Zelensky Unveils 'Victory Plan' But No Sign It Has Support From The West

Authored by Dave DeCamp via AntiWar.com,

Ukrainian President Volodymyr Zelensky addressed the Ukrainian parliament on Wednesday and unveiled his so-called "victory plan," but there’s no sign any of Ukraine’s Western backers will support his proposals.

Zelensky’s plan includes five points and three classified sections that he did not make public. The plan is essentially a list of demands that Zelensky has been making of the US and NATO for months. He claimed that if the plan was implemented, Ukraine "may be able to end the war no later than next year."

Zelensky addressing Ukrainian parliament (photo released by Zelensky’s office)

One point is for Ukraine to receive a formal invitation to join NATO, but there’s no sign the alliance will be willing to do that anytime in the near future, and Ukrainian neutrality will be a key Russian demand for any peace deal.

The plan calls for more air defenses and for NATO countries to help shoot down Russian missiles over Ukraine, which would mean direct NATO involvement in the war. NATO countries have previously rejected Ukrainian requests to intercept Russian missiles and drones.

Another point in the plan calls for support for Ukraine to use NATO-provided missiles to launch long-range strikes inside Russia, an escalation that would risk nuclear war. So far, the US and the UK have rejected Zelensky’s repeated request for help with long-range strikes.

Ukrainian MP Oleksii Honcharenko, a member of the European Solidarity party, criticized Zelensky’s plan. "First of all, it’s not a plan. Plan means something with concrete steps," he said, according to The Associated Press. "It’s kind of a wish list from Ukraine for our partners, how they can and should support us. And it doesn’t look realistic. We were waiting for some real serious conversation about the situation and the strategy, and this is not that."

Zelensky unveiled the plan as Russia continues to make advances in eastern Ukraine, a reality Honcharenko called "contradictory."

Later on Wednesday, Zelensky spoke by phone with President Biden, but the White House showed no sign that it supported the "victory plan." When asked about it, White House Press Secretary Karine Jean-Pierre said, "That’s their plan, and let them speak to it."

Despite no clear path to Ukrainian victory, the US still continues to fuel the war, and a Zelenskey aide said Tuesday that American politicians are pressuring the Ukrainian government to lower the conscription age to 18.

NATO Chief Rutte: "In the future NATO will have as a 33rd or 34th we will have Ukraine (...) Ukraine will be a member of NATO in the future, that's what we decided in Washington."

- who we in Washington? Kamala? pic.twitter.com/JnbCBgtuk1

— Russian Market (@runews) October 17, 2024

During the call with Zelensky, Biden announced a new $425 million weapons package for Ukraine. According to the Pentagon, it includes the following:

• Additional munitions for National Advanced Surface-to-Air Missile Systems (NASAMS)
• RIM-7 missiles and support for air defense
• Stinger anti-aircraft missiles
• Ammunition for High Mobility Artillery Rocket Systems (HIMARS)
• Air-to-ground munitions
• 155mm and 105mm artillery ammunition
• Tube-launched, Optically tracked, Wire-guided (TOW) missiles
• Javelin and AT-4 anti-armor systems
• High Mobility Multipurpose Wheeled Vehicles (HMMWVs)
• Small arms and ammunition
• Grenades, thermals, and training equipment
• Demolitions equipment and munitions
• Spare parts, ancillary equipment, services, training, and transportation 

Tyler Durden Thu, 10/17/2024 - 13:45

SpaceX Sues California Over Political Targeting

Authored by Eric Lendrum via American Greatness,

On Tuesday, Elon Musk’s company SpaceX has filed a lawsuit against a California state agency over alleged political discrimination against the company.

As reported by Politico, the lawsuit stems from the California Coastal Commission’s (CCC) decision to reject SpaceX’s plans to increase the number of experimental rocket launches from the Space Force base in Santa Barbara County. Lawyers from the Los Angeles-based firm Venable LLP, which represents SpaceX, claimed that the CCC made its decision purely due to political differences with Musk, an outspoken supporter of former President Donald Trump and a vocal critic of Governor Gavin Newsom (D-Calif.).

The lawsuit, filed in a federal court in Los Angeles, asserts that the CCC and its 12 members “engaged in naked political discrimination” in last week’s debate over a proposal by the Department of Defense (DOD) to expand the number of SpaceX launches at Vandenberg Space Force Base. The proposal would have seen the number of launches increase from 36 to 50.

“Rarely has a government agency made so clear that it was exceeding its authorized mandate to punish a company for the political views and statements of its largest shareholder and CEO,” the lawsuit reads.

The lawsuit named all 12 members of the commission, as well as executive director Kate Huckelbridge and alternate commissioner Gretchen Newsom, as defendants.

The commissioners are appointed by the governor and the legislature. On Thursday, they voted 6-4 in favor of rejecting the DOD plan.

However, the debate over the motion prior to the vote quickly veered away from the specifics of the plan itself, and instead focused on Musk’s support for Trump.

“Elon Musk is hopping about the country, spewing and tweeting political falsehoods and attacking FEMA while claiming his desire to help the hurricane victims with free Starlink access to the internet,” said Commissioner Newsom, who bears no relation to Governor Newsom.

Newsom and Chairwoman Caryl Hart both criticized Musk’s political stances before voting against the deal.

“Many things are said in the course of meetings, whether it’s a Coastal Commission meeting, whether it’s a legislative meeting, whether it’s a planning department,” said Chairwoman Hart on Tuesday, in an attempt to justify her vote.

“The basis for this decision is the commission’s conclusion that SpaceX, as a private company engaged in private activities, needs to apply for a coastal development permit.”

Although Musk has generally remained a political moderate, he began expressing support for President Trump following the first assassination attempt against him on July 13th in Butler, Pennsylvania. Since then, Musk has launched the pro-Trump America Pac, which has donated $45 million to supporting Trump’s campaign every month since July.

Musk himself appeared onstage with President Trump at his return rally in Butler, just over two months after the assassination attempt; during his speech, he reaffirmed his support for freedom of speech, and urged the audience to get as many people as possible out to vote in the coming election.

Tyler Durden Thu, 10/17/2024 - 13:05

US Sends B-2 Stealth Bombers To Hit Houthi Underground Bunkers In War's First

In the early morning hours of Thursday the US sent B-2 stealth bombers to launch major bombing raids on Houthi targets in Yemen. Was this a preview bombing run ahead of the expected major Israeli attack on Iran?

The warplanes hit underground bunkers used by the Houthis, and is the first known instance the B-2 stealth jets were deployed in combat over Yemen since the war on Red Sea shipping began more than a year ago.

Long-range B-2 stealth bomber. USAF/Sky News

The Associated Press called it a warning to Iran and noted that while the extent of damage is as yet unclear, "the attack appeared to be the first use of the B-2 in combat in years and the first time the flying wing targeted sites in Yemen."

Any potential Israeli strikes on Iran are also expected to target underground bunkers which conceal ballistic missiles, possibly with US-supplied munitions such as bunker busting ordinance. US Defense Secretary Lloyd Austin in commenting on the fresh action over Yemen hinted at this.

"This was a unique demonstration of the United States’ ability to target facilities that our adversaries seek to keep out of reach, no matter how deeply buried underground, hardened or fortified," he said.

Austin specified that targets were successfully struck at "five hardened underground weapons storage locations in Houthi-controlled areas of Yemen."

According to more on this new attack against a group seen as Iran's proxy on the Arabian peninsula, and how it sets up for potential further military action against Iran:

The B-2 would be used in any American attack on hardened Iranian nuclear facilities like Natanz or Fordo given it is the only aircraft in service that can drop the GBU-57, known as the "Massive Ordnance Penetrator."

But the Pentagon's anti-Houthi actions might still be seen as coming a bit late. The Houthis have for over a year held Red Sea shipping essentially hostage with its unrelenting campaign which has seen over 80 merchant vessels targeted with drones and missiles.

US warships have also been directly targeted, in what's been called the largest US Navy battle at sea going back to World War II. There's long been speculation that US military ships have actually been struck, but that the Pentagon has concealed it.

The B-2s which struck Yemen reportedly flew all the way from Whiteman Air Force Base in Missouri.

While there have been prior rounds of US and Israeli air offensives against the Houthis, this hasn't set back Houthi capabilities in any significant or known way, but only appears to have deepened their resolve to punish Israel and its allies related to the Gaza war.

Independent journalist Michael Tracey observes of Thursday's Pentagon strikes, "For 10 months, the US has been bombing Yemen on behalf of Israel with zero Congressional authorization -- Congress actively refuses to take action either way -- and as usual, it's simply not an issue in the presidential campaign."

Tyler Durden Thu, 10/17/2024 - 12:45

Is "Peak Semi" The Real Deal

By Russell Clark of the Capital Flows and Asset Markets Substack

As hard as it may seem now, peak oil was a big thing around 2007 or so, as the oil price surged.

The idea was that all the easy oil had been extracted, and that oil production was headed for a period of decline and high oil prices would be with us forever.

Of course, economics and finance suggests that high prices will attract capital and innovation, and eventually drive supply. This is exactly what happened as the US shale revolution turned the US into an energy exporter and flooded the market.

The best shorts are cyclical businesses that people believe in are secular stories. Cyclical businesses just need prices to rise high enough to attract competition. To my mind semiconductors and oil seem to have a lot in common. Essential for economic growth, but just need the occasional period of high prices to incentivise supply and capital investment. For me TSMC with its transparent pricing seemed to be a good place to look for signals. And in recent years, pricing has surged. I thought the surge would then see a period of decline like we saw from 2002 to 2011. Now I am not so sure.

Part of me put the recent surge in semi pricing down to the US effectively kneecapping Chinese semiconductor industry. Surely for an industry as innovative and competitive as semiconductors, surging pricing should soon turn to bust, as it did in 2001. However, reading a recent Economist briefing on semiconductors, I realised I was fooled. As a regular reader of TSMC quarterly reports, and the continual movement to lower and lower telemetry, I thought innovation in the semi industry was moving as it had always done. However as the Economist shows, the node names now longer match up with the actual improvements we are seeing. Unlike oil, there has been no breakthrough technology - we have been operating at peak semi since 2010.

And in contrast to the oil industry, the semiconductor sector has been the place to be.

There has been talk of some technological breakthroughs to drive more improvement- switching from silicone to nano carbon or quantum computing, but nothing so far. If peak semi is real, and it looks that way to me, and AI is real, and my interactions with Chat GPT are leaning that way, then absent a recession, semiconductors will continue to do well. What is similar to peak oil is that semiconductor industry requires a new technology to add capacity. While there is plenty of investment, so far no transformative breakthrough has occurred. Perhaps the most interesting thing about “peak semi” is that AI is driving increasing power usage. The performance of US utilities, and particularly nuclear focused utilities shows that a connection between computing and power prices is beginning to be established.

