InvestMacro

By George Prior

Global investors are “desperate for signs” that China’s Xi and France’s Macron can secure better business ties between China and the EU during the French President’s three-day visit to Beijing and Guangzhou.

The assessment from Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations, comes as a state visit by Emmanuel Macron to China kicked off on Wednesday.

He will have extended face time with Xi, and after formal meetings in Beijing on Thursday, which will also include European Commission President Ursula von der Leyen, the two national leaders will head to the southern city of Guangzhou.

Key themes said to be planned for discussion will be the Ukraine war, the climate crisis, renewable energy, and travel following the lifting of zero-Covid regulations by Beijing.

Nigel Green comments: “Geopolitical issues are at the top of the agenda for Macron’s visit to Xi in China.

“But as many top business leaders from France have also been invited along, and because Macron will meet with Chinese investors in Guangzhou, there are hopes that international trading relations will also be a major priority.

“Global investors are desperate for signs that Xi and Macron can secure better business ties between China and the EU.”

The EU is already China’s largest trading partner, and China is the EU’s second-largest trading partner.

In January 2021, the trade deficit was €14.6 billion. It reached a high of €36.0 billion in September 2022 before falling to €27.4 billion in December 2022.

Recent developments have “reignited” global investors’ interest in the world’s second largest economy.

“The break-up of Alibaba, the Chinese mega-conglomerate, in the last couple of weeks is, we believe, the start of a wave of enormous opportunities in China for investors from around the world,” says the deVere CEO.

“It represents the end of Beijing-led regulatory crackdowns on various sectors, including tech, real estate and education, which have deterred foreign investors from China in the last few years.”

He continues: “The cooling of corporate crackdowns, and Beijing seemingly becoming more pro-private enterprise, also coincides with the re-opening of the world’s second largest economy following years of Covid restrictions and as the Chinese currency, the yuan, becomes more dominant in international finance.”

Russia’s Vladimir Putin has recently stated that his country is now in favour of using the Chinese yuan for oil settlements, rather than the US dollar.  It’s also been reported that Saudi Arabia is in talks with Beijing to use the Chinese currency, instead of the dollar for oil trades.

“Global investors are increasingly bullish on China and financial markets around the world are hoping for indicators of a strengthening relationship between the European Union (EU) and China during this important state visit,” confirms Nigel Green.

“A stronger relationship would lead to increased trade and investment between the two regions, creating new opportunities for businesses and investors in both regions, leading to access to new markets, and increased profitability and growth.”

“Stronger ties would also reduce uncertainty in financial markets, meaning a more stable and predictable environment for investors.”

He concludes: “Global investors will be carefully analysing the words and actions of Xi and Macron over the next few days in order to seize opportunities and sidestep potential risks.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By JustMarkets

The US stock indices were mostly up on Monday as energy stocks rose on higher oil prices after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) unexpectedly cut oil production by 1 million BPD. As the stock market closed Monday, the Dow Jones Index (US30) increased by 0.98%, and the S&P 500 Index (US500) added 0.37%. Technology Index NASDAQ (US100) lost 0.27% yesterday.

In the US, the ISM manufacturing activity index fell to 46.3 in March from 47.7 a month earlier, while the pay-per-view price index fell to 49.2 from 51.3, indicating that the disinflationary trend in the commodities sector also remains unchanged.

Elon Musk believes that interest rate hikes by the Federal Reserve will hurt companies and provoke an economic downturn. The head of Twitter agreed with the opinion of his longtime friend, venture capitalist David Sachs, who pointed out that further Fed interest rate increases could hit banks, commercial real estate, and national debts. According to Sachs, the first stage of the crisis has already begun, with the second and third stages still to come.

Stock markets in Europe were trading Monday without a single dynamic. German DAX (DE30) decreased by 0.31%, and French CAC 40 (FR40) added 0.32%, Spanish IBEX 35 (ES35) was down by 0.81%, British FTSE 100 (UK100) closed yesterday up by 0.54%.

European business activity data showed no significant changes over the last month. Most industries are in contraction territory, and as long as the ECB raises interest rates and tightens the screws on the banking sector, the situation is unlikely to improve anytime soon.

Gold is back to the $2000 an-ounce mark. Gold has a lot of fundamentals for strengthening right now. The banking crisis, the impending recession in the US and Europe, and falling government bond yields on the soon-to-be-completed tightening cycle. In addition, the sanctioning countries are actively getting rid of dollar reserves, increasing gold reserves. There are all preconditions for the continuation of the medium-term upward movement.

Due to voluntary cuts in oil production by OPEC countries, oil prices posted their biggest one-day gain of the year. The US West Texas Intermediate (WTI) ended Monday trading at $80.42, plus 6.3% for the day. Brent closed at $84.93, also plus 6.3% for the day. Traders and analysts are already analyzing what the Federal Reserve will do in terms of raising rates to counter the new inflationary pressure that is almost inevitable because of OPEC’s inflated oil price. Analysts are predicting a further rise in quotes, up to $90-100 per barrel.

