InvestMacro

By Jason Dunion, University of Miami

As Hurricane Ian intensifies on its way toward the Florida coast, hurricane hunters are in the sky doing something almost unimaginable: flying through the center of the storm. With each pass, the scientists aboard these planes take measurements that satellites can’t and send them to forecasters at the National Hurricane Center.

Jason Dunion, a University of Miami meteorologist, leads the National Oceanic and Atmospheric Administration’s 2022 hurricane field program. He described the technology the team is using to gauge hurricane behavior in real time and the experience aboard a P-3 Orion as it plunges through the eyewall of a hurricane.

Flying into Hurricane Harvey aboard a a P-3 Hurricane Hunter nicknamed Kermit in 2018.
Lt. Kevin Doreumus/NOAA

What happens aboard a hurricane hunter when you fly into a storm?

Basically, we’re take a flying laboratory into the heart of the hurricane, all the way up to Category 5s. While we’re flying, we’re crunching data and sending it to forecasters and climate modelers.

In the P-3s, we routinely cut through the middle of the storm, right into the eye. Picture an X pattern – we keep cutting through the storm multiple times during a mission. These might be developing storms, or they might be Category 5s.

We’re typically flying at an altitude of around 10,000 feet, about a quarter of the way between the ocean surface and the top of the storm. We want to cut through the roughest part of the storm because we’re trying to measure the strongest winds for the Hurricane Center.

That has to be intense. Can you describe what scientists are experiencing on these flights?

My most intense flight was Dorian in 2019. The storm was near the Bahamas and rapidly intensifying to a very strong Category 5 storm, with winds around 185 mph. It felt like being a feather in the wind.

When we were coming through the eyewall of Dorian, it was all seat belts. You can lose a few hundred feet in a couple of seconds if you have a down draft, or you can hit an updraft and gain a few hundred feet in a matter of seconds. It’s a lot like a rollercoaster ride, only you don’t know exactly when the next up or down is coming.

At one point, we had G-forces of 3 to 4 Gs. That’s what astronauts experience during a rocket launch. We can also get zero G for a few seconds, and anything that’s not strapped down will float off.

Even in the rough parts of the storm, scientists like myself are busy on computers working up the data. A technician in the back may have launched a dropsonde from the belly of the plane, and we’re checking the quality of the data and sending it off to modeling centers and the National Hurricane Center.

What are you learning about hurricanes from these flights?

One of our goals is to better understand why storms rapidly intensify.

Rapid intensification is when a storm increases in speed by 35 mph in just a day. That equates to going from Category 1 to a major Category 3 storm in a short period of time. Ida (2021), Dorian (2019) and Michael (2018) are just a few recent hurricanes that rapidly intensified. When that happens near land, it can catch people unprepared, and that gets dangerous fast.

Since rapid intensification can happen in a really short time span, we have to be out there with the hurricane hunters taking measurements while the storm is coming together.

So far, rapid intensification is hard to predict. We might start to see the ingredients quickly coming together: Is the ocean warm to a great depth? Is the atmosphere nice and juicy, with a lot of moisture around the storm? Are the winds favorable? We also look at the inner core: What does the structure of the storm look like, and is it starting to consolidate?

Satellites can offer forecasters a basic view, but we need to get our hurricane hunters into the storm itself to really pick the hurricane apart.

What does a storm look like when it’s rapidly intensifying?

Hurricanes like to stand up straight – think of a spinning top. So, one thing we look for is alignment.

A storm that isn’t yet fully together might have low-level circulation, a few kilometers above the ocean, that isn’t lined up with its mid-level circulation 6 or 7 kilometers up. That isn’t a very healthy storm. But a few hours later, we might fly back into the storm and notice that the two centers are more lined up. That’s a sign that it could rapidly intensify.

We also look at the boundary layer, the area just above the ocean. Hurricanes breathe: They draw air in at low levels, the air rushes up at the eyewall, and then it vents out at the top of the storm and away from the center. That’s why we get those huge updrafts in the eyewall.