Can surging investment into AI eventually cause power prices to rise to a degree to force much tighter interest rates policy from central bankers? Maybe, but I don’t know. But what I have learnt is that if the best shorts are cyclical stocks that people believe are secular growth stocks, then the corollary is looking true - cyclical stocks that turn into secular growth stocks are the best longs. Nvidia and semiconductors are fitting that bill - and maybe now utilities too?

Tyler Durden Thu, 10/17/2024 - 12:25

Watch: CNN Panel Goes Berzerk When Guest Suggests 'Field' Blacks Voting For Trump

Two CNN hosts went absolutely berzerk after a guest quoted Malcom X to suggest that blacks who support Kamala Harris are 'house African Americans,' while working class 'field' African Americans support Donald Trump.

During a Wednesday appearance on CNN News Central, co-anchor Sara Sidner hosted pro-Trump radio host Shelley Wynter vs. pro-Harris ex-DNC Vice-Chair Michael Blake to discuss the race, when Wynter articulated that working class 'field' black men, 'who work with their hands' and 'who build' things are Trump supporters, while paper-pushing 'house' African Americans are voting for Kamala Harris.

Sidner and Blake went into hysterics and refused to let Wynter continue his point.

Watch (transcript below):

SARA SIDNER: Kamala Harris has been doing interviews on Black media. Trump, though, is is overperforming in polling with both groups compared to past Republicans. Here is what he said when he was campaigning in Pennsylvania.

DONALD TRUMP: Any African-American or Hispanic– and you know how well I’m doing there — that votes for Kamala. You got to have your head examined because they they are really screwing you. They are really screwing you.

SARA SIDNER: And it is Kamala, for the record, But he is denigrating voters for making a choice that he does not like. Shelley, to you, what does he achieve with this.

SHELLEY WYNTER: Well how is it, wait? First of all, how is he denigrating voters?

SARA SIDNER: He’s saying that they are being, for lack of a better word, screwed.

SHELLEY WYNTER: Taken advantage of the they’re being taken advantage of. They’re paying higher pricing. They’re the working class, the ones that he’s talking about, working class, lower middle class. They’re paying more for food. They’re paying more for gas and they’re being taken advantage of. (CROSSTALK)

SARA SIDNER: He also said that they you know, they had to have their head examined. That that’s that is not something that is a compliment.

SHELLEY WYNTER: Obama just told me the same thing. Obama just told me the same thing.

SARA SIDNER: He did not use those words.

SHELLEY WYNTER: … He inferred them. He implied them. He certainly did. He even threatened us with. We’re lucky Michelle’s not here. I mean, come on. Let’s not make things up. Let’s be honest here. And let’s really be clear what’s being said.

If you’re an African-American man. Look, let me boil this election down in the African-American community to a very simple, I’ll reference the great Malcolm X. This race is between House African-Americans and field African-Americans and the field African-Americans are going for Donald Trump.

I’m talking about your men. I’m talking about your men who build, your men, who put things together, your men who work with their hands, your men who do things, not the men who push paper on, the men who are connected to power and want to continue to be connected to power.

SARA SIDNER: Are you are you denigrating or actually degrading African-American men who are professionals, who work in white collar jobs? Is that what I’m hearing from you or–?

SHELLEY WYNTER: No, I’m not saying.

MICHAEL BLAKE: Is Shelley the house one or the field one?! I’m just trying to understand that part of it. I’m just trying to understand. I’m just trying to understand.

We have someone who’s spinning. I’m just trying to stay in the one that’s spinning talking points right now. Are you– are you the house Negro or the field negro that you’re referring to?! So I just want to make sure your question was about denigrating Black people. That literally was your question. You have a Republican fool–.

SHELLEY WYNTER: Right. (CROSSTALK).

MICHAEL BLAKE: Who is talking right now. You literally just said that Black men (CROSSTALK) you just you actually just said this is an election about “house” or “field.”.

This is the nonsense that we are listening to right now by those that are supporting Donald Trump. That is actually what you just.

SHELLEY WYNTER: (PROTESTING).

MICHAEL BLAKE: You there’s only– clearly you must be, you must be in your own talk. I’m not sure what kind of radio show you have that you can’t listen to your own thing. So you actually just said.

SHELLEY WYNTER: For Trump.

MICHAEL BLAKE: Again. Do you understand that’s what you– you sound absurd and silly. And so let’s actually talk about the substance of your question. The substance of the question was around denigrating.

SHELLEY WYNTER: I said is.

MICHAEL BLAKE: The substance of the question was denigrating Black and Latino communities.

SHELLEY WYNTER: Sir, sir, sir, the su– the substance.

MICHAEL BLAKE: My name is Michael. Name is Michael. My name is Michael. And we thank you that. So the point here, my question that was raised by my brother around denigrating Black and Latino communities.

SHELLEY WYNTER: All right, My brother. Let me answer the question. The conservative let me let me answer the question.

(CROSSTALK)

SARA SIDNER: You made a point saying that you believe.

SHELLEY WYNTER: The point I’m making ma’am, Sara, the so the point I’m making is this. The men who get up, the men who get up every day and make things happen with their hands, they build things.

They’re plumbers, they’re electricians, they’re working for Amazon. These men who who are coaching seven and under football, not because their son or daughter plays, but because they want to keep others off the streets and they’re volunteering their time.

These men, these men are going for Trump, these men and I’ll use an analogy made famous by the great Malcolm X. So you’re saying that I’m denigrating anybody? Then you must assume that he was denigrating somebody. So don’t even throw that word out there again.

Transcript via Mediaite

Tyler Durden Thu, 10/17/2024 - 12:05

5 Reasons Why The Gold Rally Is Not Over Yet

Authored by Ronnie Stoeferle via VonGreyerz.gold,

+28.1%, +27.2%, +28.3% – this is the impressive performance of gold in the first 9 months of the year in US dollars, Euros and Swiss Francs, respectively.

+42.3%, +35.0%, +31.1% – this is the even more impressive year-on-year performance as of the end of September. Given these figures, the question automatically arises: has the gold price reached its ceiling, or is it even in a bubble, as it was in the early 1980s, and is a significant correction imminent? However, there are strong reasons to believe that the gold price is not yet in a region of extreme overvaluation.

Adjusted for inflation, gold is not yet at its all-time high

Since December 2023 in US dollars and October 2023 in euros, the gold price has been chasing one all-time high after another. It is hard to imagine now that the gold price failed several times to break through the USD 2,000 mark for almost four years, given that it subsequently rose by more than 30% to over USD 2,600 in less than six months.

However, adjusted for inflation, the month-end gold price is still below its record level of USD 2,646 set in January 1980, albeit only slightly. Therefore, concerns that the air may already be thin in the current sphere are unfounded.

Another positive aspect is that the rise in the gold price since 2000 has been much more moderate than the second part of the gold bull market in the 1970s.

It should also be noted that the method of calculating inflation has changed significantly over more than four decades. Based on the calculation method used in the 1970s, the inflation in the subsequent 40+ years would be significantly higher than it is now reported, and so would gold’s inflation-adjusted all-time high. The US Bureau of Labor Statistics, responsible for calculating the CPI, lists three major inflation revisions since 1980 and countless smaller adjustments. Calculations by Shadow Government Statistics now show a difference of around 8 (!) percentage points compared to 1980.

Demand for gold remains high

Among central banks, while China noticeably slowed down its pace of accumulation in Q2/2024, India accelerated it just as noticeably. In Q2/2024, India increased its gold reserves by 18.7 tonnes, only slightly less than Poland did. In Q1/2024, India bought only marginally less. The Bank of India thus increased its gold reserves by 4.6% in just half a year.

It is striking that after the severe slump in 2022, OTC gold transactions increased almost eightfold in 2023. This trend has continued so far in 2024. Compared to the first half of 2023, OTC transactions rose by nearly 60% in the first half of 2024. This more than compensated for the other 6% decline in gold demand in Q2/2024, resulting in the highest value for a Q2 since the WGC began recording data in 2000. It is also the highest value for the first half-year in this quarter-century.

However, a central bank’s gold reserves are also an expression of a country’s economic importance. The Polish central bank, NBP, for example, now has a total of 420 tonnes of gold reserves, more than the UK. In Europe, the economic (power) balance is increasingly shifting from West to East.

Poland is one of the fastest-growing economies in Europe. Adam Glapinski, President of the NBP, emphasized that Poland aims to hold 20% of its currency reserves in gold. The current figure is 14.9 %, while at the end of 2020, it was not even 10%. The reason given by Glapinski for the substantial gold purchases speaks for itself: “None of our trading partners and investors can doubt our credibility and solvency, even when a dramatic situation is unfolding around us.”

In other words, in times of severe crisis, i.e. when it matters most, gold is a more credible guarantor of solvency than even the leading fiat currencies, the US dollar and the euro.

Interest rate cuts boost the gold price

Wednesday, September 18, was the day. Amid intense speculation, the Federal Reserve cut interest rates for the first time since the end of July 2019, and ultimately by a surprising 0.50 percentage points. After all, the last times the Federal Reserve cut interest rates by 0.50 percentage points were in January 2001 and September 2007 amid economic turmoil. The phase of falling interest rates that began with this bombshell should certainly boost the gold price. That has been the case in each of the three phases of interest rate cuts since the turn of the millennium.

At the beginning of the 2000s, the price of gold rose from USD 270 to around USD 420, or by almost 60%, during the cycle of interest rate cuts following the bursting of the dot-com bubble. In the years of interest rate cuts following the global financial crisis of 2007/2008, the gold price soared from around USD 660 to around USD 1,600, or by more than 140%.

During the interest rate cut phase in 2019/2020, the slowdown in the US economy, the trade dispute between the US and China, and the coronavirus pandemic that immediately followed resulted in gold climbing by more than a third, from USD 1,400 to around USD 1,900.

Demand from private and professional investors remains very low

Demand for gold remains very subdued among private and professional investors, particularly in North America and Europe. A Bank of America survey of investment advisors in 2023 found that 71% had invested no more than 1% of their portfolio in gold. A further 27% held between 1% and 5%. The significant underweighting of gold is also reflected in the development of global ETF holdings, especially in North America and Europe.

Global ETF stocks have only been increasing again for a few months and, at a total of 3,200 tonnes, are roughly at the same level as before the outbreak of the Covid-19 pandemic but well below the peaks of just under 4,000 tonnes in October 2020 during the pandemic and in March 2022, immediately after the war in Ukraine began.

While ETF demand from Asia has been slightly positive every month in recent quarters, European ETF holdings were only able to turn their long-lasting losses back into positive territory in May. In September, however, outflows predominated again. In the USA, ETF holdings increased for the third month in a row in September, following a rollercoaster ride in the previous quarters in which months with net outflows dominated. ETF holdings, therefore, have a huge amount of catching up to do.

Given the gold price trend in recent quarters, an increase in ETF holdings in North America and Europe from just over 3,200 tonnes to almost 6,000 tonnes would have been expected if one were to base this calculation on the historical correlation since 2005. There is, therefore, still a lot of room for improvement in this demand segment, especially as Western European investors tend to be pro-cyclical.

