Authored by Michael Shellenberger via Public,

The Border Has Fallen

During the Trump years, Democrats attacked Trump as cruel for separating migrant parents and children.

“A policy that separates young children from their parents isn’t a ‘deterrent.’ It’s unconscionable,”  said Biden in 2018. “A policy that traumatizes children isn’t a bargaining chip. It’s abhorrent.”

But Dr. Paul Wise, a pediatrician in charge of monitoring the treatment of migrant children in the custody of U.S. Customs and Border Protection, reports that the Biden administration’s U.S. Customs and Border Protection has been separating children as young as eight from their parents.

“Interviews with parents and children found that there were minimal or no opportunities for phone contact or direct interaction between parent and child,” Wise said in the court filing. “The separation of families and the lack of interaction while in custody do significant, and potentially lasting, harm to children, particularly younger children.”

There’s no denying the crisis. In some areas, the border between Texas and Mexico looks like a refugee camp in sub-Saharan Africa. There are thousands of African and Latin American migrants coming through daily. More than two million came last year, over 5,000 per day, and nearly as many will come this year.

The Biden administration rightly points out that it tried telling migrants not to come. “Do not come,” said Vice President Kamala Harris in Guatemala in 2021.

But Biden had made clear from 2018 to 2020 that he would reverse President Trump’s immigration policies. And so, many more migrants are coming.

They also do so because they know we won’t turn them away. Doing so would be cruel. Children, babies, and mothers would die. And the photographs and videos of the horror would travel the world in minutes or seconds.

If you doubt that this is true, watch the videos of parents sending their children through barbed wire fences and crossing the dangerous Rio Grande River.

That hardly means we’re helpless to stop the flow. This year, for the first time, US Border Control is encountering more migrants from outside Latin America than from within it. That means people are flying from Africa to Latin America and entering through Mexico.

Is this part of a plan by Democratic leaders to expand the voting rolls? Some Republicans say so. And in California, some progressive politicians want to give undocumented immigrants the right to vote. They already provide official California state driver’s licenses and IDs.

But if that was the plan, it’s turning the nation against them

The migrants are overwhelming not just the state of Texas but also New York, whose Democratic leaders, both Mayor Eric Adams and Governor Kathy Hochul, say bluntly that the city is filled up.

“The national government has turned its back on New York City,” said Adams in April. “This is impacting our schools, public safety, our ability to take care of those who were already in shelters. This is impacting the entire city.” Hochul is now proposing eliminating New York’s “right to shelter” law.

Maybe the progressive Democrats who run Chicago, Illinois, have more room — or compassion?

Not quite. “Let me state this clearly,” said Chicago’s progressive new Mayor. “The city of Chicago cannot go on welcoming new arrivals safely and capably without significant support and immigration policy changes.”

What, then, is to be done?

The Biden administration doesn’t even bother offering an answer. Democrats can only say what must not be done. We must not build a wall. We must not deport. Anyone. We must instead find jobs for the millions of mostly unskilled and uneducated immigrants to the US who, critics say, will drive down working-class wages and tax already over-stressed housing, educational, and health systems.

As a result, we’re seeing a return of child labor to the United States, as slaughterhouses illegally hire teenage migrants on the night shift, who are scalded by caustic chemicals and maimed in industrial accidents.

Just a few weeks ago, New York’s Governor Hochul tried to stay above the battle between New York City Mayor Adams and the Biden White House. That all changed late last month when Hochul took off the kid gloves. “We’ve managed thus far without substantive support from Washington,” she said in what her aides billed as a major speech.

In the end, nobody will be able to measure how much of the crisis is driven by Biden and how much of it is from the collapse of civilization within the African and Latin American nations themselves.

What’s clear is that if we don’t fix this, it won’t be just the border that’s fallen.

Up until this week, the White House has consistently signaled that Biden is not in favor of giving Ukraine long-range missiles, chiefly on fears they would be used to attack deep inside Ukrainian territory.

But on Friday it was revealed that as Zelensky visited the Oval Office the day prior, President Biden told him he's willing provide long-range ATACMS surface-to-surface missiles for the first time. But perhaps displaying the administration's reluctance on the issue, this is being reported as a "limited" or "small number" - according to officials.

"Officials said that a small number of ATACMS will be sent in coming weeks and more could be provided later," The Wall Street Journal says.

Will the "more" that "could" be provided later be contingent on Kiev not using the initial deliveries to attack Russia? 

The WSJ suggests this initial delivery could be more symbolic than anything, given it's meant to encourage European allies to step up: 

The U.S. provision of ATACMS could also encourage Germany to provide its Taurus long-range cruise missile. Berlin has indicated that it prefers to move with Washington in providing new types of military aid.

Also looming large in the background is Poland's declaration that it will not longer provide arms to Ukraine, and will instead stick to its own defense as the top priority. Kiev no doubt fears that other Western allies could be encouraged to abandon support by Warsaw's surprise about-face.

As this fresh decision to give Ukraine the ATACMS, it was only on Wednesday that US sources told Fox News Pentagon correspondent Lucas Tomlinson that the Ukrainians wouldn't get the advanced system "anytime soon". He wrote the following...

"Ukraine will not get ATACMS, the 190-mile-range tactical ballistic missiles, urgently requested by Zelensky to destroy Russian forces in Crimea and other Russian-held territory ‘anytime soon,’ officials say. News comes one day before Zelensky visits Biden at the White House."

But now with this reversal in White House policy by the week's end... perhaps the Biden team didn't want Zelensky and his delegation to leave Washington completely empty handed, and hence the ATACMS announcement is a consolation prize of sorts.

Authored by Tsvetana Paraskova via OilPrice.com,

Phasing out fossil fuels is unrealistic as oil, natural gas, and coal will continue to play a crucial role in global energy supply and energy security, China’s special climate envoy Xie Zhenhua said this week in a speech obtained by Reuters.

“It is unrealistic to completely phase out fossil fuel energy,” Xie, who will represent China at COP28 in Dubai in November, told ambassadors in Beijing ahead of the climate summit.

China is the world’s biggest consumer of coal and the largest importer of crude oil. Despite soaring renewable power capacity installations in recent years, China continues to consume growing volumes of coal, oil, and natural gas and continues to approve the construction of new coal-fired power capacity.

China, as well as India, has fought to have “phase down” instead of “phase out” in the language at all summits on climate and energy in recent years.

China is also building or planning to build some 366 gigawatts (GW) in new coal generation capacity, accounting for some 68% of global planned new coal capacity as of 2022.

This is according to a report earlier this year by climate think tank Global Energy Monitor, which also found that China accounted for more than half of the new global coal generation capacity that came online last year. 

During the first half of 2023 alone, China approved more than 50 GW of new coal power, Greenpeace said in a report last month. That’s more than it did in all of 2021, the environmental campaign group said.

China is relying on coal to avoid blackouts as the economy reopened after the Covid lockdowns. During the first half of this year, coal production, coal imports, and coal-fired electricity generation surged and offset a significant decline in power output at China’s massive hydropower capacity due to insufficient rainfall and drought.

According to Bloomberg chief economist Anna Wong, online betting markets see a 69% chance of a federal government shutdown starting Oct. 1, when appropriations will lapse if lawmakers can’t agree on a funding bill (in reality, the odds of a shutdown are just about 100%, although after a few weeks all should go back to normal as it always does after people get bored with the theatrics).

What happens then?

According to Goldman, a government-wide shutdown would reduce quarterly annualized growth by around 0.2% for each week it lasted after accounting for modest private sector effects. Goldman's baseline is that a shutdown could last for 2-3 weeks (the Trump government shutdown, the longest in history, lasted 35 days, from Dec 22, 2018 to Jan 25, 2019).

Meanwhile, Bloomberg Economics estimates a month-long government shutdown could temporarily push up the unemployment rate in October, triggering a popular rule for identifying the start of a recession.

And while the hit to unemployment and GDP growth will reverse once the funding impasse is resolved, Bloomberg's baseline is for the shutdown to have a mild negative impact overall due to forgone economic activity and uncertainty.

Bloomberg also speculates that in an extreme tail event, the maximum hit to 4Q GDP would be a drag of 2.8% if the shutdown lasts for the entire quarter.

Considering that the current Bloomberg survey median sees just 0.4% GDP growth for 4Q, a shutdown that lasts all quarter would push 4Q growth deep into negative territory, something we first said on Tuesday. However, as noted above, past shutdowns have, on average, been much shorter. The eight government shutdowns since 1982 have lasted an average of two weeks. The longest one — in 2018 — lasted five weeks.

Assuming a two-week duration, the shutdown will knock 0.5% off annualized quarterly GDP growth while it’s ongoing, and raise the unemployment rate by 0.1% in October. The effects will mostly reverse within 4Q once the funding stalemate is resolved, but forgone economic activity and the uncertainty from the shock could produce a net drag of 0.1% on 4Q GDP.

In the scenario of a month-long shutdown — and assuming the unemployment rate remains at 3.8% in September — October’s unemployment rate could increase to 4.0%. That would meet the Sahm Rule threshold for identifying a recession.

At the same time, a shutdown also would affect the Bureau of Labor Statistics’ ability to collect real-time unemployment statistics — potentially affecting the accuracy of those data when they’re ultimately released with a delay (not like that matters since most BLS data is already highly manipulated and "goalseeked"), to wit:

A shutdown beginning Oct. 1 and lasting two weeks — well within the normal range based on government shutdowns over the past 30 years — would likely delay the October jobs report, due Nov. 3. That might tip the scales toward an extended hold for a data-dependent Fed that won’t have all the data in hand.

Bloomberg's bottom line: In the event of a protracted government shutdown, the FOMC will face a uniquely uncertain economic environment at the Oct. 31-Nov. 1 meeting — and that may convince officials to hold rates steady again rather than hike.

