All About That Base, No Trouble By Peter Tchir of Academy Securities Last weekend we published Positioning & Key Drivers. Much of the work on interest rates followed up on the previous week’s Rates, Risk & Taylor Swift, but we really wanted to highlight “positioning”, aka “the base”. Positioning has been forming the “base” for market moves in both directions. The market’s response to Fed Chair Powell finally agreeing with us (they have to be much more cautious on rate hikes going forward) exposed the broader positioning in bonds and possibly equities. The rallies were strong, though I’d argue that the equities rally was less about positioning and more about people finally having to accept that the Fed has little interest in driving the economy into the ground. Powell’s message was not contradicted by other Fed speakers and was actually reinforced by them (all good for stocks). There is some furious debate over Friday’s market behavior. What Did Friday’s Price Action Tell Us? Price action early in the week was quite obvious. We saw weak data come in, which was coupled with the Fed pulling back on their tightening narrative (terminal rate is probably still too high). Friday saw stocks and bonds collapse after the Non-Farm Payroll data was released. The strong headline data wasn’t the key driver (though it had some impact). What drove the initial sell-off in stocks and bonds was the high and unexpected jump in average wages. That part is clear. What is less clear is why stocks and bonds reversed course (the 10-year came back from 3.63% to 3.48% and the S&P 500 e-mini futures rebounded from 4,007 back to 4,075 at the 4pm close). There are two competing theories: It’s all about the base. Positioning was so bearish that the market had to rally on news that just a couple of weeks ago would have sent it spiraling down. There is some logic to this, but there is little evidence that the market is so bearishly positioned. We can concede that the market isn’t overly bullish, but this “short covering panic theory” leaves a lot to be desired, at least for me. People questioned the data. For those of you who are sick and tired of reading T-Reports highlighting inconsistencies in the data (big focus on jobs and owners equivalent rent), you may have received many such notes from others this past week. My inbox and social media channels were filled with people questioning the jobs report. There was the now “obvious” discrepancy between the Establishment and the Household Surveys (the Household showed job losses). The data from 2 months ago got revised down (again). There were questions about the birth/death adjustment (was high in a period where other evidence showed that existing small businesses struggled, which isn’t typically a sign that new small businesses were being created rapidly). There were also questions about the historically low response rate (possibly due to timing of the survey and Thanksgiving). Finally, many people started to question if the new and improved ADP data isn’t the better data to watch. Maybe neither explanation is correct? No Trouble? Maybe there are two other big factors influencing markets: The potential for some form of armistice, truce, détente, or something between Russia and Ukraine. While many members of our Geopolitical Intelligence Group see the slog grinding through the winter, there are three things that I think have changed, making some sort of peace more likely. The U.S. election is over. Whether we like it or not, support of Ukraine was an election issue. This support had already started to break down along party lines. Why? I don’t know, but that is certainly my perception. So, with the election over, the ongoing cost of supporting Ukraine with weapons and aid will come to the forefront. The tricky question of “how does this end?” will rise to the top. Can we give Ukraine enough support to push Russia completely out? Possibly, but at what expense and where does that leave Putin and Russia? Energy. It is the winter and energy needs are spiking. The West is set to impose more sanctions and there is something about price caps (which I admit I haven’t read, because they are so unlikely to work and far more likely to backfire). Russia, by all accounts, has done a much better job than the West in securing transport for their fuel (not shocking as we pat ourselves on the back about sanctions while they are busy working around the issues). The logistics of these new sanctions will cause the amount of transportation needed to skyrocket. Quite simply, energy markets used to be somewhat efficient. A delivered to B and C delivered to D because they were closer. If A has to ship to D and B has to ship to C, the distances are longer. Ships would be at sea for longer, reducing the number of shipments. For a lot of reasons, addressing global energy concerns may take precedence over what Ukraine wants (and possibly even deserves). Winter. Winter was already mentioned in the energy discussion, but it plays several other roles. Academy’s GIG expects Russia to try to take advantage of frozen rivers to renew their attack on Ukraine. Russia needs to push west and all the rivers run north/south. At the moment, this forces the Russians to cross over bridges in very specific areas which are easily defended by Ukrainians with their highly capable weapons systems. Frozen rivers could help the Russians, but increasingly the efficiency of Ukrainian soldiers will make any Russian advance more difficult. That has led to targeting more and more infrastructure in Ukraine. Ukrainian winters are bleak at the best of times, let alone without the energy and raw resources needed to survive. The human toll will be bad for Ukraine even if they are technically “winning.” Finally, the forced migration of Ukrainians into Europe is placing unexpected burdens on the countries receiving those refugees. The longer the war and destruction lasts, the less likely people are willing or able to go “home” when it is all said and done. Winter will crystalize many risks. China. China seems to be nudging Putin along. You could almost argue that Xi, when he met with Putin, gave him a “win it, or get out ultimatum.” Let’s not fool ourselves, China would be okay with a Russian victory, but they are tired of the daily headlines. Since Russia hasn’t achieved this victory there could be pressure on Putin (whose health is being questioned again in some circles) to find some “graceful” way out. Putin is a bully, but even bullies recognize bigger bullies and try to appease them. The end of China’s zero-COVID policy. This attracts a lot of attention and seems logical (at least from our perspective). It seems realistic that China will set in motion steps to have fewer and less severe restrictions after the winter (there is that word again). That should be good for global supply chains, but with inventory levels already too high, I’m not sure how much of a bounce can be expected from China shifting their policy. Of all these narratives, I like the “peace” one the best (as you can tell by the time spent on that subject relative to others). If we get another big rally in stocks, it could be linked to developments on this front. Mo Trouble? We’ve examined no trouble, so what could cause more trouble? We covered this in more detail in Doesn’t Goldilocks Get Eaten in the End?, so we will just highlight the key issues. The Fed has already set the dominos in motion. The wealth effect and higher rates are bringing the economy to a screeching halt in some areas that will in turn impact others. The recession is coming sooner and will be deeper than expected (we will ultimately recover, but first we need to get through the recession fears). Quantitative tightening is like a nagging cough. It doesn’t seem too bad, but it certainly isn’t good, and you have to be worried about whether it will develop into something more severe. Without a doubt the Fed is committed to balance sheet reduction (because they now believe what I’ve believed all along – that QE affects asset prices directly and that is a big issue and one they want to resolve). When does bad news become bad? My guess is soon, even after Friday’s reversal (remember, Friday’s NFP data wasn’t really “bad” in any traditional sense, so it’s difficult to garner much information on how the market will respond to truly bad economic news, especially on the jobs front). The Pseudo-Random Wildcard! I like using the term pseudo-random as opposed to random because it sounds “smart,” but is actually appropriate as I’m going to apply it to the trading of daily and weekly expiration options. The prominence of these very short-dated options should not be understated. Report after report comes in showing that volumes in these options are increasing and are a large part of all options trading. This includes not just open interest, but also the back-and-forth trading of these contracts. This literally sets us up for large gamma moves each and every day. Any significant move has a greater likelihood of triggering additional buying or more selling, rather than encouraging profit taking or dip buying. It’s a minefield out there wondering what price point triggers buying from those who sold options, which in turn risks pushing levels to the next option point. It is a massive wildcard in trading these days. But it is not random. There are clearly strategies involved in trading these and just because I don’t understand them (yet) doesn’t mean we should ignore them. I’m reasonably certain of two things about these short expiration options: They mostly amplify already large moves. They allow markets to shift from seemingly being overbought to oversold in record time (and vice versa). In terms of learning more, this is an area that requires more study and better understanding. Bottom Line If it weren’t for my “hopes” that we will see some progress with Russia and Ukraine, I’d be in full anti-Goldilocks mode. Barring any positive news out of this war, I’d like to be in a “risk-off” position. Long/overweight bonds (especially in the 2-to-7-year part of the curve) and short/underweight credit spreads and equities. Since this is what I believe most strongly, it is what I should do. But, if you can’t beat them, join them, so I’d also buy some daily or weekly calls to benefit from any headline risk. Maybe the “everyone is short thesis” is correct, but I’m still not there and don’t believe that last week really supported this theory. The moves were rational given the data (and guesstimating the impact of the short-dated expiration options). On the Fed, I don’t expect them to backtrack, and I am looking for the data to drive the terminal rate lower. It isn’t often that you can be in bearish mode with world peace as the risk against you, so hopefully we get that peace dividend and the daily call options pay off! Tyler Durden Mon, 12/05/2022 - 10:50.....»»

Per the deal, Nokia (NOK) will provide Altiplano Access Controller and Lightspan MF-14 to facilitate the convergence of all services over a single fiber network infrastructure. Nokia Corporation NOK recently inked a deal with NBN Co Limited to deploy a next-generation broadband access platform across Australia. The deal will enable the publicly owned entity to offer superior broadband connectivity to its customers in the Southern Hemisphere and extend its footprint to hitherto untapped areas.Since its inception in 2009, NBN has evolved as the digital backbone of Australia, operating a wholesale broadband access network across the continent. Per the deal, Nokia will provide Altiplano Access Controller and Lightspan MF-14, the world’s first 6th-generation broadband platform, to facilitate the convergence of all services over a single fiber network infrastructure.The state-of-the-art broadband platform offers low latency with advanced hardware and disaggregated software design. Leveraging an industry-leading software-defined networking platform, the Altiplano Access Controller will enable network automation and provide key insights to improve efficiency and customer satisfaction.The Australian government is further investing $2.4 billion to improve the fiber infrastructure across the country. This will help NBN to upgrade an additional 1.5 million homes from the Fiber to the Node (FTTN) to Fiber to the Premises (FTTP) technology for faster broadband speeds, better reliability and energy efficiency.By unlocking network efficiencies with common operability, software delivery and increased hardware sharing, Nokia has reduced the total cost of ownership for mobile operators. The company is well-positioned for the ongoing technology cycle, given the strength of its end-to-end portfolio. Its installed base of high-capacity AirScale products is also growing fast.5G RAN solutions from its leading AirScale portfolio offer extensive indoor and outdoor coverage. The AirScale Radio Access products deliver low-latency, high-capacity mobile connectivity with a low cost of ownership. These can be easily upgraded through a software update, reducing network complexity.The company is driving the transition of global enterprises into smart virtual networks by creating a single network for all services, converging mobile and fixed broadband, IP routing and optical networks with the software and services to manage them. Leveraging state-of-the-art technology, Nokia is transforming the way people and things communicate and connect with each other. These include a seamless transition to 5G technology, ultra-broadband access, IP and Software Defined Networking, cloud applications and the Internet of Things.Nokia facilitates its customers to move away from an economy-of-scale network operating model to demand-driven operations by offering easy programmability and flexible automation needed to support dynamic operations, reduce complexity and improve efficiency. The company remains focused on building a robust, scalable software business and expanding it to structurally attractive enterprise adjacencies. It has inked more than 252 commercial 5G contracts across the globe.The company’s end-to-end portfolio includes products and services for every part of a network, which are helping operators to enable key 5G capabilities, such as network slicing, distributed cloud, and industrial IoT. Accelerated strategy execution, sharpened customer focus and reduced long-term costs are expected to position the company as a global leader in the delivery of end-to-end 5G solutions.The stock has lost 11.3% in the past year compared with the industry’s decline of 20.8%.Image Source: Zacks Investment ResearchNevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #4 (Sell) stock.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.TESSCO Technologies Incorporated TESS, sporting a Zacks Rank #1, delivered an earnings surprise of 126.1%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 44.3% since December 2021.TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.Harmonic Inc. HLIT, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 79.3%, on average, in the trailing four quarters. Earnings estimates for Harmonic for the current year have moved up 48.6% since March 2021.Harmonic provides video delivery software, products, system solutions, and services worldwide. With more than three decades of experience, it has revolutionized cable access networking via the industry's first virtualized cable access solution, enabling cable operators to more flexibly deploy gigabit internet service to consumers' homes and mobile devices.AudioCodes Ltd. AUDC, sporting a Zacks Rank #1, is likely to benefit from the secular tailwinds related to IP-based communications. Incorporated in 1992 and headquartered in Lod, Israel, it offers advanced communications software, products and productivity solutions for the digital workplace. It has a long-term earnings growth expectation of 9%.AudioCodes aims to leverage its long-term partnership with Microsoft to further strengthen its market position. It is also likely to benefit from its continued focus on high-margin businesses. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nokia Corporation (NOK): Free Stock Analysis Report Harmonic Inc. (HLIT): Free Stock Analysis Report AudioCodes Ltd. (AUDC): Free Stock Analysis Report TESSCO Technologies Incorporated (TESS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