Thus, it seems that Western investors initially turned down the invitation to the gold party. Now that the party is gaining momentum, they do not want to admit they were party poopers. Therefore, they could only come to this party when it is already in full swing, and then at a much higher “entrance fee”.

Geopolitical tensions remain high

The war in Ukraine has now been raging for more than 2½ years, and the situation in the Middle East also intensified further at the end of September as a result of Israel’s massive attacks on leading Hezbollah cadres and the invasion of Lebanon by ground troops. The danger of a major conflagration continues to hang like the sword of Damocles over these two conflict regions.

The increasingly fragile geopolitical situation is becoming ever more apparent in central banks’ balance sheets. The massive gold purchases by central banks since 2009 and the rising gold price have led to the precious metal’s share of global international reserves increasing to the detriment of fiat currencies. By the end of 2023, gold will have overtaken the euro. This means that gold now ranks second among central banks’ reserve assets. The US dollar remains undisputed in the first place, although the proportion of US dollars among FX reserves has now fallen well below the 60% mark. In 2015, two-thirds of currency reserves were still accounted for by the world’s reserve currency. The BRICS summit in Kazan (Russia) from October 22-24 will show whether the move away from the US dollar will gain further momentum and whether gold, as a neutral reserve asset, will receive an additional, geopolitically motivated boost in demand.

This development comes as no surprise when you consider the results of the 2024 Central Bank Gold Reserves Survey published by the World Gold Council in June. 66% of the central banks surveyed stated they expect a slightly higher share of gold in total currency reserves in five years. In 2022, the figure was just 46%. The proportion of central banks that expect gold to play a slightly or significantly smaller role has fallen from 24% to 13%. Not a single central bank now expects central bank gold holdings to fall in the coming year. 81% expect them to increase. In 2021, this figure was only 52%.

Remarkably, geopolitical considerations – at least according to this survey – are almost entirely insignificant with regard to the importance of gold as a reserve asset for central banks. Concerns about sanctions are nearly as insignificant. Instead, hedging against inflation, the performance of gold in times of crisis, the lack of default risk, and the high liquidity of gold are among the most critical reasons in favour of gold.

However, according to the Central Bank Gold Reserves Survey, a look at the central banks’ demand for gold in recent quarters does not confirm the relative insignificance of geopolitical considerations and hedging against sanctions. The discrepancy between quarterly gold purchases before the outbreak of the war in Ukraine, at an average of 118 tonnes, and the 279 tonnes afterwards is simply too large. In the end, actions count more than words.

Conclusion

With a value of 61 as of October 10, the Fear and Greed Index for gold is just outside the greed range. In view of the enormous price rally over the past 12 months, a noticeable correction cannot, therefore, be ruled out. However, there are numerous fundamental reasons to believe that gold will continue to rise even after a setback. 

After all, at the beginning of 2024, gold successfully broke out of the cup-and-handle formation that had formed since 2011. With a gold price of just over USD 2,600 at the end of September, the gold price has reached the year-end forecast of our Incrementum Gold Price Forecast Model for 2024. We presented this model for the first time in the In Gold We Trust Report 2020 and have since updated it in every subsequent In Gold We Trust report.

Given the further deterioration in economic and (geo)political conditions, the model’s price target of just over USD 4,800 by the end of 2030 will be considered a conservative projection. Against this background, even gold, which became significantly more expensive last year, is still cheap.

As Michael Kosares once said so aptly: “In a bull market, the sideline is the worst place to be!”

Tyler Durden Thu, 10/17/2024 - 11:45

Press Conferences, Meetings, & Summits

By Maartje Wijffelaars, senior Eurozone economist at Rabobank

Yesterday’s press conference by ASML’s CEO Fouquet did little to reassure investors. After a major drop in the company’s share price on Tuesday over disappointing orders, erasing some EUR 50bn of market value, shares fell another 5% on Wednesday – with some large swings during the day. ASML’s extended fall did drag down the Dutch AEX stock index on Wednesday, but didn’t have the broad scale ramifications for other chips stocks and tech heavy indices as was the case on Tuesday (US)/ Wednesday (Asia). Then, the aggregate loss of chips stocks in the US and Asia amounted to USD 420bn. Bloomberg’s Asia Pacific Semiconductors Index suffered a 0.5% loss overnight, but the composite index was broadly flat in the US yesterday (+0.2%). Nvidia was clearly one of the best performers and this actually fits with ASML’s story that it still sees strong demand for AI-related chips and hence the machines to manufacture them, whereas it is in other segments that the demand outlook is more lacklustre.

An example of the latter is the weaker outlook for chips in the automotive sector, for example, due to weaker than expected demand for EV’s. It’s news that has been coming out repeatedly in the EU recently. More broadly, it’s not only EV sales that are suffering, though. Stories about weakness in the German car sector, were accompanied yesterday by the Franco-Italian car maker Stellantis. The latter’s results showed that shipments had dropped by 20% y/y in Q3 upon falling orders from the US (-36%), EU (-17%)  and China (-30%).

Back to chips, the weak demand environment has also postponed plans of US’ intel to open two chip factories in Europe, Germany and Poland, by two years. This hurts the EU’s strive for more strategic goods production and has obviously also fed into weaker orders for ASML than previously expected – and contrasts TSMC’s revenue jump in Q3 as it rides the AI wave. According to Fouquet, customers are not yet calling off orders, but rather delaying them. This fits with our narrative that we’re currently in a cyclical downturn, but that the outlook should improve somewhat next year.

At the same time, it’s no secret that China’s economy is doing poorly and the recovery just doesn’t seem take off. Efforts so far by the PBOC and Politburo to support the economy by effectively lowering the costs and increasing the opportunities of lending credit are not likely to boost the economy sufficiently in our view. And measures announced in Thursday’s unusual press conference by China’s housing minister, on support measures for the property sector – to boost lending for stalled projects – is unlikely to change this narrative.

Day ahead

Today marks the start of a two-day Nato Defence Ministers summit and the European Council meeting. In a preview, new NATO Secretary General Mark Rutte stated, among others, that NATO allies should “move further and faster to meet the growing threats we face” and “this requires more forces, capabilities and investment to meet the ambitious targets set by our defence plans”. Apart from many other things, this implies many EU governments would have to up their games, even to meet the longstanding targets of 2% of GDP defence spending.

At the European Council meeting, heads of state will talk about Ukraine, the Middle East, competitiveness and immigration. With respect to the war in the Ukraine, EU leaders are expected to talk about the Russia sanction regime, possibly about what to do with rising Russian LNG imports  and supporting Ukraine. While the US yesterday announced a new USD 425mn aid package including air defence capabilities, munitions and vehicles, the EU will discuss financial support – we clearly don’t actually have ammunition to send.

G7 countries are expected to decide on the ‘terms’ of an USD 50bn loan to Ukraine by the end of October. The EU and the US together are supposed to cough up USD 35bn. The idea is that the loan will be repaid using the profits on freezed Russian assets in the EU and the US – the EU immobilised over EUR 200bn worth of assets. The freezing of assets is part of the sanction package that has to be reviewed and approved by all EU member states, every six months. The US apparently suspicious that one of the EU member states could lift its support to freezing the assets, wants the EU to lengthen the sanction renewal time frame from 6 to 36 months, before it agrees to take part in the USD 35bn part of the loan. All countries but Hungary approve, as Orbán claims he won’t take part in a deal with the Biden administration that the running candidate Donald Trump doesn’t want.

If others cannot persuade Hungary to get on board with the sanction framework review, the loan would still go ahead, but US involvement would likely be substantially smaller. This would mean that the EU, including Hungary, would have to shoulder a larger share of the USD 35bn loan – money for the loan would be raised on behalf of the EU and guaranteed by the EU budget.

With respect to migration, more and more countries are calling for stronger border controls and faster deportations, and are open to discuss paying foreign countries to take in migrants send ‘back’ by the EU – as right-wing forces are gaining influence. The Italian deal with Albania, according to which Italy sends migrants intercepted on the water to Albania, to be processed there under Italian jurisdiction, will likely also be touted.

At the other side of the Atlantic we’ll have US September retail sales and industrial production. Retail sales by the control group are expected to have increased by 0.3% compared to August and industrial production to have contracted by 0.2% m/m. The Fed’s Goolsbee will speak at 17:00.

Tyler Durden Thu, 10/17/2024 - 11:15

EU Bureaucrats Consider Targeting Elon Musk's Entire Empire Over X's 'Free Speech'

Radical EU bureaucrats are weaponizing the Digital Services Act (DSA) to crack down on free speech that doesn't align with government-approved narratives on social media, including Elon Musk's 'free speech' platform X. The EU's attack on free speech online has possibly entered a new chapter, with Musk's entire business empire potentially in the crosshairs of fines.

Bloomberg reported that EU bureaucrats are mulling over how to calculate fines against X for failing to combat what the bloc deems 'illegal content or disinformation' on the social media platform (this spat between EU-Musk has been ongoing for about a year). In other words, EU officials are livid with Musk because X does not censor and/or shadow-ban folks based on political views. So, these bureaucrats must potentially resort to lawfare against their political enemies.

The report cites people familiar with the matter who said EU bureaucrats are mulling over whether to expand the potential fine of up to 6% of X's yearly global revenue to Musk's other companies, including SpaceX, Neuralink, xAI, and the Boring Company. 

Under the EU's Digital Services Act, the bloc can slap online platforms with fines of as much as 6% of their yearly global revenue for failing to tackle illegal content and disinformation or follow transparency rules. Regulators are considering whether sales from SpaceX, Neuralink, xAI and the Boring Company, in addition to revenue generated from the social network, should be included to determine potential fines against X, people familiar with the matter said, asking not to be identified because the information isn't public. -BBG

More from Bloomberg:

The European Commission has been investigating X for several potential breaches of the Digital Services Act, newly introduced rules meant to ensure platforms police illegal content. The EU is leading a global crackdown on harmful online content and disinformation that's sparked increasingly vocal responses from Musk, who has said such measures restrict free speech.

... 

The commission hasn't yet decided whether to penalize X, and the size of any potential fine is still under discussion, the people said. Penalties may be avoided if X finds ways to satisfy the watchdog's concerns.

Musk has previously stated on X that he wants a "very public battle in court" with the EU over its censorship tactics...

We look forward to a very public battle in court, so that the people of Europe can know the truth https://t.co/nKBGEPxeEa

— Elon Musk (@elonmusk) July 12, 2024

Bloomberg continued:

The review of X began under Thierry Breton, the EU's former tech czar who often feuded with Musk online and had been granted special powers to enforce the DSA without the need for the commission's rubber stamp. After Breton resigned in September, he bequeathed his fining powers to competition and digital boss Margrethe Vestager. Decisions on the penalties and how they are calculated would ultimately lie with Vestager.

In August, commissioner Breton sent a letter to Musk threatening X with punishment if they didn't crack down on "content that promotes hatred, disorder, incitement to violence, or certain instances of disinformation."

