Authored by Tsvetana Paraskova via OilPrice.com,

Saudi Arabian Mining Company (Ma’aden) has signed an agreement with the Saudi sovereign wealth fund, the Public Investment Fund, to set up a joint company that will invest in mining assets abroad to secure strategic minerals.  

Under the joint venture agreement, Ma’aden will own 51% of the new company, while the Public Investment Fund (PIF) will own the remaining 49%, Ma’aden said in a statement on Wednesday.

The joint company plans to initially invest in the iron ore, copper, nickel, and lithium sectors as a non-operating partner taking minority equity positions, Ma’aden said.

“This will provide physical offtake of critical minerals to ensure supply security for domestic minerals downstream sectors and positioning Saudi Arabia as a key partner in global supply-chain resilience,” the company noted.

Separately, Ma’aden announced an agreement to buy 9.9% in U.S.-based technology firm Ivanhoe Electric Inc for $126.4 million and form with Ivanhoe Electric, a Saudi-based joint venture company, to explore and develop mining projects in Saudi Arabia.

According to Ma’aden’s statement, Ivanhoe Electric “applies a suite of technological solutions to dramatically increase the quality and efficiency of metals-focused exploration campaigns, which aligns with Ma’aden’s strategy to gain leverage of commodities with long-term growth potential.” 

In October 2021, the top executive of the state miner of the world’s top oil exporter said that the company plans “huge” investments in exploring for lithium and nickel in Saudi Arabia over the next two decades.

“In the next 10 to 20 years we are going to spend huge amount of money looking for those metals in Saudi Arabia,” Maaden’s chief executive officer Abdulaziz Al Harbi told Bloomberg at the time, asked about the key battery metals lithium and nickel.

The world’s largest oil exporter is thus betting on critical battery metals, whose demand is set to grow exponentially in the energy transition. 

Authored by Bruce Wilds via Advancing Time blog,

I have adopted the position that when a central bank allows its government to overspend and abuse its currency, something has to give. You could say this is one of the unwritten laws of fiat currencies. Time and time again history has proven this to be true and it is the reason many people claim gold is the only true form of money that cannot be corrupted. In a world where everything seems subject to manipulation, this claim about gold is still up for debate. 

The overspending by governments coupled with inflation has really started to affect the perceived value of currencies in relation to other currencies. As these relationships break the losers are the people holding the de-valuated currency. Of course, many factors feed into how we value a currency but the crux of this article is not about whether a currency is over or undervalued but rather what a country must do to defend its value if it comes under attack.

Brent Johnson of Santiago Capital is credited with coining the term the “Dollar Milkshake Theory.” It explains how our debt-based monetary system can cause the US Dollar to rise despite the increasing liquidity injections around the world. Whether this was a “grand master plan” or a situation that just developed over time, it is something that may bode well for the dollar. Johnson recently took part in a discussion that included subjects such as the future price of oil, housing, and the probability of a huge global huge recession. 

About 28 minutes into the discussion which came out in both video and transcript form here:

Johnson conveys what many of us see as a truth that haunts fiat currencies. This is rooted in the fact that when the value of a currency falls, a country and its central bank cannot save both its currency and its bonds. In his “slightly edited” words;

“The problem is you cannot, and this is for every country, the US included, again, there’s a progression in how it’ll go, but you cannot save both the bond market and the currency market because they work at cross purposes. Whatever you do to save the bond market hurts the currency. Whatever you do to save the currency hurts the bond market. And every central bank in history has promised they won’t sacrifice the currency, and every central bank in history has ultimately sacrificed the currency.

And the reason they always choose the currency over the bond or the reason they always choose to sacrifice the currency over the bond market is for two reasons. One, the currency affects the citizens more than the government, and the bond market affects the government more than citizens. So they’re going to bail themselves out before they bail the citizens out. And the second thing is if the bond market blows up and the banking system blows up, there is no longer a distribution system for the government to raise money.

So they can’t let the bond market blow up because then they can’t get money anymore. And then if they can’t get money, they can’t operate. So this is a very long way of saying that I understand why the market moved the way it did. I think maybe in the short term it makes sense, but in the medium to long term, it doesn’t make any sense to me at all. Again, kind of watch what they do, not what they say.”

He later added “The problem, as we’ve kind of figured out and found out that it’s very hard to just get four for four or 5% inflation. It goes from 2% to 12% pretty quickly. They don’t have as much control as they think they do, right? And the problem with four or 5% inflation, you can kind of get away with it because it’s annoying and it is frustrating, but it’s not totally ruining your life. But with 8, 9, 10, 12, 15, 80% inflation, that starts to ruin the pledge life, as you mentioned. And that’s when they start to push back from a political perspective. And that’s what central banks and governments don’t want. They don’t want the populace revolting” 

When you think about the true motivators driving this “system,” it is logical the government and central banks would throw the populace under the bus. This is about their survival. As to the question of equal pain, those in power justify taking raises to offset the impact of inflation under the idea we “need them” to steer things forward for the “greater good.” 

While Johnson’s remarks were aimed at what is most apparent in the actions of Japan, this truth is problematic to all fiat currencies. For more on the Dollar Milkshake Theory see; 

Authored by Mimi Nguyen Ly via The Epoch Times,

The new Republican-majority House voted Tuesday afternoon to create a select subcommittee to investigate the “weaponization of the government” by federal law enforcement agencies under Democrat President Joe Biden’s administration.

The special panel would have various functions, including the authority to have subpoena power to receive information on intelligence-related activity that’s typically only shared with the House Intelligence Committee.

It would also have the authority to probe the federal government’s expansive role in investigations on U.S. citizens, including in ongoing criminal investigations. The panel would also have the power to probe how federal agencies communicate with private companies to collect information on Americans, according to the text of the resolution.

The resolution to create the “Select Subcommittee on the Weaponization of the Federal Government” passed on a straight party-line vote of 221-211.

The panel is part of the House Judiciary Committee. Chairman Rep. Jim Jordan (R-Ohio) is also expected to chair it. It would comprise 15 members—nine Republicans and six Democrats—to be appointed by House Speaker Kevin McCarthy (R-Calif.).

Rep. Tom Cole (R-Okla.), who chairs the House Rules Committee, said the new panel is modeled on the Church Committee, a U.S. Senate select committee in 1975 that investigated U.S. intelligence agencies. That committee “uncovered and exposed a wide variety of abuses, including many [abuses] directed against American citizens,” Cole told fellow lawmakers on the House floor on Tuesday.

“Similar to the situation that confronted America in the 1970s, in recent years we have witnessed abuses of the civil liberties of American citizens committed by the executive branch,” Cole said, adding that such violations are “often for political purposes.”

He said the newly-created panel “will be tasked with studying and reporting on the executive branch’s authority to collect information on or otherwise investigate citizens of the United States.”

“The American people deserve to have confidence in their government,” Cole said. “They deserve to know that the broad powers granted to the federal government through the FBI, to the Department of Homeland Security, and to the intelligence agencies, are not being abused.”

“They deserve to know that the executive branch is not positioning itself as the final arbiter of what constitutes truth,” he continued. “And they deserve to know that they will not be labeled a domestic terrorist for advocating for their children in front of a school board.”

Rep. Jim Jordan (D-Ohio) nominates House Minority Leader Kevin McCarthy (R-Calif.) for Speaker of the House of the 118th Congress during a speech in the House Chamber of the U.S. Capitol Building on Jan. 3, 2023 in Washington. (Chip Somodevilla/Getty Images)

‘This is About the First Amendment’

Democrats have raised concerns about a provision that authorizes the committee to probe “ongoing criminal investigations,” which are generally outside the purview of congressional oversight.

“This is a violation of separation of powers, and it’s also very dangerous,” said Rep. Jerry Nadler (D-N.Y.), the top Democrat on the Judiciary Committee.

