A Fed Pivot? Gold Surges. Oil Firms. OPEC Tomorrow.

Baltic Dry Index. 2391 +132         Brent Crude  81.61

Spot Gold 2044                  US 2 Year Yield 4.73 -0.11

I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.

Jesse Livermore.

In the stock casinos, a growing sense of a change in sentiment. Perhaps we shouldn’t be buying the dips but selling the rallies.

If a global slowdown or worse is arriving and another military debacle is at hand in Ukraine, it’s probably best to opt for risk off by sitting out the next six months or a year in the relative safety of US T. Bills and UK short Gilts.

Hong Kong stocks lead Asia losses; Australia inflation slows more than expected

UPDATED WED, NOV 29 2023 12:23 AM EST

Asia-Pacific markets largely fell, led by losses in Hong Kong as investors assess comments from the U.S. Federal Reserve board members and digest Australia’s October inflation figures.

Shares of Chinese food delivery giant Meituan plunged 12% after warning of a demand slowdown for its services in its third-quarter earnings call.

Hong Kong’s Hang Seng index tumbled 2.03%, leading losses among major Asian benchmarks, while the mainland Chinese CSI 300 index also slid 0.73%.

In Australia, the S&P/ASX 200 extended gains from Tuesday and climbed 0.29% to close at 7,035.3. as the country’s overall inflation rate for October slowed to 4.8%, its lowest rate since January 2022.

South Korea’s Kospi lost 0.22% after hitting a two-month high on Tuesday, but the small-cap Kosdaq gained 0.54%

Japan’s Nikkei 225 rose 0.14%, while the Topix was down 0.36%.

Overnight in the U.S., all three major indexes rose after Waller’s comments that the Fed could be done hiking rates, with the Dow Jones Industrial Average adding 0.24%.

In contrast, Governor Michelle Bowman said more rate hikes will likely be needed, “so as to keep policy sufficiently restrictive to bring inflation down to our 2 percent target in a timely way.”

The broader S&P 500 index inched higher by 0.1%, while the tech-heavy Nasdaq Composite gained 0.29%.

Asia stock markets today: Live updates, Fed comments, Australia inflation (cnbc.com)

European stocks head for mixed open, struggling to build positive momentum

UPDATED WED, NOV 29 2023 12:42 AM EST

European stocks are heading for a mixed open Wednesday as regional markets struggle to build positive momentum and assess comments from the U.S. Federal Reserve board members.

On Tuesday, Federal Reserve Governor Christopher Waller said he was growing more confident that policy was in a place now to bring inflation back under control. However, he maintained that inflation was still too high. Waller also said the Fed might start lowering rates if inflation continues to ease over the next three to five months.

U.S. stock futures ticked up on Tuesday night, as investors held out hope that the Federal Reserve is done raising benchmark interest rates. Asia-Pacific markets largely fell overnight, led by losses in Hong Kong.

European markets live updates: stocks, news, data and earnings (cnbc.com)

With Fed likely done hiking rates, Waller flags pivot ahead

By Howard Schneider and Ann Saphir  November 29, 2023 4:37 AM GMT

WASHINGTON, Nov 28 (Reuters) - Federal Reserve policymakers look increasingly comfortable closing out the year with U.S. interest rates on hold and the clock ticking on how soon to deliver a first rate cut as they try to engineer a "soft landing" for the economy.

"Inflation rates are moving along pretty much like I thought," Fed Governor Christopher Waller, a hawkish and influential voice at the central bank, told the American Enterprise Institute think tank on Tuesday.

"I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2%," he said, and also "reasonably confident" of doing so without a sharp rise in the unemployment rate, now at 3.9%.

If the decline in inflation continues "for several more months ... three months, four months, five months ... we could start lowering the policy rate just because inflation is lower," he said. "It has nothing to do with trying to save the economy. It is consistent with every policy rule. There is no reason to say we will keep it really high."

Additional Fed rate increases remain a possibility if upcoming data includes an unexpected resurgence of price pressures, he said. And an unforeseen shock could "blow up" the soft-landing scenario, he said.

