Archive for Economics & Fundamentals – Page 129

AI and the future of work: 5 experts on what ChatGPT, DALL-E and other AI tools mean for artists and knowledge workers

By Lynne Parker, University of Tennessee; Casey Greene, University of Colorado Anschutz Medical Campus; Daniel Acuña, University of Colorado Boulder; Kentaro Toyama, University of Michigan, and Mark Finlayson, Florida International University 

From steam power and electricity to computers and the internet, technological advancements have always disrupted labor markets, pushing out some jobs while creating others. Artificial intelligence remains something of a misnomer – the smartest computer systems still don’t actually know anything – but the technology has reached an inflection point where it’s poised to affect new classes of jobs: artists and knowledge workers.

Specifically, the emergence of large language models – AI systems that are trained on vast amounts of text – means computers can now produce human-sounding written language and convert descriptive phrases into realistic images. The Conversation asked five artificial intelligence researchers to discuss how large language models are likely to affect artists and knowledge workers. And, as our experts noted, the technology is far from perfect, which raises a host of issues – from misinformation to plagiarism – that affect human workers.

To jump ahead to each response, here’s a list of each:


Creativity for all – but loss of skills?
Potential inaccuracies, biases and plagiarism
With humans surpassed, niche and ‘handmade’ jobs will remain
Old jobs will go, new jobs will emerge
Leaps in technology lead to new skills


 

Creativity for all – but loss of skills?

Lynne Parker, Associate Vice Chancellor, University of Tennessee

Large language models are making creativity and knowledge work accessible to all. Everyone with an internet connection can now use tools like ChatGPT or DALL-E 2 to express themselves and make sense of huge stores of information by, for example, producing text summaries.

Especially notable is the depth of humanlike expertise large language models display. In just minutes, novices can create illustrations for their business presentations, generate marketing pitches, get ideas to overcome writer’s block, or generate new computer code to perform specified functions, all at a level of quality typically attributed to human experts.

These new AI tools can’t read minds, of course. A new, yet simpler, kind of human creativity is needed in the form of text prompts to get the results the human user is seeking. Through iterative prompting – an example of human-AI collaboration – the AI system generates successive rounds of outputs until the human writing the prompts is satisfied with the results. For example, the (human) winner of the recent Colorado State Fair competition in the digital artist category, who used an AI-powered tool, demonstrated creativity, but not of the sort that requires brushes and an eye for color and texture.

While there are significant benefits to opening the world of creativity and knowledge work to everyone, these new AI tools also have downsides. First, they could accelerate the loss of important human skills that will remain important in the coming years, especially writing skills. Educational institutes need to craft and enforce policies on allowable uses of large language models to ensure fair play and desirable learning outcomes.

Educators are preparing for a world where students have ready access to AI-powered text generators.

Second, these AI tools raise questions around intellectual property protections. While human creators are regularly inspired by existing artifacts in the world, including architecture and the writings, music and paintings of others, there are unanswered questions on the proper and fair use by large language models of copyrighted or open-source training examples. Ongoing lawsuits are now debating this issue, which may have implications for the future design and use of large language models.

As society navigates the implications of these new AI tools, the public seems ready to embrace them. The chatbot ChatGPT went viral quickly, as did image generator Dall-E mini and others. This suggests a huge untapped potential for creativity, and the importance of making creative and knowledge work accessible to all.


 

Potential inaccuracies, biases and plagiarism

Daniel Acuña, Associate Professor of Computer Science, University of Colorado Boulder

I am a regular user of GitHub Copilot, a tool for helping people write computer code, and I’ve spent countless hours playing with ChatGPT and similar tools for AI-generated text. In my experience, these tools are good at exploring ideas that I haven’t thought about before.

I’ve been impressed by the models’ capacity to translate my instructions into coherent text or code. They are useful for discovering new ways to improve the flow of my ideas, or creating solutions with software packages that I didn’t know existed. Once I see what these tools generate, I can evaluate their quality and edit heavily. Overall, I think they raise the bar on what is considered creative.

But I have several reservations.

One set of problems is their inaccuracies – small and big. With Copilot and ChatGPT, I am constantly looking for whether ideas are too shallow – for example, text without much substance or inefficient code, or output that is just plain wrong, such as wrong analogies or conclusions, or code that doesn’t run. If users are not critical of what these tools produce, the tools are potentially harmful.

Recently, Meta shut down its Galactica large language model for scientific text because it made up “facts” but sounded very confident. The concern was that it could pollute the internet with confident-sounding falsehoods.

Another problem is biases. Language models can learn from the data’s biases and replicate them. These biases are hard to see in text generation but very clear in image generation models. Researchers at OpenAI, creators of ChatGPT, have been relatively careful about what the model will respond to, but users routinely find ways around these guardrails.

Another problem is plagiarism. Recent research has shown that image generation tools often plagiarize the work of others. Does the same happen with ChatGPT? I believe that we don’t know. The tool might be paraphrasing its training data – an advanced form of plagiarism. Work in my lab shows that text plagiarism detection tools are far behind when it comes to detecting paraphrasing.

two rows of six images, each top and bottom pair very similar to each other
Plagiarism is easier to see in images than in text. Is ChatGPT paraphrasing as well?
Somepalli, G., et al., CC BY

These tools are in their infancy, given their potential. For now, I believe there are solutions to their current limitations. For example, tools could fact-check generated text against knowledge bases, use updated methods to detect and remove biases from large language models, and run results through more sophisticated plagiarism detection tools.


