InvestMacro

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

A strong non-farm payrolls report on Friday dashed hopes that the Federal Reserve might tone down its aggressive campaign to rein in the highest inflation in decades. As long as the labor market remains strong, the Fed will seek to raise rates as much as possible so that it can have room to lower them when unemployment starts to rise, and the economy falls into recession. The likelihood of a 75 basis point Fed rate hike at the September meeting has increased even more. Signs that inflation still hasn’t peaked could affect expectations that the central bank could stop raising rates early next year, leading to a stock decline.

The US stock indices traded mixed on Friday. The Dow Jones Index (US30) increased by 0.23% (+0.15% for the week), and the S&P 500 (US500) decreased by 0.16% (+0.80% for the week). The NASDAQ Technology Index (US100) lost 0.50% (+2.76% for the week).

Chicago Fed President Charles Evans, Minneapolis Fed President Neel Kashkari, and San Francisco Fed President Mary Daly are due to speak this week. Investors should closely watch their comments for what sentiment prevails within the US Federal System. Fed Governor Michel Bowman said Saturday that the Fed should consider a 75-bp rate hike to bring inflation back in line with the central bank’s target, echoing recent comments from other Fed officials.

The US stock market is about halfway through its second-quarter reporting period, and so far, US companies have reported mostly upbeat reports and forecasts. These surprising investors had been preparing for a weaker reading. According to Reuters, about 78% of earnings reports beat Wall Street expectations, above the long-term average.

Stock markets in Europe were mostly down on Friday. Germany’s DAX (DE30) decreased by 0.65% (+0.76% for the week), France’s CAC 40 (FR40) lost 0.63% (+0.39% for the week), Spain’s IBEX 35 index (ES35) added 0.08% (+0.05% for the week) the British FTSE 100 (UK100) closed down by 0.11% (-0.16% for the week).

European stocks fell on Friday after a stronger-than-expected US jobs report boosted bets for another 75 basis point rate hike by the Federal Reserve next month. At the same time, worries about worsening growth prospects in the Eurozone prompted investors to close their equity positions. Analysts predict that the situation in Europe will only worsen, and the European Central Bank will raise interest rates more aggressively.

UN Secretary-General António Guterres called Monday for international inspectors to be granted access to the Zaporizhzhia nuclear power plant after Russia shelled Europe’s largest nuclear power plant over the weekend. Ukrainian President Vladimir Zelensky accused Russia of waging “nuclear terror,” which calls for new international sanctions, this time against Moscow’s nuclear industry.

Staff at German airline Lufthansa and management reached a wage agreement, preventing further strikes during the busy summer tourist season.

Despite supply chain problems, industrial production in Germany showed an unexpected but modest increase in June, official data showed.

Brent crude oil fell 1.4% on Friday to $92.81 a barrel. It dropped below $93 a barrel for the first time since February 21. WTI crude fell by 1.5% to $87 a barrel. Oil prices continued to decline on Monday as recession fears weighed on demand prospects and data on crude imports into China pointed to a slow recovery.

Asian markets traded higher last week. Japan’s Nikkei 225 (JP225) gained 1.30%, Hong Kong’s Hang Seng (HK50) gained 0.88%, and Australia’s S&P/ASX 200 (AU200) was up by 1.01%.

China’s export growth unexpectedly accelerated in July, providing an encouraging boost to the economy. Still, weakening global demand could slow supplies in coming months. Exports rose 18.0% in July from a year earlier, the fastest pace this year.

In the commodities market, orange juice (+6.05%), platinum (+4.73%), and sugar (+2.34%) futures showed the biggest gains by the end of the week. Futures on WTI oil (-10.23%), lumber (-9.87%), Brent oil (-9.76%), gasoline (-8.95%), wheat (-3.87%), coffee (-3.78%), and natural gas (-2.72%) showed the biggest drop.

S&P 500 (F) (US500) 4,145.19 −6.75 (−0.16%)

Dow Jones (US30) 32,803.47 +76.65 (+0.23%)

DAX (DE40) 13,573.93 −88.75 (−0.65%)

FTSE 100 (UK100) 7,439.74 −8.32 (−0.11%)

USD Index 106.58 +0.88 (+0.84%)

• – New Zealand Inflation Expectations (q/q) at 06:00 (GMT+3);
• – Switzerland Unemployment Rate (m/m) at 08:45 (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 stock indices traded without a single trend. At the close of trading yesterday, the Dow Jones Index (US30) decreased by 0.26%, while the S&P 500 Index (US500) lost 0.08%. The NASDAQ Technology Index (US100) added 0.41%.