So we might watch our dropsonde or tail doppler radar data for how the winds are flowing at the boundary layer. Is that really moist air rushing in toward the center of the storm? If the boundary layer is deep, the storm can also take a bigger inhale.

We also look at the structure. A lot of times the storm looks healthy on satellite, but we’ll get in with the radar and the structure is sloppy or the eye may be filled with clouds, which tells us the storm isn’t quite ready to rapidly intensify. But, during that flight, we might start to see the structure change pretty quickly.

Air in, up and out – the breathing – is a great way to diagnose a storm. If that breathing looks healthy, it can be a good sign of an intensifying storm.

What instruments do you use to measure and forecast hurricane behavior?

We need instruments that not only measure the atmosphere but also the ocean. The winds can steer a storm or tear it apart, but the ocean heat and moisture are its fuel.

We use dropsondes to measure temperature, humidity, pressure and wind speed, and send back data every 15 feet or so all the way to the ocean surface. All of that data goes to the National Hurricane Center and to modeling centers so they can get a better representation of the atmosphere.

One P-3 has a laser – a CRL, or compact rotational raman LiDAR – that can measure temperature, humidity and aerosols from the aircraft all the way down to the ocean surface. It can give us a sense of how juicy the atmosphere is, so how conducive it is for feeding a storm. The CRL operates continuously over the entire flight track, so you get this beautiful curtain below the aircraft showing the temperature and humidity.

The planes also have tail doppler radars, which measure how moisture droplets in the air are blowing to determine how the wind is behaving. That gives us a 3D look at the wind field, like an X-ray of the storm. You can’t get that from a satellite.

We also launch ocean probes call AXBTs – aircraft expendable bathythermograph – out ahead of the storm. These probes measure the water temperature down several hundred feet. Typically, a surface temperature of 26.5 degrees Celsius (80 Fahrenheit) and above is favorable for a hurricane, but the depth of that heat is also important.

If you have warm ocean water that’s maybe 85 F at the surface, but just 50 feet down the water is quite a bit colder, the hurricane is going to mix in that cold water pretty quickly and weaken the storm. But deep warm water, like we find in eddies in the Gulf of Mexico, provides extra energy that can fuel a storm.

This year, we’re also testing a new technology – small drones that we can launch out of the belly of a P-3. They have about a 7- to 9-foot wingspan and are basically a weather station with wings.

One of these drones dropped in the eye could measuring pressure changes, which indicate whether a storm is getting stronger. If we could drop a drone in the eyewall and have it orbit there, it could measure where the strongest winds are – that’s another important detail for forecasters. We also don’t have a lot of measurements in the boundary layer because it’s not a safe place for a plane to fly.

You also targeted the Cabo Verde islands off Africa for the first time this year. What are you looking for there?

The Cabo Verde Islands are in the Atlantic’s hurricane nursery. The seedlings of hurricanes come off Africa, and we’re trying to determine the tipping points for theses disturbances to form into storms.

Over half the named storms we get in the Atlantic come from this nursery, including about 80% of the major hurricanes, so it’s important, even though the disturbances are maybe seven to 10 days ahead of a hurricane forming.

In Africa, a lot of thunderstorms develop along the Sahara desert’s southern border with the cooler, moister Sahel region in the summer. The temperature difference can cause ripples to develop in the atmosphere that we call tropical waves. Some of those tropical waves are the precursors for hurricanes. However, the Saharan air layer – huge dust storms that come rolling off Africa every three to five days or so – can suppress a hurricane. These storms peak from June to mid-August. After that, tropical disturbances have a better chance of reaching the Caribbean.

At some point not too far in the future, the National Hurricane Center will have to do a seven-day forecast, rather than just five days. We’re figuring out how to improve that early forecasting.