 

With humans surpassed, niche and ‘handmade’ jobs will remain

Kentaro Toyama, Professor of Community Information, University of Michigan

We human beings love to believe in our specialness, but science and technology have repeatedly proved this conviction wrong. People once thought that humans were the only animals to use tools, to form teams or to propagate culture, but science has shown that other animals do each of these things.

Meanwhile, technology has quashed, one by one, claims that cognitive tasks require a human brain. The first adding machine was invented in 1623. This past year, a computer-generated work won an art contest. I believe that the singularity – the moment when computers meet and exceed human intelligence – is on the horizon.

How will human intelligence and creativity be valued when machines become smarter and more creative than the brightest people? There will likely be a continuum. In some domains, people still value humans doing things, even if a computer can do it better. It’s been a quarter of a century since IBM’s Deep Blue beat world champion Garry Kasparov, but human chess – with all its drama – hasn’t gone away.

In other domains, human skill will seem costly and extraneous. Take illustration, for example. For the most part, readers don’t care whether the graphic accompanying a magazine article was drawn by a person or a computer – they just want it to be relevant, new and perhaps entertaining. If a computer can draw well, do readers care whether the credit line says Mary Chen or System X? Illustrators would, but readers might not even notice.

And, of course, this question isn’t black or white. Many fields will be a hybrid, where some Homo sapiens find a lucky niche, but most of the work is done by computers. Think manufacturing – much of it today is accomplished by robots, but some people oversee the machines, and there remains a market for handmade products.

If history is any guide, it’s almost certain that advances in AI will cause more jobs to vanish, that creative-class people with human-only skills will become richer but fewer in number, and that those who own creative technology will become the new mega-rich. If there’s a silver lining, it might be that when even more people are without a decent livelihood, people might muster the political will to contain runaway inequality.


 

Old jobs will go, new jobs will emerge

Mark Finlayson, Associate Professor of Computer Science, Florida International University

Large language models are sophisticated sequence completion machines: Give one a sequence of words (“I would like to eat an …”) and it will return likely completions (“… apple.”). Large language models like ChatGPT that have been trained on record-breaking numbers of words (trillions) have surprised many, including many AI researchers, with how realistic, extensive, flexible and context-sensitive their completions are.

Like any powerful new technology that automates a skill – in this case, the generation of coherent, albeit somewhat generic, text – it will affect those who offer that skill in the marketplace. To conceive of what might happen, it is useful to recall the impact of the introduction of word processing programs in the early 1980s. Certain jobs like typist almost completely disappeared. But, on the upside, anyone with a personal computer was able to generate well-typeset documents with ease, broadly increasing productivity.

Further, new jobs and skills appeared that were previously unimagined, like the oft-included resume item MS Office. And the market for high-end document production remained, becoming much more capable, sophisticated and specialized.

I think this same pattern will almost certainly hold for large language models: There will no longer be a need for you to ask other people to draft coherent, generic text. On the other hand, large language models will enable new ways of working, and also lead to new and as yet unimagined jobs.

To see this, consider just three aspects where large language models fall short. First, it can take quite a bit of (human) cleverness to craft a prompt that gets the desired output. Minor changes in the prompt can result in a major change in the output.

Second, large language models can generate inappropriate or nonsensical output without warning.

Third, as far as AI researchers can tell, large language models have no abstract, general understanding of what is true or false, if something is right or wrong, and what is just common sense. Notably, they cannot do relatively simple math. This means that their output can unexpectedly be misleading, biased, logically faulty or just plain false.

These failings are opportunities for creative and knowledge workers. For much content creation, even for general audiences, people will still need the judgment of human creative and knowledge workers to prompt, guide, collate, curate, edit and especially augment machines’ output. Many types of specialized and highly technical language will remain out of reach of machines for the foreseeable future. And there will be new types of work – for example, those who will make a business out of fine-tuning in-house large language models to generate certain specialized types of text to serve particular markets.

In sum, although large language models certainly portend disruption for creative and knowledge workers, there are still many valuable opportunities in the offing for those willing to adapt to and integrate these powerful new tools.


 

Leaps in technology lead to new skills

Casey Greene, Professor of Biomedical Informatics, University of Colorado Anschutz Medical Campus

Technology changes the nature of work, and knowledge work is no different. The past two decades have seen biology and medicine undergoing transformation by rapidly advancing molecular characterization, such as fast, inexpensive DNA sequencing, and the digitization of medicine in the form of apps, telemedicine and data analysis.

Some steps in technology feel larger than others. Yahoo deployed human curators to index emerging content during the dawn of the World Wide Web. The advent of algorithms that used information embedded in the linking patterns of the web to prioritize results radically altered the landscape of search, transforming how people gather information today.

The release of OpenAI’s ChatGPT indicates another leap. ChatGPT wraps a state-of-the-art large language model tuned for chat into a highly usable interface. It puts a decade of rapid progress in artificial intelligence at people’s fingertips. This tool can write passable cover letters and instruct users on addressing common problems in user-selected language styles.

Just as the skills for finding information on the internet changed with the advent of Google, the skills necessary to draw the best output from language models will center on creating prompts and prompt templates that produce desired outputs.

