Archive for Economics & Fundamentals – Page 67

Target Thursdays: UK100, Wheat & EURUSD hit targets!

By ForexTime

  • UK100 bulls bag 770 points
  • Wheat “throwback” rewards bears
  • EURUSD secures all bearish targets

Here are how these discussed instruments performed this week:

 

    1) UK100 touches fresh record high

  • Where and when was Target Price (TP) published?

In our week ahead article published on Friday, 3rd May:

We were bullish on the UK100 and suggested that a solid “close above 8200 may encourage a move toward the next psychological level at 8300”

 

  • What happened since TP was published?

After hitting a fresh all-time high last Friday, the index extended gains on Tuesday after the bank holiday at the start of the week.

A weaker pound and optimism around the Bank of England (BoE) cutting interest rates down the road have turbocharged FTSE100 bulls.

Note: UK100 could see more volatility this week due to the upcoming BoE meeting and Q1 GDP figures

 

  • How much in potential profits?

Those who took advantage of a move above 8223 would have been rewarded 770 points.

 

    2) Wheat ready to resume upside?

  • Where and when was Target Price (TP) published?

Earlier in the week, we discussed how FXTM’S new commodity Wheat could push higher due to fundamental forces.

However, we cautioned that “prices may experience a technical throwback” with “sustained weakness below 629 opening a path towards 615….”

 

  • What happened since TP was published?

Wheat prices slipped on Wednesday, tumbling towards the 615 level before prices rebounded back towards 629.

Note: The soft commodity could see more volatility this week due to the WASDE report on Friday.

 

  • How much in potential profits?

Traders who took advantage of the breakdown below 629 and exited at 615 would have caught a roughly 2% move to the downside.

 

    3) EURUSD hits all bearish targets

  • Where and when was Target Price (TP) published?

This technical scenario (EURUSD) is based on the FXTM Signals that are released once a day, before the opening of the U.S. trading session.

These signals are designed around a trading instrument’s most influential factor – PRICE – making them a powerful asset to your trading strategy.

It can be found in the MyFXTM profile under Trading Services… FXTM Trading Signals.

 

  • What happened since TP was published?

The EURUSD fell as the dollar appreciated across the board.

Market caution and hawkish comments from a Fed official seem to be supporting the greenback.

 

  • How much in potential profits?

EURUSD has hit all its profit targets.

Traders who entered at 1.07418 and exited at the final target level of 1.07271 would have gained roughly 15 pips.

Feel like you missed out on these profits?

You can keep following our “Daily Market Analysis” for fresh trading ideas and opportunities across global financial markets.


Forex-Time-LogoArticle by ForexTime

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

US-Africa trade deal turns 25 next year: Agoa’s winners, losers and what should come next

By Bedassa Tadesse, University of Minnesota Duluth 

The African Growth and Opportunity Act (Agoa) is a landmark piece of trade legislation enacted by the United States in 2000. Its goal is to promote economic growth, development and poverty reduction in sub-Saharan Africa by providing qualifying countries with duty-free access to the US market for over 6,500 products. By eliminating import tariffs and quotas, Agoa aims to stimulate trade, attract foreign investment and foster economic integration between the US and African nations.

Agoa has made strides in boosting exports from eligible African countries to the US. Between 2001 and 2021, the annual value of US imports from Agoa-eligible countries nearly tripled, from US$8.15 billion to US$21.8 billion. The trade preferences have particularly benefited sectors like apparel, textiles, agriculture and light manufacturing. However, Agoa’s impact has been uneven across the region. Some countries have used the opportunities more effectively than others.

As Agoa approaches its 25th anniversary next year, policymakers are considering extending it for a further 16 years. I recently conducted a comprehensive review of scholarly articles and policy reports that analyse the impact of Agoa on the economic performance of sub-Saharan Africa. Below are the four key observations.

1. Some countries have benefited more than others

Agoa’s benefits can’t be measured in just one metric. They reflect in various terms for various countries. But available research indicates that the countries that benefited most from Agoa include South Africa, Kenya, Lesotho, Mauritius, Madagascar, Ethiopia and Ghana.

These nations have used Agoa preferences to substantially increase their exports to the US, particularly in sectors like apparel, textiles and light manufacturing.

Kenya, where apparel-dominated exports to the US have grown from US$55 million in 2001 to US$603 million in 2022, is a shining example of growth in exports. Mauritius exported chocolate and basket-weaving materials. Mali exported buckwheat, travel goods and musical instruments until its 2022 suspension. Mozambique exported sugar, nuts and tobacco. Togo exported wheat, legumes and fruit juices.

Lesotho’s success story is equally inspiring. It has had rapid export growth and job creation in its apparel sector, and this has contributed to new manufacturing jobs.

These success stories underscore the potential of Agoa to drive economic growth and job creation.

2. Some countries have not benefited much

Central and west African countries have not extensively used Agoa’s benefits. They have been held back by weakness in infrastructure, governance and global market integration.

Burundi, the Central African Republic, Equatorial Guinea, Eritrea, The Gambia, Guinea-Bissau and Mali have seen little export growth and foreign direct investment, or no benefits.

