Asian shares were painted red on Tuesday, tracking a heavy sell-off on Wall Street overnight as concerns over upcoming aggressive Fed hikes sapped risk sentiment. European shares took a beating in the previous session amid fears around the region’s energy crisis. Stocks are expected to open lower again this morning thanks to the negative sentiment and recession fears.
In the currency space, king dollar flexed its safe-haven muscles while EURUSD cut through parity like a hot knife through butter, touching levels not seen since 2002. Oil bulls regained hope overnight thanks to comments from Saudi Arabia regarding potential production cuts. And despite the risk-off mood, gold was hammered by a stronger dollar and rising Treasury yields.
There is a strong sense of unease across financial markets as investors grapple with inflation concerns, jitters over tightening US monetary policy, and recession fears. This will be a big week for markets thanks to the annual Jackson Hole Economic Symposium where central bankers and financial heavyweights congregate to discuss major economic issues. Investors hope to use this major event to gain fresh insight into the Fed’s thoughts on inflation, economic growth, and monetary policy. All eyes will be on Federal Reserve Chair Jerome Powell’s speech on Friday which is the main risk event and potential market shaker. What Powell reveals during the speech or chooses to hold back could set the tone for global markets in the weeks ahead.
On the data front, investors will be keeping an eye on the August S&P global flash PMIs for the eurozone due to be published this morning. Further declines are forecast as the energy crisis takes its toll on demand in manufacturing and services.
Will Fed’s Powell support dollar bulls?
The dollar continues to draw ample strength from risk aversion and fears over the Fed reasserting its hawkish message this week. Investors are looking for fresh clarity over how big future rate hikes will be and the strength of the US economy in the face of high inflation. If Powell fortifies expectations around the Fed moving ahead with another jumbo rate hike in September and more tightening ahead, this could boost the dollar. Alternatively, a cautious-sounding Powell that expresses concerns over the US economic outlook may reduce the odds of big rate moves, weakening the dollar.
Currency spotlight – EURUSD
After sinking back below parity, how much lower can the EURUSD trade? An appreciating dollar made easy work of the 1.000 level yesterday as prices tumbled to levels not seen since late 2002. The downside momentum is potent with the first level of interest at 0.9900.
A solid breakdown and daily close under this point could open the doors towards 0.9650 which acted as strong support back in the autumn of 2002. Should 0.9900 prove to be reliable support, prices could experience a bounce back to parity before resuming the downtrend.
Commodity spotlight – Gold
It has not been a great start to the week for gold. The precious metal was smothered by a stronger dollar, rising Treasury yields, and Fed rate hike jitters.
Prices are trading at $1736 as of writing with the next key level of support found at $1724. The potential for volatility in the precious metal is high this week, thanks to Jackson Hole and Powell’s remarks potentially acting as a fresh fundamental spark for gold. If prices are able to breach $1724, a selloff towards $1700 is on the cards. Alternatively, a move back above $1752 may open a path back towards $1770 and $1800, respectively.
It’s an odd quirk of history that, on the first day of his ill-fated presidential campaign in March 1968, Robert F Kennedy chose to talk to his audience about the limitations of gross domestic product* (GDP) – the world’s headline indicator of economic progress.
It seems stranger still that, despite the power of that iconic speech, growth in GDP remains to this day the predominant measure of progress across the world. Economic success is measured by it. Government policy is assessed by it. Political survival hangs on it.
Kennedy’s speech inspired a host of critiques. It has been quoted by presidents, prime ministers and Nobel laureates. Yet GDP itself has survived until now, more-or-less unscathed. But amid ever-louder concerns about the failure of national economies to tackle the multiple threats posed by climate change, spiralling energy costs, insecure employment and widening levels of inequality, the need to define and measure progress in a different way now looks as unarguable as it is urgent.
The goods, the bads, and the missing
In simple terms, GDP is a measure of the size of a country’s economy: how much is produced, how much is earned, and how much is spent on goods and services across the nation. The monetary total, whether in dollars or euros, yuan or yen, is then adjusted for any general increase in prices to give a measure of “real” economic growth over time. When governments adopt policies to pursue economic growth, this is how those policies are evaluated.
Since 1953, GDP has been the headline measure in a complex system of national accounts overseen by the United Nations. Developed during the second world war, these accounts were motivated in part by the need to determine how much governments could afford to spend on the war effort.
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The Insights team generates long-form journalism and is working with academics from different backgrounds who have been engaged in projects to tackle societal and scientific challenges.
But in measuring the monetary value of economic activity, GDP can incorporate many of the “bads” that detract from our quality of life. War, pollution, crime, prostitution, traffic congestion, disasters like wildfires and the destruction of nature – all can have a positive impact on GDP. Yet they cannot really be construed as components of economic success.
At the same time, there are numerous aspects of our lives that simply go missing from this conventional account. The inequality in our societies. The contributions from unpaid work. The labour of those who care for the young and the elderly at home or in the community. The depletion of natural resources or biodiversity. And the value of data and many digital services.
What lies outside the market, including public services funded out of taxation, remains unmeasured in a metric of monetary exchange. Kennedy was blunt: “[GDP] measures everything, in short, except that which makes life worthwhile.”
It’s a sentiment that has resonance half a century later. In a striking encounter during the Brexit debate, a UK academic was trying to convey to a public meeting the dangers of leaving the EU. The impact on GDP would dwarf any savings from the UK’s contributions to the EU budget, he told the audience. “That’s your bloody GDP!” shouted a woman in the crowd. “It’s not ours.”
This sense of an indicator out of touch with reality may be one of the reasons there is momentum for reform. When GDP conceals crucial differences between the richest and the poorest in society, it inevitably says little about the prospects for ordinary people.
But there are other reasons too for an emerging change of heart. The pursuit of GDP growth as a policy goal, and the impact that has on government, business and personal decision-making, has accompanied increasing devastation of the natural world, a loss of forests and habitats, the destabilisation of the climate, and near-meltdowns of the world’s financial markets. At the same time, GDP has become a poor measure of the technological transformation of society.
Its tenacity as a measure of progress, despite these well-known limitations, arises from factors which are on the one hand technocratic, and on the other sociological. As the headline measure in a sophisticated system of national accounts, GDP has a technocratic convenience and analytical elegance that remains unsurpassed by many alternative measures. Its authority arises from its ability to be simultaneously a measure of production output, consumption expenditure and income in the economy.
Despite this complex framework, it also offers the deceptive simplicity of a single headline figure which appears to be directly comparable from year to year and across nations, based on the simple (if inadequate) idea that more economic activity necessarily leads to a better life.
However, the combined technical authority and political usefulness of this idea has led to “path dependence” and forms of social lock-in that are difficult to address without significant effort. Think of switching to an alternative as being like switching from driving on the left to the right-hand side of the road.