With commodity prices losing steam this year, the near-term prospects of the Zacks Mining - Non Ferrous industry look downbeat. Stocks like FCX, SCCO and FQVLF are worth keeping an eye on, backed by their growth prospects. The prospects of the Zacks Mining - Non Ferrous industry look bleak as apprehensions about slowing demand and economic activity have been weighing down commodity prices. Additionally, the industry players are grappling with inflated input costs, particularly energy as well as labor shortages and supply-chain issues.Against this backdrop, we suggest keeping a close eye on companies like Freeport-McMoRan Inc. FCX, Southern Copper Corporation SCCO and First Quantum Minerals FQVLF. These are poised to gain from their endeavors to build reserves and control costs while investing in technology and improving production efficiency.About the IndustryThe Zacks Mining - Non Ferrous industry comprises companies that produce non-ferrous metals, including copper, gold, silver, cobalt, molybdenum, zinc, aluminum and uranium. These metals are utilized by various industries including aerospace, automotive, packaging, construction, machinery, electronics, transportation, jewelry, chemical and nuclear energy. Mining is a long, complex and capital-intensive process. Significant exploration and development to evaluate the size of the deposit followed by assessment of ways to extract and process the ore efficiently, safely and responsibly precede actual mining. The miners continually search for opportunities to grow their reserves and resources through targeted near-mine exploration and business development. They strive to upgrade and improve the quality of their existing assets, internally as well as through acquisitions.What's Shaping the Future of the Mining-Non Ferrous Industry?Fears of an Economic Slowdown Weighing on Commodity Prices: Copper prices have declined for most part of this year due to varied reasons — the uncertainties surrounding the global economy, resurgent COVID outbreaks in top consumer China, the Russia-Ukraine situation, spike in energy costs and low global inventories. Zinc and nickel prices were also weighed down by worries about weak demand as COVID-19 lockdowns in China stoked concerns over a global recession. Silver prices have also been negatively impacted this year, thanks to a stronger U.S. dollar, rising interest rates and sluggish growth. Gold prices also felt the pressure of a rallying dollar and Treasury yields. However, recently, metal prices have found support amid expectations of a pickup in industrial demand as Fed Chair Powell signaled that the central bank may slow the pace of rate hikes this month. Concerns of low supply are also aiding prices.Cost Control & Innovation to Increase Efficiency: The industry has been facing a shortage of skilled workforce to date, which hiked wages. Labor-related disputes can be damaging to production and revenues. The industry players are grappling with escalating production costs, including electricity, water and materials as well as higher freight expenses and supply-chain issues. Since the industry cannot control the prices of its products, it focuses on improving sales volume, increasing operating cash flow and lowering unit net cash costs. The industry participants are opting for alternate energy sources to minimize fuel-price volatility and secure supply. Miners are now committed to cost-reduction strategies and digital innovation to drive operating efficiencies. Impending Demand and Supply Imbalance: The industry players are currently dealing with depleting resources, declining supply in old mines and lack of new mines. Development projects are inherently risky and capital-intensive. Demand for non-ferrous metals will remain high in the future given their wide usage in primary sectors, including transportation, electricity, construction, telecommunication, energy, information technology and materials. Demand for electric vehicles and renewable energy are expected to be a significant growth driver for metals like copper and nickel in the years to come. The plan to overhaul and upgrade the nation’s infrastructure and promote green policies per the U.S. Infrastructure Investment and Jobs Act will require a huge amount of non-ferrous metals. While demand remains strong, there will be an eventual deficit in metal supply, leading to a situation that will bolster metal prices. This, in turn, would favor the industry in the long haul.Zacks Industry Rank Indicates Weak ProspectsThe group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates a gloomy near term. The Zacks Mining - Non Ferrous industry, a 13-stock group within the broader Zacks Basic Materials Sector, currently carries a Zacks Industry Rank #204, which places it in the bottom 19% of 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since the beginning of this year, the industry’s earnings estimate for the current year has gone down 38%.Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and its valuation picture.Industry Versus Broader MarketThe Zacks Mining- Non Ferrous Industry has outperformed its own sector and the Zacks S&P 500 composite over the past 12 months. The stocks in this industry have collectively gained 7.1% in the past year compared with the Zacks Basic Materials sector growth of 1.8%. The S&P 500 has dipped 12.8% in the said time frame.One-Year Price Performance  Industry's Current ValuationBased on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Mining- Non Ferrous stocks, we see that the industry is currently trading at 4.95X compared with the S&P 500’s 11.03X. The Basic Materials sector’s trailing 12-month EV/EBITDA is at 6.32X. This is shown in the charts below.Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)Over the last five years, the industry traded as high as 8.88X and as low as 3.42X, with the median being at 6.03X. 3 Mining-Non Ferrous Stocks to Keep an Eye onFreeport-McMoRan: FCX’s exploration activities near existing mines, which are focused on expanding reserves, will drive growth. It is expected to benefit from the ongoing large-scale concentrator expansion project at Cerro Verde that will likely result in an incremental annual production of around 600 million pounds of copper and 15 million pounds of molybdenum. Cerro Verde's expanded operations will also offer cost efficiencies, and large-scale and long-lived reserves.  It is assessing a large-scale milling operation at El Abra to process additional sulfide material. The expansion at Morenci also increased milling rates. The Lone Star project in eastern Arizona has been completed and is on track to produce more than 200 million pounds of copper annually. The company is looking to advance studies for potential expansions and long-term development options for its large-scale sulfide resources at Lone Star. It is also ramping up underground production at Grasberg in Indonesia, resulting in a spike in milling rates. Focus on cost management and reduction of debt levels is commendable. Shares of FCX have gained 7.6% over the past year.Based in Phoenix, AZ, Freeport-McMoRan is engaged in mineral exploration and development; mining and milling of copper, gold, molybdenum and silver; and smelting and refining copper concentrates. The Zacks Consensus Estimate for FCX’s earnings for 2023 indicates year-over-year growth of 0.6%. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.Price: FCXSouthern Copper: The company has the largest copper reserves in the industry and operates world-class assets in investment-grade countries, such as Mexico and Peru. Its constant focus on increasing low-cost production is commendable. SCCO expects copper production in 2023 to reach 926,000 tons, with the Peruvian production coming back on track and new production at Pilares, El Pilar and Buenavista. It will gain from its efforts to grow in Peru, given that the country is currently the second-largest producer of copper globally and holds 13% of the world’s copper reserves. Peru’s national output is anticipated grow to 206,999 by next year. Southern Copper’s total investment program in Peru runs to $7.9 billion. Michiquillay is expected to become one of Peru's largest copper mines and will produce 225,000 tons of copper per year (along with by-products of molybdenum, gold and silver) for an initial mine life of more than 25 years and at a competitive cash-cost. The company's shares have gained 5.4% in the past year.The Zacks Consensus Estimate for the Phoenix, AZ-based company’s fiscal 2023 earnings has been revised upward by 7% over the past 30 days. The company, which engages in mining, exploring, smelting, and refining copper and other minerals, currently carries a Zacks Rank #3.Price: SCCOFirst Quantum Minerals: The company’s platform of cash generating and geographically diversified operating assets poises it well for growth. Focus on operational improvements has resulted in strong production from Cobre Panama and Sentinel in the last reported quarter. The company recently signed a long-term renewable power contract for the CP100 Expansion project at Cobre Panama, which shifts the total energy mix at the mine to approximately 20% renewable by the end of 2023, marking an important step toward achieving its target of reducing its greenhouse gas emissions by 50% by 2030. FQVLF foresees 1 million tons of annual copper production through its organic brownfield opportunities. At Cobre Panama, the CP100 Expansion seems to be on track to add 100 million tons by the end of 2023. At Kansanshi mine, the ongoing S3 Expansion project will boost production and extend the mine life for two more decades. First ore production is expected at the Enterprise project in the first half of 2023. It is a low-cost, high-grade nickel sulfideproject with annual nickel production of 30 thousand tons over an 11-year mine life. The company's shares have gained 10.3% in the past year.Headquartered in Toronto, Canada, First Quantum Minerals is a global mining company primarily producing copper, with secondary production in gold, nickel, zinc and cobalt. The Zacks Consensus Estimate for the company’s fiscal 2023 earnings has moved north by 423% over the past 30 days to $1.39 per share. The estimate projects year-over-year growth of 36%. FQVLF has a trailing four-quarter earnings surprise of 32.9%, on average. The stock currently carries a Zacks Rank of 3.Price: FQVLF Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report FreeportMcMoRan Inc. (FCX): Free Stock Analysis Report Southern Copper Corporation (SCCO): Free Stock Analysis Report First Quantum Minerals Ltd. (FQVLF): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

