North American Morning Briefing: Stock Futures Tick Up After Market Pullback

MARKET WRAPS

Watch For:

U.S. Import Prices for August; U.S. Industrial Production & Capacity Utilization for August; EIA Weekly Petroleum Status Report; Canada CPI for August; Cisco Systems Investor Day webcast.

Opening Call:

Stock futures ticked up Wednesday, signaling a tepid rebound for major indexes that have come under renewed pressure on concerns that the pace of the economic recovery is slowing.

Stocks have slipped in September amid worries that markets are ripe for a pullback after marching higher for much of the year. Just as concerns about high valuations are on the rise, investors say the economic rebound likely won't be as fast as they previously expected. The spread of the Delta variant of coronavirus, an economic slowdown in China and supply-chain difficulties have all dampened sentiment.

"We've shifted from worrying about premature tightening [by the Federal Reserve] killing off the recovery in equities to concerns about the strength of the recovery weighing on equities," said Sebastian Mackay, multiasset fund manager at Invesco. Mr. Mackay remains upbeat about the outlook for stocks, but said he has taken out insurance against volatility by buying put options.

Investors will parse data on U.S. industrial production at 9:15 a.m. for clues about the state of the economic recovery. Economists forecast that output rose in August.

Overseas markets were mixed. The Stoxx Europe 600 edged down, led lower by shares of retail, travel and leisure companies. H & M Hennes & Mauritz fell over 3% after the Swedish clothes retailer said sales in its third quarter fell short of analysts' expectations.

Stock indexes in mainland China and Hong Kong fell after data showed growth across a range of Chinese economic indicators pulling back in August. An outbreak of Covid-19 and tighter property regulations hit consumer spending and the housing sector.

The data made the case for China to ease monetary and fiscal policy, said Vincent Chan, a China strategist at Aletheia Capital. The moves could include cutting banks' reserve-requirement ratios, Mr. Chan said, a tweak that would allow banks to step up their lending.

Casino companies Sands China and Galaxy Entertainment dropped 31% and 20%, respectively, following steep falls in some U.S.-listed peers. On Tuesday, the Macau government set expectations for the future of the gambling industry, including increased regulatory scrutiny over casino operations.

Shares in embattled property developer China Evergrande Group shed another 5.1%, a day after it said it had hired financial advisers.

Forex:

Tuesday's slightly weaker (although still-elevated) U.S. inflation figures had little impact on the dollar, which has kept to a tight range, MUFG said.

The figures keep the Federal Reserve on track to announce plans to taper asset purchases later this year, but this is now more likely in November than September. Next week's meeting is unlikely to "fuel any renewed FX volatility" as "any lingering expectations of something meaningful happening" are now gone, said Derek Halpenny, MUFG's head of research for global markets EMEA.

EUR/USD, last up 0.1% at 1.1817, should stay in a narrow range, with the euro supported by solid economic fundamentals but hampered by divergence between Fed policy and that of the European Central Bank, he said.

Federal elections in Germany could create shifts in terms of fiscal policy and monetary policy that "err on the side of probably more accommodation and expansion" and potentially cause the euro to fall, said Michael Hasenstab, chief investment officer for global macro at Franklin Templeton.

"I think that will have implications for the euro," he said. This doesn't only apply to the euro against the dollar and falls may be more pronounced against Scandinavian currencies, Hasenstab said.

He pointed to strong current accounts in Sweden and Norway, as well as good growth and probably tighter policy--the latter has already been signaled in Norway. "So, it's not just about euro-[US] dollar, but really euro-Scandinavia and euro to some of the other currencies that we think is equally interesting," he said.

Bonds:

In the bond market, the yield on 10-year Treasury notes ticked up to 1.280% from 1.276% Tuesday.

Commerzbank is upbeat about the strong performance of eurozone peripheral government bonds, saying it sees promising dynamics as yield spreads continue tightening regardless of market direction.

This has taken the 10-year Italian BTP-German Bund yield spread below the key 100-basis-point level, rates strategists at the German bank say.