Yet what we measure matters. And while we’re busy looking in the wrong direction, as Kennedy pointed out, bad things can happen. Kennedy’s campaign – and his critique of GDP – was cut cruelly short on June 5 1968, when he was fatally wounded by an assassin’s bullet. More than half a century later, his call for reform of how we assess progress (or its absence) has never been stronger.
The trouble with GDP: historical flaws
The way societies have understood and measured progress has changed considerably over the centuries. Measurement of “the economy” as a whole is a relatively modern, 20th-century concept, beginning with efforts by statisticians and economists such as Colin Clark and Simon Kuznets in the 1920s and 1930s to understand the impact of financial crisis and depression.
Kuznets, now best known for his curve describing the relationship between GDP and income inequality, was particularly concerned to develop a measure of economic welfare rather than just activity. For example, he argued for omitting expenditures that were unwelcome necessities rather than services or goods consumers actively wanted – such as defence spending.
However, the second world war overtook and absorbed these earlier notions of a single measure of economic welfare, resulting in what first became modern gross national product (GNP), and then GDP. The imperative – set out on the Allied side by John Maynard Keynes in his 1940 pamphlet How to Pay for the War – was measuring productive capacity, and the reduction in consumption required to have enough resources to support the military effort. Economic welfare was a peacetime concern.
Post-war, unsurprisingly, American and British economists such as Milton Gilbert, James Meade and Richard Stone took the lead in codifying these statistical definitions through the UN – and its process for agreeing and formalising definitions in the system of national accounts (SNA) is still in place today. However, since at least the 1940s, some important inadequacies of both the SNA and GDP have been widely known and debated.
Indeed, as long ago as 1934, Margaret Reid published her book Economics of Household Production, which pointed out the need to include unpaid work in the home when thinking about economically useful activity.
The question of whether and how to measure the household and informal sectors was debated during the 1950s – particularly as this makes up a larger share of activity in low-income countries – but was omitted until some countries, including the UK, started to create household satellite accounts around 2000. Omitting unpaid work meant, for instance, that the UK’s increased productivity growth between the 1960s and 1980s was then overstated, because it in part reflected the inclusion of many more women in paid work whose contributions had previously been invisible to the national GDP metric.
Another longstanding and widely understood failure of GDP is not including environmental externalities and the depletion of natural capital. The metric takes incomplete account of many activities that do not have market prices, and ignores the additional social costs of pollution, greenhouse gas emissions and similar outputs associated with economic activities.
What’s more, the depletion or loss of assets such as natural resources (or indeed buildings and infrastructure lost in disasters) boosts GDP in the short term because these resources are used in economic activities, or because there is a surge in construction after a disaster. Yet the long-term opportunity costs are never counted. This massive shortcoming was widely discussed at the time of landmark publications such as the 1972 Limits to Growth report from the Club of Rome, and the 1987 Brundtland Report from the World Commission on Environment and Development.
As with household and informal activity, there has been recent progress in accounting for nature, with the development of the System of Environmental Economic Accounting (SEEA) and publication of regular (but separate) statistics on natural capital in a number of countries. The UK has again been a pioneer in this area, while the US recently announced it would start following this approach too.
New challenges to the value of GDP
Other, perhaps less obvious failings of GDP have become more prominent recently. Digitisation of the economy has transformed the way many people spend their days in work and leisure, and the way many businesses operate, yet these transformations are not apparent in official statistics.
Measuring innovation has always been tricky, because new goods or improved quality need to be incorporated into observable prices and quantities – and what is the metric for a unit of software or management consultancy? But it is harder now because many digital services are “free” at point of use, or have the features of public goods in that many people can use them at the same time, or are intangible. For example, data is without doubt improving the productivity of companies that know how to use it to improve their services and produce goods more effectively – but how should a dataset’s value, or potential value, to society (as opposed to a big tech company) be estimated?
Recent work looking at the price of telecommunications services in the UK has estimated that output growth in this sector since 2010 has ranged anywhere from about 0% to 90%, depending on how the price index used to convert market prices to real (inflation-adjusted) prices takes account of the economic value of our rapidly growing use of data. Similarly, it is not obvious how to incorporate advertising-funded “free” search, crypto currencies and NFTs in the measurement framework.
A key limitation of GDP, particularly in terms of its use as an indicator of social progress, is that it offers no systematic account of the distribution of incomes. It is entirely possible for average or aggregate GDP to be rising, even as a significant proportion of the population find themselves worse off.
Ordinary incomes have stagnated or fallen in recent decades even as the richest in society have become wealthier. In the US, for example, Thomas Piketty and his colleagues have shown that in the period between 1980 and 2016, the top 0.001% of society saw their incomes grow by an average of 6% per year. Income for the poorest 5% of society fell in real terms.
Given these many issues, it might seem surprising that the debate about “Beyond GDP” is only now – possibly – turning into actions to change the official statistical framework. But paradoxically, one hurdle has been the proliferation of alternative progress metrics.
Whether these are single indices that combine a number of different indicators or dashboards showcasing a wide range of metrics, they have been ad hoc and too varied to build consensus around a new global way of measuring progress. Few of them provide an economic framework for consideration of trade-offs between the separate indicators, or guidance as to how to interpret indicators moving in different directions. There is a breadth of information but as a call to action, this cannot compete against the clarity of a single GDP statistic.
Statistical measurement is like a technical standard such as voltage in electricity networks or the Highway Code’s rules of the road: a shared standard or definition is essential. While an overwhelming majority might agree on the need to go beyond GDP, there also needs to be enough agreement about what “beyond” actually involves before meaningful progress on how we measure progress can be made.
Politicians can make it sound straightforward. Writing in 2009, the then-French president Nicolas Sarkozy explained he had convened a commission – led by internationally acclaimed economists Amartya Sen, Joseph Stiglitz and Jean-Paul Fitoussi – on the measurement of economic performance and social progress on the basis of a firm belief: that we will not change our behaviour “unless we change the ways we measure our economic performance”.
Sarkozy also committed to encouraging other countries and international organisations to follow the example of France in implementing his commission’s recommendations for a suite of measures beyond GDP. The ambition was no less than the construction of a new global economic, social and environmental order.
In 2010, the recently-elected UK prime minister, David Cameron, launched a programme to implement the Sarkozy commission’s recommendations in the UK. He described this as starting to measure progress as a country “not just by how our economy is growing, but by how our lives are improving – not just by our standard of living, but by our quality of life”.
Once again, the emphasis was on measurement (how far have we got?) rather than behaviour change (what should people do differently?). The implication is that changing what we measure necessarily leads to different behaviours – but the relationship is not that simple. Measures and measurers exist in political and social spheres, not as absolute facts and neutral agents to be accepted by all.
This should not dissuade statisticians from developing new measures, but it should prompt them to engage with all who might be affected – not just those in public policy, commerce or industry. The point after all is to change behaviour, not just to change the measures.