They have also claimed that Republicans could use its broad new authority to disrupt ongoing investigations into the breach of the U.S. Capitol on Jan. 6, 2021, as well as former President Donald Trump’s handling of classified documents, for which the FBI conducted a raid on his Florida property in August 2022.

Rep. Jim McGovern (D-Mass.) derided the panel on the House floor late Tuesday, calling it “nothing more than a deranged ploy by the MAGA extremists who have hijacked the party and want to use taxpayer money to push their far-right conspiracy nonsense.”

Jordan argued against that assertion on the House floor.

“A ploy? It’s not a ploy when the Department of Justice treats parents as terrorists—moms and dads simply showing up at a school board meeting to advocate for their son or daughter,” Jordan said. “It’s not a ploy when the FBI pays Twitter $3 million to censor American citizens.”

“It’s not a ploy when the Department of Homeland Security tries to set up a ‘disinformation governance board’ because we all know that the department of homeland security can tell what’s good speech and what is bad speech,” he continued. “You got to be kidding me. I’ll tell you what—dozens of whistleblowers have come talked to Republican staff on the Judiciary Committee doesn’t think this is a ploy. That’s why they talked to us. They know how serious this is.”

Republicans on the House Judiciary Committee in November 2022 released a 1,000-page report (pdf) titled “FBI Whistleblowers: What Their Disclosures Indicate About the Politicization of the FBI and Justice Department.” Citing multiple examples and whistleblower disclosures, the report outlined how the Justice Department and the FBI abused their authorities to target conservatives for political purposes.

Jordan continued: “This [committee] is about the First amendment. Something you guys [Democrats] used to care about. I would hope we could get bipartisan agreement on protecting the First Amendment—the five rights we enjoy as Americans under the First Amendment: Your right to practice your faith, assemble, right to petition the government, freedom of press, freedom of speech. Every single one’s been attacked in the last two years.”

“The government was telling people they couldn’t go to church a few years ago,” he noted. “Your right to assemble, petition the government—the Democrats kept the Capitol closed, a citizen couldn’t come to your Capitol that you pay for to redress your grievances because Nancy Pelosi wouldn’t let you in!”

“Freedom of the press—I just told you what the head of the intel committee tried to do to a journalist,” he continued. “The most important right we have, though, is your right to talk. Because if you can’t talk, you can’t practice your faith. You can’t share your faith. You can’t petition your government. The right to speak is the most important, and that’s what they [the federal government agencies] are going after.”

The US Virgin Islands case against JP Morgan just got even weirder.

Recall that in late December, Attorney General Denise George sued the bank, claiming they reaped financial benefits from Epstein’s sex-trafficking operation.

Three days later, George was fired.

The original complaint against the bank filed by George included a lengthy-but-redacted section on “High Net Worth Clients” Epstein brought to JPMorgan. It had 11 separate entries spanning three pages of the complaint – which James O’Keefe of Project Veritas wants to get his hands on.

Send us the un-redacted version of this lawsuit from the Virgin Islands lawsuit naming Epstein’s clients, to Veritastips@protonmail.com

Our investigative reporters will corroborate and meet with the named using hidden cameras

Privacy of the list? Or the public’s right to know? pic.twitter.com/rKpRdOl0Sf

— James O’Keefe (@JamesOKeefeIII) January 10, 2023

The original complaint notes that Epstein had an extensive relationship with former JPM Exec Jes Staley, who was CEO of Barclays until he resigned in 2001 over his ties to the pedophile.

One week after George’s firing, the US Virgin Islands has filed an amended complaint which significantly shortens the “High Net Worth Clients” list to just three entries, and unredacts a name we already knew about; Glenn Dubin, the owner of Highbridge Capital Management whose wife once told Epstein’s probation officer that she was “100% comfortable” with Jeffrey Epstein being around her minor children.

This is also nothing new – as we’ve known since 2019 that Epstein introduced Dubin to Staley, and reportedly received a $15 million fee in 2004 after JPMorgan Chase bought control of Dubin’s hedge fund, Highbridge Capital.

The Dubins and Epstein were close, and remained close after his 2008 conviction for pedophilia – inviting him to their Palm Beach home for Thanksgiving the following year. According to Vanity Fair, several sources said that Epstein was the godfather to the Dubins’ three children – a claim which the family disputed (“The Dubins are Jewish and Jewish people do not typically do godparents,” said a spokesman). 

Dubin also directed some of Epstein’s money to at least two hedge fund mangers; Dan Zwirn and Joseph Kusnan – both former Highbridge employees who left to start their own firms. 

“Glenn Dubin introduced me to Epstein as a new manager that he was familiar with and thought highly of,” Kusnan told Vanity Fair – insisting that he and Epstein only met once, and never communicated again. Notably, Kusnan delivered “a good rate of return on his modest investment.” 

The relationship between Epstein and Dubin also ventured into more controversial realms, if one believes the depositions recently unsealed in an old court case between one of Epstein’s alleged victims, Virginia Giuffre, and Epstein’s longtime companion and alleged madam, Ghislaine Maxwell. According to Giuffre’s May 2016 deposition, Dubin was the “first” powerful person that Maxwell sent her to have sex with “after my training.” She also said that she was instructed by Maxwell to have sex with, among others, Alan Dershowitz, the Harvard Law professor; George Mitchell, the former U.S. senator; Bill Richardson,the former New Mexico governor; and Jean-Luc Brunel, a French model scout. “My whole life revolved around just pleasing these men and keeping Ghislaine and Jeffrey happy,” Giuffre said in her deposition. “[Maxwell and Epstein’s] whole entire lives revolved around sex. They call massages sex. They call modeling sex.” She said Maxwell told her to give Dubin “a massage.” (The Dubins categorically deny Giuffre’s allegations. Their spokesperson also provided evidence they say disproves Giuffre’s account. Dershowitz, Mitchell, Richardson, and Brunel have also denied her allegations.) –Vanity Fair

Did the Dubins bring in a 15-year-old girl?

Former Dubin chef and assistant Rinaldo Rizzo claimed in an unsealed June 2016 deposition that when he and his wife Debra worked for the Dubins, Andersson-Dubin brought home a 15-year-old Swedish girl who had been with Epstein and Maxwell during a visit to the Dubins’ home. 

The girl was “distraught,” “upset,” and “she was shaking” said Rizzo, who added that the girl seemed “on the verge of crying.” 

According to the report, “[T]he girl told him and his wife that she worked for Epstein as his “executive personal assistant,” and when Rizzo expressed shock that such a young girl could have that job, “she just breaks down hysterically.” Rizzo stated that the girl told him she was involved in some forced sexual activity at Epstein’s Caribbean island and was told by Maxwell and Epstein not to discuss it.“

But about a month later, according to Rizzo, the Dubins, along with the girl and the Rizzos, were on Dubin’s private jet back to Sweden and the girl was returned home. “We flew to Sweden,” Rizzo said in his deposition, “we stopped at an airport we didn’t usually stop at and she got off the plane.” The Rizzos left the Dubins’ employ in October 2005, following those events, he said in his deposition. “My wife and I had discussed these incidents, and this last one was just, we couldn’t deal with it,” he said. –Vanity Fair

The Dubins have denied everything – stating through a spokesman who shared flight records “There was never a 15-year-old Swedish nanny in the Dubins’ home and flight records for trips to Sweden on the Dubins’ plane do not include any minors other than family members.” The Dubins’ longtime live-in nanny also attested “with certainty” that they had never employed an underage nanny. 

That said, the Dubins did confirm having traveled with Epstein on his private jet – occasionally flying between Palm Beach and New York, where they all had homes. Maxwell, meanwhile, flew on Dubin’s plane twice along with his children; once in 2004 and again in 2010. 

