Archive for Economics & Fundamentals – Page 136

13 Oct

Investor attention today is focused on US inflation data

By JustForex

The September FOMC meeting minutes showed that policymakers increased their estimate of the Fed rate trajectory needed to reach their goal. At the September meeting, voting members projected that rates would reach 4.4% in 2022 and peak at 4.6% in 2023, with a “Fed reversal” planned for the second half of 2023. But this is no surprise to the market, so the reaction from financial markets was restrained. According to FOMC spokesman Kashkari, if the US economy enters a steep decline, the Fed can always stop raising rates or slow them down, especially if there are signs of a rapid decline in inflation. So the main data of interest to investors is the US consumer inflation rate, which will be released today. A decline in inflation could give a sharp boost to stock indices as US Federal Reserve policy becomes less aggressive in upcoming meetings. Conversely, an inflation acceleration would boost the dollar index and government bond yields, leading to even more stock declines. The US Producer Price Index, which shows the rate of inflation between companies, rose another 0.4% last month, but on an annualized basis, the index fell from 8.7% to 8.5%. So there is hope for a decline in consumer inflation.

As the stock market closed Wednesday, the Dow Jones Index (US30) decreased by 0.10%, and the S&P 500 Index (US500) fell by 0.33%. The NASDAQ Technology Index (US100) was down by 0.09% yesterday.

ECB spokesman Holzmann yesterday unexpectedly spoke not about the ECB but about the US Federal Reserve, saying that the US Central Bank needs to raise interest rates by 75 bps in October and by 50 bps to return the US to an inflation-neutral stance.

The IMF on Tuesday lowered its forecast for global growth in 2023 and said policies to rein in high inflation could add risk to the global economy. Even President Joe Biden said this week that the US could face a “very slight” recession.

European stocks fall for the fifth consecutive session as investors worry about the prospect of a global economic slowdown and shrinking corporate profits due to higher interest rates. Germany’s DAX (DE30) decreased by 0.39%, France’s CAC 40 (FR40) fell by 0.25%, Spain’s IBEX 35 (ES35) lost 1.29%, Britain’s FTSE 100 (UK100) closed yesterday down by 0.86%.

European Central Bank President Christine Lagarde said policymakers are determined to lower inflation and said cooperation with other monetary and fiscal authorities is needed for success. European Central Bank Governing Council spokesman Klaas Knot said that a “sustained effort” is needed to bring inflation under control, reiterating that at least two more “significant” interest rate hikes should follow last month’s 75-basis-point interest rate hike.

The Bank of England’s monetary policy report said: “The invasion of Ukraine has led to a sharp rise in wholesale gas prices in Europe. Household incomes are falling due to higher energy bills. Corporate profits are shrinking because of higher energy costs. General inflation has risen to unacceptably high levels. For a net energy importer like the UK, rising global energy prices are affecting national income: the cost of what the country buys from the rest of the world has risen sharply relative to the price of what it sells. Higher energy prices reduce household spending and reduce economic activity. Given where the UK economy is now, the Bank of England intends to act decisively on monetary policy at the next scheduled MPC meeting.” Thus, analysts are predicting a 0.75-1% interest rate hike.

Aluminum prices on the London Metal Exchange (LME) jumped by 7% percent Wednesday after it was reported that the US is considering a ban on Russian aluminum in response to the invasion of Ukraine. Last week, the LME presented a discussion paper on the possibility of banning Russian aluminum, nickel, and copper from trade and storage in its system.

The International Monetary Fund’s economic growth forecast showed Saudi Arabia to be the fastest-growing economy among the world’s major economies. Forecasts have been revised upward this year due to a booming oil sector combined with strong growth in the non-commodity sector. According to the preliminary budget statement, Saudi Arabia is forecasting revenue of 1.12 trillion rials ($298 billion) next year.

The oil market remains tight. Two opposing forces are now at work: the economic outlook is the main downside risk, and OPEC+ is the upside potential. The dollar index may change the parity, the dynamics of which will be determined after today’s inflation data.

The UN General Assembly adopted a resolution that does not recognize the “referendums” in the “DPR,” “LPR,” and Kherson and Zaporizhzhia regions. The resolution was supported by 143 countries and opposed by five. Russia, Belarus, Syria, the DPRK, and Nicaragua voted against it.

Asian markets were mostly trading lower yesterday. Japan’s Nikkei 225 (JP225) lost 0.02% over the day, Hong Kong’s Hang Seng (HK50) decreased by 0.78%, while Australia’s S&P/ASX 200 (AU200) gained 0.04%.

Climate change poses a serious threat to China’s long-term prosperity, which emits 27% of the world’s greenhouse gases, but the country is well positioned to meet its climate commitments and transition to a greener economy, the World Bank said.

S&P 500 (F) (US500) 3,577.03 −11.81 (−0.33%)

Dow Jones (US30) 29,210.85 −28.34 (−0.097%)

DAX (DE40) 12,172.26  −47.99 (−0.39%)

FTSE 100 (UK100) 6,826.15 −59.08 (−0.86%)

USD Index 113.28 +0.06 (+0.06%)

Important events for today:
  • – US FOMC member Bowman Speaks at 01:30 (GMT+3);
  • – US Consumer Price Index (m/m) at 15:30 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 18:00 (GMT+3).

By JustForex

 

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
12 Oct

FOMC minutes and UK data on the schedule

By JustForex

Stock markets continue to fall amid hawkish comments from the Federal Reserve indicating the need to tighten monetary policy further and keep rates higher. As the stock market closed Tuesday, the Dow Jones Index (US30) added 0.12%, while the S&P 500 Index (US500) decreased by 0.65%. The NASDAQ Technology Index (US100) fell by 1.10% yesterday.