Economists are increasingly adopting complex systems thinking, including both social and psychological understandings of human behaviour. For example, Jonathan Michie has pointed to ethical and cultural values, as well as public policy and the market economy, as the big influences on behaviour. Katharina Lima di Miranda and Dennis Snower have highlighted social solidarity, individual agency and concern for the environment alongside the “traditional” economic incentives captured by GDP.
GDP alternatives in practice
Since Kennedy’s 1968 critique, there have been numerous initiatives to replace, augment or complement GDP over the years. Many dozens of indicators have been devised and implemented at local, national and international scales.
Some aim to account more directly for subjective wellbeing, for example by measuring self-reported life satisfaction or “happiness”. Some hope to reflect more accurately the state of our natural or social assets by developing adjusted monetary and non-monetary measures of “inclusive wealth” (including a team at the University of Cambridge led by this article’s co-author Diane Coyle). The UK government has accepted this as a meaningful approach to measurement in several recent policy documents, including its Levelling Up white paper.
There are two fundamental arguments for a wealth-based approach:
It embeds consideration for sustainability in the valuing of all assets: their value today depends on the entire future flow of services they make available. This is exactly why stockmarket prices can fall or rise suddenly, when expectations about the future change. Similarly, the prices at which assets such as natural resources or the climate are valued are not just market prices; the true “accounting prices” include social costs and externalities.
It also introduces several dimensions of progress, and flags up the correlations between them. Inclusive wealth includes produced, natural and human capital, and also intangible and social or organisational capital. Using a comprehensive wealth balance sheet to inform decisions could contribute to making better use of resources – for example, by considering the close links between sustaining natural assets and the social and human capital context of people living in areas where those assets are under threat.
Other initiatives aim to capture the multi-dimensional nature of social progress by compiling a dashboard of indicators – often measured in non-monetary terms – each of which attempts to track some aspect of what matters to society.
New Zealand’s Living Standards Framework is the best-known example of this dashboard approach. Dating back to a 1988 Royal Commission on Social Policy and developed over more than a decade within the New Zealand Treasury, this framework was precipitated by the need to do something about the discrepancy between what GDP can reflect and the ultimate aim of the Treasury: to make life better for people in New Zealand.
The NZ Treasury now uses it to allocate fiscal budgets in a manner consistent with the identified needs of the country in relation to social and environmental progress. The relevance to combating climate change is particularly clear: if government spending and investment are focused on narrow measures of economic output, there is every possibility that the deep decarbonisation needed to achieve a just transition to a net zero carbon economy will be impossible. Equally, by identifying areas of society with declining wellbeing, such as children’s mental health, it becomes possible to allocate Treasury resources directly to alleviate the problem.
The UK’s Measuring National Wellbeing (MNW) programme, directed by Paul Allin (a co-author of this article), was launched in November 2010 as part of a government-led drive to place greater emphasis on wellbeing in national life and business. Much of the emphasis was on the subjective personal wellbeing measures that the UK’s Office for National Statistics (ONS) continues to collect and publish, and which appear to be increasingly taken up as policy goals (driven in part by the What Works Centre for Wellbeing).
The MNW team was also charged with addressing the full “beyond GDP” agenda, and undertook a large consultation and engagement exercise to find out what matters to people in the UK. This provided the basis for a set of indicators covering ten broad areas which are updated by the ONS from time to time. While these indicators continue to be published, there is no evidence that they are being used to supplement GDP as the UK’s measure of progress.
Accounting for inequality within a single aggregate index is obviously tricky. But several solutions to this problem exist. One of them, advocated by the Sen-Stiglitz-Fitoussi commission, is to report median rather than mean (or average) values when calculating GDP per head.
Another fascinating possibility is to adjust the aggregate measure using a welfare-based index of inequality, such as the one devised by the late Tony Atkinson. An exercise using the Atkinson index carried out by Tim Jackson, also a co-author of this article, calculated that the welfare loss associated with inequality in the UK in 2016 amounted to almost £240 billion – around twice the annual budget of the NHS at that time.
Among the most ambitious attempts to create a single alternative to GDP is a measure which has become known as the Genuine Progress Indicator (GPI). Proposed initially by economist Herman Daly and theologian John Cobb, GPI attempts to adjust GDP for a range of factors – environmental, social and financial – which are not sufficiently well reflected in GDP itself.
GPI has been used as a progress indicator in the US state of Maryland since 2015. Indeed, a bill introduced to US Congress in July 2021 would, if enacted, require the Department of Commerce to publish a US GPI, and to “use both the indicator and GDP for budgetary reporting and economic forecasting”. GPI is also used in Atlantic Canada, where the process of building and publishing the index forms part of this community’s approach to its development.
A potential gamechanger?
In 2021, the UN secretary-general António Guterres concluded his Our Common Agenda report with a call for action. “We must urgently find measures of progress that complement GDP, as we were tasked to do by 2030 in target 17.19 of the Sustainable Development Goals.” He repeated this demand in his priorities for 2022 speech to the UN General Assembly.
Guterres called for a process “to bring together member states, international financial institutions and statistical, science and policy experts to identify a complement or complements to GDP that will measure inclusive and sustainable growth and prosperity, building on the work of the Statistical Commission”.
The first manual explaining the UN’s system of national accounts was published in 1953. It has since been through five revisions (the last in 2008) designed to catch up with developments in the economy and financial markets, as well as to meet user needs across the world for a wider spread of information.
The next SNA revision is currently in development, led by the UN Statistics Division and mainly involving national statistical offices, other statistical experts and institutional stakeholders such as the IMF, World Bank and Eurostat.
But unlike the UN’s COP processes relating to climate change and, to a lesser extent, biodiversity, there has, to date, been little wider engagement with interested parties – from business leaders and political parties to civil society, non-governmental organisations and the general public.
As the British science writer Ehsan Masood has observed, this revision process is happening below the radar of most people who are not currently users of national accounts. And this means many very useful ideas that could be being fed in are going unheard by those who will ultimately make decisions about how nations measure their progress in the future.
The essence of sustainable development was captured in the 1987 Brundtland Report: “To contribute to the welfare and wellbeing of the current generation, without compromising the potential of future generations for a better quality of life.” Yet it remains unclear how the next SNA revision will provide such an intergenerational lens, despite a new focus on “missing” capitals including natural capital.
Similarly, while the revision programme is addressing globalisation issues, these are only about global production and trade – not, for example, the impacts of national economies on the environment and wellbeing of other countries and populations.
Ambitious deadlines have been set further into the future: achieving the UN’s Sustainable Development Goals by 2030, and reducing global net emissions of greenhouse gases to zero before 2050. The SNA revision process – which will see a new system of national accounts agreed in 2023 and enacted from 2025 – is a key step in achieving these longer-term goals. That is why opening up this revision process to wider debate and scrutiny is so important.