Pilot Jim Dowd who flew for both Epstein and the Dubins said that both men were “friends” who liked “vacationing together.” 

Dubins and Wexner

Last but not least, Vanity Fair‘s Cohan notes that the Dubins were close enough to Victoria’s Secret boss (and former Epstein pal) Leslie Wexner, the billionaire founder and CEO of L Brands. Wexner – Epstein’s only known financial client – allowed the Dubins and their children to use their 316-foot, $100 million yacht, Limitless, for a Mediterranean vacation.

“Wexner’s wife, Abigail,“graciously invited the Dubins to use their boat for four days while Eva Dubin was recovering from breast cancer surgery,” Dubin’s spokesperson explained,” according to the report – which adds that it was “quite unusual for Wexner to let anyone use Limitless when he was not on board.” 

Interestingly – all parties have denied all wrongdoing, and many claim to have had no knowledge of Epstein’s proclivities despite hanging out with him during and following his conviction for pedophilia. What’s wrong with these people?

The bottom line, however, is that the US Virgin Islands fired AG George, then one week later filed an amended complaint with significant edits to the “High Net Worth Client” section, and unredacted names of people we already knew about.

Amended complaint below:

Via SchiffGold.com,

Last year was a tough one for investors. In fact, it was the worst year for Wall Street since 2008. The Dow was down about 8.8%. The S&P 500 fell by 19.4%, dropping more than 20% from its high. The Nasdaq took the worst hit, tumbling by 33.1%. Meanwhile, the bond market tanked, bitcoin collapsed, and the air started coming out of the real estate bubble.

Peter Schiff recently did an interview with the Epoch Times. He predicted more pain in 2023, primarily driven by inflation and the Federal Reserve.

While price inflation has cooled a bit, it is still running far above the Fed’s 2% target. Nevertheless, there is talk about a Fed pivot to rate cuts in the year ahead. Peter pointed out that “the last couple of times the Fed was able to orchestrate a pivot, it did it when inflation was 2% or less.” If the central bank makes that move in the near future,  it will “throw gasoline on the fire.”

High inflation gets even higher, and in that environment, I don’t see financial assets as a group doing well.”

Peter said bonds, in particular, will get killed.

That’s bad news for the US government as it continues to borrow and spend. A tanking bond market means higher interest rates – a big problem for a country trying to borrow more and more money.

Peter said that the year ahead could be particularly rocky for unprofitable tech companies that benefited from the Fed’s easy money policies in the past, and he sees a continued rotation into “value” stocks from companies with a proven track record of profitability.

If money is losing value much faster than 2% a year, you don’t want to wait 10–20 years to get your money. … It’s not companies that are promising earnings in the future. It’s companies that have earnings right now.”

More broadly speaking, Peter said inflation will continue to wear down consumers and make it more difficult for companies to maintain revenue streams.

If your customers are spending a lot more money on food, on energy, on insurance, on rent, on taxes, and they have nothing left over, then it doesn’t even matter if you cut your prices. You don’t have any customers.”

Peter said the Fed has turned the markets into “a casino” with artificially low interest rates and money printing. It has distorted markets and created all kinds of malinvestments.

It’s really helped undermine the productivity of the American economy, which is one of the reasons we have huge trade deficits.”

In fact, the central bank has become the dominant factor in investors’ decision-making.

The Fed should be irrelevant. Nobody should be making investment decisions based on the Fed. Right now, the Fed is the only thing anybody cares about. ‘Are they going to raise rates? By how much?’ Everything is riding on the decision of a few guys sitting in a room in Washington, DC That’s not how capitalism is supposed to work.”

Peter questioned why the Fed should have the power to decide the price of money.

That makes no more sense than putting together a bureau to decide the price of oil, or the price of milk, or the price of bread … That’s what the Soviet Union used to do, and it was a disaster.”

Oil prices rallied overnight despite a huge crude inventory build reported by API, with traders shrugging it off as likely driven by the impact of the nationwide ‘deep freeze’ and refinery shut-ins distorting the data. Additional optimism over China’s demand outlook (after the government issued a bumper batch of import quotas, spurring hopes of improved crude consumption) offset the optics of the crude build.

“The perceived demand pull that’s expected from China is superseding the rise in crude inventories from the API,” said Dennis Kissler, senior vice president at Bok Financial Securities.

Will the official data confirm the huge builds?

API

• Crude +14.865mm (-2.375mm exp) – biggest build since Feb 2021

• Cushing +2.3mm

• Gasoline +1.8mm (+1.3mm exp)

• Distillates +1.1mm (+500k exp)

DOE

• Crude +18.96mm (-2.375mm exp, BBG +6.2mm exp) – biggest build since Feb 2021

• Cushing +2.511mm

• Gasoline +4.11mm (+1.3mm exp)

• Distillates -1.069mm (+500k exp)

Confirming and surpassing the API-reported data, official data showed a massive 18.96mm barrel crude build last week – the biggest build since Feb 2021 and stocks at Cushing soared by 2.511mm barrels (the most since Dec 2021)…

Source: Bloomberg

We note that there was a more than 15 million-barrel increase in the Gulf Coast. Much of the rise in inventories due to the disruptions in refinery operations from a deep freeze had not materialized in data yet, so we are seeing that come through now.

The SPR saw a drain of only 800k barrels last week – the smallest since Jan 2022.

Bear in mind that the EIA’s January outlook expects combined gasoline, diesel and jet inventories to rise 9% in 2023, led by a 2.8% jump in refining throughput

US crude production rose last week to 12.2mm b/d – equal to its post-COVID highs…

Source: Bloomberg

WTI was hovering just above $76 ahead of the official data and, after a brief dip, extending gains despite the massive build…

Expectations for higher demand out of China as the country scraps its COVID-19 restrictions continue to provide some support for prices.

“We are confident that oil prices will climb again once the current wave of COVID infections has peaked in China and economic activity picks up,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.

Still, Stephen Innes, managing partner at SPI Asset Management, warned that oil traders are “unlikely to see the explosive economic reopening that oil bulls had hoped for, with the market ignoring case counts in favor of local Chinese activity data.”

Oil prices “should rise tangentially to the increasing mainland mobility pulse,” he said in a market update.

However, near-term time spreads are holding in a bearish contango structure, signaling ample supply.

The head of the private Russian military firm Wagner Group has announced pro-Moscow forces have taken control of the town of Soledar in the eastern Ukrainian region of Donetsk. Wagner chief Yevgeny Prigozhin admitted in a series of Tuesday and Wednesday comments that fighting in the area is still ongoing, but said “Units of the Wagner private military company have taken the entire territory of Soledar under their control,” and that the Ukrainians are surrounded.

“The city center has been surrounded, and urban warfare is underway. The number of captives will be announced tomorrow,” Prigozhin added. “No units other than Wagner PMC fighters were involved in the storming of Soledar.” The Amsterdam-based Moscow Times and the AFP underscore that “If confirmed, the capture of Soledar would mark Russia’s biggest success in its war on Ukraine following months of retreats elsewhere.” Prigozhin’s emphasis that it was ‘only Wagner’ an no regular forces that stormed Soledar has reportedly unleashed anger and controversy inside the Russian chain of command.

Britain’s Ministry of Defence (MoD) acknowledged in a Tuesday daily briefing that the majority of Soledar is arlready under Russian control.

“Part of the fighting has focused on entrances to the 200km-long disused salt mine tunnels which run underneath the district. Both sides are likely concerned that they could be used for infiltration behind their lines,” the MoD briefing described.

Control of Soledar, a small town of 10,000 (pre-war) known for its immense salt mines, is seen as especially strategically key to Russian forces seeking to encircle the city of Bakhmut, which has witnessed months of intense but stalemated fighting. Bakhmut is 15km away from the outlying town of Soledar.