Federal Reserve Bank of Cleveland President Loretta Mester echoed recent remarks from other Fed officials, calling for the Fed to continue to raise interest rates to put inflation on a steady downward trajectory to 2%. In anticipation of another significant rate hike, Treasury yields rose to 4%.

The president of the World Bank and the managing director of the International Monetary Fund added caution to the market, warning of the growing risk of a global recession and stating that inflation remains an ongoing problem. The International Monetary Fund warned Tuesday that countries that account for a third of global output could face a recession next year.

Markets are now awaiting key US inflation data this week, which is expected to influence the Fed’s plan to raise interest rates. The minutes of the Fed’s September meeting, which will be released today, will also be monitored for more hawkish signals.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE30) fell by 0.43%, France’s CAC 40 (FR40) decreased by 0.13%, Spain’s IBEX 35 (ES35) lost 0.78%, Britain’s FTSE 100 (UK100) closed down by 1.06%.

The UK unemployment rate fell to a new low. If markets are calmer ahead of the Bank of England’s November meeting, the Bank of England is likely to opt for a 75 basis point hike. But if market volatility persists and the pound continues to weaken, the Bank will be forced to act more decisively. Whether we get a 75- or 100-basis-point rate hike will depend on whether the government’s fiscal plan succeeds in stabilizing the markets at the end of October. For now, uncertainty in the UK bond market is forcing investors to sell off the pound and move into safe-haven assets such as the dollar index.

The number of Covid cases in China reached its highest level since August, with the spike coming after an increase in domestic travel during the National Golden Week holiday earlier this month. Shanghai and other major Chinese cities, including Shenzhen, stepped up testing as cases of the coronavirus increased, and some local authorities hastily closed schools, entertainment venues, and tourist spots. As a result, oil prices have fallen 3% since the beginning of this week amid falling demand.

Gold has fallen below $1,700 an ounce. Investors are moving into dollars ahead of key US inflation data this week and before FOMC minutes are released today.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) lost 2.64% over the day, Hong Kong’s Hang Seng (HK50) fell by 2.23%, and Australia’s S&P/ASX 200 (AU200) was down by 0.34%.

China’s Central Bank on Tuesday spoke out against major exchange rate fluctuations, saying it would take steps to stabilize expectations and keep the yuan stable. The People’s Bank of China (PBOC) also said that the yuan does not necessarily need to weaken against the dollar. The Central Bank said it has plenty of policy options, many tools, and “extensive experience in effectively managing market expectations and ensuring exchange rate stability.

Markets are also waiting for China’s inflation and trade data, due out Friday, to get more signals about a potential economic recovery.

The Bank of Korea (BoK) raised interest rates by 50 basis points to 3%, bringing lending rates to the highest level in a decade. The move comes as the country struggles with inflation hitting a 24-year high this year, hitting Asia’s fourth-largest economy hard.

S&P 500 (F) (US500) 3,588.84 −23.55 (−0.65%)

Dow Jones (US30) 29,239.19 +36.31 (+0.12%)

DAX (DE40) 12,220.25 −52.69 (−0.43%)

FTSE 100 (UK100) 6,885.23 −74.08 (−1.06%)

USD Index 113.25 +0.11 (+0.10%)

Important events for today:
  • – UK GDP (m/m) at 09:00 (GMT+3);
  • – UK Industrial Production (m/m) at 09:00 (GMT+3);
  • – UK Manufacturing Production (m/m) at 09:00 (GMT+3);
  • – UK FPC Meeting Minutes (Tentative);
  • – UK FPC Statement (Tentative);
  • – Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
  • – US Producer Price Index (m/m) at 15:30 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks (m/m) at 16:30 (GMT+3);
  • – US FOMC Meeting Minutes at 21:00 (GMT+3).

By JustForex

 

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
11 Oct

Nobel economics prize: insights into financial contagion changed how central banks react during a crisis

By Elena Carletti, Bocconi University 

This year’s Nobel prize in economics, known as the Sveriges Riksbank Prize in Economic Sciences, has gone to Douglas Diamond, Philip Dybvig and former Federal Reserve Chair Ben Bernanke for their work on banks and how they relate to financial crises.

To explain the work and why it matters, we talked to Elena Carletti, a Professor of Finance at Bocconi University in Milan.

Why have Diamond, Bernanke and Dybvig been awarded the prize?

The works by Diamond and Dybvig essentially explained why banks exist and the role they play in the economy by channelling savings from individuals into productive investments. Essentially, banks play two roles. On the one hand, they monitor borrowers within the economy. On the other, they provide liquidity to individuals, who don’t know what they will need to buy in future, and this can make them averse to depositing money in case it’s not available when they need it. Banks smooth out this aversion by providing us with the assurance that we will be able to take out our money when it’s required.

The problem is that by providing this assurance, banks are also vulnerable to crises even at times when their finances are healthy. This occurs when individual depositors worry that many other depositors are removing their money from the bank. This then gives them an incentive to remove money themselves, which can lead to a panic that causes a bank run.

Ben Bernanke fed into this by looking at bank behaviour during the great depression of the 1930s, and showed that bank runs during the depression was the decisive factor in making the crisis longer and deeper than it otherwise would have been.

The observations behind the Nobel win seem fairly straightforward compared to previous years. Why are they so important?

It’s the idea that banks that are otherwise financially sound can nevertheless be vulnerable because of panicking depositors. Or, in cases such as during the global financial crisis of 2007-09, it can be a combination of the two, where there is a problem with a bank’s fundamentals but it is exacerbated by panic.

Having recognised the intrinsic vulnerability of healthy banks, it was then possible to start thinking about policies to alleviate that risk, such as depositor insurance and reassuring everyone that the central bank will step in as the lender of last resort.

