US stock index futures slipped on Wednesday – after a frenzied late rally into Tuesday’s month-end thanks to a monstrous, $6 billion in Market on Close buy orders – but were off session lows as investors awaited the Fed’s policy decision after a stellar start to the year for stocks amid speculation the central bank will signal a slowdown in the pace of rate hikes.

Futures on the S&P 500 were 0.2% lower, trading around 4083, while Nasdaq 100 futs popped into the green as of 745am ET, with both underlying indexes surging more than 1% on Tuesday. The Nasdaq soared more than 10% in January in a furious short-covering rebound unseen in more than two decades. An index of global stocks excluding the US is making history with a gain of 8.6% last month — the best start to a year on record. Elsewhere, European and Asian stocks rose, the 10-year Treasury yield fell about three basis points and the dollar index dipped before the Fed statement, where it’s forecast to unveil a 25 basis point rate increase.

Among notable movers in premarket trading, Electronic Arts Inc. after the video game maker cut its full-year forecast and announced a six-week delay in the release of its next Star Wars game. Chipmaker AMD rose after the chipmaker gave a sales forecast that was better than feared, helped by gains in the server market. Perennial loser Snap plunged as the social media company gave a weaker-than-expected forecast, saying changes to its advertising products may be “disruptive” to its business. Shares of other companies that get a bulk of their revenue from online advertising, including Meta and Pinterest also dropped. Bank stocks were also lower in premarket trading Wednesday as traders await the Federal Reserve’s interest rate decision. JPMorgan is planning to launch a digital bank in Germany as its second international consumer outpost. Meanwhile, some users of bankrupt crypto lender Celsius Network’s Custody program will be able to withdraw 94% of their eligible assets, according to a court filing. Here are some other notable premarket movers.

• Peloton jumped 8% after it reported improved cash flow and a narrower net loss in the latest quarter, leading Chief Executive Officer Barry McCarthy to say that questions about the viability of the business have been “put to bed.”
• Chinese stocks listed in the US rise in premarket trading, poised to end three days of declines, with Baidu and electric-vehicle stocks leading the way. Li Auto (LI US) +6%, XPeng (XPEV US) +4.1%, Baidu (BIDU US) +7.9%, Alibaba (BABA US) +1.5%, Pinduoduo (PDD US) +2.6%, Bilibili (BILI US) +3.1%
• Western Digital shares slide 4.5% after its revenue forecast for the third quarter fell short of estimates. Analysts blamed weakness in the NAND flash market and PC demand, though some were hopeful that the data-storage device maker could weather the storm.
• Electronic Arts shares fall 11% after the video-game company cut its full-year forecast and announced a six-week delay in the release of its next Star Wars game.
• Match Group slides 8.7% after the dating services firm gave guidance for 1Q23 showing little fundamental business improvement is expected near-term.
• Keep an eye on Rocket Pharmaceuticals (RCKT US) stock as Morgan Stanley initiates coverage with an overweight recommendation, saying the biotech is a leader in gene therapy with a robust cardiovascular pipeline and a hematology pipeline providing near-term revenue.

Today’s key event is the FOMC decision due at 2pm (preview here). Economists widely expect the central bank to raise rates by 25 basis points at the conclusion of its two-day meeting Wednesday. Chair Jerome Powell is likely to keep further hikes on the table while leaning against bets they will cut rates later this year.

“Powell will certainly sound satisfied about the falling inflation and slowing wages, but he will likely point out that inflation remains high, risks to inflation remain to the upside and that the job is not done yet,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “He will surely push back the expectation of any rate cut this year” and a hawkish statement could further weigh on stocks, she said.

Wage cost data that undershot forecasts, a cooling housing market dwindling consumer confidence suggest the Fed’s rate hikes over the past year have begun to curtail inflation, but still-loose financial conditions are complicating the central bank’s task.

“The question is will the Fed emphasize a pause or push back against the easing being priced in for this year and the next,” said Steve Donzé, deputy head of investment at Pictet Asset Management in Tokyo. “The market is worried about this, because a lot of this rally was helped by softer yields and the dollar and if the Fed starts to fight the easing that’s priced in it will have consequences for the yield curve and equities.”

Powell will also try to push back against easing financial conditions which are now as loose as they were in Jun 2022 when Fed Funds were 1.75%.

Focus is also on company earnings, with analysts expecting the first quarterly drop in US profits since 2020. Investors can no longer count on some crucial tailwinds that helped spur a remarkable two-decade stretch of earnings growth, according to Bank of America.

In Europe, the Stoxx Europe 600 index pared most of its early gain after a report showed inflation in the euro area slowed more than economists’ expectations in January. The the core measure remained sticky, however, suggesting heated debate to come at the European Central Bank over how much more interest rates must rise. The central bank is expected to lift its policy rate by 50 basis points on Thursday. Here are some of the biggest European movers:

• GSK shares turned lower after gaining as much as 1.5% as its quarterly sales and profit both topped expectations, driven by a strong performance in the vaccines division and HIV drug portfolio
• ABB shares rise as much as 1.3% after the Swiss automation company’s EV-charging business raised additional funds from minority investors
• Husqvarna rises as much as 7% as the Swedish lawn care and outdoor equipment firm’s organic sales growth, particularly for its robotic products, led to an outperformance in 4Q
• BBVA shares advance as much as 2.5% after it reported earnings which Jefferies described as solid. Analysts also noted the upbeat outlook for 2023
• Virgin Money UK shares gain as much as 1.2% after the bank forecast net interest margin for the full year of 1.85% to 1.9%, in an update seen as “neutral” by Morgan Stanley
• Darktrace shares rise as much as 6%, recovering from a two-day 17% slump, after the cybersecurity firm announced plans to buy back shares
• Vodafone shares decline as much as 3.3% in early trading, after the telecom operator reported a further slowdown in service revenue growth in core markets including Germany and Spain
• SEB falls as much as 4.4% after Trygg-Stiftelsen sold 75m shares in the bank at a price of SEK120 apiece, representing a 4.9% discount versus Tuesday’s close
• Novartis dips as much as 1.9% after the Swiss drugmaker’s quarterly sales were a touch behind expectations due to a miss for psoriasis treatment Cosentyx

“Headline inflation continues to fall across the eurozone but core inflation, which strips out food and energy, flatlined,” said John Leiper, Chief Investment Officer at Titan Asset Management. “Price pressure, particularly in the services sector, will remain elevated for some time. Given the economy is holding up far better than predicted we expect the ECB to hike interest rates again on Thursday by a widely anticipated 50 basis points.”

