Archive for Economics & Fundamentals – Page 71

14 Mar

Silver prices have reached a one-year high. Oil is growing amid a decline in inventories

By JustMarkets

At Wednesday’s close of the stock market, the Dow Jones Index (US30) was up 0.09%. The S&P 500 Index (US500) decreased by 0.19%. The NASDAQ Technology Index (US100) closed negative 0.54%. The Dow Jones Industrials Index received support from companies such as 3M (MMM) with a gain of 5.42%, as well as Chevron (CVX), Caterpillar (CAT), Home Depot (HD), NIKE (NKE), Goldman Sachs (GS) and Coca Cola (KO) with gains of more than 1%.

Fed Chairman Powell said last week that the Fed is “not far” from being confident enough to cut interest rates. However, markets rate the Fed’s probability of cutting interest rates at its meeting next week as near zero, as inflation is still too far above target. Markets estimate the odds of a 25 bps rate cut at next week’s March 20 FOMC meeting at 1%, the May 1 meeting at 13%, and the June 12 meeting at 73%.

Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) was down 0.02%, France’s CAC 40 (FR40) added 0.62%, Spain’s IBEX 35 (ES35) index increased by 1.65%, and the UK’s FTSE 100 (UK100) closed positive 0.31%. The FTSE Index closed at 7,772 on Wednesday, the highest in ten months and marking the third consecutive session of gains. Market sentiment was driven by positive economic data that boosted hopes that the UK is recovering. UK Gross Domestic Product rose by 0.2% month-on-month in January, driven by strong retail and house-building performance.

ECB council spokesman Martins Kazaks said Wednesday that rate cuts could come within the next few meetings. His counterpart, Bank of France Governor Francois Villeroy de Galhau, said the ECB’s first rate cut is more likely in June than April.

WTI crude oil prices rose to $80 a barrel on Thursday, extending gains from the previous session, as an unexpected drop in US crude inventories signaled strong demand in the world’s top oil consumer. EIA data showed US crude inventories fell by 1.536 million barrels last week, contradicting expectations of a 1.338 million barrel increase. It was the first decline in seven weeks, confirming industry data reported Tuesday by API. In addition, the report noted a decline in inventories at the Cushing hub in Oklahoma and a decrease in gasoline inventories.

Silver prices (XAGUSD) rose to $24.7 an ounce, the highest since early December. They followed gains in other precious metals amid growing expectations that major central banks will soon start cutting interest rates. The Fed and ECB are expected to begin easing monetary policy in June, while the Bank of England will likely make its first rate cut in August.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was down 0.26% on the day, China’s FTSE China A50 (CHA50) was up 0.89%, Hong Kong’s Hang Seng (HK50) lost 0.07% on Wednesday, and Australia’s ASX 200 (AU200) was positive 0.22%. The Hang Seng Index (HK50) moved further away from the 3-month highs reached earlier in the week after Wall Street fell from recent highs overnight due to losses in chipmaker stocks, and market participants were wary of new key US economic data ahead of next week’s FOMC meeting.

The US House of Representatives passed a landmark bill that gives Chinese TikTok owner ByteDance six months to sell a controlling stake or the app will be blocked in the US.

Investors remain cautious amid growing speculation that the Bank of Japan (BoJ) could adjust its monetary policy as early as next week due to rising wages, inflation, and a strong economy. The country also concluded this year’s spring wage talks on Wednesday, with several major Japanese companies agreeing to solid wage increases.

S&P 500 (US500) 5,165.31 −9.96 (−0.19%)

Dow Jones (US30) 39,043.32 +37.83 (+0.097%)

DAX (DE40) 17,961.38 −3.73 (−0.021%)

FTSE 100 (UK100) 7,772.17 +24.36 (+0.31%)

USD Index 102.80 -0.16 (-0.16%)

Important events today:
  • – Switzerland Producer Price Index (m/m) at 09:30 (GMT+2);
  • – US Producer Price Index (m/m) at 14:30 (GMT+2);
  • – US Retail Sales (m/m) at 14:30 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 14:30 (GMT+2);
  • – US Natural Gas Storage (w/w) at 16:30 (GMT+2).