In a bank run caused by liquidity (panic) rather than insolvency, an announcement from the government or central bank is likely to be enough to solve the problem on its own – often without the need for any deposit insurance even being paid out. On the other hand, in a banking crisis caused by insolvency, that’s when you need to pump in money to rescue the institution.

What was the consensus about bank runs before Diamond and Dybvig began publishing their work?

There had been a lot of bank runs in the past and it was understood that financial crises were linked to them – particularly before the US Federal Reserve was founded in 1913. It was understood that bank runs made financial crises longer by exacerbating them. But the mechanism causing the bank runs wasn’t well understood.

How easy is it to tell what kind of bank run you are dealing with?

It’s not always easy. For example, in 2008 in Ireland it was thought to be a classic example of bank runs caused by liquidity fears. The state stepped up to give a blanket guarantee to creditors, but it then became apparent that the banks were really insolvent and the government had to inject enormous amounts of money into them, which led to a sovereign debt crisis.

Speaking of sovereign debt crises, the work by Diamond and Dybvig also underpins the literature on financial contagion, which is based on a 2000 paper by Franklin Allen and Douglas Gale. I worked with Allen and Gale for many years, and all our papers have been based on the work of Diamond, and Diamond and Dybvig.

In a similar way to how state reassurances can defuse a bank run caused by liquidity problems, we saw how the then European Central Bank President Mario Draghi was able to defuse the run on government bonds in the eurozone crisis in 2011 by saying that the bank would do “whatever it takes” to preserve the euro.

The prize announcement has attracted plenty of people on social media saying we shouldn’t be celebrating Bernanke when he was so involved in the quantitative easing (QE) that has helped to cause today’s global financial problems – what’s your view?

I would say that without QE our problems would today be much worse, but also that the prize recognises his achievements as an academic and not as chair of the Fed. Also, Bernanke was only one of the numerous central bankers who resorted to QE after 2008.

And it is not only the central bank actions that make banks stable. It’s also worth pointing out that the changes to the rules around the amount of capital that banks have to hold after 2008 have made the financial system much better protected against bank runs than it was beforehand.

Should such rules have been introduced when the academics first explained the risks around bank runs and contagion?

The literature had certainly hinted at these risks, but regulation-wise, we had to wait until after the global financial crisis to see reforms such as macro-prudential regulation and more stringent micro-prudential regulation. This shows that regulators were underestimating the risk of financial crises, perhaps also pushed by the banking lobbies that had been traditionally very powerful and managed to convince regulators that risks were well managed.

If retail banks become less important in future because of blockchain technology or central bank digital currencies, do you think the threat of financial panic will reduce?

If we are heading for a situation where depositors put their money into central banks rather than retail banks, that would diminish the role of retail banking, but I think we are far from that. Central bank digital currencies can be designed in such a way that retail banks are still necessary. But either way, the insights from Diamond and Dybvig about liquidity panics are still relevant because they apply to any context where coordination failures among investors are important, such as sovereign debt crises, currency attacks and so on.The Conversation

About the Author:

Elena Carletti, Professor of Finance, Bocconi University

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

Economics & Fundamentals Opinions
11 Oct

Russia shells Ukrainian civilians. The White House imposes export restrictions on China

By JustForex

The US Federal Reserve Vice Chair Lael Brainard hinted that the US Central Bank would continue its mission to reduce inflation despite the worsening growth outlook. The policymaker predicts that the recovery in the year’s second half will be limited. A 75 basis point hike in November and a peak rate of 4.60-4.70% is now the main target, but additional hawkish comments could spur additional panic amid a longer tightening cycle. The White House also added fuel to the fire after it unveiled new export restrictions on US companies selling semiconductor chips and other manufacturing equipment to China, which led to the fall of tech companies. As the stock market closed Monday, the Dow Jones Index (US30) decreased by 0.32%, and the S&P 500 Index (US500) fell by 0.75%. The Technology Index NASDAQ (US100) lost 1.04%.

Equity markets in Europe were mostly down on Monday. German DAX (DE30) declined by 0.01%, French CAC 40 (FR40) fell by 0.45%, Spanish IBEX 35 (ES35) was 0.31% lower, British FTSE 100 (UK100) closed yesterday with 0.45% loss.

British government bond prices fell on Monday, indicating that investors have yet to be persuaded by Finance Minister Kwasi Kwarteng’s desire to bolster confidence in the budget. Also, on Monday, the Bank of England expanded the scope of its emergency intervention. But strategists at JPMorgan said they believe long-term British yields will continue to rise, keeping the pound from falling.

The US dollar strengthened sharply in early trading on Monday after Russia launched a series of missile strikes on critical infrastructure in Ukraine and on ordinary residential areas, including the capital Kyiv. A total of 85 missiles and more than 20 kamikaze drones were fired at Ukraine. 43 missiles and 8 drones were shot down. Eight regions of Ukraine were temporarily left without power supply, 19 civilians were killed, and approximately 105 were injured, including children. Nothing strategic, nothing tactical, nothing meaningful, just one-sided terrorism by the Russian Federation. Having suffered serious losses on the front, all Russia has to do is simply shoot at civilians to somehow compensate for its despair and agony.

After the massive missile attack on Ukraine, protests against the war and in support of Ukraine began in European capitals. Estonia is officially considering recognizing Russia as a sponsor of terrorism.

Oil prices fell by 2% yesterday as the dollar index continues to strengthen, and investors are concerned that COVID will reduce demand in China. A strong dollar reduces demand for oil, making it more expensive for buyers using other currencies. Analysts added that the consistent zero COVID-19 policy in China ahead of the Communist Party Congress doesn’t help demand. But it is worth realizing that the fundamental backdrop points to rising oil prices, as OPEC+ last week decided to lower its production target by 2 million barrels per day. At the same time, investors should not forget that the EU sanctions on Russian oil and oil products will come into effect in December and February, respectively.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) lost 0.71% over the day, Hong Kong’s Hang Seng (HK50) fell by 2.95%, while Australia’s S&P/ASX 200 (AU200) dropped 1.40%.