But overall it was a shift in tone that appeared to start a countdown on a long-expected pivot.

---- Bond yields fell after the remarks, and traders moved to price rate cuts starting in May and dropping more than a full percentage point in 2024.

The Fed held its benchmark overnight interest rate steady in the 5.25%-5.50% range at the end of its Oct. 31-Nov. 1 policy meeting, and analysts overwhelmingly expect the same outcome at the Dec. 12-13 meeting.

Waller's comments included the caveats that are now standard in public appearances by Fed officials.

More

With Fed likely done hiking rates, Waller flags pivot ahead | Reuters

Dollar weakens further as rate cut bets build, but equities mixed

Wed, November 29, 2023 at 3:00 AM GMT

The dollar extended losses Wednesday as traders ramped up bets on the Federal Reserve cutting interest rates in the new year after officials sounded optimistic notes on the battle against inflation.

However, equity markets were mixed following another tepid performance on Wall Street, with focus on the release of the central bank's favoured gauge of prices coming up later in the week.

A string of indicators in recent weeks has indicated the US jobs market is softening and the economy slowing down -- but not quickly enough to cause much concern about a recession.

That has encouraged investors to shift back into risk assets, though the latest advance has been tempered by profit-taking ahead of what many hope will be a "Santa rally".

Data shows traders are now betting the Fed will cut rates in June, while they have priced an 80 percent chance of such a move in May, according to Bloomberg News.

Billionaire investor Bill Ackman, founder of Pershing Square Capital Management, has said there could even be one as early as the first quarter.

His comments came as Fed Governor Christopher Waller, usually one of the more hawkish members, struck an upbeat tone in a speech Tuesday.

"I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to two percent," he told the American Enterprise Institute in Washington, referring to the bank's target.

"I am encouraged by what we have learned in the past few weeks -- something appears to be giving, and it's the pace of the economy."

- 'Well-timed pivot' -

His counterpart Michelle Bowman said she would support more hikes if the data suggested they were needed but was much more conditional in her assessment than in the past.

The more dovish comments, combined with falling yields and rate expectations has dragged on the dollar, and it extended losses Wednesday.

It was sitting at its weakest level since September against the yen, while it was at a near four-month low versus the euro and sterling.

More

Dollar weakens further as rate cut bets build, but equities mixed (yahoo.com)

Nobody wants U.S. Treasury bonds

Nov 28, 2023, 4:54pm GM

 

Nobody wants U.S. Treasury bonds.

Once a symbol of America’s economic might and accepted as a global coin of the realm, they have fallen badly out of favor, with serious consequences for taxpayers, investors, and financial markets.

Elementary economic forces — too much supply and not enough demand — have collided to create the worst stretch for U.S. government bonds since the Civil War. The government keeps borrowing to cover its budget deficits, while once-reliable buyers of that debt, both at home and abroad, have pulled back.

The result: Investors are demanding the steepest yields since 2007. Auctions of fresh bonds that were once routine are now going terribly. And bond portfolios are getting absolutely hammered. The longest-dated Treasury bonds are in a bear market worse than the dot-com bust and almost as bad as 2008.

The government is borrowing more than expected, increasing the supply of Treasurys and dinging their value. Meanwhile, the Federal Reserve is selling down its own holdings, dumping yet more bonds into a market that doesn’t really want them.

“There’s just a lot less demand than there was even six months ago,” Goldman Sachs’ Jim Esposito said last week. “You can buy a 6-month T-bill that’s yielding north of 5%. Why wouldn’t you buy that instead of a long bond that’s yielding 4¾?”

More

Demand sagging for U.S. Treasury bonds | Semafor

Finally, more on NATO’s proxy war on Russia, fighting to the last Ukrainian, but for what possible gain to Ukrainians that wasn’t on offer by the diplomacy of Presidents Macron and Erdogan assisted by Israel’s Naftali Bennet in 2021-2022? 

Besides, the Americans seem to have lost interest in the Ukraine stalemate, more interested in a more winnable war in Gaza against women and children.