Wagner troops have been photographed inside the famous salt mines, following what state media described as “fierce fighting”. The firm also said it has taken many Ukrainian troops captive. There are also reports of large below-ground ammunition stores discovered there. 

Reuters details the immensity of the mines, which is the largest in Eastern Europe, in the following:

Soledar is also home to cavernous salt mines that are owned by state-owned enterprise Artemsil, which completely dominated the Ukrainian market until it halted production a few months after Russia invaded. The enterprise has produced more than 280 million tonnes of salt since it was founded in the late 19th century. The mines go down to a depth of 200-300 metres and have tunnels with a combined length of 300 km (186 miles), according a local tourist website.

The enterprise was once considered one of the largest in Eastern Europe and exported salt to 20 countries. A hot air balloon was once flown inside one of the mines to demonstrate their depth.

The Kremlin confirmed that Russian army airborne troops have been assisting by blocking Soledar’s far northern and southern access parts, but officially the Kremlin has been slower to declare full victory as of yet.

“Let’s not rush. Let’s wait for official announcements,” Kremlin spokesman Dmitry Peskov said while hailing the “positive dynamic in advances” due to the “heroism of our fighters.” He stressed that “Tactical successes, of course, are very important.”

This Kremlin reaction, which crucially didn’t mention Wagner at all, is being taken by Western press as somewhat of a humiliating blow to the private military firm with direct links to Putin, and seems an attempt to walk back potentially premature ‘full victory’ claims amid the intense ebb and flow of ongoing urban warfare.

PMC Wagner inside the ancient Salt mines in Soledar, which is a treasure in and of itself – an abundance of natural mineral salt and a large cache of ammunition all left by the AFU. pic.twitter.com/jxRSPbqDBO

— Blackrussian (@Blackrussiantv) January 11, 2023

“Airborne Force units have blocked Soledar from the town’s northern and southern parts. The Russian Aerospace Forces are delivering strikes at enemy strongholds. Assault groups are engaged in a battle in the town,” Peskov continued.

Interestingly his bolstering of Russian regular forces’ contributions comes at a moment of reported tension between Wagner and the defense ministry. Wagner seems to have been given a carte blanche mandate in how it operates, naturally putting the elite group on a collision course with the army’s chain of command, creating distrust.

The Ukrainian government is meanwhile downplaying Russian gains in and around Soledar, rejecting the Wagner assertions of victory. “Soledar was, is and will be Ukrainian,” a Ukrainian military statement said.

The statement denied that its forces had surrendered the town as of yet, and went so far as to claim that the Wagner photographs from within the salt mines were faked.

However, RT is on Wednesday circulating video of the Wagner mercenaries clearly inside large, cavernous salt mines.

⚡️I can’t believe this war is real life.

Just as Wagner announced the capture of Soledar, Z forces struck a firework warehouse in Kharkiv. This has been confirmed by the governor. pic.twitter.com/2042udtwHC

— War Monitor (@WarMonitors) January 10, 2023

The afforementioned founder of Wanger Group Prigozhin, also nicknamed “Putin’s chef”, previously described the strategic importance of the salt mines in particular, in relation to the larger city of Bakhmut:

“Bakhmut is the central point of the Eastern Front and a serious logistics center. And our task there is to die as little as possible, and to destroy the enemy as much as possible. Bakhmut’s feature is in its unique historical and geographical defense capabilities, which include, first, the division of the city into several parts by water barriers. Secondly, the neighborhood of Bakhmut is a complex of settlements that create a unified defense system.

Thirdly, this is a unique landscape, ravines and heights, which are natural tunnels. And the icing on the cake is the system of Soledar and Bakhmut mines, actually a network of underground cities. In which there is not only a cluster of people at a depth of 80-100 meters, but also tanks and infantry fighting vehicles move. And stockpiles of weapons have been stored since the First World War.”

At the start of this week, on Sunday, Ukrainian President Vladimir Zelensky admitted that the situation of his forces in Soledar was “very difficult”.

He described it as “one of the bloodiest spots along the front line,” while vowing Ukrainians would fight to hold the town “no matter what.” At this point reports from both sides have acknowledged heavy casualties as they fight for control over this key area of Donetsk.

* * *

Military situation in Bakhmut-Soledar region, Ukraine, on January 10, 2023 (SouthFront.org):

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

You read that right, the Fed wants lower stock prices.

Fed members will not say it as bluntly as we do in our title. But they have a long-held belief that stock prices directly impact the economy and, therefore, inflation. Thus, in the Fed’s efforts to quell inflation, it makes sense that they are likely using their stock market lever, specifically lower stock prices, to help improve the efficacy of monetary policy.

Before we delve into recent Fed comments about asset prices and describe the groundwork that Ben Bernanke laid for the Fed’s stock market theory, we share a quote of Fed Chair Janet Yellen from September 2016:

“It could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions.”

December 2022 FOMC Minutes

Within the minutes of the December 15, 2022 FOMC meeting comes the following statement :

Participants noted that, because monetary policy worked importantly through financial markets, an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the Committee’s reaction function, would complicate the Committee’s effort to restore price stability.

More straightforwardly, financial markets are an important way monetary policy is transmitted to the broader economy. As such, higher stock prices (“an unwarranted easing of financial conditions”) driven by a belief the Fed will pivot to lower rates make it more challenging for the Fed to tackle inflation.

In lay terms, lower stock prices can help the Fed get inflation back to its 2% objective.

Jerome Powell and other Fed members have made similar statements. For example, on Friday, August 26, 2022, Powell made an exceptionally hawkish speech about raising interest rates. The S&P 500 fell over 3% that day as investors expected a more market-friendly tone. On the following trading day, Minnesota Fed President Neel Kashkari responded:

I was actually happy to see how Chair Powell’s Jackson Hole speech was received.

Kashkari is cheering on lower stock prices!

Ben Bernanke Coins the Wealth Effect

In 2003 Ben Bernanke laid the groundwork for the Wealth Effect. His theory associates stock prices with the transmission of monetary policy to the economy.

In a speech entitled Monetary Policy and the Stock Market: Some Empirical Results Bernanke states:

The logic goes as follows: Easier monetary policy, for example, raises stock prices. Higher stock prices increase the wealth of households, prompting consumers to spend more–a result known as the wealth effect. Moreover, high stock prices effectively reduce the cost of capital for firms, stimulating increased capital investment. Increases in both types of spending–consumer spending and business spending–tend to stimulate the economy.

Bernanke argues that additional wealth resulting from stock market gains results in more household spending. While he doesn’t say it in this speech, the Wealth Effect also works in reverse!

Policy and Stocks are a Two-Way Street

Easy Fed policy, including lower rates and QE, tends to correlate with higher stock prices. Equally important and apropos for today, higher rates and QT are associated with lower stock prices.

The graph below quantifies monetary policy to show the correlation between stock prices and the degree of policy. The degree of Fed policy (red/green) is derived from the level of real Fed Funds and recent changes in the Fed’s balance sheet.

It’s not a perfect indicator, but you can generally see tightening policy (red) led to the significant drawdown in 2008, the 2020 decline, and the recent selloff. Conversely, stocks often trend upward when an easy Fed policy (green) is in place.

Inflation is a function of the supply and demand for goods and services. The Fed holds minimal sway over the supply side of the equation. However, they can, directly and indirectly, influence consumer and corporate demand. Not only do stock market gains or losses influence spending and investment, but interest rates significantly impact demand for specific items such as real estate and autos.

The Fed, aware it has little influence on supply, must target demand to reduce inflation. On November 30, 2022, Powell made it clear that the Fed’s objective is to weaken demand to reduce inflation. 