RH's fiscal Q3 results are likely to reflect soft demand and persistent supply-chain disruptions. Its focus on online platforms and cost-saving initiatives are positives. RH RH is scheduled to report third-quarter fiscal 2022 (ended Oct 29, 2022) results on Dec 8, after market close.In the last reported quarter, this leading luxury home furnishing retailer’s earnings surpassed the Zacks Consensus Estimate by 18.7%. The company beat earnings expectations in each of the last four quarters, with the average being 16.7%. The reported figure, however, decreased 4.7% from the year-ago level. RH’s net revenues topped expectations by 2.2% in the quarter and grew 0.3% year over year.Trend in Estimate RevisionsFor the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved downward to $4.71 from $4.78 over the last 30 days. The estimated figure indicates a decrease of 33% from $7.03 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $839.1 million, suggesting a 16.6% decline from the year-ago reported figure of $1.01 billion.RH Price and EPS Surprise RH price-eps-surprise | RH QuoteFactors to NoteRH’s business activities are directly tied to housing market conditions. Higher mortgage rates are taking a toll on the housing sector and the furnishing market. A weakening macroeconomic environment, comprising rising interest rates, and softness in luxury housing and stock markets, are expected to have impacted sales in the quarter to be reported.RH expects fiscal third-quarter net revenues to fall 15-18% year over year. The adjusted operating margin is projected in the 18.5-19% range. In the year-ago period, the company had generated net revenue growth of 19% and an adjusted operating margin of 27.7%. The quarterly results are expected to reflect faster backlog relief, offsetting lower-than-expected demand.Nonetheless, the company has been working on various strategies to elevate and enhance the RH brand image, which is expected to show in the to-be-reported quarter. Also, it has been transforming the entire business into a digital platform via The World of RH — a portal presenting the company’s products, places, services and spaces.Meanwhile, RH has been working on cost-saving initiatives such as redesigning the supply chain, reducing inventory, improving product margins and so on. Also, greater pricing power is expected to have aided gross margins to some extent, while SG&A expenses are likely to have remained under control as the company limited advertising due to supply-chain constraints.Overall, although the economy has been rebounding from COVID-19 impacts, retailers are still grappling with the effects of the same. Disruption across the global supply chain owing to the pandemic may have been a cause of concern. Also, rising raw material costs may have posed a risk.What the Zacks Model UnveilsOur proven model does not predict an earnings beat for RH this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.Earnings ESP: The company has an Earnings ESP of -1.49%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Zacks Rank: RH currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.Peer ReleasesWilliams-Sonoma Inc. WSM reported third-quarter fiscal 2022 (ended Oct 30, 2022), wherein quarterly earnings missed the Zacks Consensus Estimate but revenues beat the same. With this, the company’s bottom line beat the consensus mark in three of the last four quarters, while the top line surpassed for the third quarter.Although Williams-Sonoma reiterated its fiscal 2022 revenue guidance, it refrained from maintaining or updating guidance through fiscal 2024 owing to the macro uncertainty. This, along with the earnings miss might have disappointed investors.Builders FirstSource BLDR released its third-quarter 2022 results, wherein it reported 6.9% core organic sales growth.BLDR’s earnings and net sales surpassed the Zacks Consensus Estimate and increased year over year. The results were driven by an increase in net sales in value-added product categories, gross margin as well as contributions from acquisitions amid continuous raw material supply woes.Beacon Roofing Supply, Inc. BECN reported strong results for third-quarter 2022. Both earnings and revenues surpassed their respective Zacks Consensus Estimate and increased significantly on a year-over-year basis. The solid results were backed by strong net sales and operational improvement.Julian Francis, BECN’s president and CEO, said, “We continued to deliver value to our customers, driving record third quarter net income and our 11th straight quarter of year-over-year increases in Adjusted EBITDA. At the same time, we continued making strategic investments toward achieving our Ambition 2025 growth and margin targets.”Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Beacon Roofing Supply, Inc. (BECN): Free Stock Analysis Report Builders FirstSource, Inc. (BLDR): Free Stock Analysis Report WilliamsSonoma, Inc. (WSM): Free Stock Analysis Report RH (RH): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Funds like FSAVX, FCYIX and FSRFX are likely to benefit in the near term as higher demand continues to drive orders for durable goods. Orders for U.S.-made goods meant to last longer than three years rose sharply in October, indicating that demand remains high despite the pressure on the cost of living created by rising costs. The jump in orders comes since data showed that the cost of living somewhat eased in October as inflation showed signs of colling.Higher demand for durable goods also indicates that the manufacturing sector despite being under tremendous pressure is still going strong and has succumbed to inflationary pressures.  Thus, funds like Fidelity Select Automotive Portfolio FSAVX, Fidelity Select Industrials Portfolio FCYIX and Fidelity Select Transportation Portfolio  FSRFX are likely to benefit in the near term.Durable Goods Orders RiseThe Commerce Department reported on Nov 23 that orders for durable goods made in U.S. factories rose a solid 1% or $2.8 billion in October on a month-over-month basis to reach $277.4 billion. This was more than economists’ expectations of a rise of 0.4%. October’s jump follows a 0.3% rise in orders for durable goods in September.Excluding defense, new orders for durable goods increased 0.8% in October.The rise in October was primarily driven by an increase in orders for transportation equipment. Orders for transportation equipment rose $2 billion, or 2.1%, to reach $97.8 billion. Orders for transportation equipment have not increased in six of the past seven months. Excluding transportation, new orders increased 0.5% in October.Shipments of manufactured durable goods increased 0.4% in October after gaining 0.3% in September. Shipments of machinery led the gains, at 1.3%. Capital goods shipments have now increased in 17 out of the past 18 months. Core capital goods shipments, a metric to gauge equipment investment in the government’s GDP report, rose 1.3%.Additionally, inventories of manufactured durable goods increased by $0.9 billion, or 0.2%, month over month in October, reaching $489.5 billion.The solid rise in October orders gain proves that producers are still confident, although rising costs are reducing consumer confidence.People spent more on goods and less on services during the peak of the pandemic. However, once restrictions started getting eased, and the economy began performing at its optimum level, people started spending more on services.Even then, there is still a sizable amount of product demand, which is driving up orders for durable goods.3 Best ChoicesWe have, thus, selected three mutual funds with significant exposure to the manufacturing sector, each carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).Fidelity Select Automotive Portfolio aims for capital appreciation. FSAVX invests most of its assets in common stocks of companies engaged in manufacturing automobiles, trucks, specialty vehicles, parts, tires, and related services.Fidelity Select Automotive Portfolio fund has a history of positive total returns for over 10 years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Automotive Portfolio has a Zacks Mutual Fund Rank #1. FSAVX has returned 14.5% and 9.9% over the past three and five years, respectively.Fidelity Select Industrials Portfolio fund aims for capital appreciation. FCYIX invests typically a large portion of its assets in the common stock of companies, principally engaged in the research, development, manufacture, distribution, supply, or sale of industrial materials, equipment, products, or services. Fidelity Select Industrials Portfolio is a non-diversified fund.Fidelity Select Industrials Portfolio fund has a history of positive total returns for over 10 years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Industrials Portfolio has a Zacks Mutual Fund Rank #1. FCYIX has returned 6.2% and 5.5% over the past three and five years, respectively.Fidelity Select Transportation Portfolio aims for capital appreciation. FSRFX invests the majority of its assets in securities of companies that are primarily involved in the design, manufacture, distribution, or sale of transportation equipment or businesses that are primarily involved in providing transportation services.Fidelity Select Transportation Portfolio fund has a history of positive total returns for over 10 years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.Fidelity Select Transportation Portfolio has a Zacks Mutual Fund Rank #2. FSRFX has returned 10.1% and 8% over the past three and five years, respectively.Want key mutual fund info delivered straight to your inbox?Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >> Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Get Your Free (FCYIX): Fund Analysis Report Get Your Free (FSRFX): Fund Analysis Report Get Your Free (FSAVX): Fund Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report.....»»

Oil Rises After Launch Of Russia Price Cap As OPEC+ Keeps Output Unchanged Two weeks ago, oil tumbled after the WSJ reported a fake news hit piece quoting "delegates" who "said" that Saudi Arabia was preparing for a 500K oil production hike. We quickly countered that this was ridiculous and if anything OPEC+ would seek further production cuts, a view which other media promptly quickly picked up. In the end, the report of an output hike (which some interpreted as a gesture of good will from Saudi crown prince MBS who had just received immunity from the Biden regime), proved to be indeed fake news, but likewise any expectations of further output cuts were dashed when earlier on Sunday OPEC+ agreed to stick to its oil-output targets just two days after G-7 nations agreed to a $60 price cap on Russian oil, despite mounting concerns about oil demand as the world in swept up by a global recession and as new Covid-related lockdowns in China and lingering uncertainty over Russia’s ability to export crude have sent the price of oil sliding. During a virtual meeting, OPEC+ decided to rollover the production cuts of 2 million barrels a day initially agreed to in October, a move which will allow the group time to assess the market impact of the price cap on Russian oil, the delegates said. Brent crude plunged to its lowest level since September on Nov. 28, but ended up posting its biggest weekly gain in a month. Meanwhile, prices are responding as expected to the OPEC+ decision, helped by continuing Covid restriction relaxation in China. At the time of writing both Brent crude and West Texas Intermediate were up by more than a percentage point from Friday’s close, although both remained far below $90 per barrel. “With massive and offsetting fundamental and geopolitical risks bearing down on the oil market, ministers understandably opted to hold steady and hunker down,” said Bob McNally, president of Rapidan Energy Advisers LLC. Meanwhile, Brent crude closed at $85.42 on Friday, and West Texas Intermediate, the U.S. benchmark, was at $80.34, far below the $90-a-barrel level where some oil-market analysts say the group wants to see prices. Prices have come under downward pressure from Chinese Covid-19 lockdowns that have prompted concerns in OPEC of weakening oil demand. Oil prices fell Friday after the EU agreed to the cap, as traders discounted fears the mechanism will force much Russian oil out of the market and cause a supply issue. In the end, however, it is all just posturing and the status quo remains as Russia will still sell oil to its traditional customers China and India, who will then resell some of this product to Europe and other nations. It’s unclear to what extent those measures will curtail Russian exports. The price cap is comfortably above the $50 that the country’s flagship Urals grade of crude currently trades at, according to data from Argus Media. Yet Moscow has said it would rather cut production than sell oil to anyone that adopts the price cap. Speaking on Russian TV, Deputy Prime Minister Alexander Novak said the country will operate strictly in line with market conditions: “We will sell oil and oil products to the countries that will work with us based on market conditions, even if that means we’ll have to somewhat reduce output." Russia is “not going to use tools linked to the price cap” and is “working on a mechanism banning adoption of the price cap tools, irrespective of what level will be set." Russian crude has traded at a steep discount this year, with Argus Media, which assesses commodity prices, pegging the price at about $48 a barrel. The US and its G7 allies designed the price to cut into Moscow’s oil revenues while keeping Russian oil, a key part of global supply, available on the market, which of course is ridiculous, and is just an attempt by Europe at virtue signaling optics while eating its Russian oil cake too. It aims to take advantage of the concentration of key maritime services in the West to try to curb Moscow’s ability to wage war in Ukraine. As Bloomberg notes, with these powerful forces poised to push oil markets in unpredictable directions, OPEC watchers said the group’s decision was understandable. “OPEC+ rolled over the existing quotas as expected amid uncertainty around Russian flows following the price cap, and a weaker China,” said Amrita Sen, chief oil analyst and co-founder at consultant Energy Aspects Ltd. “The group will continue to monitor markets and should fundamentals deteriorate they will meet prior to June -- currently the scheduled next ministerial meeting.” The decision by OPEC+ should hold for at least a few months. The group’s Joint Ministerial Monitoring Committee, led by Saudi Arabia and Russia, will meet again in June. The outlook could be clearer by then, and the panel has the power to call extraordinary meetings if it thinks output policy may need to change; OPEC said it was ready “to meet at any time and take immediate additional measures to address market developments” if needed. Until then three major forces will determine the future path of oil prices: a global economic slowdown which will seek to keep a lid on oil demand, and speculation about the date of China's reopening which many believe will send oil prices sharply higher. Indeed, as Bloomberg notes, as OPEC+ ministers convened their video conference, officials in Shanghai had just eased some of their Covid restrictions, joining other top-tier Chinese cities as authorities accelerate a shift toward reopening the economy after thousands of demonstrators took to the streets. A far bigger, and longer-term driver, however is the continued lack of capital spending to boost an aging E&P infrastructure which means that over the next 5 to 10 years, oil will become increasingly scarce in a world where western government are openly hostile toward legacy energy companies. Tyler Durden Mon, 12/05/2022 - 07:21.....»»