The lesson, as Vietnamese, Afghans and Iraqis found out, don’t get suckered into fighting other peoples wars, least of all in your own country.

'At what cost?' Ukraine strains to bolster its army as war fatigue weighs

By Olena Harmash and Tom Balmforth  November 28, 2023 6:08 AM GMT

 

KYIV, Nov 28 (Reuters) - When Antonina Danylevych's husband enlisted in the Ukrainian army in March 2022, he had to line up at the draft office alongside crowds of patriotic countrymen.

There are no crowds now, she says.

Danylevych, a 43-year-old HR manager, gave her blessing when Oleksandr joined up with tens of thousands of other Ukrainian citizens to defy the Russian invasion.

Now she's finding it hard to cope, with no end in sight. Her husband has only had about 25 days' home leave since he enlisted and their two children are growing up without a father.

"We want Ukraine to win, but not through the efforts of the same people," she said in an interview at her home in Kyiv. "I can see they need to be replaced and that they also need to rest, but for some reason other people don't understand."

Women on the home front have also had to become stronger, she added: "But at what cost did we become stronger?"

Her husband - a university lecturer with no prior combat experience who's now a platoon commander - watched his son get married this year on his phone by video call from the ruined city of Bakhmut. His 14-year-old daughter misses her dad.

Almost two years into the grinding war, this family and others around the country are coming to terms with the prospect of a much longer and costlier conflict than they had hoped for, and one that some now acknowledge they're not guaranteed to win.

This autumn, Danylevych was one of 25,000 people to sign a petition to President Volodymyr Zelenskiy saying that military service cannot remain open-ended and calling for troops to be given a clear timeline for when they will be discharged.

The campaign, which has included two protests by 50 to 100 people in Kyiv's main square in recent weeks, illustrates a growing level of exhaustion among Ukrainian troops and the mounting toll that is taking on families back home.

Ukraine's vaunted summer counteroffensive has so far failed to deliver a decisive breakthrough, both sides are dug in along largely static front lines and questions are being asked over whether foreign military aid will be as forthcoming as it was.

The country has relied on tens of billions of dollars in arms from the United States and other allies to sustain its war effort, but stockpiles of artillery shells are emptying and governments are cooler on sustaining previous levels of support.

Such protests would have been unthinkable a year ago when national morale soared as Ukraine beat Russian forces back from Kyiv and retook swathes of the northeast and south. Martial law, declared at the war's start, prohibits public demonstrations.

Danylevych's campaign points to difficult choices war planners face as they try to maintain the flow of recruits to defeat a much larger army amid steady losses, while retaining a big enough workforce to sustain the shattered economy.

Only Ukrainian men aged between 27 and 60 can be mobilised by draft officers. Men aged between 18 and 26 can't be drafted, though they can enlist voluntarily.

Ukraine, which has said it has about 1 million people under arms, has barred military-age men from going abroad. Its constantly running mobilisation programme, which was declared at the start of the war, is a state secret. So are battlefield losses, which U.S. estimates put in the tens of thousands.

The Ukrainian defence ministry referred questions for this article to the military, which declined to comment, citing wartime secrecy.

More

'At what cost?' Ukraine strains to bolster its army as war fatigue weighs | Reuters

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

Volkswagen to reduce headcount at 'no longer competitive' VW brand

November 27, 2023

BERLIN (Reuters) -Volkswagen's 10 billion euro ($10.9 billion) savings programme will include staff reductions, managers told staff on Monday as brand chief Thomas Schaefer warned that high costs and low productivity were making its cars uncompetitive.

The German carmaker is in the midst of negotiations with its works council over a cost-cutting scheme at its VW brand, the first step in a group-wide drive to boost efficiency in the transition to electric cars.

"With many of our pre-existing structures, processes and high costs, we are no longer competitive as the Volkswagen brand," Schaefer told a staff meeting at the carmaker's headquarters in Wolfsburg, according to a post on the company's intranet site and seen by Reuters.

The company had previously said it planned to take advantage of the "demographic curve" to reduce its workforce, having pledged that it would not carry out dismissals until 2029.