About the Author:

Jason Dunion, Research Meteorologist, University of Miami

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

By JustForex

At yesterday’s stock market close, the Dow Jones index (US30) decreased by 1.11%, and the S&P 500 index (US500) fell by 1.03%. The NASDAQ Technology Index (US100) lost 0.63% on Monday. The Fed’s aggressive tightening campaign has pushed the US dollar to new multi-year highs, and many are worried about the consequences of such a strong dollar. Fed officials’ statements continue to be hawkish, with Boston Fed President Susan Collins saying Monday that additional tightening is needed. The US 2-year bond yields have reached 4.34%. In addition, a strong dollar could lead companies to release weak forecasts for the coming quarters, which could further exacerbate the drop in stock indices.

According to strategists at Morgan Stanley, a sharp rise in the dollar usually ends in a crisis. MS experts believe that a possible minimum for the benchmark S&P 500 index will come late this year or early next year at 3,000-3,400 points. That means an 8-13% decline from current prices.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE30) decreased by 0.46%, France’s CAC 40 (FR40) fell by 0.24%, Spain’s IBEX 35 (ES35) lost 0.99%, Britain’s FTSE 100 (UK100) closed up to 0.03%.

Germany’s economy is heading for recession, the IFO Institute said Monday, reporting a stronger-than-forecast drop in business activity across all sectors. The business climate index fell to 84.3 from 88.6 in August. The decline was noticeable in all sectors of the German economy. The report said the energy price shock is dragging consumers’ purchasing power down and making production unprofitable for many companies. Germany is struggling to avoid gas shortages this winter.

ECB head Christine Lagarde said yesterday that the Governing Council intends to continue raising interest rates at its next meetings, even though the economic outlook is worsening.

Giorgia Meloni won a clear majority in Sunday’s elections in Italy, making her the country’s first female prime minister at the head of the most right-wing government since World War II. The center-right won 44.34% of the vote in the elections to the Chamber of Deputies.

EU countries plan to delay a cap on Russian oil prices because of the controversy.

Russia’s actions in Ukraine will cost the world economy $2.8 trillion in lost production by the end of next year – and even more if a harsh winter leads to rationing of energy consumption in Europe, the Organization for Economic Cooperation and Development (OECD) said Monday. Global financial companies, still reeling from multibillion-dollar losses due to their business withdrawal from Russia, are now reviewing the risks of doing business in China after escalating tensions over Taiwan.

Turkey and Kazakhstan do not recognize the results of the referendums in the DNR, LNR, Kherson, and Zaporizhzhia regions.

Oil prices hit a nine-month low on Monday amid choppy trade under pressure from a strengthening dollar and expectations of new sanctions against Russia. It also became known yesterday that more than 1 million barrels of oil from the US are scheduled to be delivered to Europe daily. Supplies from the US should come to replace oil from Russia.

Asian markets were trading lower yesterday. Japan’s Nikkei 225 (JP225) decreased by 2.66%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.44%, and Australia’s S&P/ASX 200 (AU200) ended Monday down by 1.60%.

The Chinese economy will recover moderately in 2023 after sluggish growth in 2022. In June, the OECD projected the economy to grow 4.4% in 2022 but now expects growth to be only 3.2%. By 2023, growth is projected at 4.7%.

S&P 500 (F) (US500) 3,655.04 −38.19  (−1.03%)

Dow Jones (US30) 29,260.81 −329.60 (−1.11%)

DAX (DE40) 12,227.92  −56.27 (−0.46%)

FTSE 100 (UK100) 7,020.95 +2.35 (+0.033%)

USD Index 114.13 +0.93 (+0.82%)

• – US Fed Chair Powell Speaks at 14:30 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 14:30 (GMT+3);
• – US Core Durable Goods Orders (m/m) at 15:30 (GMT+3);
• – US FOMC Member Bullard Speaks at 16:55 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
• – US New Home Sales (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.

By ForexTime

Article by ForexTime

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

By JustForex

Asset prices around the world fell sharply on Friday as central banks and governments stepped up their fight against inflation. At the close of the stock market on Friday, the Dow Jones Index (US30) decreased by 1.42% (-3.69% for the week) and the S&P 500 Index (US500) fell by 1.72% (-4.07% for the week). Technology index, NASDAQ (US100) lost 0.82% on Friday (-5.92% for the week).