Asian markets were mostly on the rise yesterday. Japan’s Nikkei 225 (JP225) gained 0.52%, China’s FTSE China A50 (CHA50) decreased by 0.16%, Hong Kong’s Hang Seng (HK50) gained 0.04%, India’s NIFTY 50 (IND50) gained 0.22%, and Australia’s S&P/ASX 200 (AU200) increased by 0.63% on the day.

The Reserve Bank of Australia (RBA) kept interest rates at 3.6%, signaling a pause in its rate hike cycle. The bank said it wanted to see the full effect of the rate hike and assess Australia’s economic prospects while noting that inflation has probably peaked. But with inflation still well above the bank’s target range of 2% to 3%, the RBA warned that further monetary tightening might be needed.

The Reserve Bank of New Zealand will hold its monetary policy meeting tomorrow. Investors expect a 0.25% rate hike with a hint of an end to the tightening cycle. New Zealand’s GDP fell by 0.6% in the last quarter of 2022, more than the RBNZ forecast in its last report. Meanwhile, GDP growth and inflation are expected to be negative in the first half of 2023 due to disruptions from hurricanes on the North Island.

According to analysts, the Monetary Authority of Singapore (MAS) is likely to tighten monetary policy this month amid continuing price pressures. It should be noted that instead of interest rates, MAS manages policy by allowing the local dollar to rise or fall against the currencies of its major trading partners within an undisclosed range known as the Nominal Effective Exchange Rate of the Singapore dollar. The Reserve Bank of India is also set to meet later this week and is expected to raise interest rates.

S&P 500 (F) (US500) 4,124.51 +15.20 (+0.37%)

Dow Jones (US30)33,601.15 +327.00 (+0.98%)

DAX (DE40) 15,580.92 −47.92 (−0.31%)

FTSE 100 (UK100) 7,673.00 +41.26 (+0.54%)

USD Index 102.04 −0.36 (−0.45%)

• – Australia RBA Interest Rate Decision at 07:30 (GMT+3);
• – Australia RBA Rate Statement at 07:30 (GMT+3);
• – Canada Building Permits (m/m) at 15:30 (GMT+3);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By Guilherme Casarões, São Paulo School of Business Administration (FGV/EAESP) 

Brazilian president Luiz Inácio Lula da Silva was scheduled to visit his Chinese counterpart Xi Jinping at the end of March. Beijing would have been Lula’s fourth international destination in less than 100 days in office.

Lula had to cancel his trip, which was set to include 200 business people, after catching pneumonia but it is now expected to take place in April or May. His administration had hoped the China visit would alleviate political pressure at home.

Since returning to the presidency (his previous term was 2003-2010), Lula has already been to visit partners in the South American trade bloc Mercosur, Argentina and Uruguay, and recently flew to Washington DC for conversations with US president Joe Biden and members of the Democratic party over infrastructure investments, trade and climate change.

Globetrotting seems like quite an effort for a 77-year-old, third-term president who faces a deeply divided society. But Lula does it with a smile on his face. Since he first took office 20 years ago, the former metalworker has risen to the challenge of international diplomacy as a natural negotiator with political charm.

Building political legitimacy

As Lula kicks off his third term, foreign policy will be a tool for building his own domestic political legitimacy. His reputation currently appears to be greater abroad than at home.

Always a determined player on the international stage, Lula’s administration spearheaded the construction of Unasur, a South American organisation set up to offset US economic and political power in the region. He also forged several alliances in the developing world.

Although Lula left office in 2010 with an impressive 83% approval rating, much of his political capital waned in the years that followed. This was largely thanks to his successor Dilma Rousseff’s pitiful economic performance and to the mounting accusations of graft against top figures in his Workers’ party.

But despite being indicted and imprisoned for corruption in early 2018 (at which point his domestic popularity plummeted), the admiration of foreign figures has endured. Some even visited Lula in prison, protesting what they called political persecution of the former president.

So, at the age of 77 – and with health problems – a big diplomatic play might be his best bet of leaving a presidential legacy.

Challenges of a new world order

But Brazil’s capacity as a meaningful international player will depend on the administration’s ability to navigate a world that is fundamentally different from the one of the early 2000s.

The country is not in its best shape, either. In the years following Lula’s first two terms, Brazil went through a decade of decline, introspection and isolation.

Much of this is down to his immediate predecessor, Jair Bolsonaro. On Bolsonaro’s watch, Brazil ranked second, at 700,000 recorded deaths, in total COVID fatalities. Massive areas of rainforest were burned, and the lands of the Yanomami indigenous people were devastated by large amounts of mining.

So, while Lula must capitalise on any residual international popularity to relaunch Brazil as a global player, he has a lot to do to restore his own country’s economy and to heal the wounds of a divided society.

Lula’s first task internationally – a tough challenge – is to strike a balance in his relationships with Washington and Beijing, Brazil’s two foremost partners. So far, his new administration’s even-handed strategy has worked fine. But if tensions between Joe Biden and Xi Jinping lead to further political instability – or if a Republican with a zero-sum approach to China gets elected in 2024, Brazil could find itself in a difficult position.

