Archive for Economics & Fundamentals – Page 133

06 Dec

Sentiment Hit By Rekindled Fed Hike Bets

By ForexTime 

Asian shares were under attack on Tuesday, following the negative cues from Wall Street overnight as unexpectedly strong US data revived expectations of the Fed raising rates more than expected.

European futures are pointing to a mixed open this morning amid the shaky sentiment and lack of risk appetite. This overall market caution could trickle back down to US indices, empowering US equity bears ahead of a light week of data for financial markets. In the currency universe, the dollar pushed higher, dragging most G10 currencies lower while gold tumbled back below $1780. Oil bears seem to be in control as investors juggle the impact of the new EU sanctions, the OPEC+ meeting over the weekend, and the strong US economic data.

Overnight, the Reserve Bank of Australia (RBA) raised its key interest rate by 25 basis points as widely expected. Given how the central bank left the door open to further hikes down the road, this has offered some support to the Australian dollar. However, signs of easing inflationary pressures may raise hopes that prices have peaked. Back in October, inflation cooled to 6.9% compared to 7.3% year-on-year in September. With the central bank potentially adopting a less aggressive approach towards rates as the tightening cycle approaches an end, this could eventually hit the Australian dollar.

Dollar receives a lifeline?

Over the past few weeks, the dollar has been bruised and battered by expectations around the Federal Reserve adopting a less aggressive approach towards interest rate hikes. It has depreciated against every single G10 currency since the start of the fourth quarter as long dollar positioning eased and the DXY index shifted in favour of the bears. However, buying sentiment towards the world’s reserve currency received a slight boost yesterday after the ISM services PMI data surprised to the upside, further fuelling bets that the Fed could keep its foot on the rate rise pedal. While the central bank is widely expected to hike interest rates by 50bps next week, continued strength in the labour markets and signs of inflation regaining momentum could lead to a higher peak or “terminal” rate than anticipated.

Looking at the technicals, the DXY is trading below the 200-day SMA and 105.50 resistance level. A breakout above this point could encourage more upside towards 107.00 and 107.85, respectively.

Currency spotlight – USDCAD

USDCAD is edging higher ahead of the Bank of Canada’s final rate decision for 2022 on Wednesday, which analysts expect to conclude with a 25bp rate hike. However, money markets price in a 68% chance of a 50bp move after better-than-expected Q3 GDP and the tight labour market.

Looking at the technical picture, the USDCAD remains fairly neutral on the daily charts with support found at 1.3390 and resistance at 1.3620. A breakout could be on the horizon with the BoC meeting acting as the directional catalyst.

Commodity spotlight – Gold

Gold crumbled yesterday, cutting through key levels like a hot knife through butter thanks to a stronger dollar, renewed Fed hike bets, and the easing of China’s Covid zero policies.

The precious metal fell roughly 1.6% and has found itself back within the November range. Support can be found at $1735 and resistance at $1785. Given how bears seem to be in a position of power, prices could test the lower part of the range soon. Below this level, a decline toward $1700 could be on the cards.

Forex-Time-LogoArticle by ForexTime

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

Economics & Fundamentals Financial News
05 Dec

Jobs are up! Wages are up! So why am I as an economist so gloomy?

By Edouard Wemy, Clark University 

In any other time, the jobs news that came down on Dec. 2, 2022, would be reason for cheer.

The U.S. added 263,000 nonfarm jobs in November, leaving the unemployment rate at a low 3.7%. Moreover, wages are up – with average hourly pay jumping 5.1% compared with a year earlier.

So why am I not celebrating? Oh, yes: inflation.

The rosy employment figures come despite repeated efforts by the Federal Reserve to tame the job market and the wider economy in general in its fight against the worst inflation in decades. The Fed has now increased the base interest rate six times in 2022, going from a historic low of about zero to a range of 3.75% to 4% today. Another hike is expected on Dec. 13. Yet inflation remains stubbornly high, and currently sits at an annual rate of 7.7%.

The economic rationale behind hiking rates is that it increases the cost of doing business for companies. This in turn acts as brake on the economy, which should cool inflation.

But that doesn’t appear to be happening. A closer dive into November’s jobs report reveals why.

It shows that the labor force participation rate – how many working-age Americans have a job or are seeking one – is stuck at just over 62.1%. As the report notes, that figure is “little changed” in November and has shown “little net change since early this year.” In fact, it is down 1.3 percentage points from pre-COVID-19 pandemic levels.

This suggests that the heating up of the labor market is being driven by supply-side issues. That is, there aren’t enough people to fill the jobs being advertised.

Companies still want to hire – as the above-expected job gains indicate. But with fewer people actively looking for work in the U.S., companies are having to go the extra yard to be attractive to job seekers. And that means offering higher wages. And higher wages – they were up 5.1% in November from a year earlier – contribute to spiraling inflation.

This puts the Fed in a very difficult position. Simply put, there is not an awful lot it can do about supply-side issues in the labor market. The main monetary tool it has to affect jobs is rate hikes, which make it more costly to do business, which should have an impact on hiring. But that only affects the demand side – that is, employers and recruitment policies.