In Monday's meeting, human resources board member Gunnar Kilian said this would be achieved through agreements on partial or early retirement.

However, the bulk of the 10 billion euro savings goal would be achieved through measures other than personnel reduction, Kilian added, with the full details to be defined by the end of the year.

"We need to finally be brave and honest enough to throw things overboard that are being duplicated within the company or are simply ballast we don't need for good results," Kilian said.

Volkswagen to reduce headcount at 'no longer competitive' VW brand (msn.com)

Central bank spending is like ‘heroin’ for households, says Jamie Dimon

November 27, 2023

The chief executive of the world’s largest bank has compared a $9 trillion wave of cash unleashed during the pandemic to heroin, as he suggested the US economy is addicted to debt.

Jamie Dimon, chief executive of JP Morgan, warned the world was now facing a “dangerous cocktail” of risks that could prove “explosive” for the global economy.

While Mr Dimon described the world’s biggest economy as at the forefront of innovation, he added: “we’re now spending a lot of money”.

Referring to the trillions of dollars in stimulus cheques handed to Americans during lockdown and $4 trillion printed by the US Federal Reserve to buy bonds, he said: “That money is like heroin. 

“And of course when you put $5 trillion in the hands of consumers … think of those as drugs in the system …Well, of course you’d feel pretty good. Of course stock markets are high and of course companies are earning more money.”

Mr Dimon, who recently warned of the “most dangerous time the world has seen in decades”, suggested companies could see big drops in profit as the economy returned to a world that was not supported by government handouts or cheap cash.

Mr Dimon also warned that Israel’s war with Hamas and the ongoing conflict in Ukraine added to a plethora of risks facing a more fragile global economy.

“You can’t sit here and say that something bad may not happen. I’m not trying to scare people, I’m more in the category that something could go wrong,” he told the Global Investment Summit organised by Rishi Sunak in London.

He warned that inflation was likely to remain higher for longer, partly driven by a move towards net zero and higher government spending.

“We’re on this sugar high and I’m not saying this ends in a depression [but] I think there’s more inflationary forces out there.

“There’s a higher chance that rates go higher, inflation doesn’t go away and all these things cause more problems of some sort.”

Despite the pessimism, Mr Dimon praised the UK economy for its innovation, entrepreneurialism and “pro-growth” policies that he said he would “take notes and send them back to the American administration”, adding the “happy talk” about the US economy had to be taken in the context of massive government spending.

More

Central bank spending is like ‘heroin’ for households, says Jamie Dimon (msn.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

 No update today, nothing new.

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Today, trains. With the UK pledged to be free of all diesel locomotives by 2040, UK train operators have 16 years to replace some 2,900 diesel engines. That’s 182 a year, every year including 2040. Will it happen? Can it happen? I have serious doubts. It's never happened before.

Steel works locos converted to battery power

By Railway Gazette International 26 November 2023

 

USA: Innovative Rail Technologies has converted two industrial shunting locomotives used at United States Steel Corp’s Edgar Thomson and Clairton sites from diesel to battery power using its Advanced Technology Li-Ion Adaptive System turnkey propulsion and control package. 

This is intended to reduce fuel consumption and airborne particulate matter, and demonstrate the use of emerging technology to help the steel company reach its goal of achieving net-zero emissions by 2050. 

US Steel has invested more than $2·3m in the project, with further funding from Pennsylvania Department of Environmental Protection’s Marine & Rail Freight Movers air quality improvement grant programme 

‘Mon Valley Works is the first industrial site to deploy this technology to reduce small particulate matter emissions from its locomotive fleet’, said Scott Buckiso, Senior Vice-President & Chief Manufacturing Officer at US Steel when the locos were unveiled on October 30.  

IRT Principal Ira Dorfman said ’battery propulsion technology is already in use throughout many modes of transportation, and rail transportation is the next step’. 

Steel works locos converted to battery power | News | Railway Gazette International

GB and the world can probably never get to carbon neutral no matter how many trillions are spent. Google "The New Energy Economy: An Exercise in Magical Thinking," for the science of why not.