Shares of chipmakers Anji Microelectronics Tech Co Ltd and Chengdu Xuguang Electronics Co Ltd fell about 20% after the White House unveiled export controls barring Chinese companies from certain semiconductor chips made with US equipment. Technology heavyweights Alibaba Group Holding Ltd, Baidu Inc, and Tencent Holdings Ltd lost 2% to 4%. The US actions threaten to worsen trade ties between the world’s two largest economies and could have deeper economic consequences if China retaliates.

Also in the spotlight, this week is the 20th Congress of the Chinese Communist Party, which is expected to determine government policy for the next five years.

S&P 500 (F) (US500) 3,612.39 −27.27 (−0.75%)

Dow Jones (US30) 29,202.88 −93.91 (−0.32%)

DAX (DE40) 12,272.94 −0.060 (−0.01%)

FTSE 100 (UK100) 6,959.31 −31.78 (−0.45%)

USD Index 112.75 +0.49 (+0.44%)

Important events for today:
  • – Australia NAB Business Confidence (m/m) at 03:30 (GMT+3);
  • – UK Average Earnings Index (m/m) at 09:00 (GMT+3);
  • – UK Claimant Count Change (m/m) at 09:00 (GMT+3);
  • – UK Unemployment Rate (m/m) at 09:00 (GMT+3);
  • – US FOMC member Mester Speaks at 19:00 (GMT+3);
  • – Switzerland SNB Chairman Jordan Speaks at 19:45 (GMT+3);
  • – UK BoE Gov Bailey Speaks at 21:35 (GMT+3).

By JustForex

 

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
11 Oct

Market Mood Fragile Ahead Of US CPI

By ForexTime 

A sense of deep unease rippled through financial markets on Tuesday as concerns over the global growth outlook and geopolitical threats left investors on edge.

European stocks were painted red this morning amid fears around untamed inflation pushing interest rates higher at the expense of economic growth. US stock futures are pointing to a lower open with the negative momentum and risk-off sentiment infiltrating Wall Street. In the currency space, king dollar continues to draw power from aggressive rate hike bets while sterling remains shaky despite efforts from the Bank of England to support the currency and the vulnerable UK bond market. Oil is weaker thanks to a strong dollar and an outbreak of Covid-19 cases in China, while gold is selling off for a fifth day in a row as traders await Thursday’s US CPI report.

It may be wise to fasten your seatbelts tightly because this will be another busy week for markets. Investors will be served a platter of key economic reports and speeches from various financial heavyweights. Most importantly, all eyes will be on the latest US inflation figures which is now the biggest risk event on the calendar. Later today, the International Monetary Fund (IMF) publishes its World Economic Outlook and will almost certainly revise global growth lower. ECB Chief Economist Philip Lane, Bank of England Governor Andrew Bailey, and Cleveland Fed President Loretta Mester will be under their separate spotlights. Given how financial markets remain highly sensitive to anything relating to inflation or monetary policy, any fresh insight offered by these central bank officials could translate into market volatility.

All eyes on the US inflation report

Most attention will be directed toward the US inflation report on Thursday with investors watching to see if prices are rising again or perhaps finally peaking. According to Bloomberg, the headline print for September is projected at 8.1% from 8.3%, while the core is expected to rise to 6.5% from 6.3% in August. A higher-than-expected CPI figure may reinforce expectations around the Fed unleashing another monetary bazooka in November to tame inflation. This could inject dollar bulls with fresh momentum to steamroll G10 and other currencies. It’s worth keeping in mind that the greenback has had a phenomenal trading year, appreciating against every single major currency. Alternatively, a softer print could reduce aggressive rate hike bets and feed the “dovish pivot” narrative ultimately hitting the dollar. Traders are currently pricing in an 80% probability of a 75-basis point rate hike next month.

Currency spotlight – GBPUSD

Sterling has struggled for direction so far on Tuesday despite the upbeat jobs report soothing concerns over the UK economy. Unemployment hit a fresh multi-decade low at 3.5% in the three months to August from 3.6% in the previous period. This was the lowest level witnessed since February 1947. However, the fall in unemployment was the result of a sharp rise in the number of adults within working age labelled as economically inactive. The focus now shifts toward the BoE Governor Bailey’s speech later today. If he mentions anything relating to inflation, monetary policy, and the ructions in the gilt market, this could translate into pound volatility.

Focusing on the technical picture, GBP is under pressure on the daily charts. An appreciating dollar could drag prices back toward 1.0850 support. Weakness below this point may trigger a selloff towards 1.0520. Alternatively, a break back above 1.1100 has the potential to spark a rally towards 1.1300.

Commodity spotlight – Gold

Where gold concludes this week will most likely be influenced by the US inflation data on Thursday.

A red-hot CPI report will almost certainly reinforce aggressive rate hike bets, ultimately boosting the dollar and Treasury yields at gold’s peril. Such a development may drag the precious metal towards $1655, $1615, and $1600. Alternatively, an inflation report that misses expectations could offer space for gold bulls to fight back, opening a path back toward the psychological $1700 level.

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Economics & Fundamentals Financial News
10 Oct

Nobel-winning quantum weirdness undergirds an emerging high-tech industry, promising better ways of encrypting communications and imaging your body

By Nicholas Peters, University of Tennessee 

Unhackable communications devices, high-precision GPS and high-resolution medical imaging all have something in common. These technologies – some under development and some already on the market all rely on the non-intuitive quantum phenomenon of entanglement.

Two quantum particles, like pairs of atoms or photons, can become entangled. That means a property of one particle is linked to a property of the other, and a change to one particle instantly affects the other particle, regardless of how far apart they are. This correlation is a key resource in quantum information technologies.