So where does this leave the possibility of further rate hikes? Viewing this as an economist, it suggests that the Fed might be eyeing a base rate jump of more than 75 basis points on Dec. 13, rather than a softening of its policies as Chair Jerome Powell had suggested as recently as Nov. 30. Yes, this still would not ease the labor supply problem that is encouraging wage growth, but it might serve to cool the wider economy nonetheless.

The problem is, this would increase the chances of also pushing the U.S. economy into a recession – and it could be a pretty nasty recession.

Wage growth still trails behind inflation, and for one reason or another people have been opting out of the labor market. The logical assumption to make is that to make up for both these factors, American families have been dipping into their savings.

Statistics back this up. The personal saving rate – that is, the chunk of income left after paying taxes and spending money – has fallen steeply, down to 2.3% in December from 9.3% before the pandemic. In fact, it is at its lowest rate since 2005.

So, yes, employment is robust. But the money being earned is eroded by soaring inflation. Meanwhile, the safety net of savings that families might need is getting smaller.

In short, people are not prepared for the recession that might be lurking around the corner.

And this is why I am gloomy.The Conversation

About the Author:

Edouard Wemy, Assistant Professor of Economics, Clark University

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

Economics & Fundamentals Financial News
05 Dec

China eases Covid restrictions. The dollar index fell to a 5-month low amid expectations of a rate hike slowdown

By JustMarkets

Fed Chairman Jerome Powell said last week that it might be time to slow rate hikes, raising hopes that the Central Bank is near the end of its tightening cycle. But Friday’s jobs report that hiring remained high last month while average hourly earnings rose. The US non-farm payrolls report (NFP) beat market expectations with 263,000 new jobs created compared to the expected 200,000. The unemployment rate remained unchanged at 3.7%, while average hourly earnings rose to 5.1% year-over-year against expectations of 4.6% and a revised higher October rate of 4.9%. This suggests that the labor market remains strong, giving the Fed room for another major hike, although there is less than a 20% chance of such a scenario.

At the close of the stock market on Friday, the Dow Jones Index (US30) increased by 0.10% (+0.45% for the week), while the S&P 500 Index (US500) decreased by 0.12% (+1.66% for the week). Tech Index NASDAQ (US100) was down by 0.18% (+2.82% for the week). Despite the slight decline on Friday, all three indices closed the week on a profit.

Equity markets in Europe mostly rallied last week. German DAX (DE30) gained 0.27% (+0.40% for the week), French CAC 40 (FR40) lost 0.17% (+0.96% for the week), Spanish IBEX 35 (ES35) was down 0.30% (+0.06% for the week), British FTSE 100 (UK100) closed 0.03% (+0.93% for the week).

European Central Bank President Christine Lagarde is scheduled to appear twice this week ahead of this year’s key ECB policy meeting on December 15. Markets are leaning toward a 50 basis point rate hike at the ECB’s upcoming meeting after data last week showed that Eurozone inflation fell much more than expected in November. European Central Bank officials in Germany and France said over the weekend that the ECB would return inflation to 2% by the end of 2024 or 2025. National governments have used hundreds of billions of euros to protect companies and households from rising energy prices, which bankers said could undermine their efforts to rein in inflation. Nagel and Villeroy called for a return to a more balanced budget in the near future.

Representatives of OPEC+, which includes the Organization of the Petroleum Exporting Countries, and its allies, including Russia, met Sunday to discuss production targets after the G7 countries agreed to cap Russian oil prices. On Friday, the G7 nations and Australia agreed to cap the price of Russian offshore crude at $60 a barrel to deprive President Vladimir Putin of revenue to fund the invasion of Ukraine. Many OPEC analysts and ministers say the cap is ineffective because Moscow sells most of its oil to countries such as China and India. So far, OPEC+ countries have agreed to stick to their oil production targets at a meeting on Sunday. Russian Deputy Prime Minister Alexander Novak said Sunday that Russia would rather cut production than deliver oil under a price cap.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) declined 1.57% over the week, Hong Kong’s Hang Seng (HK50) jumped by 9.85% last week, and Australia’s S&P/ASX 200 (AU200) was up 0.58%. Most Asian markets are trading sideways on Monday amid some uncertainty over US monetary policy after strong wage data, while Chinese stocks are rising as the government loosened restrictions imposed on COVID. Hong Kong stocks have also significantly outperformed their Chinese counterparts in the last month as the city rolled back its COVID policies early.

In the commodities market, futures on silver (+8.98%), copper (+6.27), WTI oil (+5.32%), palladium (+4.56%), platinum (+3.8%), cotton (+3.68%), and gold (+3.27%) showed the biggest gains over the week. Futures on natural gas (-15.12%), lumber (-6.23%), wheat (-4.64%), corn (-3.69%), and orange juice (-3.18%) showed the biggest drops.