US Futures Drop As Chinese Stocks Soar On Reopening Optimism US stock futures fell on Monday as investors weighed the outlook for economic growth against the possibility of a softening in the Federal Reserve’s policy, or in other words, whether bad news is again bad news. At the same time, and just one week after China was swept by violent anti-covid zero protests, Chinese stocks in listed in the US rose sharply after Hong Kong-listed peers rallied and the offshore yuan strengthened past the key 7.00 level after Chinese authorities eased Covid testing requirements across major cities over the weekend. The financial hub of Shanghai scrapped PCR testing requirements to enter outdoor public venues such as parks or use public transportation starting Monday. Hangzhou, home to tech giant Alibaba dropped obligations to enter most public venues including offices and supermarkets, while Shanghai also eased rules.  As a result, Hong Kong’s Hang Seng Tech Index closed at session highs, soaring some 9.2%, the biggest jump since Nov. 11, after China eased Covid testing requirements across major cities over the weekend. Meanwhile in the US, Nasdaq 100 futures were down 0.4% by 7:30 a.m. in New York, while S&P 500 futures dipped 0.5%. The indexes shrugged off a hotter-than-expected jobs report on Friday as investors and erased almost all early losses as they remained optimistic that the Fed would slow the pace of interest rate hikes at its meeting this month. The dollar remained near session lows, boosting most Group-of-10 currencies. Treasury yields climbed across the curve. Oil advanced after OPEC+ kept its 2 million production cut and amid growing signs China is reopening, while gold was little changed. Bitcoin rose more than 1%, gaining for a second day. The S&P 500 is on course for its biggest fourth-quarter gain since 1999 as signs of a cooling in US inflation have led to a pullback in bond yields, but market participants warn the outlook for next year remains uncertain amid the risk to corporate earnings from the specter of a recession. Among notable moves in premarket trading, US-listed Chinese stocks extended their torrid rally as easing Covid curbs in major Chinese cities fueled optimism that Beijing is hastening the shift away from its Covid Zero strategy; Alibaba rose 5.2%, Baidu +5.6%, Pinduoduo +5%, JD.com +5.6%, Bilibili +16%, Nio +6.3%, XPeng +11%. Cryptocurrency-exposed stocks rose as Bitcoin extended gains for a second day. Tesla slipped as much as 4.8% after a Bloomberg News report said that the electric vehicle maker planned to lower production at its Shanghai factory. Here are the other notable premarket movers: Activision Blizzard rises 2.3% after Bloomberg News reported that Microsoft is ready to fight for its $69 billion acquisition of the video gaming company if the US Federal Trade Commission files a lawsuit seeking to block the deal. Marathon Digital and Riot Blockchain lead cryptocurrency-exposed stocks higher as Bitcoin extends gains for a second day. Marathon Digital +4.9%, Riot Blockchain (RIOT US) +2.8% and Coinbase  +2.3% Keep an eye on airlines’ shares as Morgan Stanley says 2023 could be a “Goldilocks” year for air travel, boosting earnings beyond current expectations, as the broker upgrades United Airlines to overweight and cuts Allegiant Travel to equal-weight. Alaska Air is initiated with a buy recommendation at Citi, saying the carrier has attributes to offset headwinds facing domestic airlines in 2023. Additionally, the broker begins coverage on JetBlue with a neutral rating. Watch Terex as Deutsche Bank cut its rating to hold from buy on recent outperformance, saying that it’s best to stay defensively-positioned on US industrial stocks into 2023. Keep an eye on Ameris Bancorp and Atlantic Union (AUB US) as Piper Sandler resumed coverage on US mid-Atlantic and southeast banks, saying the two lenders are its preferred larger-cap names with both at attractive entry points. “Despite an increasingly optimistic end to the year, the main indexes seem unlikely to recover their lost ground and the current rally may be too little, too late,” said Richard Hunter, head of markets at Interactive Investor. Moreover, “doubts still linger” on how much more the Fed will still need to raise interest rates and the impact of higher-for-longer inflation, he said. Morgan Stanley strategist Michael Wilson said the year-end rally he had predicted had now run its course and investors are better off booking profits from here on. He sees an “absolute upside” for the S&P 500 at 4,150 points -- about 2% above current levels -- which could be achieved “over the next week or so.” Notable other US headlines: WSJ's Timiraos writes that Fed officials have signalled plans to hike by 50bp at the December gathering, though elevated wage pressures could lead them to continue increasing rates to levels higher than investors currently expect. Delta Air Lines (DAL) confirmed it reached an agreement in principle for a new pilot contract after it offered a 34% pay increase to pilots over 3 years, according to Reuters. Apple (AAPL) supplier Foxconn (2317 TT) expects full production at its COVID-hit plant in China to resume from late December to early January, while the Co. and the local government are pushing hard on the plant's recruitment drive but many uncertainties remain, according to sources cited by Reuters. Moldova’s central bank is to conduct an extraordinary meeting on Monday to assess its main policy indicators including the policy rate, according to Reuters. Iran’s Attorney General announced that Iran abolished its morality police and is considering changing hijab laws following the protests, according to WSJ. Euro Stoxx 50 falls 0.2%. FTSE 100 outperforms peers, adding 0.3%. Here are some of the biggest European movers today: Tech investors Naspers and Prosus both gain more than 5% in Johannesburg trading Monday after Chinese authorities accelerate a shift toward reopening the economy. European mining stocks in focus as metals advance after Chinese authorities eased Covid testing requirements across major cities over the weekend. Rio Tinto and Glencore shares rise as much as 3.7% and 2.4% respectively. Credit Suisse shares climb as much as 3.7% in early trading after the Wall Street Journal reported that Saudi Arabia’s Crown Prince Mohammed bin Salman is preparing to invest in the Swiss lender’s investment-bank unit. Grifols shares rise as much as 6.5% in early trading after Morgan Stanley raised to overweight from equal-weight on the expectation that 2023 will be a “strong growth year” supported by accelerating plasma collections and early signs of declining donor fees. Bayer shares slide as much as 2.8%, the most in about a month, after Bank of America cut its recommendation for the German agropharmaceutical giant to neutral on the company’s lack of catalysts after a 2022 outperformance. FlatexDEGIRO shares fall as much as 38%, the biggest intraday drop since its 2009 listing, after the online brokerage firm cut its revenue forecast and said it was working on measures to address shortcomings in some business practices and governance identified by a BaFin audit. German catering equipment company Rational sinks as much as 9%, making them the worst performer in the Stoxx 600, after Bank of America initiated coverage on the stock with an underperform recommendation, citing a “demand crunch” in 2023. Swedish Orphan Biovitrum shares drop as much as 2.2% after Morgan Stanley downgrades the stock to equal-weight from overweight. Asian stocks rebounded, inching closer to bull market territory, as Chinese equities resumed their rally on further relaxation of Covid rules in Asia’s biggest economy. The MSCI Asia Pacific Index climbed as much as 1.4%, led by communication services and consumer discretionary shares. Benchmarks in Hong Kong led gains in the region with the Hang Seng Tech Index soaring more than 9% and the Hang Seng China Enterprises Index up roughly 5%. Morgan Stanley upgraded China to overweight. Investors cheered latest signs of China pivoting from its strict virus rules as authorities eased Covid testing requirements across major cities over the weekend, including the financial hub of Shanghai. The move fueled gains in reopening stocks in China and its neighboring countries such as South Korea. Markets were closed in Thailand for a holiday. The moves coincided with growing bullish calls from Wall Street banks on Chinese equities, with more market watchers calling a bottom in the nation’s shares. Morgan Stanley upgraded China stocks to overweight from an equal-weight position held since January 2021, while abrdn’s Asia Pacific chief executive Rene Buehlmann urged investors to “go back” into Chinese markets. Elsewhere, stock benchmarks were mixed with gauges in Japan and South Korea trading lower while those in Australia, Singapore and Vietnam rose.  After falling for much of the year, Asian stocks staged a dramatic rally in the past few weeks with a surge in foreign inflows into emerging Asian shares, supported by the dollar’s weakness and expectations for a slowdown in the Fed’s hikes.  The key Asian stock benchmark still remains about 17% lower so far this year, on course for its worst annual performance in more than a decade. A closer look at Japanese stocks reveals that they ended mixed as investors gauged the impact of China’s shift toward reopening and US employment data. The Topix fell 0.3% to close at 1,947.90, while the Nikkei advanced 0.2% to 27,820.40. Toyota Motor Corp. contributed the most to the Topix decline, decreasing 1%. Out of 2,164 stocks in the index, 741 rose and 1,304 fell, while 119 were unchanged. “Japanese stocks are a bit weak at the moment as economic indicators are becoming a little more globally skewed,” said Mamoru Shimode, a chief strategist at Resona Asset Management.  Australian stocks rose: the S&P/ASX 200 index rose 0.3% to close at 7,325.60, led by gains in mining and real estate shares, as traders bet on further reopening of the Chinese economy from Covid restrictions.  Shares of iron ore miners and steel companies were among top performers advancing as commodity prices rallied on China reopening bets.  In New Zealand, the S&P/NZX 50 index rose 0.3% to 11,677.75. Stocks in India ended flat on Monday as investors likely took profits in recent outperformers, while the focus shifts to the central bank’s monetary policy announcement later this week. The S&P BSE Sensex ended flat at 62,834.60 in Mumbai, while the NSE Nifty 50 Index was also little changed, as both indexes overcame declines of as much as 0.6% each. The key gauges rose for eight consecutive sessions before declining on Friday. The Reserve Bank of India’s rate-setting panel will commenced its three-day meet Monday for the monetary policy to be announced on Wednesday. All of the economists surveyed by Bloomberg expect the benchmark lending rate to be increased, with the median estimate for a 35 basis points hike. Polls in India’s Gujarat, also the home state to Prime Minister Narendra Modi, end today and results will be announced on Dec. 8. Investors will be watchful of the outcome as the results will indicate Modi’s popularity for national elections next in 2024.  In rates, treasuries are mixed as the curve bear flattens with 2s10s narrowing 1.6bps as US trading day begins, extending the flattening move unleashed Friday by stronger-than-estimated November employment data. All Treasuries apart from the very long end fell, with the largest decline seen in the belly of the curve, as traders added to Fed hike wagers ahead of US ISM services numbers for November. Yields remain inside Friday’s ranges, though inverted 2s10s reached -81.4bp, new low for the cycle. 2- to 7-year yields higher by 3bp-4bp on the day, 30-year lower by ~1bp; 10-year higher by ~2bp at 3.50% Most European 10-year yields are lower, led by UK as expectations for BOE rate hikes are pared. IG credit issuance slate blank so far, however dealers expect $10b-$15b this week and $20b for December. Three-month dollar Libor fell for a third straight day, longest streak since February, to 4.72343%. The Bloomberg Dollar Spot Index snapped a four-day drop as the greenback rose 0.1%. CAD and AUD are the strongest performers in G-10 FX, JPY and GBP underperform. ZAR (1.7%) leads gains in EMFX. The yen underperformed all its Group-of-10 peers while the Australian and Canadian dollar were the top gainers as commodities got a boost on hopes that China is engineering a gradual shift away from its strict Covid Zero policy. Chinese stocks and the yuan also rallied. The yuan strengthened past the key 7 per dollar level after Shanghai and Hangzou relaxed Covid testing rules. Hong Kong dollar surged to the strongest level since June 2021. Te onshore yuan extended gain to 1.5% to 6.9450 per dollar, the most since Nov. 11 as reopening optimism continues to boost the currency.  The euro steadied after rising to a fresh five-month high of $1.0585. Euro options bets suggest a run above $1.06 before FOMC meeting. Bunds, Italian bonds swung between modest gains and losses amid a slew of ECB speeches. The pound slipped after posting four consecutive weeks of gains. Money markets eased BOE rate-hike wagers after policy-maker Swati Dhingra said in a newspaper interview that interest rates should peak below 4.5%. The central bank will conduct bond sales later on Monday In commoidties, Crude benchmarks have been choppy, but are ultimately firmer post-OPEC+ and as the Russian oil cap comes into effect at USD 60/bbl. Brent rises 1.8% near $87.15 while WTI Jan was at 81.50/bbl, with the latest easing of China's COVID controls also factoring. OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilize markets. Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well, while he added that they are working on mechanisms to ban supplies which are capped. Russia is analysing the price cap imposed by G7 and allies on its oil and made preparations for this, while it will not accept the oil price cap, according to state news agencies citing the Kremlin. Russia's Kremlin, on price cap, said Russia is preparing a decision and will not recognise the price cap; price cap will destabilise global energy market but will not affect Russia's ability to sustain the military operation in Ukraine. US economic data include November final S&P Global US services and composite PMIs (9:45am), October factory orders and November ISM services (10am) Market Snapshot S&P 500 futures down 0.3% to 4,062.75 STOXX Europe 600 little changed at 442.85 MXAP up 1.1% to 159.66 MXAPJ up 1.7% to 521.41 Nikkei up 0.2% to 27,820.40 Topix down 0.3% to 1,947.90 Hang Seng Index up 4.5% to 19,518.29 Shanghai Composite up 1.8% to 3,211.81 Sensex down 0.1% to 62,798.89 Australia S&P/ASX 200 up 0.3% to 7,325.60 Kospi down 0.6% to 2,419.32 German 10Y yield little changed at 1.85% Euro up 0.2% to $1.0555 Brent Futures up 1.9% to $87.16/bbl Gold spot down 0.0% to $1,797.23 US Dollar Index little changed at 104.47 Top US News From Bloomberg ECB Governing Council member Francois Villeroy de Galhau said it’s too early to discuss where interest rates will peak, saying the monetary-tightening process should be carried out at the appropriate pace The ECB should raise borrowing costs by at least a half-point this month to curb surging consumer prices, according to Governing Council member Gabriel Makhlouf ECB Governing Council Member Mario Centeno said “everything indicates” that the peak of inflation may be reached in the fourth quarter “Decisive monetary tightening must continue” as inflation persists above target, Croatian Central Bank Governor Boris Vujcic told the newspaper Jutarnji List, weeks before the Balkan nation joins the euro zone The US dollar has erased more than half of this year’s gains amid growing expectations the Federal Reserve will temper its aggressive rate hikes, and as optimism grows over China’s reopening plans Swedish central bankers are divided on the prospects for bringing inflation back to its target after a string of interest-rate increases, minutes from the bank’s latest policy meeting show Emerging-market central banks face a Catch-22 where plunging economic growth means they can’t keep monetary conditions tight, but elevated inflation doesn’t allow them to halt rate hikes either OPEC+ responded to surging volatility and growing market uncertainty by keeping its oil production unchanged The world’s worst- performing major currency looks poised for an impressive turnaround in 2023 as its two key drivers -- a hawkish Federal Reserve and dovish Bank of Japan -- swap places in the eyes of some investors The BOJ may achieve its inflation target in 2023 as the cost of living has consistently exceeded market expectations this year, according to Takatoshi Ito, a contender to replace Governor Haruhiko Kuroda in April The PBOC injected a record monthly amount into state policy banks in November to help spur infrastructure spending and boost a struggling economy Turkish inflation slowed for the first time in over a year-and-a-half, though measures to revive the economy ahead of elections in 2023 may keep it elevated for some time A more detailed look at global markets courtesy of Newsquawk Asia-Pacific stocks traded mostly positive as Chinese markets led the advances on reopening optimism after several large cities further loosened COVID-19 restrictions, although the gains for the rest of the region were limited after Friday’s mixed post-NFP performance on Wall St and a further deterioration in Chinese Caixin Services and Composite PMI data. ASX 200 was higher with the index supported by strength in mining and energy as underlying commodity prices benefitted from the China reopening play. Nikkei 225 was indecisive and just about kept afloat throughout the session with price action contained by a lack of pertinent drivers to propel the index closer to the 28,000 level. Hang Seng and Shanghai Comp shrugged off the weak Chinese PMI data with risk appetite supported by reopening hopes and as the PBoC’s previously announced RRR cut took effect, while developers were boosted after reports last week that China's top four banks intend to issue loans for domestic developers’ overseas debt repayments. Top Asian News Chinese Caixin Services PMI (Nov) 46.7 vs. Exp. 48.0 (Prev. 48.4); Composite PMI (Nov) 47.0 (Prev. 48.3) Several Chinese cities accelerated the loosening of COVID-19 restrictions over the weekend including Shanghai and Shenzhen which scrapped requirements for commuters to present PCR tests for travelling on public transport, while apartment complexes in Beijing indicated that those that tested positive could quarantine at home, according to FT. China could announce 10 supplementary COVID measures as soon as Wednesday, via Reuters citing sources; could downgrade COVID to category B management as early as January. Subsequently, Shanghai scraps COVID testing requirement at more public venues from Tuesday, according to Bloomberg. PBoC is reportedly expected to reduce the amount of open market operations towards the end of the year to avoid excess liquidity, according to China Securities Journal. Morgan Stanley upgraded MSCI China to overweight from equal weight and said the ROE is likely to rise to 11.1% by end-2023, according to Reuters. European bourses are under modest pressure, Euro Stoxx 50 -0.2%, following on from fairly contained action in futures overnight. In APAC hours, Chinese stocks were the marked outpeformers given the loosening of COVID restrictions, though the region's PMIs slipped. Stateside, futures are are in-fitting with European peers and are under slight pressure, ES -0.3%, with specific developments light during the Fed blackout window. Tesla (TSLA) reduced Shanghai output by up to 20% due to sluggish demand, according to Bloomberg; output cuts set to take effect as soon as this week, sources state. Foxconn (2317 TT) November sales -11.4% YY. Q4 outlook expected in-line with consensus. November was the month most affected by COVID; due to off-peak seasonality and COVID November revenue declined MM. Top European News BoE’s Dhingra said higher interest rates could lead to a deeper and longer recession which is what she thinks they should all be worried about, while she sees few signs that demands for higher wages are raising the risk of a wage-price spiral, according to the Observer. Confederation of British Industry warned the UK will fall into a year-long recession next year as a combination of rising inflation, negative growth and declining business investment weigh on the economy, according to FT. UK Conservative Party Chairman and Minister without Portfolio in the Cabinet Office Zahawi said the government is looking at bringing in the military if strikes go ahead in various sectors including the health sector, according to Reuters and Sky News. UK RMT union rejected the Rail Delivery Group offer and demanded a meeting on Monday to resolve the dispute, while UK Transport Secretary Harper said the situation is disappointing and unfair to the public, according to Reuters. ECB’s Villeroy said that inflation should peak in H1 next year and that he favours a 50bps rate hike at the December 15th meeting, while he added that rate hikes will continue after that but cannot say when they will stop and he expects to beat inflation by 2024-2025, according to Reuters. ECB's Makhlouf sees a 50bps increase at a minimum at the December (15th) meeting, expects the eventual magntude to be 50bp; have to be open to policy rates moving into restrictive territory for a period in 2023; pre-mature to be talking about the endpoint for rates EU Commission President von der Leyen said the US Inflation Reduction Act is raising concerns in Europe and there is a risk it could lead to unfair competition, close markets and fragment supply chains that have already been tested by the pandemic, while she added that competition is good but it must be a level playing field and that they must take action to rebalance the playing field where the IRA or other measures conduct distortions, according to Reuters. FX DXY bid despite an earlier move to 104.10 lows, with the index recovering to 104.75+ parameters amid favourable technical levels US yields. Action which has been felt most keenly against the JPY, USD/JPY testing 135.50 at best from an initial 134.10 low, action which has offset the Yuan's impact on the USD. Yuan outperforms given the latest easing of COVID restrictions and source reports pointing to additional measures being forthcoming. AUD the next-best ahead of the RBA policy announcement with a 25bp hike expected. Both EUR and GBP were unreactive to the latest PMIs, with hefty OpEx in EUR/USD of note for the NY Cut; though, GBP has felt the USD's bid more keenly, sub-1.2250 at worst. PBoC set USD/CNY mid-point at 7.0384 vs exp. 7.0368 (prev. 7.0542) Fixed Income Core benchmarks are experiencing choppy trade, but retain an underlying bid with Bunds surpassing touted 142.17 resistance and Gilts briefly breaching 106.00. A move which leaves USTs lagging slightly with corresponding yields bid, though the curve is mixed and action is once again most pronounced at the short-end ahead of ISM & Factory Orders. Commodities Crude benchmarks have been choppy, but are ultimately firmer post-OPEC+ and as the Russian oil cap comes into effect at USD 60/bbl. Currently, WTI Jan & Brent Fed are pivoting USD 81.50/bbl and USD 87/bbl respectively, with the latest easing of China's COVID controls also factoring. OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilise markets, according to Reuters and FT. Iraqi Oil Minister said OPEC members are committed to the agreed production rates until the end of 2023 and the Algerian Energy Minister said the decision to keep output unchanged is appropriate to market fluctuations. Kuwaiti Oil Minister said OPEC+ decisions are based on market data and ensure its stability, while he added the impact of slow global economic growth on oil demand is a cause for continuous caution, according to Reuters. G7 and Australia announced on Friday that a consensus was reached on a price cap for Russian seaborne oil at USD 60/bbl which will enter into force on December 5th or very soon thereafter and they will ‘grandfather’ any revision of the price cap to allow compliant transactions concluded beforehand. Furthermore, US Treasury Secretary Yellen said that the price cap will immediately cut into Russia’s most important source of revenue and preserve stable global energy supplies, while a senior Treasury official stated that the price cap will create an anchor for Russian oil and has already driven prices lower, according to Reuters. Ukrainian President Zelensky’s chief of staff commented that the price cap on Russian oil should be capped to USD 30/bbl, according to Reuters. Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well, while he added that they are working on mechanisms to ban supplies which are capped. Russia is analysing the price cap imposed by G7 and allies on its oil and made preparations for this, while it will not accept the oil price cap, according to state news agencies citing the Kremlin. Russia's Kremlin, on price cap, said Russia is preparing a decision and will not recognise the price cap; price cap will destabilise global energy market but will not affect Russia's ability to sustain the military operation in Ukraine. EU countries cut their gas demand by a quarter last month despite a fall in temperature which shows an effort in reducing the reliance on Russian energy, according to FT. Moldova’s Deputy PM Spinu said they will not pay a 50% advance to Gasprom by December 20th for its December gas supplies, according to Reuters. Spot gold has pulled back below USD 1800/oz and now resides in proximity to its 200-DMA at USD 1795/oz while base metals remain bid, but have eased from initial best levels. Geopolitics US Defense Secretary Austin accused Russia of deliberate cruelty in its war in Ukraine and that it was intentionally targeting civilians, according to Reuters. US Director of National Intelligence Haines said they expect a reduced tempo in Ukraine fighting to continue in the coming months, while she added that Russia is not capable of indigenously producing munitions they are expending, according to Reuters. US Indo-Pacific Commander Aquilino said it is in China’s strategy to encourage nations like North Korea to create problems for the US and he is not optimistic about China doing anything helpful to stabilise the Indo-Pacific region, according to Reuters. N.Korea has fired around 130 artillery shots off its East & West Coast, via Yonhap; Subsequently, N. Korean military says the firing of artillery shells was a warning to S. Korean military action, via KCNA. US Event Calendar 09:45: Nov. S&P Global US Composite PMI, est. 46.3, prior 46.3 09:45: Nov. S&P Global US Services PMI, est. 46.1, prior 46.1 10:00: Oct. Durable Goods Orders, est. 1.0%, prior 1.0% Durables-Less Transportation, est. 0.5%, prior 0.5% Cap Goods Ship Nondef Ex Air, prior 1.3% Cap Goods Orders Nondef Ex Air, prior 0.7% 10:00: Oct. Factory Orders, est. 0.7%, prior 0.3% Factory Orders Ex Trans, prior -0.1% 10:00: Nov. ISM Services Index, est. 53.3, prior 54.4 DB's Jim Reid concludes the overnight wrap Although there is little question that I feel fully aware that someone has cut my back open with a knife within the last few days and sawed off some bone inside, I feel remarkably mobile and spritely. However, I'm trying not to appear too mobile as I've been signed off housework for a few weeks as I'm not supposed to bend, twist or lift. Don't waste a crisis as they say. I also resisted any urge to celebrate England waltzing into the last 8 of World Cup last night. Still plenty of time for it to go spectacularly wrong. No need to stress the back needlessly at this stage! As the World Cup builds to the business end of the tournament, we welcome in a week with limited US data and one with the Fed now on their blackout period ahead of next week's FOMC. In fact, could it actually be quite a quiet week ahead? Famous last words in a year like this, but next week should be much more interesting than this week given that we also have US CPI and the ECB meeting to go alongside the Fed. The data we do see in the US starts today with the ISM services index (DB forecast 53.9 vs 54.4 in October) and ends with PPI and the UoM consumer confidence number on Friday with the latest inflation expectations numbers included. Elsewhere we’ll also get CPI and PPI from China (Friday), industrial production from Germany (Wednesday) and trade data from key economies. While central bank speak will be sparse, Lagarde speaks today and for this week some attention will shift to Canada and Australia. The former meet on Wednesday and as a reminder, their last meeting's dovish tilt spurred a pivot trade in the US on the back of expectations the Fed would mimic the message. So this meeting may be a driver of sentiment more broadly. The consensus is split on Bloomberg between 25bps and 50bps which makes it interesting. The Reserve Bank of Australia will also decide on policy tomorrow, and consensus expects a 25bp rate hike that takes the cash rate to 3.1%. Wednesday will also likely see the Reserve Bank of India downshift to 25bps after three 50bps hikes. So by midweek we’ll have a better feel for whether these central banks are trying to downshift. The full day-by-day week ahead is at the end as usual on a Monday. Staying on the topic of where central bank rates are going, payrolls from last Friday merit some closer attention. The headline (263k vs 284k last and 200k consensus) and private (221k vs. 248k last and 185k consensus) payrolls numbers beat with unemployment steady at 3.7%. However, market focus was squarely on the upside surprise to average hourly earnings (+0.6% vs. +0.5% last and +0.3% consensus) which boosted the year-over-year growth rate by a couple of tenths to 5.1% vs consensus at only 4.6%. This big upside miss got our economists digging into the data and they found that the response rate for the establishment survey, which measures nonfarm payrolls, hours and earnings, was just 49.4%, well below the normal 65-70% range and the lowest since 2002. So it feels like you could see decent sized revisions. In addition, our economists found that most of the upside surprise to AHEs was due to the transportation and warehouse sector, which showed a +2.5% monthly gain - over five standard deviations above the average and by far a record increase. Information services AHEs (+1.6% vs. Unch.) also showed an unusually large gain that was about 2.5 standard deviations outside of the average. Combined, the unusually large increases in these two sectors likely boosted overall AHEs by around one to two tenths in their view. Nevertheless, income growth from our economists’ payroll proxy was still up 7.6% compared to a year ago and inflation is not going to be coming down to trend with labour markets like this. There is more and more evidence that the supply side is normalising on the inflation front but it's seems inconceivable that inflation can normalise overall when we see the type of employment numbers we saw last week, not just from the employment report but also from the JOLTS data which still pointed towards a tight labour market. Indeed, in Powell's mid-week speech which caused a major bond/rates rally, he did cite the latest JOLTS data as still showing a large imbalance between supply and demand for labour, referencing the roughly 1.7 job openings for every unemployed worker. Powell also noted that for "the principal wage measures that we look at, I would say that you're one and half or two percent above that (which is consistent with two percent inflation over time)". So it's fascinating that at the moment the market is focusing squarely on the very strong likelihood that we'll ratchet down to 'only' a 50bps hike next week and extrapolating that level of dovishness rather than focus on any risks that the terminal rate could end up being nearer say 6% than 5%. Indeed Larry Summers was doing the rounds over the weekend suggesting that markets were likely under-pricing terminal and seemingly being more comfortable suggesting a peak nearer 6 than 5%, even if he wasn't specific over a particular number. In terms of weekend news OPEC+ decided to keep production at current levels as expected. This follows the EU decision on Friday, after months of negotiations, to cap the price of Russian crude at $60 per barrel, starting today. This morning in Asia trading hours, oil prices are trading higher with Brent crude futures (+0.82%) trading at $86.27/bbl and WTI futures (+0.83%) at $80.64/bbl following China’s further easing of its Covid Curbs. Elsewhere, Shanghai and Hangzhou have followed other Chinese cities in easing some Covid restrictions over the weekend. They announced that from tomorrow, they will remove the requirement to have a PCR test to enter outdoor public venues and to use public transport. Chinese equities surged on the news with the Hang Seng rising +3.3% in early trading to its highest since mid-September, leading gains across the region with the CSI (+1.60%) and the Shanghai Composite (+1.55%) also rallying. Outside of China, the Nikkei (+0.01%) is struggling to gain traction this morning whilst the KOSPI (-0.51%) is slipping back slightly. In overnight trading, US stock futures are indicating a negative start with contracts tied to S&P 500 (-0.14%) and the NASDAQ 100 (-0.17%) edging lower. Meanwhile, yields on 10yr USTs (+4.55 bps) have climbed higher, trading at 3.53% with the 2s10s curve at -79.15 bps as we go to press. Data out from China today showed that services activity contracted further in November as Covid restrictions continued to restrain growth, with the Caixin China services PMI falling to a six-month low of 46.7 from 48.4 in October. Elsewhere, the final estimate of Japan’s services PMI fell to 50.3 from October's 53.2, hitting the lowest since August as cost pressures remained acute. The composite PMI contracted to 48.9 in November from 51.8 a month earlier. In FX, the Chinese currency strengthened to 6.96 against the US dollar, moving below 7 for the first time since mid-September on hopes of reopening. Recapping last week now and for the second week running major sovereign bond markets and equity indices rallied, after perceived dovishness from Fed Chair Powell in his last remarks before the December FOMC communications blackout period, troubling global growth data, and further confirmation of China moving on from the strictest form zero Covid policies that have plagued global supply chains. Treasury and Bund yields fell over the week, a largely parallel shock to the already inverted US yield curve while Bund yields flattened slightly. All told, 2yr Treasuries fell -18.1bps (+4.4bps Friday) while 10yr yields were -19.1bps lower (-1.9bps Friday). 2yr Bunds fell -8.7bps, though climbed +8.0bps Friday, while 10yr yields were -11.8bps lower after climbing +4.2bps Friday following the US jobs report. But note that 10yr US yields fell c.7bps after the European close and c.15bps lower than their highs for the day just after payrolls were released. Terminal Fed Funds fell c.8bps on the week but were first c.6bps higher pre-Powell's speech and then c.22bps lower into payrolls, before climbing 8bps after and into the close for the week. A second straight week of falling discount rates led to a second straight week of decent equity performance. The S&P 500 climbed +1.13% (-0.12% Friday) with the more rate-sensitive NASDAQ outperforming, up +2.09% (-0.18% Friday). One area of weakness was bank stocks, where the S&P 500 banks sector fell -2.03% (-1.04% Friday) as slower growth and flatter curves weighed. Performance was more mixed in Europe, but the STOXX 600 still managed to post a +0.58% weekly gain (-0.15% Friday), while the regional indices took their cues from the World Cup: the DAX fell -0.08% (+0.27% Friday) with Germany failing to reach the knockout round again while the CAC and FTSE 100 increased +0.44% (-0.17% Friday) and +0.93% (-0.03% Friday), respectively. Tyler Durden Mon, 12/05/2022 - 08:03.....»»