Authored by Steve Watson via Summit News,

Senator Rand Paul doubled down on his staunch opposition to further funding for the war in Ukraine Thursday, blasting the visiting President Zelensky as a leader of a corrupt regime “begging for more money.”

“It’s not even just going to armaments. You realize we’re funding the pension of their government workers and we complain about bloated government here. They’ve got bloated government and they’ve got corruption. And the American taxpayer, people are struggling in our country, are asked to fund it. I think it’s wrong. And I think most of the American people, frankly, are with me,” Paul said during a Fox Business interview.

Paul also noted that Zelensky has cancelled Democracy in the country.

“They’ve cancelled the elections. What kind of democracy has no election?” he noted, adding “next year, Zelensky said he’s not going to have an election because it would be inconvenient during the war and would be expensive.”

He continued, “if you don’t have elections, who in the world will be supporting a country that’s not a democracy? They’ve banned the political parties, they’ve invaded churches, they’ve arrested priests. So, no, it isn’t a democracy. It’s a corrupt regime.”

“The Russians are worse,” Paul noted, adding “But at the same time, we don’t always have to pick some side to be on. But the ultimate reason I’m against this is we don’t have the money. And when we borrow more money, it leads to more inflation, leads to more likelihood of recession in our country. And so we just can’t keep doing it.”

“We are about $1.5 trillion dollars in debt for this year. Over the last three months we’ve accumulated almost a trillion dollars in three months. The total is $33 trillion, so we don’t have like an extra rainy day fund or a surplus we can send them,” Paul further urged.

The Senator added, “We have to borrow the money from China to send to Ukraine, so no matter what your sympathies are in the war, and I am sympathetic to Ukraine fighting off the Russian aggressors, but at the same time I think it’s irresponsible to think about their country before I think about my country.”

Watch:

Earlier this week in the Senate, Paul said that he will hold up any spending bill to fund the government beyond September 30 to avert a shutdown if it includes aid to Ukraine, asking “When will the aid requests end? When will the war end? Can someone explain what victory looks like?” 

Several Biden officials provided answers to Paul’s questions Thursday, basically saying the funding will go on “as long as it takes.”

"One of the points that @JDVance1 raises is that it's not clear what the exit strategy is — so can you speak to that?"

JOHN KIRBY: "We don't have American troops in Ukraine"

"We are providing them military aid and obviously financial aid..."

KIRBY: "As long as it takes" pic.twitter.com/MQ0fJHTgHf

— RNC Research (@RNCResearch) September 21, 2023

"What are you telling congressional leaders about how much more aid is needed [for Ukraine]?"

National Security Advisor Jake Sullivan: "War is inherently unpredictable, of course, so I can't look you in the eye ... and predict exactly what’s going to happen" pic.twitter.com/XI9RISY7T9

— RNC Research (@RNCResearch) September 21, 2023

Biden National Security Advisor Jake Sullivan says he's "not gonna stand here and give a precise figure" on exactly how much taxpayer funding has been spent on aid to Ukraine pic.twitter.com/1TNWSmogIb

— RNC Research (@RNCResearch) September 21, 2023

National Security Advisor Jake Sullivan on U.S. funding for Ukraine: "There's not a single dollar dollar amount that is necessary for all time. We need funding to keep going" pic.twitter.com/zTKumrtY9i

— RNC Research (@RNCResearch) September 21, 2023

REPORTER: "President Zelenskyy, are you confident that Congress is gonna support your efforts to get this supplemental aid? Did you get any assurances?"

BIDEN: "There's no alternative" pic.twitter.com/8oy3pte600

— RNC Research (@RNCResearch) September 21, 2023

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On Thursday, Fox News White House correspondent Peter Doocy asked White House press secretary Karine Jean-Pierre: "So, what do you call it here at the White House when 10,000 people illegally cross the border in a single day?"

Jean-Pierre responded, "So, what do you call it, Peter, when [the] GOP put forth a — wait, no, no, no, no, no, you can't." 

Doocy then attempted to refine the question as she added without answering the initial question: "We're moving on." 

Doocy: “What do you call it when 10,000 illegals cross the border in a single day.”

Jean-Pierre: “What do you call it when republicans…”

Doocy: You’re not answering

Jean-Pierre: “We’re moving on”
pic.twitter.com/rvKDTDLUt9

— Greg Price (@greg_price11) September 21, 2023

Doocy's question comes as the union representing the US Border Patrol warned: 

"From Sept 1st through 20th the Biden Admin ordered the release of more than 100,000 illegal border crashers-enough to double the population of cities like Yuma, AZ.

"Think about what Biden is doing to this country with his out-of-control border policies. How many millions more?" 

From Sept 1st through 20th the Biden Admin ordered the release of more than 100,000 illegal border crashers-enough to double the population of cities like Yuma, AZ.

Think about what Biden is doing to this country with his out-of-control border policies. How many millions more?

— Border Patrol Union - NBPC (@BPUnion) September 21, 2023

The White House and major left-leaning corporate media outlets have been rush-rush about the worsening border crisis.

Earlier this week, Elon Musk managed to shift national attention to the border crisis after he posted on X, "Strange that there is almost no legacy media coverage of this." He quoted Fox News' Bill Melugin's post that included footage of a "total free fall al in Eagle Pass, Texas, right now." 

Strange that there is almost no legacy media coverage of this.

About 2 million people – from every country on Earth – are entering through the US southern border every year.

The number is rising rapidly, yet no preventive action is taken by the current administration. https://t.co/EF7HTS1ktT

— Elon Musk (@elonmusk) September 20, 2023

This week's footage of the worsening border crisis is something progressive media and the Biden administration do not want the American people to see ahead of the presidential election cycle. 

AFRICANS SPILLING INTO MEXICO LIKE WORLD WAR Z ###
pic.twitter.com/hhAabno74V

— The_Real_Fly (@The_Real_Fly) September 22, 2023

If you aren't aware, the Southwest Border is beyond blowing up. The 2nd train full of illegals arrived - and no one is stopping them.

Biden is inviting illegals to surge the border by providing them special status and ID cards.

He is entirely responsible for this crisis. pic.twitter.com/MnVh1v2Ygf

— 👑💥 Serenity 💥👑 (@polishprincessh) September 22, 2023

Thousands of migrants continue to flood into Eagle Pass, Texas, after the Biden administration was filmed removing razor wire intended to deter illegal crossings.

The mayor of Eagle Pass has declared a state of emergency and is "pleading for help."pic.twitter.com/hlnZI10djO

— KanekoaTheGreat (@KanekoaTheGreat) September 21, 2023

Texas National Guard soldiers are on the ground in Eagle Pass replacing razor wire the Biden Admin cut yesterday.

Texas will NEVER give up on our efforts to secure the border.#OperationLoneStar pic.twitter.com/yBywlBa8iv

— Mike Banks (@TexasBorderCzar) September 21, 2023

Eagle Pass TX yesterday! How many women and children do you see? This is going to get much worse and our Federal Government is doing nothing about it! And we, the taxpayers will foot the bill for this as well as dealing with the rise in crime if not worse....🤬🤬🤬🤬 pic.twitter.com/3QIrHw31wA

— ⚔Dennis⚔ (@clovis1931) September 21, 2023

Get ready NYC and Chicago! Here’s the next train headed to U.S, this will add to the more than 7K that crossed into Eagle Pass, Texas in last 72hrs. pic.twitter.com/aQIi8ADhfX

— Randy Clark (@RandyClarkBBTX) September 20, 2023

On Wednesday, Texas Governor Greg Abbott declared an "invasion" on the southern border amid the massive influx of illegal migrants.   

I officially declared an invasion at our border because of Biden's policies.

We deployed the Texas National Guard, DPS & local law enforcement.

We are building a border wall, razor wire & marine barriers.

We are also repelling migrants.

More: https://t.co/dEivr1lL2n pic.twitter.com/hzCl6ouTVJ

— Greg Abbott (@GregAbbott_TX) September 20, 2023

An alleged video shows Border Patrol agents possibly breaking ranks while some say it's "hard to defend the constitution." 

Border Patrol Agents ARE BREAKING RANKS!! They Are Questioning Why Isn’t Leadership UPHOLDING THE CONSTITUTION ‼️
‌
Border Patrol Chief “We stay focused we continue to do the job and the mission that we signed up for. We all signed up for it, we all raised our hand.”
‌
BRAVE… pic.twitter.com/yLmzFqwKMg

— Wall Street Apes (@WallStreetApes) September 21, 2023

Biden's open border policies are not what the majority of voters want and have sparked migrant chaos across major metro areas like New York City. 

It seems as if the fringe progressive minority of elites continue to impose their unpopular and disastrous policies on the majority. 

By Russell Clark of the Capital Flows and Asset Markets substack

Has the Federal Reserve fucked up?

Markets were a bit unsure of what the decisions would be from the Federal Reserve. Looking at monetary policy history, they would have seemed wise to pause interest rates increases. Looking at the US bond market, with it deeply inverted, this has typically been seen as a sign of “over-tightening” by the Federal Reserve. The 2 year to 10 year spread is its most negative since the 1970s, and previous bouts of yield inversion have preceded financial problems.

And if you look around, there are loads of indicators that show the economy is beginning to roll over. US quits rates is one, but you have a huge choice in indicators to choose from to be honest. And with lag in monetary policy effects, it is easy to understand why the Federal Reserve chose caution over action.

The economics and the back testing all tell you, now is the time to buy long dated bonds. Many market commentators also recommend bonds. And the market has responded. Inflows into TLT have been huge, even as TLT itself has been poor.