For the cover letter example, multiple prompts are possible. “Write a cover letter for a job” would produce a more generic output than “Write a cover letter for a position as a data entry specialist.” The user could craft even more specific prompts by pasting portions of the job description, resume and specific instructions – for example, “highlight attention to detail.”

As with many technological advances, how people interact with the world will change in the era of widely accessible AI models. The question is whether society will use this moment to advance equity or exacerbate disparities.The Conversation

About the Author:

Lynne Parker, Associate Vice Chancellor, University of Tennessee; Casey Greene, Professor of Biomedical Informatics, University of Colorado Anschutz Medical Campus; Daniel Acuña, Associate Professor of Computer Science, Affiliate Professor of Information Science, University of Colorado Boulder; Kentaro Toyama, Professor of Community Information, University of Michigan, and Mark Finlayson, Associate Professor of Computer Science, Florida International University

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

 

Inflation in Australia has reached a 30-year-high. World Bank cuts growth forecast for most countries

By JustMarkets

The US indices were trading up yesterday. By the close of trading yesterday, the Dow Jones (US30) increased by 0.56%, and the S&P500 (US500) added 0.70%. The NASDAQ Technology Index (US100) jumped by 1.01% on Tuesday.

In his speech at a banking symposium in Sweden, Federal Reserve Chairman Jerome Powell provided no new information on monetary policy but pointed to the Central Bank’s resolve, saying that unpopular decisions may be needed to lower inflation. This is in line with comments from other US Federal Reserve officials: San Francisco Fed President Mary Daley and Atlanta Fed President Rafael Bostic are insisting that the US Fed will hold rates higher for a longer period of time. Investors are trying to predict the next steps of the major central banks. The main factor will be the US inflation data, which will be released on Thursday. The decline in consumer prices will likely force the US Federal Reserve to lower the pace of rate hikes to 0.25%.

The World Bank lowered its growth forecasts for most countries and regions and warned that more adverse shocks could lead to a global recession. Global gross domestic product will likely increase by 1.7% this year. This would be the third-worst result in three decades. The bank also cut its growth estimates for 2024. Among the main reasons are persistent inflation, high-interest rates, Russia’s invasion of Ukraine, and lower investment.

Stock markets in Europe were mostly down yesterday. Germany’s DAX (DE30) decreased by 0.12%, France’s CAC 40 (FR40) lost 0.55%, Spain’s IBEX 35 (ES35) added 0.29%, Britain’s FTSE 100 (UK100) closed down 0.39% on Tuesday.

ECB board spokeswoman Isabelle Schnabel said yesterday at the International Symposium on Central Bank Independence that the ECB will continue its rate hike cycle and that rates should rise significantly. With the Fed’s rate hike cycle coming to an end and the ECB still operating at full power, the rate differential is likely to strengthen the euro.

Crude oil prices rose slightly on Tuesday. Oil traders are waiting for the key data on US oil inventories, which are expected to decline. Against the background of the opening of China (the largest oil importer), it may be a trigger for oil to rise.

Asian markets traded without a single dynamic yesterday. Japan’s Nikkei 225 (JP225) gained 0.78%, China’s FTSE China A50 (CHA50) added 0.11%, Hong Kong’s Hang Sengv(HK50) ended the day down 0.27%, India’s NIFTY 50 (IND50) decreased by 1.03%, and Australia’s S&P/ASX 200 (AU200) ended the day down 0.28%

China is considering allowing local governments to borrow more debt for infrastructure projects. Base metals, especially copper, rose on the prospect that China will resume higher levels of industrial production after the economy opens. A revival in consumer demand is likely to lead China to improve international relations as well. The focus this week will also be on China’s inflation data for December. The country’s slowing economic growth is expected to lead to deflationary trends.

The consumer price level in Australia rose to a 30-year high. On an annualized basis, consumer prices rose from 6.9% to 7.3% (7.2% expected). Rising inflation will likely lead to further tightening of policy by the Central Bank, which will provide additional support to the Australian currency.

S&P 500 (F) (US500) 3,919.25 −2.99 (+0.70%)

Dow Jones (US30) 33,704.10 +186.45 (+0.56%)

DAX (DE40) 14,774.60 −18.23 (−0.12%)

FTSE 100 (UK100) 7,694.49 −30.45 (−0.39%)

USD Index 103.27 +0.27 (+0.26%)

Important events for today:
  • – Australia Consumer Price Index (m/m) at 02:30 (GMT+2);
  • – Australia Retail Sales (m/m) at 02:30 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 17:30 (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.

The focus today is on the banking symposium. Inflation in Tokyo set another record

By JustMarkets

The US indices traded yesterday without a single trend. Dips in healthcare and energy stocks offset gains in the high-tech sector. At the close of trading yesterday, the Dow Jones index (US30) decreased by 0.34%, while the S&P500 index (US500) lost 0.08%. The NASDAQ Technology Index (US100) gained 0.63% on Monday.

Goldman Sachs analysts believe the US economy will be more resilient to monetary tightening than other G10 economies, as not only a strong labor market but also a housing finance structure and energy self-sufficiency will help. Unlike Europe, most US households have fixed-rate mortgages that are locked in at historically low levels and are not subject to Fed rate hikes.

Neuberger’s experts believe that now is a great opportunity to buy Tesla (TSLA) stock. According to analysts, the electric carmaker’s business model remains strong, and current price levels are attractive.