The US Labor Department reported yesterday that about 260,000 people filed unemployment claims during the previous week, 6,000 more than the previous week. The Nonfarm Payrolls report today will also serve as an overview of the Federal Reserve’s likely path for monetary policy, as the Central Bank emphasized labor market strength as evidence that the economy remains resilient and capable of resisting further rate hikes.

Fed spokeswoman Loretta Mester said yesterday that she would like to see the rate rise to just above 4% at the end of the interest rate cycle. However, analysts predict that the Fed will stop at 3.5-3.75%. Mester added that the Fed could raise rates by 75 bps in September, but it could well be 50 bps, with the Committee guided by inflation and labor market data.

Coinbase stock jumped more than 40% yesterday. The cryptocurrency exchange announced a partnership agreement with BlackRock (BLK) to provide institutional clients access to cryptocurrency trading and storage services.

Stock markets in Europe were mostly up on Thursday. German DAX (DE30) gained 0.55%, French CAC 40 (FR40) jumped by 0.64%, Spanish IBEX 35 (ES35) added 0.23%, British FTSE 100 (UK100) closed on the rise by 0.03%.

The Bank of England raised its interest rate by 0.5% as expected. The rate is now at 1.75%, higher than the ECB (0.5%) but lower than the US Federal Reserve (2.5%), the Canadian Central Bank (2.5%), and the Reserve Bank of New Zealand (2.5%). Having made its most significant rate hike in nearly 30 years, the Bank of England suggested that it may be less decisive in raising rates in the coming months. The report also indicates that under the weight of skyrocketing inflation, the UK will be in recession for more than a year.

Russia is beginning to drag out the process of launching the Nord Stream 1 pipeline. Moscow is demanding additional documents confirming that the equipment used in the repairs is not subject to sanctions. Thus, the energy problems in Europe are exacerbated.

On Thursday, US crude oil prices fell below $90 a barrel for the first time since Russia invaded Ukraine. The drop to its lowest level since February was driven by lingering fears that global growth slow would hurt oil demand. Fears of a recession intensified after the Bank of England warned of a prolonged recession and expectations of a one-year recession.

Saudi Arabia and the UAE are ready to provide a “significant increase” in oil production only if winter’s global supply crisis worsens.

Gold prices reached their highest level a month after rising more than 1.5% yesterday. A weaker dollar helped support gold even as US Treasury yields rose.

Asian markets traded higher yesterday. Japan’s Nikkei 225 (JP225) gained 0.69%, Hong Kong’s Hang Seng (HK50) jumped by 2.06%, and Australia’s S&P/ASX 200 (AU200) was down by 0.01%. Asian stock indices rebounded strongly after several declines, as strong earnings reports in the US boosted optimism about the corporate outlook. Investors in the region are preparing for a slew of earnings reports next week from Chinese, Japanese, and South Korean companies.

The Monetary Policy report from the RBA showed that Australia’s economy would slow down sharply soon due to a sharp rise in inflation. A full percentage point cut economic growth forecasts for this year to 3.25%, and for 2023 and 2024 by about a quarter point to 1.75%. The inflation forecast has also increased from 5.9% to 7.75%, requiring further interest rate increases.

S&P 500 (F) (US500) 4,152.02 −3.15 (−0.076%)

Dow Jones (US30) 32,727.19 −85.31 (−0.26%)

DAX (DE40) 13,662.68 +75.12 (+0.55%)

FTSE 100 (UK100) 7,448.06 +2.38 (+0.032%)

USD Index 105.69 −0.81 (−0.76%)

• – Australia RBA Monetary Policy Statement (m/m) at 04:30 (GMT+3);
• – German Industrial Production (m/m) at 09:00 (GMT+3);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
• – US Unemployment Rate (m/m) at 15:30 (GMT+3);
• – Canada Unemployment Rate (m/m) at 15:30 (GMT+3);
• – Canada Ivey PMI (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 Erica D. Walker, Brown University 

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].

If all of the vehicles in the world were to convert to electric, would it be quieter? – Joseph, age 10, Chatham, New Jersey

If everyone everywhere received a free electric vehicle at the same time – and owners were required to travel at really slow speeds across well-maintained roads – the world would sound different.

But that doesn’t mean it would be quieter.

People can have different feelings about the same sound. As the founder of Community Noise Lab at Brown University’s School of Public Health, I am particularly interested in how we, as humans, decide what is a sound and what is a noise – which is what we call unwanted sounds. We perceive the sounds that we experience in our daily lives in many ways, from quiet to loud. And they can make us feel happy, angry or many things in between.

These feelings can affect our health by relaxing or stressing us. Studies also show that chronic exposure to noise can affect your sleep and hearing and contribute to health problems like heart disease.

How loud are cars?

We know that gasoline-powered cars make a lot of noise, especially on highways where they can travel at high speeds. In 1981, the U.S. Environmental Protection Agency estimated that nearly 100 million people nationwide were exposed to traffic noise every year that was loud enough to be harmful to their health. At the time, this was about 50% of the U.S. population.

