Friday 18 October 2024

Stocks Party Time. An IMF Warning. Gold Soars.

Baltic Dry Index. 1594 -82          Brent Crude  74.68

Spot Gold 2712               US 2 Year Yield 3.96  +0.03

The farmer and manufacturer can no more live without profit than the labourer without wages.

David Ricardo.

In the stock casinos it’s party time, with the Fed and ECB brining back the punchbowl once again.

Yesterday it was the ECB’s turn to spike the punchbowl with a 25 basis point cut to its key interest rates.

The US Fed gets to do the same thing one day after the US November 5th elections.

China’s CSI 300 rebounds on stronger-than-expected GDP data amid mixed Asia-Pacific markets

Updated Fri, Oct 18 2024 11:28 PM EDT

China’s CSI 300 rebounded after the country reported better-than-expected economic growth, while most Asia-Pacific markets were mixed.

China’s third-quarter GDP grew 4.6% compared to the same period last year, slightly above estimates by economists in a Reuters poll but down from 4.7% in the previous quarter.

The rate was at its lowest level since the middle of last year, moving further away from Beijing’s 5% annual growth target.

Data for the month of September showed that retail sales beat estimates to grow 3.2% year on year, while China’s industrial output also grew faster than expected at 5.4%.

Meanwhile, China’s house prices fell 5.8% year-over-year in September, a larger drop than 5.3% in August.

Mainland China’s CSI 300 was trading up 0.7% as investors ingested the data. Hong Kong’s Hang Seng index was up 1.3% in choppy trading.

Japan’s headline inflation for September came in at 2.5%, while core CPI — which excludes fresh food prices — rose 2.4% year on year compared with Reuters estimates of 2.3%.

Japan’s Nikkei 225 was trading 0.4% higher while the broad-based Topix rose 0.3%.

South Korea’s blue-chip Kospi slipped 0.4%, while the small-cap Kosdaq was down 1.4%.

Australia’s S&P/ASX 200 was down 0.8%.

Overnight in the U.S., the Dow Jones Industrial Average rallied to a new record close after strong economic data eased lingering fears of a potential recession. The blue-chip index rose 161 points, or 0.37%, to 43,239.05.

The S&P 500 closed down 0.02% to settle at 5,841.47 after hitting an intraday record earlier in the session.

The Nasdaq Composite rose 0.04% inched higher, as chipmakers rallied, to end at 18,373.61.

All three indexes are tracking for their sixth straight positive week.

Asia markets live updates: China GDP, Japan CPI, China retail sales, industrial production, unemployment (cnbc.com)

Dow futures are little changed after blue-chip average closes at all-time high: Live updates

Updated Thu, Oct 17 2024 6:52 PM EDT

Dow Jones Industrial Average futures sat near flat Thursday night after the blue-chip average finished the preceding session at a record closing level.

Futures connected to the 30-stock index added just 11 points. S&P 500 futures and Nasdaq 100 futures were rose 0.1% and 0.2%, respectively.

Investor attention after hours centered on Netflix, whose shares climbed more than 4% in a post-earnings rally. The streaming giant beat Wall Street’s expectations on both lines in the third quarter, while reporting a 35% jump in ad-tier memberships from the prior three-month period.

Those moves come after a rally in Travelers propelled the Dow to finish Thursday at an all-time closing high. The broad S&P 500 inched lower despite notching a fresh intraday high during the session, while the technology-heavy Nasdaq Composite concluded modestly higher.

The Dow has led the way this week, on track to finish 0.9% higher. The S&P 500 and Nasdaq Composite have added 0.5% and 0.2%, respectively, on the week.

With those gains, all three indexes are tracking for their sixth straight positive week. That would mark the longest weekly winning streaks in 2024 for both the Dow and S&P 500.

On the economic front, investors will watch Friday for data on housing starts and building permits. They’ll also monitor commentary expected from central bank officials including Atlanta Federal Reserve President Raphael Bostic and Minneapolis Fed President Neel Kashkari.

American Express and Procter & Gamble are among the companies reporting earnings before the bell Friday morning.

“Earnings season is off to the races, and despite some mixed signals, appears to be in good shape,” said Liz Young Thomas, head of investment strategy at SoFi. “We’re in the early innings though, and coming up on the final days before the election and the next Fed meeting.”