The heads of the central banks of the United States, Canada, and Japan will speak at a banking symposium in Sweden today. Markets will be watching for any changes to the Fed chairman’s hawkish rhetoric, especially amid growing signs of declining inflation in the US.

At the end of this week, the US earning season begins. As usual, the season will start with the banking sector. US banking giants are forecast to report lower profits and lower next quarter forecasts.

Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 1.25%, French CAC 40 (FR40) added 0.68%, Spanish IBEX 35 (ES35) lost 0.07%, and British FTSE 100 (UK100) closed on Monday with a 0.33% gain.

Geopolitics in Europe and energy prices are likely to continue to be the focus of investors’ attention. In early 2023, Europe’s energy outlook seems more hopeful. Gas reserves in Germany are back above 90%, and Europe as a whole is at 83%. The milder weather has led to a drop in demand.

After surging prices for most of 2022 due to weather-related disruptions and supply reductions caused by political and other disruptions in Russian gas production following the invasion of Ukraine, natural gas futures suddenly collapsed in December 2022. The market reversal was caused by unusually high winter temperatures last month. But on Monday, natural gas prices rose more than 5% as the forecast for the coming week points to lower temperatures that will increase consumption. Long-term forecasts from the European (ECMWF) weather forecast model version 2 (CFSv2) hint at another potentially cold period of weather that will occur from late January into February. If this forecast materializes, it could result in the withdrawal of more than 200 BСF or more in the coming weeks.

Oil traders are betting China’s economic recovery from tough COVID policies will boost oil consumption. With current production, increased demand will drive oil prices higher. Oil fell more than 8% last week, the most significant weekly decline in months. Oil rebounded on Monday after China fully reopened its borders to international trade. Oil demand in China usually rises every year after the Lunar New Year, which this year falls at the end of January.

Asian markets rose steadily yesterday. Japan’s Nikkei 225 (JP225) gained 0.59%, China’s FTSE China A50 (CHA50) added 0.97%, Hong Kong’s Hang Seng (HK50) jumped by 1.89%, India’s NIFTY 50 (IND50) increased by 1.35%, and Australia’s S&P/ASX 200 (AU200) ended the day up 0.59%.

According to bank analysts, Japan’s GDP growth will slow in 2023 from 1.2% to 1.0% but remain above its potential level, helped by a favorable macroeconomic environment. A stronger yen and softer border controls will likely improve trade conditions, and a fiscal stimulus program will support the recovery. Nationwide inflation in Japan has not yet peaked and is likely to reach 4.0% in early 2023, but will soon slow to 2% in the second quarter. Inflation in Tokyo has reached 4%, indicating a stronger-than-expected trend in consumer prices. This is the highest value since 1982. The largest contributors to the price increase were food and energy. Inflation in Tokyo is a leading indicator of the national CPI, and its higher rate suggests that national price growth is also likely to accelerate in December. This factor could further fuel rumors that the Bank of Japan will begin to adjust its monetary policy.

S&P 500 (F) (US500) 3,892.09 −2.99 (−0.077%)

Dow Jones (US30) 33,517.65 −112.96 (−0.34%)

DAX (DE40) 14,792.83 +182.81 (+1.25%)

FTSE 100 (UK100) 7,724.94 +25.45 (+0.33%)

USD Index 103.17 -0.71 (-0.68%)

Important events for today:
  • – Japan Tokyo Core CPI (m/m) at 01:30 (GMT+2);
  • – Canada BoC Gov Macklem Speaks at 12:10 (GMT+2);
  • – Japan BOJ Gov Kuroda Speaks at 12:10 (GMT+2);
  • – US Fed Chair Powell Speaks at 16:00 (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.

Markets Slip On Hawkish Fed Remarks

By ForexTime 

It’s a new year but the same old story with markets sensitive to Fed rate hike bets and hawkish chatter by policymakers.

Asian shares were knocked lower during early trading as investors evaluated comments from two Federal Reserve officials overnight. A sense of caution ahead of the key US inflation report on Thursday dampened the overall mood, encouraging investors to adopt a guarded approach towards riskier assets.

European futures are pointing to a lower open this morning amid the shaky risk sentiment. In the currency markets, the dollar was little changed but remains pressured by market expectations of a less hawkish Fed, despite the recent comments from Raphael Bostic and Mary Daly. Gold continues to shine, kissing levels not seen since May 2022 above $1880 while oil remains a fierce battleground for bulls and bears.

In other news, the World Bank is expected to unveil its global economic prospects report today. The international financial institution has already expressed concerns about the global economic outlook, warning of recession risk in 2023. Should the forecasts point to a global economic slowdown, another wave of risk aversion could sweep across markets as investors rush to safety.

More pain ahead for the Dollar?

Over the past few weeks, it has been the same old story for the tired dollar.

Expectations around a less hawkish Fed and subdued Treasury yields have clipped the greenback’s wings. Things are looking rough for the buck which has depreciated against almost every single G10 currency since the start of 2023. Bears remain in the vicinity despite the recent hawkish comments from Fed officials overnight with further downside on the cards if Thursday’s US inflation cools again.

According to Bloomberg, annual headline inflation for December is expected to cool to 6.5% from the prior print of 7.1%. Should expectations become reality, this will mark the sixth straight monthly decline and the lowest since October 2021. More signs of falling inflation may fuel talk around the Federal Reserve steering to a smaller rate hike at the start of next month. Alternatively, a hotter-than-expected CPI report could revive aggressive rate hike bets as investors question how slowly inflation will fall. Such a development could see the dollar rebound.