Earlier in the session, Asian stocks rose ahead of the Federal Reserve’s interest-rate decision, as signs of cooling US inflation boosted risk appetite in the region. The MSCI Asia Pacific Index rose as much as 0.8%, driven by technology and consumer discretionary shares. Benchmarks in Hong Kong as well as the tech-heavy markets of South Korea and Taiwan all gained about 1%, while India declined. All eyes were on the Fed meeting later Wednesday, with markets expecting a 25-basis-point rate hike. Investors betting on a downshift in tightening were cheered by data showing slower growth in US employment costs, adding to signs of moderating inflation. 

“Wall Street is slowly growing confident that this week’s Fed rate hike might end up being the last one in this tightening cycle,” said Edward Moya, senior market analyst at Oanda. “The economy is weakening and that is fueling Fed rate cut bets at the end of the year.” India’s benchmarks erased early gains driven by a budget boost, as a selloff among Adani group’s stocks accelerated in afternoon trading.

In India, Adani Group stocks resumed their selloff after the share sale by the Indian conglomerate’s flagship firm failed to turn sentiment from Hindenburg Research’s fraud allegations. In one bright spot for the group, nearly all dollar bonds issued by Adani companies extended gains into a second day.

Japanese stocks closed mixed ahead of the Federal Reserve meeting later Wednesday and as investors weighed domestic company results. The Topix fell 0.2% to close at 1,972.23, while the Nikkei advanced 0.1% to 27,346.88. Lasertec contributed the most to the Topix decline, falling 14% after the chip-equipment maker reported quarterly profit that missed analyst estimates and trimmed its order outlook. Out of 2,164 stocks in the index, 935 rose and 1,134 fell, while 95 were unchanged. “There is a consensus that the FOMC may end interest-rate hikes in March,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “After that, we would want to see the impact on the economy”.

Australian stocks rose with the S&P/ASX 200 index 0.3% higher to close at 7,501.70, boosted by gains in mining stocks and banks, as investors await the Federal Reserve’s policy meeting.  Flight Centre was the top performer, surging 8% after the travel agency successfully completed a A$180 million placement to buy UK-based luxury travel brand Scott Dunn and provided a trading update.  In New Zealand, the S&P/NZX 50 index rose 1% to 12,090.93.

In FX, the Bloomberg Dollar Spot Index eased 0.1% ahead of the Fed policy decision later on Wednesday where it’s expected to raise rates by 25 basis points. The greenback was steady to weaker against its most Group-of-10 peers, with Scandinavian currencies topping the G-10 leaderboard. The Treasury curve bull flattened, with the 10-year yield dropping by about 4bps.

• The euro inched up toward $1.09 though options suggest a move above $1.10 after the Fed and the ECB is unlikely. Euro-zone bonds pared an advance after core-CPI for the region came in higher than estimated in January, while the headline number eased more than forecast.
• The pound underperformed most of its Group-of-10 peers, trading little changed against a the US dollar. Domestic focus remains on Thursday’s BOE decision.
• New Zealand’s dollar was steady while short-maturity bonds gained and traders trimmed bets on a rate hike at the RBNZ’s February meeting after employment data missed estimates.

Treasury yields are slightly lower across the curve, with gilts outperforming over the early London session across the belly of the curve. US yields are richer by up to 2.5bp across the long end of the curve, which is outperforming slightly, flattening 2s10s, 5s30s spreads by 1.8bp and 0.5bp; 10-year yields around 3.485%, outperforming bunds by 3bp in the sector — the front end and belly of the UK curve is outperforming over the early London session. Fed-dated swaps market is pricing in around 27bp of rate hike premium for Wednesday’s decision and 47bp over the Feb. and March meetings; policy peak is priced at around 4.92% by the June meeting. The US session focus is on manufacturing data in the morning, before attention shifts to the Federal Reserve’s interest-rate decision at 2 p.m. in Washington and Chair Jerome Powell’s press conference 30 minutes later.    

In commodities, crude futures are little changed, with WTI trading near $79.00. Spot gold falls roughly 0.1% to trade near $1,926

Looking to the day ahead now, and the main highlight will be the Fed’s latest policy decision as well as Chair Powell’s press conference. Otherwise, data releases include the flash CPI release for the Euro Area in January, as well as the unemployment rate for December. Alongside that, there’s the global manufacturing PMIs for January and in the US we’ve got the ISM manufacturing print for January, the ADP’s report of private payrolls, and the JOLTS job openings for December. Finally, earnings releases today include Meta.

Market snapshot

• S&P 500 futures down 0.2% to 4,084
• MXAP up 0.7% to 169.15
• MXAPJ up 1.0% to 554.79
• Nikkei little changed at 27,346.88
• Topix down 0.2% to 1,972.23
• Hang Seng Index up 1.1% to 22,072.18
• Shanghai Composite up 0.9% to 3,284.92
• Sensex little changed at 59,576.27
• Australia S&P/ASX 200 up 0.3% to 7,501.66
• Kospi up 1.0% to 2,449.80
• STOXX Europe 600 up 0.2% to 454.03
• Gold spot down 0.2% to $1,923.98
• U.S. Dollar Index down 0.12% to 101.97
• German 10Y yield little changed at 2.26%
• Euro up 0.2% to $1.0880
• Brent Futures little changed at $85.38/bbl