Stock market today: Live updates (cnbc.com)

European Central Bank cuts rates, Lagarde flags downside risks to inflation outlook

Updated Thu, Oct 17 2024 10:21 AM EDT

The European Central Bank on Thursday cut its key interest rate to 3.25%, in its third quarter-percentage-point reduction of the year.

The move at the October meeting had been fully priced by markets after policymakers flagged reduced inflation risks and a weakening growth outlook.

In a statement following the decision, the ECB’s Governing Council called the process of disinflation “well on track” in its most optimistic statement in the current cycle.

“The inflation outlook is also affected by recent downside surprises in indicators of economic activity,” it said.

Headline price rises in the euro area eased to 1.8% in September, coming in below the central bank’s 2% target for the first time in three years.

The ECB once again forecast that inflation would “rise in the coming months, before declining to target in the course of next year.”

It is the first time the ECB has reduced rates at consecutive meetings since December 2011.

The ECB only debated a 25 basis point rate cut, rather than a larger 50 basis point cut, as opted for by the U.S. Federal Reserve in September, ECB President Christine Lagarde said during a Thursday press conference.

“It is a fact that the economic activity has come in — on the basis of the … indicators that are available — a bit lower than we anticipated,” Lagarde said, when asked by CNBC’s Annette Weisbach why it did not cut by a half-percentage point.

More

Live updates: European Central Bank lowers key rate (cnbc.com)

Safe-haven gold breaks $2,700/oz level as uncertainty looms

18 October 2024

(Reuters) - Gold breached the $2,700-per-ounce level on Friday for the first time ever, as U.S. election jitters and simmering Middle East tensions boosted safe-haven demand, while a looser monetary policy environment also added fuel to the rally.

Spot gold firmed 0.5% to $2,706.76 per ounce by 0220 GMT, adding nearly 2% so far in the week. U.S. gold futures rose 0.5% to $2,722.00.

"Gold has scoffed at a surging dollar and rallies at every chance it gets. It's just a bull market that shows no signs of exhaustion," said Tai Wong, a New York-based independent metals trader. [USD/]

U.S. economic data released overnight pointed to a strengthening economy, which boosted the U.S. dollar and Treasury yields. But traders still see a 90% chance of a Federal Reserve rate cut in November. [US/]

The European Central Bank cut interest rates for the third time this year as the euro zone economy sags.

Gold is expected to trade within the range of $2,500-$2,800 in the coming months, as prices receive support from Fed's rate cuts and high levels of geopolitical tension, BMI analysts said.

Hezbollah said it will escalate war with Israel after the killing of Hamas leader Yahya Sinwar.

More

Safe-haven gold breaks $2,700/oz level as uncertainty looms (msn.com)

In other news, another warning from the IMF.

IMF chief warns ‘not yet time to celebrate’ as low growth and high debt weigh on global economy

Published Thu, Oct 17 20241 2:32 PM EDT  Updated Thu, Oct 17 20241 2:37 PM EDT

The head of the International Monetary Fund cautioned on Thursday that high debt and low growth remained major impediments to the global economy.

IMF Managing Director Kristalina Georgieva told CNBC that while notable progress had been made in the global economic recovery, governments had become too accustomed to borrowing, with “anemic growth” adding to the challenges of servicing that debt.

“It’s not yet time to celebrate,” she told Karen Tso. “When we look into the challenges ahead of us, the biggest one is low growth, high debt. This is where we can and must do better,” she added.

While Georgieva commended the work of major central banks in taming inflation, she noted that the achievements had not been universal and that some economies were continuing to struggle with higher prices, which was adding to social and political discontent.

“It is successful major economies that have done really well … and there are pockets in the world where inflation is still a problem,” she said.

“The impact of higher prices remains, and it is making many people in many countries feel worse off and angry.”

The comments come as finance ministers and central bank governors are set to meet next week in Washington DC for the 2024 annual meetings of the IMF and the World Bank Group. They will discuss topics including the world economic outlook, poverty eradication and the green energy transition.

Georgieva warned that international trade would no longer be the “engine of growth” it once was, highlighting the proliferation of restrictive policies among many economies.