S&P 500 (F) (US500) 4,071.70 −4.87 (−0.12%)

Dow Jones (US30) 34,429.88 +34.87 (+0.10%)

DAX (DE40) 14,529.39 +39.09 (+0.27%)

FTSE 100 (UK100) 7,556.23 −2.266 (−0.030%)

USD Index 104.51 −0.22 (−0.21%)

Important events for today:
  • – Japan Services PMI (m/m) at 03:30 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks at 03:45 (GMT+3);
  • – China Caixin Services PMI (m/m) at 04:45 (GMT+3);
  • – Spanish Services PMI (m/m) at 10:15 (GMT+3);
  • – Italian Services PMI (m/m) at 10:45 (GMT+3);
  • – French Services PMI (m/m) at 10:50 (GMT+3);
  • – German Services PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
  • – UK Services PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
  • – US ISM Services PMI (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.

Economics & Fundamentals Financial News
05 Dec

Jiang Zemin propelled China’s economic rise in the world, leaving his successors to deal with the massive inequality that followed

By Edward Cunningham, Harvard Kennedy School 

By the summer of 1989, a series of problems were threatening China’s stability. Soaring inflation was undermining the economy at home while the violent suppression of Tiananmen Square demonstrations had left it largely a pariah state abroad. Yet within a few years the nation rebounded – beginning two decades of high economic growth, membership in the largest trading club in the world and international acceptance on the global stage.

That transition came thanks in no small part to an underestimated, Soviet-trained electrical engineer – former Chinese President Jiang Zemin, who died on Nov. 30, 2022, at the age of 96.

I first traveled to and studied in China in 1992. At that time, the still powerful former leader Deng Xiaoping was publicly criticizing Jiang’s more conservative approach to the economy in a series of visits and talks he gave during what became known as Deng’s “Southern Tour.” Eventually Jiang fell in line and supported Deng’s liberalization measures and the idea of economic transformation. Yet while Jiang’s subsequent policies laid a strong foundation for China’s growth, they also likely sowed the seeds of excess that set the stage for current President Xi Jinping’s rise.

The grand experiment

Jiang was picked to lead the country as general secretary in June 1989, after the ouster of former leader Zhao Ziyang for Zhao’s conciliatory approach towards the Tiananmen Square protesters.

Within three years Jiang embarked on a grand experiment together with Deng and then-Vice Premier Zhu Rongji, which required Jiang to do what others had been unable or unwilling to do: force the restructuring of inefficient state-owned enterprises in a wide range of sectors. This resulted in the laying off of millions of workers who had expected such jobs to be lifelong “iron rice bowls.”

From 1998 to 2002, approximately 34 million people were fired as China privatized hundreds of state-owned enterprises and shuttered thousands more.

This concerted effort proved an important and necessary step toward preparing Chinese companies for more direct market competition and integration with the world economy by the turn of the century.

Ascending on the world stage

Jiang’s real influence began upon Deng’s death in February 1997.

In July of that year, he presided over the handover of Hong Kong to the mainland. He then proved an able leader during the macroeconomic storm of the Asian financial crisis that began that same month. China quickly recovered and by 2001 had both acceded to the World Trade Organization and won the bid to host the 2008 Summer Olympic Games.

By 2002 China’s economy had grown to represent over 4% of the global economy. Jiang sought to reinforce such economic dynamism through more formal means, and revised the constitution that same year to formally allow corporate elite and private business entrepreneurs into the Chinese Communist Party.

Growing inequality

This economic liberalization was paired with housing privatization policies. Combined, they spurred the creation of a burgeoning middle class and large-scale private wealth generation.

What was missing, though, was adequate regulation to provide a check on the often-wild results of unbridled growth. Economic inequalities grew dramatically in the 1990s and on through 2005, when Jiang formally relinquished his final title as the head of the military.

This created large social fissures, as rampant corruption began to permeate central and local governments, crime rates rose, and even the military itself got into business schemes. Local governments resorted to rafts of arbitrary and extra-budgetary fees levied on citizens to pay for critical public goods and services, as well as infrastructure, which had eroded over time.

Return of the state

Jiang’s successors needed to respond to the problems his policies created. They did so by elevating the role of the state in social and economic life, promoting what they described as a more “balanced development” model.

Hu Jintao, who succeeded Jiang, focused resources and policy priorities on transferring more resources to the poorer regions of China, shoring up a weak medical and social insurance system and promulgating more egalitarian measures as part of a “putting people first” program. In just five years, the percentage of China’s population covered by health insurance more than doubled, from 43% in 2006 to 95% in 2011.

Hu also moderated Jiang’s growth at any cost focus, pushing through policies that provided assistance to groups who had not benefited as much from China’s economic reforms, such as migrants, the rural poor and laid-off urban workers.

Xi has provided a more pointed response to what he likely views as the costs of Jiang’s governance. While continuing the shift toward greater centralization, he has deepened and widened the state’s role in not only the economy but other spheres of Chinese life, such as society and the military.

A smooth transition?

But Jiang’s legacy is more than just soaring economic growth and staggering inequality. It is also important to note that the end of his leadership marked China’s first orderly transition of political power since the founding of the People’s Republic of China in 1949.