Stocks & Bonds Slide After 'Fed Whisperer' Confirms 'Higher For Longer' Rates After Powell's words sparked panic-buying - and dramatic easing of financial conditions - some are wondering if The Wall Street Journal's Nick Timiraos' report this morning is an attempt top jawbone back the market's dovish perception. Federal Reserve officials have signaled plans to raise their benchmark interest rate by 0.5 percentage point at their meeting next week, but elevated wage pressures could lead them to continue lifting it to higher levels than investors currently expect. ... brisk wage growth or higher inflation in labor-intensive service sectors of the economy could lead more of them to support raising their benchmark rate next year above the 5% currently anticipated by investors. Timiraos comments come right after the Fed's pre-meeting 'blackout' began over the weekend. Timiraos' comments pushed terminal Fed rate expectations higher... And sparked selling in bonds and stocks. Treasury yields are higher (but obviously not in the same range as Friday's chaos)... The S&P mechanically retraced all of Friday's losses, tagged the stops and has sunk since with futures now testing back below the 2090-day moving-average... Specifically, Timiraos confirms what most Fed speakers have been saying: They want to guard against raising rates too little and allowing inflation to resurge, or raising them too much and causing unnecessary economic weakness, according to recent public comments and interviews. ... Some officials could seek to push through another half-point rate rise in February because they see a greater risk that inflation won’t decline enough next year. Without signs of slower hiring, they could worry that inflation could pick up again. So why is the market still pricing in earlier and more rate-cuts next year? And will the next Fed statement crush that hope once again? Tyler Durden Mon, 12/05/2022 - 09:06.....»»