The U.S. and the European Union have moved to impose a series of punitive tariffs against China over what they deem as Beijing’s unfair trade practices.

“What we are seeing in the United States, but also elsewhere, is pressures from people who understandably feel that globalization did not work for them; their jobs disappeared, their communities had not been attended, and concerns on security grounds — mostly grounded in the impact of the pandemic, and the impact of Russia’s aggression against Ukraine — they bring national security priorities up on the list,” she said.

“All of this indeed is creating more of an environment of mistrust and now it is advanced economies more than emerging markets that are leading in industrialist measures [and] in protectionist measures.”

The IMF managing director has previously warned against such restrictions, telling CNBC in June that the growing “love” of curbs, such as tariffs, were damaging to international development.

On Thursday, she doubled down on that message insisting that “retaliatory” trade measures could hurt the implementers as much as their targets.

“Our advice is, carefully look at the costs and benefits and what that may mean in [the] medium term. And of course we do our part by calculating the cost and benefits, and showing who bears them, because tariffs are usually borne by businesses and consumers in the country that introduces them,” she said.

Earlier on Thursday, Georgieva also pointed to wider geopolitical tensions as one of the key risks to global financial stability.

“We are all very worried about the expanding conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets,” she said during her curtain raiser speech.

IMF chief warns low growth and high debt weigh on global economy (cnbc.com)

Finally, some sanity on EVs from BMW. But no one, of course, in the EU is listening. In practice, no one wants an EV whether four or two wheel vehicle.

BMW boss says ban on new petrol and diesel cars needs to be CANCELLED

16 October 2024

The ban on sales of new cars with petrol and diesel engines should be cancelled to reduce reliance on China's battery supply chain and play to its technological strengths, BMW's chief executive has said.

Oliver Zipse, who has long pushed for regulators to permit various technologies - including alternative fuels like e-fuels or biofuels and hydrogen fuel cell cars - said the mood in Europe is 'trending towards one of pessimism' and the region needed a new regulatory framework to remain competitive.

In Europe, sales of new fossil-fuelled cars is due to be outlawed in 2035, while in the UK they - except some hybrids - they will be banned five years earlier.

Mr Zipse's comments were made on Tuesday while attending the Paris Motor Show, which has been dominated by French and Chinese makers during a brewing trade war over tariffs on EV imports from the Far East to the EU.

'A correction of the 100 per cent BEV [battery electric vehicle] target for 2035 as part of a comprehensive CO2-reduction package would also afford European OEMs [Original Equipment Manufacturers] less reliance on China for batteries,' Mr Zipse said.

'To maintain the successful course, a strictly technology-agnostic path within the policy framework is essential.'

In March 2023, EU countries approved a landmark law that would require all new cars to have zero CO2 emissions from 2035, effectively banning diesel and petrol vehicles, and 55 per cent lower CO2 emissions from 2030, compared to 2021 levels.

Car makers including BMW, VW and Renault have called for the CO2 targets to be loosened or delayed, fearing the impact of heavy fines because of lower-than-expected EV sales.

Still, Zipse's home country of Germany has rejected an early review of the targets, given the need for clarity for industry and the urgency of tackling climate change.

During the motor exhibition in the capital, the head of the French auto association - PFA - stopped short of calling for the 2035 ban to be abolished, but said it was necessary to quickly 'come back around the table' to discuss the review of the targets, currently scheduled for 2026.

Closer to home, minsters are yet to confirm by statement that it has accelerated the ban on sales of new petrol and diesel cars in the UK from 2035 to 2030 - however, This is Money has had this rubberstamped by the Department for Transport.

The ban will combine with the existing Zero Emission Vehicle Mandate to force car manufacturers to sell an increasing share of EVs in Britain in the run up to the end of the decade.

It has also been confirmed in recent weeks that some new hybrid vehicles will receive a five-year stay of execution and be allowed to remain in UK showrooms until 2035

However, the DfT is yet to clarify which type of hybrid will be allowed to remain on sale, though it is most likely to be plug-in hybrids with the longest electric-only ranges of between 50 and 70 miles.