That precedent was, and continues to be, important. While he initially maintained some influence for several years after formally stepping down as general secretary, Jiang’s most singular legacy may be showing the world – and the Chinese people – that smooth transitions of power were indeed possible. Whether they still are possible remains an open question.The Conversation

About the Author:

Edward Cunningham, Director of Ash Center China Programs, Harvard Kennedy School

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

 

Economics & Fundamentals Opinions
02 Dec

Darknet markets generate millions in revenue selling stolen personal data, supply chain study finds

By Christian Jordan Howell, University of South Florida and David Maimon, Georgia State University 

It is common to hear news reports about large data breaches, but what happens once your personal data is stolen? Our research shows that, like most legal commodities, stolen data products flow through a supply chain consisting of producers, wholesalers and consumers. But this supply chain involves the interconnection of multiple criminal organizations operating in illicit underground marketplaces.

The stolen data supply chain begins with producers – hackers who exploit vulnerable systems and steal sensitive information such as credit card numbers, bank account information and Social Security numbers. Next, the stolen data is advertised by wholesalers and distributors who sell the data. Finally, the data is purchased by consumers who use it to commit various forms of fraud, including fraudulent credit card transactions, identity theft and phishing attacks.

This trafficking of stolen data between producers, wholesalers and consumers is enabled by darknet markets, which are websites that resemble ordinary e-commerce websites but are accessible only using special browsers or authorization codes.

We found several thousand vendors selling tens of thousands of stolen data products on 30 darknet markets. These vendors had more than US$140 million in revenue over an eight-month period.

Horizontal left-to-right flowchart with four segments
The stolen data supply chain, from data theft to fraud.
Christian Jordan Howell, CC BY-ND

Darknet markets

Just like traditional e-commerce sites, darknet markets provide a platform for vendors to connect with potential buyers to facilitate transactions. Darknet markets, though, are notorious for the sale of illicit products. Another key distinction is that access to darknet markets requires the use of special software such as the Onion Router, or TOR, which provides security and anonymity.

Silk Road, which emerged in 2011, combined TOR and bitcoin to become the first known darknet market. The market was eventually seized in 2013, and the founder, Ross Ulbricht, was sentenced to two life sentences plus 40 years without the possibility of parole. Ulbricht’s hefty prison sentence did not appear to have the intended deterrent effect. Multiple markets emerged to fill the void and, in doing so, created a thriving ecosystem profiting from stolen personal data.

Screenshot of a webpage showing a product for sale
Example of a stolen data ‘product’ sold on a darknet market.
Screenshot by Christian Jordan Howell, CC BY-ND

Stolen data ecosystem

Recognizing the role of darknet markets in trafficking stolen data, we conducted the largest systematic examination of stolen data markets that we are aware of to better understand the size and scope of this illicit online ecosystem. To do this, we first identified 30 darknet markets advertising stolen data products.

Next, we extracted information about stolen data products from the markets on a weekly basis for eight months, from Sept. 1, 2020, through April 30, 2021. We then used this information to determine the number of vendors selling stolen data products, the number of stolen data products advertised, the number of products sold and the amount of revenue generated.

In total, there were 2,158 vendors who advertised at least one of the 96,672 product listings across the 30 marketplaces. Vendors and product listings were not distributed equally across markets. On average, marketplaces had 109 unique vendor aliases and 3,222 product listings related to stolen data products. Marketplaces recorded 632,207 sales across these markets, which generated $140,337,999 in total revenue. Again, there is high variation across the markets. On average, marketplaces had 26,342 sales and generated $5,847,417 in revenue.

Graphic with a silhouette representing a person and a dollar sign
The size and scope of the stolen data ecosystem over an eight-month period.
Christian Jordan Howell, CC BY-ND

After assessing the aggregate characteristics of the ecosystem, we analyzed each of the markets individually. In doing so, we found that a handful of markets were responsible for trafficking most of the stolen data products. The three largest markets – Apollon, WhiteHouse and Agartha – contained 58% of all vendors. The number of listings ranged from 38 to 16,296, and the total number of sales ranged from 0 to 237,512. The total revenue of markets also varied substantially during the 35-week period: It ranged from $0 to $91,582,216 for the most successful market, Agartha.

For comparison, most midsize companies operating in the U.S. earn between $10 million and $1 billion annually. Both Agartha and Cartel earned enough revenue within the 35-week period we tracked them to be characterized as midsize companies, earning $91.6 million and $32.3 million, respectively. Other markets like Aurora, DeepMart and WhiteHouse were also on track to reach the revenue of a midsize company if given a full year to earn.

Our research details a thriving underground economy and illicit supply chain enabled by darknet markets. As long as data is routinely stolen, there are likely to be marketplaces for the stolen information.

These darknet markets are difficult to disrupt directly, but efforts to thwart customers of stolen data from using it offers some hope. We believe that advances in artificial intelligence can provide law enforcement agencies, financial institutions and others with information needed to prevent stolen data from being used to commit fraud. This could stop the flow of stolen data through the supply chain and disrupt the underground economy that profits from your personal data.The Conversation

About the Author:

Christian Jordan Howell, Assistant Professor in Cybercrime, University of South Florida and David Maimon, Professor of Criminal Justice and Criminology, Georgia State University

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

Economics & Fundamentals Opinions
02 Dec

EU governments have set a price ceiling for Russian oil. NFP report in the spotlight today

By JustMarkets

The US stock market traded mixed yesterday ahead of the monthly jobs report due today. The Dow Jones Index (US30) decreased by 0.08% at the stock market’s close yesterday, while the S&P 500 Index (US500) lost 0.08%. The NASDAQ Technology Index (US100) gained 0.13% on Thursday.