3. Reason for the uneven benefits

The variation in Agoa’s impact across sub-Saharan Africa is down to several factors. First, countries with better infrastructure, stable governance and conducive business environments are better positioned to attract foreign investment and increase exports.

Second, the level of economic diversification and export capabilities matters. Countries with more diversified export baskets and established manufacturing sectors have managed to make the most of Agoa’s opportunities.

Third, national policies and strategies to complement Agoa are essential. Countries that put in place policies to improve productivity, integrate value chains and ease supply-side constraints appear to have had success under Agoa. Cultural (historical) connections with the US market may have also provided an advantage for some countries, like Kenya and Lesotho.

4. What the future holds

The US Senate is considering extending Agoa for another 16 years. It is vital to consider the lessons learned from the past 25 years.

Diversify the economy and add value: Many countries still rely heavily on primary commodity exports. This leaves them vulnerable to global price movements and limits their economic development prospects.

Invest in infrastructure: Transport, energy and communication are critical to enhance competitiveness and attract more foreign direct investment. Public-private partnerships and multilateral development financing could help to fill infrastructure gaps.

Promote good governance, political stability and institutional reforms: These create an enabling environment for businesses and investors. It means strengthening legal frameworks, combating corruption and ensuring the rule of law.

Build capacity and develop skills: It should be a priority to enhance human capital and create a skilled workforce that can support the other steps outlined above.

Recognise the diverse economic, political and social contexts in sub-Saharan Africa: Tailored strategies and targeted assistance could work better for individual countries.

As Agoa approaches its 25th anniversary, the potential extension through 2041 presents a strategic opportunity. The sub-Saharan African countries should refine and broaden Agoa’s impact to better serve the diverse needs of the region. By tackling the uneven impacts and focusing on sustainable development goals, Agoa can continue to play a part in the region’s economic transformation. The US and beneficiary countries must work together closely to ensure the benefits are widespread and inclusive.The Conversation

About the Author:

Bedassa Tadesse, Professor of Economics, University of Minnesota Duluth

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

 

What’s in a VIN? How to decode the vehicle identification number, your car’s unique fingerprint

By Jordan Frith, Clemson University 

Every vehicle built after 1981 has a unique vehicle identification number, or VIN. The location of this string of letters and numbers varies, but it’s located somewhere on every car, SUV, motorcycle and truck – typically on a small metal plate or a sticker.

VINs serve many purposes. They help consumers learn about a used car’s history, including whether it was stolen, or determine whether rebates for a particular electric vehicle are available. This code appears in the paperwork necessary to do everything from insuring your car to selling it.

I research data standards and became interested in VINs while doing research for my book about the cultural history of barcodes.

Like barcode numbers, a VIN’s characters are standardized. They can tell a story if you know what to look for.

A string of numbers and letters with the heading 'Decoding the VIN'
A lot of information is packed into these 17 characters.
The Conversation U.S., CC BY-SA

What VINs can tell you

VINs can convey at least seven pieces of information.

  1. Origin
    If a VIN begins with a 1, 4 or 5, that means it’s a vehicle assembled in the U.S. Many other countries have their own unique identifier. A 2, for example, means the vehicle was made in Canada; a J stands for Japan.
  2. Manufacturer
    The second and third characters indicate the manufacturer. In some cases, the code corresponds with a line of vehicles that now belongs to a larger corporation. Dodge and Jeep, now part of Stellantis, each has its own. So does Lincoln, which became a division of Ford Motor Co. in 1922.
  3. Description
    The fourth through eighth characters provide several details, such as body type and engine type.
  4. Security
    The ninth character is a “check digit” determined by a complex mathematical equation based on the rest of the VIN’s numbers and letters. This digit, either a number or the letter X, is used to authenticate that the VIN is not a forgery.
  5. Year
    The 10th character indicates the model year. There’s only one slot for this, and not all letters and numbers are used, resulting in repetition. An R could signal either 2024 or 1994, for example.
  6. Factory
    The 11th character indicates the specific plant where the vehicle was assembled.
  7. Serial number
    The VIN’s final six characters compose a serial number that differentiates the vehicle from all others made in the same factory that are the identical type and model year.
A drawing of a car with the heading 'Where's my VIN?'
Vehicle identification number locations vary but are generally found in one of four places.
The Conversation U.S., CC BY-SA

Finding more information

Only experts can tell where a vehicle was assembled or what type of engine it has by looking at its VIN. But help is available.

The National Highway Traffic Safety Administration provides a handy VIN decoder. When I plugged my vehicle’s VIN into the decoder, the site correctly determined that my SUV is a 2011 Subaru Forester with an automatic transmission.

Of course, I already knew all that.

What I didn’t realize was that it weighs between 4,000 and 5,000 pounds, has a 2.5-liter engine and features side curtain airbags to protect the driver and passengers in the front and back seats. I also learned that this Subaru Forester was assembled in Gunma, Japan.

Those details had been invisible to me as a consumer, but they had been within easy reach ever since I bought my Forester in 2018. I had somehow driven that car well over 100,000 miles without realizing the number on the side of my driver’s seat contained some history.