Goldman Sachs strategists Friday lowered their year-end target for the benchmark S&P 500 US stock index to 3600 from 4300. Because monetary policy tends to lag, analysts estimate that the renewed aggressiveness by central banks means the global economy will become even weaker by the middle of next year. The Fed’s latest economic forecasts, released Wednesday along with a massive third straight 75 basis point interest rate hike, show that the Central Bank expects the nation’s unemployment rate to rise to 4.4% next year – up from 3.7% in August. Assuming the labor force remains unchanged, that would mean about 1.2 million people would be out of work. Analysts believe that Fed Chairman Jerome Powell has triggered an emotional bear market phase by endorsing the idea of a recession.

Analysts now dismiss the option that the recession will be short and shallow. Experts are now predicting much tighter monetary policy from central banks and other unintended consequences. The question now is already how deep the recession will be and whether the economy can face any form of financial crisis and a serious global liquidity shock. The US benchmark 10-year Treasury bond yields have reached their highest level in more than 12 years, while German two-year bond yields have exceeded 2% for the first time since late 2008. In the UK, five-year bonds jumped by 50 bps, the biggest one-day jump since late 1991.

Canadian retail sales fell by 2.5% to $61.3 billion in July, the first decline in seven months. Sales fell in 9 of 11 sub-industries, representing 94.5% of retail sales.

Stock markets in Europe were mostly down on Friday. German DAX (DE30) fell by 1.97% (-3.16% for the week), French CAC 40 (FR 40) decreased by 2.28% (-4.39% for the week), Spanish IBEX 35 (ES35) lost 2.46% (-4.68% for the week). British FTSE 100 (UK100) was 1.97% negative (-3.62% for the week).

The manufacturing PMI fell to a low in almost all economies of the region except France. These are clear signs of an impending recession in Europe.

In the UK, recession risks are also rising as the PMI business activity index signals a deepening recession. Companies report that the rising cost of living associated with the energy crisis and growing concerns about the outlook are suppressing demand and reducing output. Renewed supply constraints, soaring energy prices, and the rising cost of imports associated with the weakening pound exacerbate rising price pressures. The British pound and stock indexes fell sharply on Friday after the country’s finance minister announced historic tax cuts and a huge increase in borrowing. Investors are turning away from British bonds amid an expected increase in government debt. According to Bloomberg, analysts expect UK interest rates to reach 5.2% in August 2023, with growing expectations that the Bank of England may raise interest rates by one percentage point at its next meeting in November.

Italians are heading to the polls for a national vote that could bring back the country’s first female prime minister and first far-right-led government since the end of World War II. Incumbent President Mario Draghi, who was kicked out in July because of political strife, has agreed to stay as a caretaker.

Gold remains under pressure because of the rising US dollar index and US government bond yields. As long as the US Federal Reserve follows an aggressive tightening policy, precious metals will have no fundamental reason to rise.

Oil prices fell more than 5% to an eight-month low Friday as the US dollar hit its strongest level in more than two decades and fears that rising interest rates will lead to a recession in major economies, reducing demand for oil. As fears of global growth have turned to panic mode, this will weaken both economic activity and the short-term outlook for oil demand.

Asian markets traded lower last week. Japan’s Nikkei 225 (JP225) decreased by 2.58% for the week, Hong Kong’s Hang Seng (HK50) ended last week down by 4.08%, and Australia’s S&P/ASX 200 (AU200) ended the week in minus 3.92%.

The Chinese yuan finished the trading session at an almost 28-month low as the widening yield gap between the two largest economies in the world continues to put pressure on the Chinese currency.

In the commodities market, futures on orange juice (+6.43%), coffee (+2.32%), and wheat (+2.01%) showed the biggest gains by the end of the week. Natural gas futures (-11.89%), lumber (-9.6%), cotton (-6.8%), WTI oil (-6.29%), platinum (-5.34%), Brent oil (-5.15%), copper (-4.78%), silver (-2.82%) and gold (-1.89%) showed the biggest drop.

