dwarf and go back to ruining London.

— Konstantin Kisin (@KonstantinKisin) November 20, 2022

“Allowed”? Sadiq, do a better job protecting the people of London from crime and maybe someone might take you seriously. https://t.co/BNFSNjGJdt

— Ian Miles Cheong (@stillgray) November 21, 2022

Odd how you never utter a condemning word about murderous Islamists. https://t.co/1znhQFJYBQ

— Patrick Brauckmann 🕉️ (@vonbrauckmann) November 20, 2022

“A far-right politician” is misinformation.

He was the president of USA, democratically elected, in a country that is a friend of the UK.

Let the people decide who they wish to follow.
Only dictators control the narrative.

— Marguerite Doig Gander 🇿🇦 (@margieMYDNA) November 20, 2022

“I believe in free speech BUT only if everyone promises to say things that exactly match my point of view …….”

— Susan Flint (@Hypnoteq) November 20, 2022

Get in the sea, you cretinous failure. pic.twitter.com/HR8mPZVmku

— Rita Panahi (@RitaPanahi) November 20, 2022

And you are a far left socialist who has turned London into an absolutely. Dangerous shot hole

— leilani dowding 🌸🚜 ☮️ (@LeilaniDowding) November 20, 2022

Well this happened in London Madia Vale. Not sure who in charge of London’s crime and violence. Oh, is that you? Just shut up about Trump and sweep your front door first https://t.co/ve3C9yImO2

— Hunter02🇨🇦🚛🚚🚛🚚 (@UncleSa88735673) November 20, 2022

Couldn’t be worse , let’s be honest

— Maggie (@mortonpeas) November 21, 2022

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The World Health Organization (WHO) announced in a Monday statement that the power situation in Ukraine is so dire that it will potentially be “life-threatening” for millions of Ukrainians due to the recent devastating series of Russian air attacks on the national energy grid.

“Put simply – this winter will be about survival,” Hans Kluge, regional director for Europe at the United Nations’ health body, said from the Ukrainian capital. “This winter will be life-threatening for millions of people in Ukraine,” he added. 

The attacks, the last major wave of which came this past Tuesday and continued intermittently into the weekend, are “already having knock-out effects on the health system and on the people’s health,” Kluge described. 

“Continued attacks on health and energy infrastructure mean hundreds of hospitals and health care facilities are no longer fully operational,” the WHO official said. “We expect two to three million more people to leave their homes in search of warmth and safety,” he forewarned. 

Ukrainian Prime Minister Denys Shmyhal last Friday estimated that half of the entirety of the country’s energy infrastructure has been disabled by the Russian attacks at this point. Millions are already without power as temperatures plunge and Kiev saw its first snow of the season starting days ago. 

“Unfortunately Russia continues to carry out missile strikes on Ukraine’s civilian and critical infrastructure. Almost half of our energy system is disabled,” Shmyhal was cited in Reuters as saying.

Politico reported last week that Congressional leaders had been given classified intelligence reports detailing the expected impact of Russia’s campaign to degrade Ukraine’s power grid. 

“The Ukrainian government is warning Western allies that it is anticipating increased Russian attacks on its energy infrastructure in the coming days and that Kyiv does not have enough replacement parts to bring heat and power back online if those occur, according to two congressional officials and one Western official briefed on U.S. intelligence,” the report said.

Politico detailed further that “Ukrainian officials have in recent days asked their American counterparts and more than half a dozen European countries for assistance preparing for a prolonged period with limited electricity and gas — a scenario Kyiv expects to complicate fighting on the ground and displace civilians, the officials and an adviser to the Ukrainian government said.”

Amid emergency rolling blackouts and city or regional mandates banning use of large appliances and other imposed consumption limits, Ukraine government officials are urging the people not to panic. “Denying the panicky statements spread by social networks and online media, we assure you that the situation with the energy supply is difficult, but under control,” the energy ministry said in a Saturday statement.

Authored by Irina Slav via OilPrice.com,

• Runaway energy inflation has taken a toll on European industry, but another threat is looming.

• Europe’s two biggest fertilizer suppliers, Russia and Belarus have retaliated against European sanctions by cutting off fertilizer exports.

• The fact remains that the global food chain, especially its European links, is not in a good place right now.

Runaway energy price inflation has wreaked havoc on European industrial activity, with the heaviest consumers taking the brunt. Aluminum and steel smelters are shutting down because of energy costs. Chemical producers are moving to the United States. BASF is planning a permanent downsizing.