To be honest, I really wanted to respond with this Tropic Thunder meme, but I would NEVER do something so rude & irresponsible! https://t.co/jL0GDW5QUx pic.twitter.com/XhUxCSGFNP

— Elon Musk (@elonmusk) August 12, 2024

By mid-Sept., Breton resigned after going rogue on Musk. 

The letter says he was fired. https://t.co/ReIxjnAd0p

— Hans Mahncke (@HansMahncke) September 16, 2024

What's very clear is that EU bureaucrats and radical Democrats in the US, including the Obama-Biden-Harris team, have pushed censorship campaigns under the guise of 'public safety' to silence and destroy political enemies. Dictators and demagogues usually use these tactics.

In the US, Musk has been hit with an obscene amount of lawfare by federal agencies under the Biden-Harris administration, such as the FAA slowing down SpaceX rocket launches or the FCC rejecting Starlink space internet in the US' rural internet program. This lawfare shows just how desperate Democrats have become - and that's because - if Trump wins, X becomes the primary source of news and narratives, which would entirely displace legacy MSM.

Tyler Durden Thu, 10/17/2024 - 10:05

US Manufacturing Output Plunged In September

US Manufacturing contracted 0.4% MoM in September (dramatically worse than the 0.1% decline expected). This dragged Manufacturing output down 0.5% YoY...

Source: Bloomberg

This helped drag US Industrial Production down 0.3% MoM and -0.6% YoY (the weakest since April) as August's print was revised down...

Source: Bloomberg

A strike by aircraft machinists held down industrial production by an estimated 0.3%, while the effects of hurricanes Helene and Francine subtracted a similar amount, the Fed said.

Production of aerospace equipment tumbled 8.3% during the month.

And this is all happening as Capacity Utilization tumbles to 77.5%

Source: Bloomberg

Mining and energy extraction slid 0.6%, while output at utilities increased for the first time in three months.

Does that looking a 'no landing' economy? Or is it all 'transitory' too?

Tyler Durden Thu, 10/17/2024 - 09:28

The Next Wave(s) Of Inflation

Authored by Adam Sharp via DailyReckoning.com,

Have you ever been caught in a set of gnarly waves at the ocean? The kind where you get smashed by a breaker, come up for air and there’s another big one waiting for you at the surface?

This is a solid metaphor for inflationary periods. They don’t happen like a single big tsunami.

They are typically processes that play out in stages over a decade or more. Policymakers try various fixes, and most fail or only provide temporary relief.

Let’s take a look at the three waves of America’s 1970s inflation…

Source: Crescat Capital

I believe we are currently floating in the trough after the first wave of inflation, catching our breath.

Things seem to be trending in the right direction, despite prices remaining permanently higher.

But the fundamental problems haven’t been addressed, and more breakers loom on the horizon.

Commonplace Problems, Fewer Options

Like most inflationary periods, the ‘70s woes trace back to bad monetary policy and too much government spending.

In 1971, President Nixon ended the dollar’s convertibility into gold after France, Germany and others began to swap their rapidly inflating dollars for bullion.

This set the stage for a decade of stagflation (high unemployment, sluggish growth, and sustained inflation).

Throughout the 1970s, the Fed hiked interest rates to match CPI, yet inflation persisted.

Source: Econlib

Higher interest rates, price controls, but nothing really worked until the dollar found equilibrium after being severed from gold.

(Eventually, the petrodollar system would help restore demand for dollars, but we’ll save that for a separate article.)

We can learn much by studying the 1970s stagflation. I believe we will also see multiple waves of devaluation and disruption, interrupted by brief respites.

But we also need to acknowledge key differences.

In the 1970s, America’s debt load was not nearly as bad as it is today.

Throughout the 1970s, U.S. federal debt/GDP never got above 35% or so. Today it’s over 120%. At such levels, our country can’t even handle 3% interest rates for much longer.

Interest costs on U.S. debt are soaring and should approach 6% of GDP by the end of this year. At the current pace, we risk a severe debt spiral within the next few years.

This means that if and when inflation returns, hiking interest rates to compensate may not be an option. So this period will almost certainly look different from the ‘70s because the Fed has fewer options to choose from.

Unfortunately, more waves of inflation seem certain. Our financial situation practically guarantees it.

The Federal Reserve, and Americans, may have to simply grin and bear these next waves of debasement. The value of fiat savings will dwindle as yields can’t come close to matching CPI.

Gold: Crucial in the 70s and Today

Precious metals investors thrived in the 1970s. Purchasing power for gold and silver owners was preserved and even grew.

Jim Rogers and George Soros built the foundations of their fortunes by investing in precious metal assets through their Quantum fund.

Here’s a chart showing the performance of gold vs. inflation. Note how gold follows CPI closely during the 70s…

Source: Suisse Gold

The primary difference I see today is the magnitude of the problem we face. It’s far more severe, and the Fed has fewer options.

If anything, gold may be even more important today than it was in the 70s.

There’s only so much Jay Powell can do. Eventually the Fed will have to get “creative.” And when central banks get creative, that’s when money printing tends to get out of control.

Physical bullion is the most obvious way to protect your assets. And makes an excellent addition to any portfolio.

Tyler Durden Thu, 10/17/2024 - 09:20

Expedia Jumps On FT Report That Uber Explored Takeover

Shares of Expedia Group surged in premarket trading in New York following a report from the Financial Times, which stated that Uber Technologies has been in talks with advisors in recent months to explore a potential takeover of the travel website. Wall Street analysts viewed the possible merger between the ride-hailing giant and the travel website as 'positive.' 

The FT report cites three individuals familiar with the talks between Uber and advisors: 

Uber approached advisers in recent months after the idea of an Expedia acquisition was broached by a third party to examine whether such a deal would be possible and how it could be structured, according to three people familiar with the process.

The report noted that Uber chief executive Dara Khosrowshahi, who served as Expedia's CEO between 2005-17 and remains a non-executive director on its board, may suggest that any deal would be 'friendly' instead of hostile in nature.  

The people briefed on the matter said Uber's discussions with advisors to determine how a deal could be structured with the travel website was in the "very early stage, and it was possible that a deal would not transpire." Another person said Uber and Expedia have yet to discuss any deal formally. 

Earlier this week, Uber chief executive Dara Khosrowshahi told FT, "Anywhere you want to go in your city and anything that you want to get, we want to empower you to do so." 

Combining ride-hailing services with Expedia and its booking technology under one platform would create a 'super app' such as those built by Chinese tech firms. 

In August, Uber CEO Prashanth Mahendra-Rajah said that the ride-hailing firm's "top priority" for deploying capital was investing in growth, including via acquisitions. 

In markets, Uber shares fell about 3% in premarket trading, while Expedia shares were up about 6%. 

Wall Street analysts provided commentary on FT's report (courtesy of Bloomberg): 

Bloomberg Intelligence analyst Mandeep Singh

• "Uber CEO Dara Khosrowshahi's familiarity with Expedia as its former leader could help drive revenue and cost synergies"
• "Adding Expedia would likely have a better margin profile than Uber's Delivery segment and could support ads and subscriptions scale over time"

TD Cowen analyst Kevin Kopelman

• A possible deal would offer synergies if Uber planned a broader rollout of Travel booking services
• Kopelman notes Uber UK rolled out Hotel bookings in 2022 and Flights in 2023
• "However, an acquisition of EXPE would also come with the challenges of managing EXPE's existing brand portfolio in the face of difficult competition"

Bernstein analyst Nikhil Devnani

• Hoping that Uber makes forays into travel, but thought it would come via partnerships "and not outright M&A — particularly a potential deal of this size"
• "Despite Dara's background, we think it would be the furthest step out of Uber's core area of competency via M&A for the business at large — and that notion makes us nervous as Uber bulls"

Truist Securities analyst Gregory Miller

• The timing of Uber's possible outreach is potentially opportunistic as Expedia "has largely completed its multi-year strategic transformation to simplify its business model"

Since 2019, Uber has expanded into food and beverage delivery, freight, and logistics, yet it has made very few large deals. 

Tyler Durden Thu, 10/17/2024 - 09:00

Initial Jobless Claims Drop As Storm Impact Fades

After last week's storm- and strike-driven surge in initial jobless claims, the headline data slipped back from 260k (revised higher) to 241k...

Source: Bloomberg

On an unadjusted basis, initial claims remain high (but off their highs) while continuing claims pushed higher from 1.858mm Americans to 1.867mm Americans...

Source: Bloomberg

The impact of Hurricane Helene (North Carolina) will continue to be felt...

Presumably, this does not include the impact of Milton???

Source: Bloomberg

But analysts expect that to fade as all that lovely money from FEMA flows into the local economy (oh wait...).

And WTF is going on in Michigan? It appears those Stellantis layoffs were 'transitory'...

In other words, ignore the jump in jobless claims this close to an election, it's just transitory...

Tyler Durden Thu, 10/17/2024 - 08:55

Retail Sales 'Reality Check': This Was The Biggest Positive September Seasonal-Adjustment Ever!

As we warned in our preview last night, the almost omniscient folk at BofA warned, 'brace' for a blowout retail sales print this morning, forecasting a huge 0.8% MoM rise in spending (well above the 0.2% consensus) all due to seasonal adjustments.

BofA was mostly right with all the retail sales cohorts coming in hot - headline +0.4% (+0.3% exp), ex-autos +0.5% MoM (+0.1% exp), and most notably the control group (which flows into the GDP calc) +0.7% MoM (+0.3% exp).

Headline retail sales MoM beat was not enough top keep the YoY print improving as it dropped to +1.7% YoY - the weakest since January...

Source: Bloomberg

On an unadjusted basis, Retail sales fell a shocking 7.5% MoM...

Source: Bloomberg

This was the biggest positive September seasonal adjustment in history...

Source: Bloomberg

In case it's hard to see above... how do you know it's an election year (and Dem support is waning over a bifurcated economy or haves and have-nothings)...

However, Core retail sales rose 4.0% YoY...

Source: Bloomberg

Spending at Gas stations and Furniture Stores fell on a MoM basis while Food Services and Food & Beverage Stores spending jumped most...

Source: Bloomberg

On an unadjusted basis, retail sales were flat (0.0%) YoY which means (roughly speaking) real retail sales were down notably on a YoY basis...

Source: Bloomberg

So, take your pick - is retail spending 'hot' or is inflation eating into personal incomes more than many think?

Tyler Durden Thu, 10/17/2024 - 08:45

ECB Cuts Rates As Expected With Disinflation "Well On Track". Keeps Guidance Unchanged

As expected by literally every economist, moments ago the ECB cut its three key rates by 25bps for the second consecutive meeting, in a show of support to the rapidly shrinking European economy and saying it did so because "incoming information on inflation shows that the disinflationary process is well on track" and adding that "the inflation outlook is also affected by recent downside surprises in indicators of economic activity. Meanwhile, financing conditions remain restrictive."

Specifically, the ECB cut its Marginal Lending Facility from 3.90% to 3.65%, the Refinancing rate from 3.65% to 3.40% and the Deposit Rate from 3.50% to 3.25%.

We cut our key interest rates by 0.25 percentage points.