We are tightening the stance of policy in order to slow growth in aggregate demand. Slowing demand growth should allow supply to catch up with demand and restore the balance that will yield stable prices over time. Restoring that balance is likely to require a sustained period of below-trend growth.

Controlled Burn of Stocks

Between higher interest rates and QT, the Fed is trying to cool demand and bring inflation to its target. Based on numerous comments like those shared, it also appears the Fed is targeting stock prices to help reduce inflation.

The Fed does not want to plunge stock prices as it could result in significant financial disruptions in which they could quickly lose control. We believe they want lower trending stock prices with controlled volatility until they meet their goals. Hawkish rhetoric, higher interest rates for longer, and QT can help them on their quest. The graph below shows volatility has been higher than average during the recent decline, but it did not spike as in the disorderly declines of 2008 and 2020.

The Fed likely wants a controlled, low-volatility burn on stock prices. If prices gravitate too far upward or downward from the trend channel, the Fed can adjust liquidity via the combination of QT and its Reverse Repurchase Agreement (RRP) program. Such policy management might explain the clean channel the S&P 500 followed throughout 2022.

Our article S&P 3500 By Year End details RRP and Fed-generated liquidity.

Summary

Bernanke and Yellen acknowledge that influencing stock prices is crucial for the Fed to help them accomplish their goals. Powell is following in their footsteps and, in our opinion, trying to push stock prices lower to help ensure inflation is slayed.

Given inflation remains well above the Fed’s target, we suspect the Fed will try to guide stock prices lower in the foreseeable future. In doing so, the Fed may get inflation back to target and bring valuations back to historical norms as a side benefit.

The risk the Fed faces is that volatility spikes and stock declines get out of hand. Such would not only create financial instability but could significantly hamper economic activity. Likely, inflation would turn to deflation in the said scenario and allow the Fed to get back to its preferred playbook of pumping stocks higher to boost economic activity and get inflation up to its target.

The road ahead for stocks is likely lower until inflation is tamed. If the Fed is successful in a controlled burn of stock prices, we should see rallies from the lower range of the trend channel and declines from the upper end. Both extremes may very well present trading opportunities.

In market jargon, expect pumps and dumps as the stocks grind lower.

US equity futures were set to rise for a second day as upbeat sentiment ahead of tomorrow’s key CPI print – which JPM gives 85% odds of pushing stocks at least 1.5% higher – lifted global markets despite a freak outage of key FAA advisory system this morning led to a nationwide ground halt for all domestic flights (until at least 9am) pre. Contracts on the S&P 500 and Nasdaq 100 ticked up 0.1% as of 7:15am ET while Europe’s Stoxx 600 Index rose 0.8%. The FTSE 100 climbed within striking distance of a record high; Asian equities were supported by China lifting Covid restrictions. Among the top corporate news, Credit Suisse weighs cutting by half the bonus pool for 2022 after a turbulent year and Apple plans to start using its own custom displays in mobile devices as early as next year. Treasury yields dropped and the dollar gained for the second day in a row.

Among US premarket movers, airline stocks slipped in New York premarket as the failure of a key pilot notification system operated by the Federal Aviation Administration disrupted air travel. American Airlines Group Inc. fell 1.1% and United Airlines Holdings Inc. was down 0.6%. Delta Air Lines Inc. fell 0.8% as the FAA ordered a ground halt of all flights until at least 9am. Bed Bath & Beyond surged again and were on course for a third day of gains. World Wrestling Entertainment rose as much as 5.3%, extending a rally sparked by speculation that the company may sell itself. Chairwoman and co-CEO Stephanie McMahon announced she’s resigning from the company. Here are some other notable premarket movers:

• US biotech Prokidney surges 34% after early data from a mid-stage trial of its cell therapy for chronic kidney disease. Jefferies said the treatment has multi-billion dollar potential.
• CarMax falls 4.8% after JPMorgan cut its recommendation on the used-car retailer to underweight from neutral, citing unfavorable risk-reward following recent outperformance.
• JinkoSolar Holding ADRs rise 1.9% after Roth Capital upgrades the solar panel maker to buy, saying US policy improvements point to a stronger outlook.
• Levi Strauss drops 1.5% as Citi downgrades to neutral from buy to reflect what it describes as a challenging US backdrop in the near to medium term.
• Keep an eye on PTC and Autodesk as Berenberg begins coverage of both US design software companies with buy ratings, and initiates AspenTech at hold, saying all three have the potential to continue outperforming the industry in terms of growth.
• Data and analytics providers could be in focus as Redburn says they will have a significant opportunity to capitalize on growing and increasingly complex risk factors in financial markets. The broker has buy ratings on MSCI (MSCI US), S&P (SPGI US) and London Stock Exchange (LSEG LN), though initiates Verisk (VRSK US) at sell and cuts Morningstar (MORN US) to neutral.

The gains of US stocks since the start of 2023 has surprised many (very bearish) strategists who believe that much of the advance is conditional on inflation easing, which would allow the Federal Reserve to slow the pace of rate hikes. And while hawkish comments on Monday by San Francisco and Atlanta Fed presidents put a chill on the rally, a lack of subsequent reinforcement by Chair Powell led to a sharp rally on Tuesday. The next test for the market comes on Thursday with the US inflation report which will determine if the Fed hikes by 25bps or 50bps on Feb 1, and it’s widely believed that a lower-than-expected reading would trigger further gains.  Investors are also closely watching technical levels as the S&P 500 Index nears its 200-day moving average.

“Tomorrow’s CPI event risk could be a decider where the S&P 500 can either break above its 200-day moving average, the 4,000 level and the downtrend line, or we head back to 3800,” says Gurmit Kapoor, a cross-asset sales trader at Aurel BGC.

While Powell didn’t directly comment on the Fed’s next steps at a forum in Stockholm, he did say that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise rates to slow the economy.”

Fed Governor Michelle Bowman said the central bank has more work to do to curb inflation, noting that further tightening is needed.

“We do expect an inflection in central bank policy later on this year,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “More risk-tolerant investors can look to anticipate this turn by phasing into markets, seeking early winners from a global improvement in sentiment, and identifying beneficiaries from China’s reopening. “However, we don’t believe we have yet reached the inflection point in policy or economic growth, and as we enter 2023 we continue to favor a defensive tilt when adding exposure in both equity and fixed-income markets,” he said.

“The prospect of a less cloudy economic outlook in both Europe and the US after recession risks in both regions eased back, combined with the reopening of the Chinese economy, is providing strong support toward risk appetite from investors,” said Pierre Veyret, a technical analyst at ActivTrades. “The lack of clear hints from Fed Chairman Jerome Powell yesterday also contributed to keeping the bullish trading stance alive, and most traders will now look toward tomorrow’s US inflation print for further clues.”