Many factors influence how loud a car is on the road, including its design, how fast it travels and physical road conditions. On average, cars moving at around 30 mph on local roads will produce sound levels ranging from 33 to 69 decibels. That’s the range between a quiet library and a loud dishwasher.

For cars traveling at typical speeds on the interstate, which is around 70 mph, sound levels range up to 89 decibels. That’s equivalent to two people shouting their conversation at each other.

Electric and hybrid gas/electric cars emit very low sounds at low speeds because they don’t have internal combustion engines producing noise and vibrations. To ensure that pedestrians will hear electric and hybrid vehicles coming, the National Highway Traffic Safety Administration requires these vehicles to emit sounds ranging from 43 to 64 decibels when they are moving at less than 18.6 mph. Each manufacturer uses its own warning sounds.

At high speeds, there may not be much difference between gas-powered cars and EVs or hybrids. That’s because other factors like tire and wind noise become louder as cars move faster.

Quieter streets for everyone

Infrastructure also contributes to street noise. Cracks, depressions and holes in roads can increase sound levels as cars travel across them.

Lower-income communities tend to have poorer-quality streets and highways. So failing to fix roads could drown out any improvements in a community’s soundscape from EVs, quite literally.

Another way to reduce traffic noise would be to build more bike lanes and paths in less-wealthy communities, which often lack them, and encourage people to substitute this cheaper, healthier, cleaner and quieter mode of transportation when they can.

Electric vehicles are still out of reach for many people because most models cost more than gas-powered cars. So in reality, the benefits of switching to electric-powered vehicles – such as lower fuel costs, cleaner air and somewhat quieter streets – are going now mainly to people who live in wealthier communities and can afford EVs.

That inequitable distribution of benefits is what the EPA calls an environmental injustice: a situation in which everyone doesn’t have the same degree of protection from environmental and health hazards. To share those benefits more equally, electric vehicles will have to become as affordable as gas-powered versions.

Many people think of noise as a nuisance that’s less urgent than other, more pressing environmental issues like air and water pollution. As a result, governments fail to plan for noise, measure it, mitigate it or regulate it in any meaningful way.

In fact, noise is a significant environmental stressor that negatively affects everyone’s health and well-being, especially those who are most vulnerable. At Community Noise Lab, we aim to shed light on the public health implications of noise, argue for more holistic measurements of sound, and study noise together with other environmental pollutants like water and air pollution, working alongside vulnerable communities across the United States.

Hello, curious kids! Do you have a question you’d like an expert to answer? Ask an adult to send your question to [email protected]. Please tell us your name, age and the city where you live.

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.

About the Author:

Erica D. Walker, Assistant Professor of Epidemiology, Brown University

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

By JustForex

Fed officials reiterated Wednesday their determination to curb high inflation. One official noted that a half-percent hike in the Central Bank’s key interest rate next month may be enough to achieve that goal.

In July, the US services sector unexpectedly rebounded due to a strong increase in orders, while supply bottlenecks and price pressures eased. This confirmed the view of the Fed representatives that the economy is not in recession, despite the reduction in production in the first half of the year.

As the stock market closed yesterday, the Dow Jones Index (US30) increased by 1.29%, and the S&P 500 Index (US500) added 1.56%. The NASDAQ Technology Index (US100) jumped by 2.59%.

PayPal (PYPL) was one of the day’s leaders, rising more than 9% after reporting better-than-expected results and announcing a $15 billion share buyback program. The fintech giant also said Elliott Investment Management had invested $2 billion in the company as the activist shareholder hopes to encourage PayPal to explore plans to return capital to shareholders. Moderna (MRNA) shares rose nearly 16% after a report showed better-than-expected second-quarter results thanks to higher sales of the Covid-19 vaccine. Online travel agency Booking Holdings Inc (BKNG) reported an increase in quarterly revenue Wednesday as a surge in bookings amid strong demand for summer travel led to a faster-than-expected recovery.

Alibaba (BABA), Toyota Motor (TM), Amgen (AMGN), ConocoPhillips (COP), Vertex (VRTX), and others report today.

Stock markets in Europe were mostly up on Wednesday. German DAX (DE30) gained 1.03%, French CAC 40 (FR40) jumped by 0.97%, Spanish IBEX 35 (ES35) added 0.56%, British FTSE 100 (UK100) gained 0.13%.

According to Eurostat, Eurozone producer inflation rose another 1.1% in June 2022. Eurozone retail sales showed a decline of 1.2%, with a forecast of rising of 0.4%. This is negative data for the euro. On the other hand, the PMI of business activity in the service sector in Europe has noticeably increased. Still, analysts attribute the growth of the index to the increase in demand for services during the summer season.