Before the key US inflation data later in the week, all eyes will be on Fed Chair Jerome Powell as he speaks during an international symposium at the Riksbank in Stockholm later today. Should the Fed Chair provide any guidance on rate hikes, this could influence the dollar.

Looking at the technicals, the DXY could be in store for more pain as the death cross technical pattern strikes. With the 50-period simple moving average (SMA) crossing down below the 200-day SMA, this signals a major trend reversal to the downside.  Sustained weakness below 103.00 could encourage a decline towards 101.30.

Currency spotlight – GBPUSD

It has been a choppy affair for GBPUSD recently as prices have traded within a 200-pip range with support at 1.1900 and resistance at 1.2100. However, the recent breakout has shifted the scales of power in favour of the bulls, with further upside on the cards. Bank of England Governor Andrew Bailey will be under the spotlight this morning as he speaks at the event at the Riksbank. This could translate to pound volatility depending on his remarks. Nevertheless, pound bulls remain in some control above 1.2100 with the next key levels of interest found at 1.2230 and 1.2300.

Commodity spotlight – Gold

Gold has kicked off 2023 on a solid note, gaining 2.7% since the start of the New Year.

The precious metal continues to draw strength from a softer dollar, falling Treasury yields, and growing expectations of a less hawkish Federal Reserve. Given how last Friday’s mixed jobs report has fanned speculation around the Fed slowing its rate hikes, further upside could be on the cards. In the meantime, gold’s outlook is likely to be influenced by the upcoming US inflation report. A further cooling in prices in December and lower bond yields would be a welcome development for zero-yielding gold. Looking at the technical picture, bulls remain in a position of power with the next key level of interest found at $1900.


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China is opening its borders. The US labor market remains solid

By JustMarkets

The US stock market ended Friday’s trading higher on the back of a dollar Index drop after key data on the US labor market. The non-farm report showed the US economy added 223,000 jobs, higher than the expected 200,000. The unemployment rate fell to 3.5% from 3.7%, while average hourly earnings fell to 4.6% from a revised decline of 4.8%. As the US labor market remains resilient, the Fed can count on further rate hikes to keep inflation in check. The dollar index unexpectedly fell on a strong US labor market report, and this could be a “false” move as a strong labor market, along with further rate hikes, is the foundation for a stronger dollar. At the close of the stock market on Friday, the Dow Jones index (US30) increased by 2.13% (+1.54% for the week), and the S&P 500 index (US500) added 2.28% (+1.72% for the week). The NASDAQ Technology Index (US100) gained 2.56% on Friday (+1.94% for the week). All three indices closed in positive territory last week.

Last week’s FOMC report showed that Fed policymakers increased the final interest rate range, and the non-farm payrolls report showed that the labor market remains resilient. Together, these 2 factors point to further interest rate hikes in the first half of 2023. A key factor will be the inflation data on January 12.

On Sunday in California, hundreds of thousands of homes and businesses were without power due to a severe storm. On Saturday, the NWS Weather Alert warned that the cumulative effect of successive heavy rains since late December could cause rivers to reach record highs and cause flooding in much of central California.

Stock markets in Europe were mostly up Friday. German DAX (DE30) gained 1.20% (+4.41% for the week), French CAC 40 (FR40) added 1.47% (+5.21% for the week), Spanish IBEX 35 (ES35) jumped by 1.00% (+4.78% for the week), British FTSE 100 (UK100) was up 0.87% (+2.49% for the week).

Falling energy prices in the Eurozone (especially natural gas prices) helped weaken the overall inflation rate. The overall inflation rate fell from 10.1% to 9.2% on an annualized basis. Core inflation (which excludes food and energy prices) also fell from 5.1% to 5.0% year over year. But the detailed report indicates that price pressures in non-energy sectors are rising, especially for food. This indicates that inflation is still strong. The next two months will be critical, as many businesses traditionally change prices early in the year.

Consequently, it is possible that core inflation will continue to rise. Consumption remains under pressure, and retail sales have been declining for quite some time, businesses continue to adjust their prices upward. The ECB has taken a very hawkish stance and is likely to keep the pace of rate hikes at 50 bp in February and March.

Asian markets traded mixed last week. Japan’s Nikkei 225 (JP225) decreased by 0.39%, China’s FTSE China A50  CHA50) was up 0.81%, Hong Kong’s Hang Seng (HK50) ended the week up 4.80%, India’s NIFTY 50 (IND50) decreased by 1.34%, and Australia’s S&P/ASX 200 (AU200) ended the week up 1.24% positive.

China on Saturday marked the first day of “Chun Yun,” the 40-day lunar New Year period. This Lunar New Year public holiday, which officially begins on January 21, will be the first since 2020 with no restrictions on domestic travel. Also, on Sunday, China will reopen its border with Hong Kong. China’s Ministry of Transportation expects more than 2 billion passengers to travel over the next 40 days. Investors hope the reopening will eventually revive the economy. Ultimately, it is likely to have an impact on oil prices. Demand for oil in China usually rises every year after the Lunar New Year. The increase in demand is a signal for rising oil prices.