We did this because incoming data show we are well on track to reach our inflation goal.

Read today’s monetary policy decisions https://t.co/aUqG9kd0zO pic.twitter.com/qsOuo3O1Yp

— European Central Bank (@ecb) October 17, 2024

Some highlights from the statement:

Inflation

• Domestic inflation remains high, as wages are still rising at an elevated pace.
• Inflation is expected to rise in the coming months, before declining to target in the course of next year
• Disinflationary process is well on track

Labor Market

• At the same time, labour cost pressures are set to continue easing gradually, with profits partially buffering their impact on inflation.

Guidance:

• Will keep policy rates sufficiently restrictive for as long as necessary. The Governing Council is not pre-committing to a particular rate path, and data will determine level, duration of restriction
• ECB to Follow Data-Dependent, Meeting-by-Meeting Approach
• ECB to Keep Rates Sufficiently Restrictive as Long as Needed

Here is the comment on the unchanged guidance:

“The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim. The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction.”

Some have pointed out that the only real alteration to the statement’s wording is the line around inflation being at 2% in the course of 2025, as opposed to in H2-2025, potentially an acknowledgement of recent HICP progress, with this morning’s Final September Y/Y measure subject to a downward revision to 1.7%, though we await the presser for more clarity on the importance of the language change.

Commenting on the ECB, Bloomberg Intelligence European Equity Strategist Laurent Douillet said that there was “no surprise there,” adding that "a 50-bp cut at the next meeting in December is a possibility if the two inflation and PMI prints of October and November continue to surprise on the downside. With this rate cut and many more -- five by the end of next year -- already priced into European equities, the current earnings season is more likely to dominate market movements."

And indeed, as we wrote in our preview, there is virtually no reaction in the EURUSD, which moves very little after the report and was last seen at 1.0863 because the ECB did very much as expected.

As newsquawk notes, a 25bps cut was delivered and based on an "updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission' with the incoming inflation on inflation showing the disinflationary process is well on track".

From the upcoming press conference, we look for any signs that there was dissenting voices on the decision; interestingly, the continued inclusion of the line that it will 'keep policy rates sufficiently restrictive for as long as necessary..." could be seen as one for the hawks in order to appease them against the cut. Reminder, cutting at the October meeting is a departure from the guidance provided around September but very much in-fitting with communication more recently given the progress of inflation and soft growth outturns. Evidently, any disagreement on the board may be clearer from source reports that the Q&A itself.

Dissent insight aside, we are attentive to any guidance from Lagarde that goes beyond the data dependent" and meeting by meeting' approach.

Tyler Durden Thu, 10/17/2024 - 08:28

Futures Jump After Blowout TSMC Earnings And Ahead Of ECB Rate Cut

Futures are higher and on the verge of another all time high with Tech leading: NVDA is up +2.5% pre-market as TSMC reported strong upside on margin, along with comments on “extremely robust AI related demand”. As of 8:00am, S&P futures rose 0.4% to 5,910, just shy of the 5,918 all time high; Nasdaq 100 futures climbed 0.9%, led by an advance in chip stocks after TSMC posted a better-than-projected 54% rise in quarterly earnings. That helped reverse the impact of ASML Holding NV’s lowered 2025 guidance, which halted a rally that had pushed US-traded shares to a three-month high. Europe's Stoxx 600 index gained 0.7% ahead of the ECB's second consecutive rate cut. China stocks extended their post-euphoria slump and erased gains on disappointment over the outcome of a joint ministry press briefing about the property market which again lacked critical details on the stimulus package. Iron ore tumbled to a three-week low ahead of data on Friday which is expected to show the economy grew at its weakest pace in six quarters. Bond yields are higher and USD is lower; 10-year yields are 2bp higher to 4.03%. Commodities are mixed: Oil and base metals are higher, while precious metals are lower.

In premarket trading, chip giant Taiwan Semiconductor jumped 8.5% after it gave a strong forecast and touted the sustainability of AI hardware demand as strong sales of Nvidia AI chips offset a sagging mobile industry. Margins were seen as a highlight, and the report helped to ease recent concerns about the chip space that followed ASML’s results. The company also raised its target for 2024 revenue growth. US chip were broadly higher on the report. Expedia shares jumped 6.7% after the Financial Times reported that Uber Technologies explored a possible bid for the online travel-booking company. Analysts were positive about a deal noting that Dara Khosrowshahi led Expedia for 12 years before taking the helm at Uber in 2017. CSX shares dropped 3.9% after the freight-transportation company reported third-quarter earnings per share and revenue that missed consensus estimates. Analysts flagged the impact of hurricane activity on the results. Here are some other notable premarket movers:

• Alcoa (AA) rises 5.9% premarket after the aluminum producer reported better-than-expected adjusted Ebitda for the third quarter. Results were aided by surging alumina prices, analysts said.
• Elevance (EXPE) shares tumble 13% after the health insurer slashed its forecast for adjusted full-year EPS as the firm reported third-quarter profits that fell short of expectations. The company also reported higher-than-expected medical expenses for the quarter.
• Fortinet Inc. (FTNT) shares fall 3.7% after Mizuho Securities downgraded the security software company to underperform from neutral.
• Lithium Americas (LAC) shares jump 7.9% in New York after the miner was upgraded to outperform from sector perform at National Bank Financial following the announcement of a joint venture with General Motors.
• Sealed Air (SEE) shares advance 3.1% after Raymond James upgraded the packaging company to strong buy from market perform.
• SolarEdge Technologies (SEDG) shares fall 3.3% after Guggenheim analyst Joseph Osha downgrades the solar company to sell from neutral.
• Topgolf Callaway Brands (MODG) shares fall 2.2% after B. Riley Securities downgraded the golf company to neutral from buy. Analyst Eric Wold expects weak trends at its namesake chain of high-tech driving ranges will weigh on the stock until the firm’s planned separation, anticipated in the second half of 2025.

“TSMC earnings were clearly a positive and that has allayed some of the worries around the chip sector after that dismal report from ASML,” said Michael Brown, strategist at Pepperstone Group Ltd. “The outlook for risk remains very positive particularly as central banks across both developed markets continue to remove policy restriction at a pretty rapid pace.”

The European Central Bank’s policy decision is due later, where it’s expected to cut its benchmark rate by another quarter-point to 3.25% (our preview is here). Shortly after, the market will turn its attention to US retail sales and jobless figures for further evidence that the US consumer and labor market remain healthy, as investors seek confirmation of soft-landing bets. Traders also await results from tech bellwether Netflix which is set to report its third-quarter earnings after the close amid some concern its breakneck rally may be running out of steam.

 

In Europe, major markets are higher (Stoxx 600 +0.3%, UKX +0.2%, DAX +0.8%) ahead of the ECB's second consecutive rate cut with banks leading gains after Nordea increased its outlook for the full year and outlined a new program of share buybacks, while mining and real estate stocks lagged. France and Italy markets outperformed while and Spain lagged. Thematically, Macro Recovery, French Exporters and Italian Banks are among the top outperformers, while Momentum sLong are lagging. ECB is expected to announce the second 25bp rate cut today. Here are the biggest movers Thursday:

• Nordea gains as much as 6.1%, after the Finnish lender announced a fresh €250 million buyback in its third-quarter report, outshining an otherwise in-line report.
• ABB shares rise as much as 2.4% after the company raised its margin guidance, boosted by performance of its electrification unit, which saw strong demand from data centers and utilities, outweighing weakness in its robotics and automation business
• Rentokil shares rise as much as 10%, the most since July, after the pest controller reported North America revenue for the third quarter that beat estimates
• Schindler gains as much as 3.4%, reaching the highest since Nov. 2021, after reporting results that are seen as strong overall by analysts, with improving margins a key positive
• Entain shares gain as much as 4.2% after the gambling group said it now expects full-year adjusted Ebitda to be toward the top end of the forecast range. Additionally, it reported third-quarter results that Citi and Morgan Stanley described as strong
• EQT gains as much as 1.7% after the Swedish asset manager reported robust investment performance, even as exit activity and fundraising remain muted in a challenging environment
• Deliveroo shares rise as much as 4.7% after the food delivery firm reported a 2% order increase in home market UK and Ireland during 3Q, outperforming key rival Just Eat Takeaway
• Nokia shares fall as much as 4.8% after the 5G gear maker trimmed full-year operating profit expectations, saying a recovery in sales is happening slower than expected
• Mondi shares sink as much as 9.5%, hitting their lowest level since 2016, after the paper and packaging company’s quarterly earnings came in way below estimates
• Man Group shares decline as much as 3.6% after the hedge fund firm reported net outflows in the latest quarter and lower assets under management. Citi expects mild consensus downgrades

Earlier in the session, Asian equities fell, on pace for its longest stretch of losses in nearly five months, as a rally in Chinese stocks faltered. The MSCI Asia Pacific Index declined as much as 0.4%. Tencent, Keyence and Tokyo Electron contributed the most to the index’s fourth-straight day of decline. Shares also fell in Japan and India, while they rose in Taiwan and Australia. Chinese stocks in mainland slid into correction territory, while those in Hong Kong fell more than 1%, as investors were underwhelmed by the property sector support measures announced at a government briefing. The country pledged to nearly double the loan quota for unfinished residential projects to 4 trillion yuan ($562 billion), which fell short of market expectations. A Bloomberg Intelligence gauge of Chinese developer stocks tumbled more than 12%.

In rates, treasuries are slightly cheaper across the curve in a mild bear-steepening move, similar to price action in European rates ahead of the European Central Bank’s monetary policy decision at 8:15am New York time. It’s expected to cut the deposit rate for a third time this cycle, to 3.25%, and President Christine Lagarde holds a presser thirty minutes later. US yields are higher by less than 2bp with long-end leading losses, leaving 2s10s and 5s30s spreads steeper by less than 1bp. 10-year around 4.03% is up 1.8bp from Wednesday’s close, keeping pace with bunds while gilts outperform by ~1bp. Bunds fall ahead of the European Central Bank decision although did trim losses after euro-area inflation was revised lower. German 10-year yields rise 3bps to 2.21%. US session has packed economic data slate including jobless claims and retail sales.

In FX,  the Bloomberg Dollar Spot Index halted gains as markets awaited key data including jobless claims and remarks by Federal Reserve Bank of Chicago President Austan Goolsbee. The euro extended losses ahead of the European Central Bank policy meeting. The Aussie dollar is the strongest of the G-10 currencies, rising 0.2% against the greenback after stronger-than-expected jobs data.

In commodities basic resources underperform after Chinese stocks slid into a correction following another underwhelming policy briefing. Iron ore tumbled to a three-week low following China’s latest moves to shore up the property market, underscoring skepticism they will be enough to boost construction activity and steel demand. Oil prices advance, with WTI rising 0.3% to $70.60 a barrel after four days of declines, as traders weighed potential risks to production in the Middle East. Spot gold rises $4 having earlier hit a record high, as the increasingly tight presidential race drives demand for haven assets.