Crude oil inventories unexpectedly rose by 4.5 million barrels last week, compared to analysts’ forecast of 600,000 barrels. The OPEC+ group said it would raise its oil production target by just 100,000 BPD. Oil prices decreased by 3% amid the data yesterday.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.53%, Hong Kong’s Hang Seng (HK50) added 0.40%, and Australia’s S&P/ASX 200 (AU200) was down by 0.32%.

China launched an unprecedented live-fire military exercise in six areas around Taiwan on Thursday, a day after US House Speaker Nancy Pelosi visited the island. Taiwanese officials said the exercises violate United Nations rules, invade Taiwan’s territorial space, and pose a direct challenge to free air and sea navigation. China is conducting the drills in the busiest international waterways and air routes. A Taiwanese cabinet spokesman, expressing strong condemnation of the exercises, also said the websites of the defense ministry, foreign ministry, and presidential office had been attacked by hackers.

S&P 500 (F) (US500) 4,155.17 +63.98 (+1.56%)

Dow Jones (US30) 32,812.50 +416.33 (+1.29%)

DAX (DE40) 13,587.56 +138.36 (+1.03%)

FTSE 100 (UK100) 7,445.68 +36.57 (+0.49%)

USD Index 106.38 +0.14 (+0.13%)

• – UK Construction PMI (m/m) at 11:30 (GMT+3);
• – UK BoE Inflation Report (m/m) at 14:00 (GMT+3);
• – UK BoE Interest Rate Decision (m/m) at 14:00 (GMT+3);
• – UK BoE Monetary Policy Statement (m/m) at 14:00 (GMT+3);
• – UK BoE Gov Bailey Speaks at 14:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – GUS Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US FOMC Member Mester Speaks (m/m) at 19:00 (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

When is it due?

• The Bank of England’s (BOE) policy statement is due to be released today (Thursday, August 4th) at 11:00 AM GMT
• Half an hour later, BOE Governor Andrew Bailey is due to hold a press conference at 11:30 AM GMT

The BOE is widely expected to raise the UK bank rate by 50 basis points (bps) today.

A 50bps hike today would mark the BOE’s largest hike since 1995.

Markets are currently forecasting an 80% chance that the BOE will trigger a larger-than-usual hike, given that a 50bps move would be double the size of its previous four hikes.

The BOE has been hiking its benchmark rates since the end of last year:

• December: 15bps
• February: 25bps
• March: 25bps
• May: 25bps
• June: 25bps
• August: 50bps?

TOTAL: 165bps? (to be determined after today’s decision)

Why is the BOE in a rush to raise interest rates?

One word: inflation.

The UK consumer price index (CPI), which measures changes in the prices of a basket of goods and services, has risen by 9.4% in June 2022 compared to June 2021.

That’s the highest year-on-year advance for the headline CPI since February 1982!

Given that a central bank’s primary method for cooling inflationary pressures is by raising interest rates, no surprise then that the BOE has sent its bank rate to 1.25% (as of last month), which could go up to 1.75% after today’s decision.

What happens next?

As things stand, markets are forecasting that the BOE can only send its benchmark rate higher by another 125bps to 3% after today’s decision (assuming today’s hike is indeed 50bps), before having to reverse course and lower rates in Q2 2023.

Thus, it appears that the BOE is already more than halfway done in this ongoing rate hike cycle.

The reason for this about-turn is because the BOE may be concerned about sending the UK economy deep into a recession. Already back in May earlier this year, the central bank warned of the prospects of a UK recession in 2023.

And with inflation set to reach double-digits in Q4 this year (well above the BOE’s 2% target), along with rates moving higher, such a combo could break the UK economy (i.e. a recession).

How would this impact the Pound?

So far this year, the Pound has already weakened by 10% against the US dollar (remember the good ol days of GBPUSD being above 1.30?).

More recently, GBPUSD a.k.a. “cable” hasn’t been able to keep its head above its 50-day simple moving average (SMA).

• If the BOE triggers a smaller-than-expected 25bps hike today, that could result further declines for GBPUSD.
• If the BOE triggers a massive 75bps hike today, that could shock GBPUSD northwards.
• If Governor Bailey can convince markets (and that’s the key part: markets need to believe the BOE’s message) that the UK economy can indeed withstand interest rates rising past 3% by Q1 2023, that could also translate into further strength for Sterling.
• If Governor Bailey suggests that the BOE will have to slow down its intended rate hikes, for fear of sending the UK economy into a recession, that could see the Pound move lower.

Expect a combination of the above-listed scenarios.

Key support and resistance levels for GBPUSD

The BOE’s latest policy signals are set to determine whether GBPUSD will be kept above its 50-day SMA, or sent below that key technical indicator.