The 10-year BTP-Bund spread is trading at 99.4 basis points in early trade, with 10-year Spanish-German spreads at around 64 basis points and 10-year Portuguese-German spreads slightly below 55 basis points, according to Tradeweb.

Commodities:

Oil prices rose, with Hurricane Nicholas adding to disruption for U.S. Gulf of Mexico producers, who hadn't even fully ramped back up following Hurricane Ida. Those hurricanes are among the factors pushing oil higher Wednesday according to OANDA's Jeffrey Halley.

Elsewhere, jumping natural gas prices in Europe may add indirect support for oil, he adds. Those factors come after OPEC raised its demand forecast for 2022 and the IEA on Tuesday slashed its supply forecast for this year--both of which suggest a tightening market.

Gold prices edged lower, but hold on to most of the gains made on Wednesday after U.S. inflation data were weaker than expected. The weaker-than-expected CPI reading offered support to the Federal Reserve's view that inflation will be fleeting, leading investors to bet that the central bank's tapering and rate hikes won't happen imminently.

"The influence of the special effects caused by the pandemic [on inflation] appears to be gradually dwindling," Commerzbank said. The Fed "will not be in any great rush to scale back its bond purchases," the bank said.

Copper prices edged higher, halting two days of declines, driven by concerns about fresh Covid-19 outbreaks in China. Three-month copper on the LME is up 0.6% at $9,492 a metric ton. Prices rallied to a roughly six-week high on Monday but have slumped since.

"Investors are growing concerned about the spreading Delta variant, especially in China, which now seems to have more than its usual share of outbreaks," said Ed Meir, a metals consultant at ED&F Man.

Beijing has locked down the city of Xiamen, a manufacturing hub, Meir said.

Aluminum meanwhile rises 1.4% to $2,873.50 a ton. Data released Wednesday shows China's aluminum output fell for a fourth straight month, amid production restrictions.

TODAY'S TOP HEADLINES

High Steel Prices Have Manufacturers Scrounging for Supplies

Manufacturers are facing the highest steel and aluminum prices in years, another hurdle for U.S. companies already struggling to make enough cars, cans and other products.

Rapidly increasing metal costs are pushing manufacturers to take what steel they can get and hire more people to seek out available supplies, company executives said. The rising costs are flowing through to some producers of consumer goods: Campbell Soup Co. is paying more to get the cans it fills with tomato soup; Peloton Interactive Inc. is seeing prices rise for parts that go into its stationary bikes; and Steelcase Inc. is paying more to make metal desks and filing cabinets. Car makers like Ford Motor Co. and General Motors Co. are also dealing with rising metal prices.

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SpaceX, Jared Isaacman Face Test During Private Flight to Orbit

Elon Musk's SpaceX has demonstrated its ability to accomplish missions for the U.S. government. This week, the company has a new customer from the private sector to satisfy: a 38-year-old billionaire who wants to be an astronaut.

Jared Isaacman, founder and chief executive of payments-processing company Shift4 Payments Inc., purchased the Inspiration4 mission for an undisclosed sum from Space Exploration Technologies Corp., the formal name for Mr. Musk's company. Mr. Isaacman will lead the first orbital mission made up entirely of civilians. Other non-astronauts have made it that deep into space in the past, but only aboard government spacecraft.

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Apple iPhone 13's Price Wins Favor in China

Apple Inc.'s latest smartphone lineup won favorable reviews from Chinese consumers thanks to its competitive pricing, although supply constraints and competition from local brands remain challenges in one of Apple's most important markets.

The Cupertino, Calif., company showed four iPhone 13 models Tuesday at its annual September product introduction. They adhered closely to previous designs but included improvements in camera functions, processing power and battery life.

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Senators Seek Answers From Facebook After WSJ Report on Instagram's Impact on Young Users

Sens. Richard Blumenthal and Marsha Blackburn said they would launch a probe into Facebook Inc.'s internal research on the way its Instagram photo- and video-sharing service affects young users, prompted by a Wall Street Journal investigation that showed the company knew the app was harmful to some in that group.