Looking at today's calendar, US economic data calendar includes September retail sales, October Philadelphia Fed business outlook and weekly jobless claims (8:30am), September industrial production (9:15am), August business inventories, October NAHB housing market index (10am) and August TIC flows (4pm). Fed’s Goolsbee is scheduled to speak at 11am

Market Snapshot

• S&P 500 futures up 0.3% to 5,905.75
• STOXX Europe 600 up 0.4% to 521.64
• MXAP down 0.3% to 189.29
• MXAPJ down 0.4% to 601.88
• Nikkei down 0.7% to 38,911.19
• Topix down 0.1% to 2,687.83
• Hang Seng Index down 1.0% to 20,079.10
• Shanghai Composite down 1.0% to 3,169.38
• Sensex down 0.6% to 80,987.77
• Australia S&P/ASX 200 up 0.9% to 8,355.92
• Kospi little changed at 2,609.30
• German 10Y yield little changed at 2.22%
• Euro little changed at $1.0854
• Brent Futures up 0.4% to $74.48/bbl
• Gold spot up 0.4% to $2,683.40
• US Dollar Index little changed at 103.61

Top Overnight News

• China’s policymakers rolled out fresh stimulus aimed at boosting the country’s sluggish property sector, though the measures fell short of hopes for more specific liquidity support. Authorities plan to fast-track credit for struggling property developers, and aim to renovate 1 million apartments in so-called urban shantytowns, a strategy used during the prior real-estate slump, the housing ministry and other policymakers said. WSJ
• China’s show of force around Taiwan in a day of massive military exercises has fueled alarm in Taipei, which wants other democracies to push back harder against Beijing. FT
• Japan reported a modest shortfall in Sept trade numbers, with exports -1.7% Y/Y (vs. the Street +0.9%) and imports +2.1% (vs. the Street +2.8%). RTRS
• Trump’s tariff plan for a second term would be far broader than what he did before and threatens to “radically” reshape global trade (tariffs could rise to the highest level since the 1930s). WSJ
• Euro-area inflation slowed more last month than initially reported, cementing the case for a second consecutive 25-bp cut at today’s ECB meeting and adding to the case for another in December. The euro weakened. BBG
• The EU warned X that it may calculate fines against the social-media platform by including revenue from Elon Musk’s other businesses, including SpaceX and Neuralink, people familiar said. The approach would significantly increase the potential penalties for violating content moderation rules. BBG
• US gasoline inventories slumped again, dropping by 5.9 million barrels last week, the API is said to have reported. That would make total holdings the lowest in almost two years if confirmed by the EIA today. BBG
• TSMC – beat across the board saying capex would be up next year (that is in street). Most positive the comments of 2nm where they are actually seeing more demand from 2nm than they had seen for N3. GS GBM
• Elevance reported a shortfall on Q3 adjusted EPS at 8.37 (vs. the Street 9.66), and the full-year EPS guide is cut to ~$33 (down from the prior “at least $37.20” outlook). The earnings miss in Q2 was driven by a large shortfall on the MCR, which spiked 270bp to 89.5% (this is about 200bp worse than anticipated). This ELV report is the second underwhelming managed care release of the week (after UNH) and follows the recent HUM 2026 CMS blowup. RTRS
• Goldman Sachs expects the Fed to deliver consecutive 25bps cuts from November 2024 through June 2025 to a terminal rate range of 3.25%-3.50%, while it expects the ECB to deliver a 25bps cut at the upcoming meeting and then sequential 25bps of cuts until the policy rate reaches 2% in June 2025.
• BofA Institute Total Card Spending (w/e 12th Oct) +0.8% Y/Y (vs -0.9% average in Sep)

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly in the green following the rebound of equity markets stateside but with gains capped amid quiet macro catalysts and as China's property sector briefing failed to rally local developers. ASX 200 climbed to a fresh record high led by strength in real estate, industrials and financials, while strong jobs data added to the upbeat mood but further lowered the odds of a rate cut this year. Nikkei 225 underperformed following disappointing trade data including a surprise contraction in exports. Hang Seng and Shanghai Comp advanced at the open with the help of tech strength and consumer-related stocks, although the mainland index briefly wiped out all of its gains amid weakness in property stocks as the press briefing by several Chinese government agencies and the PBoC failed to inspire a turnaround in the sector.

Top Asian News

• Japan Bankers Association Chair said "Personally, I think the Japanese economy is really at a tipping point with wage increases"
• China's Housing Minister vowed to stabilise the property market from declining further in the press briefing and said the government has announced a raft of policies on housing, while he announced they will add 1mln village urbanisation projects, as well as expand the white list of projects and bank lending to CNY 4tln. Furthermore, they will adopt monetisation measures for urbanisation projects and cities will make their own decisions regarding property restrictions based on the economic situation and local property market conditions.
• PBoC Deputy Governor said regarding existing mortgage rate cuts that most stock of existing mortgage loans interest rates will be adjusted on October 25th and real estate development loans will be extended until end-2026, while interest rates on existing mortgages are expected to fall by an average 50bps, benefitting 50mln households and 150mln residents.
• China's Assistant Finance Minister said regarding housing purchases that the use of special loans is to support the local government in accordance with the actual situation and they will further broaden local funding sources, while he said they will reduce the burden on developers and home buyers regarding property taxes.
• China NFRA Deputy Director said all commercial housing loans are to be included in the 'whitelist' and management of real estate projects are to be further standardised, while financing will be made more convenient and quicker. The official added that commercial banks should make full use of loans and they should optimise the allocation of loans and method of appropriation.

European bourses, Stoxx 600 (+0.4%) began the session modestly firmer and gradually edged to session highs as the morning progressed before coming off best levels. Sentiment across European futures improved following the release of TSMC’s earnings, with tech opening in the green but then faltering. European sectors hold a slight positive bias; Banks take the top spot, lifted by post-earning strength in Nordea Bank (+3.5%). The Basic Resources sector is found towards the bottom of the pile, hampered by broader weakness in the base metals complex. US Equity Futures (ES +0.3%, NQ +0.6%, RTY +0.2%) are modestly firmer across the board, ahead of key US data which includes US Initial Jobless Claims, Philly Fed Index, Retail Sales and Industrial Production. Earnings include: Nestle (revenue & guidance soft), Nokia (missed, maintained outlook), Pernod Ricard (Miss, China sales -26%). EU is weighing using Elon Musk's empire revenue as a potential fine for X, according to Bloomberg sources; Tesla (TSLA) would be exempt as it is a publicly-traded company.

Top European News

• BoE's Prudential Regulation Authority is to signal more rules can be relaxed to support growth, according to FT.
• UK Chancellor Reeves will use her Budget to increase capital gains tax on the sale of shares and other assets but will not change the rate for second homes, according to The Times. It was also reported that Reeves's Budget is set to be the largest tax raiser in history in which she may look to increase fuel duty and faces backlash from Cabinet colleagues, according to The Telegraph.

FX

• USD is showing a mixed performance vs. peers, however, that could change later in the session amid a slew of US data points with retail sales being the standout highlight. To the upside for DXY, the 200DMA is at 103.77.
• EUR is trivially lower vs. the USD in the run-up to today's ECB rate decision which is widely expected to see a 25bps reduction in the deposit rate. To the upside, Wednesday's high lies at 1.0901. On the downside, there is clean air until 1.0800.
• GBP is flat vs. the USD following yesterday's CPI-induced sell-off which saw Cable decline from a 1.3077 high to an overnight trough at 1.2974. However, if the downside resumes, the focus will be on a test of the 100DMA at 1.2954.
• JPY is a touch softer vs. the USD, however, USD/JPY remains unwilling to crack 150.00 to the upside after printing a high at 149.98 on Monday.
• Diverging fortunes for the antipodes with AUD boosted by strong jobs data overnight which has further heightened expectations that the RBA will delay commencing its rate-cutting cycle until next year. NZD is flat vs. the USD in quiet newsflow.

Fixed Income

• Bunds are on the back foot, holding around a 133.74 trough ahead of resistance at 133.68 from Wednesday before 133.40-42 before 133.00 itself. The Spanish auction was strong but was unable to stop the selling pressure.
• USTs are modestly lower and directionally in-fitting with peers but with magnitudes once again smaller; the docket today holds US Initial Jobless Claims, Philly Fed Index, Retail Sales and Industrial Production. At a 112-11 base, just below Wednesday’s 112-13 low. For Europe, focus on the ECB ahead of which Final EZ HICP was revised down.
• Gilts are the marginal laggard after Wednesday’s inflation-driven upside. Gilts gapped lower by 23 ticks and have since slipped by another 20 ticks to a 97.55 base.
• Spain sells EUR 5.115bln vs exp. EUR 4.5-5.5bln 3.10% 2031, 3.45% 2034, 2.70% 2048 Bonos
• France sells EUR 12bln vs EUR 10-12bln 2.50% 2027, 0.75% 2028, 2.75% 2029, and 2.75% 2030 OAT

Commodities

• Crude oil is choppy and trading on either side of the unchanged mark amid light catalysts thus far and following four back-to-back closes in the red. Brent Dec trades in a 73.89-74.92/bbl parameter.
• A mixed session for precious metals with spot palladium flat, silver subdued, and gold eking mild gains at the time of writing. Spot gold incrementally printed fresh record highs of USD 2,685.84/oz in today's session.
• Base metals are mostly lower after being initially underpinned overnight alongside the mostly constructive risk tone in Asia but later faltered as participants were underwhelmed by Beijing's latest press briefing on the property sector.
• Peru copper output rose 10.7% Y/Y in August to 246.6k tons.

Geopolitics: Middle East

• German naval ship reportedly brought down an unmanned flying object in an incident off the coast of Lebanon early Thursday, according to a German Defence Ministry spokesman.
• Israeli source cited by ABC said PM Netanyahu agreed to a set of targets to be hit inside of Iran without specifying a timeline for the attack, according to Al Jazeera.
• Israeli PM Netanyahu said he held an emergency discussion on increasing aid to Gaza, according to Reuters citing three Israeli officials.
• US President Biden's envoy told aid groups that Israel is too close an ally for the US to suspend arms, according to POLITICO. It was separately reported that US Defence Secretary Austin spoke to his Israeli counterpart on Wednesday and reinforced the importance of taking all necessary measures to ensure the safety and security of UNIFIL forces and Lebanese armed forces, according to the Pentagon.
• Yemen's Houthi Al Masirah TV reported US-British air strikes which targeted the capital of Sanaa and the city of Saada, while US Defence Secretary Austin said US forces targeted several Houthi underground facilities housing various weapons components in Yemen.
• Explosions were heard amid reported Israeli aggression targeting Syria's Latakia, according to Syrian state media.

Geopolitics: Other

• China's Coast Guard said a Japanese fishing boat illegally entered the territorial waters of Diaoyu Island and the Chinese Coast Guard drove away Japanese vessels on October 15th-16th in accordance with the law, according to state media.
• North Korea said roads and railways with South Korea were completely cut off under its constitution that defines the South as a hostile state, while it will continue to take measures to permanently fortify the border with South Korea, according to KCNA.