For the most part, quantum entanglement is still a subject of physics research, but it’s also a component of commercially available technologies, and it plays a starring role in the emerging quantum information processing industry.

Devices like this experimental apparatus can produce pairs of photons that are linked, or ‘entangled’.
Carlos Jones/ORNL, U.S. Dept. of Energy

Pioneers

The 2022 Nobel Prize in Physics recognized the profound legacy of Alain Aspect of France, John F. Clauser of the U.S. and Austrian Anton Zeilinger’s experimental work with quantum entanglement, which has personally touched me since the start of my graduate school career as a physicist. Anton Zeilinger was a mentor of my Ph.D. mentor, Paul Kwiat, which heavily influenced my dissertation on experimentally understanding decoherence in photonic entanglement.

Decoherence occurs when the environment interacts with a quantum object – in this case a photon – to knock it out of the quantum state of superposition. In superposition, a quantum object is isolated from the environment and exists in a strange blend of two opposite states at the same time, like a coin toss landing as both heads and tails. Superposition is necessary for two or more quantum objects to become entangled.

Entanglement goes the distance

Quantum entanglement is a critical element of quantum information processing, and photonic entanglement of the type pioneered by the Nobel laureates is crucial for transmitting quantum information. Quantum entanglement can be used to build large-scale quantum communications networks.

On a path toward long-distance quantum networks, Jian-Wei Pan, one of Zeilinger’s former students, and colleagues demonstrated entanglement distribution to two locations separated by 764 miles (1,203 km) on Earth via satellite transmission. However, direct transmission rates of quantum information are limited due to loss, meaning too many photons get absorbed by matter in transit so not enough reach the destination.

Entanglement is critical for solving this roadblock, through the nascent technology of quantum repeaters. An important milestone for early quantum repeaters, called entanglement swapping, was demonstrated by Zeilinger and colleagues in 1998. Entanglement swapping links one each of two pairs of entangled photons, thereby entangling the two initially independent photons, which can be far apart from each other.

Quantum protection

Perhaps the most well known quantum communications application is Quantum Key Distribution (QKD), which allows someone to securely distribute encryption keys. If those keys are stored properly, they will be secure, even from future powerful, code-breaking quantum computers.

How quantum encryption keeps secrets safe.

While the first proposal for QKD did not explicitly require entanglement, an entanglement-based version was subsequently proposed. Shortly after this proposal came the first demonstration of the technique, through the air over a short distance on a table-top. The first demonstrations of entangement-based QKD were published by research groups led by Zeilinger, Kwiat and Nicolas Gisin were published in the same issue of Physical Review Letters in May 2000.

These entanglement-based distributed keys can be used to dramatically improve the security of communications. A first important demonstration along these lines was from the Zeilinger group, which conducted a bank wire transfer in Vienna, Austria, in 2004. In this case, the two halves of the QKD system were located at the headquarters of a large bank and the Vienna City Hall. The optical fibers that carried the photons were installed in the Vienna sewer system and spanned nine-tenths of a mile (1.45 km).

Entanglement for sale

Today, there are a handful of companies that have commercialized quantum key distribution technology, including my group’s collaborator Qubitekk, which focuses on an entanglement-based approach to QKD. With a more recent commercial Qubitekk system, my colleagues and I demonstrated secure smart grid communications in Chattanooga, Tennessee.

Quantum communications, computing and sensing technologies are of great interest to the military and intelligence communities. Quantum entanglement also promises to boost medical imaging through optical sensing and high-resolution radio frequency detection, which could also improve GPS positioning. There’s even a company gearing up to offer entanglement-as-a-service by providing customers with network access to entangled qubits for secure communications.

There are many other quantum applications that have been proposed and have yet to be invented that will be enabled by future entangled quantum networks. Quantum computers will perhaps have the most direct impact on society by enabling direct simulation of problems that do not scale well on conventional digital computers. In general, quantum computers produce complex entangled networks when they are operating. These computers could have huge impacts on society, ranging from reducing energy consumption to developing personally tailored medicine.

Finally, entangled quantum sensor networks promise the capability to measure theorized phenomena, such as dark matter, that cannot be seen with today’s conventional technology. The strangeness of quantum mechanics, elucidated through decades of fundamental experimental and theoretical work, has given rise to a new burgeoning global quantum industry.The Conversation

About the Author:

Nicholas Peters, Joint Faculty, University of Tennessee

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

Economics & Fundamentals Financial News
10 Oct

How to steer money for drinking water and sewer upgrades to the communities that need it most

By Andrian Lee, University of Wisconsin-Milwaukee and Melissa Scanlan, University of Wisconsin-Milwaukee 

When storms like Hurricane Ian strike, many people have to cope afterward with losing water service. Power outages mean that pumps can’t process and treat drinking water or sewage, and heavy stormwater flows can damage water mains.

Ian’s effects echoed a similar disaster in Jackson, Mississippi, where rising river water overwhelmed pumps at the main water treatment plant on Aug. 29, 2022, following record-setting rain. The city had little to no running water for a week, and more than 180,000 residents were forced to find bottled water for drinking and cooking. Even after water pressure returned, many Jackson residents continued to boil their water, questioning whether it was really safe to drink.

Jackson had already been under a boil-water notice for more than a month before the crisis, which arrived like a slow-motion bullet to the city’s long-decaying infrastructure. Now, Jackson and its contractors face lawsuits and a federal investigation.

This 2021 episode of ‘60 Minutes’ explores Jackson, Mississippi, residents’ frustration with their city’s long-running water problems.

We study water policy with a focus on providing equitable access to clean water. Our research shows that disadvantaged communities have suffered disproportionately from underinvestment in clean and affordable water.

However, a historic increase in federal water infrastructure funding is coming over the next five years, thanks to the Infrastructure Investment and Jobs Act that was enacted in 2021.