• Immediate resistance above 50-day SMA at recent cycle peak of 1.22934
• Stronger resistance can be seen around 1.24 (end-April lows/mid-June high)

• Support: 1.200 (psychologically-important level) / 1.19335 mid-June trough
• Stronger support set to arrive at 1.1760 – lowest since the onset of the pandemic

Overall, I expect that GBPUSD may do no better than 1.24 for the immediate term, barring a shockingly-hawkish tone out of the BOE today, and assuming markets can buy into such an aggressive messaging.

In other words, GBPUSD is likely to remain confined to its downtrend (series of lower highs and lower lows) that has persisted since June 2021, given the dark clouds swirling about the UK economic outlook which have lent themselves to a downward bias for “cable”.

Other points to look out for today:

1. Details on “Quantitative Tightening”

   Today, the BOE is also expected to unveil how it plans to reduce the 895 billion in “easy money” it has pumped out (by selling gilts) into the UK economy since the 2008 global financial crisis.

   Such details may impact gilt yields, which have a large influence over Sterling’s moves.

2. BOE’s economic and inflation forecasts

   Markets will be eager to find out how high the BOE thinks UK inflation will go, and the central bank’s forecasts on the likelihood of a UK recession.

   The Pound will be ready to offer an immediate reaction to such economic projections, as they should inform market expectations for how the BOE is able to respond (i.e. how much higher UK rates can go).

Article by ForexTime

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

By JustForex

According to analysts at JPMorgan, the US stock market is ready for further growth, likely starting as early as the second half of this year. Easing inflation expectations and falling bond yields indicate that the peak of the hawkish sentiment has probably already passed, and for this reason, analysts at JPMorgan believe that the US economy will avoid recession, despite the negative GDP growth for two consecutive quarters. JPMorgan’s year-end target for the S&P 500 is 4,800 points, which represents a growth potential of 17% from current levels.

Cleveland Fed President Loretta Mester said yesterday that it would take some time to get inflation back to the 2% level and brushed aside concerns about a slowing economy, stressing that a slowdown is necessary. The comments came just hours after San Francisco Fed President Mary Daly said the Fed’s work on lowering inflation is far from over and that raising interest rates another 0.75% at the September meeting is also under active consideration by the Committee.

As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 1.22%, and the S&P 500 Index (US500) lost 0.66%. The NASDAQ Technology Index (US100) fell by 0.10%.

An American special flight carrying US House Speaker Nancy Pelosi landed in Taipei, the administrative capital of Taiwan. According to preliminary information, Taiwanese fighters escorting Nancy Pelosi’s plane opened warning fire on Chinese fighters that had entered the air defense zone of Taiwan. The Chinese Foreign Ministry summoned the US ambassador and protested about Nancy Pelosi’s visit to Taiwan. “China’s response will be powerful and strong,” the Chinese ambassador to the US said. The US military installations in the Indo-Pacific region are on high alert.

Geopolitical tensions rose higher during the day after Chinese battery giant CATL said it would suspend plans to invest billions of dollars in a new battery plant in the United States because of House Speaker Nancy Pelosi’s trip to Taiwan.

Uber Technologies (Uber) reported its first positive cash flow and earnings that beat expectations. The company’s stock jumped by 17% on the report. Pinterest (PINS) jumped more than 12% despite quarterly results missing the Wall Street estimates. Caterpillar (CAT) showed a drop in earnings as a business exit from Russia, higher costs, and a stronger dollar impacted performance. The company’s stock is down more than 4%.

Booking (BKNG), Moderna (MRNA), Regeneron Pharma (REGN), Nintendo ADR (NTDOY), MetLife (MET), eBay (EBAY), and others report today.

Stock markets in Europe were mostly down on Tuesday. German DAX (DE30) fell by 0.23%, French CAC 40 (FR40) lost 0.42%, Spanish IBEX 35 (ES35) gained 0.15%, British FTSE 100 (UK100) closed down by 0.06%.

Challenging summer conditions, including extreme heat and drought, led to new highs in European energy prices. Rivers are too warm to cool nuclear plants in France, and water levels are too low to deliver coal to power plants, limiting Europe’s electricity supply. This means countries rely even more on gas to meet additional electricity demand. Further cuts in Russian supplies to the continent will further exacerbate the situation. Analysts believe that electricity prices in Europe will rise even higher.

Energy stocks, meanwhile, remained flat amid uncertainty over whether major oil producers will decide to raise production at Wednesday’s meeting. Commerzbank said the outcome of the OPEC+ meeting is impossible to predict for now, but there is speculation that the current output will remain unchanged.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.42%, Hong Kong’s Hang Seng (HK50) ended down by 2.36%, and Australia’s S&P/ASX 200 (AU200) was up by 0.07%.