There is, however, a bigger problem than all these would constitute for their respective industries. Fertilizer makers are also shutting down their plants. And fertilizer imports are down because the biggest suppliers of fertilizers for Europe were Russia and Belarus, both currently under sanctions.

Both countries have retaliated against the sanctions by cutting off exports of fertilizers to Europe, and European officials repeating that fertilizer exports are not sanctioned is not really helping. 

Russia accounts for 45 percent of the global ammonia nitrate supply, according to figures from the Institute for Agriculture and Trade Policy cited by the FT. But it also accounts for 18 percent of the supply of potash—potassium-containing salts that are one of the main gradients of fertilizers—and 14 percent of phosphate exports.

Belarus is a major exporter of fertilizers, too, especially potash. But Belarus has been under EU sanctions since 2021 on human rights allegations, and unlike Russia, it has seen its fertilizer industry targeted by these sanctions. This has made for an unfortunate coincidence for Europe and its food security.

“The value chains were incredibly integrated,” the chief executive of Norway’s Yara International, a fertilizer major, told the FT this week. 

“When you look at the map — where Europe is, where Russia is, where the locations for natural resources are — these chains have been created over decades. Even during the coldest parts of the cold war, these products kept flowing so business was running. And that all changed radically in the course of a few days.”

Like with gas, although prone to acting before thinking, the EU has started looking for alternative fertilizer supplies. Morocco is one option, Euractiv reported earlier this month, as the country already supplies some 40 percent of Europe’s phosphate. This figure could even increase substantially.

Central Asia is another option, and more specifically, Uzbekistan. Uzbekistan exports fertilizers mostly to Asia and some Middle Eastern countries at the moment, but this may well change after an EU-Central Asia ministerial get-together, which is taking place right now in Uzbekistan.

So, on the one hand, local fertilizer production has been decimated by sky-high energy costs. On the other hand, sanctions have elicited a response from Russia that was probably not expected, although it should have been: exports have been slashed, leaving import-dependent Europe vulnerable to food shocks, and exposing yet another dangerous dependency.

There does not seem to be an immediate solution to the problem, and there may not be for a while. Even if Europe finds sufficient replacements for all Russian and Belarusian fertilizer imports, its bill will swell in a way similar to its gas bill when it switched from Russian pipeline gas to LNG. And this will feed inflation 

The Institute for Agriculture and Trade Policy, a sustainable farming advocacy, warned in a recent report that the world is “addicted” to chemical fertilizers. Advocacy aside, however, the report said that fertilizers are getting quite expensive.

“G20 nations paid almost twice as much for key fertiliser imports in 2021 compared to 2020 and are on course to spend three times as much in 2022 — an additional cost of at least US$ 21.8 billion. For example, the UK paid an extra US$ 144 million for fertiliser imports in 2021 and 2022, and Brazil paid an extra US$ 3.5 billion,” it said.

Of course, a big part of this inflation is due to energy cost inflation since fertilizer production is an energy-intensive process. The fact remains that the global food chain, especially its European links, is not in a good place right now.

Russia continues supplying fertilizers to African countries, for example, but African countries haven’t imposed sanctions on Moscow. And Europe can’t really do a U-turn and remove sanctions because that will be the end of any reputation the EU has left.

Someone who subscribes to the IATP’s argument that the world is dangerously addicted to chemicals might see an opportunity in this fertilizer crisis. The Dutch government may actually embrace it as it pushes for a 70-percent reduction of nitrogen emissions from farming—a push that ignited mass farmer protests in the country.

Yet the recent events in Sri Lanka suggest that shaking off the fertilizer dependence might be unwise, especially if done suddenly. In this sense, the fertilizer addiction is as strong as the fossil fuel addiction some say humankind is suffering from. The silver lining is that a crisis prompted by overwhelming dependence on external suppliers could result in becoming less dependent on these suppliers, one way or another.

NATO countries and other global allies are now looking to shore up tiny Moldova’s resources amid renewed fears of future Russian aggression and energy supply cuts against it. 

Around 45 countries and international institutions have met in Paris to discuss assistance to the ‘NATO-friendly’ country, which is neither an EU nor a NATO member. The countries reportedly pledged millions of Euros in new aid to Moldova amid fears of destabilization due to the war in neighboring Ukraine. 