Putin's objectives to capture Ukraine have not changed despite him becoming aware of Russia's failures, the US director of national intelligence said. Russian President Vladimir Putin at the Artificial Intelligence Journey conference in Moscow, Russia, on November 24, 2022.Contributor/Getty Images Putin had initially been kept in the dark about Russia's failures in Ukraine, earlier reports said.  But the US director of national intelligence said Saturday that he is "becoming more informed." Avril Haines said Putin is "surprised" but not deterred by Russia's military performance. Russia's President Vladimir Putin is increasingly aware of how poorly his military is doing in Ukraine, US National Intelligence Director Avril Haines said on Saturday.Speaking at the Reagan Defense Forum in Simi Valley, California, Haines said Putin was "surprised" at his military's disappointing performance in Ukraine following its invasion in February."I do think he is becoming more informed of the challenges that the military faces in Russia," Haines said, according to NBC News. "But it's still not clear to us that he has a full picture at this stage of just how challenged they are." Haines' comments come after reports that Putin's military advisors had been shielding him from what is happening on the ground in Ukraine. In March — one month after Putin launched a full-scale invasion of Ukraine — a US intelligence official told reporters that they believe that Putin "is being misinformed by his advisors about how badly the Russian military is performing and how the Russian economy is being crippled by sanctions because his senior advisors are too afraid to tell him the truth."In September, it was reported that Putin was playing a more active role in the war in Ukraine, becoming more hands-on with his commanders.Haines said on Saturday that Putin's political objectives to capture Ukraine have not changed despite him becoming more aware of Russia's military failures.She said it is unclear whether he would still accept scaled-back military ambitions, adding: "I think our analysts would say he may be willing to do that on a temporary basis with the idea that he might then come back at this issue at a later time," according to NBC News.Russia continues to experience battlefield setbacks. In the last few months, Putin's troops have been forced to retreat from the Kharkiv region, from Kherson Oblast, and from parts of the Russian-occupied Donbas region.Read the original article on Business Insider.....»»

Wage growth "is too high for the Fed's liking and heading in the wrong direction," UBS analysts said Monday. Average hourly wages have jumped 5.1% year-on-year, according to the latest jobs report.AP Photo/Nam Y. Huh Surging wages could disrupt the Federal Reserve's efforts to tame inflation, according to UBS. Wage growth "is too high for the Fed's liking and heading in the wrong direction," the bank said Monday. Average hourly earnings have climbed at the fastest month-on-month pace since January. Accelerated wage increases will likely hinder the Federal Reserve's fight against inflation and could lead to the central bank boosting interest rates more aggressively than the market currently expects, according to UBS.Strategists at the Swiss bank said Monday that the November US jobs report — which showed average hourly wages climbing at the fastest monthly pace since January of 0.6% — showed wage pressures in the world's largest economy still remain high.That suggests the Fed will probably raise benchmark rates higher than 5%, the level that financial markets are currently pricing in as the likely peak in borrowing costs. The so-called fed funds rate is currently set in the 3.75% to 4% range."Friday's jobs report indicated that the labor market remains tight," a team led by UBS CIO Mark Haefele wrote in a note. "The 0.6% growth in average hourly earnings is too high for the Fed's liking and heading in the wrong direction."The US central bank has raised interest rates by an outsized 75 basis points at each of the last four meetings in a bid to tame soaring prices, and will next review rates at a December 13-14 meeting.UBS expects the Fed to slow the pace of its policy tightening, and predicts the institution to announce a 50-basis-point hike on December 14.Higher wages tend to fuel inflation because they mean Americans have more disposable income, leading to a rise in spending. The most recent reading of US annual inflation came in at 7.7%, well above the central bank's 2% target.In a speech at the Brookings Institution last week, Fed chair Jerome Powell warned that wage growth remains "well above the levels that would be consistent with 2% inflation over time"."We appear to be heading for a situation where inflation is slowing from its peak, but is not on track to hit the 2% target because of rapid wage growth," Haefele's team said. "We think this could eventually end up forcing the Fed to raise rates beyond the 5% terminal rate currently priced into markets.""However, we still expect the Fed to moderate the pace of hikes to 50 basis points at the Federal Open Market Committee meeting on 14 December," the strategists added.UBS's warning came after a stronger-than-expected jobs report weighed on stocks at the end of last week.The US added 263,000 jobs in November, exceeding economists' forecast for a gain of 200,000. That sparked a mixed finish to the week for equities, with the benchmark S&P 500 index sliding 0.12% Friday.Read more: The US jobs market keeps beating the odds, adding another 263,000 jobs in NovemberRead the original article on Business Insider.....»»