S&P 500 (F) (US500) 4,091.35 −27.28 (−0.66%)

Dow Jones (US30) 32,396.76 −401.64 (−1.22%)

DAX (DE40) 13,449.20 −30.43 (−0.23%)

FTSE 100 (UK100) 7,409.11 −4.31 (−0.058%)

USD Index 106.25 +0.80 (+0.76%)

• – US FOMC Member Bullard Speaks (m/m) at 01:45 (GMT+3);
• – New Zealand Unemployment Rate at 01:45 (GMT+3);
• – Japan Services PMI (m/m) at 03:30 (GMT+3);
• – Australia Retail Sales (m/m) at 04:30 (GMT+3);
• – China Caixin Services PMI (m/m) at 04:45 (GMT+3);
• – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3);
• – German Services PMI (m/m) at 10:55 (GMT+3);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
• – UK Services PMI (m/m) at 11:30 (GMT+3);
• – Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
• – US ISM Services PMI (m/m) at 17:00 (GMT+3);
• – US Crude Oil Reserves (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 Christopher Decker, University of Nebraska Omaha 

The 9.1% increase in U.S. consumer prices in the 12 months ending in June 2022, the highest in four decades, has prompted many sobering headlines.

Meanwhile, annual inflation in Germany and the U.K. – countries with comparable economies – ran nearly as high: 7.5% and 8.2%, respectively, for the 12 months ending in June 2022. In Spain, inflation has hit 10%.

It might seem like U.S. policies brought on this predicament, but economists like me doubt it because inflation is spiking everywhere, with few exceptions. Rates averaged 9.65% in the 38 largely wealthy countries that belong to the Organization for Economic Cooperation and Development through May 2022.

What revved up those price increases starting in early 2021?

Scarcity put pressure on prices everywhere

When the COVID-19 pandemic began, demand for computers and other high-tech goods soared as many people switched from working in offices to clocking in at home.

Computer chip manufacturers struggled to keep up, leading to chip shortages and higher prices for a dizzying array of devices and machines requiring them, including refrigerators, cars and smartphones.

It’s not just chips. Many of the goods Americans consume, such as cars, televisions and prescription drugs, are imported from all corners of the world.

Supply chain strains

On top of problems tied to supply and demand changes, there have been major disruptions to how goods move to manufacturers and then onto consumers along what’s known as the supply chain.

Freight disruption, whether by ship, train or truck, has interfered with the delivery of all sorts of goods since 2020. That’s caused the cost of shipping goods to rise sharply.

These massive shipping disruptions have exposed the disadvantages of the popular just-in-time practice for managing inventory.

By keeping as little of the materials needed to make their products on hand, companies become more vulnerable to shortages and transportation snafus. And when manufacturers are unable to make their products quickly, shortages occur and prices surge.

This approach, especially when it involves the reliance on far-flung suppliers, has left businesses much more susceptible to market shocks.

Labor complications

The beginning of the pandemic also sent shock waves through labor markets with lasting effects.

Many businesses either fired or furloughed large numbers of workers in 2020. When governments began to relax restrictions related to the pandemic, many employers found that significant numbers of their former workers were unwilling to return to work.

Whether those workers had chosen to retire early, seek new jobs offering a better work-life balance or become disabled, the results were the same: labor shortages that required higher wages to recruit replacements and retain other employees.

Again, all of these dynamics are occurring globally, not just in the U.S.

War in Ukraine compounded these woes

Russia’s war on Ukraine, which began officially on Feb. 24, 2022, has also exacerbated inflation by interfering with the global supply of fuels and grains.

The conflict’s effects are reverberating around the globe and fueling inflation.

Russia is the world’s second-largest exporter of crude oil. Sanctions against Russian imports, combined with Russia halting oil shipments to European countries in retaliation, has led to disruptions in the global oil market.

As Europe buys more oil from the Middle East, demand for oil from that region increases, prompting price increases. Crude prices jumped from $101 per barrel in late February 2022, to $123 a month later. Prices stayed high for several months but by late July were around $100 a barrel again.

Food prices have increased substantially in the U.S. and elsewhere, partly due to this conflict. Ukraine possesses some of the most fertile soil in the world and is the third-largest exporter of corn.

Russia’s destruction of Ukrainian crops and its blockade of Ukrainian exports have led to significant price increases worldwide for agricultural commodities.

How will the world respond?

Support for globalization and international trade has waned in recent years. Given supply chain disruptions and the war in Ukraine fueling inflation, this trend will likely continue.

However, as an economist, I believe the benefits of free and open trade still outweigh current challenges.

In my view, there isn’t anything fundamentally wrong with the globalization that cannot be fixed. But, like quelling inflation and alleviating supply chain bottlenecks, it will take time.