The problem with this analysis is not the economics, but the politics. If you think the US government is fully ok with rising unemployment, and/or constrained by fiscal deficits, and will act to reduce these deficit, then buying bonds is completely rational. The problem is that you know that the next Presidential election will be contested between Trump and Biden. Both are proven spenders. There is no more austerity in US politics because Trump proved it’s a losing electoral strategy, just as Reagan and Thatcher proved austerity in the 1980s could be an election winning strategy. In a new pro-labor world, central banks have to act as a restraint, and when they don’t the bond market rebels. You can see despite the pause, the 30 year US treasury yield hit new highs.

This is of course a problem, as the US housing market feeds directly off the yield on the 30 year Treasury. The Fed “pause” actually will do nothing much for the economy. I am fairly convinced we have moved back to a big-government, pro labor world, which puts the long end of the yield curve in a bear market. Buying at 4.5% makes very little sense to me. In reality, long dated Treasuries are a structural short, and I read steep inversion as a sign that it is a good time to short! An inverted yield cure, means you can sell a 30 year Treasury, put the proceeds in cash, and make a positive spread!

When I think about interest rate policy, the pressure not to increase rates must be intense. The amount of wealth that has been built on transforming credit to equity is vast, and where there is money, there is political power. But the votes are no longer with the wealthy, they are with the poor, so policy is pro-labor for as far out as I can see. My preferred trade of long GLD/Short TLT also took out new highs on the Fed pause.

One other trade I recommended for a new pro-labour world was Japanese banks. They continue to steam ahead. Historically speaking they have tended to act as deflationary canaries in the mine. Japanese banks are not point to an imminent slowdown requiring interest rate cuts!

In the new political environment, central banks need to be aggressive to keep inflation under control. The pause is already been seen as a mistake by bond markets. I expect the Fed to resume raising rates shortly. I ultimately suspect treasury yields get back to double digits.

Russia's Defense Ministry (MoD) has confirmed that the headquarters of its Black Sea Fleet in Sevastopol was damaged in a Ukrainian attack Friday.

The MoD said the strike was conducted by multiple missiles, but that anti-air defenses intercepted the majority of them. There was damage to the "historic building" which houses the navy HQ, but few other details were given. One military service member remains missing, according to the initial statement. This suggests there were potentially multiple casualties, but the MoD statement didn't give these details.

"The serviceman was not killed, but is missing," the statement said as a search is underway, as presumably there's debris and wreckage being investigated. 

Citing Crimean Governor Sergei Aksyonov, one report details: 

Video shared by anonymously run channels on the Telegram messaging app showed charred columns and smoke coming out of a building identified as the Russian Navy's headquarters.

Razvozhayev said emergency crews were fighting to put out the fire that broke out at the headquarters, but added that no civilian infrastructure in the area had been damaged.

The governor has told area residents to be on the alert given that more attacks could be coming. In the hours after the attack, the movement of public transport was restricted in Sevastopol.

Video of the smoke from the strike recorded in Sevastopol pic.twitter.com/RyfS9UWACk

— Dmitri Alperovitch (@DAlperovitch) September 22, 2023

TASS indicated that wreckage after the missile attack is scattered over hundreds of meters, and a large emergency response followed.

Ukraine's military is owning up to this fresh attack on Crimea, in a rare acknowledgement accompanies with the threat of more to come:

In an apparent acknowledgement of Ukraine's responsibility for the barrage, the country's air force commander posted a video of air sirens blazing and smoke rising from the building along with a message thanking the pilots.

"We promised that ‘there will be more,'" Lt. Gen. Mykola Oleschuk said.

Despite the attack doing nothing to change the reality of the front-line situation, Kiev's supporters are also hailing a 'victory':

In 10 days, Ukraine:
1. Destroyed a submarine and a warship by hitting a Sevastopol dry dock
2 . Reopened unilateral commercial shipping to Odesa
3. Hit a Sevastopol bunker with the back-up Black Sea Fleet HQ
4. Struck the main HQ in central Sevastopol. https://t.co/6YgmhaoTJU https://t.co/D9USYzvlUw

— Yaroslav Trofimov (@yarotrof) September 22, 2023

Ukrainian sources have previously suggested there's a psychological operations component to these attacks - to keep the population in fear and in turn increase pressure on the Kremlin.

Crimean authorities have urged people in the Sevastopol area to "Please remain calm" and have assured "The situation is under the control of the emergency services."

Authored by Lance Roberts via RealInvestmentAdvice.com,

The hit TV series “That 70s Show” aired from 1998 to 2006 and focused on six teenage friends living in Wisconsin in the late 70s. The irony was that the actors playing the teenagers were not born in the late 70s and had never experienced life during that period. Many alive today cannot fathom a lifestyle devoid of the internet, cable television, mobile phones, and social media. Oh…the horrors.

Yet, today, almost 50 years later, financial commentators, many of whom were not alive at the time, suggest that inflation and yields will repeat “That 70s Show.” Understandably, the increase in inflation and interest rates from their historic lows is cause for concern. As James Bullard noted, “Inflation is a pernicious problem,” which is why the Federal Reserve lept into action.

“When the US Federal Reserve embarked on an aggressive campaign to quash inflation last year, it did so with the goal of avoiding a painful repeat of the 1970s, when inflation spun out of control and economic malaise set in.” – CNN

That concern of “spiraling inflation” remains the key concern of the Federal Reserve in its current monetary policy decisions. It has also pushed many economists to point back at history, using “That 70s Show” period as the yardstick for justifying their concerns about a resurgence of inflation.

“The chair of the Federal Reserve at the time, Arthur Burns, hiked interest rates dramatically between 1972 and 1974. Then, as the economy contracted, he changed course and started cutting rates.

Inflation later roared back, forcing the hand of Paul Volcker, who took over at the Fed in 1979, Richardson said. Volcker brought double-digit inflation to heel — but only by raising borrowing costs high enough to trigger back-to-back recessions in the early 1980s that at one point pushed unemployment above 10%.

‘If they don’t stop inflation now, the historical analogy [indicates] it’s not going to stop, and it’s going to get worse,’ said Richardson, an economics professor at the University of California, Irvine.”

However, such may be an oversimplification to suggest Burns was wrong and Volker was right. The reason is the economy today is vastly different than during “That 70s Show.”

Today Is Very Different Than The 1970s

During the 70s, the Federal Reserve was entrenched in an inflation fight. The end of the Bretton Woods and the failure of wage/price controls combined with an oil embargo sent inflation surging. That surge sent markets crumbling under the weight of rising interest rates. Ongoing oil price shocks, spiking food costs, wages, and budgetary pressures led to stagflation through the end of that decade.

What was most notable was the Fed’s inflation fight. Like today, the Fed is hiking rates to quell inflationary pressures from exogenous factors. In the late 70s, the oil crisis led to inflationary pressures as oil prices fed through a manufacturing-intensive economy. Today, inflation resulted from monetary interventions that created demand against a supply-constrained economy.

Such is a critical point. During “That 70s Show,” the economy was primarily manufacturing-based, providing a high multiplier effect on economic growth. Today, the mix has reversed, with services making up the bulk of economic activity. While services are essential, they have a very low multiplier effect on economic activity.

One of the primary reasons is that services require lower wage growth than manufacturing.

While wages did rise sharply over the last couple of years, such was a function of the economic shutdown, which created a supply/demand gap in the employment matrix. As shown, full-time employment as a percentage of the population fell sharply during the pandemic lockdown. However, with full employment back to pre-pandemic levels, wage growth declines as employers regain control over the labor balance.

Furthermore, the economic composite of wages, interest rates, and economic growth remain highly correlated between “That 70s Show” and today. Such suggests that while inflation rose with the supply/demand imbalance created by the shutdown, the return to normalcy will lower inflation as economic activity slows.

With a correlation of 85%, the inflationary decline will be coincident with economic growth, interest rates, and wages.

Unlike “That 70s Show,” where economic growth and wages were rising steadily, which allowed for higher levels of interest rates and inflation, There is a singular reason why a repeat of that period is quite impossible.

The Debt Burden And Economic Weakness

What is notable about “That 70s Show” is that it was the culmination of events following World War II.

Following World War II, America became the “last man standing.” France, England, Russia, Germany, Poland, Japan, and others were devastated, with little ability to produce for themselves. America found its most substantial economic growth as the “boys of war” returned home to start rebuilding a war-ravaged globe.

But that was just the start of it.

In the late ’50s, America stepped into the abyss as humankind took its first steps into space. The space race, which lasted nearly two decades, led to leaps in innovation and technology that paved the wave for the future of America.

These advances, combined with the industrial and manufacturing backdrop, fostered high levels of economic growth, increased savings rates, and capital investment, which supported higher interest rates.

Furthermore, the Government ran no deficit, and household debt to net worth was about 60%. So, while inflation increased and interest rates rose in tandem, the average household could sustain its living standard. The chart shows the difference between household debt versus incomes in the pre- and post-financialization eras.

With the Government running a deep deficit with debt exceeding $32 trillion, consumer debt at record levels, and economic growth rates fragile, consumers’ ability to withstand higher inflation and interest rates is limited. As noted previously, the “gap” between income and savings to sustain the standard of living is at record levels. The chart shows the gap between the inflation-adjusted cost of living and the spread between incomes and savings. It currently requires more than $6500 of debt annually to fill the “gap.“

It Is Not The Same

While the Fed is currently engaged “in the fight of its life,” trying to quell inflation, The economic differences are vastly different today. Due to the heavy debt burden, the economy requires lower interest rates to sustain even meager economic growth rates of 2%. Such levels were historically seen as “pre-recessionary,” but today, they are something economists hope to maintain.