Before buying the Forester, even though I didn’t know that my VIN could say so much, I did run it through a free online system to make sure it hadn’t been stolen.

To be sure, VINs won’t tell you everything you might want to know about a vehicle, such as what color it was when it rolled off the line. But if you can do a little decoding and make use of widely available online tools, they do harbor important information.The Conversation

Where’s your VIN and what’s it for?

 

About the Author:

Jordan Frith, Pearce Professor of Professional Communication, Clemson University

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

Oil prices are rising amid rumors of increased production by OPEC countries. European indices are growing amid the “dovish” position of the ECB

By JustMarkets

The US stock indices traded mixed on Tuesday. The Dow Jones Index (US30) rose by 0.08%, while the S&P 500 Index (US500) gained 0.13%. The NASDAQ Technology Index (US100) closed negative 0.10% yesterday. Minneapolis Fed President Kashkari’s comments on Tuesday were hawkish when he said that given the latest inflation data, he doubts that Fed policy is restrictive enough to bring price growth back to the Fed’s 2% target. He added that the Fed will likely keep interest rates unchanged “for an extended period” until it is satisfied that inflation will align with the target. Investors await further comments from the central bank and Friday’s Michigan consumer sentiment index to better understand how rates will move.

First-quarter earnings results were mostly better than expected, which is favorable for the stock. First-quarter earnings are expected to be up 6.5% YoY, well above the 3.8% forecast before the reporting season.

Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) rose by 1.40%, France’s CAC 40 (FR40) closed 0.99% higher, Spain’s IBEX 35 (ES35) added 1.50%, and the UK’s FTSE 100 (UK100) gained 1.22%.

ECB Governing Council representative De Cos said that the ECB may cut interest rates in June if inflation persists. On the back of positive economic news from the Eurozone, European indices were supported on Tuesday. Eurozone retail sales for March rose by 0.8% m/m, which exceeded expectations of 0.7% m/m and was the largest increase in a year and a half. German factory orders for March unexpectedly fell by 0.4% m/m, weaker than expectations of 0.4% m/m. German trade news was better than expected: exports for March added 0.9% m/m, stronger than expectations of 0.3% m/m. In addition, imports for March unexpectedly rose by 0.3% m/m, stronger than expectations of 1.0% m/m.

WTI crude oil prices fell to $78 per barrel on Wednesday, back to their lowest levels in nearly two months after reports that Russian Deputy Prime Minister Alexander Novak said OPEC+ may consider increasing oil production. The group of major producers will meet on June 1 to decide on production policy for the year’s second half. The current supply agreement, which takes about 2.2 million barrels a day off the market, expires at the end of June.

Asian markets were mostly up on Wednesday. Japan’s Nikkei 225 (JP225) closed up 1.57% yesterday, China’s FTSE China A50 (CHA50) added 0.25% for the day, Hong Kong’s Hang Seng (HK50) was down 0.53% for the day, and Australia’s ASX 200 (AU200) was positive 1.44%.

The Hang Seng (HK50) attempted to near its highest level in eight months as traders focused on Chinese President Xi Jinping’s visit to Europe this week and how trade relations will develop despite ongoing inspections of various sectors. On the fiscal front, Beijing will allocate billions of yuan to upgrade infrastructure in China’s cities over the next three years. Meanwhile, foreign exchange reserves in China fell more than expected to US$3.20 trillion in April, and Hong Kong’s fell to the lowest level in six months, US $416.4 billion.

Finance Minister Shun’ichi Suzuki repeated a warning that authorities are ready to respond to excessive currency volatility. At the same time, Bank of Japan Governor Kazuo Ueda said they will study the impact of yen movements on inflation to guide policy decisions. Analysts say the intervention will only give the authorities some time, given the sharp interest rate differential between Japan and the US.

S&P 500 (US500) 5,187.70 +6.96 (+0.13%)

Dow Jones (US30) 38,884.26 +31.99 (+0.082%)

DAX (DE40) 18,430.05 +254.84 (+1.40%)

FTSE 100 (UK100) 8,313.67 +100.18 (+1.22%)

USD Index 105.37 +0.32 (+0.32%)

Important events today:
  • – German Industrial Production (m/m) at 09:00 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
  • – US FOMC Member Cook Speaks at 20:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

The RBA kept all monetary policy settings. Oil rises amid the breakdown of negotiations between Israel and Hamas

By JustMarkets

At Monday’s close, the Dow Jones (US30) Index added 0.46%, while the S&P 500 (US500) Index was up 1.46%. The NASDAQ Technology Index (US100) closed positive 1.19% yesterday.

The Dollar Index stabilized above 105 on Tuesday as investors continued to assess the Federal Reserve’s monetary policy outlook in light of the central bank’s recent comments. New York Fed Chairman John Williams said decisions on interest rate cuts will be made based on incoming data. At the same time, Federal Reserve Bank of Richmond Chairman Thomas Barkin expressed confidence that inflation will fall to 2% as the full effect of a rate hike materializes. Markets estimate the odds of a 25 bps rate cut at 10% at the June 12 FOMC meeting and 34% at the July 31 meeting.