The November jobs report showed that US labor force participation is falling even as wages carry on rising. Mohamed El-Erian.Rob Kim/Getty Images The latest jobs report showed there are economic 'clouds on the horizon', Mohamed El-Erian has warned. US labor force participation fell even as wages carried on rising, according to November's employment data. Markets need to watch out for a possible Federal Reserve policy mistake, El-Erian said. The latest US jobs report has underscored economic risks that should put markets on edge about a potential Federal Reserve policy mistake, Mohamed El-Erian has warned.The economist said Saturday that November's nonfarm payrolls data — which showed the US economy adding a better-than-expected 263,000 jobs last month — offered insights on underlying labor-market imbalances that investors need to keep an eye on.Labor force participation fell by 0.1 percentage point to 62.1%, according to the latest report — meaning that the share of Americans who are willing and able to work remains below the pre-pandemic level of 63.4%."There are clouds on the horizon," El-Erian told MSNBC's Ali Velshi. "One is labor force participation — how many people are in the labor force? It was already low and it came down, meaning that we have more supply issues."Friday's data also showed wages rising 0.6% month-on-month, the fastest pace since January, which could potentially pressure inflation even higher due to consumers having more income to spend on goods and services.It's more likely that the Fed will make a policy mistake in its battle against soaring prices if wages and prices both carry on rising, El-Erian warned.The US central bank has been aggressively raising interest rates since March to tame inflation, but that has raised the risk of an economic downturn."Inflation remains a problem — yes it's coming down but it's not coming down fast enough and if anything this week's numbers suggest that the Fed is doing too little, too late," El-Erian said. "So put all that together, we remain exposed to the risk of a policy mistake and that's why people are still worried about a recession."Read more: Expect a US recession that will ravage markets and could send stocks spiraling down 24% next year, Bank of America saysRead the original article on Business Insider.....»»

Investors are trying to read the tea leaves in a choppy stock market to gauge whether its recent run higher can continue after Federal Reserve Chair Jerome Powell unleashed bullish sentiment at the end of November......»»

Oil Rises After OPEC+ Keeps Production Unchanged After Launch Of Russia Price Cap Two weeks ago, oil tumbled after the WSJ reported a fake news hit piece quoting "delegates" who "said" that Saudi Arabia was preparing for a 500K oil production hike. We quickly countered that this was ridiculous and if anything OPEC+ would seek further production cuts, a view which other media promptly quickly picked up. In the end, the report of an output hike (which some interpreted as a gesture of good will from Saudi crown prince MBS who had just received immunity from the Biden regime), proved to be indeed fake news, but likewise any expectations of further output cuts were dashed when earlier on Sunday OPEC+ agreed to stick to its oil-output targets just two days after G-7 nations agreed to a $60 price cap on Russian oil, despite mounting concerns about oil demand as the world in swept up by a global recession and as new Covid-related lockdowns in China and lingering uncertainty over Russia’s ability to export crude have sent the price of oil sliding. During a virtual meeting, OPEC+ decided to rollover the production cuts of 2 million barrels a day initially agreed to in October, a move which will allow the group time to assess the market impact of the price cap on Russian oil, the delegates said. Brent crude plunged to its lowest level since September on Nov. 28, but ended up posting its biggest weekly gain in a month. Meanwhile, prices are responding as expected to the OPEC+ decision, helped by continuing Covid restriction relaxation in China. At the time of writing both Brent crude and West Texas Intermediate were up by more than a percentage point from Friday’s close, although both remained far below $90 per barrel. “With massive and offsetting fundamental and geopolitical risks bearing down on the oil market, ministers understandably opted to hold steady and hunker down,” said Bob McNally, president of Rapidan Energy Advisers LLC. Meanwhile, Brent crude closed at $85.42 on Friday, and West Texas Intermediate, the U.S. benchmark, was at $80.34, far below the $90-a-barrel level where some oil-market analysts say the group wants to see prices. Prices have come under downward pressure from Chinese Covid-19 lockdowns that have prompted concerns in OPEC of weakening oil demand. Oil prices fell Friday after the EU agreed to the cap, as traders discounted fears the mechanism will force much Russian oil out of the market and cause a supply issue. In the end, however, it is all just posturing and the status quo remains as Russia will still sell oil to its traditional customers China and India, who will then resell some of this product to Europe and other nations. It’s unclear to what extent those measures will curtail Russian exports. The price cap is comfortably above the $50 that the country’s flagship Urals grade of crude currently trades at, according to data from Argus Media. Yet Moscow has said it would rather cut production than sell oil to anyone that adopts the price cap. Speaking on Russian TV, Deputy Prime Minister Alexander Novak said the country will operate strictly in line with market conditions: “We will sell oil and oil products to the countries that will work with us based on market conditions, even if that means we’ll have to somewhat reduce output." Russia is “not going to use tools linked to the price cap” and is “working on a mechanism banning adoption of the price cap tools, irrespective of what level will be set." Russian crude has traded at a steep discount this year, with Argus Media, which assesses commodity prices, pegging the price at about $48 a barrel. The US and its G7 allies designed the price to cut into Moscow’s oil revenues while keeping Russian oil, a key part of global supply, available on the market, which of course is ridiculous, and is just an attempt by Europe at virtue signaling optics while eating its Russian oil cake too. It aims to take advantage of the concentration of key maritime services in the West to try to curb Moscow’s ability to wage war in Ukraine. As Bloomberg notes, with these powerful forces poised to push oil markets in unpredictable directions, OPEC watchers said the group’s decision was understandable. “OPEC+ rolled over the existing quotas as expected amid uncertainty around Russian flows following the price cap, and a weaker China,” said Amrita Sen, chief oil analyst and co-founder at consultant Energy Aspects Ltd. “The group will continue to monitor markets and should fundamentals deteriorate they will meet prior to June -- currently the scheduled next ministerial meeting.” The decision by OPEC+ should hold for at least a few months. The group’s Joint Ministerial Monitoring Committee, led by Saudi Arabia and Russia, will meet again in June. The outlook could be clearer by then, and the panel has the power to call extraordinary meetings if it thinks output policy may need to change; OPEC said it was ready “to meet at any time and take immediate additional measures to address market developments” if needed. Until then three major forces will determine the future path of oil prices: a global economic slowdown which will seek to keep a lid on oil demand, and speculation about the date of China's reopening which many believe will send oil prices sharply higher. Indeed, as Bloomberg notes, as OPEC+ ministers convened their video conference, officials in Shanghai had just eased some of their Covid restrictions, joining other top-tier Chinese cities as authorities accelerate a shift toward reopening the economy after thousands of demonstrators took to the streets. A far bigger, and longer-term driver, however is the continued lack of capital spending to boost an aging E&P infrastructure which means that over the next 5 to 10 years, oil will become increasingly scarce in a world where western government are openly hostile toward legacy energy companies. Tyler Durden Mon, 12/05/2022 - 07:21.....»»

"Do you want the good news or the bad news first?” You have likely been asked this many times in your life. Research has shown that most people prefer to hear the bad news first and save the good news for last. Many small and medium-sized businesses (SMBs) were hit hard with a serious business downturn recently, barely staying afloat. Almost 200,000 had to shut their doors during the first year of the pandemic alone. But others not only survived, they are thriving. In fact, many SMBs are optimistic, according to the latest Verizon Business State of Small Business Survey , with more than 60% of respondents believing that their business is going to be better this year compared to 2021 and 46% are optimistic about what 2023 has in store. “Small businesses are the lifeblood of the U.S. economy; they create two-thirds of net new jobs, drive U.S. innovation and account for 44 % of U.S. economic activity,” states the U.S. Small Business Administration Office of Advocacy . Just think of the business owners, their employees, the consumers who support them, and the entire supply chain that is affected. Finding new ways for SMBs to thrive has required them to be resilient, tailor their offerings to address new market demands, and revamp digital strategies by updating their tools and technology infrastructures. Post-pandemic, savvy SMBs are better able to compete and are flourishing. I would call that good news, wouldn’t you? Latest Survey Finds SMBs Face Challenges…with Good News Ahead The latest Verizon survey identifies key trends affecting small businesses across the country. Concerns around maintaining adequate staffing; supply chain interruptions affecting sourcing materials; cyberthreats and viruses, especially as cyber risks nearly double year over year; and the upcoming holiday season and the effects inflation will have on their businesses. Fortunately, SMBs are finding that incorporating technology can help address these challenges. In fact, more that 77% of SMBs have already done the digital transformation work based on recent lessons learned and implementing digital tools and technologies. 5 Ways Digital Transformation Supercharges Business The adoption of new digital technologies for businesses of all sizes is helping to supercharge business operations and increase sales and profitability. While Main Street businesses may lack the budgets and resources of their Wall Street counterparts, there are easy-to-implement technology tools of the trade and strategies for SMBs to implement — no IT department or big budgets needed: 1. Update to broadband. When running a business in today’s hyper-competitive environment, businesses that run 5G — the ultra-fast, low-latency cellular standard that fuels data transfer speeds — can empower new customers to get authorized for instant credit checks and shipments to be tracked with pinpoint accuracy. 2. Invest in enabling mobile and digital payments. Make it easy for customers to pay the way they want, and ensure it can happen securely by having the right point of sale system in place. 3. Automate orders and bookings. Make it easier for your customers to engage with your business, such as installing a reservation app or creating a chat for questions and feedback. 4. Leverage tech to update online company info. Consider a service that can update all your company sites (e.g., Yelp, Google, etc.) with your store information, including open hours, address and contact information. 5. Ensure your website is mobile-ready. Mobile devices are the tool of choice for one third of consumers, according to a recent PYMNTS report . The implementation of technology is proving to be a winning strategy for SMBs, with more than 78% of small and medium-sized business owners adopting new tools and technologies to streamline their operations and costs, offer new customer services and experiences, and drive sales. As small businesses continue to innovate, fuel jobs, and thrive, these businesses are also keeping the American dream alive......»»

OPEC said on Sunday it would stick to the oil production target the group set in October — to slash output by 2 million barrels per day. OPEC said after its November meeting it's keeping its oil policy unchanged from October.Vladimir Simieck/AFP/Getty Images Crude oil futures jumped on Monday after OPEC said its oil policy will remain unchanged from October. The group has been cutting oil output by 2 million barrels a day due to "market considerations." Prices were also boosted by hopes that China's eyeing an exit from its Covid-zero stance. Oil futures rose Monday, thanks to good news on the demand and supply side: OPEC will be sticking to its production cut target and China is softening its Covid-zero stance, which has sparked hopes of an outsized demand. OPEC+, or the Organization of the Petroleum Exporting Countries and its allies — including Russia — said on Sunday they would stick to the oil production target the group set in October: to slash output by 2 million barrels per day from November through to end-2023.The production cut is equivalent to about 2% of the world's demand, and is the largest reduction since the outbreak of COVID-19. US West Texas Intermediate oil futures were up 1.6% at $81.28 a barrel at 4.45 a.m. ET Monday, while international Brent crude oil futures were 1.8% higher at $87.09 a barrel, after gaining as much as 2.4% overnight.Back in October, OPEC+ had said that the decision was made "in light of the uncertainty that surrounds the global economic and oil market outlooks." The move angered the US, and the White House accused the OPEC+ of "aligning with Russia." That's because tighter oil supply typically drives up prices, which may help prop up Russia's war chest, despite sanctions and boycotts over its invasion of Ukraine.On Sunday, the OPEC said the move was "purely driven by market considerations."Hopes of China's economic reopening from the pandemic are also boosting market sentiment.The expectation that the world's second-largest economy is finally eyeing an exit from COVID came after the country's top COVID official appeared to tone down the country's hardline COVID-zero approach last week. Several Chinese cities — including financial hub Shanghai and tech hub Hangzhou — relaxed strict COVID testing rules over the weekend.The events "point to the beginning of the end of zero-COVID" in China, although they do not point to a quick reopening for the entire country, Nomura economists said in a note on Monday. But there's certainly optimism surrounding the relaxation of COVID restrictions, Vishnu Varathan, Mizuho Bank's head of economics and strategy, wrote in a Monday note.OPEC's decision came two days after the European Union and the G7 agreed on a $60 a barrel price cap for Russian crude oil — a move that creates uncertainty in the oil markets.Prices could jump to $120 a barrel next year if Russia cannot find enough "dark ships" — vessels that turn off tracking devices — to export crude covertly, analysts at Bernstein estimate. The price limit on Russian crude takes effect on Monday.However, Kremlin spokesman Dmitry Peskov said Moscow will not accept the price cap and has made "certain preparations" to counter the move, TASS state news agency reported on Friday.Read the original article on Business Insider.....»»