Investors are cautiously awaiting the release of key monthly US employment data, which could affect the Federal Reserve’s monetary policy. The monthly employment data is expected to show that the economy created fewer jobs in November than in the previous month. Treasury yields fell sharply yesterday on concerns that the economy could face a deeper recession next year, despite early signs of declining consumer inflation. Although data on Thursday showed that the PCE index, the Federal Reserve’s preferred measure of inflation, remains well above (6%) the Central Bank’s target range (2%).

Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.65%, French CAC 40 (FR40) added 0.23%, Spanish IBEX 35 (ES35) increased by 0.53%, and British FTSE 100 (UK100) closed on Thursday down by 0.19%.

In a speech in Thailand, European Central Bank President Lagarde said that central banks should work to get the Consumer Price Index back to target levels. But monetary policy is complicated by the uncertainty resulting from Russia’s invasion of Ukraine. Ms. Lagarde also added that the fiscal policies of some European governments may lead to excess demand and that fiscal and monetary policies must work in sync to ensure sustainable and balanced economic growth.

Oil prices traded mixed Thursday as worrisome US production data and uncertainty over the course of OPEC+ actions restrained the market. European Union governments have tentatively agreed to set a ceiling on Russian oil at $60 a barrel, which is also restraining oil bulls.

Gold hit a 5-month high on rising hopes of a slowdown in the pace of Fed rate hikes. Gold futures yesterday at $1,815.20 an ounce. Silver, which often follows gold, also rose sharply. The December through February period is a seasonally stronger time for precious metals, so there are many positives here.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 0.92% on the day, Hong Kong’s Hang Seng (HK50) added 0.75%, and Australia’s S&P/ASX 200 (AU200) closed up 0.96%.

Bank of Japan Governor Kuroda indicated that a gradual slowdown in global rate increases and gradual growth of the global economy is expected. Global inflation is also expected to exceed the 2021 level in 2022 and then decline in 2023, a forecast that applies to Japan as well.

Reserve Bank of Australia Governor Lowe, speaking at an event in Thailand, pointed out that inflation expectations remain firmly entrenched. However, household spending in Australia is still resilient to higher interest rates. Lowe added that the Reserve Bank of Australia is trying to slow inflation without much negative impact on the economy. Still, this cycle of high rates will be longer than previous ones.

S&P 500 (F) (US500) 4,076.57 −3.54 (−0.087%)

Dow Jones (US30) 34,395.01 −194.76 (−0.56%)

DAX (DE40) 14,490.30 +93.26 (+0.65%)

FTSE 100 (UK100) 7,558.49 −14.56 (−0.19%)

USD Index 104.71 −1.24 (−1.17%)

Important events for today:
  • – Japan BoJ Kuroda Speaks at 03:30 (GMT+3);
  • – Australia RBA Gov Lowe Speaks at 04:40 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks at 04:40 (GMT+3);
  • – New Zealand RBNZ Gov Orr Speaks at 06:30 (GMT+3);
  • – Switzerland Unemployment Rate (m/m) at 09:30 (GMT+3);
  • – Eurozone Producer Price Index (m/m) at 12:00 (GMT+3);
  • – US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
  • – US Unemployment Rate (m/m) at 15:30 (GMT+3);
  • – Canada Unemployment Rate (m/m) at 15:30 (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.

Economics & Fundamentals Financial News
02 Dec

Week Ahead: Big Week For Oil Markets…

By ForexTime 

Fasten your seatbelts because the next few days could be wild for oil markets.

The global commodity may be injected with fresh volatility due to not only the OPEC+ meeting but developments revolving around European Union sanctions on Russian oil. Other factors like geopolitical risks, economic data and overall sentiment may play an important role in shaping the global commodities outlook for the rest of 2022.

Before we tackle what to expect from oil as December gets in full swing, here are the scheduled economic data releases/events in the coming week:

Sunday, 4 December  

  • OIL: OPEC+ virtual meeting   

Monday, 5 December  

  • CNH: China Caixin services PMI
  • OIL: EU ban on Russian crude  
  • EUR: S&P Global PMI, Eurozone retail sales, ECB President Christine Lagarde speech
  • USD: US factory orders, durable goods, ISM services index

Tuesday, 6 December

  • AUD: Reserve Bank of Australia rate decision   
  • EUR: Germany factory orders, S&P Global PMI
  • USD: US trade data

Wednesday, 7 December

  • EUR: Eurozone GDP, Germany industrial production
  • CAD: Bank of Canada rate decision
  • OIL: EIA crude oil inventory report
  • USD: MBA mortgage applications

Thursday, 8 December

  • JPY: Japan GDP
  • EUR: ECB President Christine Lagarde speech
  • USD: US initial jobless claims

Friday, 9 December

  • CNH: China Inflation, PPI, money supply
  • USD: US PPI, University of Michigan consumer sentiment
  • FIFA World Cup quarterfinal matches

Oil prices nosedived in November as concerns that a rebound in Covid-19 cases in China would hit demand. Rising US stock pilled rubbed salt into the wound with Brent shedding almost 10% last month. Nevertheless, both Crude and Brent are still up roughly 10% year-to-date and could be supported by the key risk events and data releases over the next few days.