US Event Calendar

• 08:30: Sept. Retail Sales Advance MoM, est. 0.3%, prior 0.1%
  • Sept. Retail Sales Ex Auto MoM, est. 0.1%, prior 0.1%
  • Sept. Retail Sales Control Group, est. 0.3%, prior 0.3%
  • Sept. Retail Sales Ex Auto and Gas, est. 0.3%, prior 0.2%
• 08:30: Oct. Initial Jobless Claims, est. 258,000, prior 258,000
  • Oct. Continuing Claims, est. 1.87m, prior 1.86m
• 08:30: Oct. Philadelphia Fed Business Outl, est. 3.0, prior 1.7
• 09:15: Sept. Industrial Production MoM, est. -0.2%, prior 0.8%
  • Sept. Manufacturing (SIC) Production, est. -0.1%, prior 0.9%
  • Sept. Capacity Utilization, est. 77.8%, prior 78.0%
• 10:00: Aug. Business Inventories, est. 0.3%, prior 0.4%
• 10:00: Oct. NAHB Housing Market Index, est. 42, prior 41
• 16:00: Aug. Total Net TIC Flows, prior $156.5b

DB's Jim Reid concludes the overnight wrap

Markets put in a solid performance yesterday, with investors remaining upbeat as they digested several earnings results and another modest decline in oil prices. This backdrop proved very supportive for risk assets, meaning that the S&P 500 (+0.47%) advanced to its second-highest ever closing level, whilst US IG spreads remained at their tightest since June 2021. Investors even grew more relaxed about inflation thanks to the decline in commodity prices and a downside surprise in the UK CPI release, which helped sovereign bonds to rally on both sides of the Atlantic. So it was a strong day overall, even as a few concerns remain in the background, not least around geopolitical tensions in the Middle East.

When it comes to the next 24 hours, central banks will be back in the spotlight today, as the ECB is widely expected to deliver another 25bp rate cut, taking their deposit rate down to 3.25%. Bear in mind that as recently as mid-September, markets were expecting that the ECB would probably stay on hold at this meeting, having only done quarterly cuts so far in June and September. But since then, we’ve had a weak batch of data, with the Euro Area composite PMI in contractionary territory for the first time in 7 months, whilst inflation has also continued to fall. In fact, Euro Area headline inflation was down to +1.8% in September, which is the first time it’s been beneath the ECB’s 2% target in over three years. So the backdrop has turned a lot more dovish in recent weeks.

DB’s economists also expect the ECB to cut by 25bps today, and they write that this would signal a pivot towards faster easing, as it would be the first back-to-back cut of the cycle. But given the high level of macro uncertainty, they don’t expect the ECB to move away from the 'data dependent, meeting by meeting' approach to policy. For more info, see their full preview here.

Ahead of the ECB’s decision, sovereign bonds rallied on both sides of the Atlantic. In part, that was because of the UK CPI print for September, which came in beneath expectations and helped to reassure investors about inflationary pressures, not least after Canada’s inflation data also surprised on the downside on Tuesday. The release showed UK headline inflation was down to +1.7% (vs. +1.9% expected), which is its lowest since April 2021. And even though core inflation was stronger at +3.2% (vs. +3.4% expected), that was also its weakest in three years.

That downside surprise in UK inflation led investors to dial up their expectations for Bank of England rate cuts. Indeed, overnight index swaps for the June 2025 meeting were pricing in 114bps of rate cuts by the close, up +9.8ps on the previous day. That pattern was echoed more broadly as well, with expectations for ECB cuts by June up +4.1bps on the day to 137bps. And over in the US, there were now 121bps cuts priced by June, up +2.8bps on the day. So that offered fresh momentum to sovereign bonds, which was also supported by the latest declines in commodity prices. So by the close, it meant that yields on 10yr gilts (-9.7bps) had seen a sharp decline, whilst those on 10yr bunds (-3.8bps), OATs (-3.4bps) and BTPs (-5.2bps) all moved lower as well.

Over in the US, the decline in yields was smaller, with those on 10yr Treasuries down -2.0bps to 4.01%. But in the meantime, we did get a fresh indication that the recent pickup in US yields has been filtering through to mortgages, with data from the Mortgage Bankers Association showing that the 30yr fixed rate was up to 6.52% in the week ending October 11, having been at 6.14% just a couple of weeks earlier. Moreover, that decline yesterday has since pulled back overnight, with the 10yr Treasury yield up +1.8bps this morning again to 4.03%.

When it came to equities, there were solid gains in the US which saw the S&P 500 rise +0.47%, leaving it less than -0.3% beneath its record high from Monday. The key theme was a rotation towards small-cap stocks, with the Russell 2000 (+1.64%) reaching its highest level since November 2021. A few other segments also did very well, with the KBW Bank Index (+1.71%) reaching its highest level since March 2022, and Morgan Stanley (+6.50%) was the strongest performer in the index after its earnings release. On the other hand, the megacap tech stocks underperformed, with the Magnificent 7 (+0.01%) little changed despite a +3.13% gain for Nvidia, amidst losses for Meta (-1.62%), Apple (-0.89%) and Microsoft (-0.63%).

In terms of the geopolitical situation, investors are still following the Middle East closely, including what form any retaliation from Israel might take against Iran. But in the meantime, oil prices continued to fall back modestly yesterday, with Brent crude (-0.04%) losing ground for a fourth consecutive day to end the session at $74.22/bbl.

Overnight in Asia, there’s been a mixed performance across the major equity indices, and US equity futures are also pointing lower this morning, with those on the S&P 500 down -0.23%. Initially, Chinese equities had posted strong gains overnight, with the CSI 300 up +1.32% at its intraday peak, but it’s since pared those back to only be up +0.08% at time of writing. That followed the news that China would almost double its loan quota for so-called “white-list” property projects, up to 4 trillion yuan, but this fell short of some expectations, and the CSI 300 Real Estate Index is down -4.95% this morning.

Elsewhere in the region, Australian government bond yields have risen after the country’s employment report for September was stronger than expected. It showed the unemployment rate falling to 4.1% (vs. 4.2% expected), while employment was up by +64.1k (vs. +25.0k expected), coming in above every economist’s estimate on Bloomberg. That’s seen investors dial back the likelihood of a near-term rate cut by the RBA, with the probability of a rate cut by the December meeting down to 36% overnight, from 49% at yesterday’s close.

Finally in Japan, the Nikkei has fallen by -0.65% this morning, which follows data showing that Japan’s exports were down -1.7% year-on-year in September. That’s the biggest decline since February 2021, and it fell short of estimates for a +0.9% gain.

To the day ahead now, and the main highlight will be the ECB’s policy decision, along with President Lagarde’s subsequent press conference. We’ll also hear from the Fed’s Goolsbee. Data releases from the US include retail sales, industrial production and capacity utilisation for September, the weekly initial jobless claims, and the NAHB’s housing market index for October. Finally, earnings releases include Netflix.

Tyler Durden Thu, 10/17/2024 - 08:13

TSMC Beats Forecasts On 'Insane' AI Demand

Nasdaq 100 futures rose 80 bps as US chip stocks jumped in premarket trading in New York after Taiwan Semiconductor Manufacturing reported 'insane' AI demand. This comes days after Dutch semiconductor equipment maker ASML posted disappointing earnings and sales forecast that sent global chip stocks into a downward spiral.

The Taiwan-headquartered chipmaker reported a 54% YoY jump in net profit to NT$325.3 billion ($10.2 billion) in the third quarter, exceeding the average Wall Street estimate of NT$299.3 billion (tracked by Bloomberg). The sharp profit increase was primarily due to the 'insane' demand for AI chips.

Here's a snapshot of the third quarter (courtesy of Bloomberg): 

• Net income NT$325.3 billion, +54% y/y, estimate NT$299.3 billion

• Gross margin 57.8% vs. 53.2% q/q, estimate 54.8%

• Operating profit NT$360.77 billion, +58% y/y, estimate NT$330.82 billion

• Operating margin 47.5% vs. 42.5% q/q, estimate 44.6%

• Sales NT$759.69 billion, +39% y/y, estimate NT$751.06 billion

"Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies," Wendell Huang, Senior VP and Chief Financial Officer of TSMC, wrote in a statement. 

Huang continued, "Moving into the fourth quarter of 2024, we expect our business to continue to be supported by strong demand for our leading-edge process technologies."

If demand at the world's largest contract chipmaker, which supplies chips to Apple and Nvidia, continues through the end of the year, TSMC could exceed Bloomberg consensus forecasts for the fourth quarter: 

TSMC's fourth quarter forecast 

• Sees sales $26.1 billion to $26.9 billion, estimate $24.94 billion (Bloomberg Consensus)

• Sees gross margin 57% to 59%, estimate 54.7%

• Sees operating margin 46.5% to 48.5%, estimate 44.3%

In a note on Thursday to clients, Goldman's Sean Johnstone commented on TSMC's solid earnings: 

TSMC – beat on Q3 and sees 4Q SALES OF $26.1B TO $26.9B, EST. $24.94B. Sees CAPEX for 2024 to be "slightly higher than $30b" due to strong AI demand. On capex for 2025 would not be drawn on a number but saying that 'next year will be a healthy year' as in higher than 2024. This is also the view of GIR which has recently increased its capex for '25E to $40B vs previously $36B. So the positive is that TSMC continues to deliver, seems very positive on the outlook for AI (as expected). On AI - extremely robust" and believes demand is "real and just beginning" and expect to "last for many years." Overall chip demand outside of AI is stabilizing and starting to improve. On 2nm remain positive so saying that they have seen interest in 2nm and are actually seeing more demand from 2nm than they had seen for N3. Demand is very high and TSMC is preparing both 2nm and A16 and they need to prepare capacity for N2.So net +ve for ASM. To be fair ASML yesterday they suggested that TSMC would be fine and that issue with pushout was not TSMC but Samsung, Intel and memory names.

TSMC's solid earnings and forecast contend with a downbeat earnings report from major supplier ASML, the world's largest chip equipment maker, earlier in the week. ASML downgraded its revenue guidance for 2025 on a slower PC and mobile phone recovery. However it noted that AI demand was still solid. 

C.C. Wei, TSMC chairman and CEO, told investors, "One of my key customers said the [AI] demand right now is insane," adding, "The demand is real. I believe it's just the beginning of this demand ... and it will continue for many years." 

On Thursday, Nomura Securities analyst Aarong Jeng told clients, "AI continues to be the driver to TSMC's fundamentals and valuations."

"Mid-next year will be an important period, as more companies are working with more advanced ... AI with new logic and memory chips, plus more powerful large language models," Simon Woo, Asia-Pacific technology research coordinator at BofA Securities, told clients. 

Woo noted, "But still, the uncertain factor is whether consumers will be excited with a new [AI-powered] smartphone, new PC, new TV, new consumer electronics." 

In markets, TSMC ADR shares jumped more than 8% to a new record high above the $200 handle. 