In Europe, real-estate and mining stocks led a 0.4% gain in the Stoxx Europe 600 Index amid subsiding inflation worries. Miners were boosted by optimism China’s economic reopening will spur demand for metals. Among the top corporate news, Credit Suisse weighs cutting by half the bonus pool for 2022 after a turbulent year. Here are some of the biggest European movers on Wednesday:

• Vestas shares jump as much as 5.6%, the most in a month, after being raised to buy at Jefferies, which says an inflection point has been reached for wind-turbine manufacturers
• JD Sports shares jump as much as 6.5%, reaching April highs, after the sports retailer said it sees headline pre-tax profit toward the top end of current market expectations
• TeamViewer shares gain as much as 7.3% after the software company reported preliminary 4Q billings. RBC says the firm posted “a surprisingly stronger- than-expected finish to the year”
• Corbion rises as much as 11%, reaching an almost 11-month high, after Barclays upgrades to overweight in note on “renewed conviction” following the Dutch ingredients maker’s CMD
• Bang & Olufsen rises as much as 4.5% on better-than-expected 2Q results. Nordnet says “B&O does what it can and maybe even a little more” despite a challenging environment
• Grafton shares rise as much as 4.7% after it predicted its profit will be at the top end of analysts’ forecasts. Investec expects 2022 underlying consensus profit to edge up
• Direct Line shares slump 30%, pulling peers down with it, after saying it no longer expects to pay a final dividend; news that is likely to be a “major shock” to the market, Jefferies says
• Adyen declines as much as 3.4% after BofA cuts the stock to neutral, saying risks of further slowdown in e-commerce sales and margin compressions are not properly accounted for
• Maersk shares fall as much as 4.1%, the most since November, after Goldman Sachs cut its recommendation to sell, anticipating a “great unwind” in air and sea freight markets
• Eurofins Scientific declines as much as 4.9% and is among the worst performers on France’s SBF 120 index after two brokers cut their recommendations for the French laboratory group

Earlier in the session, Asia’s equity benchmark resumed its advance, led by gains in key regional markets including Japan, South Korea and Hong Kong.  The MSCI Asia Pacific Index climbed as much as 0.9% to the highest level in almost five months before paring about half of its gain. Tencent and Alibaba were the top contributors, with tech and communication services among the major sectoral boosters.

“A lot of traders and investors see the US being closer to peak inflation — if we have not already passed that point. Then that as a corollary also indicates an end to global central bank rate hike cycles,” said Justin Tang, head of Asian research at United First Partners.  Though Chinese shares dropped on Wednesday, with liquor giant Kweichow Moutai among the decliners, investor sentiment remains bullish amid further signs of fading regulatory risks in the tech sector as well as more support coming for property developers. The dramatic recovery in Chinese equities, with a gauge of mainland companies listed in Hong Kong up more than 40% in about two months, helped the broad Asian benchmark enter a bull market this week. The key gauge is outperforming US peers so far in 2023 boosted by optimism over China’s reopening and a weakening dollar.

“In general the Chinese markets have been a pretty tough place to invest for almost five years now. So that recovery we’ve seen from below, there’s still a lot of value, support in the marketplace,” David Perrett, co-head of Asian equities at M&G Investment Management, said in an interview with Bloomberg TV

In FX, the Bloomberg dollar gauge rose, after hovering near a seven-month low and the greenback was mixed against its Group-of-10 peers, though most currencies traded in relatively narrow ranges. The euro traded in a narrow $1.0726-1.0757 range

• The Australian dollar led G-10 gains after solid inflation and retail sales prints for November reinforced expectations for a quarter-percentage-point interest rate hike at the Reserve Bank’s first meeting of the year next month. CPI advanced 7.4% seasonally adjusted from a year earlier, up from 6.9% in October and exceeding economists’ median estimate. Core prices, or the trimmed-mean gauge, climbed to 5.6% in November compared with a forecast 5.5%. Retail sales beat most estimates.
• The yen was sandwiched between large options expiring on Wednesday. Japan’s 30-year bonds gained after an auction of this tenor met resilient demand and the central bank announced unscheduled debt purchases.
• The Egyptian pound plunged 5% against the US dollar on Wednesday, after the International Monetary Fund said authorities were showing commitment to a flexible exchange rate.

In rates, treasury yields trimmed their advance from the previous session as yields shed up to 6bps as the curve bull-flattened and with the rate on 10-year debt slipping to below 3.58% as investors remained focused on the price outlook for the US. UK spreads flatter, leading core European rates higher with 2s10s, 5s30s tighter by 5.5bp and 2.5bp on the day; Bunds also bull-flattened and outperformed Treasuries as money markets eased ECB tightening bets before a German 10-year bond sale. Focus is also on scheduled ECB speeches. Japan’s 30-year bonds gained after an auction of this tenor met resilient demand and the central bank announced unscheduled debt purchases.

In commodities, oil reversed an earlier decline as traders weighed the outlook for stronger Chinese demand against a reported build in US crude stockpiles. Optimism over demand from China was evident in the iron ore market, with the steel-making ingredient rallying above $120 a ton in Singapore. Copper rose above $9,000 a ton for the first time since June, fueled by hopes of increased consumption by the world’s top user of the metal.

Looking to the day ahead now, it’s a quiet day and data releases include US Mortgage applications. Otherwise, central bank speakers include the ECB’s Holzmann, Villeroy and De Cos.

Market Snapshot

• S&P 500 futures up 0.2% to 3,948.50
• MXAP up 0.5% to 162.36
• MXAPJ up 0.3% to 535.96
• Nikkei up 1.0% to 26,446.00
• Topix up 1.1% to 1,901.25
• Hang Seng Index up 0.5% to 21,436.05
• Shanghai Composite down 0.2% to 3,161.84
• Sensex little changed at 60,124.03
• Australia S&P/ASX 200 up 0.9% to 7,195.34
• Kospi up 0.3% to 2,359.53
• STOXX Europe 600 up 0.5% to 448.06
• German 10Y yield little changed at 2.25%
• Euro up 0.1% to $1.0746
• Brent Futures up 0.8% to $80.75/bbl
• Brent Futures up 0.8% to $80.76/bbl
• Gold spot up 0.5% to $1,885.60
• U.S. Dollar Index little changed at 103.25

Top Overnight News from Bloomberg

• The collective hive mind of Wall Street is backing a view that the euro rally is just getting started. With energy prices tumbling and calls for a region-wide recession falling to the wayside, a clear narrative is emerging that the worst of the economic damage is over and European assets are cheap
• In Germany, Italy and Spain — three of the currency bloc’s top four economies — anxiety at inflation over the next year is close to or below the average since the euro was introduced in 1999, European Commission data show
• Only a slowdown in core inflation can alter the ECB’s resolve to raise interest rates, according to Governing Council member Robert Holzmann
• The ECB needs to be pragmatic as it raises interest rates in the coming months to get to a level by the summer that is sufficiently high to bring inflation back toward 2%, Governing Council member Francois Villeroy de Galhau said
• The French economy continued to grow at the end of 2022 and should avoid a contraction in the first weeks of the year despite headwinds from surging energy prices, a Bank of France survey showed
• China shouldn’t bail out the debt that local governments take off their balance sheets so as to discourage them from allowing hidden liabilities to snowball out of control, according to former Finance Minister Lou Jiwei
• Japan’s Finance Ministry will likely issue sovereign bonds to fund decarbonization efforts from the latter half of fiscal year 2023 after assessing investor needs, Michio Saito, a senior official at the ministry, says in a TV Tokyo interview

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks initially tracked the advances on Wall Street after Fed Chair Powell refrained from any major policy rhetoric and as participants looked ahead to upcoming US CPI data with hopes of softening price growth. ASX 200 tested the 7,200 level to the upside with the index led by outperformance in the mining and materials sectors, while participants also digested better-than-expected Retail Sales and a pickup in monthly inflation metrics. Nikkei 225 gained as earnings trickled in with outperformance in Yaskawa Electric after growth in its top and bottom lines, while there was encouragement from news that Fast Retailing will boost wages by as much as 40%. Hang Seng and Shanghai Comp were firmer for a bulk of the session after the PBoC pledged support measures including for the property sector and boosted its short-term liquidity efforts ahead of next week’s Lunar New Year celebrations, although gains were capped in the mainland after the recent mixed loans and aggregate financing data.