Over the weekend, the Organisation of Petroleum Exporting Countries and Co. including Russia are expected to leave production unchanged after the group changed its meeting to an online format. This move comes after the cartel agreed in early October to reduce production by 2 million barrels per day from November despite calls from the United States to pump more oil. The decision to leave production unchanged is based on the growing uncertainty over China’s demand outlook and the looming price cap on Russian crude exports. However, any unexpected decisions could result in explosive volatility in oil markets.

It’s all about the upcoming sanctions on Russian oil which are expected to start on Monday 5th December. Back in June, the EU agreed to ban the purchase of Russian crude in an attempt to limit its earnings – ultimately impacting Moscow’s budget. According to Bloomberg, the EU is closing in a deal to cap Russian crude oil at $60 a barrel before the Monday deadline. Should this deal go through, it could have uncertain effects on the price of oil as concerns over lost supply through the price cap clash with fears over a gloomy demand outlook. Whatever the outcome on Sunday and Monday, it will most likely set the tone for oil as 2022 slowly comes to an end.

Looking at the technical picture, Brent remains under pressure on the daily charts with prices respecting a bearish channel. Should prices push back below $87 this could encourage a decline back toward $82.50 and $80.00. Alternatively, a strong breakout above $90.00 may open the doors towards $95.00 – a level above the 100-day SMA.

Forex-Time-LogoArticle by ForexTime

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

Economics & Fundamentals Financial News
01 Dec

The US Federal Reserve will reduce the pace of rate hikes. Inflation in the Eurozone is falling

By JustMarkets

Federal Reserve Chairman Jerome Powell said Wednesday that the rate hikes are likely to slow, but the peak rate will be higher than previously expected, as there is a long way to go to curb inflation. About 70% of traders expect the Fed to slow rate hikes to 50 basis points in December, down from the 75 basis points seen in the previous four meetings. The Fed has targeted the labor market in its fight against inflation, hoping that tighter monetary policy will help reduce demand enough to curb wage growth and, ultimately, inflation. Such “dovish” statements by the head of the US Federal Reserve were seen by investors as positive. Stock indices jumped after Powell’s speech. At the close of the stock market yesterday, Dow Jones (US30) gained 2.18%, and S&P 500 (US500) added 3.09%. The NASDAQ Technology Index (US100) jumped by 4.41% on Wednesday.

The US inflation-adjusted GDP rose by 2.9% year-over-year for the latest quarter. For Federal Reserve policymakers, the overall GDP growth picture is what they want to see in line with the economy’s long-term trend.

Elon Musk believes a recession is coming and fears that Federal Reserve attempts to reduce inflation could make it worse. In a tweet yesterday, the Tesla CEO and the Twitter owner called on the Fed to immediately lower interest rates. Otherwise, the Fed risks increasing the likelihood of a serious recession.

Stock markets in Europe traded higher yesterday. Germany’s DAX (DE30) gained 0.29%, France’s CAC 40 (FR40) added 1.04%, Spain’s IBEX 35 index (ES35) increased by 0.49%, Britain’s FTSE 100 (UK100) closed Wednesday up by 0.81%.

The oil price rose to $85-86 on news that OPEC+ countries are willing to cut OPEC production even further. The talks are about an additional 2 million BPD of production cuts.

In November, inflation in the Eurozone fell from 10.6% to 10% year-on-year due to falling energy prices. Core inflation remained stable at 5%. Nevertheless, economists warn that lower inflation is unlikely to prevent the European Central Bank from raising interest rates as food inflation rises. Whether this is the peak of overall inflation remains to be seen. But the current economic situation could push the European Central Bank to hike less by 50 basis points next month

The KOF economic barometer fell slightly in November and now stands at 89.5 points. This is the fifth consecutive drop in the barometer. The outlook for the Swiss economy in the coming months thus remains subdued.

Oil rose almost 3% yesterday on a decline in US crude oil inventories. Traders are also betting that China will ease Covid restrictions and OPEC countries will resort to deeper production cuts this Sunday.

Asian markets mostly rose yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.21% for the day, Hong Kong’s Hang Seng (HK50) jumped 2.16%, and Australia’s S&P/ASX 200 (AU200) was up 0.43% by the end of the day.

Asian indices were boosted by growing optimism that China is easing its stance on COVID-19-related restrictions. Despite high infection rates, several cities in the world’s second-largest economy lifted regional blockades.

S&P 500 (F) (US500) 4,080.11 +122.48 (+3.09%)

Dow Jones (US30) 34,589.77 +737.24 (+2.18%)

DAX (DE40) 14,397.04 +41.59 (+0.29%)

FTSE 100 (UK100) 7,573.05 +61.05 (+0.81%)

USD Index 106.03 -0.79 (-0.74%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 02:30 (GMT+3);
  • – China Caixin Manufacturing PMI (m/m) at 04:45 (GMT+3);
  • – German Retail Sales (m/m) at 09:00 (GMT+3);
  • – Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
  • – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3);
  • – Spanish Manufacturing PMI (m/m) at 10:15 (GMT+3);
  • – Italian Manufacturing PMI (m/m) at 10:45 (GMT+3);
  • – French Manufacturing PMI (m/m) at 10:50 (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);
  • – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
  • – US PCE Price index (m/m) at 15:30 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
  • – US FOMC Member Bowman Speaks at 16:30 (GMT+3);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3);
  • – US Natural Gas Storage (w/w) 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.