China's Paris Motor Show takeover in the face of EU tariff hikes 

The BMW CEO's comments were made despite Chinese manufacturers attending this year's Paris Motor Show in force.

BYD, Leapmotor and Xpeng are among the nine Far East EV brands launching new models at the event, despite the European Union's threat to punitively tax imports of their electric cars in an escalating trade clash with Beijing. 

Chinese marques account for around of fifth of car makers in attendance at this year's show.

However, long-established European manufacturers are trying to fight back with new efforts to win consumers who have balked at their higher-priced EVs, with the likes of Renault and Citroen unveiling more affordable models powered entirely by batteries.

Earlier this month, EU member states narrowly backed import duties on Chinese-made EVs of up to 45 per cent, meant to counter what the Brussels says are unfair subsidies from Beijing to Chinese manufacturers. 

More

BMW boss says ban on new petrol and diesel cars needs to be CANCELLED (msn.com)

Pioneering Italian electric motorcycle manufacturer Energica have officially filed for bankruptcy

Updated: 15 October 2024

Italian electric superbike manufacturer Energica Motor Company has filed for liquidation, marking the end of their decade-long run as a leader in high-performance electric motorcycles

In a statement released today, the company said: “Despite the efforts from the management in actively and extensively pursuing a search for new investors – always with the aim of preserving going concern in the best interest of creditors – it has become clear in the last few hours that these alternative options are no more viable, thus leaving the company with no other choice than resolving for the opening of a bankruptcy judicial liquidation, thus allowing repayment of creditors to the extent possible from the proceeds of liquidation.”

The company cited a “downturn in the automotive market and supply chain,” alongside a “crisis in the electric market and the decline in sector investments,” as key reasons for their financial collapse. The decision was confirmed during a board meeting on October 14, despite Energica achieving record sales volumes and revenues in recent years. 

Founded in 2014, with a design phase that began in 2009, Energica were among the first players in the high-capacity electric bike game, initially showcasing the potential of the platform with their Ego superbike

In its latest and most premium iteration, the Ego+ RS, Energica’s flagship sports machine boasted a hefty 171bhp, a claimed 248-mile city range (143 miles combined), and 0-60mph time of just 2.6 seconds – thanks to its 21.5 kWh lithium-ion battery.  

Building on the success of the Ego, Energica expanded their line-up with the Eva naked in 2015, the retro-styled Eva EsseEsse9 in 2017, and the Eva Ribelle in 2020. Despite their premium price tags, these bikes helped Energica carve out a niche following in the electric motorcycle sector. 

In 2022, Energica introduced the Experia sports tourer, which drove record sales, netting the company €13 million that year. They also gained significant traction in the world of racing over the years, serving as the official supplier for the MotoE World Cup for four consecutive seasons.

In 2021, Energica secured investment from American firm Ideanomics Inc., who completed a voluntary takeover in March 2022, acquiring a 75% stake in the company. Initially, the future looked bright, but rising supply chain costs, global economic instability, and a sharp decline in the electric vehicle market soon took their toll. 

Despite extensive efforts to find new investors and keep the company afloat, Energica ultimately failed to secure a lifeline, leaving no option but to file for liquidation. For now, the fate of one of Italy’s most ambitious electric brands remains uncertain.

Italian electric brand Energica confirm bankruptcy (motorcyclenews.com)

EV buyers falling into negative equity in latest sign switch to greener cars is stalling

By Daily Mail City & Finance Reporter  Updated: 08:01, 17 October 2024

Electric vehicle buyers are being plunged into negative equity in the latest sign that the switch to greener cars is stalling.

Vertu Motors warned that EVs coming off financing agreements have been found to be worth less than the loans used to pay for them.

The Government is facing a backlash over its EV quotas, which carmakers have said is driving supply levels way above demand.

Vertu, one of the country's biggest dealership chains, said weak demand for electric models has 'led to significant discounting'. This is leaving buyers with higher debts than the value of their cars.

Robert Forrester, chief executive of Vertu, said this 'puts a brake on the new and used car market'.

EV buyers falling into negative equity in latest sign switch to greener cars is stalling | This is Money

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.