It’s time to abandon this ‘GDP fetish’
One lesson to learn from the history of indicators, such as those about poverty and social exclusion, is that their impact and effectiveness depends not only on their technical robustness and their fitness for purpose, but also on the political and social context – what are the needs of the time, and the prevailing climate of ideas?
The current SNA revision should be a process as much about the use and usefulness of new measures as about their methodological rigour. Indeed, we might go as far as Gus O’Donnell, the former UK cabinet secretary, who said in 2020: “Of course measurement is hard. But roughly measuring the right concepts is a better way to make policy choices than using more precise measures of the wrong concepts.”
In short, there is an inherent tension involved in constructing an alternative to GDP – namely achieving a balance between technical robustness and social resonance. The complexity of a dashboard of indicators such as New Zealand’s Living Standards Framework is both an advantage in terms of meaningfulness, and a disadvantage in terms of communicability. In contrast, the simplicity of a single measure of progress such as the Genuine Progress Indicator – or, indeed, GDP – is both an advantage in terms of communication, and a disadvantage in terms of its inability to provide a more nuanced picture of progress.
Ultimately, a plurality of indicators is probably essential in navigating a pathway towards a sustainable prosperity that takes full account of individual and societal wellbeing. Having a wider range of measures should allow for more diverse narratives of progress.
Some momentum in the current SNA revisions process and ongoing statistical research is directed toward measurement of inclusive wealth – building on the economics of sustainability brought together in Partha Dasgupta’s recent review of the economics of biodiversity. This framework can probably gain a broad consensus among economists and statisticians, and is already being implemented by the UN, starting with natural capital and environmental accounting.
Including wellbeing measures in the mix would signal that wellbeing matters, at least to some of us, while also recognising that many different things can affect wellbeing. The evidence to date is that planting wellbeing measures in a different part of the data ecosystem means they will be overlooked or ignored. Wellbeing measures are not a panacea, but without them we will continue to do things that restrict rather than enhance wellbeing and fail to recognise the potential economic, social and environmental benefits that a wellbeing focus should bring.
The task of updating the statistical framework to measure economic progress better is non-trivial. The development of the SNA and its spread to many countries took years or even decades. New data collection methodologies should be able to speed things up now – but the first step in getting political buy-in to a better framework for the measurement of progress is an agreement about what to move to.
National accounting needs what the name suggests: an internally-consistent, exhaustive and mutually exclusive set of definitions and classifications. A new framework will require collecting different source data, and therefore changing the processes embedded in national statistical offices. It will need to incorporate recent changes in the economy due to digitalisation, as well as the long-standing issues such as inadequate measurement of environmental change.
Ultimately, this “beyond GDP” process needs to grapple not only with measurement problems but also with the various uses and abuses to which GDP has been put. Kennedy’s neat summary that it measures “everything except that which makes life worthwhile” points as much to the misuse of GDP as to its statistical limitations. Its elegance in being simultaneously a measure of income, spending and output means that in some form, it is likely to remain a valid tool for macroeconomic analysis. But its use as an unequivocal arbiter of social progress was never appropriate, and probably never will be.
Clearly, the desire to know if society is moving in the right direction remains a legitimate and important goal – perhaps more so now than ever. But in their search for a reliable guide towards social wellbeing, governments, businesses, statisticians, climate scientists and all other interested parties must abandon once and for all what the Nobel Laureate Stiglitz called a “GDP fetish”, and work with civil society, the media and the public to establish a more effective framework for measuring progress.
*Strictly speaking, Robert Kennedy referred to gross national product (GNP) in his 1968 speech. You can read more about the UN’s Towards the 2025 SNA process here.
Curious Kids is a series for children of all ages. If you have a question you’d like an expert to answer, send it to [email protected].
What are wormholes and do they exist? – Chinglembi D., age 12, Silchar, Assam, India
Imagine two towns on two opposite sides of a mountain. People from these towns would probably have to travel all the way around the mountain to visit one another. But, if they wanted to get there faster, they could dig a tunnel straight through the mountain to create a shortcut. That’s the idea behind a wormhole.
A wormhole is like a tunnel between two distant points in our universe that cuts the travel time from one point to the other. Instead of traveling for many millions of years from one galaxy to another, under the right conditions one could theoretically use a wormhole to cut the travel time down to hours or minutes.
Because wormholes represent shortcuts through space-time, they could even act like time machines. You might emerge from one end of a wormhole at a time earlier than when you entered its other end.
While scientists have no evidence that wormholes actually exist in our world, they’re good tools to help astrophysicists like me think about space and time. They may also answer age-old questions about what the universe looks like.
Fact or fiction?
Because of these interesting features, many science fiction writers use wormholes in novels and movies. However, scientists have been just as captivated by the idea of wormholes as writers have.
While researchers have never found a wormhole in our universe, scientists often see wormholes described in the solutions to important physics equations. Most prominently, the solutions to the equations behind Einstein’s theory of space-time and general relativity include wormholes. This theory describes the shape of the universe and how stars, planets and other objects move throughout it. Because Einstein’s theory has been tested many, many times and found to be correct every time, some scientists do expect wormholes to exist somewhere out in the universe.
But, other scientists think wormholes can’t possibly exist because they would be too unstable.
The constant pull of gravity affects every object in the universe, including Earth. So gravity would have an effect on wormholes, too. The scientists who are skeptical about wormholes believe that after a short time the middle of the wormhole would collapse under its own gravity, unless it had some force pushing outward from inside the wormhole to counteract that force. The most likely way it would do that is using what’s called “negative energies,” which would oppose gravity and stabilize the wormhole.
But as far as scientists know, negative energies can be created only in amounts much too small to counteract a wormhole’s own gravity. It’s possible that the Big Bang created teeny, tiny wormholes with small amounts of negative energies way back at the beginning of the universe, and over time these wormholes have stretched out as the universe has expanded.
In this short video by Fusion, a Caltech professor sums up what wormholes are and the stability question that’s boggling scientists.
Just like black holes?
While wormholes are interesting objects structures to think about, they still aren’t accepted into mainstream science. But that doesn’t mean they’re not real – black holes, which we astrophysicists know abound in our universe, weren’t accepted when scientists first suggested they existed, back in the 1910s.
Einstein first formulated his famous field equations in 1915, and German scientist Karl Schwarzschild found a way to mathematically describe black holes after only one year. However, this description was so peculiar that the leading scientists of that era refused to believe that black holes could actually exist in nature. It took people 50 years to start taking black holes seriously – the term “black hole” wasn’t even coined until 1967.
The same could happen with wormholes. It may take scientists a little while to come up with a consensus about whether or not they can exist. But if they do find strong evidence pointing to the existence of wormholes – which they may be able to do by looking at odd movements in star orbits – the discovery will shape how scientists see and understand the universe.
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And since curiosity has no age limit – adults, let us know what you’re wondering, too. We won’t be able to answer every question, but we will do our best.