Economics & Fundamentals Financial News
29 Nov

China Needs to Fuel Recovery in 2023

By Dan Steinbock

After a tough 2022, China seeks to move toward recovery in 2023, amid stagnation in the US and deep recession in the Eurozone.

Battered by domestic challenges and disruptive external headwinds, Chinese economy has coped with a tough year. The lockdown of Guangzhou’s transportation hub, a rising number of cases in Beijing and other major cities highlight the most recent challenges, along with shifts in Covid strategy.

And if it’s been a hard year for China, it’s been worse elsewhere, thanks to misguided economic policies and ill-advised geopolitics. The risk of recession casts a dark shadow over the US, which remains deeply polarized. The Eurozone is facing a deep recession, Japan’s economy is shrinking, and the United Kingdom is struggling with the worst fall in living standards since records began.

In this dire international landscape, China’s recovery could alleviate global economic prospects.

From headwinds…

Until the fall, economic data has reflected challenges. Retail sales and domestic tourism have slumped, mainly because of recurrent lockdowns across first-tier megacities. That’s the net effect of mobility restrictions, which undermine effective demand.

The reverse side of reduced consumption are rising household deposits and falling equity markets. When people feel uneasy about the future, they save rather than consume, while businesses defer investment decisions and investors flee to liquidity.

Industrial production has moderated, due to supply-chain disruptions among the provinces. While automobile production and new electric vehicle production signals progress, the double-digit fall of the semiconductors is the direct result of US-led geopolitics. In turn, the slowing growth of exports reflects recessionary risks in the US and the European Union, two of China’s major trading partners.

Following several years of adverse liquidity in the real estate sector, the new property market support measures, particularly the government’s 16-point recovery plan, will contribute to stabilization. While default risks remain elevated with weaker developers, larger quality developers will benefit from consolidation.

Through the year, investment, fueled mainly by the public sector, has offset effective demand, as evidenced by higher output in steel and new renewable projects. That will add to debt pressures, particularly at the local level. Meanwhile, the Fed’s aggressive tightening has complicated efforts at monetary easing at the People’s Bank of China.

… to recovery

Yet, the real story of 2023 is likely to be the impending recovery of the Chinese economy. A central determinant in unleashing the Chinese consumption potential, private sector investment and investor confidence hinges on the fine-tuning of the dynamic clearing policy to Covid-19 cases and the consequent broad-based recovery.

Though gradual, the implementations of new rules to better balance the pandemic fight and economic development could result in a surge of pent-up demand by the second quarter of 2023. Such progress would strengthen economic data. Retail sales would climb. Consumer confidence, even domestic tourism, would pick up with rising consumption, including (costlier) consumer durables, while household deposits would decrease accordingly.

Businesses would invest more, including foreign multinationals as their home markets in the West will stagnate. Property markets would gradually normalize and also benefit from pent-up demand. Chinese investors would return to equity markets, which would also be attractive to overseas investors seeking diversification. The MSCI China Index heralds the turnaround; it was 24% up in November, compared to only 2% for the S&P 500 Index.

Industrial production would pick up. Despite demand destruction in the West, the Belt and Road Initiative (BRIA) will promote steady progress on the back of recovery in Southeast Asia, which China is both driving and benefiting from. Less fixed asset investment by the public sector would reduce local governments’ debt pressures.

Downside risks, upside realities

In a downside scenario, domestic woes would prove more adverse because China would shun from reforms and opening-up policies. This nightmare scenario is aggressively propagated by neoconservatives in the West, although it has nothing to do with facts.

In reality, both reforms and opening-up policies will continue in China.

Certainly, domestic challenges will remain tough. The population is aging. The economy needs to move from investment toward consumption. Despite decelerating economic growth, per capita incomes must continue to rise. Worse, these challenges must be met amid the West’s purposeful efforts to undermine such efforts.

Yet, in each case, policymakers have shown willingness to rely on reforms to overcome challenges. The aging-related reduction of the labor force will be significantly smaller than expected, as the new UN projections attest.

Furthermore, the share of investment to GDP likely peaked at 42 percent in the past half a decade, with a gradual decline set to ensue.

And thanks to continued reforms and “common prosperity” policies, Chinese catch-up in productivity and per capita incomes has climbed to more than a third of the US level, even as secular growth is decelerating to 4% in the late 2020s.

A brighter 2023 outlook

In 2022, analysts and multilateral banks estimate China’s GDP growth at 3 to 3.3%. Then again, the growth rates of all major economies have been downgraded for 2022.