Lula has attempted to anticipate these problems by offering to broker peace between Russia and Ukraine. It was a way to dodge criticism by western powers, who wanted Brazil to engage in military assistance to the Ukrainian government – while still preserving Brazil’s longstanding ties with Russia.

Lula’s take on the war is part of what researchers have dubbed “active non-alignment”. It is part of a broader Latin American strategy to safeguard policy space and instruments for national development strategies in an increasingly polarised international order. By offering itself as a high-profile mediator, Brazil wants to maintain trade and cooperation with all sides in the conflict.

Lula’s balancing trick

But Russian-Ukrainian peace appears to be a long way off – and it will hardly come via mediators from the developing world. If Lula wants to create a legacy, he needs to build on Brazil’s preexisting capacity, in both multilateral and regional terms.

One possible way is to restore Brazil’s activism at the United Nations. He must also reestablish cooperation in issues as diverse as climate change, biodiversity, indigenous rights, vaccines, food security and development.

Another way is to rebuild South American integration. Regional organisations such as Mercosur and Unasur could help bolster global supply chains in critical sectors like energy and food that have been disrupted by the war in Ukraine. To do so, Brazil must reclaim its role as the continent’s centre of economic gravity.

But there is an obstacle: Venezuelan president Nicolás Maduro. A persistent political, economic and humanitarian crisis in Venezuela has exposed the dangers of left-wing authoritarianism. Lula is one of the few leaders who have open channels with Maduro and may be able to help the country work towards a national reconciliation.

The question is whether Lula wants to get involved. Unlike left-wing leaders who recently rose to power in Chile and Colombia, Lula and the Workers’ party have been unapologetically sympathetic towards dictators such as Venezuela’s Maduro and Nicaragua’s Daniel Ortega.

Overcoming the Brazilian left’s outdated views on authoritarian socialism and anti-imperialism may be as daunting a challenge for the Lula administration as leaving a sound diplomatic legacy. But both steps are necessary if Lula really wants to make a difference in the region – and the world.

About the Author:

Guilherme Casarões, Professor of Political Science, São Paulo School of Business Administration (FGV/EAESP)

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

The Fed’s preferred measure of inflation, the PCE Core Price Index (personal consumption expenditures excluding home prices), fell on an annualized basis from 5.3% to 5.0%. Signs of a slowdown in inflation have reinforced the hopes of the Federal Reserve to end its aggressive rate hikes soon. This bolstered confidence in stock indices. At the close of the stock market on Friday, the Dow Jones Index (US30) gained 1.26% (+ 3.09% for the week), and the S&P 500 Index (US500) added 1.44% (+ 3.17% for the week). The NASDAQ Technology Index (US100) jumped by 1.74% (+2.98% for the week). The Nasdaq recorded its biggest quarterly percentage gain since June 2020.

Boston Fed President Susan Collins said Friday that whenever the US central bank stops raising its rate, maintaining that level for a while will be crucial to bringing high inflation down to the 2% target.

Equity markets in Europe were mostly up on Friday. German DAX (DE30) gained 0.69% (+3.27% for the week), French CAC 40 (FR40) added 0.81% (+3.08% for the week), Spanish IBEX 35 (ES35) added 0.35% (+3.84% for the week), British FTSE 100 (UK100) gained 0.15% (+3.06% for the week).

Eurozone’s inflation fell to 6.9% y/y in March. This is a decent drop from 8.5% y/y in February and below the Bloomberg consensus forecast of 7.1% y/y. However, core inflation increased to 5.7% y/y in March from 5.6% y/y in February. The overall drop is the base effect of the rapid rise in energy prices last March. The details show that prices for services increased underlying inflation. Service prices rose by 5.0% y/y in March, up from 4.8% y/y in February, and growth was strong on a monthly basis as well. Services prices have the highest labor content, and hence higher services inflation likely partly reflects rising wage growth. Analysts are betting on a 0.5% interest rate hike at the May meeting of Europe’s Central Bank.

Monthly UK GDP increased by 0.3% in January 2023 after declining by 0.5% in December. For the first quarter of 2023, GDP increased by 0.1%. Given that the pace of growth remains and inflation is expected to fall, the Bank of England may refrain from raising rates further if the next consumer price data indicates that inflationary pressures are easing.

Saudi Arabia and other OPEC oil producers on Sunday announced voluntary production cuts, with Saudi Arabia cutting production by 500,000 BPD from May through the end of 2023. The UAE said it would cut production by 144,000 BPD, Kuwait announced a cut of 128,000 BPD, Iraq will cut production by 211,000 BPD, and Oman announced a cut of 40,000 BPD. Algeria said it would cut production by 48,000 BPD. In total, this is a reduction of more than 1 million BPD. In a statement, the Ministry of Energy of Saudi Arabia said that the voluntary reduction of production by the kingdom was a precautionary measure aimed at maintaining the stability of the oil market. Thus, oil traders expect oil prices to rise on the eve of summer.