The Democratic chairman and ranking Republican on the Consumer Protection, Product Safety, and Data Security Subcommittee on Tuesday also said that they were in touch with someone they identified as "a Facebook whistleblower" and "will use every resource at our disposal to investigate what Facebook knew and when they knew it-including seeking further documents and pursuing witness testimony." In the statement, the senators said, "The Wall Street Journal's blockbuster reporting may only be the tip of the iceberg."

Read More ->

Fintech Startup Pagaya Nears $9 Billion SPAC Deal

Pagaya Technologies Ltd. is close to an agreement to go public through a merger with a special-purpose acquisition company that would value the financial-technology startup at about $9 billion, said people familiar with the matter.

Based in New York and Tel Aviv, Pagaya operates an artificial-intelligence network to make financial transactions like lending more efficient and give more people the ability to borrow. Banks and other financial-services providers use its platform, which analyzes troves of data to help partners serve more customers. Pagaya is nearing a deal to combine with SPAC EJF Acquisition Corp., the people said. The merger could be announced as soon as this week.

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Boeing CEO, Board Ask Judge to Clarify Ruling

Boeing Chief Executive David Calhoun and other current and former directors are asking a Delaware judge to clarify a legal opinion indicating she had found that the plane maker's board "publicly lied" about its handling of the 737 MAX.

In a motion for clarification filed late last week, defense lawyers for Mr. Calhoun and the directors say the judge's Sept. 7 ruling "contains categorical statements that the board and Mr. Calhoun misled the public about the board's safety oversight."

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Big Truckers Say Vaccine Mandate Could Push Drivers Away

Big trucking companies say a federal vaccination and testing mandate aimed at curbing the spread of the Covid-19 virus could push more workers away from their operations and deepen upheaval in U.S. supply chains.

Executives say the proposed testing requirements for workers who choose not to get vaccinated could also pose challenges for trucking companies whose fleets haul goods long distances, often along irregular routes that send drivers from one corner of the country to another over several days or weeks.

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Inditex Books Swing to 1H Profit as Sales Recover From Pandemic

Industria de Diseno Textil SA continued its momentum in the second quarter, with sales returning above pre-pandemic levels as the Spanish fashion company swung to a net profit for the first half of its fiscal year.

Inditex booked a net profit of 1.27 billion euros ($1.50 billion) in the six months to end-July swinging from a net loss of EUR195 million in the same period last fiscal year. Sales in the half rose almost 50% to EUR11.94 billion. In the second quarter, sales were 7% higher at constant currency than the same period of 2019.

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H&M 3Q Sales Rose on Pandemic Recovery, But Fell Short of Expectations

Sweden's Hennes & Mauritz AB said Wednesday that third-quarter sales grew as stores reopened following the easing of restrictions put in place to combat the pandemic.

The fast-fashion retailer said sales were 55.59 billion Swedish kronor ($6.46 billion) in the three months to Aug. 31. That figure is slightly below estimates of SEK57.23 billion, according to a FactSet poll.

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Consulate Health Affiliates Agree to Put Off Settlement of Whistleblower Suit

Bankrupt affiliates of Florida nursing-home operator LaVie Care Centers LLC agreed to put off seeking court approval of a settlement of a $258 million whistleblower suit after lawyers for the Department of Justice said on Tuesday that the agreement hasn't been finalized.

The affiliates of the LaVie chain, which does business as Consulate Health Care, are facing a lawsuit over allegations that they overbilled U.S. government health programs. In March, CMC II LLC, a back-office manager for Consulate-run nursing homes, along with two affiliated nursing homes filed for bankruptcy, saying they couldn't pay the $258 million judgment.

Read More ->

Uranium Heats Up, and Hedge Funds Score

Uranium prices are rising, enriching a handful of hedge funds that have been betting a market laid low by a nuclear disaster a decade ago would rebound.