Hot summer days can mean high electricity bills. People want to stay comfortable without wasting energy and money. Maybe your household has fought over the best strategy for cooling your space. Which is more efficient: running the air conditioning all summer long without break, or turning it off during the day when you’re not there to enjoy it?
We are a team of architecturaland building systemsengineers who used energy models that simulate heat transfer and A/C system performance to tackle this perennial question: Will you need to remove more heat from your home by continuously removing heat throughout the day or removing excess heat only at the end of the day?
The answer boils down to how energy intensive it is to remove heat from your home. It’s influenced by many factors such as how well your house is insulated, the size and type of your air conditioner and outdoor temperature and humidity.
According to our unpublished calculations, letting your home heat up while you’re out at work and cooling it when you get home can use less energy than keeping it consistently cool – but it depends.
Blast A/C all day, even when you’re away?
First, think about how heat accumulates in the first place. It flows into your home when the building has less stored heat than outside. If the amount of heat flowing into your home is given by a rate of “1 unit per hour,” your A/C will always have 1 unit of heat to remove every hour. If you turn off your A/C and let the heat accumulate, you could have up to eight hours’ worth of heat at the end of the day.
It’s often less than that, though – homes have a limit to how much heat they can store. And the amount of heat that enters your home depends on how hot the building was to begin with. For example, if your home can only store 5 units of thermal energy before coming to an equilibrium with the outdoor air temperature, then at the end of the day you will only ever have to remove 5 units of heat at most.
Additionally, as your home heats up, the process of heat transfer slows down; eventually it reaches zero heat transfer at equilibrium, when the temperature inside is the same as the temperature outside. Your A/C also cools less effectively in extreme heat, so keeping it off during the hottest parts of the day can increase overall efficiency of the system. These effects mean there’s no one straightforward answer to whether you should blast the A/C all day or wait until you get back home in the evening.
Energy used by different A/C strategies
Consider a test case of a small home with typical insulation in two warm climates: dry (Arizona) and humid (Georgia). Using energy modeling software created by the U.S. National Renewable Energy Laboratory for analyzing energy use in residential buildings, we looked at multiple test cases for energy use in this hypothetical 1,200 square-foot (110 square-meter) home.
We considered three temperature strategy scenarios. One has the indoor temperature set to a constant 76 degrees Fahrenheit (24.4 degrees Celsius). A second lets the temperature float up to 89 F (31.6 C) during an eight-hour workday – a “setback.” The last uses a temperature setback to 89 F (31.6 C) for a short four-hour workday.
Within these three scenarios, we looked at three different A/C technologies: a single stage central A/C, a central air source heat pump (ASHP) and minisplit heat pump units. Central A/C units are typical of current residential buildings, while heat pumps are gaining popularity due to their improved efficiency. Central ASHPs are easily used in one-to-one replacements of central A/C units; minisplits are more efficient than central A/C but costly to set up.
We wanted to see how energy use from A/C varied across these cases. We knew that regardless of the HVAC technology used, the A/C system would surge when the thermostat setpoint returned to 76 F (24.4 C) and also for all three cases in the late afternoon when outdoor air temperatures are usually the highest. In the setback cases, we programmed the A/C to start cooling the space before the resident is back, ensuring thermal comfort by the time they get home.
Energy models can show how much energy a house will use under particular conditions – like Phoenix’s hot, dry summer weather. The researchers ran the numbers on three different HVAC technologies and three different temperature-setting strategies. Pigott/Scheib/Baker/CU Boulder, CC BY-NDThe researchers used the same three different HVAC technologies and three temperature-setting strategies, but this time for a house in hot and humid Atlanta. Pigott/Scheib/Baker/CU Boulder, CC BY-ND
What we found was that even when the A/C temporarily spikes to recover from the higher indoor temperatures, the overall energy consumption in the setback cases is still less than when maintaining a constant temperature throughout the day. On an annual scale with a conventional central A/C, this could result in energy savings of up to 11%.
However, the energy savings may decrease if the home is better insulated, the A/C is more efficient or the climate has less dramatic temperature swings.
The central air source heat pump and minisplit heat pump are more efficient overall but yield less savings from temperature setbacks. An eight-hour setback on weekdays provides savings regardless of the system type, while the benefits gleaned from a four-hour setback are less straightforward.
The US stock indices were trading lower on Friday. By the closing of the stock market, Dow Jones (US30) decreased by 0.85% (-0.01% for the week), and S&P 500 (US500) lost 1.29% (-0.96% for the week). The NASDAQ Technology Index (US100) fell by 2.01% (-2.24% for the week). Amazon, Apple, and Microsoft all fell, and the S&P 500 and Nasdaq slowed the most. Higher rates tend to be negative for technology companies and growth stocks.
Richmond Federal Reserve President Thomas Barkin said on Friday that US Central Bank officials still have plenty of time before they need to decide how much to raise interest rates in September. The recovery in US stocks is inspiring confidence among investors. The S&P 500 (US500) rebounded about 16% from its low after its worst first half since 1970, helped by stronger-than-expected corporate earnings, and hopes the economy can avoid a recession.
Stock markets in Europe were mostly down on Friday. German DAX (DE30) decreased by 1.12% (-2.19% for the week), French CAC 40 (FR40) lost 0.94% (-1.32% for the week), Spanish IBEX 35 (ES35) fell by 1.09% (-1.05% for the week), British FTSE 100 (UK100) was up by 0.11% (+0.66% for the week).
In the last few days, Europe has been hit by the rains. Water levels in a key German bottleneck on the Rhine River jumped, easing a crisis that has hampered energy and industrial production this month. An extended period of very hot and dry weather this summer drained Europe’s rivers, disrupting the transportation of goods and energy at a time when the region needs alternative energy sources instead of gas the most. This helped push natural gas prices to record highs, increasing inflationary pain for industries and households and threatening to push Germany into recession.
On Sunday, a senior ministry official said that energy-intensive industries in Italy are also modifying their production to save energy as they struggle with rising bills. Italy recently struck deals with several alternative gas-producing countries to reduce its dependence on Moscow. Those agreements allowed Rome to fill its gas storage facilities quickly, but it was not enough to protect its industry from skyrocketing energy prices.
Oil prices stabilized on Friday but fell over the week because of a stronger US dollar and fears that the economic slowdown would weaken demand for crude oil. The strengthening US dollar hit a five-week high, which limited the rise in oil prices as it makes oil more expensive for buyers in other currencies. Haitham al-Gais, the new secretary general of the Organization of the Petroleum Exporting Countries, told Reuters he was optimistic about oil demand in 2023.
Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) decreased by 0.04% for the week, Hong Kong’s Hang Seng (HK50) added 1.32% for the week, and Australia’s S&P/ASX 200 (AU200) was up by 1.17% for the week.