Top overnight News from Bloomberg

The EU risks missing a March target to agree on a reform of its debt-limit rules in the face of resistance from countries including Germany, a prospect that may force member states into abrupt and potentially painful budgetary adjustments

For bond investors looking to bet big on a rally this year, signs of distress in the world’s highly-leveraged housing markets are only adding to their conviction. Places like the UK, New Zealand and Sweden — where house prices are slumping and mortgage payments are rocketing — are high on their watchlist

Shaky property markets across much of the world pose another risk to the global economy as higher interest rates erode household finances and threaten to exacerbate falling prices

Swathes of office staff have been forced to work from home Wednesday as widespread industrial action closes schools and cripples Britain’s rail network. As many as 475,000 union members are on strike

Chinese President Xi Jinping called for enhanced efforts to boost consumption in order to realize a virtuous economic cycle, as the world’s second largest economy gradually recovers from Covid Zero

A surge in Chinese spending last month has spurred more optimism about the country’s economic rebound, though weakness among manufacturers and sales of cars and homes still suggest the recovery isn’t yet on sure footing

Asia’s manufacturers are improving at the start of the year as the region becomes more optimistic about the boost from China’s reopening, while activity in the euro area shows the downturn is softening as cost pressures ease

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded higher after the positive lead from Wall St where stocks advanced into month-end and which was facilitated by the softer Employment Cost growth in the US, although gains were capped by the approaching FOMC rate decision and after disappointing Chinese Caixin Manufacturing PMI data. ASX 200 was led higher by strength in the mining and materials sectors after a rebound in commodity prices and with an upgrade in the Final Australian Manufacturing PMI also conducive for risk appetite. Nikkei 225 briefly climbed above 27,500 but closed off its highs amid a deluge of earnings releases and after Japan’s manufacturing activity was confirmed to have declined for a 3rd consecutive month. Hang Seng and Shanghai Comp. were positive albeit with momentum restricted after Chinese Caixin Manufacturing PMI missed forecasts and printed a 6th consecutive month in contraction territory which was in contrast to the recent rebound seen in China’s official PMIs.

Top Asian News

• US Defence Secretary Austin’s visit to Manila is expected to bring a deal on expanded US access to bases in the Philippines, according to a senior Philippines official cited by Reuters.
• China’s President Xi says the need to coordinate expansion of domestic demand with deepening supply-side structural reforms, via State Media.
• China securities regulator CSRC has released draft rules for IPO registration system reform for 1st February.
• Tiny Radioactive Device Found in Australia After Desert Hunt
• Modi Aims to Please All With $550 Billion India Budget
• Gold Steadies as Traders Await Fed Meeting for Rate Outlook
• China Lifts Southeast Asia Factories as Europe Downturn Softens
• Insurers Top Losers as India Budget Seeks to Tighten Tax Rules
• Adani Rout Passes $90 Billion as Stock Sale Fails to Stem Doubt

European bourses are little changed overall but with a modest positive bias, Euro Stoxx 50 +0.2%, ahead of data points and the FOMC. Sectors are predominantly in the green, but with the overall breadth narrow and no overarching theme in play despite numerous large cap earnings in the European morning; click here and here for details. Stateside, futures are a touch softer after yesterday’s strength, ES -0.4%, with after-market updates weighing ahead of data and the Fed’s policy announcement/press conference. Advanced Micro Devices, Inc. (AMD) – Q4 sales and profits topped expectations, but warns of revenue decline in Q1. +3.3% in pre-market trade  Tesla (TSLA) intends to increase the Shanghai plant’s average weekly output to nearly 20k vehicles for Feb and March, according to an internal memo cited by Reuters.

Top European News

• UK and EU reached a customs agreement which could pave the way for an end of post-Brexit wrangling over Northern Ireland, according to The Times.
• Officials in Brussels have reportedly dismissed claims of a compromise deal on the ECJs role in the N. Ireland Protocol, via BBC’s Parker citing sources; Parker adds, “A precise timeline isn’t clear but one official says negotiators are in the “tunnel”.”.”Regardless any compromise of that kind would also represent a significant UK concession, as well as an EU one.” (re. the ECJ).
• RTE’s Connelly, on reports of an EU/UK deal on the NI protocol, says there is “Nothing new. Talks ongoing. Progress (is) being made but no sign of anything imminent.”, citing a source.

FX

• The DXY is subdued and holding modestly below the 102.00 mark with slightly softer US yields vs global peers and the pre-FOMC risk tone exerting modest pressure on the USD.
• EUR and AUD are the current outperformers despite a fleeting dip in EUR/USD following EZ Flash CPI while AUD is benefiting from soft New Zealand labour data and a subsequent paring in RBNZ rate expectations; EUR/USD just shy of 1.09 while AUD/USD resides near 0.708.
• CAD remains near 1.33 pre-data while Cable has extended above the 1.23 mark irrespective of a pushback on reporting of an EU/UK compromise.
• SEK and NOK have benefitted somewhat from their respective PMIs, though EUR upside caps gains, while the INR has slipped post-budget.
• PBoC set USD/CNY mid-point at 6.7492 vs exp. 6.7499 (prev. 6.7604)

Fixed Income

• EGBs are firmer but well off initial best levels, with Bunds below 137.00 after more than paring a knee-jerk spike on the EZ Flash CPI release, where once again the headline cooled but core remains firmer.
• Gilts are faring better than their German peer post-supply, with the 2033 Green Gilt better received than the 2033 Bund, which required a hefty retention.
• USTs are marginally outperforming and towards the top-end of 114.17+ to 114.30 parameters with yields lower as such and action most pronounced at the long-end of the curve.

Commodities

• Crude benchmarks have seen some modest two-way action throughout the morning, though the benchmarks are in relatively narrow ranges and near the unchanged mark overall.
• Action which comes ahead of the OPEC+ JMMC event, which is not a decision-making meeting, and other risk events throughout the session.
• US Energy Inventory Data (bbls): Crude +6.3mln (exp. +0.4mln), Cushing +2.7mln, Gasoline +2.7mln (exp. +1.4mln), Distillate +1.5mln (exp. -1.3mln).
• OPEC+ JMMC has been pushed back one hour to 13:00GMT/08:00EST, according to Energy Intel.
• Spot gold is little changed around the USD 1925/oz mark, given the broader tentative pre-FOMC price action. Base metals are softer following the miss in China’s Caixin PMI release.