Europe ‘Well on Track’ to Taming Inflation, Avoiding Recession

October 17, 2024 at 6:01 PM GMT+1

The European Central Bank cut interest rates for the third time this year after data suggested policymakers are “well on track” to containing inflation. Thursday’s move quickens the pace at which monetary shackles are being removed from the euro-zone and will re-focus attention on measures needed to support the region’s limping economy. With the key deposit rate now at 3.25%, ECB President Christine Lagarde said the region isn’t heading for a recession and that the process of taming prices should be complete next year. New dangers lurk that may nevertheless interfere with the bank’s best-laid plans. The hostilities in the Middle East and the tariffs looming over another Donald Trump presidency may quickly sap the ECB’s mounting optimism. Our liveblog is here.

The European Union has 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 Corp., an approach that would significantly increase the potential penalties for violating content moderation rules. The platform formerly known as Twitter is being investigated for several potential breaches of the EU’s Digital Services Act, newly introduced rules meant to ensure platforms police illegal content.

Bloomberg Evening Briefing: ECB Cut Signals Inflation Under Control - Bloomberg

The US risks being caught off-guard by a recession with the labor market far weaker than most realize, strategist says

October 16, 2024

·         Wall Street should still be watching out for a possible recession, said strategist Paul Dietrich.

·         He says unemployment is worse than many seem to think at present time.

·         If temporary government jobs were removed from the lastjobs report, unemployment would be 4.5%, Dietrich said.

The US is riding high, but one strategist says economic optimism will eventually be cut short as unseen labor weakness bites.

That's according to Paul Dietrich, who warned that employment conditions are worse than analysts seem to grasp.

"Eventually, the US economy will fall into a recession, catching off-guard the Fed, the US administration, and the majority of economists and analysts," Dietrich wrote.

In his latest monthly commentary, the B. Riley Wealth chief investment strategist cited that September's jobless rate would have been 4.5% if temporary government positions were eliminated.

That's significantly higher than the 4.1% rate published two weeks ago, a figure that convinced Wall Street that the labor market was doing better than originally feared.

Dietrich pointed out this year's significant jump in state and local government employment, adding to the job market's perception of strength.

In his view, the rise of these positions came after $500 billion worth of COVID-era stimulus programs were finally delivered to regional governments this year, which rushed to use these funds on new positions before the September 30th fiscal year-end deadline.

"Unfortunately, almost all of these jobs were listed as temporary jobs, and unless these governments are willing to use their own state and local taxes to keep them hired after September 30th, most of these jobs will be lost over the next few months," Dietrich wrote.

Though other analysts have also scrutinized the unemployment rate, its importance has been questioned in today's unusual economic cycle. As joblessness has ticked up through September, consumer spending remained an unyielding driver of growth.

But Dietrich isn't so sure the US consumer can remain as healthy for long.

For this, he cited a near-bottom drop in the Consumer Confidence index which fell below consensus expectations in September. Dietrich considers deteriorating confidence as a signal that the consumer sector is shrinking.

He argued that the soft landing narrative fueled by a strong consumer base is temporary, and the consequence of pandemic stimulus programs that encouraged consumers to keep spending.

Given that spending drives 80% of the economy, contracting consumer activity bodes ill for the current US outlook, he said.

The US risks being caught off-guard by a recession with the labor market far weaker than most realize, strategist says (msn.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

Northwestern sues Moderna for patent infringement over COVID-19 vaccines

By Blake Brittain  October 17, 20241:28 AM GMT+1

Oct 16 (Reuters) - Moderna (MRNA.O), opens new tab was hit with a new patent lawsuit on Wednesday in Delaware federal court from Northwestern University, which accused the company of misusing the school’s innovations to develop its blockbuster COVID-19 vaccine Spikevax.

The lawsuit said, opens new tab Moderna uses Northwestern-developed lipid nanoparticle (LNP) technology without a license in Spikevax shots to transport fragile messenger RNA into the human body.

A Moderna spokesperson said the company was aware of the lawsuit and will defend itself against the claims. Attorneys and spokespeople for Northwestern did not immediately respond to a request for comment.