S&P 500 (F) (US500) 3,693.23  −64.76  (−1.72%)

Dow Jones (US30) 29,590.41 −486.27 (−1.62%)

DAX (DE40) 12,284.19 −247.44 (−1.97%)

FTSE 100 (UK100) 7,018.60 −140.92 (−1.97%)

USD Index 113.02 +1.67 (+1.50%)

• – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
• – Japan Services PMI (m/m) at 03:30 (GMT+3);
• – Japan BoJ Governor Kuroda Speaks at 08:35 (GMT+3);
• – Eurozone German GDP (q/q) at 09:00 (GMT+3);
• – Eurozone German IFO Business Climate (m/m) at 11:00 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 16:00 (GMT+3);
• – US FOMC Member Mester Speaks at 23:00 (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.

By JustForex

The US indices continue to be under pressure due to the aggressive roadmap of the US Federal Reserve. At the close of trading on Tuesday, the Dow Jones index (US30) decreased by 0.35%, while the S&P 500 index (US500) lost 0.84%. The NASDAQ Technology Index (US100) fell by 1.37% yesterday.

Ahead of the Fed’s remaining meetings in 2022, analysts believe there will likely be another 75 basis point hike in November before the pace slows to 50 basis points in December as the Fed approaches the rate cap in early 2023. The Fed is likely to leave the discount rate at this capped level for a while before the economy eventually slows down. The gap between fighting inflation and adapting to growth is becoming increasingly difficult as the Fed hopes to cut the discount rate to neutral.

Equity markets in Europe mostly fell yesterday. Germany’s DAX (DE30) fell by 1.84%, France’s CAC 40 (FR40) decreased by 1.87%, Spain’s IBEX 35 (ES35) lost 1.24%, Britain’s FTSE 100 (UK100) closed down by 1.08%.

The Bank of England raised the interest rate to the highest level in 14 years. Money markets now expect another 50 basis point increase in November. The current issues affecting the Bank of England are a weak pound, fiscal policy, high energy prices, a technical recession with two consecutive quarters of GDP contraction, and a hawkish Federal Reserve stance. Experts believe that financial support from the UK government may stabilize inflationary pressures in the short term but will lead to higher inflation in the medium and long term.

The Swiss National Bankм(SNB) raised interest rates by 75 basis points to push the official borrowing rate into positive territory for the first time in more than a decade. The SNB said it could not rule out further rate hikes to ensure price stability over the medium term and was prepared to be active in the foreign exchange market as needed. The SNB now expects GDP growth to be 2% this year, down half a percent from the last meeting. The central bank also noted that inflation, which was 3.5% in August, is likely to remain elevated.

Norway’s Central Bank raised its interest rate by 50 basis points and signaled that another increase is likely in November. The bank’s interest rate has reached 2.25%. Meanwhile, the inflation forecast has been revised upward, peaking at 3% in 2023 and remaining at that level through 2024.

The US Federal Reserve’s 0.75% interest rate hike Wednesday was widely expected, but the central bank’s concurrent forecast was perhaps even more hawkish than expected. That pushed US Treasury bond yields to an 11-year peak, which is more bad news for unprofitable assets such as precious metals. The overall fundamental backdrop looks unfavorable for gold, given that it has recently been largely traded as a risk asset rather than a safe-haven asset.

Buyers in the oil market are hopeful that Vladimir Putin will reduce the supply of oil in Russia so much that prices per barrel will return to triple digits. But the Federal Reserve’s influence on the flow of funds through interest rates is proving tighter than anticipated. The European Union has stepped up its plans to impose a price ceiling on Russian oil, a measure aimed at weakening Moscow’s ability to finance the war in Ukraine. Also yesterday, Nigeria’s Oil Minister Timipre Marlin Silva, speaking on behalf of the OPEC+ producers’ alliance, threatened to cut global oil production if prices continue to fall.