Geopolitics

• US is readying a USD 2.2bln weapons package for Ukraine which includes longer-range rockets for the first time, according to two officials cited by Reuters.
• Russian Kremlin says that potential US supplies of long-range missiles to Ukraine would escalate tensions but would not stop Russia from achieving its goals; as bad as the present situation is, Russia believes the START treaty is very important; no current plans to hold talks between Russian President Putin and US President Biden, according to Sky News Arabia.
• Belarusian servicemen have begun full independent operation of the Iskander missile system, according to the defence ministry.

US Event Calendar

• 07:00: Jan. MBA Mortgage Applications -9.0%, prior 7.0%
• 08:15: Jan. ADP Employment Change, est. 180,000, prior 235,000
• 09:45: Jan. S&P Global US Manufacturing PMI, est. 46.8, prior 46.8
• 10:00: Dec. Construction Spending MoM, est. 0%, prior 0.2%
• 10:00: Dec. JOLTs Job Openings, est. 10.3m, prior 10.5m
• 10:00: Jan. ISM Manufacturing, est. 48.0, prior 48.4
  • New Orders, prior 45.2, revised 45.1
  • Employment, prior 51.4, revised 50.8
  • Prices Paid, est. 40.4, prior 39.4

Central Banks

• 14:00: Feb. FOMC Rate Decision (Lower Bound est. 4.50%, prior 4.25%; Upper Bound est. 4.75%, prior 4.50%)
• 14:00: Feb. Interest on Reserve Balances R, est. 4.65%, prior 4.40%

DB’s Jim Reid concludes the overnight wrap

After a very positive January, the start of February today marks a pivotal three days for markets that have the potential to decisively set the tone for the weeks ahead. That begins this morning with the flash CPI release from the Euro Area for January, before we have the Fed’s latest policy decision and Chair Powell’s press conference tonight. Then tomorrow we’ve got more policy decisions from the ECB and the BoE, an array of major earnings including Apple, Amazon and Alphabet, followed up by the US jobs report for January on Friday.

The last time we had a big round of central bank meetings like this in December, the rate hikes themselves were much as expected, but the hawkish rhetoric alongside them led to a big selloff. Nevertheless, the mood going into this round is much more optimistic, with the S&P 500 (+1.46%) closing at a 2-month high after the US Employment Cost Index numbers showed labour costs grew by less-than-expected, whilst the French CPI release also came in much as expected (unlike the Spanish print the previous day). So all eyes are now on the Fed to see whether they maintain their hawkish tone of recent meetings, or whether there might be any signals of a potential pause at future meetings.

When it comes to the Fed’s decision today, a 25bps rate hike is now widely expected by both markets and economists, and anything other than that would be a massive shock. It would also mark the first “normal” sized hike since March 2022 when this hiking cycle began, before they embarked on a series of supersized hikes to swiftly get the policy rate into restrictive territory. Given that the 25bps move is anticipated, the main focus today will instead be on any changes to forward guidance, both in the statement and from Fed Chair Powell’s press conference.

In their preview (link here), our US economists write that the statement is likely to keep the reference to “ongoing” rate hikes. Their view is that although the FOMC might be inclined to adjust this language as it moves closer to a pause, doing so now has little upside and risks widening the existing gap between market expectations and a more hawkish Fed. In terms of market expectations, futures are currently pricing in one more 25bps hike after today’s move, but only a one-in-three of another move after that. Indeed, terminal rate pricing points to just +58.3bps of further hikes, so closer to 50bps than 75bps. Futures are also indicating that the Fed will start cutting by year-end, which is contrary to the last FOMC minutes in December, where it said that “no participants” thought it would be appropriate to start cutting rates in 2023.

Ahead of the decision, there was some good news from their perspective in the latest ECI numbers for Q4. That’s closely followed by the Fed and showed an increase in employment costs of +1.0% (vs. +1.1% expected), which is the slowest quarterly increase in a year and added to the signs that wage growth is moderating. Nevertheless, if you wanted a more negative perspective, it’s still running above levels consistent with their target, and is above what we saw throughout the entirety of the 2010s. So as with the inflation figures, the Fed still have a way to travel before they can be comfortable about reaching their target, even if we’ve come off the highs from early 2022.

This optimism on the inflation side got added support from the French CPI numbers yesterday, with the EU-harmonised print at +7.0% as expected. That was a bit higher than the +6.7% in December, but the good news from an investor perspective was that it didn’t exceed expectations, unlike the Spanish print on Monday. All eyes will now be on the release for the Euro Area as a whole at 10:00 London time, and particularly on core inflation which hit a record 5.2% in December.

With all that to look forward to, markets staged a decent rally yesterday and the S&P 500 was up +1.46% to recover from its slump on Monday. The moves were part of a broad-based advance, with all 24 industry groups gaining on the day, led by autos (+4.32%), transports (+3.19%), retail (+2.24%), and materials (+2.22%). The worst performing industries were more defensive sectors, but even they advanced on the day as well. Meanwhile, the small-cap stocks in the Russell 2000 (+2.45%) were a particular outperformer as they closed at a 5-month high. The performance in Europe was rather weaker, with the STOXX 600 down -0.26%, but they hadn’t experienced the late selloff after the previous day’s close either.

Sovereign bonds also rallied ahead of the various meetings, with yields on 10yr Treasuries seeing a decline of -3.0bps decline to 3.507%, with yields remaining fairly stable overnight. That was echoed in Europe as well, where there were slightly larger moves in yields for 10yr bunds (-3.2bps), OATs (-3.4bps) and BTPs (-4.4bps). Those moves followed a small decline in terminal rate pricing for the Fed down -1.3bps on the day, while expectations for the ECB were basically unchanged (-0.6bps).