From eyeing energy stocks to preparing for Xi Jinping dig in on his COVID policy, here's what some market experts are monitoring. Protesters march in Beijing.Photo by NOEL CELIS/AFP via Getty Images Chinese cities have loosened COVID restrictions in the wake of mass protests, lifting Chinese stocks.  But market watchers are still preparing to see if China is ready to announce a full reopening of its economy.  Here are five things experts say they're watching in China after protests shook the market.  Chinese equities finished higher last week after cities throughout the country relaxed some strict COVID-19 restrictions, but questions remain whether the government will fully scrap the zero-COVID policy it put in place after the outbreak began in 2019.  Protests in at least 17 cities erupted last week after 10 people died in an apartment fire in the city of Urumqi, with local residents angered by the building being blocked off by lockdown measures. Protestors, in a rare display of dissent against China's authoritarian government, called for President Xi Jinping to resign.  China's top pandemic official last week appeared to signal a softening in the zero-COVID policy but the government has yet to pledge a comprehensive step-down. Hong Kong's Hang Seng Index climbed 6.3% and the Shanghai Composite gained 1.8% last week but each remained sharply lower for 2022, down 20% and 13%, respectively."Hopefully ... the Chinese government will start to unlock a little bit more. But knowing China, they have a habit of keeping a tight fist, "Darrell Martin, founder and CEO of Apex Trader Funding, a proprietary trading platform, told Insider. Retail investors should be prepared to move defensively should Beijing's decisions on zero-COVID policy go against their respective positions, Martin said. "I think you definitely need to learn how to trade short in this market. That's something that many retail traders are foreign to – where they can sell first and buy second," he said. "There are short ETFs … and for more active investors, they can short the market in  a regular trading account or investing account."  Here's what some market experts are looking at as global investors watch for developments surrounding the Chinese government's zero-COVID stance. More crackdowns, more market losses. Emerging markets investing legend Mark Mobius said last week that Chinese stocks may come under further pressure in the face of the government's response to dissent. "It's clear to me that Xi cannot tolerate any protests, so there will be a very tough crackdown on any protesters," Mobius told Bloomberg TV. "More people will be arrested and they will probably go further in terms of population control in many areas.""So if you have that kind of scenario, then you've got to consider that the market will probably not do that well in the short term," he added.FOMO is back in China The "recent pickup in China equity inflows … suggests the fear of missing out is back," Emmanuel Cau, European equity analyst at Barclays, wrote this week. "China mobility in 2022 is now lower than it was in 2020, when the pandemic started, while it is the opposite for Europe and US," he wrote. "So while reopening may not be a smooth process, all else equal, it seems reasonable to expect a positive growth impulse, or less growth drag, from zero-Covid next year in China compared to this year, in our view." Metals prices to get a lift A China reopening would contribute upside potential for certain metals, Bank of America said, noting China accounts for 50% of global metals demand. "A second leg higher in the Fed's tightening cycle in 2H23 remains a key downside risk to commodity prices, particularly gold. Yet we expect Chinese economic activity to pick up firmly as Zero Covid policies are gradually eased lending support to the commodity complex," wrote Francisco Blanch, head of global commodities at BofA. The bank said it's increasingly constructive on transition metals like copper as Chinese spending on infrastructure and its electrical grid should combine with rising sales of electric vehicles. Copper could rise to $12,000 a ton next yea and aluminum may reach $2,738 a tonne.  Position for China's re-opening Being bullish on energy stocks in the way to be positioned if China were to "truly" reopen its economy in the second quarter of 2023, Anastasia Amoroso, chief investment strategist at iCapital, wrote in a note. The "country's traffic congestion, airline bookings and flights, and overall mobility should [recover] meaningfully, supporting more demand for oil in an otherwise constrained supply environment," she said. Brent crude oil traded above $85 a barrel on Friday and has lost about 13% over the past month. The S&P 500 energy sector has risen modestly over the past month but it's zoomed up 64% during 2022. China policy, after all, is "impossible to predict" Activist short-seller Carson Block said this week on CNBC that China has not been outlining its economic policy goals and investors need to price in such risk. The founder of Muddy Waters Research said projections from Wall Street investment banks about China's next COVID policy moves are viewed from the "prior lens" of a government that was open to foreign investment and raising its citizens' standards of living. "You have to understand that nobody has an edge as to predicting China policy anymore. The guy you know who's got lots of 'guanxi' or relationships in China? No, that doesn't matter anymore," Block said. "So you have to price in to what you're willing to pay the understanding that you wake up one morning and [say], 'It's down 90%.' Because that's what China is now. It is impossible to predict on a macro level."Read the original article on Business Insider.....»»

OPEC said on Sunday it would stick to the oil production target the group set in October — to slash output by 2 million barrels per day. OPEC said after its November meeting it's keeping its oil policy unchanged from October.Vladimir Simieck/AFP/Getty Images Crude oil futures jumped on Monday after OPEC said its oil policy will remain unchanged from October. The group has been cutting oil output by 2 million barrels a day due to "market considerations." Prices were also boosted by hopes that China's eyeing an exit from its Covid-zero stance. Oil futures jumped Monday, thanks to good news on the demand and supply side: OPEC will be sticking to its production cut target and China is softening its Covid-zero stance, which has sparked hopes of an outsized demand. The OPEC+, or the Organization of the Petroleum Exporting Countries and its allies — including Russia — said on Sunday it would stick to the oil production target the group set in October: to slash output by 2 million barrels per day from November through to end-2023.The production cut is equivalent to about 2% of the world's demand, and is the largest reduction since the outbreak of COVID-19. Back in October, OPEC+ had said that the decision was made "in light of the uncertainty that surrounds the global economic and oil market outlooks." The move angered the US, and the White House accused the OPEC+ of "aligning with Russia." That's because tighter oil supply typically drives up prices, which may help prop up Russia's war chest, despite sanctions and boycotts over its invasion of Ukraine.On Sunday, the OPEC said the move was "purely driven by market considerations."US West Texas Intermediate oil futures were up 1.1% at 80.84 a barrel at 10.46 p.m. EST on Sunday, while international Brent crude oil futures were also 1.1% higher at $86.47 a barrel — that's after jumping as much as 2.4% earlier in the day.Hopes of China's economic reopening from the pandemic are also boosting market sentiment.The expectation that the world's second-largest economy is finally eyeing an exit from Covid came after the country's top Covid official appeared to tone down the country's hardline Covid-zero approach last week. Several Chinese cities — including financial hub Shanghai and tech hub Hangzhou — relaxed strict Covid testing rules over the weekend.The events "point to the beginning of the end of zero-Covid" in China, although they do not point to a quick reopening for the entire country, Nomura economists said in a note on Monday. But there's certainly optimism surrounding the relaxation of Covid restrictions, Vishnu Varathan, Mizuho Bank's head of economics and strategy, wrote in a Monday note.OPEC's decision came two days after the European Union and the G7 agreed on a $60 a barrel price cap for Russian crude oil — a move that creates uncertainty in the oil markets.Prices could jump to $120 a barrel next year if Russia cannot find enough "dark ships" — vessels that turn off tracking devices — to export crude covertly, analysts at Bernstein estimate. The price limit on Russian crude takes effect on Monday.However, Kremlin spokesman Dmitry Peskov said Moscow will not accept the price cap and has made "certain preparations" to counter the move, TASS state news agency reported on Friday. Read the original article on Business Insider.....»»

Chinese consumer-related shares from airlines to food chain operators are higher in early trade Monday, after Beijing pared back some of its strictest COVID-19 control measures, pointing to a reopening of the economy......»»

OPEC+ ministers say they are not changing their policy of cutting oil production amid uncertainty about the impact of new Western sanctions against Russian oil......»»

Rate Hikes: The Beatings Will Continue Until Morale Declines Stagflationary crisis events are relatively rare in modern history, and the average mainstream economist will have very little input to give on why they happen and how they can be solved.  Their knowledge is limited on the issue and their experience is non-existent.   It has been argued by alternative analysts for several years now that the majority of banking executives, investors and economists entering the field in the past decade have never worked within a financial environment without direct monetary intervention by central banks.  They can't even comprehend a world where the Federal Reserve does not artificially support equities, bonds and other elements of the system.  They have no concept of consequences. This dynamic is finally being acknowledged by those in the mainstream. Alison Harding-Jones, vice chair of corporate and investment and head of M&A in EMEA at Citigroup, recently noted that the majority of junior bankers had never worked in an investment world without the existence of cheap money. These people are about to experience a rude awakening beyond anything they can imagine.    It was the long term existence of central bank support that conditioned many economists into assuming the easy money party would never end.  The Fed will step in, they say, because the Fed has always stepped in and nothing will ever change.  But things always change, and the notion that the Fed cares about the longevity of the markets is naive.  The past year alone has debunked that little theory, with rates continuing to climb. A cycle of cope has formed with a predictable set of reactions – The Fed suggests hikes will continue, the mainstream freaks out.  The Fed then suggests that “one day” the hikes might stop, maybe sooner maybe later.  The mainstream rejoices and interprets the comments to mean that the Fed is about to pivot, markets rocket higher.  Then, the Fed does not pivot, and they freak out again. No one is asking the question that really matters here:  Why is it so important what the Fed says about rate hikes?  Why is the entire system dependent on their whims?  This is not how it should be.   The US economy is addicted to cheap money like that money is heroin, and many elements of the system just can't let it go.  People thought that the central bankers, our resident drug dealers, would never stop providing the fix.  They thought that there was incentive for the Fed to continue dealing that delicious fiat.  But the easy money drug has diminishing returns and the addict is acclimated.  The negative health effects are starting to set in, the addict is beginning to die, and the dealer wants to distance himself from the corpse. Stagflation has arrived and now there is no reason for the central bank to continue providing easy money because there is nothing to be gained.   The circumstances surrounding stagflation are chaotic.  Certain sectors of the economy will go into steep decline while others will appear to remain resilient.  For example, US jobs numbers came in far hotter than expected this month (some might suggest a little too hot for reality), inspiring the Biden White House to claim a victory in the midst of fiscal defeat.  At the same time, the US is facing an unprecedented manufacturing slowdown, a housing market sales implosion, a GDP sinking back into contraction, a rising poverty rate, an explosion in homelessness, etc.  It might be confusing – Why is there better than expected employment numbers and in some cases retail numbers while there is also a major contraction across the board in multiple other areas of the economy?  That's what happens when a central bank pumps over $8 trillion into the veins of the system in only two years, on top of tens of trillions of dollars over the past decade.  That money is circulating rapidly and wearing down the gears of the machine, some parts break while others still function.   These are the effects of stagflation, as well as the effects of a central bank which is now abandoning the inflation game and actively seeking to create a deflationary event.  Without the endless trillions in free money which kept the system on life support since 2008/2009, they will get what they want eventually, but it will take time.   Meaning, the Fed is going to continue with rate hikes well into next year until there is a hard landing; there will be no “soft landing” and Jerome Powell knows this.  He openly warned about it back in the October Fed meeting of 2012, stating that the economy would not know how to function without stimulus measures because those measures had been active for so long.  That was 10 years ago; imagine how bad things are today. Powell is all too aware of the effects of rate hikes into economic weakness and stagflationary crisis.  He knows what is about to happen, and Joe Biden's economic advisers likely know as well.   In the meantime, an important issue that the Fed and many mainstream economists don't want to discuss is that prices continue to remain painful on most necessities no matter how high interest rates go.  Rent is high, food is high, energy prices fell due to Biden's market manipulation but are still high, home prices are high, vehicle prices are high, everything is incessantly expensive for the average consumer.  This is not going to stop anytime soon.   Once stagflation takes hold it hangs on like a bad rash.  When jobs numbers finally hit a wall (and they will, probably by the second quarter of next year), costs will still be suffocating the public's savings.  If the goal is truly an engineered deflation event that reduces money velocity and drags down prices, we have to ask ourselves how long will that take to accomplish?  Two years?  Five years?  How high will rates have to go?  Maybe only 5%, maybe 10%, maybe more.  How much damage will be done to the middle class and the poor as this process unfolds?   The Fed does not care.  Those hoping for an immediate pivot should understand that the rate hike beatings will continue until morale declines.  The quantitative tightening will stop when the contraction has fully pummeled the jobs market and the populace in general.   Tyler Durden Sun, 12/04/2022 - 18:00.....»»