Asian markets mostly rose last week. Japan’s Nikkei 225 (JP225) gained 2.03%, China’s FTSE China A50 (CHA50) added 0.75%, Hong Kong’s Hang Seng (HK50) jumped by 2.76%, India’s NIFTY 50 (IND50) added 1.99%, and Australia’s S&P/ASX 200 (AU200) was positive by 3.20% over the week.

Australia’s Central Bank is expected to go for a final interest rate hike of 25 basis points to 3.85% on Tuesday. Australia’s new monthly consumer price gauge released last week showed that inflation slowed to an eight-month low of 6.8% in February from 7.4% the previous month, bolstering the case for holding off on raising rates.

Markets are full of rumors that the Bank of Japan may modify or abandon bond yield curve control (YCC) when new governor Kazuo Ueda and his team take office. With Yield Curve Control (YCC), the Bank of Japan sets short-term rates at 0.1% and 10-year bond yields at around 0%. Its huge bond purchases to protect the 0.5% limit set for the 10-year yield target has been criticized for distorting bond prices and disrupting the market by depleting liquidity. A statement on the IMF policy consultation said that many of its executive board directors urged the Bank of Japan to “consider options to increase flexibility” within the YCC to address the side effects of prolonged easing.

In the commodities market, futures on WTI crude (+9.3%), cotton (+8.11%), sugar (+7.11%), Brent crude (+6.59%), soybeans (+5.37%), orange juice (+5.18%), silver (+3.84%), palladium (+2.91%) and corn (+2.41%) showed the biggest gains last week. Futures on lumber (-10.4%), coffee (-4.88%), and natural gas (-2.26%) showed the biggest drop.

S&P 500 (F) (US500) 4,109.31 +58.48 (+1.44%)

Dow Jones (US30)33,274.15 +415.12 (+1.26%)

DAX (DE40) 15,628.84 +106.44 (+0.69%)

FTSE 100 (UK100) 7,631.74 +11.31 (+0.15%)

USD Index 102.51 +0.36 (+0.35%)

• – Japan Tankan Large Manufacturers Index (q/q) at 02:50 (GMT+3);
• – Japan Tankan Large Non-Manufacturers Index (q/q) at 02:50 (GMT+3);
• – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
• – Australia Retail Sales (m/m) at 04:30 (GMT+3);
• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3);
• – German Manufacturing PMI (m/m) at 10:55 (GMT+3);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
• – OPEC Meeting (m/m) at 13:00 (GMT+3);
• – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
• – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3);
• – Canada BoC Business Outlook Survey at 17:30 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

SVB failed in March. Oil was destined to fall as early as February – here’s why;

By Elliott Wave International

The failures of Silicon Valley Bank, Silvergate Bank and Signature Bank have prompted a lot of discussion about the potential of a domino effect. People are wondering “what’s next?”

The financial press is linking just about every downward price move in just about every financial market to the woes in the banking sector.

As a March 15 headline noted (CNBC):

Oil tumbles to lowest level since December 2021 as banking crisis routs markets

At the time that headline published, West Texas Intermediate had fallen around 5% during that trading session.

But, first of all, if you’re failing to see an immediate connection between bank failures and crude oil prices, you’re not alone. I see no connection, either. What’s more, Elliott Wave International was forecasting the price of crude oil to decline well before the bank failures hit the news.

On Feb. 3, the February Global Market Perspective, a monthly Elliott Wave International publication which covers 50-plus financial markets, published with this chart and commentary (Elliott wave labels are shown to subscribers):

Crude Oil’s trend still looks down… [a strong Elliott wave] decline still seems like the likely path.

During the next month, oil largely traded sideways. Sometimes, Elliott wave analysis requires patience. On March 3, our March Global Market Perspective updated its crude oil analysis with this chart and commentary:

Crude Oil still looks lower. Crude has yet to step into the meat of the [strong Elliott wave decline] we’re anticipating, but it still seems like the likely path.

As you probably know, the price of crude oil has moved lower since our March Global Market Perspective published.

As with all financial markets, countertrend moves will inevitably occur. Yet, Elliott wave analysis provides context and a basis for forecasting before the news; without any news.

If you’d like to learn the details of the Elliott wave model, read Frost & Prechter’s Elliott Wave Principle: Key to Market Behavior. Here’s a quote from this Wall Street classic:

The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.

Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news. Nor is the market the cyclically rhythmic machine that some declare it to be. Its movement reflects a repetition of forms that is independent both of presumed causal events and of periodicity.

The market’s progression unfolds in waves. Waves are patterns of directional movement.

If you want to know what the waves are showing for the energy sector next, we have a rare, free opportunity for you. Now through April 5, use our trader-focused Energy Pro Service — free.

Learn How to Navigate Oil & Volatile Energies now.

By George Prior

President Joe Biden’s push for regulators to tighten the rules for banks is “well-intentioned but badly focused,” says the CEO of one of the world’s largest financial advisory, asset management and fintech organizations.