Nasdaq futures jumped 80 bps following the report. 

Risk on returns. 

Tyler Durden Thu, 10/17/2024 - 08:00

ECB Preview And Cheat Sheet: How To Trade The 3rd Rate Cut

The ECB is expected to cut interest rates Thursday for the third time this year and for a second-straight meeting, quickening the speed of easing as a rapid retreat in inflation accompanies a deteriorating economy.

Analysts polled by Bloomberg unanimously predict that the deposit rate will be decreased by another quarter-point on Thursday, to 3.25%. The euro is set for a fourth day of losses against the US dollar with anticipation policymakers will signal a willingness to loosen policy again soon. Here is a scenario analysis courtesy of ING Economics:

According to Bloomberg FX strategist Vassilis Karamanis, options traders aren’t predicting fireworks for the euro from the ECB meeting, but positioning could make all the difference. Overnight volatility in the common currency hits one of the lowest readings ahead of a ECB decision since officials started increasing interest rates in July 2022. On Wednesday, hedging costs were at the lowest level in three years on the eve of a meeting day.

Relatively low volatility reflects market consensus for a quarter-point cut and low expectations for concrete forward guidance from President Christine Lagarde. So it’s down to positioning adjustments to see higher-than-expected realized volatility.

According to CFTC data, hedge funds were close to holding a neutral exposure for the week ending Oct. 8, while real money accounts were still long the euro but with waning conviction. Europe-based interbank traders say that aggregate short-term positioning is around -1.5 on a scale from -5 to +5.

One-day breakeven in the euro stands at around 50 dollar pips which poses a low bar for a surprise should investors decide to rebalance their spot exposure, even if Lagarde sticks to script and keeps all options open for the December meeting. A clearly dovish or hawkish cut is bound to see wider ranges than expected.

Deep Dive Into Markets:

EUR/USD is trading modestly lower at 1.0866 as of 7:35am ET; it’s down 1.6% year-to-date and heads for a third week of declines for the first time since June. Technically, the euro remains within a bullish trend channel initiated a year ago, with support currently coming around 1.0770; a short-term MA bearish crossover weighs on sentiment:

• Euro longs need mean reversion to take over and 1.0835, the 61.8% Fibonacci retracement of gains since mid-April, to hold on a closing basis
• Euro bears target a move to the Aug. 1 low at 1.0778 which could result in profit-taking bias taking over

Overnight volatility trades at 9.75% for a breakeven of around 50 dollar pips

• One-week 25d risk reversals trade at 32 basis points, puts over calls, and are in consolidation mode this week; downside exposure trades at a premium across tenors, which widens as one moves further out the curve; see 3-D surface
• Large expiries Thursday include 1.0800 (€988m) and 1.0975 (€914m): DTCC

Positioning, according to traders in Europe: Interbank desks have shifted this month into sell-the-rally mode while fast money enter the decision long the greenback; real money names still hold on longs.

Tyler Durden Thu, 10/17/2024 - 07:40

African Nations Plan To Launch Their Own 'Energy Bank'

Authored by Irina Slav via OilPrice.com,

• African nations are planning the creation of an African Energy Bank.

• African resource-rich countries have grown frustrated with Western banks' refusal to lend money for the development of oil and gas fields.

• For now, the 18 members of the African Energy Bank initiative have agreed to each contribute $83 million towards the bank, for a total of $1.5 billion.

African countries are planning to launch their own financing vehicle for oil and gas projects in the face of growing pressure from Western financial institutions to abandon the development of these resources. The group of 18 states needs $5 billion to kickstart what it calls an energy bank.

They call themselves the African Petroleum Producers Organization, according to a recent report in the Financial Times that said African resource-rich countries have grown frustrated with Western banks' refusal to lend money for the development of oil and gas fields, to which they believe they have a sovereign right. It's hard to argue with that.

"[These] are countries at a development stage where you cannot suddenly move into green [transition] . . . you cannot just say funding is cut and they can't do oil," Haytham El Maayergi, global trade executive VP at African Export-Import Bank told the publication in an interview. Afrexim Bank is partnering with the 18 states to set up the new institution.

Africa is the continent with the smallest carbon footprint. It's also a continent rich in yet-to-be-tapped oil and gas. Under pressure from pro-transition Western governments, international lending institutions such as the World Bank and the African Development Bank have stopped providing money for such energy projects, limiting these countries' chances of taking advantage of their own resources the way countries such as the United States are doing.

The U.S. is the second-largest shareholder in the African Development Bank, per the Financial Times. Not only that, but Biden administration officials have recently praised the latest boom in U.S. shale oil and gas at the same time as that government's representatives in the ADB favor no oil and gas development in Africa. That must sting.

"Africa's context is totally different from what you find elsewhere," Afrexim Bank's El Maayergi told the FT, noting that unlike some legacy oil and gas producing regions, much of Africa's hydrocarbon wealth has yet to be developed, serving to alleviate rampant poverty in many parts of the continent where 600 million have no access to electricity and as many as 1 billion cook with charcoal, dung, and firewood.

Once again, it would be difficult for institutions such as the World Bank—or indeed, private banks—to argue with the assertion that African nations have the right to reap the same benefits from hydrocarbons that Western nations have reaped for decades before they decided to shift beyond oil and gas. It would be especially difficult because that shift is proving trickier than its architects expected and the Western world remains essentially as dependent on oil and gas as before.

Meanwhile, African governments are dealing with boycotts by banks and, most recently, insurers, themselves the object of growing pressure by climate activists, who insist that Africa must remain the least emitting continent, leapfrogging the hydrocarbon era and moving straight from charcoal to wind and solar. International lenders such as the WB and the ADB would be only too happy to finance such projects. Yet there is a problem with those.

Solar and wind farms generate electricity by capturing the light of the sun or the energy of the wind and converting it into electricity. This electricity then needs to be transmitted to where it will be used or stored. It is at this point that one of the challenges specific to Africa rears its head: transmission.

Many African countries simply lack transmission infrastructure extensive enough to accommodate utility-scale solar and wind installations economically. After all, a company cannot just build a solar farm at a random spot only because it is near the existing infrastructure. Solar and wind farms require optimal conditions to perform well. The fact that transmission is a problem even in mature wind and solar markets such as Europe speaks volumes about the size of the challenge of the transition in African countries.

So, African states are getting together to find an alternative to Western lenders. For now, the 18 members of the African Energy Bank initiative have agreed to each contribute $83 million towards the bank, for a total of $1.5 billion. Afrexim Bank will match this amount, leaving a gap of $2 billion that needs to be filled by external institutions such as sovereign wealth funds, private funds, and other banks, the FT report said.

According to the African Energy Chamber, a group advocating for the development of local oil and gas resources, there are 125 billion barrels of oil and 620 trillion cu ft of natural gas waiting to be tapped. Luckily for those eager to develop their own resources, Big Oil, if not Big Bank, is rather interested. And it is already moving to explore these resources despite the relentless pressure from activists.

Namibia is a case in point, as the country eyes the rank of fifth-largest oil producer in Africa by 2035, but so are countries such as Uganda and Senegal, in addition to legacy producers such as Nigeria, Angola, and Libya—all but Uganda members of the African Petroleum Producers Organization.

Tyler Durden Thu, 10/17/2024 - 07:20

Great News: Americans' Trust In Mass Media Hits All-Time Low

Good news is hard to come by in this late-stage American empire, but a new poll offers a ray of hope, finding that Americans' trust and confidence in mass media is at an all-time low. 

Only 31% of Americans have a "great deal" or a "fair amount" of trust in mass media "when it comes to reporting the news fully, accurately and fairly," according to Gallup poll conducted in early September. A greater number of Americans -- 36% -- say they have no trust at all.  

Going back to when Gallup first asked the question in 52 years ago, trust was highest in 1976, topping out at 72% -- more than double current levels. Meanwhile, the percent expressing complete distrust has soared from single digits in '76.  

Time and time again, mass media has fully earned those low marks -- from cultivating the lie that Saddam Hussein had weapons of mass destruction, promoting the Trump-Russia collusion hoax, echoing false narratives undergirding the unscientific, tyrannical and ultimately disastrous Covid regime, and covering up President Biden's mental collapse, just to name a few. Social media has likely played a role, as it often provides Americans with information that contradicts mass media narratives -- or provides information that mass media ignores altogether.  

Far fewer Republicans than Democrats have a great deal or fair amount of trust in media, by a 12% to 54% margin. However, even Democrats' trust has fallen significantly, from 76% during the Trump presidency. Expect that number to keep falling as older Democrats die off. "Young Democrats trust the media far less than older Democrats do: 31% of Democrats aged 18 to 29 versus 74% of those aged 65 and older have a great deal or fair amount of confidence," reports Gallup. 

By a thin margin, mass media is the least trusted of 10 major civic and political institutions evaluated in the Gallup survey, edging out the US Congress, which only 34% of Americans have a fair or high degree of trust and confidence. State and local governments had the best showing. 

Gallup grimly sums up the situation as a "crisis of confidence," but we find rising distrust in untrustworthy institutions profoundly heartwarming. 

Tyler Durden Thu, 10/17/2024 - 06:55

German Companies Skirt Sanctions To Help Putin's War Machine

Authored by Liz Heflin via Remix News,

Germany continues to sell industrial goods to Russia, including machines for manufacturing vehicle and aircraft parts and ammunition, according to the Tagesschau news portal, which reported on an investigation conducted by broadcaster SWR.

Putin needs a constant supply of military equipment, and due to the sanctions imposed on Russia blocking imports, large parts of Russian industry have been transformed to cater to a war economy, producing military equipment, ammunition and spare parts as required. 

However, products from German mechanical engineering companies also continue to help out, with more than 300 machine deliveries for manufacturing everything from vehicle parts to ammunition made in Russia in 2023, often via Turkey, SWR research indicates. 

SWR was able to identify more than 30 German manufacturers whose machines were imported to Russia last year, many of them based in Baden-Württemberg, a traditional location for mechanical engineering.

In around two-thirds of the cases, the machines were imported to Russia via Turkey. Some Turkish middlemen involved have direct connections to Russia, while other companies there facilitating the shipments were founded by Russian entrepreneurs.

Videos and photos obtained by SWR prove just how extensively German machines are used by Russian military suppliers, including by Russian companies Parsek, Kamaz, NIR and Industrial Solutions. 

Most of the deliveries involved large industrial machines or so-called CNC machines, computer-controlled equipment that enables automated manufacturing.

These machines can cut steel, weld parts, and perform other functions for the production of defense equipment, such as vehicle/aircraft parts and ammunition.

Olena Yurchenko ,from the Economic Security Council of Ukraine, claims that 80 percent of CNC machines in Russia are now used in military production:

“With computer-aided CNC machines, they can produce much faster and more precisely, which is extremely important, especially in the weapons sector. This ultimately enables them to produce even more deadly weapons. And Germany is the market leader in the production of these machines, with a share of up to 30 percent in Russia,” she told the portal.

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Tyler Durden Thu, 10/17/2024 - 06:30