Overnight in Asia, that positive mood has continued with the major indices recovering after the previous day’s losses. Currently, the KOSPI (+0.72%) is leading gains with the Shanghai Comp (+0.29%), Hang Seng (+0.27%), CSI 300 (+0.25%) and the Nikkei (+0.09%), posting smaller advances. That’s also in spite of overnight data showing that Chinese manufacturing activity shrank more than expected in January, with the Caixin manufacturing PMI at 49.2 (vs. 49.8 expected), even if that was up from the 49.0 reading in December. Outside of Asia, the picture is a bit less positive as well, with futures on the S&P 500 (-0.28%) and the NASDAQ 100 (-0.39%) in negative territory ahead of the Fed’s decision today.

Looking at yesterday’s other data, the Euro Area economy unexpectedly grew by +0.1% in Q4 (vs. -0.1% expected), so avoiding a recession for the time being. That said, plenty of countries still saw a quarterly contraction, including Germany (-0.2%), Italy (-0.1%), Sweden (-0.6%) and Austria (-0.7%). Otherwise, UK mortgage approvals fell more than expected to 35.6k in December (vs. 45.0k expected), which is their lowest level since May 2020 when the economy was affected by the Covid-19 pandemic.

To the day ahead now, and the main highlight will be the Fed’s latest policy decision as well as Chair Powell’s press conference. Otherwise, data releases include the flash CPI release for the Euro Area in January, as well as the unemployment rate for December. Alongside that, there’s the global manufacturing PMIs for January and in the US we’ve got the ISM manufacturing print for January, the ADP’s report of private payrolls, and the JOLTS job openings for December. Finally, earnings releases today include Meta.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Should bubble symmetry play out in the S&P 500, we can anticipate a steep 45% drop to pre-bubble levels, followed by another leg down as the speculative frenzy is slowly extinguished.

Bubble symmetry is, well, interesting. The dot-com stock market bubble circa 1995-2003 offers a classic example of bubble symmetry, though there are many others as well. The key feature of bubble symmetry is the entire bubble retraces in roughly the same time frame as it took to soar to absurd heights.

Nobody could see bubble symmetry coming, of course. At the peak and for some time after, bubbles are viewed as the natural order of markets and so they should continue expanding forever.

Alas, the natural order of markets is mean reversion and the collapse of whatever is unsustainable. This includes speculative manias, credit bubbles, asset bubbles and projections of endless expansion of margins, profits, sales, consumption, tax revenues and everything else under the sun.

There’s a well-worn psychological path in the collapse of bubbles. This path more or less tracks the Kubler-Ross phases of denial, anger, bargaining, depression and acceptance, though the momentum of speculative frenzy demands extended displays of hubris and over-confidence, i.e. the first wobble “must be the bottom.”

There’s also repeated spikes of false hope that “the bottom is in” and the bubble is starting to reflate.

This pattern repeats until the speculative fever finally breaks and all those betting on a resumption of the bubble mania finally give up.

This process often takes about the same length of time that it took for the bubble mania to become ubiquitous. If it took about 2.5 years for the bubble to expand, it takes about 2.5 years for the bubble to pop and the market to return to its pre-bubble level.

Once again we hear reasonable-sounding claims being used to support predictions of a never-ending rise in stock valuations.

What hasn’t changed is humans are still running Wetware 1.0 which has default settings for extremes of emotion, particularly manic euphoria, running with the herd (a.k.a. FOMO, fear of missing out) and panic / fear.

Despite all the assurances to the contrary, all bubbles pop because they are based in human emotions. We attempt to rationalize them by invoking the real world, but the reality is speculative manias are manifestations of human emotions and the feedback of running in a herd of social animals.

With all this in mind, let’s consider the current bubbles in stocks and housing. Should bubble symmetry play out in the S&P 500, we can anticipate a steep 45% drop to pre-bubble levels, followed by another leg down as the speculative frenzy is slowly extinguished.

Housing is notoriously “sticky” when it comes to price declines, as sellers show remarkable tenacity in the denial phase. The last few greater fools buying on the first modest decline spur the hopes of sellers that the flood of mania-driven buyers is about to resume, but manias don’t last nor do they resume.

If bubble symmetry plays out, we can anticipate a relatively steep drop of about 30% to pre-mania levels, followed by a longer decline to pre-Bubble #1 and Bubble #2 levels, a roughly 60% drop from bubble heights.

Such declines are of course “impossible.” There are always endless reasons why bubbles can’t possibly pop and why 60% declines are impossible, even as history tells us that 60% declines are inevitable, and in the bigger picture, rather modest. It’s the 90% declines that really hurt.

*  *  *

My new book is now available at a 10% discount ($8.95 ebook, $18 print): Self-Reliance in the 21st Century. Read the first chapter for free (PDF)

Become a $1/month patron of my work via patreon.com.

Authored by Paul Joseph Watson via Summit News,

Scottish leader Nicola Sturgeon says transgender criminals convicted for raping women are women, despite a car crash interview in which she appeared to flip flop all over the place.

The controversy began after 31-year-old Adam Graham, who was was found guilty of raping the two women during frenzied sex attacks, was sent to Scotland’s only all female prison.

Only when on trial for the attacks did Graham announce that he was “transitioning” into a woman, a process which seemingly culminated in him wearing a bad wig and cheap make-up.

The rapist was clearly trying to exploit Scotland’s ludicrously woke legal system in which biological males who identify as women can be sent to female prisons.

After a massive public backlash, Scottish First Minister Nicola Sturgeon reiterated her belief that “trans women are women,” no matter how many actual women they have violently raped.

During an excruciatingly awkward interview, Sturgeon flip-flopped back and forth on the question of whether violent male rapists are actually women on the basis of them claiming to be so in order to get more lenient treatment in prison.