If this funding is managed smartly, we believe it can start to right these wrongs.

A complex funding mix

Water infrastructure has two parts. Drinking water systems bring people clean water that has been purified for drinking and other uses. Wastewater systems carry away sewage and treat it before returning it to rivers, lakes or the ocean.

Money to build and maintain these systems comes from a mix of federal, state and local sources. Over the past 50 years, policymakers have debated how much each level of government should contribute, and what fraction should come from the most prized source: federal money that does not need to be repaid.

The 1972 Clean Water Act created a federal grant program, managed by the Environmental Protection Agency, to help states and municipalities build wastewater treatment plants. Under the program, federal subsidies initially covered 75% of project costs.

Aerial view of water treatment tanks and gas digesters on a peninsula surrounded by ocean
The Deer Island water treatment plant in Boston began operation in 1995. It treats wastewater from towns across greater Boston and discharges cleaned effluent into the Atlantic Ocean.
Doc Searls/Wikipedia, CC BY

In the 1980s, the Reagan Administration challenged this arrangement. Conservatives argued that the grant program’s main purpose – addressing the need for more municipal wastewater treatment – had been fulfilled.

In 1987, Congress replaced wastewater grants with a loan program called the Clean Water State Revolving Fund, which still operates today. The EPA uses the fund to provide seed money to states, which offer low-interest loans to local governments to build and maintain wastewater treatment plants. Congress created a corresponding program, the Drinking Water State Revolving Fund, in 1996 to fund drinking water infrastructure.

As a result, U.S. water infrastructure now is funded by a mix of loans that must be repaid, principal forgiveness awards and grants that do not require repayment, and fees paid by local users. The larger the share that can be shifted into grants and principal forgiveness, the less pressure on local ratepayers to foot the bill for long-term infrastructure investments.

What’s in the infrastructure law

The Infrastructure Investment and Jobs Act authorizes more than US$50 billion for water infrastructure over the next five years. This won’t close the gap in funding needs, which the EPA has estimated at $472.6 billion from 2015 through 2034 just for drinking water systems. But it could support tangible improvements.

When water systems that serve low-income communities borrow money from state programs, even at low interest rates, they have to pay the loans off by raising rates on customers who already struggle to pay their bills. To reduce this burden, federal law allows state programs to provide “disadvantaged communities” additional subsidies in the form of principal forgiveness and grants. However, states have broad discretion in determining who qualifies.

The infrastructure law requires that 49% of federal funding for both drinking water and wastewater infrastructure must be awarded as additional subsidies to disadvantaged communities. In other words, almost half the money that states receive in federal funds must be awarded as principal forgiveness or outright grants to disadvantaged communities.

Who counts as ‘disadvantaged’?

In March 2022, the EPA released a memorandum that calls the infrastructure law a “unique opportunity” to “invest in communities that have too often been left behind – from rural towns to struggling cities.” The agency pledged to work with states, tribes and territories to ensure the promised 49% of supplemental funding reaches communities where the need is greatest.

This is an issue where the devil truly is in the details.

For example, under Mississippi’s definition of “disadvantaged community,” Jackson’s 2021 award for principal forgiveness was capped at 25% of the original principal. In its March 2022 memorandum, the EPA identified such caps as obstacles for under-resourced communities.

Mississippi appears to have responded by using a new standard for funds coming from the infrastructure law. Beginning this year, communities whose median household income is lower than the state median household income – including Jackson – will be awarded 100% principal forgiveness, which makes the funding effectively a grant.

Additionally, the EPA discourages using population as a factor to define “disadvantaged communities.” Communities with smaller populations struggle to cover water systems’ operating costs, so that challenge is important to consider. But using population as a determining factor penalizes larger cities that may otherwise be disadvantaged.

For example, in 2021, when determining principal forgiveness, Wisconsin awarded a higher financial need score to communities with populations below 10,000. This penalized Milwaukee, the state’s largest city, with almost a quarter of its people experiencing poverty.

In September 2022, Wisconsin updated its definition to consider additional factors, such as county unemployment rate and family poverty percentage. With these changes, Milwaukee now qualifies for the maximum principal forgiveness.

Mississippi and Wisconsin previously relied on factors too narrow to reach many disadvantaged communities. We hope the steps they have taken to update their programs will inspire similar actions from other states.

Getting the word out

In our view, the Infrastructure Investment and Jobs Act is a once-in-a-generation opportunity to correct decades of underinvestment in disadvantaged communities, especially with the EPA pushing the states to do so.

Historically under-resourced communities may not be aware of these state program funds, or know how to apply for them, or carry out infrastructure improvements. We believe the EPA should direct states that receive federal funds to help under-resourced communities apply for and use the money.

Recent events in Jackson and Florida show how natural disasters can overwhelm water systems, especially older networks that have been declining for years. As climate change amplifies storms and flooding, we see investing in water systems as a priority for public health and environmental justice across the U.S.The Conversation

About the Author:

Andrian Lee, Water Policy Specialist, University of Wisconsin-Milwaukee and Melissa Scanlan, Professor and Lynde B. Uihlein Endowed Chair in Water Policy, UW-Milwaukee School of Freshwater Sciences; Director of the Center for Water Policy; Affiliate Faculty, University of Wisconsin Law School, University of Wisconsin-Milwaukee

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

Economics & Fundamentals Financial News
10 Oct

The panic narrative is returning to the stock markets. The focus today is on a non-farm report

By JustForex

The US 10-year bond yields rose nearly 10 basis points to 3.85% after Minneapolis Fed President Neel Kashkari said yesterday that the central bank is “very far” from suspending its tightening campaign. Kashkari’s comments followed a series of hawkish remarks from other officials. Federal Reserve Bank of Chicago President Charles Evans said Thursday that the US Central Bank’s discount rate is likely to reach 4.5-4.75% by the spring of 2023 as the Fed increases the cost of borrowing to reduce too much inflation. A day earlier, San Francisco Federal Reserve President Mary Daly said that investors are wrong to anticipate monetary policy easing in 2023. Such hawkish rhetoric brought negativity back to the financial markets, which triggered some sell-off in stocks.