Earlier this year, the COVID-19 shutdown in China disrupted global supply chains, causing delays in shipments and production worldwide and hampering economic growth. Now the country faces another severe threat, and that threat could be even worse for the economy. This month, China is battling its worst heat wave in 60 years. In Sichuan province, home to more than 80 million people, the record-breaking heat wave has exacerbated an ongoing drought that has caused reservoir levels to drop by half this month. As a result, officials announced on Aug. 15 that factories in 19 cities and prefectures would be forced to close for five days to save power.
The People’s Bank Loan Prime Rate rate was cut for the second time in two weeks. The move comes as the bank struggles to stimulate the economy amid headwinds from COVID lockdowns, a debt-laden real estate market, and a looming energy crisis.
In the commodities market, futures on natural gas (+5.84%) and cotton (+3.64%) showed the largest gains over the week. Futures on lumber (-12.23%), silver (-8.37%), platinum (-7.31%), wheat (-6.33%), orange juice (-5. 91%), palladium (-4.03%), coffee (-3.96%), sugar (-3.06%), gold (-3.04%), soybeans (-2.88%), WTI oil (-2.68%), and Brent oil (-2.1%) showed the biggest drop.
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.
All eyes will be on the annual Jackson Hole Economic Symposium where central bankers and financial heavyweights discuss key economic issues that impact the world. Given how this major event could offer investors fresh insight into the Fed’s thinking on rates and inflation, get ready for a potentially wild week for financial markets. Before we take a deep dive into what to expect from Jackson Hole Symposium, here are the scheduled economic data releases/events in the coming week:
Monday, 22 August
CNH: China loan prime rates
GBP: UK Foreign Secretary Liz Truss and Rishi Sunak Campaign
Tuesday, 23 August
EUR: Eurozone S&P Global PMIs, consumer confidence
GBP: UK S&P Global/CIPS UK PMIs
USD: US new home sales, S&P Global PMIs, Minneapolis Fed President Neel Kashkari’s speech
Wednesday, 24 August
ZAR: South Africa CPI
USD: US durable goods, pending home sales
Oil: EIA oil inventory report
Thursday, 25 August
JPY: Japan PPI
Jackson Hole Economic Policy Symposium, Wyoming
EUR: Germany GDP, IFO business climate, ECB minutes
USD: US GDP, initial jobless claims
Friday, 26 August
NZD: New Zealand consumer confidence
Fed Chair Jerome Powell’s Speech at Jackson Hole
NGN: Nigeria’s GDP
USD: Consumer income, University of Michigan consumer sentiment
The main risk event and potential market shaker could be Federal Reserve Chair Jerome Powell’s speech at Jackson Hole on Friday, August 26th.
Investors have many questions for the Fed thanks to the latest developments revolving around inflation and the US labour force. According to the Fed minutes for July’s meeting, policymakers saw inflation as a significant risk to the economy and indicated they would remain aggressive until the beast was tamed. However, inflation in the United States cooled to 8.5% in July, encouraging traders to cut bets over how aggressive the Fed will be on rates. In regards to the jobs market, it defied recession fears with NFP increasing 528k in July. This has split expectations over the size of the next rate hike in September. Market players need clarity on how big future rate hikes will be and the strength of the US economy in the face of high inflation.
We expect many assets to be influenced by the Jackson Hole but our attention falls on gold. Powell’s remarks could be the fundamental spark the precious metal has been waiting for these months. Markets are still pricing in a 52% probability of a rate hike in September but the Fed could use Jackson Hole to shift the scales. If Powell strikes a hawkish tone and reinforces expectations around the Fed moving ahead with another jumbo 75 bps hike, this could drain appetite for zero-yielding gold. Alternatively, a cautious sounding Powell may reduce the odds of a jumbo hike, providing some support to gold.
Prices are already under pressure on the daily charts and heading for their first weekly decline in five. The precious metal could be in store for more pain ahead of Powell’s speech if the dollar continues to appreciate. Talking technicals, $1740 remains a level of interest in the short term.
Pulling our focus away from the Jackson Hole and gold, there are a couple of key economic reports from major economies to keep a close eye on. We could see some volatility across currency markets in the run-up to the Symposium due to this.
According to the National Association of Realtors monthly report, home sales fell nearly 6% in July compared to June. Compared to the same month last year, home sales are down about 20%. The US real estate market is already in a recession regarding economic impact. But other data so far show no signs of weakness. Philadelphia’s Monthly Manufacturing Index rose to 6.2 this month from a negative 12.3 in July, topping all 30 estimates by Reuters economists. The number of US new jobless claims also fell moderately last week. Consumer price inflation and employment data for August, due out before the Fed’s September meeting, will likely affect the size of the rate hike. Traders now expect the benchmark rate to peak at 3.5% in March, although some Fed officials favor 4% or more.
The US stock indices rose yesterday. As the stock market closed, the Dow Jones Index (US30) added 0.06%, and the S&P 500 Index (US500) increased by 0.23%. The Technology Index NASDAQ (US100) gained 0.21%.
The Fed officials spoke again about more aggressive rate hikes. In his speech yesterday, Minneapolis Fed Chairman Neel Kashkari indicated that a Fed rate hike would significantly slow the economy and make a recession more likely. St. Louis Fed Chairman Jim Bullard thinks another 0.75% hike is needed. Next week will be the annual gathering of policymakers at the Jackson Hole Symposium, which will be a focus for traders and investors. But analysts believe Fed Chairman Jerome Powell will again dismiss the market’s optimism by reminding investors that there will be another inflation report and job number before the Fed meeting in September.
Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.52%, French CAC 40 (FR 40) added 0.45%, Spanish IBEX 35 (ES35) lost 0.05%, British FTSE 100 (UK100) closed up by 0.35%.
The Eurozone Consumer Price Index (CPI) reached 8.9% in annual terms, compared to June’s value of 8.6%. A year earlier, the figure was 2.5%. The outlook for Eurozone inflation has not improved after the interest rate hike in July, said European Central Bank board member Isabelle Schnabel, suggesting she favors another significant interest rate hike next month, even as recession risks intensify. Ms. Schnabel also added that another difficulty is that a rate hike would inevitably raise borrowing costs disproportionately in the bloc’s periphery, putting countries with more debt, such as Italy or Greece, at greater risk.
Eurozone businesses are struggling with surging energy prices and deficits, rising inflation, and expectations of higher interest rates. Germany’s economic sentiment index, the Eurozone’s leading index, recently showed a drop in investor sentiment in August as fears grow that rising costs of living will hit private consumption.
Norway’s Central Bank raised its deposit rate by 50 basis points and indicated it would likely raise rates next month. Norges Bank acknowledged that the trajectory of the discount rate would be faster than predicted in June, and inflation risks will remain high for longer. The interest rate now stands at 1.75%.
The Turkish lira fell after the Central Bank announced another interest rate cut. Policymakers lowered the benchmark rate to 13% from 14%. The Turkish central bank’s decision to lower interest rates amid soaring inflation surprised analysts and economists, as global banks are raising rates to reduce inflation.