Equity markets in Europe were mostly up. Germany’s DAX (DE40) rose by 0.96%, France’s CAC 40 (FR40) closed 0.49% higher, Spain’s IBEX 35 (ES35) added 0.58%, and the UK’s FTSE 100 (UK100) was not trading yesterday.

ECB Chief Economist Lane said the latest Eurozone data gives him confidence that inflation is returning to the ECB’s 2% target, raising the likelihood of a first interest rate cut in June. ECB Governing Council spokesman Simkus said he expects the ECB to cut interest rates three times this year, starting with a planned move in June. These are strengthening factors for European indices.

WTI crude oil prices rose to $79 a barrel on Tuesday, extending gains from the previous session, as ceasefire talks between Israel and Hamas appeared to have stalled. Hamas agreed to the mediators’ ceasefire proposal on Monday, but Israel said the terms did not meet its demands. The ongoing conflict in the Middle East has supported oil prices amid concerns it could disrupt crude supplies from the region. On the demand side, Saudi Arabia raised official selling prices for its crude oil sold to Asia, Northwest Europe, and the Mediterranean in June amid forecasts of strong oil demand this summer.

Asian markets were mostly rising on Monday. Japan’s Nikkei 225 (JP225) was not trading yesterday, China’s FTSE China A50 (CHA50) added 1.50% for the day, Hong Kong’s Hang Seng (HK50) was up 0.55% for the day and Australia’s ASX 200 (AU200) was positive 0.70%.

Hong Kong stocks fell to 18,480 in morning deals on Thursday, falling for the first time in 11 sessions due to losses in most sectors, particularly technology, consumer discretionary, and financials. Traders profited after the Hang Seng Index hit its highest level in 8 months. Vigilance was also heightened ahead of several key data releases from China this week, including April trade and inflation data.

As expected, the Reserve Bank of Australia (RBA) left the money rate unchanged at 4.35% at its May meeting. The central bank kept borrowing costs unchanged for the fourth consecutive meeting, acknowledging that the return of inflation to target is unlikely to be smooth. The Council added that it needs to make sure prices move towards the 2-3% range while remaining vigilant on upside risks and reiterated that it would neither rule in nor rule out anything as it would rely on data and risk assessment. In doing so, the RBA will keep an eye on the global economy, domestic demand trends, and the inflation and labor market outlook. The ASX 200 (AU200) hit a one-month high on the back of the decision.

S&P 500 (US500) 5,180.74 +52.95 (+1.03%)

Dow Jones (US30) 38,852.27 +176.59 (+0.46%)

DAX (DE40) 18,175.21 +173.61 (+0.96%)

FTSE 100 (UK100) 8,213.49  +41.34 (+0.51%)

USD Index 105.11 +0.08 (+0.07%)

Important events today:
  • – Japan Services PMI (m/m) at 03:30 (GMT+3);
  • – Australia RBA Interest Rate Decision at 07:30 (GMT+3);
  • – Australia RBA Monetary Policy Report at 07:30 (GMT+3);
  • – German Trade Balance (m/m) at 09:00 (GMT+3);
  • – UK Services PMI (m/m) at 11:30 (GMT+3);
  • – Canada Ivey PMI (m/m) at 17:00 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Investors expect a hawkish stance from the RBA. Natural gas prices returned to growth

By JustMarkets 

On Friday, the Dow Jones (US30) was up 1.18% (for the week +1.03%), while the S&P 500 (US500) was up 1.26% (for the week +0.27%). The NASDAQ Technology Index (US100) closed positive 1.99% (for the week +0.93%). The US stocks rose thanks to a weaker-than-expected April employment report, which increased expectations of a Federal Reserve interest rate cut in September.

The US jobs report recorded a 175,000 increase in Non-farm payroll employment for April, compared to the consensus forecast of 240,000, while March data was revised slightly upward to 315,000 from 303,000. In the household survey, the unemployment rate rose to 3.9% from 3.8%, with a slight increase in employment. Average hourly earnings rose 0/2% for the month, slightly below expectations of 0.3%, with year-over-year growth slowing to 3.9% from 4.1%. The data suggests the labor market is cooling, and wage pressures are slowing. According to economists, given the current situation, the US Fed will likely start cutting rates in September.

Canada’s services PMI for April 2024 came in at 49.3, up from March’s 46.4. This is the highest reading since June but is still indicative of contraction. The slower decline in activity is partly due to a stabilization in new orders. The latest data showed no change in new work, ending eight months of contraction.

Equity markets in Europe were mostly up on Friday. The German DAX (DE40) rose by 0.59% (for the week +0.45%), the French CAC 40 (FR40) closed Friday up 0.54% (for the week -1.42%), the Spanish IBEX 35 (ES35) declined 0.16% (for the week -1.72%), the British FTSE 100 (UK100) closed positive 0.51% (for the week +0.90%).

The S&P Global UK Services PMI for April 2024 jumped to 55 from 53.1 the previous month, indicating a sixth consecutive period of growth at the sharpest pace in over a year. Service providers saw a sharp increase in new orders amid changing economic conditions for clients. Combined with a decline in work backlogs, business activity also increased significantly. Based on signs of recovering customer demand, upcoming marketing initiatives, and long-term expansion plans, companies remained optimistic about the outlook for business activity in the coming year.