About the Author:

Christopher Decker, Professor of Economics, University of Nebraska Omaha

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

By Meredith Oyen, University of Maryland, Baltimore County 

U.S. House Speaker Nancy Pelosi arrived in Taiwan on Aug. 2, 2022 – a highly controversial trip that has been strongly opposed by China.

Such is the sensitivity over the island’s status that even before Pelosi’s plane touched down in the capital of Taipei, mere reports of the proposed trip prompted a warning by China of “serious consequences.” In the hours before she set foot on the island, Chinese fighter jets flew close to the median line separating Taiwan and China, while Chinese foreign minister Wang Yi commented that U.S. politicians who “play with fire” on Taiwan would “come to no good end”.

For it’s part, the U.S. has distanced itself from the visit. Prior to the trip President Joe Biden said it was “not a good idea.”

As someone who has long studied the U.S.‘s delicate diplomatic dance over Taiwan, I understand why this trip has sparked reaction in both Washington and Beijing, given the current tensions in the region. It also marks the continuation of a process that has seen growing U.S. political engagement with Taiwan – much to China’s annoyance.

Cutting diplomatic ties

The controversy over Pelosi’s visit stems from the “one China” policy – the diplomatic stance under which the U.S. recognizes China and acknowledges Beijing’s position that Taiwan is part of China. The policy has governed U.S. relations with Taiwan for the last 40-plus years.

In 1979, the U.S. abandoned its previous policy of recognizing the government of Taiwan as that of all of China, instead shifting recognition to the government on the mainland.

As part of this change, the U.S. cut off formal diplomatic ties with Taiwan, with the U.S. embassy in Taiwan replaced by a nongovernmental entity called the American Institute in Taiwan.

The institute was a de facto embassy – though until 2002, Americans assigned to the institute would have to resign from U.S. State Department to go there, only to be rehired once their term was over. And contact between the two governments was technically unofficial.

As the government in Taiwan pursued democracy – starting from the lifting of martial law in 1987 through the first fully democratic elections in 1996 – it shifted away from the assumption once held by governments in both China and Taiwan of eventual reunification with the mainland. The government in China, however, has never abandoned the idea of “one China” and rejects the legitimacy of Taiwanese self-government. That has made direct contact between Taiwan and U.S. representatives contentious to Chinese officials.

Indeed, in 1995, when Lee Teng-hui, Taiwan’s first democratically elected president, touched down in Hawaii en route to Central America, he didn’t even set foot on the tarmac. The U.S. State Department had already warned that the president would be refused an entry visa to the U.S., but had allowed for a brief, low-level reception in the airport lounge during refueling. Apparently feeling snubbed, Lee refused to leave the airplane.

Previous political visits

Two years after this incident came a visit to Taiwan by then-House Speaker Newt Gingrich.

Similarly to the Pelosi visit, the one by Gingrich annoyed Beijing. But it was easier for the White House to distance itself from Gingrich – he was a Republican politician visiting Taiwan in his own capacity, and clearly not on behalf of then-President Bill Clinton.

Pelosi’s visit my be viewed differently by Beijing, because she is a member of the same party as President Joe Biden. China may assume she has Biden’s blessing, despite his comments to the contrary.

Asked on July 20 about his views on the potential Pelosi trip, Biden responded that the “military thinks it’s not a good idea right now.”

The comment echoes the White House’s earlier handling of a comment by Biden in which he suggested in May 2022 that the U.S. would intervene “militarily” should China invade Taiwan. Officials in the Biden administration rolled back the comment, which would have broken a long-standing policy of ambiguity over what the U.S. would do if China tried to take Taiwan by force.

Similarly with Pelosi, the White House is distancing itself from a position that suggests a shift in U.S.-Taiwanese relations following a period in which the U.S. had already been trying to rethink how it interacts with Taiwan.

Shifting policy?

In 2018, Congress passed the bipartisan Taiwan Travel Act. This departed from previous policy in that it allowed bilateral official visits between the U.S. and Taiwan, although they are still considered to be subdiplomatic.

In the wake of that act, Donald Trump’s Health and Human Services secretary, Alex Azar, became the highest-ranking U.S. official to visit Taiwan since 1979. Then in 2020, Keith Krach, undersecretary for economic growth, energy and the environment, visited Taiwan.

And in April 2022, a U.S. congressional delegation visited Taiwan. Pelosi herself was reportedly due to visit the island that same month, but canceled after testing positive for COVID-19.

Each of these visits has provoked angry statements from Beijing.

A high-profile visit – even one without the public backing of the White House – would signal support to the island at a time when the invasion of Ukraine by Russia has raised questions over the international community’s commitment to protect smaller states from more powerful neighbors.