Nicola Sturgeon clarifies matters. pic.twitter.com/Y9TqYmCB29

— The State Media (@The_StateMedia) January 30, 2023

Sturgeon’s assertion that men with penises should be accepted as women was backed up by Keith Brown, her justice secretary, who said: “If somebody presents as a trans person, then we accept that at face value.”

Brown said the decision on where to send male sex offenders who identified as women rested with the Scottish Prison Service (SPS), and its risk assessment, which Brown claimed had a “tremendous track record”.

Another biological male, who now calls himself, Tiffany Scott, was also set to be transferred to the same all woman prison after being convicted of stalking a 13-year-old girl.

Another transgender inmate also started identifying as a baby in order to get better treatment in prison, a demand that was “taken seriously” by prison bosses.

That sounds like a Babylon Bee article, but it’s a real story.

As we document in the video below, the situation in Scotland completely vindicates those who have been warning for years that sexual predators are exploiting the acceptance of transgenderism to target victims.

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. I need you to sign up for my free newsletter here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Get early access, exclusive content and behind the scenes stuff by following me on Locals.

Cash is now king in Lebanon, where a three-year economic meltdown has led the country’s once-lauded financial sector to atrophy and turned the country into a Venezuelan-esque hyperinflationary hell. The country has been hit hard by events over the past few years, starting with COVID.

In August 2020, the city of Beiruit was practically destroyed by a massive blast which killed at least 200 people and triggered as much as $15 billion in damage…

In March 2021, violent protests erupted across Lebanon as the currency collapse accelerated and with it the economy and people’s living standards.

And most recently, In December 2022, the Lebanese parliament failed for the eighth consecutive time to elect a new president, as a majority of lawmakers opposed the options laid on the table.

The prolonged power vacuum only exacerbates the situation, as Beirut is currently unable to enact sweeping reforms demanded by international lenders as a condition for releasing billions of dollars in loans.

All of which has sent the ‘parallel’ FX rate to a stunning 60,000/USD (compared to the official Pound – often nicknamed ‘Lira’ – rate of 1500/USD)…

Source: LiraRate.org

As Reuters reports, Zombie banks have frozen depositors out of tens of billions of dollars in their accounts, halting basic services and even prompting some customers to hold up tellers at gunpoint to access their money.

This has prompted bank runs…

Not a week goes by without Lebanese depositors storming their own banks in a desperate attempt to access savings frozen after the country’s economy collapsed.

Banks began imposing draconian limits on withdrawals and transfers in 2019, leaving depositors able to access only a fraction of their savings in dollars and Lebanese pounds.

and heists…

The National has recorded 27 depositor bank “heists” since the start of the year, including armed and unarmed hold-ups and sit-ins.

Former director-general of the Ministry of Finance Alain Bifani estimated that $6 billion was “smuggled” by bankers outside Lebanon for the political and economic elites while they were blocking transfers abroad for ordinary people.

“These forced withdrawals — we do not call them heists, because this would imply that these depositors are stealing other people’s money — are a solution of last-resort after the exhaustion of all possible ways for depositors to recover their money,” said lawyer Fouad Debs, co-founder of Lebanese Depositors Union.

People and businesses now operate almost exclusively in cash.

The local currency in circulation ballooned 12-fold between Sept. 2019 and Nov. 2022, according to banking documents seen by Reuters.

With more bank notes in circulation, crime has risen. Elie Anatian, CEO of security firm Salvado, said yearly sales of safes had grown steadily, with a 15% increase in 2022.

And that has seemingly forced officials’ hands as Reuters reports that Lebanon will adopt a new official exchange rate of 15,000 pounds per U.S. dollar on Feb. 1, central bank governor Riad Salameh said, marking a 90% devaluation from its current official rate that has remained unchanged for 25 years.

The shift from the old rate of 1,507 to 15,000 is still far off the parallel market rate of around 60,000.

Salameh said the change to 15,000 was a step towards unifying multiple exchange rates, in line with a draft agreement Lebanon reached with the International Monetary Fund last year that set out conditions to unlock a $3 billion bailout.

Nassib Ghobril, chief economist at Lebanon’s Byblos Bank, said the pound’s continuing decline meant the cash economy was now also dollarised, “with dollars accounting for approximately 70-80% of operations”.

“The transformation to a cash economy means the collapse of the economy,” said Mohammad Chamseddine, an economic expert at Lebanese research group Information International.

The IMF deal is widely seen as the only way for Lebanon to begin restoring confidence in its financial system and recover from the collapse.

However, as we previously noted, there have also been fights in supermarkets as people try to buy bread, sugar, oil, and other goods before they run out, with inflation 400 percent, the report said.

Murder rates and other crimes are also rapidly rising.

The economic collapse could reduce the country into a failed state, experts have warned.

“Not only do we have an absence of government and a political vacuum, but we’re going to have a severe problem with the function of the state of Lebanon,” Lebanese American University political scientist Imad Salamey told The Wall Street Journal. “We are heading toward the unknown.”

By Tsvetana Paraskova of OilPrice.com,

Europe’s benchmark gas prices have rebounded this week as traders closed short positions at the expiry of the front-month contract and some weather forecasts suggested colder weather in northern and central Europe next week than previously expected.

The Dutch TTF benchmark price jumped by 11% at over $65 (60 euros) per megawatt-hour (MWh) at the opening of trade in Amsterdam on Tuesday, extending small gains from Monday and recovering some of the losses from last week, when prices slumped by 17%.

On Monday, the prices were supported by short covering and an unplanned outage at a Norwegian gas processing plant. However, wind power generation is still expected to be strong, which could curb some demand for gas-fired power generation.

But next week, temperatures could be lower than initially expected, which would boost demand for household heating. Colder spells are set to return to northern and central Europe next week, according to weather models by Maxar Technologies Inc, cited by Bloomberg.

Still, the record gas prices in Europe could be behind us, according to ING’s revised outlook on natural gas for this year.

“Mild weather and weak industrial demand have ensured that gas storage has remained strong. The region should get through this winter comfortably and prospects also look better for the 23/24 winter,” Warren Patterson, Head of Commodities Strategy at ING, said on Monday.