The price of uranium hit an eight-year high of $44 a pound this week, according to the price tracker UxC LLC. The surge follows the recent launch of an exchange-traded trust by Sprott Asset Management LP, which has bought large stockpiles of uranium after raising money from shareholders and emerged as a favored trading vehicle in its own right, traders said.

Read More ->

China's Economic Recovery Is Looking Gloomier

BEIJING-Growth across a range of Chinese economic indicators pulled back sharply in August, as a new outbreak of the Covid-19 Delta variant and tighter government regulations on the property market hit consumer spending and the housing sector.

Retail sales, a key gauge of China's consumption, rose just 2.5% in August from a year earlier, down sharply from July's 8.5% year-over-year growth, according to data released Wednesday by China's National Bureau of Statistics. The result marked the lowest pace of growth in a year and missed by a large margin the 6.3% increase expected by economists polled by The Wall Street Journal.

Read More ->

High Steel Prices Have Manufacturers Scrounging for Supplies

Manufacturers are facing the highest steel and aluminum prices in years, another hurdle for U.S. companies already struggling to make enough cars, cans and other products.

Rapidly increasing metal costs are pushing manufacturers to take what steel they can get and hire more people to seek out available supplies, company executives said. The rising costs are flowing through to some producers of consumer goods: Campbell Soup Co. is paying more to get the cans it fills with tomato soup; Peloton Interactive Inc. is seeing prices rise for parts that go into its stationary bikes; and Steelcase Inc. is paying more to make metal desks and filing cabinets. Car makers like Ford Motor Co. and General Motors Co. are also dealing with rising metal prices.

Read More ->

Derby's Take: Fed Faces Inflation Cross Currents Ahead of FOMC Meeting

As the Federal Reserve ramps up for its monetary policy meeting next week, it faces some tough cross currents on the inflation front.

The Fed has for some time been up against an unexpected surge in price pressures testing its desire to keep monetary policy on an aggressively supportive footing to help the U.S. economy recover from the body blow of the coronavirus pandemic.

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Some Oil Majors Back Investor Standard for 'Net Zero' Plans

Some big oil companies have thrown their weight behind new investor-backed guidelines for plans to reach net-zero carbon emissions, a move that could make it easier to compare different approaches among energy providers.

BP PLC, Eni SpA, Repsol SA, Royal Dutch Shell PLC and TotalEnergies SE said Wednesday they would trial next year the new "Net Zero Standard for Oil and Gas," a 30-page set of guidelines put together by investors and energy companies. The U.S.'s Occidental Petroleum Corp. also gave feedback on the standards, but won't participate in the trial as of now.

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Supply-Chain Strains Hit Prices, Inventories of Artificial Christmas Trees

Supply-chain disruptions will make decking the halls more expensive than ever for consumers looking for artificial trees this Christmas.

Some U.S. retailers are raising prices by 20% to 25% to keep pace with skyrocketing shipping costs and they are warning that certain trees could sell out early because deliveries from overseas producers have been hit by the congestion that has tied up distribution networks from ports in China to freight yards in Chicago.

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UK Annual Inflation Accelerated in August

Annual inflation in the U.K. accelerated in August to its highest level in almost a decade, adding to signs of inflationary pressure as the global economy recovers from the pandemic.

Consumer prices rose 3.2% on the year in August, the Office for National Statistics said Wednesday. That was the highest annual rate of inflation since March 2012 and well in excess of the Bank of England's 2% target.

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Democrats Put Off Hard Decisions on $3.5 Trillion Spending Plan for Now

WASHINGTON-Democrats on Capitol Hill have hard choices to make if they want to pass a sprawling package of healthcare, education and climate-change programs without any GOP support. So far, they have avoided making them.

Centrist Senate Democrats are raising concerns over Democratic leaders' plans to assemble a package of $3.5 trillion in spending and tax cuts, even if offset by other sources of revenue and savings. Because Democrats cannot afford to lose a single vote from their own caucus in the evenly-split Senate, that means that overall spending level will likely have to come down, either by excluding or shortening the length of some proposed programs.