The observation from deVere Group’s Nigel Green comes as The White House on Thursday called for federal banking agencies, in conjunction with the Treasury Department, to implement a raft of reforms.

These include raising liquidity requirements for banks, updating liquidity stress tests to consider high-speed digital withdrawals, and requiring banks to submit plans to regulators on how they would close should they fail.

He says: “This is the US government’s boldest response yet to the banking crisis that recently led to the collapse of two banks – although it’s not definite that the regulators will impose the changes.

“Clearly, and especially after previous waves of deregulation, the tightening of rules must be a good thing.

“A robust regulatory framework is important for protecting depositors and consumers, promoting financial stability, and preventing fraud and illegal activities.

“But, while this move by the Biden administration is well-intentioned, it is also badly focused.”

The deVere CEO continues: “At the same time as The White House is pushing for greater regulation for legacy banks, they must also simultaneously focus on digital-only financial institutions. The government can and should do both.

“But currently, there’s too much emphasis on traditional banks, which seem to have been in a perpetual game of ‘catch-up’ in recent years amid evolving customer expectations, regulatory requirements and tech advances, when digital is inevitably the future of banking.”

Nigel Green says demographics, tech and mistrust show why digital banking should get more attention from regulators as it is destined to outrun traditional banking.

“Not only are Millennials and Gen Z the fastest-growing cohort of clients, but they are also becoming the beneficiaries of the Greatest Transfer of Wealth in history.

“According to some estimates, $68 trillion in wealth is to be passed down from the baby boomers – the wealthiest generation ever – to their children and other heirs over the next few decades.

“Also, critically, Millennials and Gen Z have grown up on technology. They are ‘digital natives’.

“They’ve been influenced by the enormous surge in tech as they came into adulthood and they seemingly became comfortable using fintech [financial technology] to help them access, manage and use their money, rather than using a traditional bank.

He continues: “This wave of tech that bought us not only fintech, but the likes of Uber, AirBnB, and Amazon, also coincided with the financial crash.

“Many people blame the traditional banking industry for causing that crisis and believe that banks prioritise their own profits over their customers’ interests, that they lack transparency, fees are too high, customer experience is low and they have poor standards or corporate responsibility.

“In short, there’s huge mistrust in legacy institutions.”

This environment has helped fuel the demand for digital-only banks, as customers seek out more convenience, accessibility, a better user experience, innovation, and security.

Another major reason why the US government “must focus on digital” is its own move towards a digital dollar.

Nellie Liang, the US Treasury Department’s undersecretary for domestic finance, noted recently that the federal government will start meetings in the “coming months” on a Central Bank Digital Currency (CBDC).

“A digital dollar – which, again, seems like an inevitability in our increasingly tech-driven world – would destroy traditional banks, it’ll be the final nail in the coffin. Therefore, it seems misguided that the regulatory resources are focused on them,” says Nigel Green.

The American Bankers Association has recently argued that the digital dollar would mean “deposits accounting for 71% of bank funding are at risk of moving to the Federal Reserve.” This would increase the cost of funding in banking to an “unsustainable” level.

The deVere CEO concludes: “Our world is increasingly being shaped and driven by the blistering pace of tech innovation.

“More and more of us are turning to fintech instead of a traditional banking system that is perceive as outdated, inconvenient, expensive and/or untrustworthy.

“Yet the US government is seemingly focusing its attention and resources on legacy rather than future-focused digital banking. Unless this changes, it will mean that it will forever be playing catch-up with a fast-changing sector.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By ForexTime

Despite the holiday-shortened week ahead for US and UK financial market, the US March nonfarm payrolls (NFP) report is set to grab hold of traders and investors’ attentions.

The NFP is due at the end of a week that also features these economic data releases and events:

Monday, April 3

• CNH: China March Caixin manufacturing PMI
• EUR: Eurozone March manufacturing PMI
• GBP: UK March manufacturing PMI (final)
• USD: US March ISM manufacturing

Tuesday, April 4

• AUD: Reserve Bank of Australia rate decision
• GBP: Bank of England Chief Economist Huw Pill speech
• USD: Cleveland Fed President Loretta Mester speech

Wednesday, April 5

• AUD: RBA Governor Philip Lowe speech
• EUR: Germany February factory orders; Eurozone composite and services PMIs (final); speech by ECB chief economist Phillip Lane

Thursday, April 6

• AUD: Australia February trade balance
• CNH: China March composite and services PMIs
• EUR: Germany February industrial production
• CAD: Canada March unemployment
• USD: US weekly initial jobless claims; speech by St. Louis Fed President James Bullard

Friday, April 7

• USD: US March nonfarm payrolls (NFP)
• US and UK stock markets closed for Good Friday

Why is the NFP report important to global financial markets?

The US jobs report offers a major clue for how much higher the Federal Reserve can raise interest rates.