In the commodities market, futures on copper (+2.97%), cotton (+2.76%), gold (+2.43%), and platinum (+1.99%) showed the biggest gains last week. Futures on natural gas (-15.96%), gasoline (-9.05%), Brent oil (-8.51%), WTI oil (-8.14%), wheat (-6.19%), sugar (-5.34%), coffee (-5.29%), corn (-3.72%) and lumber (-2.95%) showed the biggest drop.

S&P 500 (F) (US500) 3,895.08 +66.02  (+1.72%)

Dow Jones (US30) 33,630.61 +509.00 (+1.54%)

DAX (DE40) 14,610.02 +173.71 (+1.20%)

FTSE 100 (UK100) 7,699.49 +66.04 (+0.87%)

USD Index 103.91 -1.13 (-1.08%)

Important events for today:
  • – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
  • – German Industrial Production (m/m) at 09:00 (GMT+2);
  • – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
  • – Canada Building Permits (m/m) at 15:30 (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.

US stock indices are declining ahead of the Nonfarm report. Inflation is expected to decline in Europe

By JustMarkets

The US indices declined on Thursday due to rising Treasury yields as preliminary data from ADP continued to point to a robust labor market, fueling fears of aggressive tightening by the Federal Reserve. At the close of the US stock market yesterday, the Dow Jones Index (US30) decreased by 1.02%, and the S&P 500 Index (US500) lost 1.16%. Technology Index NASDAQ (US100) fell by 1.47. By the end of the day, all three indices were negative.

Today, the US will release an important Nonfarm Payroll report. Analysts expect the data to show the number of 200,000 jobs while the unemployment rate will remain unchanged. Such data could return strength to the dollar index, which is negative for stock indices. A worsening labor market data, on the other hand, would indicate that the US Federal Reserve will act more softly, which is negative for the dollar and could be a boost to indices. Currently, the Fed is forecasting an increase in the unemployment rate to about 4.6% from the current 3.7% by the end of 2023.

Equity markets in Europe traded yesterday without a single dynamic. German DAX (DE30) decreased by 0.38%, French CAC 40 (FR40) was 0.22% lower, Spanish IBEX 35 (ES35) added 0.51%, and British FTSE 100 (UK100) closed up by 0.64% on Thursday.

The inflation report will be released in Europe today. The December CPI figure is expected to be 9.7% annualized, down from the current level of 10.1%. But there is some confidence in the markets that there may be a positive surprise in the form of a stronger decline in inflation. Falling inflation indicators tend to be a growth booster for stock indices.

Gold prices fell sharply on Thursday due to a rising dollar index and US government bond yields. Recession risks and expectations of a strong labor market report are forcing investors to buy dollars. Precious metals are inversely correlated to the dollar index, so a decline in gold and silver usually accompanies a rise in the dollar.

Asian indices were mostly on the rise yesterday. Japan’s Nikkei 225 (JP225) gained 0.40%, China’s FTSE China A50 (CHA50) added 2.47%, Hong Kong’s Hang Seng (HK50) jumped by 1.25%, India’s NIFTY 50 (IND50) was down by 0.28% and Australia’s S&P/ASX 200 (AU200) was up by 0.06% on the day.

Tokyo’s main Consumer Price Index rose to 3.8% in December, a new 40-year record. This index is a leading indicator of national inflation trends. Rising inflation increases the likelihood that the Bank of Japan will abandon its soft monetary policy this spring.

S&P 500 (F) (US500) 3,808.10 −44.87 (−1.16%)

Dow Jones (US30) 32,930.08 −339.69 (−1.02%)

DAX (DE40) 14,436.31 −54.47 (−0.38%)

FTSE 100 (UK100) 7,633.45 +48.26 (+0.64%)

USD Index 105.12 +0.87 (+0.84%)

Important events for today:
  • – Japan Services PMI (m/m) at 02:30 (GMT+2);
  • – German Retail Sales (m/m) at 09:00 (GMT+2);
  • – Switzerland Retail Sales (m/m) at 09:30 (GMT+2);
  • – UK Construction PMI (m/m) at 11:30 (GMT+2);
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
  • – Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
  • – US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
  • – US Unemployment Rate (m/m) at 15:30 (GMT+2);
  • – Canada Unemployment Rate (m/m) at 15:30 (GMT+2);
  • – Canada Ivey PMI (m/m) at 17:00 (GMT+2);
  • – US ISM Services PMI (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.

China hides statistics on real COVID-19 deaths. Britain is on the brink of a deep recession

By JustMarkets

At the close of the US stock market yesterday, the Dow Jones Index (US30) increased by 0.40%, and the S&P 500 Index (US500) added 0.75%. The Technology Index NASDAQ (US100) gained 0.69% on Wednesday. All three indices closed the day in positive territory.

The Open Market Committee (FOMC) raised its rate target to a range of 5% to 5.25%. The markets expect the Fed to raise the rate by 0.25% at its next meeting on February 1. The probability of such a scenario is 84%. Goldman Sachs analysts expect three rate hikes of 25 bps in February, March, and May, with a peak funds rate of 5-5.25%.

The ISM Manufacturing Index has long been considered one of the best indicators of the health of the US economy. The December report showed that the manufacturing PMI fell to 48.4 from 49.0. This is the second consecutive month of contraction and the fourth consecutive month below the level of 50. Export orders are down, and new orders are unacceptably low, so there seems little chance of a quick manufacturing recovery.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 2.18%, France’s CAC 40 (FR40) added 2.30%, Spain’s IBEX 35 (ES35) jumped by 1.89%, and the British FTSE 100 (UK100) closed up by 0.41% on Wednesday.