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.

Economics & Fundamentals Financial News
14 Mar

Target Thursdays: USDJPY, Silver & Crude reach targets!

By ForexTime

Check out these potential profits that you may have missed from our Daily Market Analysis.

  • USDJPY bulls lock in 80 pips
  • Silver up almost 3% this week
  • Crude hits all bullish targets   

 

    1) USDJPY rebound lends bulls support

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

In our Trade of The Week article on Monday 11th March:

We cautioned around the possibility of a “technical rebound” and highlighted how the USDJPY’s “14-day relative strength index (RSI) was already flirting with the 30 level”.

Note: When the 14-day RSI hits or goes below 30, this signals that prices are oversold.  

 

  • What happened since TP was published?

After failing to push lower, the USDJPY experienced a technical rebound on Tuesday thanks to the hotter-than-expected US inflation data.

This report cooled hopes around the Fed cutting interest rates in the coming months, boosting this dollar – which sent the USDJPY higher as a result.

Prices shot past the 147.20 resistance with the momentum briefly taking the currency pair above 148.00.

 

  • How much in potential profits?

Traders who took advantage of the breakout above 147.20 and exited at 148.00 would have been rewarded with 80 pips.

Note: The USDJPY could be injected with fresh volatility on Friday due to the results of Japan’s wage negotiations.

 

    2) Silver hits fresh 2024 high

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

In our article covering Silver on Wednesday, March 13th we maintained a bullish outlook for the precious metal due to technical forces.

“Silver is currently in a daily uptrend after breaking out of a ranging period…, if the price reaches the $24.676 level, a long scenario becomes feasible.”

 

  • What happened since TP was published?

Silver prices rallied higher, hitting a fresh 2024 high above $25 and gaining almost 3% since the start of the week.

 

  • How much in potential profits?

440 points for traders who bought silver at $24.676 and locked in profits at the second bullish price target at $25.116.

 

    3) Crude bulls enter the scene

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

This technical scenario (Crude) is based on the FXTM Signals that are posted twice a day (before the London and New York sessions) for all FXTM clients to follow.

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

 

  • What happened since TP was published?

Oil prices initially rallied on Wednesday due to a surprise drop in U.S crude stockpiles and geopolitical risks concerning Ukraine/Russia.

The global commodity extended gains this morning (Thursday) after the International Energy Agency warned of a supply deficit throughout 2024.

 

  • How much in potential profits?

Crude has hit all its profit targets.

Traders who entered at $79.49 and exited at the final target level of $79.83 would have gained 34 points.

Forex-Time-LogoArticle by ForexTime

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

Economics & Fundamentals Financial News
13 Mar

ECB intends to cut rates this spring. The US stock indices grow despite inflation growth

By JustMarkets

At Tuesday’s stock market close, the Dow Jones Index (US30) rose by 0.61%. The S&P 500 Index (US500) was up 0.61%. The NASDAQ Technology Index (US100) closed positive 1.54%. Despite a slight rise in inflation, stock indices refuse to fall. The bullish consensus in the market is so strong that it is almost unrealistic to turn this train around without a significant negative trigger. It is probably not worth waiting for any changes in the market until the quarterly expiration this Friday.

The market focus will shift to the Fed meeting next week on March 20. If the market does not hear any negative signals from Mr. Powell, the best strategy for the coming months will be to follow the bullish trend and buy risky assets. Currently, markets are pricing the odds of a 25 bps rate cut at 1% for next week’s FOMC meeting on March 20, 15% for the next meeting on May 1, and 78% for the subsequent meeting on June 12.