And various assets, including FX, commodities, and stocks, have been rocked by shifting forecasts surrounding the future rate adjustments by the world’s most influential central bank (the Fed).

Note that the Fed wants to see more “destruction” in the jobs market

While it’s odd to think that a central bank of the world’s largest economy would want to see more people losing their jobs (or at least fewer people getting jobs), but that’s the prescribed antidote by the Fed for subduing inflation that’s still too high.

Fewer people with jobs = less spending in the economy = businesses are less confident about hiking their prices aggressively = slower inflation

With the Fed already hiking US rates by 450 basis points over the past 12 months, here’s what markets are forecasting for the Fed’s next major adjustments to its benchmark interest rates:

• 60% chance of another 25 basis points hike in May 2023
• 61% chance of a 25-basis point cut in September
• 76% chance of the Fed lowering rates by a total of 50 basis points before 2023 is over

Those rate cuts by year-end are being priced in by the markets because they think the Fed won’t want to incur too much damage to the US economy and/or the financial system, especially after the recent turmoil in the US banking sector.

What are markets forecasting for the March NFP numbers?

• Headline NFP number: 240,000 new jobs added in the US economy in March
• Unemployment rate: 3.6%
• Average hourly earnings: 4.3% rise year-on-year (March 2023 vs. March 2022)

It’s important to note that the above forecasts set the base for how various assets may react (more on that later) to the official figures released a week from today.

Here are 2 broad potential outcomes from the upcoming NFP report:

• A stronger-than-expected US jobs report may force markets into thinking that the Fed can afford to keep raising interest rates, provided it doesn’t incur more damage on the US banking sector.
• Further evidence of a weakening US jobs market (fewer jobs added/higher unemployment/slowing wage growth) may allow the Fed to pause its rate hikes, before eventually lowering them.

With all of the above in mind, here’s how these 3 assets are ready to react to the NFP prints:

1) USD Index

The US dollar tends to rise at the prospects of US interest rates moving even higher.

• Stronger-than-expected US jobs report = higher bets for more Fed rate hikes in 2023 = USD index may retest its 50-day simple moving average (SMA) for resistance.
• Weaker-than-expected US jobs report = reinforce market bets for Fed rate cuts in 2023 = USD index may test the mid-January lows around 101.3 for support.

2) Gold

Note that gold is a zero-yielding asset, which means it does not pay interest to the investor for holding on to that asset.

Hence, the precious metal tends to fall at the thought of US interest rates moving higher, and vice versa.

• Stronger-than-expected US jobs report = higher bets for more Fed rate hikes in 2023 = spot gold may drop back into sub-$1960 levels
• Weaker-than-expected US jobs report = reinforce market bets for Fed rate cuts in 2023 = gold may stay above the psychologically-important $2,000 mark.

3) NQ100_m

The Nasdaq 100 is an index that’s filled with US tech stocks, which generally do not like the thought of US interest rates moving higher.

• Stronger-than-expected US jobs report = higher bets for more Fed rate hikes in 2023 = NQ100_m might falter back into sub-13,000 territory
• Weaker-than-expected US jobs report = reinforce market bets for Fed rate cuts in 2023 = NQ100_m might go above the late-August cycle high at 13,206.3.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

At the close of the stock market yesterday, the Dow Jones Index (US30) increased by 0.43%, while the S&P 500 Index (US500) added 0.57%. The NASDAQ Technology Index (US100) jumped by 0.73% on Thursday.

The US GDP for the first quarter of 2023 rose by 2.6%, indicating a resilient economy. The US jobless claims rose by 7,000 in the last week (forecast 5,000) to 198,000. The level remains extremely low, but analysts predict a sharp increase in the second quarter. Federal Reserve Bank of Richmond President Thomas Barkin said Thursday that he has not yet concluded what rate hike might be appropriate for the May meeting. According to the politician, there is a lot of uncertainty about how the bank situation affects consumer confidence, the business climate, business investment, consumer spending, and the availability of credit.

For now, banking stress in the United States seems to be under control. Leading US banking regulators said Monday that they plan to tell Congress that the overall financial system remains on solid footing, despite recent bank failures. On Tuesday, Michael Barr, the Fed’s vice chairman for oversight, told the Senate Banking Committee that Silicon Valley Bank’s problems stemmed from “terrible” risk management, suggesting it could be an isolated incident.

There are many questions about what will happen to demand and inflation. Federal Reserve Bank of Boston President Susan Collins said in a statement that US inflation remains too high, and recent indicators support the view that more work needs to be done to bring inflation down to the 2% target. Today, the Personal Consumption Expenditures Index will be released in the US, which is on the Fed’s list of monitored inflation indicators. A rise in this indicator could put the panic back into the market as it would indicate sustained inflationary pressures, which would force US Federal Reserve officials to continue raising rates.