At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 1.15%, and the S&P 500 Index (US500) fell by 1.30%. Tech Index NASDAQ (US100) closed the day down by 0.35%. At the Fed meeting in November, money markets are pricing in a more than 85% chance of a fourth straight 75 basis point rate hike.

Today, the main focus for investors will be on the US labor market data. If the report turns negative, it could trigger a drop in the dollar index and a rise in stock indices on expectations that the US Federal Reserve will be less aggressive in tightening monetary policy further. But if the non-farm payrolls report is positive and shows the strength of the labor market, the opposite reaction could follow a sell-off in the stock market plus an increase in the dollar index and treasury yields. Weekly labor market data showed that the number of Americans filing new jobless claims rose more than expected last week, but the labor market remains strong even as demand declines amid higher interest rates.

Stock markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.37%, French CAC 40 (FR40) fell by 0.82%, Spanish IBEX 35 (ES35) lost 0.92%, British FTSE 100 (UK100) closed down by 0.78%.

The report on the ECB’s September 7-8 monetary policy meeting released yesterday showed that an absolute majority approved a 75 basis point rate hike of the Governing Council. The report also indicated that in the medium term, a 50 basis point hike would be part of a sustainable path toward more neutral rate levels, and such a dynamic would be sufficient to alleviate inflationary pressures and not “drop” the economy deep into recession. But all inflation forecasts for 2023 and 2024 have been revised upward.

In August 2022, seasonally adjusted retail sales were down by 0.3% in the Eurozone. Retail sales also declined by 0.4% in July. This is negative data, which indirectly points to high inflationary pressures.

Oil prices rose about 1% on Thursday, holding at a three-week high after OPEC+ agreed to cut global supply by 2 million BPD, the biggest cut since 2020. Saudi Arabia’s energy minister said the real supply cut would be 1 million to 1.1 million BPD. Experts believe that such a move by OPEC+ will not only boost oil prices but also cause a new round of unwinding inflation, which central banks around the world are actively fighting.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.70%, Hong Kong’s Hang Seng (HK50) decreased by 0.42%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.03%.

A report released Thursday by the Bank of Japan (BOJ) indicates that most regional economies in Japan are seeing a moderate rebound, with some firms considering wage increases, stressing the hope that household incomes will rise enough to offset rising costs of living.

OPEC+ will no longer meet monthly. Meetings will now be held every two months.

S&P 500 (F) (US500) 3,744.40 −38.88 (−0.20%)

Dow Jones (US30) 29,926.47 −347.40 (−1.15%)

DAX (DE40) 12,470.78  −46.40 (−1.21%)

FTSE 100 (UK100) 6,997.27 −55.35 (−0.78)

USD Index 112.22 +1.14 (+1.02%)

Important events for today:
  • – US FOMC Member Waller Speaks (m/m) at 00:00 (GMT+3);
  • – US FOMC Member Mester Speaks (m/m) at 01:30 (GMT+3);
  • – German Industrial Production (m/m) at 09:00 (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);
  • – US FOMC Member Williams Speaks (m/m) at 17:00 (GMT+3).

By JustForex

 

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
07 Oct

The panic narrative is returning to the stock markets. The focus today is on a non-farm report

By JustForex

The US 10-year bond yields rose nearly 10 basis points to 3.85% after Minneapolis Fed President Neel Kashkari said yesterday that the central bank is “very far” from suspending its tightening campaign. Kashkari’s comments followed a series of hawkish remarks from other officials. Federal Reserve Bank of Chicago President Charles Evans said Thursday that the US Central Bank’s discount rate is likely to reach 4.5-4.75% by the spring of 2023 as the Fed increases the cost of borrowing to reduce too much inflation. A day earlier, San Francisco Federal Reserve President Mary Daly said that investors are wrong to anticipate monetary policy easing in 2023. Such hawkish rhetoric brought negativity back to the financial markets, which triggered some sell-off in stocks.

At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 1.15%, and the S&P 500 Index (US500) fell by 1.30%. Tech Index NASDAQ (US100) closed the day down by 0.35%. At the Fed meeting in November, money markets are pricing in a more than 85% chance of a fourth straight 75 basis point rate hike.

Today, the main focus for investors will be on the US labor market data. If the report turns negative, it could trigger a drop in the dollar index and a rise in stock indices on expectations that the US Federal Reserve will be less aggressive in tightening monetary policy further. But if the non-farm payrolls report is positive and shows the strength of the labor market, the opposite reaction could follow a sell-off in the stock market plus an increase in the dollar index and treasury yields. Weekly labor market data showed that the number of Americans filing new jobless claims rose more than expected last week, but the labor market remains strong even as demand declines amid higher interest rates.

Stock markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.37%, French CAC 40 (FR40) fell by 0.82%, Spanish IBEX 35 (ES35) lost 0.92%, British FTSE 100 (UK100) closed down by 0.78%.

The report on the ECB’s September 7-8 monetary policy meeting released yesterday showed that an absolute majority approved a 75 basis point rate hike of the Governing Council. The report also indicated that in the medium term, a 50 basis point hike would be part of a sustainable path toward more neutral rate levels, and such a dynamic would be sufficient to alleviate inflationary pressures and not “drop” the economy deep into recession. But all inflation forecasts for 2023 and 2024 have been revised upward.

In August 2022, seasonally adjusted retail sales were down by 0.3% in the Eurozone. Retail sales also declined by 0.4% in July. This is negative data, which indirectly points to high inflationary pressures.