Consulting firm KPMG predicts that UK real GDP will contract by 1.3% in 2023. KPMG expects the UK Central Bank to raise the bank rate to 4% during the first quarter of this year before taking a pause. The labor market will begin to deteriorate in the first half of 2023, with the unemployment rate reaching 5.6% by mid-2024, meaning an increase of about 680,000 unemployed people. The jump in food and energy prices and higher overall inflation have already reduced the purchasing power of households.

Switzerland’s annual inflation rate has fallen from 3% to 2.8%. Although the inflation rate has declined, this is the highest inflation rate the country has experienced in decades. From 2008 to 2022, the annual average inflation in Switzerland was between 0.6 and 0.7%.

Global growth problems, along with growing COVID-19 problems in China (the biggest oil importer), have caused the price of “black gold” to fall by another 5%. In addition, leading oil exporter Saudi Arabia may further reduce the price of its flagship Arab Light crude to Asia. The US WTI crude decreased by 5.3% to $72.84 a barrel. British benchmark Brent Crude fell by 5.2% to $77.84 a barrel. The total decline in quotes was almost 10% during the last two days. Considering the fact that China increased export quotas for oil products in the first batch for 2023, which indicates the expectations of low domestic demand, oil quotes may fall even more.

Asian indices traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.45%, China’s FTSE China A50 (CHA50) gained 0.25%, Hong Kong’s Hang Seng (HK50) ended the day up 3.22%, India’s NIFTY 50 (IND50) decreased by 1.04%, and Australia’s S&P/ASX 200 (AU200) ended Wednesday with a 1.63% gain.

The World Health Organization (WHO) criticized China’s definition of COVID-19 deaths and warned that official statistics do not show the true impact of the outbreak. China’s eagerness to move away from a zero-COVID policy is also alarming in the financial markets. Data on Tuesday showed that manufacturing activity in China contracted for the fifth straight month in December.

S&P 500 (F) (US500) 3,852.97 +28.83  (+0.75%)

Dow Jones (US30) 33,269.77 +133.40 (+0.40%)

DAX (DE40) 14,490.78 +309.11 (+2.18%)

FTSE 100 (UK100) 7,585.19 +31.10 (+0.41%)

USD Index 104.24 −0.28 (−0.27%)

Important events for today:
  • – China Caixin Services PMI (m/m) at 03:45 (GMT+2);
  • – UK Services PMI (m/m) at 11:30 (GMT+2);
  • – Italian Consumer Price Index (m/m) at 12:00 (GMT+2);
  • – US ADP Non-Farm Employment Change (m/m) at 15:15 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 18:00 (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.

Major recession fears rise on Fed minutes

By George Prior

The latest Federal Reserve meeting minutes suggest that the U.S. economy is headed for recession as the central bank will remain aggressive in raising rates to cool inflation, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The warning comes from deVere Group’s Nigel Green as the meeting minutes released Wednesday signal that the U.S. central bank remains cautious on inflation, with officials agreeing that “rate cuts shouldn’t happen in 2023.”

He says: “Investors have been waiting with bated breath as the Federal Open Market Committee (FOMC) minutes from the December meeting released on Wednesday give us more insight into what factors the Committee has been using for future policy decisions.

“It appears that officials remain hawkish and are especially concerned about the tight labor market.

“We expect that the latest minutes will give the central bank further support to maintain interest rates higher for longer than had been previously priced-in by the markets.

“With the labor market not cooling as fast, there seems to be a considerable turnaround in tone from the more dovish minutes in November.”

He continues: “These minutes dash yet more hopes for an economic soft landing.

“Investors are increasingly concerned that the Federal Reserve could now overtighten and will steer the U.S. economy into a major recession.

“Of course, the central bank will argue it needs to continue with rate rises to bring inflation back to target.

“But it must also ensure that the tight labor market doesn’t overshadow the broader picture and continue to overdo the hikes, which would make a U.S. recession deeper and longer.

“As the world’s largest economy, this would clearly have a serious, negative impact on the global economy.”

Nigel Green concludes: “The tone of the minutes indicate the Fed is not yet ready to pivot as the central bank believes risks for inflation remain to the upside and they will keep tightening until more substantial progress is made on bringing it back closer to target.

“Inflation remains their primary concern, not risks to economic growth.”

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.

Why the Threat of Deflation is Real

“The Federal Reserve is forging ahead with its balance sheet reduction”

By Elliott Wave International

I know — inflation has been grabbing all the headlines for a good while now — so you may wonder why the subject of deflation is relevant.

First, the definitions of inflation and deflation go beyond commonly accepted meanings.

As Robert Prechter’s Last Chance to Conquer the Crash says:

Inflation is an increase in the total amount of money and credit, and deflation is a decrease in the total amount of money and credit. …

The most common misunderstanding about inflation and deflation … is the idea that inflation is rising prices and deflation is falling prices. General price changes, though, are simply effects.

That said, let’s start off with an occurrence which is quite rare. Here’s a chart and commentary from the December Elliott Wave Theorist, a monthly publication which covers major financial and cultural trends:

The chart, published by the Fed, shows that absolute M2 has been declining on a month-by-month basis for the first time in many decades, probably since the 1930s or 1940s. This trend is deflationary.