Borrowing under the Fed’s Emergency Financing Program, a new emergency lending program launched after the Silicon Valley bank collapse, has gained momentum. Bank funding levels jumped from $10.7B to $64.4B. The new bank financing mechanism allows banks to borrow for up to one year using eligible assets, including any nominal bonds as collateral. The rise in lending signals that banks remain on high alert and are looking to shore up finances to reassure depositors at a time when the White House is calling for stricter regulation. President Joe Biden on Thursday urged regulators to step up oversight of banks, urging them to reinstate rules that the Trump administration repealed.

Stock markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 1.23%, France’s CAC 40 (FR40) added 1.06%, Spain’s IBEX 35 (ES35) increased by 1.61%, and the British FTSE 100 (UK100) closed Tuesday up by 0.74%.

The inflation level in European countries is beginning to decline. In Spain, the consumer price index fell sharply from 6% to 3.3% year-over-year. In Germany, inflation fell from 9.2% to 8.3%. Today, inflation data will be released by France (forecast 6.3% to 5.5% y/y) and Italy (forecast 9.1% to 8.2% y/y), and the total figure for the Eurozone will be published afterward. Analysts forecast a decline in consumer prices in Europe from 8.5% to 7.1%. But despite lower inflationary pressures, the ECB still intends to raise interest rates by 0.5% in May.

According to The Daily Telegraph, Britain is about to join the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP). This Indo-Pacific trade group will give British companies access to tens of millions of new customers and a $10 trillion market.

The US natural gas prices fell by 4% Thursday, once again hitting critical support of $2. Inventory data showed a decline of 47 billion cubic feet of natural gas from storage, compared to a forecast of 55 billion. In other words, more gas remains in storage than previously planned. As a result, supply exceeds demand, which leads to further downward pressure on prices.

Asian markets were mostly on the rise yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.36%, China’s FTSE China A50 (CHA50) gained 1.23%, Hong Kong’s Hang Seng (HK50) added 0.58% on the day, India’s NIFTY 50 (IND50) did not trade, while Australia’s S&P/ASX 200 (AU200) ended Wednesday with a 1.02% gain.

In Japan, the Tokyo Consumer Price Index, considered a leading indicator of overall inflation, fell last month from 3.3% to an annualized 3.2%. The fall in inflation was largely due to government subsidies on electricity prices. Earlier this year, the Japanese government deployed an additional 2 trillion yen to offer subsidies on some utilities to help curb high inflation.

Purchasing managers’ index (PMI) data showed that activity in China’s service sector grew at its fastest pace in 12 years in March, but manufacturing activity slowed from the previous month, indicating an uneven recovery in Asia’s largest economy. The manufacturing sector plays a leading role in China’s economy and faces growing headwinds from sluggish demand overseas.

S&P 500 (F) (US500) 4,050.83 +23.02 (+0.57%)

Dow Jones (US30)32,859.03 +141.43 (+0.43%)

DAX (DE40) 15,328.78 +193.62 (+1.26%)

FTSE 100 (UK100) 7,620.43 +56.16 (+0.74%)

USD Index 102.17 -0.47 (-0.46%)

• – Japan Tokyo Core CPI (m/m) at 02:30 (GMT+2);
• – Japan Unemployment Rate (m/m) at 02:30 (GMT+2);
• – Japan Industrial Production (m/m) at 02:50 (GMT+2);
• – Japan Retail Sales (m/m) at 02:50 (GMT+2);
• – China Manufacturing PMI (m/m) at 04:30 (GMT+2);
• – China Non-Manufacturing PMI (m/m) at 04:30 (GMT+2);
• – UK GDP (q/q) at 09:00 (GMT+2);
• – German Retail Sales at 09:00 (GMT+2);
• – Switzerland Retail Sales at 09:30 (GMT+2);
• – French Consumer Price Index (m/m) at 09:45 (GMT+2);
• – German Unemployment Rate (m/m) at 10:55 (GMT+2);
• – Italian Consumer Price Index (m/m) at 12:00 (GMT+2);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
• – Canada GDP (m/m) at 15:30 (GMT+2);
• – US Core PCE Price Index (m/m) at 15:30 (GMT+2);
• – US Chicago PMI (m/m) at 16:45 (GMT+2);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By Benjamin Park, Sam Houston State University 

During the first weekend of April 2023, the Church of Jesus Christ of Latter-day Saints will hold its semiannual General Conference in Salt Lake City. Tens of thousands of members will attend in person, with millions watching from home.

Over two days, Latter-day Saints – often called “Mormons” – will hear an array of talks from religious leadership. But another speaker will likely be a member of the church’s auditing department, who, if he follows tradition, will state that the institution’s financial activities from the past year were “administered in accordance with Church-approved budgets, accounting practices, and policies.” No further specifics are typically provided.

This yearly ritual may seem striking in the face of the church’s February 2023 agreement to pay a US$5 million fine in a settlement with the U.S. Securities and Exchange Commission. According to its press release, the SEC concluded that the church went to “great lengths” to “obscure” its investment portfolio. A church statement expressed “regret” that its leaders had followed faulty legal counsel and insisted that the fine would be paid through “investment returns” rather than members’ donations.