The bank expects the TTF price to average around $65-70 (60-65 euros) per MWh over the first half of 2023—around current levels, before increasing to $81-87 (75-80 euros) per MWh over the second half of the year.

“The more comfortable storage situation does put Europe in a better position to handle the 2023/24 winter. It certainly isn’t looking as dire as it did just several months ago. Therefore, prices do not need to go as high as originally expected going into the next heating season,” ING’s Patterson said.

The “domino theory” was once used to great effect in order to manipulate the American public into supporting the Vietnam War, but will the same narrative work to get the west to support World War III with Russia? 

Former UK Defense Minister Sir Gerald Howarth seems to think so as he uses this exact claim to justify NATO boots on the ground in Ukraine. 

FORMER DEFENSE MINISTER OF UK SAYS NATO FORCES MAY NEED TO FACE RUSSIA ON THE GROUND pic.twitter.com/7LJ3Nksniq

— The_Real_Fly (@The_Real_Fly) January 31, 2023

It should be noted that a large percentage of the American populace and most of Europe have no interest whatsoever in engaging with Russia and possibly its allies in all out war, but the establishment appears intent on forcing the issue anyway.  The delivery of NATO tanks and the possibility of longer range missiles will no doubt trigger a wider response from Russia, which will then be used by NATO as a reason to escalate further. 

At the very least, Howarth does admit what many in the alternative media have been saying for some time – That Ukraine’s efforts have ground to a halt without further support from NATO troops.  The deliveries of money and weapons are nothing more than a stop-gap; wars are won by men. 

The former minister suggests that Ukraine is essentially too big to fail and that NATO cannot allow Russia to prevail in the region, otherwise they will be emboldened to strike other nearby nations.  There is zero evidence to support this argument, but it is clear that NATO talking heads are desperate to drum up some kind of public fervor. 

Are western citizens willing to fight and die for Ukraine?  It’s highly unlikely. 

By Tsvetana Paraskova of OilPrice.com,

Russia’s pipeline gas exports to Europe slumped to a new monthly record-low in January, falling by nearly 30% from December due to lower prices on the spot market, according to Reuters calculations.

Russia’s gas giant Gazprom has seen exports to Europe decline since the Russian invasion of Ukraine last year as Russia cut off gas supplies to a number of countries in Europe. Russia cut off supply to Poland, Bulgaria, and Finland in April and May, slashed gas deliveries via Nord Stream to Germany in June, then off Nord Stream supply in early September. 

Russia still sends some gas via pipelines to Europe via one transit route through Ukraine, and via TurkStream.

This month, Gazprom has reduced pipeline gas transit flows to Europe via Ukraine on some days. Analysts have said that the lower pipeline flows were the result of lower demand for gas under long-term contracts, considering the milder weather in parts of Europe earlier in January and the fact that spot supply is currently cheaper.   

Per Reuters calculations, which are based on daily data of flows from Russia via the transit route through Ukraine and via TurkStream, pipeline gas exports from Russia to Europe dropped to around some 1.8 billion cubic meters (bcm) in January, down from 2.5 bcm in December.

Gazprom hasn’t released January export data yet, but its exports to Europe via pipelines plunged to a post-Soviet low in 2022, according to data from the Russian firm calculated by Reuters. Last year’s Russian gas exports slumped by 45% year on year to reach 100.9 bcm in 2022. 

Germany, Russia’s biggest customer of gas before the Russian invasion of Ukraine, doesn’t import any Russian gas via pipeline now. Norway became Germany’s single-largest natural gas supplier in 2022, overtaking Russia, as total German gas imports dropped by 12.3% compared to 2021.

Authored by Dr. Sean Lin and Mingjia Jacky Guan via The Epoch Times (emphasis ours),

China’s state-run medicare program recently failed to reach an agreement with Pfizer to import more Paxlovid, claiming the COVID-19 treatment drug is too expensive. This is despite the drug being offered to the state at a reduced rate in comparison with that offered to other developed countries. Lack of Paxlovid will leave only Azvudine, an anti-HIV drug the Chinese communist regime rushed through development and re-branded as an anti-COVID drug, as a treatment option.

Given the recent explosive spread of COVID and the resulting skyrocketing rates of hospitalization, finding viable treatment options is paramount.

Ivermectin in India and Peru

When the Delta variant broke out in 2021 across India, many states offered ivermectin population-wide. The efficacy of ivermectin in treating early and mild COVID-19 infections was confirmed in large states such as Uttar Pradesh—home to 241 million residents—where the use of the prophylactic dramatically reduced both the infection rate and the death toll.

Even among frontline health care workers, ivermectin proved to be an effective prophylactic against COVID-19. One study with 3,532 frontline health care workers from the All India Institute of Medical Sciences Bhubaneswar found that two doses of oral ivermectin (300 μg/kg given 72 hours apart) as chemoprophylaxis among health care workers reduced the risk of COVID-19 infection by 83 percent in the following month.

In Peru, mass ivermectin treatments were conducted through a broad-scale effort called Mega-Operación Tayta, or MOT for short. Operation MOT was led by the Peruvian army and involved 10 states, where the excess death rate saw a sharp decline with an average of 74 percent over 30 days. In 14 states where ivermectin was administered locally, the mean reduction in excess deaths over 30 days compared with deaths was 53 percent.

Lima, the capital of Peru, where the distribution of ivermectin was restricted, saw only a 25 percent reduction in excess deaths. The findings of researchers, detailed in the diagram below, show infection numbers, deaths, and fatalities across Peruvian states which implemented ivermectin (blue) and those which did not (red). The conclusion is that a reduction in deaths correlated with the distribution of ivermectin with a statistically significant p-value of less than 0.002.

Ivermectin–The Wonder Drug

Ivermectin was discovered in Japan during the late 70s as a derivative of Avermectin, produced from a single organism isolated at the Kitasato Institute in Tokyo. Since then, ivermectin has played an immeasurable role in improving the lives of billions with its humble beginnings as an anti-parasitic drug.