This is one of the primary reasons why economic growth will continue to run at lower levels. Such suggests we will witness an economy:

• Subject to more frequent recessionary spats,

• Lower equity market returns, and

• A stagflationary environment as wage growth remains suppressed while the cost of living rises.

Changes in structural employment, demographics, and deflationary pressures derived from changes in productivity will magnify these problems.

While many want to suggest that the Federal Reserve is worried about “That 70s Show,” we would be lucky to have the economic strength to support such a concern.

The Fed’s bigger worry should be when the impact of higher rates causes a financial break in a debt-dependent financial system.

House Speaker Kevin McCarthy has sent the House home for the week without a resolution on the looming government shutdown, after members of the Freedom Caucus refused to play ball, scuttling plans to pass a Continuing Resolution (a 30-day band-aid to avoid government shutdown), and putting 11 appropriations bills in jeopardy which McCarthy is hoping to pass in the next nine days.

McCarthy on Thursday accused the (actual) conservatives of wanting to "burn the whole place down."

“This is a whole new concept of individuals that just want to burn the whole place down.”

— After House Republicans once again failed to pass a basic procedural rule to fund the Pentagon, Speaker Kevin McCarthy (R-CA) hits some members of his own conference pic.twitter.com/Qt4AR71jP3

— The Recount (@therecount) September 21, 2023

 But wait, there's more!

Senate Majority Leader Chuck Schumer (D-NY), meanwhile, has a bill lined up that could form the framework for the Continuing Resolution designed to keep the government operating beyond Sept. 30, according to Punchbowl News.

While House Republicans are pointlessly grinding through their version of FY2024 spending bills next week, Schumer and Senate Minority Leader Mitch McConnell will likely send the House a bipartisan CR. And yes, it’ll probably include billions of dollars in Ukraine aid as well as disaster relief funding and plenty of provisions that conservatives abhor.

At that point, McCarthy will have a choice to make. Will he bring up the Senate-approved CR and pass it with a mix of Democratic and Republican votes? Will he try to amend it and see if the Senate will bite? (They probably won’t.) Or will he ignore it and shut the government down?

This is a decision that could define McCarthy’s speakership.

On Friday, the House Rules Committee is slated to mark up four spending bills, Homeland Security, State-Foreign Operations, Defense and Agriculture, as part of the GOP leadership's plan to get the 11 appropriations bills through the chamber. The four amount to $1.52 trillion in total spending - tens of billions less than what the Senate will accept.

After that, House members will return on Tuesday evening according to GOP leadership aides.

Punchbowl suggests that a Senate-led CR may have always been in the cards - as any bill to fund the government must be bipartisan, and McCarthy has been unwilling to put a bipartisan solution on the floor out of fear of an open war with his hardline conservatives.

When lawmakers return Tuesday, they'll have just five days left to avoid a shutdown.

By Benjamin Picton, Senior Macro Strategist at Rabobank

How Often Do You Think About The Empire?

There is big news today that ex-Australian media titan Rupert Murdoch is stepping down as Chairman of News Corp. He is to be succeeded by son Lachlan who, having served the longest apprenticeship since Prince Charles, will take over as sole Chair of News Corp and continue on as Executive Chair and CEO of Fox Corporation. The Murdoch family’s grip on the legacy media landscape lives rent-free in the heads of many, and speculation over the eventual passing of the baton has even spawned an Emmy award-winning TV series. So, how often do you think about the Empire?

The question has become a light-hearted social media sensation, but in a world of geopolitical fragmentation, empires matter. Wannabe Tsar (a derivative of ‘Caesar’) Vladimir Putin raised eyebrows in June last year by comparing himself to Peter the Great. “It seems it has fallen to us, too, to reclaim and strengthen” he said. The process of “reclamation” continues as the war in Ukraine grinds on, and Putin fired a new shot at the West overnight by imposing a ban on exports of diesel and petrol. This saw front month European gasoil futures surge by 4.5% yesterday, but they have fallen back again by around 2.7% in early trade today. The Russian ban compounds the problem of an already tight market for refined products that has been driven by hot weather, reduced refining capacity and Western embargoes on Russian crude supplies.

The timing of the ban coincides with the decision by erstwhile Imperial institution the Bank of England yesterday to leave the official bank rate unchanged yesterday for the first time since November 2021. A majority of analysts surveyed by Bloomberg had expected the Bank to lift rates by 25bps to 5.50% but the Monetary Policy committee ultimately voted 5-4 against a hike. The decision probably swung on the softer than expected CPI inflation figures for August that were released earlier this week. Those numbers saw core inflation fall to 6.2% YoY and the headline number decelerate to 6.7% after a merciful fall in food price inflation. Motor fuels were the largest upward pressure on the headline number though, and Russia clearly isn’t helping on that score.

The BOE hold followed a decision earlier in the week from the US Federal Reserve to leave the upper bound of the Fed Funds rate unchanged at 5.50%, a move widely expected by surveyed analysts (including us). Despite holding at this meeting, the Fed upgraded its dot plot forecasts on the trajectory of interest rates and has maintained its bias towards another hike in 2023. The median of the FOMC dot plot is now well north of the OIS curve for 2024 and 2025, and the prospect of higher rates has been received poorly by equity markets. The S&P500 has lost 115 points so far this week as the higher for longer narrative gets priced in and increased geopolitical tensions threaten to roll back the frontiers of the empire of American capital.

There was a point of difference in the world of central banking this week from the Rijksbank and Norges Bank. Both central banks hiked rates by 25bps, following a similar decision by the ECB last week. Rijksbank projections suggest that Swedish rates may have now peaked at 4%, but there is a slight tightening bias implied by the projected peak in the rate path of 4.10%. The Norges Bank was more explicit, raising the outlook for the peak in its policy rate from the current policy level of 4.25% to 4.5% through 2024. Here again the “higher for longer” narrative applies.

Higher for longer is undoubtedly an unpopular meme, and financial markets remain slow to accept it if rates curves are any guide. Even so, we are now seeing 10-year treasury yields at the highest levels this side of Western capitalism’s near death experience 15 years ago, leaving the “rate cuts soon!” brigade of equity managers and real estate spruikers asking “Quo Vadis?” while overleveraged governments and households say “et tu, Brute?”

How sustainable is this with the immense debt loads that we are currently carrying? What will happen once US student loan repayments resume next month for the first time in 3 years? Can equity and real estate valuations continue to defy the most rapid rate tightening cycle in living memory? In so many ways it feels like the barbarians are at the gates.

Undoubtedly, the unpopularity of higher rates is the main reason why they are the exclusive domain of an unelected technocracy. Central bankers are a modern breed of Optimates, while Tribunes of the Plebeians like former President Trump burnish their Populares credentials by promising to force rates lower. In this respect, as with all things, life boils down to the basic question: are you for Caesar? Or the Senate?

Think about that.

By all accounts, Zelensky came away from his Washington visit with nothing new. Biden did announce a fresh $325 million aid package for Ukraine from already committed funds, but the hoped-for long range missile approval never came (however, more cluster bombs are being sent). And as we detailed Thursday, House Republican leadership once again failed to move forward on a mere procedural vote for the Pentagon funding bill, due in large part to GOP members rejecting Biden's proposed $24 billion more in Ukraine aid.

Thursday's package announced by Biden, as Zelensky visited the White House and Capitol Hill, was run-of-the-mill and entirely to be expected. "Today I approved the next tranche of U.S. security assistance to Ukraine including more artillery, more ammunition, more anti-tank weapons and next week, the first U.S. Abrams tanks will be delivered to Ukraine," Biden said.

As for the earlier in the day (Thurs.) meeting with Congressional leaders, House Speaker Kevin McCarthy explained when asked why the Ukrainian leader's request to address Congress was denied, "Zelensky asked for a joint session, we just didn't have time. He's already given a joint session."

Instead in a closed-door meeting, Zelensky later acknowledged he discussed with lawmakers "the battlefield situation and priority defense needs."

But if there is any level of consolation for Kiev, it's seen in the Pentagon announcement which came late in the day Thursday. Facing potential US government shutdown on Oct.1st, given at this point Congress is not expected to pass the 12 appropriations bills needed to fund government operations before next fiscal year, the Pentagon has said it will exempt its operations supporting Ukraine from a shutdown. 

The military typically suspends any activities not deemed vital to national security during government shutdowns, thus the DoD is in effect saying Ukraine aid remains "vital to national security". 

"Operation Atlantic Resolve is an excepted activity under a government lapse in appropriations," Pentagon spokesman Chris Sherwood told Politico, in reference to the operational name still used for actions supporting Kiev.

But Politico points out a potential shutdown would still negatively impact US support to Ukraine:

Sherwood noted that while DOD’s activities related to Ukraine will continue, furloughs and other activities halted under the shutdown could still have a negative impact.

"Training would happen, but depending on whether or not there were certain personnel that were not able to report for duty, for example, that could have an impact," said Pentagon spokesperson Brig. Gen. Patrick Ryder on Thursday.

This Pentagon exemption to keep Ukraine-related support active during a government shutdown seems to be the only significant thing Zelensky came away with. 

Zelensky visited the US in person, made a speech at the UN, and came home with an amount of ammo so small the Pentagon won't give numbers and a handful of the worst air defense systems currently in use by a major power.

In the Army we called this "getting thrown under the bus." pic.twitter.com/f8hFVstDud

— Armchair Warlord (@ArmchairW) September 22, 2023

It appears to have been the main object of discussion when Zelensky met with Secretary of Defense Lloyd Austin in Washington during the trip. The Pentagon said this was "to reaffirm the steadfast US support for Ukraine."

Meanwhile, Bloomberg takes note of Zelensky "showing the strain" amid increasing divisions among allies:

The Ukrainian president allowed a dispute with one of his biggest allies to spin out of control at the United Nations General Assembly this week, and that’s just a hint of the tensions building behind the scenes.