Gold prices are falling amid a rising US dollar index and US government bond yields. And while the US Federal Reserve is in a cycle of monetary policy tightening, gold and silver have no fundamental support.
Whether sanctions on Iranian oil are lifted or not, OPEC does not seem to be about to give up the price per barrel of $90 or more. Rumors that the Iran nuclear deal could be reopened and data showing that the largest oil importer, China, has reduced its oil consumption because of the pandemic have caused oil prices to fall to $85 a barrel this week. While upbeat weekly US data increased optimism that fuel demand will improve in the near term, lingering recession fears and possible OPEC+ production increases are likely to limit the upside for oil prices.
Asian markets traded lower yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.96%, Hong Kong’s Hang Seng (HK50) lost 0.80%, and Australia’s S&P/ASX 200 (AU200) was down by 0.21% by the end of the day.
S&P 500 (F) (US500) 4,283.74 +9.70 (+0.23%)
Dow Jones (US30) 33,999.04 +18.72 (+0.055%)
DAX (DE40) 13,697.41 +70.70 (+0.52%)
FTSE 100 (UK100) 7,541.85 +26.10 (+0.35%)
USD Index 107.45 +0.87 (+0.82%)
Important events for today:
– Japan National Consumer Price Index (m/m) at 02:30 (GMT+3);
– UK Retail Sales (m/m) at 09:00 (GMT+3);
– Germany Producer Price Index (m/m) at 09:00 (GMT+3);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The US stock indices were trading lower yesterday. At yesterday’s stock market close, the Dow Jones Index (US30) decreased by 0.50%, and the S&P 500 Index (US500) lost 0.72%. NASDAQ Technology Index (US100) fell by 1.25%.
The US Retail Sales data on Wednesday were good, which helped ease fears of an economic slowdown. Minutes from the Federal Reserve’s July meeting showed Fed officials were concerned the US Central Bank might raise rates too much as part of its commitment to control inflation. Some Fed participants noted that interest-rate-sensitive sectors were starting to show signs of slowing and that some felt there was a risk of over-tightening. After the minutes were released, the probability of a 75 basis point hike in September fell to 40% from 52% earlier Wednesday, with a 50 basis point hike now seen as a 60% probability.
Equity markets in Europe mostly fell yesterday. Germany’s DAX (DE30) fell by 2.04% on Wednesday, France’s CAC 40 (FR40) lost 0.97%, Spain’s IBEX 35 (ES35) decreased by 0.91%, Britain’s FTSE 100 (UK100) closed down by 0.27%.
The Eurozone economy grew by 0.6% in the second quarter, a strong sign of slowing growth since the previous quarter’s growth of 3.9%. At the same time, the statistical office revised downward its estimates of GDP growth for 19 Eurozone countries. Despite the worsening of the estimates, the growth rate of the Eurozone economy in quarterly terms is the highest in 3 quarters due to the easing of Covid restrictions and the active tourist season in the southern European countries. The Spanish and Italian economies grew by 1.1% and 1%, respectively, last quarter, while France gained 0.5%.
The UK Consumer Price Index rose to 10.1% in annual terms (forecast 9.8%) in July, its highest level in 40 years. The Core Consumer Price Index (excluding energy and food) rose to a 6.2% annualized rate, up from 5.8% in June. The Bank of England warned that inflation would rise until October, with a projected peak of around 13%.
The Financial Times reported that European banks followed US banks in resuming operations with Russian bonds. Such banks as UBS, Barclays, and Deutsche Bank again allowed their clients to sell Russian bonds following the similar actions of the American JPMorgan, Bank of America, Jefferies, and Citigroup. All banks mentioned by the Financial Times declined to comment officially. Still, people briefed on their actions said the decisions to resume operations with Russian debt were not due to a desire to make a profit but rather to help clients reduce risks under sanctions rules.
The situation in the oil market remains tense. Oil crude reserves data yesterday showed a sharp 7.1 million barrel decline over the past week, while open questions remain about the Iran deal, a possible production build-up by Saudi Arabia, and fears of a possible global recession. Nor should we forget about sanctions on Russia and the energy crisis in Europe. Too many catalysts affect oil prices. Also, yesterday it became known that despite the sanctions, Russia began to gradually increase oil production, as Asian countries increased their purchases.
Gold prices fell on Wednesday after the July FOMC protocol showed that most members support further rate hikes to reduce inflation. Although the central bank intends to eventually revise its pace of tightening, it indicated that it is likely to keep rates high until inflation is within the 2% target range.
Asian markets traded higher yesterday. Japan’s Nikkei 225 (JP225) gained 1.23%, Hong Kong’s Hang Seng (HK50) added 0.46%, and Australia’s S&P/ASX 200 (AU200) was up by 0.31% by the end of the day. But at the open on Thursday, Chinese and Hong Kong stocks were down sharply due to a drop in large real estate developers after unfavorable earnings warning from Country Garden Holdings. The developer showed weak quarterly results, losing more than 5%, while the company warned that profits would decline sharply. Country Garden’s warning points to new problems for China’s debt-laden real estate sector. A downturn in this sector could potentially spread to other aspects of the Chinese economy.
Australia’s labor market unexpectedly contracted in July. The number of people employed in the country fell by 40,900 in July, falling short of expectations of a 25,000 increase. Meanwhile, wages rose at an annualized rate of 2.6% in July, well below the annualized consumer price inflation rate of 6.1%. But the unemployment rate fell from 3.5% to 3.4%, the lowest level in 48 years. Analysts said the unexpected decline in the labor market is likely to force the Reserve Bank of Australia (RBA) to reconsider the monetary policy and be less aggressive in raising interest rates. Analysts now expect the bank to keep rates at 1.85% at a meeting in early September.
S&P 500 (F) (US500) 4,274.04 −31.16 (−0.72%)
Dow Jones (US30) 33,980.32 −171.69 (−0.50%)
DAX (DE40) 13,626.71 −283.41 (−2.04%)
FTSE 100 (UK100) 7,515.75 −20.31 (−0.27%)
USD Index 106.66 +0.16 (+0.15%)
Important events for today:
– Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
– Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
– US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
– US Existing Home Sales (m/m) at 17:00 (GMT+3);
– US Natural Gas Storage (w/w) at 17:30 (GMT+3);
– US FOMC Member George Speaks (m/m) at 20:20 (GMT+3).
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The US Industrial Production for July reports a 0.6% month-over-month increase compared to the consensus forecast of 0.3%. This report provides more evidence that Q3 GDP should be good, but the outlook for Q4 looks tougher. The NY Empire manufacturing survey was weak on Monday and pointed to low year-end orders and activity. There are also growing problems with the real estate sector. The US housing starts fell by 9.6% m/m in July to an annualized rate of 1.446k compared to the consensus forecast of 1.527k. This is the weakest level since February 2021.