Oil prices rose about 1% on Thursday, holding at a three-week high after OPEC+ agreed to cut global supply by 2 million BPD, the biggest cut since 2020. Saudi Arabia’s energy minister said the real supply cut would be 1 million to 1.1 million BPD. Experts believe that such a move by OPEC+ will not only boost oil prices but also cause a new round of unwinding inflation, which central banks around the world are actively fighting.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.70%, Hong Kong’s Hang Seng (HK50) decreased by 0.42%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.03%.

A report released Thursday by the Bank of Japan (BOJ) indicates that most regional economies in Japan are seeing a moderate rebound, with some firms considering wage increases, stressing the hope that household incomes will rise enough to offset rising costs of living.

OPEC+ will no longer meet monthly. Meetings will now be held every two months.

S&P 500 (F) (US500) 3,744.40 −38.88 (−0.20%)

Dow Jones (US30) 29,926.47 −347.40 (−1.15%)

DAX (DE40) 12,470.78  −46.40 (−1.21%)

FTSE 100 (UK100) 6,997.27 −55.35 (−0.78)

USD Index 112.22 +1.14 (+1.02%)

Important events for today:
  • – US FOMC Member Waller Speaks (m/m) at 00:00 (GMT+3);
  • – US FOMC Member Mester Speaks (m/m) at 01:30 (GMT+3);
  • – German Industrial Production (m/m) at 09:00 (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);
  • – US FOMC Member Williams Speaks (m/m) at 17:00 (GMT+3).

By JustForex

 

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
07 Oct

Week Ahead: Gold’s presence above $1700 may depend on US inflation data

By ForexTime

Markets have of late dared to revive bets over a “dovish pivot” by the Fed, which has helped gold prices recover back above $1700 this week.

However, whether such a recovery can be sustained over the immediate term may all boil down to the upcoming US inflation data release (and also the US jobs report due later today – Friday, October 7th).

For the week ahead, here are the key scheduled economic data releases and events that could move markets:

Monday, October 10

  • USD: Speeches by Fed Vice Chair Lael Brainard and Chicago Fed President Charles Evans
  • EUR: Speeches by ECB Chief Economist Philip Lane and Banco de Portugal Governor Mario Centeno

Tuesday, October 11

  • JPY: Japan August trade balance and current account
  • AUD: Australia September household spending and business confidence, October consumer confidence
  • IMF publishes World Economic Outlook
  • EUR: ECB Chief Economist Philip Lane speech
  • GBP: BOE Governor Andrew Bailey speech, UK August 3-month unemployment rate, September jobless claims
  • USD: Cleveland Fed President Loretta Mester speech
  • Meta Platform’s virtual conference

Wednesday, October 12

  • EUR: ECB President Christine Lagarde speech, Eurozone August industrial production
  • GBP: UK August monthly GDP, industrial production, trade balance
  • GBP: Speeches by BOE’s Jonathan Haskel, Catherine Mann, and Huw Pill
  • Brent: OPEC publishes Monthly Oil Market Report
  • USD: US September PPI, FOMC minutes, speeches by Fed Governor Michelle Bowman, Minneapolis Fed President Neel Kashkari

Thursday, October 13

  • JPY: Japan September PPI
  • AUD: Australia October consumer inflation expectations
  • EUR: Germany September CPI (final)
  • Brent: IEA publishes Oil Market Report
  • US crude: EIA weekly oil inventory report
  • USD: US September CPI, US weekly initial jobless claims

Friday, October 14

  • NZD: New Zealand September manufacturing PMI
  • CNH: China September CPI, PPI, external trade
  • GBP: BOE due to end its emergency bond buying
  • USD: US September retail sales, October consumer sentiment
  • CAD: Canada August manufacturing sales, September existing home sales
  • S&P 500: US earnings season begins with Wall Street banks (JPMorgan, Wells Fargo, Citigroup, Morgan Stanley)

 

At the time of writing, although gold has managed to clamber back above the psychologically-important $1700 mark, prices have been resisted at the 50-day simple moving average (SMA) and have since eased slightly.

 

And the next US inflation data, as measured by the consumer price index (CPI), could dictate gold’s next big move.

Markets are currently expecting the September headline US CPI to have risen by 8.1% compared to the same month last year (September 2021).

If so, that would mark a third consecutive month whereby the headline CPI figure has eased lower since June’s 9.1% – the highest CPI year-on-year print in over 40 years!

A lower-than-expected headline CPI print this coming Thursday may embolden the “dovish pivot” narrative (which is to say that markets expect the Fed to have less impetus to keep US interest rates higher for longer on signs that US inflation has peaked).

 

If so, that lower-than-8.1% CPI figure may help push gold even higher:

  • If the 50-day SMA isn’t already breached in the immediate aftermath of today’s US jobs report, then that would be another key area of interest for bullion bulls.
  • Markets are rather pessimistic about spot gold’s chances of hitting the psychological $1800 mark, allocating a mere 5.6% chance of such an event happening over the next one week.
  • However, a shockingly-low CPI print may just do the trick for gold bulls (those hoping gold prices can keep marching higher).

 

A higher-than-8.1% CPI print on Thursday however may dash gold’s recent recovery:

  • Gold may well falter back below $1700 (if it hasn’t already done so following today’s NFP print). However, markets are relatively cautious about such prospects (gold falling below $1700 over the next week), with such odds now standing at just 38%, given that the US jobs report remains a massive unknown.
  • Immediate support may arrive around the $1680 mark (July low, also where spot gold’s 21-day SMA currently resides).
  • Stronger support may arrive around the mid-$1600 region, as was the case around mid-September.

Forex-Time-LogoArticle by ForexTime

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Economics & Fundamentals Financial News
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