Moscow’s decision to partially mobilize Russian military reservists marks the biggest escalation of the Ukrainian conflict since it began. Some Russians have rushed to the country’s borders to avoid mobilization. In southeastern Ukraine, attacks from Russia have intensified, coming on the eve of pseudo-referendums planned there by Moscow’s separatists.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.58%, Hong Kong’s Hang Seng (HK50) ended Thursday down by 1.61%, and Australia’s S&P/ASX 200 (AU200) closed the day by 1.56%.

Japan intervened in currency to support the yen for the first time since 1998, trying to stem a 20 percent drop in the yen against the dollar this year amid a widening policy divergence with the US. Japan’s Ministry of Finance said the Central Bank would defend the 145 USD/JPY level.

Singapore’s Core Consumer Price Index (CPI) rose year-over-year to 5.1% in August, exceeding expectations of 5% and up from 4.8% in July. Spending on food and transportation contributed the most to price pressures in August. The island nation imports nearly all of its fuel and grain. The Central Bank of Singapore (MAS) has tightened policy three times this year and is likely to continue to do so to offset increased inflationary pressures.

S&P 500 (F) (US500) 3,757.99  −31.94  (−0.84%)

Dow Jones (US30) 30,076.68 −107.10 (−0.35%)

DAX (DE40) 12,531.63 −235.52 (−1.84%)

FTSE 100 (UK100) 7,159.52 −78.12 (−1.08%)

USD Index 111.29 +0.65 (+0.58%)

• – Australia Manufacturing PMI (m/m) at 02:00 (GMT+3);
• – Japan BoJ Interest Rate Decision (Tentative);
• – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3);
• – Australia Services PMI (m/m) at  :00 (GMT+3);
• – Eurozone Spanish GDP (q/q) at 10:00 (GMT+3);
• – Eurozone France Manufacturing PMI (m/m) at 10:15 (GMT+3);
• – Eurozone France Services PMI (m/m) at 10:15 (GMT+3);
• – Eurozone German Manufacturing PMI (m/m) at 10:30 (GMT+3);
• – Eurozone German Services PMI (m/m) at 10:30 (GMT+3);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
• – UK Services PMI (m/m) at 11:30 (GMT+3);
• – Canada Retail Sales (m/m) at 15:30 (GMT+3);
• – US Manufacturing PMI (m/m) at 16:45 (GMT+3);
• – US Services PMI (m/m) at 16:45 (GMT+3);
• – Switzerland SNB Chairman Jordan Speaks at 18:30 (GMT+3);
• – US Fed Chair Powell Speaks 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.

By ForexTime

Article by ForexTime

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

By JustForex

The Federal Reserve raised interest rates and changed its outlook for further rate hikes, indicating a period of higher interest rates. The prospect of higher interest rates over the long term has put pressure on growing sectors of the economy. As the stock market closed on Tuesday, the Dow Jones Index (US30) decreased by 1.70%, and the S&P 500 Index (US500) lost 1.71%. The NASDAQ Technology Index (US100) fell by 1.79% yesterday.

The Fed raised rates by 0.75% and signaled that rates will reach about 4.4% by the end of the year and 4.6% by the end of 2023, well above the 3.8% previously projected. For 2023, inflation is estimated to fall to 3.1% from the previous forecast of 2.7%, and in 2024, inflation expectations will remain unchanged at 2.3%. Fed members estimate that the economy will grow by 0.2% in 2022, sharply lower than the previous forecast of 1.7%. Growth forecasts have also been revised downward for 2023 and 2024. The Fed also predicts that a recession might be avoided, despite the need to accelerate rate hikes. But economists at Jefferies do not believe this and believe the Fed is incapable of effecting such a delicate planting of the economy. The pace of tightening has increased the risk that the Fed will slow growth too much, pushing the economy into a deep recession. The Fed’s aggressive push to bring inflation down to 2% would take years and cost higher unemployment and slower growth, according to policymakers who have questioned the prospects of a so-called “soft landing.” Bond markets quickly assessed the growing risk of recession as the Treasury yield curve flipped further. The yield on the 2-year Treasury bond rose above 50 basis points compared to the yield on the 10-year Treasury bond.