The US stock indices traded yesterday without a single trend. At Monday’s close, the Dow Jones Index (US30) added 0.71%, while the S&P 500 Index (US500) increased by 0.19%. The NASDAQ Technology Index (US100) lost 0.19%.
Inflation in Canada is down slightly but remains too high. Canada’s Consumer Price Index for July was 7.6% y/y (forecast 7.6%), down from June’s 8.1% y/y. The Core Consumer Price Index was 6.1% y/y versus expectations of 6.1% and 6.2% in June. The good news is that inflation appears to have peaked. The bad news is that inflation will likely remain too high for a while. In his speech, the Governor of the Bank of Canada pointed out that to combat inflation, the Bank needs to bring overall economic demand more in balance with supply. The Bank of Canada’s current goal is to cool the economy enough to bring inflation back to its target of 2%. Therefore, the Bank of Canada will seek to slow demand growth. This is what is called a soft landing. By drastically raising interest rates now, the Bank of Canada is trying to avoid the need for even higher interest rates and a sharper slowdown later.
Equity markets in Europe mostly rose yesterday. Germany’s DAX (DE30) gained 0.68% on Tuesday, France’s CAC 40 (FR40) gained 0.34%, Spain’s IBEX 35 (ES35) added 1.01%, Britain’s FTSE 100 (UK100) closed up by 0.36%.
On Tuesday, Germany secured a commitment from major gas importers to ensure that two floating liquefied natural gas (LNG) terminals are fully supplied this winter to reduce dependence on Russian fuel. Analysts expect a worst-case scenario for Europe this winter, which is why the US dollar remains so strong.
The latest UK labor market data for April-June 2022 showed a slight drop in the employment rate, and a slight increase in the unemployment rate, with the economic inactivity rate unchanged.
Oil hit a 6-month low as a potential deal with Iran scares oil investors. West Texas Intermediate, the US benchmark, was down by $2.88, or 3.2%. Brent, a London-listed global benchmark, decreased by $2.76, or 2.9%.
Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.01%, Hong Kong’s Hang Seng (HK50) lost 1.05%, and Australia’s S&P/ASX 200 (AU200) was up by 0.58%.
Japan’s trade deficit hit a record high in July as the impact of soaring commodity prices and a 24-year low in the yen exacerbated the obstacles to the country’s economic recovery. Because of its dependence on energy and food from abroad, Japan has faced sharply higher import costs amid the war in Ukraine and supply problems related to quarantine in China. The Finance Ministry said Wednesday that the trade deficit widened to 2.13 trillion yen ($15.9 billion). The trade balance has been in negative territory since 2015.
Minutes from the Reserve Bank of Australia’s (RBA) August policy meeting on Tuesday showed that Australia’s Central Bank still sees the need to raise interest rates further to prevent high inflation from locking in expectations.
The Reserve Bank of New Zealand raised its key interest rate by another half a percent to 3% and expected it to rise to at least 4%. New Zealand’s rate hike in the last ten months is the most aggressive tightening cycle in 30 years. Updated RBNZ forecasts on Wednesday showed that OCR will peak at 4.1% in the second quarter of 2023, compared with a May estimate of 3.95% in the third quarter of that year. Goldman Sachs Group Inc. sees a 30-35% chance of a recession in New Zealand over the next 12 months. In their view, the RBNZ is putting the brakes on too much, squeezing the housing market, and reducing consumer spending.
S&P 500 (F) (US500) 4,305.20 +8.06 (+0.19%)
Dow Jones (US30) 34,152.01 +239.57 (+0.71%)
DAX (DE40) 13,910.12 +93.51 (+0.68%)
FTSE 100 (UK100) 7,536.06 +26.91 (+0.36%)
USD Index 106.47 -0.08 (-0.07%)
Important events for today:
– Australia Wage Price Index (q/q) at 04:30 (GMT+3);
– New Zealand RBNZ Interest Rate Decision (m/m) at 05:00 (GMT+3);
– New Zealand RBNZ Monetary Policy Statement (m/m) at 05:00 (GMT+3);
– New Zealand RBNZ Press Conference at 06:00 (GMT+3);
– UK Consumer Price Index (m/m) at 09:00 (GMT+3);
– Eurozone GDP (q/q) at 12:00 (GMT+3);
– US Retail Sales (m/m) at 15:30 (GMT+3);
– US FOMC Member Brainard Speaks at 16:30 (GMT+3);
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.
Asian shares edged cautiously higher on Tuesday, tracking a rebound in Wall Street overnight despite disappointing economic data from China and the US fuelling recessionary fears. Stocks in the region were supported by expectations over China unleashing more stimulus to support economic growth. In Europe, futures pointed to a steady start, borrowing momentum from Asian markets ahead of the German ZEW survey for August. This has proved to be a leading indicator for the Eurozone and may give more insight into the severity of the downturn in the wider region. With recent economic data showing US inflation cooling, this has offered equity bulls some room to breathe and may translate to further short-term gains across stock markets.
In the currency arena, the safe-haven dollar drew ample strength from global recession fears while oil prices tumbled to levels not seen in six months on growing signs of an economic downturn and prospects of rising supply on an Iran deal. Gold has struggled for direction this morning after tumbling more than one per cent in the previous session. Prices are trading back within a range and could be waiting for a fresh directional catalyst this week.
Fed minutes and Fed speakers in focus
This could be a volatile week for the dollar due to the FOMC meeting minutes, key economic reports as well as scheduled speeches from Fed officials.
All eyes will be on the Federal Reserve meeting minutes released on Wednesday. This will be closely scrutinised by investors for any fresh clues into what policymakers were thinking when rates were hiked by 75 basis points for a second straight meeting. If the minutes strike a hawkish tone, this could inject dollar bulls with fresh inspiration as rate hike bets jump towards another jumbo-sized September move. Alternatively, any dovish hints or caution may encourage some dollar weakness. It will also be wise to keep an eye on the US retail sales report for July published mid-week and speeches by Kansas City Fed President Esther George and Minneapolis Fed President Neel Kashkari on Thursday.
Oil prices crumble
Oil prices collapsed like a house of cards on Monday as China’s growth fears and prospects of rising supply empowered bears. Given how Libya is pumping more oil and Iran is moving closer to restoring a nuclear deal, this could result in higher flows at a time when demand remains shaky. Both WTI and Brent remain under pressure on the daily charts with a stronger dollar seen enforcing downside pressures. The benchmarks have shed roughly six per cent this month with the current fundamental drivers opening the doors to further losses this week.
Commodity spotlight – Gold
Gold remains stuck in a range with support at $1770 and resistance at $1800. A breakout could be on the horizon triggered by the pending Fed minutes, US economic data, or even speeches by Fed officials. A move above $1800 would open the doors towards $1825. Alternatively, a selloff below $1770 is seen triggering a steeper move back towards $1740.
Article by ForexTime