Zelenskiy has been leading his country through Russia’s brutal assault for 19 months, all the time fighting on another front to wring the weapons and finance he needs from his US and European supporters. Now he suspects that President Joe Biden’s commitment is wavering and other leaders may be taking their cue from the US, according to a person who met with him recently.

He grew very emotional at times during that discussion, the person said, and was scathing in his criticism of nations that he said weren’t delivering weapons quickly enough.

Washington's lackluster greeting of Zelensky this week (compared to how he was received in December 2022) came simultaneous to Poland declaring it will no longer arm Ukraine, amid a fierce diplomatic spat over blockage of Ukraine grain imports by Warsaw, to protect Polish farmers.

The Economist is also taking note of the significant mood shift among Western allies...

A "long war" indeed... given a G7 leader from a European country has told reporters this week that the West is prepared for a years-long war, something likely to last some six or seven years, according to the quote.

"A senior official from one European G-7 country said the war may last as much as six or seven more years and that allies need to plan financially to continue support for Kyiv for such a long conflict," Bloomberg wrote.

This morning started with a modest rise in Euro-area Composite PMI (+0.3 to 47.1) on the back of a pick up in Services.

The increase in the area-wide index was driven by an improvement in Germany and the periphery, offset by a deceleration in France. In the UK, the composite flash PMI decreased by 1.9pt to 46.8, meaningfully below consensus expectations.

Goldman saw three main takeaways from today's data.

• First, while marginally better than last month, Euro area growth momentum remains subdued across both sectors. Country press releases attributed this weakness to poor demand conditions, both domestically and abroad.

• Second, inflationary pressures continue to moderate, as reflected by the continued decline in output prices, but the recent pickup in input prices points to upside risk going forward.

• Third, growth momentum in the UK appears to be deteriorating at a faster-than-anticipated pace. This, in turn, is now being accompanied by a loosening in the labour market, and a cooling in underlying inflationary pressures

In the US, however, the last few months have seen 'hard' (real) macro-economic data serially disappoint, while at the same time, 'soft' (survey-based) economic data has dramatically outperformed, sending 'hope' - the spread between 'hard' and 'soft' - to two year highs...

Source: Bloomberg

This morning's mixed PMI picture from Europe followed through into the US with Manufacturing PMI for September (preliminary) rising from 47.9 to 48.9 - the fifth straight month of contraction; while Services PMI disappointed, sliding from 50.5 to 50.2 - its lowest since January...

Source: Bloomberg

Commenting on the data, Siân Jones, Principal Economist at S&P Global Market Intelligence said:

“PMI data for September added to concerns regarding the trajectory of demand conditions in the US economy following interest rate hikes and elevated inflation. Although the overall Output Index remained above the 50.0 mark, it was only fractionally so, with a broad stagnation in total activity signalled for the second month running. The service sector lost further momentum, with the contraction in new orders gaining speed.

“Subdued demand did not translate into overall job losses in September as a greater ability to find and retain employees led to a quicker rise in employment growth. That said, the boost to hiring from rising candidate availability may not be sustained amid evidence of burgeoning spare capacity and dwindling backlogs which have previously supported workloads.

“Inflationary pressures remained marked, as costs rose at a faster pace again. Higher fuel costs following recent increases in oil prices, alongside greater wage bills, pushed operating expenses up.

Weak demand nonetheless placed a barrier to firms’ ability to pass on greater costs to clients, with prices charged inflation unchanged on the month.”

So, slower growth, but rising prices - The Fed and ECB face their nemesis 'Stagflation' in the Sisyphean struggle against reality.

Sen. Bob Menendez (D-NJ) has been indicted for allegedly accepting bribes in the form of gold bars, according to federal prosecutors.

The bars, which were valued at approximately $400,000, were allegedly given to him by a developer, Fred Daibes, who was facing federal bank charges. Daibes allegedly bribed Mendez in exchange for assistance in his case.

Instead of facing over 10 years in prison, Daibes only ended up serving probation after striking an agreement with the US Attorney's Office in New Jersey.

A press event will be held today at 11:00 a.m. to announce the unsealing of an indictment charging Robert Menendez, U.S. Senator from New Jersey, and his wife, Nadine Menendez, with bribery offenses in connection with their corrupt relationship with three New Jersey businessmen. pic.twitter.com/CLTXnU0mAm

— US Attorney SDNY (@SDNYnews) September 22, 2023

Developing...

Authored by Simon White, Bloomberg macro strategist,

The Bank of England’s quantitative tightening program shows that unwinding central-bank bond portfolios, even with outright sales, need not be disruptive for markets. The greater risk for US and global yields comes from positive stock-bond correlations driving risk premia wider.

The BOE has been a pioneer and a thought leader in QT. While the Fed and ECB have only allowed bonds to run off naturally to help achieve their balance-sheet contraction goals, the BOE has sold gilts outright in addition to allowing bonds to mature.

So far, it has not led to any significant market disruption. This enabled the BOE Thursday to increase the pace of reduction in the Asset Purchase Facility (APF) from £80 billion last year to £100 billion over the coming 12 months from October (while holding Bank Rate steady). As colleague Ven Ram also noted, the schedule of maturing bonds next year allowed the bank to keep gilts sales unchanged from last year while increasing the total amount of the APF’s decrease.

The QT watchwords from the bank are “gradual and predictable.” If gilt sales are conducted in such a way, then market disruption should be minimized. The chart below shows the BOE’s own assessment of the impact of bond sales on the market.

The BOE estimates that of the ~40 bps of term-premium increase since the MPC voted to begin QT in February 2022, about 10-15 bps comes from QT specifically – small in comparison to the overall rise in yields since that time.

QT or bond sales, though, are not the most critical risk facing bond prices in the current cycle. Rising and now positive stock-bond correlations threaten to lead to a structural rise in bond risk premium, and lower prices. The correlation is now positive in the US, Japan, and the UK.

In a positive stock-bond correlation world, bonds lose their portfolio-hedge and recession-hedge capabilities, and thus become less sought after. The penny has not fully dropped yet, but the negative term premium for bonds is increasing, and is prone to rising much higher as they become less desirable.

Yields of developed market countries are biased structurally higher, but QT is unlikely to be the culprit. Instead, it allows central banks to reload their capacity for a future time when they may need to restart quantitative easing, in order to stabilize the market from sharply rising term premia.

Amazon Prime announced Friday morning a new plan to start placing "limited advertisements" in TV shows and movies unless customers pay an extra monthly fee. 

"To continue investing in compelling content and keep increasing that investment over a long period of time, starting in early 2024, Prime Video shows and movies will include limited advertisement," an Amazon press release read. 

The e-commerce giant said its streaming platform would have "fewer ads than linear TV and other streaming TV providers," and ads in Prime Video will be introduced across the US, UK, Germany, and Canada in early 2024. Then, customers in France, Italy, Spain, Mexico, and Australia will see ads in the second half of the year. 

Prime Video customers who want the luxury of no ads must pay a new ad-free option for an additional $2.99 per month. Current pricing in the US for Prime memberships is around $14.99 per month, or about $139 per year if paid annually. 

The Verge noted, "The introduction of ads comes at a time when Amazon is undergoing cost-cutting across the company, and arrive as price increases and ad-supported tiers launch on competing streaming services." 

Amazon already runs ads elsewhere: Its Freevee service, which doesn't require a subscription, allows users to watch movies and TV shows. However, viewers will be bombarded with ads in exchange for free content. 

Minimal ad load on streaming platforms has been the norm since debuting a decade ago. The fear is that Prime and others will become too aggressive in monetization. 

The days of streaming platforms charging bargain-basement prices in pursuit of fast growth are over. 

We noted last month that 'streamflation' has led to a revolt of Disney+ and Hulu customers as prices are set to hike next month. 

Authored by Irina Slav via OilPrice.com,

The Offshore Alliance trade union has called off a strike at two Chevron LNG projects in Australia after the country’s labor market regulator mediated a settlement between the parties.

The strike began on September 8 after they failed to reach an agreement with Chevron about working conditions and wage demands.

"The Offshore Alliance will now work with Chevron to finalise the drafting of the agreement and members will soon cease current industrial action," the union said, as quoted by Reuters.

Because of the dispute between Chevron and workers at the Gorgon and Wheatstone projects, LNG prices jumped 35% in August and remain highly volatile as autumn begins and importers step up buying for the winter heating season.

The Gorgon project has a capacity of 15.6 million tons of liquefied natural gas annually, while the Wheatstone facility can produce 8.9 million tons annually. Together, the two account for over 5% of global LNG production capacity, hence the effect on gas prices.

A third Australian LNG project was also under threat of industrial action in August but its operator, Woodside Energy, managed to negotiate a deal with the Offshore Alliance. The North West Shelf is the largest LNG production facility in the country, with a capacity of 16.9 million tons of liquefied gas annually.

Even with the danger of supply disruptions now over, however, the LNG market remains volatile because of the surge in demand from Europe last year as it sought to replace Russian pipeline gas with alternative supplies.

This year, it has been buying gas less frantically but it has filled its gas storage well ahead of schedule and might need to resort to floating storage to lock in more supply for the winter since the available storage does not cover all consumption.

Meanwhile, however, China is stepping up its LNG buying ahead of winter, too, intensifying competition for limited supply.