Federal Reserve Chairman Jerome Powell said Wednesday that the US real estate market will likely undergo a “correction.” This year, the Fed’s rate hikes have had the biggest impact on the real estate sector, slowing sales and lowering prices. Housing inflation will remain high for some time.

As for business activity, the geopolitical backdrop, slowing growth in China, the possibility of energy rationing in Europe, a strong dollar, and volatile domestic equity and real estate markets point to clear recession risks worldwide.

Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.76%, French CAC 40 (FR40) added 0.87%, Spanish IBEX 35 (ES35) declined by 0.01%, British FTSE 100 (UK100) closed the day at 0.63%.

Prime Minister Liz Truss’ plans to cut payroll taxes and reverse a planned corporate tax hike risk putting the UK national debt on an unsustainable upward trajectory, the IFS Institute for Financial Studies said Wednesday. Truss’ plans will likely result in a permanent budget deficit of about 3.5% of the Gross Domestic Product once energy subsidies end, well above the pre-recession average of 1.9%. Truss has promised tax cuts of about £30 billion a year. Finance Minister Kwasi Kwarteng will outline the details of the financial plan on Friday.

Finland will prepare a bill to restrict Russian tourists from entering its territory, Foreign Minister Pekka Haavisto said at a news conference in New York.

The European Commission is preparing a new package of sanctions against Russia. On September 23, the EU executive body will initiate a discussion of its proposals with ambassadors of EU countries. Among the proposed measures will be a restriction on Russian oil prices and a ban on imports of Russian diamonds and other luxury items.

The US President Joe Biden’s main talking points at the UN General Assembly:

• Russia is shamelessly violating the basic provisions of the UN charter. If countries can pursue imperial ambitions without consequence, it jeopardizes everything the UN stands for.
• Putin recklessly threatens nuclear weapons.
• No one has threatened Russia, and no one but Russia has sought conflict.
• The United States does not seek conflict with China.

Oil prices fell after the Fed raised interest rates to curb inflation because it could also reduce economic activity. A widespread increase in US oil, gasoline, and distillate inventories announced by the Energy Information Administration last week sent oil prices near their January lows.

Increased geopolitical risks made not only the dollar a safe haven but also the precious metals gold and silver, which yesterday showed resilience to the rising dollar. Investors are returning to safe haven assets because there are almost no alternatives now.

Asian markets were trading lower yesterday. Japan’s Nikkei 225 (JP225) was 1.36% lower, Hong Kong’s Hang Seng (HK50) decreased by 1.79% on Wednesday, and Australia’s S&P/ASX 200 (AU200) was 1.56% lower on the day.

Asian fund managers are betting that the inevitable fall of the Japanese yen will soon stop, and some are even getting ready for the possible fall of the Japanese government bonds. Analysts believe Japanese politicians will ask Bank of Japan Governor Haruhiko Kuroda to cancel the 0.25% ceiling on 10-year JGBs and try to steer the economy away from trouble. But for now, this is just a talk. At its meeting today, the Japan Central Bank kept all key elements of its policy unchanged.

S&P 500 (F) (US500) 3,789.93  −66.00  (−1.71%)

Dow Jones (US30) 30,183.78 −522.45 (−1.70%)

DAX (DE40) 12,767.15  +96.32 (+0.76%)

FTSE 100 (UK100) 7,237.64 +44.98 (+0.63%)

USD Index 111.32 +1.10 (+1.00%)

• – Japan BoJ Outlook Report (Tentative);
• – Japan BoJ Interest Rate Decision (Tentative);
• – Japan BoJ Press Conference at 09:30 (GMT+3);
• – Switzerland SNB Monetary Policy Statement at 10:30 (GMT+3);
• – Switzerland SNB Interest Rate Decision at 10:30 (GMT+3);
• – Norwegian Interest Rate Decision at 11:30 (GMT+3);
• – UK BoE Interest Rate Decision at 14:00 (GMT+3);
• – UK MPC Meeting Minutes at 14:00 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (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.