Moldova’s breakaway region of Transnistria is also seen as a potential flashpoint, and early in the invasion of Ukraine there was constant speculation that the Kremlin was eyeing an incursion into Moldova next. Currently Russia has what it calls “peacekeeping” troops in contested Transnistria. 

A French diplomat told reporters following the Paris meeting of donor countries, “Moldova is directly impacted because it’s dependent on Russian energy supplies and is a country which has a part of its territory controlled by Russian soldiers so it’s especially vulnerable.”

Additionally Al Jazeera noted that the country is “facing more difficulties with winter arriving and Moscow cutting natural gas supplies by about 40 percent, hurting its ability to supply enough electricity to its population.”

Despite itself having a population of just over 2.5 million, it has thus far throughout the Ukraine war received about an equal amount, or 2.5 million refugee Ukrainians into its territory. 

Moldovan President Maia Sandu told delegates in a speech to the forum, “This war is endangering the supply of electricity and gas. We are not certain we can find enough… to heat and light our homes, and even if we do, the prices are unaffordable for our people and economy. This could jeopardize our social peace and security.”

Meanwhile, among leading European countries to pledge a significant amount was France, which hosted the meeting on Moldova, with French President Emmanuel Macron unveiling a new aid package worth 100 million euros.

He specified that it is needed to help the country weather the energy crisis while maintaining its independence particularly amid the harsh winter months. 

Authored by Peter Feher via Remix News,

The EU continues to insist on creating the ever-elusive “European identity,” but is such a goal realistic?

European Commission President Ursula von der Leyen speaks about Ukraine at the European Parliament in Strasbourg, eastern France, Wednesday, Sept. 14, 2022. (AP Photo/Jean-Francois Badias)

A top-down approach to forcibly create a common identity has never worked, and it never will.

Despite the spasmodic efforts of the leftist media dictatorship, its dominance has up until now failed to force the public opinion of European countries into believing the old continent is united. Few in the West dare to contradict this, while the opinions of the East are ignored.

This pretentious outlook — detached from the reality of the world — is presented to Europeans on a daily basis, but it instead serves as clear proof that those who are pushing the cause the most aggessively do not themselves believe in the thesis they claim is their own. What did Ursula von der Leyen say about Italy? If Italy elects the wrong parties during parliamentary elections, the EU “has tools” to coerce them, as in the case of Poland and Hungary.

This is what European unity looks like per the left-liberal authoritarian concept. We have heard many and varied answers to the question of why, but very few have tackled the question regarding the lack of European identity. Brussels, the left-liberal media, and the NGO networks that dictate EU policy are not the only ones who have tried and failed to forge a common European identity.

Notably, Tito tried to forge a unified southern Slavic nation-state out of the diverse Yugoslavia, and his one-party dictatorship did its best to stifle dissent. The party leader, born a Croatian-Slovenian, even divorced his Serbian wife when she warned him that greater autonomy for the member republics — which Tito believed would quell the nationalist fervor that was smoldering everywhere — would tear Yugoslavia apart. The Serbian woman was right because Tito’s measures had inflamed rather than quelled nationalist sentiment.

The powerful leader forgot one thing. There was no real substance behind the party and state propaganda, which constantly talked about a united Yugoslavia. Indeed, Yugoslav identity had not emerged in the seven decades of the South Slav state.

How did the philosopher John Lukacs put it? The most powerful builder of identity for people is belonging to a nation, and ignoring such basic truths in politics has fatal consequences. At the last census of Yugoslavia, only 20,000 people identified themselves as Yugoslavs. For a country of 23 million people, this is an extremely low number and would have a negligible social impact.

Yet the languages of the Slavic peoples living there, who made up the vast majority of the former country’s population, were similar — certainly more similar, for example, than Hungarian is to Flemish. However, everything else separated the people of the Balkans, including history, religion, and even economics.

The harder Brussels pushes the fever dream of a united Europe, the further it gets from the goal. After all, the divide is not only East-West and North-South, but now also West-West. Just think of the disputes between the two “big ones,” Germany and France. All these tensions are being swept under the rug and concealed from the public in vain. The Franco-German summit at the end of October was already marked by differences over how to deal with the energy crisis in Europe, European defense policy, and relations with China; the event was even almost cancelled.

Could it be that Emmanuel Macron and Olaf Scholz are not so different than many of their own citizens? Do these two supposedly pro-EU politicians, in the end, have no real common identity to speak of?