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Biden to Meet With Top Executives on Covid-19 Vaccine Mandate

WASHINGTON-President Biden is expected to meet Wednesday with executives from companies including Walt Disney Co., Microsoft Corp. and Walgreens Boots Alliance Inc. to advance his Covid-19 vaccination requirements for the private sector.

The White House meeting comes after a plan Mr. Biden announced last week designed to bring the pandemic under control, which includes vaccine requirements affecting roughly 100 million workers. Attendees are expected to discuss how they are expanding requirements at their companies and institutions and how mandates have driven up vaccinations among employees, a White House official said.

Read More ->

North Korea Fires Two Ballistic Missiles Off Its East Coast

SEOUL-North Korea launched two ballistic missiles off its east coast on Wednesday, South Korean and Japanese officials said, in Pyongyang's second weapons test in recent days.

The missiles splashed into the waters between Korea and Japan. The distance flown and the precise time of launch weren't immediately released by South Korea's Joint Chiefs of Staff. The projectiles didn't enter Japanese territory and weren't believed to have landed inside the nation's exclusive economic zone, Tokyo's military said.

Read More ->

Gavin Newsom Beats California Recall Effort, Remains Governor

California Gov. Gavin Newsom has easily defeated a recall effort led by Republicans and fueled by frustrations over his handling of the Covid-19 pandemic, according to a vote projection by the Associated Press.

With 62% of the state's precincts partially reporting, 65.9% of California voters chose to keep the Democrat in office, and 34.1% opted to remove him.

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Justice Department Asks Federal Judge to Quickly Block Texas Abortion Law

WASHINGTON-The Justice Department asked a federal judge to block a restrictive Texas abortion law temporarily while its lawsuit challenging the state's near-ban on the procedure moves forward.

"This relief is necessary to protect the constitutional rights of women in Texas and the sovereign interest of the United States in ensuring that its states respect the terms of the national compact," the department said in an emergency motion late Tuesday that seeks a temporary restraining order or preliminary injunction against the Texas law.

Read More ->

Senators Seek Answers From Facebook After WSJ Report on Instagram's Impact on Young Users

Sens. Richard Blumenthal and Marsha Blackburn said they would launch a probe into Facebook Inc.'s internal research on the way its Instagram photo- and video-sharing service affects young users, prompted by a Wall Street Journal investigation that showed the company knew the app was harmful to some in that group.

The Democratic chairman and ranking Republican on the Consumer Protection, Product Safety, and Data Security Subcommittee on Tuesday also said that they were in touch with someone they identified as "a Facebook whistleblower" and "will use every resource at our disposal to investigate what Facebook knew and when they knew it-including seeking further documents and pursuing witness testimony." In the statement, the senators said, "The Wall Street Journal's blockbuster reporting may only be the tip of the iceberg."

Read More ->

Healthcare Workers, Hospitals Spar Over Covid-19 Vaccine Mandates

A federal judge weakened New York state's mandate for medical workers to be vaccinated against Covid-19, a win for nurses and other staff who have lost their jobs elsewhere in the country over their refusal to get the shots.

U.S. District Judge David Hurd on Tuesday issued an order to temporarily prevent New York's health department from rejecting employer-approved religious exemptions to a vaccine mandate that takes effect Sept. 27.

Read More ->

Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

Nothing major scheduled

Economic Indicators (ET):

0830 Jul New motor vehicle sales

0830 Aug CPI

Stocks to Watch:

No items published

Other News:

Uranium Heats Up, and Hedge Funds Score

Uranium prices are rising, enriching a handful of hedge funds that have been betting a market laid low by a nuclear disaster a decade ago would rebound.

The price of uranium hit an eight-year high of $44 a pound this week, according to the price tracker UxC LLC. The surge follows the recent launch of an exchange-traded trust by Sprott Asset Management LP, which has bought large stockpiles of uranium after raising money from shareholders and emerged as a favored trading vehicle in its own right, traders said.

The turnaround in the nuclear fuel, whose price declined sharply after the 2011 nuclear meltdowns at Fukushima, Japan, has bolstered shares of miners including Cameco Corp. and Denison Mines Corp. of Canada, and Texas-based Uranium Energy Corp.