The Eurozone unemployment rate for March 2024 was a record low of 6.5%, in line with market expectations and the previous three months. The unemployed fell by 94 thousand from the previous month to 11.087 million. Among the major Eurozone countries, Spain recorded the highest unemployment rate at 11.7%, followed by France at 7.3% and Italy at 7.2%. In contrast, Germany recorded the lowest rate of 3.2%. A year earlier, the unemployment rate was slightly higher at 6.6%.

Norges Bank (NB) kept its key interest rate unchanged at 4.5% in May 2024 for the third consecutive time, in line with market expectations, and said the rate will remain at the current level “for some time.” Norway’s central bank said monetary policy is tight enough to have a tightening effect on the economy, keeping growth low and enough to bring inflation back to target within a “reasonable time horizon.” However, policymakers noted they would be willing to hold another rate hike if monetary conditions were insufficient to bring inflation back to the bank’s target level.

The US natural gas (XNG) prices rose more than 5% to above $2.1 per mmbbl on Friday, nearing a three-month high thanks to rising exports and production cuts. Major energy giants like EQT and Chesapeake Energy have cut drilling and production, leading to a 9% decline in US gas output this year. Gas production fell to 98.1 Bcf/d in April from a record 105.5 Bcf/d in December 2023 and continued to decline in May.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) rose by 0.45%, China’s FTSE China A50 (CHA50) decreased by 0.25% for the week, Hong Kong’s Hang Seng (HK50) jumped by 6.57% for the week, and Australia’s ASX 200 (AU200) was positive 0.55%.

The Australian dollar holds above $0.66, which is near its strongest level in two months, as investors await the Reserve Bank of Australia’s (RBA) policy decision this week. The central bank is expected to leave interest rates unchanged, but markets are betting it will take a more hawkish stance due to recent strong domestic inflation figures. Australia’s inflation rate fell to 3.6% in the first quarter from 4.1% in the previous quarter, slowing for the fifth consecutive quarter but beating forecasts of 3.4%.

S&P 500 (US500) 5,127.79 +63.59 (+1.26%)

Dow Jones (US30) 38,675.68 +450.02 (+1.18%)

DAX (DE40) 18,001.60 +105.10 (+0.59%)

FTSE 100 (UK100) 8,213.49 +41.34 (+0.51%)

USD Index 105.08 -0.22 (-0.21%)

Important events today:
  • – China Caixin Services PMI (m/m) at 04:45 (GMT+3);
  • – Germany Services PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
  • – Eurozone Producer Price Index (m/m) at 12:00 (GMT+3);
  • – SNB Board Member Jordan Speaks at 15:25 (GMT+3);
  • – US FOMC Member Barkin Speaks at 20:00 (GMT+3);
  • – US FOMC Member Williams Speaks at 20:00 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

The British index has updated the historical maximum. Oil lost 5% over the week

By JustMarkets

At the end of Thursday, the Dow Jones Index (US30) rose by 0.85%, and the S&P 500 Index (US500) rose by 0.91%. The NASDAQ Technology Index (US100) closed negative 0.33%. Optimism about the economic outlook is supporting stocks. Stocks have also received support since Wednesday when Fed Chair Powell said the Fed’s next move is unlikely to be an interest rate hike. Stock indices maintained gains even after US economic reports showed weekly jobless claims rose less than expected and unit labor costs rose more in the first quarter, a hawkish factor for Fed policy.

On Thursday, Apple (AAPL) reported second-quarter results that beat Wall Street expectations, thanks to better-than-expected performance in its key China market. It also announced the most significant share repurchase in its history. Apple Inc (AAPL) shares rose more than 7% after the report. Qualcomm (QCOM) rose more than 9% after reporting better-than-expected second-quarter adjusted earnings per share and predicting third-quarter adjusted earnings per share above consensus. On the downside, Etsy (ETSY) is down more than 16% after the company reported first-quarter gross merchandise sales below consensus.

The Organization for Economic Cooperation and Development (OECD) raised its 2024 global growth prognosis to 3.1% from a February estimate of 2.9% and said risks are becoming “more balanced.”

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) was down 0.20%, France’s CAC 40 (FR40) closed down 0.88%, Spain’s IBEX 35 (ES35) added 0.16%, and the UK’s FTSE 100 (UK100) closed positive 0.63%.

On Thursday, the FTSE 100 Index hit a new record high of 8160 on positive corporate developments. Shell shares rose more than 2.5% after announcing a $3.5 billion share buyback and better-than-expected first-quarter earnings and cash flow.

WTI crude futures stabilized above $79 a barrel on Friday but are still down more than 5% this week as easing fears of a broader conflict in the Middle East, signs of increased US oil supplies, and growing uncertainty about the outlook for oil demand weighed on prices. Egypt led efforts this week to restart stalled peace talks between Israel and Hamas. At the same time, US Secretary of State Antony Blinken urged Hamas to accept Israel’s offer of a ceasefire in exchange for hostages. Meanwhile, OPEC+ said it may extend a voluntary 2.2 million BPD production cut beyond June if oil demand does not recover.