US equity futures rebounded from a furious three-day selloff at the end of a bruising week for investors which sent markets to the lowest level in over a month as investors are forced to accept the idea of higher-for-longer interest rates (at least until the Fed once again breaks something, which it will). As of 7:45am ET, S&P 500 added 0.3%, a modest rebound after the index fell the most since March on Thursday; the tech-heavy Nasdaq 100 climbed 0.5%.European stocks pared their losses while Asian markets closed week well in the green, except for Japan where not even continued BOJ dovishness and a collapsing yen is enough to support risk. Treasury yields retreated across the curve, after 10-year rates briefly climbed above 4.5% in early trading in Asia. The Bloomberg Dollar Spot Index was little changed, with the Japanese yen and British pound leading declines among Group-of-10 currencies. Brent crude climbed 0.5% to $93.80 after a three-day drop. Gold and Bitcoin rose.

In premarket trading, megacap tech stocks rose, set to rebound slightly after Thursday’s losses as US 10-year yields dipped slightly from highest since 2007. Apple, Amazon.com, Alphabet, Meta Platforms, Tesla, Nvidia were all in the green. Activision Blizzard gained 1.8% as Microsoft’s $69 billion acquisition of the gaming company looked set to clear its final regulatory hurdle. Here are some other notable premarket movers:

• Alibaba Group and other US-listed Chinese stocks are rallying, a day after the Nasdaq Golden Dragon China Index fell to the lowest level since July. BABA is up 3.9%.
• Coeur Mining is up 5.2% after RBC upgrades to outperform from sector perform.
• Ralph Lauren shares are up 1.2%, after Raymond James started coverage on the apparel company with an outperform rating and $135 price target, writing that “expectations are relatively low for RL,” while the “below-average valuation creates an attractive entry point.”
• Roku shares are up 1.4% in premarket trading, after CFRA upgraded the streaming-video platform company to hold from sell.
• Scholastic shares fall 18% in US premarket trading after the children’s publishing company reported a larger-than-expected adjusted loss per share for the first quarter as the company spent on other areas of its business for growth, and flagged the seasonality of sales in its Education Solutions unit. Sales also declined.
• Wayfair gains 2.4% in premarket trading after Bernstein raises the online home-furnishings retailer to market perform from underperform, citing improving revenue growth and management’s positive messaging on margins.

Global central banks this week stressed that they remain vigilant about the risks of inflation and warned investors against premature expectations of rate cuts. The increasing possibility that monetary policy will lead to recession is prompting investors to dump stocks at the fastest pace since December, BofA's Michael Hartnett said, who noted that equity funds had outflows of $16.9 billion in the week through Sept. 20. Hartnett warned that persistently high rates could lead to a hard economic landing in 2024, and result in “pops and busts” in financial markets.

“What matters more than Fed hikes themselves is whether a recession occurs or not,” said Wolf von Rotberg, an equity strategist at Bank J Safra Sarasin Ltd. “It would be a remarkable accomplishment if it were avoided, yet that seems unlikely. If a recession were to happen, the equity market is not prepared for it.”

The latest evidence of resilience in the US labor market reinforced the case for the Fed’s stance of holding interest rates higher for longer. Applications for US unemployment benefits fell to the lowest level since January last week, figures out Thursday showed.

“The prospect of interest rates staying higher for longer has given investors a lingering headache and sentiment has worsened as the week progressed,” said Russ Mould, investment director at AJ Bell. “Many investors had hoped we would approach the end of 2023 with a clearer picture on when interest rates will start to be cut. That scenario has now been muddied by comments from the Fed that it is prepared to raise rates further if necessary and keep a restrictive policy until there are clear signs that inflation is moving back to target levels.”

Always an outlier, amid a hawkish barrage of central bank announcements, overnight the yen weakened after the Bank of Japan held interest rates, its 10-year yield target and forward guidance unchanged. The central bank reiterated its expectation that inflation is decelerating.

European stocks were lower, with the Stoxx 600 down 0.2% and almost all sectors in the red. Construction, retail and real estate are the worst performers.  In individual moves in Europe, Adevinta ASA soared after the classifieds company said it received a takeover proposal from private equity investors including Blackstone Inc. and Permira. Meanwhile there were fresh signs of frailty in the euro-area economy Friday as figures showed private-sector activity in France and Germany continued to shrink in September. Here are the most notable European movers:

• Adevinta shares surge as much as 24% after the European classifieds company confirms it received a takeover offer from Permira and Blackstone, with analysts saying any deal is likely to be at a price well above where the stock is trading. The move also lifts peers including Rightmove and Auto Trader.
• Ascential shares jump as much as 12%, most since Jan. 25, after earnings that showed a strong performance in the UK firm’s events business, according to Citigroup.
• Ubisoft shares gain as much as 4.2% on Friday after the UK’s antitrust regulator said a revised proposal from Microsoft to sell some gaming rights to the French video-game maker opens the door for its Activision acquisition to be cleared.
• BioGaia shares rise as much as 8.6%, the most since April, after Handelsbanken raised its recommendation for the Swedish probiotics firm to buy, saying share price now reflects warranted concerns over customer demand and tough comparables in its 3Q report.
• Jungheinrich shares gain as much as 3.2% after Barclays initiated coverage of the warehouse machinery company with an ‘overweight’ rating, citing an attractive valuation.
• Dutch lenders ABN Amro -4.3% and ING Groep -5.2% slide after the parliament’s lower house approved a proposal to increase bank tax to support lower-income households.
• Alten shares fall as much as 7.8%, the most since January, after the engineering and technology consulting firm reported a bigger-than-expected drop in profitability due to lower activity levels and higher operating expenses.
• Var Energi shares drop as much as 7.6% as the co’s offering of 157.3m shares by holder prices via Barclays Bank Ireland, DNB Bank, Morgan Stanley & Co. International, SpareBank 1 Markets.
• Italgas shares decline as much as 2.8%, touching its lowest level since late October, after a placement of about 14.5m shares offered on behalf of buyers of exchangeable bonds who wish to sell shares to hedge market risk, according to terms of the deal seen by Bloomberg.
• Solutions 30 shares drop as much as 21% after the French technology-services company reported a wider first-half loss and a narrower profit margin.

Earlier in the session, Asian stock retraced early declines and closed in the green. Chinese shares rallied, a move that likely reflects “short covering on expectations of more policy support measures over the weekend, just like the government’s moves in every weekend this month,” said Steven Leung, an executive director at Uob Kay Hian Hong Kong Limited.

• Hang Seng and Shanghai Comp shrugged off early jitters amid supportive measures including Beijing’s draft rules to promote a high level of opening up and encourage foreign investments, while China's market regulator also issued measures to promote the private economy.
• Japan's Nikkei 225 was pressured following the mostly firmer-than-expected Japanese CPI data but then pared some of the losses following the lack of hawkish surprises from the BoJ.
• Australia's ASX 200 was dragged lower with real estate and tech among the worst performers after the Australian 10yr yield touched its highest level since 2014, while the flash PMI data was mixed and showed a deeper contraction in manufacturing.

In FX, the Japanese yen and British pound are rooted to the bottom of the G-10 rankings today. The yen added to its post-BOJ fall as Governor Ueda tempered expectations they were close to raising interest rates - USD/JPY rises 0.4% to trade near 148.20. Sterling slipped 0.4% after UK retail sales and composite PMI both fell short of estimates. The Bloomberg Dollar Spot Index rises 0.1%. EURUSD dropped 0.4% to 1.0615, lowest since March 17, after French manufacturing and services PMIs came in below estimates; currency pared losses after German PMI data came stronger-than-expected

In rates, 10-year yields fall 2bps to 4.47% after touching a new cycle high above 4.5% for the first time since 2007 during Asian trading hours. The US session includes the first Fed speakers since Wednesday’s policy decision. Yields are lower by 1bp-2bp with curve spreads little changed on the day; in 10-year sector bunds trade cheaper by ~2.5bp vs Treasuries while gilts keep pace. Futures block trade of 5-year contracts at 6:35am New York time appeared consistent with a seller. Dollar IG issuance slate empty so far and expected to be muted; weekly volume stands at around $16b, in line with estimates for $15b to $20b. US economic data slate includes September S&P manufacturing and services PMIs at 9:45am.

In commodities, oil rose, in part supported by news that Russia would ban exports of diesel-type fuel and gasoline; crude futures advanced, with WTI rising 1% to trade near $90.50. European natural gas prices fell as Chevron and labor unions in Australia agreed to end strikes at major export plants that roiled the market for more than a month. Spot gold adds 0.3%.

At 8:50 a.m., Federal Reserve Governor Lisa Cook will give a keynote address at a National Bureau of Economic Research event. At 9:45 a.m., we’ll get the latest reading on S&P Global’s manufacturing and services gauges. San Francisco Fed Mary Daly will speak in a fireside chat at 1 p.m., and Minneapolis Fed President Neel Kashkari will appear in a separate event at the same time.