Ivermectin, approved by the U.S. Food and Drug Administration and deployed worldwide since 1987, has made major inroads against two devastating tropical diseases—onchocerciasis and lymphatic filariasis. In addition, some topical forms of ivermectin are approved to treat external parasites like head lice and skin conditions such as rosacea.

In addition to its anti-parasitic effects, a 2022 study published in the European Journal of Medicinal Chemistry Reports found that ivermectin has a strong potency at low concentrations against many DNA and RNA viruses, including HIV-1, yellow fever, malaria, West Nile virus, Zika, dengue fever, etc.

According to the study, ivermectin has an amazing inhibitory effect across multiple species and can interrupt motility and reproduction in both arthropods (such as insects) and nematodes (such as roundworms). This explains why ivermectin is prescribed for parasite infections, and also sheds light on its potential as a prophylactic against vector-borne diseases. In insects and other arthropods specifically, it can interrupt the transmission of disease.

Ivermectin’s Potential Mechanisms Against COVID

SARS-CoV-2 is a virus that takes over host cells to multiply in the body. To enter the host cells, the virus binds to the ACE-2 receptor on the surface of cells which grants them entry. Ivermectin prevents the bonding process by interfering with the virus’s spike proteins—this is the same mechanism the vaccines use.

If the virus slips past the cell membrane, its top priority is to infiltrate the brain of the cell—the DNA-containing nucleus—to start mass-producing itself. SARS-CoV-2 latches itself onto a special class of transport proteins called IMPs that have enough security clearance to enter the nucleus. In the case of a viral infection, ivermectin binds to these transport proteins and halts the interaction.

Ivermectin also inhibits the nuclear transport mechanism mediated by the KPNA-1 protein, which has a similar effect when compared with IMPs. Both proteins can enter the nucleus and ivermectin can effectively stop the virus from getting to the nucleus. In the event that the virus does manage to invade the nucleus—ivermectin also has a backup plan.

For example, when the virus has taken over and initialized self-replication, it does so through a protein called RdRp, which is at the centerpiece of viral replication—and is directly inhibited by ivermectin with very high efficacy.

Ivermectin Could Reduce Severe Lung Damage in COVID Patients

Once COVID-19 reaches later stages, it may require intensive care for recovery. For example, white lung syndrome (a hallmark symptom of acute respiratory distress syndrome) now occurring in severe COVID infections in China, is a sign that the virus has deeply infected the lungs and may have caused cytokine storms (a severe immune reaction in the body) in patients.

Other complications that arise from COVID-19 involving the lungs are conditions such as pulmonary fibrosis and hypoxia. Hypoxia occurs when the virus infects lung tissue to the extent that the alveoli, tiny sacs of air at the end of lung branches responsible for oxygen exchange, become scarred causing a severe loss of oxygen in the body.

Cytokines and chemokines are responsible for inflammation, a natural immune system response to foreign invaders. However, a large number of cytokines released into the body all at once can cause a “cytokine storm,” wherein the body is flooded with armies of white blood cells that harm the body.

A cytokine storm can be triggered through the TLR-4 pathway by the virus. The same pathway also triggers the release of nitric oxide, causing fluid leaks, dilating blood vessels, or even sepsis and fluid buildup in the lungs.

Read more here…

United Parcel Service (UPS) is facing a spike in labor costs after a union contract expires in July, along with a possible strike which would throw package delivery into chaos if the company isn’t willing to meet the new demands.

The Teamsters union, which represents 340,000 UPS employees, says the company needs to boost wages for part-time workers to over $20 an hour and eliminate a controversial two-tiered wage system, Bloomberg reports. Employees are also demanding air conditioning in vehicles as well as blocking inward-facing cameras that monitor drivers.

“We’ve got some great arguments on why these folks should be paid,” said Teamsters President Sean O’Brien, who has promised members a hard fight. “We’ve got a great argument just on how much money the company’s been making.”

In short, UPS CEO Carol Tomé has quite the problem on her hands. The company delivers 20 million packages a day in the US alone – making it  the second-largest ground courier behind the US Postal Service. An employee strike would make it likely impossible for USPS and rival FedEx to make up for the volume from UPS customers – particularly Amazon.

A Bloomberg notes, a strike would have a much greater impact than it did in 1997, when UPS workers walked out for 15 days.

“It’s pretty clear that it’s going to be spicy,” said Morgan Stanley analyst Ravi Shanker, who has an underweight rating on the stock. Shanker has predicted UPS may increase compensation as much as 10% a year.

Under the current contract set to expire in June, UPS had been benefiting from predictable labor costs, which shielded the company from wage spikes which have hurt FedEx – and which gave UPS a temporary advantage during the pandemic, when the demand for home-delivery surged.

UPS is hopeful (or at least spinning it that way) that they can come to a speedy agreement with the Teamsters.

“We have more alignment on key issues with the Teamsters than not. That’s especially true with respect to maintaining industry-leading pay and benefits, and delivering the best service in the industry with the best safety record,” said a spokesperson to Bloomberg in an emailed statement.

UPS argues that it already pays its workers, especially drivers, much more than competitors. The average wage for a delivery driver with at least four years on the job is $42 an hour, not counting pension and health benefits, the company says. A typical wage for an experienced driver at rival FedEx Ground, depending on the region, is $20 an hour and usually comes with no benefits. The company also added 72,000 Teamsters jobs in three years through August 2021, which is more than was pledged under the current contract. UPS has about another 100,000 US workers who aren’t unionized.  -Bloomberg

That said, the company’s ratio of compensation to sales is the lowest it’s been in at least 25 years.

According to O’Brien, the starting wage for part-time workers should jump from $15.50 per hour to $20, in order to attract more part-time workers. He also has a broader goal of organizing more warehouse workers, including at Amazon, and intends to showcase the upcoming UPS contract as a shining example of the leverage organized labor has over employers.

“We’re going to use the UPS agreement as a template to basically say, this is what you get when you work for a unionized carrier,” he said.