US natural gas (XNGUSD) prices climbed above the $2/MMBtu mark on Thursday, recovering from two consecutive losses. Prognoses point to higher demand next week, including increased gas deliveries to LNG export plants. In addition, the latest EIA report showed that US utilities pumped 59 billion cubic feet (BCF) of gas into storage for the week ended April 26, 2024, compared to market expectations of a 55 BCF increase. Inventories are now 34.9% above the seasonal average.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.10%, China’s FTSE China A50 (CHA50) was not trading, Hong Kong’s Hang Seng (HK50) was up 2.5% and Australia’s ASX 200 (AU200) was positive 0.23%.

Global hedge funds using a strategy of long-short equity market positions are increasingly tilted in favor of China, as evidenced by their active buying of Hong Kong-listed stocks. The Hang Seng Index rose more than 7% in April, posting its best monthly gain since January 2023 and outperforming most significant markets. Swiss bank UBS said in a research note that trends in the Hong Kong market have reversed, unlike in February when the primary inflows came from covering short positions. As Hong Kong stocks rose, fundamental hedge funds with long-short positions continued accumulating shares of Chinese companies.

S&P 500 (US500) 5,064.20 +45.81 (+0.91%)

Dow Jones (US30) 38,225.66 +322.37 (+0.85%)

DAX (DE40) 17,896.50 −35.67 (−0.20%)

FTSE 100 (UK100) 8,172.15 +50.91 (+0.63%)

USD Index 105.39 −0.36 (−0.34%)

Important events today:
  • – Norwegian NB Interest Rate Decision at 11:00 (GMT+3);
  • – UK Services PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
  • – US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
  • – US Unemployment Rate (m/m) at 15:30 (GMT+3);
  • – US ISM Services PMI (m/m) at 17:00 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

High interest rates aren’t going away anytime soon – a business economist explains why

By Christopher Decker, University of Nebraska Omaha 

The Federal Reserve held interest rates steady at its May 1, 2024, policy meeting, dashing the hopes of potential homebuyers and others who were hoping for a cut. Not only will rates remain at their current level – a 23-year high – for at least another month, there’s little reason to believe the Fed will start tapering until the fall. Indeed, if inflation starts to heat back up, it’s plausible — though at the moment unlikely — that the Fed will consider ratcheting up rates another 25 basis points or so in the coming months.

As recently as a few months ago, investors were betting that 2024 would bring a slew of rate cuts.

But speaking as a business economist, I think it’s clear that the latest economic data discouraged the Fed from easing up as it gathered for its latest policy meeting. There’s no sign of an imminent recession. Employment is still pretty strong, with the U.S. adding 303,000 jobs in March 2024 and 270,000 in February, and the unemployment rate – at 3.8% in March – ticked up only slightly from 3.5% in March 2023. That is simply not a large enough increase to be concerned that high rates are slowing the economy down too abruptly.

While it’s true that inflation-adjusted gross domestic product growth, after posting a remarkable 4.8% annualized increase in the fourth quarter of 2023, slowed significantly to 1.6% in the first quarter of 2024, slower growth is exactly what the Fed has been attempting to engineer by raising interest rates. By controlling demand for good and services, price growth slows. That’s still not a recessionary indication.

The inflation challenge

Getting inflation rates down to the Fed’s 2% target — a number that Federal Reserve Chair Jerome Powell repeated several times during his news conference — has been challenging, to say the least. The Fed began hiking interest rates in early 2022. Initially, it had some success in reducing inflation that had peaked at about 9% that year. Indeed, as Powell said, the reduction in inflation was historically fast, due in part to both rate increases and easing international supply chain disruptions. But since June 2023, when inflation was 3.1%, there’s been little decline. Indeed, consumer price index growth hasn’t fallen below 3% since March 2021.

One of the main reasons inflation has stayed high is that there aren’t enough workers. Economic growth increases labor demand, and labor supply simply hasn’t kept pace. The result is higher wages. With higher wages, firms need to cut costs elsewhere, increase prices, or both, to maintain profitability.

Another important driver of inflation, which Powell took pains to mention, is the rising cost of rent. With higher mortgage rates, the housing market has slowed considerably, and many Americans — especially younger ones — are renting instead of buying. Sustained demand for apartments, combined with increased costs of maintenance and upkeep of rental properties, is pressuring rents upward.

Could hikes be in the future?

The next rate decision, in June, is “unlikely” to bring an increase, Powell said during his news conference. He also indicated said the current regime of high rates should be sufficient to tame inflation.

Indeed, as he noted, new job openings have fallen from a peak of 12.1 million in March 2022 to 8.4 million in March 2024. While that’s still high in absolute terms, it’s a significant decline, which suggests slower labor demand. This should then reduce pressure on wages.

So, what about rate cuts? After all, some observers were expecting rate cuts to begin this summer. Based on the information I’m looking at, that is simply not going to happen. No move will occur until September at the earliest. Until then, expect a sluggish housing market and costly borrowing, but moderating inflation and slow but steady growth.The Conversation

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.