The real story is that, thanks to the expected rebound, China’s growth could climb to 4.5 percent to 5.0 percent in 2023. The precondition is that prevention and control policies will continue to be refined to make them more agile and flexible and the global landscape remains manageable, as indicated by the easing of Sino-US tensions after the recent meeting between President Joe Biden and President Xi Jinping.

With recovery in 2023, China’s long-term development goals – primary modernization by 2035 comprehensive modernization by 2050 – remain within schedule.

About the Author:

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net

The original version was published by China Daily in the expert series on “China and the World Roundtable” on November 28, 2022

 

Economics & Fundamentals Financial News
29 Nov

Goldman Sachs dampened investor enthusiasm for 2023. Fed officials talk again about further tightening

By JustMarkets

The US indices fell on Monday due to pressure from Federal Reserve officials, who reiterated the need for higher rates for a more extended period. Civil unrest in China, amid intensifying Covid, also added to the negative sentiment. As the stock market closed Monday, the Dow Jones Index (US30) decreased by 1.45%, and the S&P 500 Index (US500) lost 1.54%. The NASDAQ Technology Index (US100) was down by 1.58%.

Federal Reserve Bank of St. Louis President James Bullard said markets are “underestimating the risk that the FOMC will have to be aggressive for a longer period of time. The remarks followed comments by John Williams, president of the Federal Reserve Bank of New York, who reiterated that inflation remains too high. The remarks further dampened investor sentiment, leading to a rise in the dollar index and a decline in stock indices.

Goldman Sachs analysts dampened investor enthusiasm for 2023. In their report, the analysts warned that next year’s stock market dynamics would be characterized by “no growth in earnings per share (EPS), which will correspond to zero growth in the S&P 500 (US500). GS estimates that earnings per share for the S&P 500 will remain at $224 in&2023, and the index will end next year at $4,000 (up 1%). According to the investment bank, the “hard landing” recession scenario remains a “clear risk.”

Stock markets in Europe were mostly down yesterday. Germany’s DAX (DE30) decreased by 1.09%, France’s CAC 40 (FR40) lost 0.70%, Spain’s IBEX 35 (ES35) was down by 1.11%, and the British FTSE 100 (UK100) closed down by 0.17% on Monday.

European Central Bank President Christine Lagarde showed her hawkish side on Monday, pointing out that inflation has not yet reached its peak, thus adding more uncertainty to what further action the ECB will take. Some ECB officials favor a 0.75% rate hike, while others insist on a 0.5% step so as not to affect the region’s economic performance so much.

Public protests against Covid blockades in China, the largest oil importer, have added to the already tense oil market. Protests in China put upward pressure on oil quotes, along with rumors that OPEC countries will consider new production cuts this week. On the other hand, the EU and allies are considering imposing a ceiling on oil prices from Russia to limit Russian revenues to finance the war with Ukraine. This situation puts downward pressure on oil prices. According to the Australian-New Zealand bank ANZ, the surge in new infections in China has reduced expected oil demand by at least one million barrels a day from the previous average.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) was down by 0.42% for the day, Hong Kong’s Hang Seng (HK50) lost 1.57%, and Australia’s S&P/ASX 200 (AU200) decreased by 0.42% on Monday.

Analysts believe the protests in China could also prompt the government to eventually roll back its zero COVID policy, a largely positive scenario for the Chinese and broader Asian markets. But given that the country is struggling with a record-high daily increase in infections, the chances of being able to stop COVID-19 in the near future seem slim.

In Japan, the unemployment rate has remained at 2.6%. While the numbers show that good working conditions will put upward pressure on wages, they still show that labor market tensions remain well below pre-pandemic levels. These figures have not led to the wage growth sought by Bank of Japan Governor Haruhiko Kuroda, who has repeatedly said that Japan needs wages to grow at around 3% in order to reach the central bank’s goal of 2% sustainable inflation. For the Bank of Japan to move away from its current adaptive policy, further labor market strengthening may be needed to encourage firms to raise wages faster.

Prime Minister Fumio Kishida on Monday instructed his defense and finance ministers to secure funds to increase Japan’s defense budget to 2% of GDP. The Defense Ministry has said that 48 trillion yen will be needed over the next five years to improve the country’s defense capabilities amid China’s growing military might and North Korea’s missile development.

S&P 500 (F) (US500) 3,963.94 −62.18 (−1.54%)

Dow Jones (US30) 33,849.46 −497.57 (−1.45%)

DAX (DE40) 14,383.36 −158.02 (−1.09%)

FTSE 100 (UK100) 7,474.02 −12.65 (−0.17%)

USD Index 106.71 +0.76 (+0.71%)

Important events for today:
  • – Japan Unemployment Rate (m/m) at 01:30 (GMT+3);
  • – Japan Retail Sales (m/m) at 01:50 (GMT+3);
  • – Switzerland GDP (m/m) at 10:00 (GMT+3);
  • – Spanish Consumer Price Index (m/m) at 10:00 (GMT+3);
  • – German Consumer Price Index (m/m) at 15:00 (GMT+3);
  • – Canada GDP (q/q) at 15:30 (GMT+3);
  • – UK BOE Gov Bailey Speaks at 17:00 (GMT+3);
  • – US CB Consumer Confidence (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.

Economics & Fundamentals Financial News
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