Meanwhile, the erosion of democracy in Hong Kong has undermined China’s commitment to the idea of “one nation, two systems.” The principle, which allowed Hong Kong to maintain its economic, political and social systems while returning to the mainland after the end of British rule, had been cited as a model for reunification with Taiwan. The Chinese Communist Party also plans to hold its 20th congress in the coming months, making the timing sensitive for a Taiwan visit from a high-profile U.S. political figure such as Pelosi.

Editor’s note: This is an updated version of an article originally published on July 26, 2022.

About the Author:

Meredith Oyen, Associate Professor of History and Asian Studies, University of Maryland, Baltimore County

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

By JustForex

According to the latest ISM report, economic activity in the US manufacturing sector rose in July, with the economy posting its 26th consecutive month of growth. But it should be noted that there is a downward trend in growth, and the PMI indicator is approaching the level of 50. Going below 50 is usually a harbinger of recession.

At the close of trading yesterday, the Dow Jones (US30) decreased by 0.14%, and the S&P 500 (US500) lost 1.28%. The NASDAQ Technology Index (US100) was down by 1.13% on Monday.

Twitter (TWTR) lost about 2%, even as Greenlight Capital announced a new stake in the social media giant, betting that the latter will emerge victorious in a legal battle with Elon Musk to force the billionaire to fulfill his $44 billion deal. Boeing (BA) shares jumped by 6% after reports that the Federal Aviation Administration cleared the maker to resume delivery of the 787 Dreamliner.

Companies reporting today include AMD (AMD), Caterpillar (CAT), PayPal Holdings Inc (PYPL), Starbucks (SBUX), Gilead (GILD), Airbnb (ABNB), Marriott Int (MAR), Uber Tech (UBER), Ferrari NV (RACE), Electronic Arts (EA), and others.

On the political front, US House Speaker Nancy Pelosi is expected to visit Taiwan as part of her tour of Asia, despite hostile threats from China. This adds significantly to the nervousness in the financial markets.

Stock markets in Europe were mostly down on Monday. German DAX (DE30) decreased by 0.03%, French CAC 40 (FR40) lost 0.18%, Spanish IBEX 35 (ES35) was 0.87% lower, British FTSE 100 (UK100) was 0.13% lower.

European manufacturing PMI dipped below the level of 50 in July. This usually means that a country is approaching a recession. It is a preliminary and rough indicator, but the statistics show that a drop of 50 triggers recessive processes in the country. The Central Bank has begun to work toward easing monetary policy. In Spain, the Index fell from 52.6 to 48.7, Italy from 50.9 to 48.5, France from 49.6 to 49.5, Germany from 52 to 49.3, and the overall Eurozone PMI fell from 52.1 to 49.8. With the ECB just starting to tighten monetary policy and raise interest rates, Europe will slowly deepen into recession. Winter will not be easy for Europe.

Oil is down nearly 5% due to negative Chinese data. Chinese factory activity declined in July amid new blockages related to COVID. China is the world’s largest importer of crude oil. OPEC+, Organization of Petroleum Exporting Countries, will meet Wednesday to decide on September production quotas for the group’s members. Analysts believe that OPEC+, which includes 23 countries, will likely leave production unchanged and only raise it slightly in September. Most importantly, OPEC+ should not cut production at this point.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.69%, Hong Kong’s Hang Seng (HK50) ended down by 0.05%, while Australia’s S&P/ASX 200 (AU200) was up by 0.69%.

Australia’s Central Bank raised its interest rate by 50 basis points to 1.85% and noted further tightening. The Bank said in a statement that it attaches great importance to getting inflation back into the 2-3 percent range over time while keeping the economy stable. The outlook for global economic growth has been worsened by pressure on real income due to higher inflation, tighter monetary policy in most countries, Russia’s invasion of Ukraine, and COVID containment measures in China.

Japan’s planned record minimum wage hike paves the way for sustained GDP growth. Japan’s average minimum wage is rising at a record pace this year. The government said Tuesday, a positive development for Prime Minister Fumio Kishida’s efforts to protect households from global inflation. Kishida expects the increase to contribute to his flagship policy of distributing wealth to the broader population to put Japan’s economy on a sustainable recovery path.

S&P 500 (F) (US500) 4,118.63 −11.66 (−0.28%)

Dow Jones (US30) 32,798.40 −46.73 (−0.14%)

DAX (DE40) 13,479.63 −4.42 (−0.033%)

FTSE 100 (UK100) 7,413.42 −10.01 (−0.13%)

USD Index 105.41 −0.49 (−0.47%)

• – Australia RBA Interest Rate Decision (m/m) at 07:30 (GMT+3);
• – Australia RBA Rate Statement (m/m) at 07:30 (GMT+3);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (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.