US Fed tilts towards a rate cut despite the postponement. HKMA left the rate unchanged at 5.75%

By JustMarkets

At Tuesday’s close, the Dow Jones Index (US30) added 0.23%, while the S&P 500 Index (US500) was down 0.34%. The NASDAQ Technology Index (US100) closed negative 0.33%. US stock indices traded mixed on Wednesday. Stock prices rose after bond yields fell, and Fed Chairman Powell said it was unlikely that the Fed’s next move would be a rate hike. However, the broader market gave up its gains and declined to close on the prospect of higher long-term interest rates. The broader market also came under pressure after Wednesday’s ADP employment change report for April rose more than expected, indicating a strengthening US labor market and strengthening the case for the Fed not to cut interest rates.

The US Federal Reserve left interest rates unchanged. Fed Chair Powell ruled out the possibility of another rate hike, confirming that the Central Bank is leaning toward easing despite the delay. Meanwhile, policymakers acknowledged that inflation has fallen over the past year but remains high, saying there has been no progress on the Central Bank’s inflation target in recent months. Investors now await the critical monthly US jobs report on Friday to gauge the labor market’s strength and determine the future outlook for rates.

Starbucks (SBUX) shares fell more than 15% after the company reported an unexpected decline in comparable sales in the second quarter. Additionally, Garmin Ltd (GRMN) is up more than 13% after it reported first-quarter earnings that beat consensus estimates. Advanced Micro Devices (AMD) closed down more than 8% after reporting second-quarter revenue of $5.4–6.0 billion, below the average consensus estimate of $5.72 billion. Kraft Heinz (KHC) lost more than 6% after the company reported first-quarter net sales of $6.41 billion, below the consensus forecast of $6.43 billion. According to Bloomberg Intelligence, about 81% of the S&P 500 companies already reported beat first-quarter earnings forecasts.

European equity markets did not trade yesterday, except for the British FTSE 100 (UK100), which closed negative 0.04%.

WTI crude oil prices stabilized above $79 per barrel on Thursday amid speculation that the US government may move to replenish its strategic oil reserves as it seeks to buy back oil at or below $79 per barrel. However, WTI crude prices remained near 7-week lows and are down more than 5% this week as hopes of a ceasefire agreement between Israel and Hamas and rising US crude inventories put pressure on the oil market.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.34%, China’s FTSE China A50 (CHA50) and Hong Kong’s Hang Seng (HK50) were not trading, while Australia’s ASX 200 (AU200) was negative 1.23%.

The Hong Kong Monetary Authority (HKMA) kept the benchmark rate unchanged at 5.75% on May 2, hours after the US Federal Reserve left its key interest rate unchanged for the sixth consecutive time. Monetary policy in the Asian financial hub is conducted in line with US policy as the local currency is pegged to the US dollar.

Australia’s trade surplus in goods fell to A$5.02 billion in March 2024 from a downwardly revised $6.59 billion in the previous month, below market forecasts of $7.30 billion. It was the smallest trade surplus since November 2020, as exports grew slower than imports.

The S&P Global Malaysia Manufacturing PMI for April 2024 rose to 49.0 from March’s three-month low of 48.4. It was the 20th consecutive month of contraction in factory activity as demand remained weak. Declines in output and new orders were more moderate, with overseas sales rising for the first time in a year and at the fastest pace since April 2021. Employment remained flat after three consecutive monthly declines. On the other hand, purchasing activity declined, and delivery times fell marginally.

S&P 500 (US500) 5,018.39 −17.30 ((−0.34%)

Dow Jones (US30) 37,903.29 +87.37 (+0.23%)

DAX (DE40) 17,932.17 0 (0%)

FTSE 100 (UK100) 8,121.24 −22.89 (−0.28%)

USD Index 105.63 −0.59 (−0.56%)

Important events today:
  • – Japan Monetary Policy Meeting Minutes at 02:50 (GMT+3);
  • – Australia Trade Balance (m/m) at 04:30 (GMT+3);
  • – Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3);
  • – Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
  • – Germany Manufacturing PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
  • – US Trade Balance (m/m) at 15:30 (GMT+3);
  • – Canada Trade Balance (m/m) at 15:30 (GMT+3);
  • – Canada BoC Gov Macklem Speaks at 15:45 (GMT+3);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Is scientific discovery driven by great individuals or by great teams?

By Denisa Mindruta, HEC Paris Business School 

“This isn’t mine; this is one for the team,” said Succession star Kieran Culkin as he accepted the Best Actor award at this year’s Golden Globes. It’s a familiar aspect of Hollywood awards speeches – a reminder that the stars dazzling us on screen could not exist without the people who support them. “It’s been said, but it’s a team effort, this show,” said Succession creator Jesse Armstrong at the awards, underlining the same sentiment.

Hollywood speeches aside, we do seem to focus on individuals when we acknowledge greatness. In business and science, the dominant cultural narrative is that the bulk of innovation is driven by a handful of exceptional individuals, or “stars.” We elevate pioneers like Steve Jobs or Albert Einstein, and reward individuals who show similar promise with resources that allow them to continue performing high-value work.