Market Snapshot

• S&P 500 futures up 0.2% to 4,378.75
• STOXX Europe 600 down 0.3% to 453.29
• Nikkei down 0.5% to 32,402.41
• Topix down 0.3% to 2,376.27
• Hang Seng Index up 2.3% to 18,057.45
• Shanghai Composite up 1.5% to 3,132.43
• Sensex down 0.1% to 66,136.23
• Australia S&P/ASX 200 little changed at 7,068.84
• Kospi down 0.3% to 2,508.13
• German 10Y yield little changed at 2.72%
• Euro down 0.2% to $1.0642
• Brent Futures up 0.4% to $93.64/bbl
• Gold spot up 0.3% to $1,926.57
• U.S. Dollar Index up 0.23% to 105.60
• MXAP up 0.3% to 159.89
• MXAPJ up 0.9% to 496.80

Top Overnight News

• The BOJ left its monetary policy unchanged, capping a week of central bank decisions that have roiled financial markets. Kazuo Ueda said the distance toward ending the YCC program and negative rate regime hasn't changed much. Market watchers expect the yen to drop toward 150 per dollar, with intervention possible as it nears that level. BBG
• China is considering relaxing foreign ownership caps in listed local companies to lure global funds back to its stock market, people familiar said. The country currently caps it at 30%, and subjects a single foreign shareholder to a 10% limit. BBG
• JPM will include Indian gov’t bonds in its emerging market index, a move that could trigger billions of inflows to the market. Nikkei
• Euro-area private sector activity shrank for the fourth consecutive month, suggesting the economy contracted in the current quarter. The composite PMI hit 47.1 in September, an improvement on August but still in contraction. While Germany's downturn eased, it deepened in France. UK figures showed the sharpest decline since January 2021. BBG
• European gas prices dropped after Chevron and labor unions resolved a dispute at key LNG facilities in Australia that began Sept. 8th. The agreement brings an end to strikes at the Gorgon and Wheatstone plants, which accounted for about 7% of the world's LNG supply last year. BBG
• Euro zone companies are finally absorbing wage pressures and the labor market has started to soften, European Central Bank chief economist Philip Lane said on Thursday, suggesting inflation pressures from employee pay rises are finally subsiding. RTRS
• AAPL cools the pace of compensation increases for retail employees, the latest sign of the labor market easing. BBG
• Hollywood studios will continue negotiations w/the WGA on Friday amid hopes for a breakthrough that settles the strike relatively soon. WaPo
• AMZN confirmed recent media reports with a plan to begin running advertisements inside its Prime Video content. The company will sell an ad-free upgrade option for Prime members who pay an additional $2.99/month (given that Prime cost $14.99 per month, this is effectively a ~20% price hike in the US for people who want to keep ads out of their content). WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed amid a higher yield environment and after this week’s central bank frenzy culminated with a lack of surprises from the BoJ. ASX 200 was dragged lower with real estate and tech among the worst performers after the Australian 10yr yield touched its highest level since 2014, while the flash PMI data was mixed and showed a deeper contraction in manufacturing. Nikkei 225 was pressured following the mostly firmer-than-expected Japanese CPI data but then pared some of the losses following the lack of hawkish surprises from the BoJ. Hang Seng and Shanghai Comp shrugged off early jitters amid supportive measures including Beijing’s draft rules to  promote a high level of opening up and encourage foreign investments, while China's market regulator also issued measures to promote the private economy.

Top Asian News

• China mulls easing foreign stake limits to lure global funds, via Bloomberg.
• PBoC releases list for systemic important banks; will promote stable operations and healthy development of systemically important banks, according to Reuters.
• Chinese Vice President Han Zheng said China remains committed to opening itself up to the wider world and to an independent foreign policy, while it stays committed to safeguarding sovereignty and territorial integrity, according to Reuters.
• China's market regulator issued measures to promote the private economy and China will continue to break down market access barriers for the private economy, according to state media.
• Japanese PM Kishida said he will reform the asset management sector and will introduce a new programme to assist new entrants to the asset management sector. Furthermore, Kishida said it is important for FX to move stably, reflecting economic fundamentals.

European bourses are mostly lower, but have trimmed the losses seen at the cash open. The main macro story for the region thus far has been the flash PMI prints for September. Sectors in Europe are mostly lower with the exception of Basic Resources which is in marginally positive territory thanks to underlying metals prices. On the downside, the Construction & Materials sector lags. US futures are trading slightly firmer following the biggest US stock drop since March, in yesterday's session.

Top European News

• UK Recession Risk Grows as Companies Cut Staff at a Sharp Pace
• Dutch Lenders Slide After Parliament Approves Bank Tax Increase
• European Stocks Slide on Interest Rate Woes; Dutch Banks Slide
• Dutch Lenders Slide as Parliament Approves Share Buyback Tax
• Grim Euro-Area Private Sector Suggests Quarterly Contraction
• Alten Falls as Profit Dragged by Expenses, Lower Activity Level
• Vodafone in Negotiations to Sell Spanish Business to Zegona

FX

• DXY is on a firmer footing following the uneventful BoJ decision overnight coupled with weakness from the EUR post-PMI.
• EUR and GBP both declined following overall downbeat PMI data in which the overarching theme was growth concerns.
• USD/JPY hit a high of 148.42 after the BoJ announcement overnight which offered no hawkish surprises whilst Governor Ueda repeated that the central bank will not hesitate to take additional easing measures if necessary.
• Antipodeans outperform in tandem with optimism surrounding China which has also propped up commodities.
• PBoC set USD/CNY mid-point at 7.1729 vs exp. 7.3009 (prev. 7.1730)

Fixed Income

• Debt futures faded from post-French PMI peaks and never really threatened best levels again.
• Bunds returned to flat on the day within a 130.19-129.50 range and OATs recently dipped below par between 124.87-124.21 parameters, while Gilts are holding above 96.00 having reached 96.37 from their 95.65 early Liffe low.
• T-note is closer to 108-19+ overnight high than 108-09 base awaiting the fate of preliminary US PMIs and Fed rhetoric from Daly, Cook and Kashkari with an element of pre-weekend short covering probably in mind.

Commodities

• WTI and Brent November futures are choppy in the European morning, with the complex swayed by mixed flash PMI data from France and Germany, with price action within yesterday’s range but underpinned by Russia’s gasoline and diesel export ban which came into effect yesterday.
• Dutch TTF is on a firmer footing despite Chevron’s Australia LNG workers suspending industrial action after reaching a deal. The upside for the complex could emanate from the Russian gasoline/diesel export ban, whilst recent reports also suggested firmer Chinese LNG demand.
• Metals are resilient to the firmer Dollar with spot gold rising from a 1,919.12/oz low, above its 200 DMA (1,925.29/oz) to a high just shy of its 50 DMA (1,929.58/oz).
• Base metals meanwhile have rebounded and trimmed a bulk of yesterday’s losses, with some citing optimism of a Chinese economic rebound amid recent stimulus measures, with desks also pointing to restocking ahead of China’s 8-day long holiday commencing next Friday.
• Australian unions agreed to endorse recommendations made by the industrial umpire to end the dispute with Chevron (CVX) and agreed to call off strikes at Chevron facilities. Chevron (CVX) Australia spokesperson says unions have advised the Co. and the Fair Work Commission that industrial action has been suspended.
• Russian Kremlin said the fuel export ban will last for as long as necessary to ensure stability of the fuel market, according to Reuters.
• Russia's Kremlin said there has been no progress on the Black Sea grain deal issue, with no talks between the Russian and Turkish presidents scheduled, according to Reuters.

Geopolitics

• Belarus Defence Ministry announces that Belarus and Russia are to commence joint military drills, according to Reuters.
• US President Biden said in a meeting with Ukrainian President Zelensky that Russia alone stands in the way of peace and Russia is seeking more weapons from Iran and North Korea, while he added that Russia hopes to use winter as a weapon against the Ukrainian people.
• Biden announced USD 325mln of security aid for Ukraine and that the first US Abrams tanks would be delivered to Ukraine next week.
• Ukrainian President Zelensky said that they reached an agreement to strengthen Ukraine's defence capabilities and that the US will help Ukraine boost air defence during the winter, while they agreed on steps to expand exports of grain from Ukraine, according to Reuters.
• Chinese Vice President Han Zheng said China supports all efforts that are conducive to the peaceful resolution of the Ukraine crisis and stands ready to continue playing a constructive role for an early attainment of peace, according to Reuters.

US Event Calendar

• 09:45: Sept. S&P Global US Services PMI, est. 50.7, prior 50.5
• 09:45: Sept. S&P Global US Manufacturing PM, est. 48.2, prior 47.9
• 09:45: Sept. S&P Global US Composite PMI, est. 50.4, prior 50.2

Central Bank Speakers

• 08:50: Fed’s Cook Speaks at NBER AI Conference
• 13:00: Fed’s Daly to Discuss Monetary Policy, Economy
• 13:00: Fed’s Kashkari Speaks

DB's Jim Reid concludes the overnight wrap

Markets experienced another big sell-off yesterday, with longer-dated yields hitting new highs for the cycle across several countries. In fact, the US 10yr Treasury yield has surpassed the 4.5% mark in trading overnight, which is the first time that’s happened since 2007. And the moves haven’t just been confined to Treasuries, since Bloomberg’s global aggregate bond index closed at its lowest level of 2023 so far yesterday. Meanwhile for equities, the losses gathered pace towards the end of the session, and the S&P 500 (-1.64%) experienced its worst day since March.

In large part, those moves have been driven by the prospect that central banks are likely to keep policy rates in restrictive territory for longer than previously thought. That was prompted initially by the Fed’s hawkish dot plot on Wednesday. But the sell-off then got fresh momentum yesterday from theUS weekly jobless claims, which came in at their lowest since January at 201k. That pushed the 4-week moving average to its lowest level since March, offering further evidence that this strength doesn’t just look like a blip.

That backdrop led to an intense bond sell-off, since the strong labour market data suggested that any rate cuts were still some way off. By the close yesterday, the 10yr Treasury yield (+8.7bps) was at a post-2007 high of 4.494%, and it remains there overnight after coming down slightly from the 4.5% mark. At the same time, the 10yr real yield (+6.6bps) also hit a post-2009 high of 2.11%. Yesterday’s rise was even stronger at the long-end, with the 30yr yield seeing its sharpest rise since April, up +12.8bps to 4.57%. That said, front-end yields actually fell on the day, with the 2yr yield ending the day -3.1bps lower at 5.15%. As a result, the 2s10s slope saw its most significant steepening since the March banking stress (to -65.4bps), and overnight it’s steepened a bit further to -63.9bps. Over in Europe it was much the same story, with yields on 10yr bunds (+3.5bps) hitting their highest intraday level since 2011 at one point, although they then pared back those gains somewhat to close at 2.73%.