Top Asian News

• PBoC injected CNY 65bln via 7-day reverse repos with the rate kept at 2.00% and it injected CNY 22bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 71bln net daily injection.
• Analysts noted there is room for China to cut RRR and interest rates this year, while analysts also see room for a rate cut in the property sector, according to China Securities Journal.
• BoJ offered to buy JPY 100bln in 1-3yr JGBs, JPY 100bln in 3-5yr JGBs, JPY 300bln in 5yr-10yr JGBs, JPY 200bln in 10yr-25yr JGBs and JPY 50bln in 25yr+ JGBs, while it also offered to buy an unlimited amount of JGBs at a fixed rate with maturities of 1yr-3yr and 3yr-5yr in an unscheduled announcement.
• Stocks Climb Amid Optimism Over Inflation, China: Markets Wrap
• Egypt Pound Plunges 5% in Test of Shift to Currency Flexibility
• Russia to Restart FX Operations in Yuan Under Fiscal Rule
• Philippine Finance Chief Sees Rate Hike Cycle Nearing End

European bourses are firmer across the board, Euro Stoxx 50 +0.8%, with an easing in yields seemingly spurring a modest extension of opening gains. Sectors are primarily in the green, though Insurance names are pressured in sympathy with Direct Line while Retail-related stocks are supported after updates from the likes of JD Sports. US futures posting marginal gains, ES +0.2%, with the US docket particularly thin ex-supply ahead of Thursday’s CPI. US FAA has reported a system equipment outage, all flights nationwide have been grounded, according to a source familiar with the situation, cited by NBC Washington reporter.

Top European News

• ECB’s Villeroy says they will need to be pragmatic on speed of hikes, will have to raise rates more in the coming months. Should aim to reach the terminal rate by the summer. Domestic inflation is likely to peak in H1, will avoid hard landing scenario.
• ECB’s Holzmann says rates will need to rise significantly further to reach levels that are sufficiently restrictive to ensure a timely return of inflation to target. Inflation is expected to subside but risks remain to the upside. There are no signs of de-anchored market expectations.
• Activist Coast Capital Sells Vodafone Stake Within a Year
• Russia to Sell Yuan From Wealth Fund as Oil Price Hits Budget
• Ukraine Latest: Zelenskiy Says Russian War Won’t Turn to WWIII
• Direct Line Shares Tumble as Insurer Cuts Dividend on Claims

FX

• DXY forms a foothold on 103.000 handle within a tight band post-Powell and pre-US CPI.
• Aussie outperforms on perky inflation metrics, strong retail sales data and gains in iron ore prices, AUD/USD holds near 0.6900 and AUD/NZD rebounds from around 1.0800 to top 1.0850.
• Euro retains grasp of 1.0700 handle, but Sterling sags around 1.2150 axis and Yen weakens after closing below a Fib to circa 132.75 and away from decent option expiries at 132.50.
• PBoC set USD/CNY mid-point at 6.7756 vs exp. 6.7776 (prev. 6.7611)

Fixed Income

• Core benchmarks continued to gain momentum throughout the morning with little clear sign of concession pre-supply and perhaps deriving some support from ECB remarks.
• However, the rally has run out of steam with a sub-par German outing aiding the pullback, with Bunds and Gilts now sub 137.00 and 103.00 respectively.
• Stateside, USTs have been following suit and it remains to be seen if the looming 10yr supply will influence broader action, an auction which follows Tuesday’s strong 3yr.
• UK DMO is to launch a new conventional Gilt maturing October 2053 in the week commencing January 23rd.

Commodities

• WTI and Brent have experienced a firmer start to the mid-week session, with the benchmarks posting upside of around USD 0.30/bbl within relatively narrow ranges that keeps the complex within WTD and recent parameters
• US and allies are reportedly preparing the next round of sanctions on Russian oil, via WSJ; intending to cap the sales price of Russian exports of refined petroleum products.
• Russian Kremlin, on possible losses from oil price caps, says there have been hardly any cases of the caps yet.
• Chinese Commerce Ministry will continue to impose anti-subsidy tariffs on dried distillers grains with solubles (DDGS) imported from the US.
• Standout mover has been LME Copper which eclipsed the USD 9k mark in an extension of yesterday’s price action after fairly contained/rangebound APAC trade for base metals.
• Spot gold is modestly firmer and resides towards the top-end of a USD 1872-1886/oz range, which is a fresh multi-month high leaving the figure itself as resistance before the May 2022 USD 1909/oz peak.

Geopolitics

• Russia’s ambassador to the US commented that the US training of Ukrainian troops on Patriot systems confirms Washington’s de facto participation in the conflict and that the US administration’s goal is to inflict the most damage on Russia on the battlefield by the hands of Ukrainians, according to Reuters.
• Russian Kremlin says there is a positive dynamic in the military situation around Ukrainian town of Soledar Putin is open to discussions on Ukraine.
• Russian Rights Commissioner says important ceasefire proposals have been made during her meeting with Turkish and Ukrainian colleagues in Turkey, via Reuters.
• Russia and Iran are working on a new shipping corridor to bypass sanctions and are looking to work with India, according to Nikkei. ]

US Event Calendar

• 07:00: Jan. MBA Mortgage Applications 1.2%, prior -10.3%

DB’s Jim Reid concludes the overnight wrap

Morning from Helsinki where snow is on the ground. This is the start of a whistle stop 4 countries in 2 days 2023 outlook tour. I’ve been coming here around this week every year for about the last 25, apart from the last 2 due to Covid. So it’s nice to have the old routine back. In the past I’ve landed in wild snow storms, seen the temperature hit -20c, seen piles and piles of snow, and yet everything always runs. Impressive! This year it’s all fairly calm with the temperature just above zero.

Markets have also been relatively quiet over the last 24 hours as we await tomorrow’s all important US CPI print. There was some speculation that remarks from Fed Chair Powell could inject some volatility into proceedings but overall markets turned steadily higher after his lack of commentary on the policy outlook at his panel in Stockholm.

Looking through the various moves yesterday, some of the biggest came from longer-dated core sovereign bond yields. For instance, yields on 10yr Treasuries were up +8.7bps to 3.619%, marking their biggest daily increase so far this year, and taking yields up to their highest level since the weak ISM services release last Friday. We have given back -3bps of that climb in Asia as I type. The rise yesterday though came as investors took out some of the dovish expectations for the Fed they’d been pricing over recent days, with the futures-implied rate for end-2023 up by +2.0bps on the day to 4.459%. Separately, we also heard from the Treasury Department that they were increasing the size of their T-bill auctions. It comes with many expecting that they’ll soon announce extraordinary measures in order to avoid exceeding the statutory cap imposed by the debt ceiling.

Sticking with the US Treasury Department, it was reported yesterday that Treasury Secretary Yellen has agreed to remain in her post after having been asked to by President Biden last month. This is a confirmation of Secretary Yellen’s own professed wished from back in November when she said she intended to stay through the entirety of Biden’s first term. This means at least one part of the upcoming debt ceiling negotiations will have some stability. Bloomberg reported that the Biden administration was preparing to turnover some cabinet-level positions now that the midterms are over.

Over in Europe it was a similar story, with yields on 10yr bunds (+8.0bps) seeing the largest increase on the day, along with smaller increases for OATs (+7.0bps) and BTPs (+3.6bps). And as in the US, the moves occurred with investors taking out some of the dovishness priced for the ECB, which got further support after the ECB’s Schnabel said that “interest rates will still have to rise significantly” and that “inflation will not subside by itself”.

When it comes to the Fed, we did hear from Chair Powell yesterday, but despite the anticipation he didn’t comment on the policy outlook. He was speaking on a panel on central bank independence, and stuck to that topic by defending the merits of an independent monetary policy. Interestingly, he acknowledged that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.” Otherwise, he explicitly said that the Fed should “stick to our statutory goals and authorities”, and said that they would not be a “climate policymaker”. With little to go off from Powell, the focus will now turn to tomorrow’s US CPI release for December.

With Powell not taking a hawkish tone, equities drifted higher after Europe logged off. The S&P 500 ticked +0.70% higher, with both the NASDAQ (+1.01%) and the Dow Jones (+0.56%) also rising. The rally had a distinct risk-on tone with communications (+1.29%) and consumer discretionary (+1.26%) names outperforming while defensives like staples (-0.16%) and utilities (+0.04%) lagged. Having closed beforehand and catching up to the US reversal late Monday, European equities pulled back with the STOXX 600 down -0.59% on the day.