The settlement came on the heels of other controversies about the church’s taxes and financial portfolio, which journalists and whistleblowers have estimated at around $100 billion.

These revelations have raised questions concerning the ethics of a religious organization amassing such a large amount of wealth, and how it is balanced with charitable giving. But headlines often overlook the long and surprising history of the modern church’s financial success – as well as the continued anxiety surrounding its economic reserves.

Share and share alike

Mormonism was born through the spiritual quest of Joseph Smith, who was raised amid America’s Second Great Awakening during the early 1800s, a period of Christian revivals. His parents were religious seekers who struggled to find a fulfilling church, and tussled with the young country’s financial turbulence. Smith’s father had lost savings in an ill-fated ginseng deal, plunging the family into two decades of poverty.

It is no surprise, then, that when Smith formed his own church, its teachings included a sharp critique of the capitalist system. Early converts to what was originally called the Church of Christ, organized in 1830, were encouraged to consecrate all their goods to their new religious community so it could redistribute resources to those in need.

It was one of many communal experiments Americans attempted during the antebellum period as religious innovators offered alternatives to what they believed was a dangerous and uncaring economic system. Smith’s earliest revelations denounced individualism and urged believers to share their property and resources with one another.

Yet financial difficulties, personal clashes and other challenges doomed the experiment from the start. Within just a few years, the new church’s leaders had already abandoned the consecration ideal. In its stead, Smith directed members to donate “surplus property” to help pay off the group’s immediate debts and then to donate “one tenth of all their interests annually.” This commandment commenced a practice of tithing that still exists today, though it has been interpreted in different ways over the years.

Hardscrabble years

Over the first two decades of the church’s existence, the Latter-day Saints had to relocate their headquarters multiple times – including seven years in Nauvoo, Illinois, a focus of my historical research. By the time the Saints reached Utah’s Great Salt Lake in 1847, leaders and members alike largely embraced the economic system that Smith had previously decried.

A series of national economic crises during the late 19th century further tested the church’s finances and financial ideals. In addition, the government’s decision to prosecute polygamists amid growing criticism of the church’s “plural marriages” crippled the region’s economy until Latter-day Saint leaders renounced the practice in 1890.

Facing financial ruin, the church’s prophet and president in 1899, Lorenzo Snow, urged members to redouble their commitment to tithing. The church formalized its expectation that members donate 10% of their annual income to remain in good standing. To this day, Latter-day Saints are expected to meet with local bishops every year and state that they have paid a full tithe.

By 1907, Snow’s successor, Joseph F. Smith, jubilantly announced that tithing income had paid off all the church’s loans. He even predicted that if the current rate continued, “we expect to see the day when we will not have to ask you for one dollar of donation for any purpose.”

Bust to boom

Donations only increased over the following decades, however, as the church continued to grow rapidly. The prosperity of the 1950s enabled an ambitious construction agenda for the next decade, as the church built over a thousand new meetinghouses and temples for its exploding membership.

Yet high spending, poor financial management and unwise or unlucky investments brought another financial crisis, and the church soon found itself cash-poor. By 1962, the budget had amassed a $32 million deficit. Leaders ceased offering detailed financial reports, which had been inconsistent yet common staples at the church’s General Conference.

Things started looking up the next year when N. Eldon Tanner, a successful Canadian politician and businessman, joined the church’s leadership and modernized its financial structure, investing any surplus. The church was once again on solid financial footing by the end of the 1960s, though it did not resume the release of detailed financial reports. Instead, Tanner empowered a private economic team to continue growing the faith’s portfolio.

Decades of membership growth, tithing donations and lucrative investments resulted in the modern church’s massive accumulation of wealth. This financial success has enabled it to oversee a worldwide church with nearly 17 million members of record, tens of thousands of employees and countless volunteer and charitable programs.

Its investments became so profitable in the early 2000s that, according to the SEC report, church leaders explored ways to shield their success from the public. According to one whistleblower, church authorities feared that greater transparency would discourage members from further tithing.

Giving to God

While the church reports giving over $1 billion in charitable aid last year, some members and observers alike critique leaders for not donating more, given the vast size of its investment portfolio, which is almost twice the size of Harvard’s endowment.

The issue also raises important ethical questions regarding a religious institution’s obligations toward its own members. Should Latter-day Saints, especially those who are struggling financially, still donate a tenth of their income to a church whose reserves are likely deep enough to pay off more than a decade of expenses? The seeming discrepancy between the transparency required of individual members and the church’s own lack of accountability has unsettled some members.

Yet many believers emphasize that their tithing’s purpose is not merely to add to the church’s coffers but to help build the kingdom of God – their donations are primarily offered for spiritual reasons, not worldly ones. And investments are also a safety net for the faith’s growth: Leaders likely hope it can support rapidly growing membership in lower-income countries.

As absurd as it may be to call a $100 billion dollar portfolio a “rainy day” fund, the church’s turbulent history may have led leaders to see it as just that.

About the Author:

Benjamin Park, Associate Professor of History, Sam Houston State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.