Keep in mind that M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers’ checks) plus savings deposits (including money market deposit accounts), small time deposits under $100,000, and shares in retail money market mutual funds.

Another factor regarding deflation has to do with the Fed.

The November Global Forecast Service, an Elliott Wave International publication which analyzes 50-plus worldwide financial markets, showed this chart and noted:

The Federal Reserve is forging ahead with its balance sheet reduction, as the chart shows. This reduction in the central bank’s assets which were paid for by money created out of thin air constitutes disinflation, and deflation (when the balance sheet is contracting on an annualized basis) will likely come by the end of the year.

So, now you see why deflation is very much on the radar screen of Elliott Wave International’s Global Forecast Service, which can help you to prepare for what may be next.

Understanding the Elliott wave price patterns of global stock market indexes can also be of help in anticipating what’s next for major economies around the globe.

You see, the economy tends to follow the stock market, in each country.

Getting back to the Wave Principle, here are some insights from Frost & Prechter’s book, Elliott Wave Principle: Key to Market Behavior:

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.

Would you like to read the entire online version of this Wall Street classic — for free?

You may do so once you become a member of Club EWI, the world’s largest Elliott wave educational community.

A Club EWI membership is also free (no obligations whatsoever) and allows for complimentary access to a wealth of Elliott wave resources on investing and trading.

So, get started now by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Why the Threat of Deflation is Real. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Gold rises amid the looming recession. Oil falls due to high mortality from COVID-19 in China

By JustMarkets

As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 0.04%, and the S&P 500 Index (US500) fell by 0.41%. The Technology Index NASDAQ (US100) lost 0.76% on Tuesday. At the end of the day, all three indices closed with losses.

Apple (AAPL) lost more than 4%, approaching a $2 trillion market value for the first time since 2021. Shares of electric carmaker Tesla Inc (TSLA) fell more than 13% Tuesday after the company reported lower-than-expected deliveries for the quarter and year.

The US stocks ended 2022 with their worst performance since 2008, as interest rates rose throughout the year, putting pressure on once-high growth rates and shares of large tech companies.

In the United States, this week’s focus will be on Friday’s US Nonfarm Payrolls report for December. The jobs report is crucial as the Federal Reserve faces the dilemma of whether to continue tightening monetary policy to bring inflation to desired levels or to abandon aggressive rate hikes to protect the economy from slowing. Higher inflation and rising interest rates have hit the housing sector and could next hit the labor market.

The FOMC minutes will also be released today. Given Powell’s hawkish tone after the last meeting and the general market expectation that the Fed will now level rates, there is speculation that the minutes may be more dovish this time. The market is currently pricing in a final rate below 5.0%, while the Fed is pushing for a final rate above 5.0%.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 0.80%, France’s CAC 40 (FR40) added 0.44%, Spain’s IBEX 35 (ES35) jumped by 0.42%, Britain’s FTSE 100 (UK100) closed Tuesday in plus 1.37%.

European Central Bank Governing Council spokesman Martins Kazaks expects interest rates to rise significantly in February and March 2023. We are talking about a 0.5% ECB rate hike at each of the meetings. Kazaks, who heads Latvia’s Central Bank, is considered one of the hawkish officials.

Oil starts in 2023 with declining 4%. The US West Texas Intermediate (WTI) crude for February delivery fell by 4.1% to $76.93 a barrel. Brent Crude oil of British origin for delivery in February dropped by 4.4% to $82.10 per barrel. Decreasing activity at factories in China (the biggest oil importer) and IMF warnings about global recession put pressure on oil quotes. The outlook for crude oil remains very uncertain, so high volatility will persist.

Gold showed a strong start in the new year as concerns about an impending recession and a potential slowdown in US interest rates led to increased demand for safe-haven assets other than the dollar.

Asian indices traded flat yesterday. Japan’s Nikkei 225 (JP225) did not trade yesterday, China’s FTSE China A50 (CHA50) fell by 0.69%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.84%, India’s NIFTY 50 (IND50) added 0.19%, and Australia’s S&P/ASX 200 (AU200) ended Tuesday with a minus 1.31%.

China’s repeal of strict antivirus controls last month caused COVID-19 to spread to 1.4 billion people. Funeral companies are reporting a surge in demand for their services, and international health experts are predicting that at least a million people in China will die from COVID-19 this year. But officially, China reports few COVID-19 deaths and downplays concerns about the disease.

S&P 500 (F) (US500) 3,823.95 −15.55 (−0.41%)

Dow Jones (US30) 33,134.79 −12.46 (−0.038%)

DAX (DE40) 14,181.67 +112.41 (+0.80%)

FTSE 100 (UK100) 7,554.09 +102.35 (+1.37%)

USD Index 104.61 +1.09 (+1.05%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
  • – Switzerland Consumer Price index (m/m) at 09:30 (GMT+2);
  • – French Consumer Price index (m/m) at 09:45 (GMT+2);
  • – Spanish Services PMI (m/m) at 10:00 (GMT+2);
  • – Italian Services PMI (m/m) at 10:45 (GMT+2);
  • – French Services PMI (m/m) at 10:50 (GMT+2);
  • – Germany Services PMI (m/m) at 10:55 (GMT+2);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
  • – US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
  • – US FOMC minutes at 21:00 (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.