The lawsuit adds to a web of U.S. court cases involving Pfizer, BioNTech and Moderna over patent royalties for technology used in their COVID vaccines, including one [USN:L2N3GL23C TEXT:“brought by Moderna against Pfizer”] in 2022. British pharmaceutical company GlaxoSmithKline [USN:L1N3LR0LZ TEXT:“sued Moderna”] in the same Delaware court on Tuesday for allegedly misusing GSK’s LNP technology in its COVID-19 and RSV shots.

Evanston, Illinois-based Northwestern said its researchers pioneered the use of LNPs to deliver mRNA into human cells in 2009 and 2010. The university’s lawsuit said the LNPs in Moderna’s Spikevax work in the same way as its patented technology.

The school’s complaint said Moderna could not have made its “rapid progress” in developing the vaccine “without appropriating the technological breakthroughs of prior researchers, including those at Northwestern.”

Northwestern asked the court for an unspecified amount of monetary damages from Moderna’s alleged infringement including royalties. Moderna earned $6.7 billion in revenue from Spikevax last year.

The case is Northwestern University v. Moderna Inc, U.S. District Court for the District of Delaware, No. 1:24-cv-01151.

For Northwestern: Rebecca Horwitz, John Hughes, Mac LeBuhn and Katherine Rhoades of Bartlit Beck

For Moderna: Not yet available.

Northwestern sues Moderna for patent infringement over COVID-19 vaccines | Reuters

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.

Magnet-free induction motor aims to nearly halve carbon emissions

By C.C. Weiss  October 15, 2024

Two great minds in permanent-magnet-free motor design are fusing their know-how to create an even more capable inductive electric motor. Mahle and Valeo have teamed up to introduce what they call the Inner Brushless Electrical Excitation (iBEE) system, a form of e-machine that eliminates the need for sensitive rare earths, promises powerful performance and sends lifecycle carbon emissions right off a tall, steep cliff.

We've been watching Mahle's work in the permanent-magnet-free motor space closely since it detailed a cheaper, more efficient motor design free from rare earths in 2021. The German automotive supplier has been using wireless induction with a rotor configuration it calls the Magnet-free Contactless Transmitter (MCT).

The MCT system replaces the physical magnets and mechanically brush-powered electromagnetic windings commonly used in motor rotor designs with wound coils magnetized via inductive electricity sent from a wireless transmitter. Not only does the setup eliminate dependence on rare earths, and the supply, mining and pricing issues that go along with them, but it also cuts out the physical wear-and-tear and necessary maintenance related to physical brushes. Mahle says the MCT layout also allows for more compact packaging thanks to using fewer components.

For its part, French automotive supplier Valeo has focused on magnet-free electric motor stators and control systems, working with Renault on its next-gen E7A motor design, planned for a 2027 launch. Its power-dense hairpin copper winding technology is integral to the E7A's stator design,

The new joint development agreement between the two companies will combine Mahle's magnet-free rotor technology with Valeo's inverter and motor control technology to create an even more advanced evolution of magnet-free motor design for upper segment vehicles. The new iBEE axle will offer an output range between 220 and 350 kW (295 and 469 hp).

Mahle and Valeo also plan to work on a motor cooling system aimed at achieving a superior continuous-to-peak power ratio. Mahle has used an oil cooling system as the backbone of its SCT motor, the "endurance champion" that blurs the line between peak and continuous power by running continuously at over 90% peak power. While the original SCT motor used permanent magnets, it was also designed to work with the inductive MCT layout.

The two companies aim to cut overall carbon footprint by more than 40% as compared to a permanent-magnet e-motor with equivalent power. That's a further improvement upon the 30% reduction goal of Valeo and Renault's work on the E7A motor.

Valeo and Mahle plan to complete initial prototype testing by the end of 2024.

Source: Mahle/Valeo

Magnet-free induction motor aims to nearly halve carbon emissions (newatlas.com)

Next, the world global debt clock. Nations debts to GDP compared.

World Debt Clocks (usdebtclock.org)

Another weekend and it looks to me like Israel has agreed to postpone chastising Iran until after the US elections. Sadly, one of the two presidential contenders must win! Poor America. 

In the weekend LIR, inside the Krispy Kreme donut factory.  Have a great weekend everyone.

The demand for money is regulated entirely by its value, and its value by its quantity.

David Ricardo.

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