By JustForex

The US indices fell on Tuesday as investors raised their bearish rates over fears that the Federal Reserve might signal a continuation of aggressive rate hikes. The Fed’s willingness to continue tightening monetary policy brings the economic recession closer. The bond market continues to signal the risk of a broader recession as the continued inversion in the key part of the Treasury yield curve has intensified further. As the stock market closed on Tuesday, the Dow Jones Index (US30) decreased by 1.01%, and the S&P 500 Index (US500) lost 1.13%. The NASDAQ Technology Index (US100) fell by 2.52% yesterday.

The Fed has an important monetary policy meeting today. Analysts expect the US Federal Reserve to raise interest rates by 0.75% for the third time in a row. If the data is worse than expected and the Fed raises the rate by 1%, the dollar index may see upward momentum. If, on the contrary, the Fed raises interest rates by 0.5%, the dollar index is likely to fall sharply as the Fed is less aggressive. If the fact is as expected, there is a high probability that the market will just temporarily increase volatility.

ECB head Christine Lagarde said yesterday that Europe is experiencing a record-high inflation rate for the tenth month in a row, and this streak will continue soon. When inflation is high, monetary policy cannot remain expansionary. That is why the ECB is pursuing a strategy of monetary policy normalization. Normalization involves stopping net asset purchases and then raising rates to a neutral level that is neither stimulative nor restrictive. This is why the ECB has not only begun to raise interest rates but has indicated that it expects to raise interest rates further over the next few meetings. The ECB will reconsider whether the normalization strategy is enough to return to 2% inflation in the medium term.

The Netherlands imposed price caps on gas and electricity on January 1.

Oil falls ahead of the Fed’s interest rate decision. The dollar rose for the third time in four sessions, adding weight to oil prices as industry analysts forecast a third consecutive weekly increase in domestic crude inventories.

Gold prices are stuck at $1,600 a dollar, falling for the fifth time in six days. The rise in the dollar index is the main catalyst for gold’s weakness. Gold has lost about 4% in the last six sessions. Gold and silver could fall sharply if Powell can convince markets today not only that they will continue to aggressively tighten policy but that they will keep rates in place even as the economic downturn worsens.

Putin has announced a partial military mobilization in Russia. The Kremlin is still not calming down and has once again begun to intimidate Ukraine and the West with nuclear weapons.

Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) gained 0.44%, Hong Kong’s Hang Seng (HK50) added 1.16% on Tuesday, while Australia’s S&P/ASX 200 (AU200) was up by 1.29% on the day.

China kept its benchmark lending rates on hold on Tuesday, as expected, as authorities postponed immediate monetary policy easing after a sharp drop in the local currency. The benchmark one-year lending rate (LPR) was kept at 3.65%, while the five-year LPR remained unchanged at 4.30%. Analysts believe that the growing divergence in the US and Chinese monetary policy could heighten fears of capital flight from China as Beijing seeks to mobilize resources to restore sluggish growth.

S&P 500 (F) (US500) 3,855.93  −43.96  (−1.13%)

Dow Jones (US30) 30,706.23 −313.45 (−1.01%)

DAX (DE40) 12,670.83  −132.41 (−1.03%)

FTSE 100 (UK100) 7,192.66 −44.02 (−0.61%)

USD Index 110.15 +0.41 (+0.38%)

• – US Existing Home Sales (m/m) at 17:00 (GMT+3);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• – US Fed Interest Rate Decision at 21:00 (GMT+3);
• – US FOMC Statement at 21:00 (GMT+3);
• – US FOMC Economic Projections at 21:00 (GMT+3);
• – US FOMC Press Conference at 21:30 (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.