This rise in nominal and real yields meant that equities continued to struggle, and the S&P 500 (-1.64%) seeing its worst day since March and closing at its lowest level in nearly 3 months. It also means that we’ve now had a 5% sell-off in the index since its recent peak at end-July, which is the first time since the SVB sell-off in March that we’ve experienced a decline of that magnitude. At the same time, the VIX index of volatility rose for a 5th consecutive day, up a further +2.4pts to 17.5pts, which is its highest level in a month. The NASDAQ saw an even sharper loss (-1.82%). Meanwhile, the small-cap Russell 2000 (-1.56%) is now in technical correction territory, having shed more than -10% since its peak in end-July. And over in Europe there were losses across the continent, with the STOXX 600 down -1.37%.

Overnight in Asia, the main story is that the Bank of Japan has left policy unchanged at their latest meeting, in line with expectations. We’ll have to see what Governor Ueda says in the press conference, but so far the Japanese Yen has weakened -0.30% against the dollar overnight, since the ongoing stimulus has put further pressure on the Yen. Ahead of the decision, the latest CPI numbers for August were also stronger than expected, with headline CPI at +3.2% (vs. +3.0% expected). Following the decision, Japanese equities have pared back some of their earlier losses, but the Nikkei is still down -0.38%. But outside of Japan the picture has been more mixed, with losses for the KOSPI (-0.41%), but gains for the Hang Seng (+1.21%), the CSI 300 (+1.03%) and the Shanghai Comp (+0.77%). Looking forward, there’s also been a stabilisation in US equity futures, with those on the S&P 500 up +0.17% overnight .

The other important news overnight has been from the September flash PMIs. In Japan, they’ve weakened relative to August, with the composite PMI down to 51.8, which is its lowest level since February. But in Australia, there’s been a recovery in the composite PMI, which has risen to a 3-month high of 50.2. So all eyes will be on the US and European numbers later to see the direction of travel as we come to the end of Q3.

Elsewhere yesterday, t he Bank of England kept their policy rate on hold at 5.25%, which ended a run of 14 successive hikes. It was a narrow 5-4 vote among the committee, with 4 of the members preferring a 25bp hike, and their statement still signalled the potential for more hikes. For instance, it said that “Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.” The other important development came with regards to quantitative tightening, where they voted to reduce the gilt portfolio by £100bn over the year from October, taking the total down to £658bn .

For markets, the decision to leave rates unchanged came as something of a surprise, since swaps had been pricing in a 63% likelihood of a hike immediately prior to the decision. As a result, sterling fell against both the US dollar (-0.37%) and the Euro (-0.39%). However, gilt yields followed a pattern similar to the rest of Europe, with a noticeable steepening amidst rises in both the 2yr (+2.5bps) and the 10yr yield (+9.0bps). Looking forward, our UK economist thinks it’s more likely than not that rates have peaked. See his full recap here.

Central banks were in the spotlight elsewhere yesterday, with decisions in several other European countries. In Sweden, the Riksbank raised their policy rate to 4%, in line with expectations. Likewise in Norway, the Norges Bank hiked by 25bps to 4.25%, and Governor Bache said “There will likely be one additional policy rate hike, most probably in December”. However, in Switzerland, the SNB left rates unchanged at 1.75%, contrary to the consensus of economists who expected a 25bp hike. As a result, the Swiss Franc was the worst-performing G10 currency yesterday, weakening by -0.66% against the US Dollar .

Looking at yesterday’s other data, US existing home sales fell to an annualised rate of 4.04m in August (vs. 4.10m expected), leaving them at a 7-month low. Meanwhile, the Conference Board’s Leading Index fell by -0.4%, marking its 17th consecutive monthly decline.

To the day ahead now, and data highlights include the September flash PMIs from Europe and the US, along with UK retail sales for August. Central bank speakers include ECB Vice President de Guindos, along with the Fed’s Cook, Daly and Kashkari.

The head of United Auto Workers, Shawn Fain, warned General Motors Co., Ford Motor Co., and Stellantis NV earlier this week that strikes would expand on Friday - if offers for a new four-year labor contract were not increased to 'satisfying levels.' 

Fast forward to Friday morning, UAW boss Fain is expected to address all 146,000 members via Facebook Live event around 1000 ET. He is expected to reveal the union's next steps in broadening strikes at automakers' manufacturing plants.

"Either the Big Three get down to business and work with us to make progress in negotiations, or more locals will be called on to stand up and go out on strike," Fain said on Monday. 

A Deutsche Bank note shows the automakers have offered around 20% pay hike increase over a new four-year labor contract. There have been no new offers by automakers this week. UAW pay hike demands are still around 36%, indicating a very large gap in talks. 

Bloomberg noted, "An expanded strike could ratchet up pressure on the carmakers to reach a deal. Fain's strategy has been to keep the companies guessing about his next move. But more members walking on also poses a risk to the union in the form of a diminished strike fund." 

Deutsche Bank shows the union's strike fund had $825 million at the start of the strike one week ago. 

The pressure is on for automakers and the union to find common ground at the bargaining table. Morgan Stanley's auto strategist, Adam Jonas, revealed in a note to clients this week, "The value of N. American light production of the D3 (F, GM, STLA collectively) is approximately $750mm per day (approx. 15k units per day). Applying slightly more than a 30% decremental (yes, mix is that high) implies around $250mm of lost profit per day (assuming 100% of production impacted)."

We've pointed out that automakers have already responded with layoffs of non-striking workers (see here & here). 

The ball is in Fain's court today. 

With a growing number of central banks either ending their hiking cycle (BOE, SNB, Riksbank, and absent an oil price shock, the Fed too), or even actively easing (PBOC, Brazil), Japan remains the glaring monetary policy outlier it has been for the past 30 years, and despite soaring inflation that has been above the 2% inflation target since April 2022 (and even above US CPI at times) overnight the BOJ once again refused to even begin its long overdue policy tightening, when despite growing speculation that the central bank will at least set the groundwork for an end to YCC if not NIRP to tame the imploding Japanese lira yen, the BOJ voted unanimously to maintain its current policy as expected, with its 10-year JGB yield target at about 0%, the policy balance rate at -0.1% and kept yield curve control unchanged.

And in a slap to the face of those expecting the central bank to at least hint that it is catastrophically behind the curve when it comes to controlling inflation, It also left its forward guidance unchanged, and noted “extremely high uncertainties” over prices and the economy and forecast inflation to decelerate.

The BOJ also made no changes to its assessment of the economy and prices, which were revised upward in the previous Outlook Report. Specifically, its statement maintained the view that "Japan's economy has recovered moderately." In terms of individual items, it again stated that "consumption has increased steadily at a moderate pace," and that business fixed investment has also "increased moderately."

On the inflation front, it adjusted its assessment of core CPI inflation, which has started to slow recently, to “has been at around 3 percent recently,” from “has been in the range of 3.0-3.5 percent.” Its view on inflation expectations was unchanged, as “have shown some upward movements again.” The BOJ also made no revisions to its view on risk factors, reiterating that "it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices."

During his press conference following the policy announcement, governor Ueda, asked about his recent comments alluding to the possibility of confirming a virtuous inflation trend by year-end, a condition for policy normalization — clarified that the “distance to ending negative rates” hasn’t really changed. He explained he had simply wanted to avoid ruling anything out and limiting the BOJ’s options.

Ueda also reiterated that when the goal of sustained 2% inflation is in sight, the BOJ will consider ending its YCC policy as well as raising interest rates. He reiterated that inflation should slow more clearly in coming months, although the recent deceleration was less than previously expected.

Kuroda's successor said that the BOJ has long placed a greater emphasis on the risk of tightening too soon over the possibility of being behind the curve in raising rates. He says there’s no change to this “risk management” tendency.

Speaking of the currency, Ueda said it’s desirable for currency rates to reflect economic fundamentals and for them to move in a stable fashion, although he declined to comment on "short-term" currency moves, which have seen the yen plunge as the worst performing major this year.

Of course, the yen - which has been the Developed World's Turkish lira this year as it has cratered from 130 to 148, weakened even more on what was widely seen as a dovish BOJ stance, sliding 0.5% to about 148.3 per dollar. The drop may have been restrained by comments from government officials that they are ready to act on sharp moves.

And indeed, while some were expecting the USDJPY to immediately spike above 150 after anything except a hawkish BOJ statement - with rate differentials to the US entering nosebleed territory - the contained drop may have been explained by what National Australia Bank noted was a warning that the BOJ is ready to intervene in the FX markets on the Ministry of Finance’s behalf at a moment's notice.

"There is an addition of a paragraph in the BOJ statement that was not there in July, which concludes ‘it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan’s economic activity and prices’," says Ray Attrill, strategist in Sydney.

“Intervention is of course MOF’s not BOJ’s call, but BOJ will evidently be fully onside with this should MOF so choose” Attrill said adding that “taken together with Mr Suzuki’s comments earlier, I think its pretty clear we should expect a burst of FX intervention one side or other of 150.”

“As such, risk-reward doesn’t favor being long USD/JPY at current levels”, although with the USDJPY fast approaching 150, it appears that many disagreed.

Ultimately, the question of when the BOJ intervenes will be a political one: there is only so much inflation Japan's long-suffering population can sustain, and at some point - quite soon - they will make it very clear that they will demand a different PM if the current one is willing to risk currency collapse just to preserve fake bond market stability for a few months longer.

Stocks were also down, however, despite the sliding yen with the Topix closing 0.3% lower and the Nikkei 225 posting a 0.5% decline. JGBs rose, with 10-year futures up 16 ticks to 145.46. Cash bonds were mostly flat, with the 10-year yield holding at 0.745%, the highest since 2013.