Star scientists are those who publish significantly more than their peers, producing papers with greater impact and actively participating in commercialisation ventures. However, science is rarely a solo effort. Even star scientists usually have a team ¬– a “constellation” – of collaborators behind them. Research teams have grown in size by 50% in the period between 1981 and 1999. In recent years, more than 80% of all science and engineering publications and over two-thirds of patents have been the product of multiple authors. Research collaborations that include star researchers typically achieve higher average performance than those without such individuals.

But what is the maximum impact that a single person can have on the joint performance of a collaboration? We examined the relative contributions individuals and their collaborators make to scientific innovation to understand how to optimize team composition to best perform.

Plus de trois fois sur quatre, c’est la complémentarité entre la tête d’affiche de l’équipe et le reste des membres qui apporte le plus de valeur aux recherches.
Flickr/NTNU, CC BY-SA

How star researchers improve collective performance

Star researchers improve collective performance in two ways. First, the presence and contributions of the star researcher improve the quality and output of their collaborators, leading to greater overall team success. Previous approaches have studied this so-called spillover effect by examining what happens when a star scientist leaves the group. These studies showed that when this happened, colleagues experienced a lasting 5-10% decline in publication rate.

Second, once a researcher has initial success, they find it increasingly easy to attract talent and resources. This is called the “Matthew effect,” named after a (loose) interpretation of a Biblical parable.

In practice, the Matthew effect reflects a feedback loop wherein star researchers can increase their success at a greater rate than their peers. It has been borne out by studies showing that star scientists gain preferential access to valuable resources like funding, talented graduate students, and advanced lab facilities in both in academia and in the private sector.

30 star scientists and their constellations

Prior research has treated spillover and the Matthew effect separately, but they are inextricably linked. So, we developed a model to capture this complexity.

We investigated the star-constellation relationship in collaborations that resulted in an invention. University researchers must disclose new inventions to their institutions. Because the disclosure is a legal document, it’s useful for our research because it sidesteps social noise such as favours and institutional politics that may skew rates of publication authorship. The data was taken from a U.S. university with a renowned medical school.

Analysis was performed using data on the 555 invention disclosures that were registered between 1988 and 1999. From the total cohort of 1003 scientists, of which 248 were team leaders, we identified a cohort of 30 “stars” who were in the top 5% of globally cited researchers.

Irreplaceable stars

The contribution of a star scientist to a team is dominant – i.e. their contribution exceeds that of their team – when they are “irreplaceable”. This means that they are so well-matched to the rest of the team that the constellation would be unable to produce work of the same standard without them, even with a new leader.

What makes a leader “well matched” to their team? We looked for trends in the dataset, considered the research impact, knowledge profile, and the range of seniorities in the group, so we could determine what matters the most when scientists choose collaborators.

We found that high-value team leaders tend to work with high-value collaborators, supporting the theory that star scientists attract talented constellations. Further, prominent leaders have access to, and are preferred by, collaborators with whom they share some expertise overlap, though a very high similarity makes the collaboration less favourable. Some common language and goals are a strength, but too much overlap in expertise stifles innovation.

In addition, high-value team leaders tend to work in groups where scientists of both senior and junior ranks come together. We therefore argue that diversity of perspectives and skills enables discovery. Last but not least, star scientists and their collaborators tend to share the same research profile with respect to the application domains of their research.

Star’s surprisingly small contribution

We used these findings to investigate whether the star or constellation makes the greater contribution to scientific discovery. When a star and constellation are well-matched, they produce higher quality research. For each collaboration, we calculated whether the star or constellation would be harder to replace.

To calculate the replaceability, we replaced a star or constellation with the substitute that was the second-best match. The greater the loss in research impact, the more irreplaceable the missing star or constellation was to the research.
Surprisingly, our results show that it is rare for a single person to make a more impactful contribution than their team. The relative contribution the star makes to knowledge creation surpasses the constellation’s in only 14.3% of collaborations. The constellation is the dominant party, in terms of relative value creation, in only 9.5% of cases. In more than three-quarters of cases, neither party dominates, with complementarity between star and constellation maximizing research value. In almost every pairing, innovation was a collective endeavor.

In short, to identify the drivers of innovation and discovery, we should not allow our view of the entire sky to be eclipsed by a few very bright stars.

Championing the whole team

Scientists perceived to bring star qualities are in demand and are often induced to transfer from one institution to another. This research suggests that administrators should endeavour to enable stars to move with their teams. Adjusting to work without their collaborators may have an adverse effect on the scientist’s research and their ability to attract additional talented hires. Dominating stars suffer a smaller loss without their team, but they are getting a bigger piece of a smaller pie.

However, the most significant takeaway for this research is that research credit is unfairly biased towards prominent individuals. Star scientists undoubtedly drive innovation, and a minority brings irreplaceable value. However, when considering the research output of a star, their achievements should be looked at within the context of a team. In most cases, the constellation brings a high contribution that merits recognition with IP credits, financial rents and other resources.The Conversation

About the Author:

Denisa Mindruta, Professeur Associé en Stratégie et Politique d’Entreprise, HEC Paris Business School

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