Asian markets are stronger this morning. As I type, the Nikkei (+1.02%) is leading gains followed by the Hang Seng (+1.01%), the KOSPI (+0.40%), the CSI (+0.22%) and the Shanghai Composite (+0.20%). Outside of Asia, stock futures in the US are fluctuating with contracts on the S&P 500 (+0.04%) just above flat while those on the NASDAQ 100 (-0.05%) are trading fractionally lower. Meanwhile, European futures tied to the DAX (+0.55%) are catching back up.

Early morning data showed that inflationary pressures are yet to ease in Australia as CPI advanced +7.3% y/y in November (v/s +7.2% expected), up from a surprise pullback to +6.9% in October. The latest inflation reading is at its highest level in 30 years with housing costs being the main contributor to the annual increase. Separately, retail sales rebounded +1.4% m/m in November, buoyed by consumer appetite for Black Friday sales despite rising interest rates and high inflation. Market expectations were for a +0.6% gain as against October’s upwardly revised +0.4% rise. The Australian dollar (+0.39%) nudged higher against the dollar, trading at $0.69 on the prospect of more interest rate hikes by the Reserve Bank of Australia (RBA).

In commodity news, copper prices are trading at the highest level since June inching towards $9,000 a ton as China’s exit from the Zero Covid policy enhanced the demand outlook of the commodity.

Elsewhere yesterday, the French government outlined a plan that would see the country’s retirement age rise to 64 by 2030, up from 62 at present. Moves to reform the pension system have long been an ambition of President Macron’s, but a previous attempt in his first term was postponed during the Covid-19 pandemic, and there remains opposition from trade unions and some other political parties. Macron’s party no longer has an absolute majority in parliament either, but they have made some concessions to the conservative Les Républicains to try and secure their votes.

In other news, the World Bank released their latest round of economic projections yesterday, with their global growth projection for 2023 now at +1.7%, marking a downgrade from their +3.0% forecast back in June. Those downgrades were mainly driven by the advanced economies, where growth is now seen at just +0.5% (vs. +2.2% in June), but the forecasts for emerging market and developing economies were also lowered, with this year’s growth now seen at +3.4% (vs. +4.2% in June).

Finally, there wasn’t a great deal of other data yesterday. One release in the US was the NFIB’s small business optimism index, which fell more than expected to 89.8 in December (vs. 91.5 expected). That’s the second-lowest reading in over a decade. Elsewhere, French industrial production grew by a faster-than-expected +2.0% in November (vs. +0.8% expected).

To the day ahead now, and data releases include Italian retail sales for November. Otherwise, central bank speakers include the ECB’s Holzmann, Villeroy and De Cos.

Update (0742ET):

President Biden has been briefed about the FAA’s system failure. 

*PRESIDENT HAS BEEN BRIEFED ON FAA SYSTEM OUTAGE, PRESS SEC SAYS

*JEAN-PIERRE: NO EVIDENCE OF CYBERATTACK AT THIS POINT

— zerohedge (@zerohedge) January 11, 2023

And now domestic departures halts will extend 30 minutes until 0930 ET.

*US FAA DOMESTIC DEPARTURES PAUSE EXTENDED TO 9:30 AM ET: CBS

— zerohedge (@zerohedge) January 11, 2023

Hmmm. 

*BIDEN: FAA EXPECTS IN A FEW HOURS TO HAVE A SENSE OF CAUSE

— zerohedge (@zerohedge) January 11, 2023

*   *   * 

Update (0730ET):

FAA ordered all airlines to halt domestic departures until 0900 ET. 

Update 3: The FAA is still working to fully restore the Notice to Air Missions system following an outage.⁰⁰The FAA has ordered airlines to pause all domestic departures until 9 a.m. Eastern Time to allow the agency to validate the integrity of flight and safety information.

— The FAA ✈️ (@FAANews) January 11, 2023

So far, 1,366 flights have been delayed within, into, or out of the US, flight tracking website FlightAware showed. Another 108 were canceled. 

*   *   * 

Update (0719ET): 

“The FAA is still working to fully restore the Notice to Air Missions system following an outage … some functions are beginning to come back online, National Airspace System operations remain limited,” FAA tweeted.

Cleared Update No. 2 for all stakeholders: ⁰⁰The FAA is still working to fully restore the Notice to Air Missions system following an outage. ⁰⁰While some functions are beginning to come back on line, National Airspace System operations remain limited.

— The FAA ✈️ (@FAANews) January 11, 2023

*   *   * 

Early Wednesday morning, the US Federal Aviation Administration’s (FAA) system that notifies pilots about hazards or any changes to airport facility services suffered an outage that might result in a nationwide grounding. 

The FAA wrote in an advisory update that its NOTAM (Notice to Air Missions) system had “failed.” The aviation agency provided no immediate estimate for when it would return online. 

“THE FAA is experiencing an outage that is impacting the update of NOTAMS. All flights are unable to be released at this time,” the FAA said in a statement.

In a statement to NBC News, the FAA said, “Operations across the National Airspace System are affected.” 

So far, 1,162 flights have been delayed within, into, or out of the US, flight tracking website FlightAware showed. Another 94 were canceled. 

Flights are being grounded nationwide. 

Just an FYI if you are planning to fly today (as I sit on a plane I boarded at 5am), FAA’s NOTAM system is down and basically all planes within and coming in and out of the U.S. are grounded. Our pilot says they have no idea when it will be functioning again. So. pic.twitter.com/4iW11Ns2vr

— Asha Rangappa (@AshaRangappa_) January 11, 2023

BREAKING NEWS: 🚨🚨
Dozens of flights have been delayed at Charleston International airport due to a FAA computer malfunction.
We haven’t seen any flights leave Charleston in the past 40-45 minutes.
Tune into @ABCNews4 for the latest updates #Working4You pic.twitter.com/kcZugsJaqo

— Sean Mahoney (@SeanMahoneyTV) January 11, 2023

It’s probably not a good time to fly this morning. 

BREAKING: Widespread U.S. flight delays expected after critical FAA system goes down; agency currently working on getting it back online pic.twitter.com/DVQAw4nsTE

— CNBC Now (@CNBCnow) January 11, 2023

Passengers are beginning to complain on social media about delayed flights. 

FAA computer outage has grounded flights nationwide this morning. Boarded at 5:30AM as the first flight of the day. Currently delayed indefinitely. Idk if I’ll be making this cruise out of Florida… 😢🌴🚢 pic.twitter.com/SBy8q2sD2N

— Stephanie Grindley (@StephanieGTV) January 11, 2023

FAA outage also affecting flights abroad. Our flight from FCO – PHL is halted on the runway.

— Allie Evans (@whattheklutz) January 11, 2023

The FAA has grounded all flights due to a computer outage. Sitting on a plane @EWRairport on @UnitedAirlines pic.twitter.com/Rlq5OBmiJd

— Alan Smith (@alan_f_smith) January 11, 2023

Currently sitting on the runway and am seeing that the FAA is grounding all flights in the US for a system outage…

if yal gone cancel, do it now so I can go get back in my bed 😩🙏🏽

— Jay Dub (@TheSweetest_Jay) January 11, 2023

Sitting in DCA, they just told us there is a nation-wide FAA outage. No flights are moving anywhere. Anyone have any clue what’s going on?

— GChris (@GChris65) January 11, 2023

@AmericanAir I’ve been sitting on a full plane at the gate at LAX for 2+ hours for a system issue with the FAA. When will this be resolved? #flightdelay

— Lynn (@birdsonglynn1) January 11, 2023

*Developing