That boost has benefited hedge funds including Segra Capital Management and Sachem Cove Partners, which have been betting that uranium would bounce back.

Traders say the surge in uranium, an element that when enriched is manufactured into rods that fuel nuclear power plants, in some respects echoes the 2021 rise in shares of GameStop Corp. and AMC Entertainment Holdings Inc. Hedge funds and family offices are among those to have invested in the newly listed trust.

Traders say interest from individual investors is also helping to drive prices in a market that largely comprises private agreements between buyers and sellers, rather than the open price discovery of larger markets such as oil and gold.

"It's become a momentum trade that's kind of self-fulfilling," said Kevin Smith, managing director for energy-metals trading at Traxys Group, one of the biggest uranium traders globally.

Amazon Union Drive Heads North to Canada

Organized labor's efforts to unionize workers at Amazon.com Inc. warehouses have moved north to Canada following a failed drive this year at the e-commerce retailer's operations in Alabama.

The Canadian arm of the International Brotherhood of Teamsters, one of America's largest labor unions, said Tuesday it requested that labor regulators in the province of Alberta certify a union for workers at an Amazon warehouse in the town of Nisku, just south of the capital, Edmonton, and 300 miles north of the Montana border.

To be eligible for certification in Alberta, 40% of the unit's employees must sign a petition in support of unionization. Pending verification of the signatures, the Alberta Labour Relations Board will organize a secret-ballot vote among the warehouse's roughly 800 employees on whether the union drive will succeed.

A spokeswoman for the labor board said the agency received the Teamsters' application, but declined to comment on next steps. A spokesman for Teamsters said a surge of Covid-19 cases in the province could complicate the timing of a certification vote.

Market Talk:

No items published

Expected Major Events for Wednesday

04:30/JPN: Jul Tertiary Industry Index

04:30/JPN: Jul Revised Retail Sales

06:00/UK: Aug UK producer prices

06:00/UK: Aug UK monthly inflation figures

06:45/FRA: Aug CPI

08:00/ITA: Aug CPI

08:30/UK: Jul UK House Price Index

10:00/FRA: 2Q OECD Quarterly National Accounts G20 GDP growth

11:00/US: 09/10 MBA Weekly Mortgage Applications Survey

12:30/US: Aug Import & Export Price Indexes

12:30/US: Sep Empire State Manufacturing Survey

12:30/CAN: Jul New motor vehicle sales

12:30/CAN: Aug CPI

13:15/US: Aug Industrial Production & Capacity Utilization

14:30/US: 09/10 EIA Weekly Petroleum Status Report

23:50/JPN: Aug Provisional Trade Statistics for the Month

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Wednesday

Amrep Corp (AXR) is expected to report for 1Q.

Applied Genetic Technologies Corp (AGTC) is expected to report $-0.40 for 4Q.

Basic Energy Services (BASXQ) is expected to report for 2Q.

Charles Schwab (SCHW) is expected to report.

Weber Inc (WEBR) is expected to report for 3Q.

tinyBuild Inc (TBLD.LN) is expected to report for Interim.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

10x Genomics Cut to Neutral From Buy by B of A Securities

Advanced Energy Cut to Neutral From Positive by Susquehanna

Casey's General Stores Raised to Buy From Neutral by Northcoast Research

DXC Technology Raised to Buy From Neutral by B of A Securities

Jounce Therapeutics Raised to Outperform From Market Perform by Raymond James

Kadmon Holdings Cut to Neutral From Buy by Mizuho

KLA Raised to Positive From Neutral by Susquehanna

Lam Research Cut to Neutral From Positive by Susquehanna

Leslie's Raised to Buy From Hold by Berenberg

PS Business Parks Raised to Overweight From Neutral by JP Morgan

TaskUs Cut to Neutral From Buy by B of A Securities

This article is a text version of a Wall Street Journal newsletter published earlier today.


  (END) Dow Jones Newswires
  09-15-21 0608ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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