Shares of Oracle (ORCL) jumped by 11.88% on Tuesday after its earnings report beat market expectations on Monday, thanks to a surge in orders for cloud services. The company said that demand for Gen2 AI infrastructure is significantly outstripping supply. Boeing (BA) fell another 4.17% following news that officials in Chile have launched an investigation into a flight traveling from Auckland to Sydney where a violent air shake was reported, resulting in the hospitalization of 10 people and injuries to 50 people. In addition, the CEO of United Airlines told Boeing that it no longer wants to deliver Boeing 737 Max 10 airplanes because of delays in certification.

Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) rose by 1.23%, France’s CAC 40 (FR40) gained 0.84%, Spain’s IBEX 35 (ES35) added 0.61%, and the UK’s FTSE 100 (UK100) closed positive 1.02%.

There is broad agreement at the European Central Bank to start cutting interest rates in the spring as the fight against inflation is won, according to Governing Council spokesman Francois Villeroy de Galhau. The risk of waiting too long before easing monetary policy and unnecessarily hurting the economy is now equal to the risk of acting too soon and letting inflation recover. Policymakers can act independently of their counterparts at the Federal Reserve and will have ample room to adjust the pace of easing as needed once the process begins, the policymaker said.

WTI crude prices rose to around $78 a barrel on Wednesday, pulling back from two-week lows amid a favorable outlook for global demand. In its monthly report, OPEC said global oil demand is expected to grow by 2.25 million bpd in 2024 and 1.85 million bpd in 2025, unchanged from previous estimates. The group also raised its economic growth forecast for the current year, indicating room for improvement. In addition, industry data showed that US crude inventories unexpectedly fell by 5.521 million barrels last week, indicating healthy demand in the world’s largest oil consumer.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.06% on the day, China’s FTSE China A50 (CHA50) was up 0.89%, Hong Kong’s Hang Seng (HK50) added 3.05% on Tuesday, and Australia’s ASX 200 (AU200) was positive 0.11%.

Bank of Japan Governor Kazuo Ueda gave a slightly gloomier assessment of the economy ahead of the central bank’s policy meeting next week. Ueda told parliament that Japan’s economy is recovering at a moderate pace, although there is weakness in some data. He added that there are various ways to raise the cost of short-term borrowing if the central bank decides to end negative interest rates, but offered few clues. There has been increasing speculation recently that the Bank of Japan could start raising interest rates this month because of rising wages, high inflation, and a robust economy.

S&P 500 (US500) 5,175.27 +57.33 (+1.12%)

Dow Jones (US30) 39,005.49 +235.83 (+0.61%)

DAX (DE40) 17,965.11 +218.84 (+1.23%)

FTSE 100 (UK100) 7,747.81 +78.58 (+1.02%)

USD Index 102.93 +0.06 (+0.06%)

Important events today:
  • – UK GDP (q/q) at 09:00 (GMT+2);
  • – UK Industrial Production (m/m) at 09:00 (GMT+2);
  • – UK Manufacturing Production (m/m) at 09:00 (GMT+2);
  • – UK Trade Balance (m/m) at 09:00 (GMT+2);
  • – Eurozone Industrial Production (m/m) at 12:00 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 16:30 (GMT+2).

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.

Economics & Fundamentals Financial News
12 Mar

How Florida’s home insurance market became so dysfunctional, so fast

By Latisha Nixon-Jones, Jacksonville University 

Imagine saving for years to buy your dream house, only to have surging property insurance costs keep homeownership forever out of reach.

This is a common problem in Florida, where average insurance premiums cost homeowners an eye-watering US$6,000 a year. That’s more than triple the national average and about three times what Floridians paid on average for insurance premiums in 2018.

What’s more, several major insurance carriers have left the state over the past year, leaving residents with limited alternatives.

As a law professor who specializes in disaster preparedness and resilience, I think it’s important to understand what’s driving costs higher – not least because other states could soon face a similar predicament.

Three primary factors are driving the insurance challenge. First, natural disasters are becoming more common and costly. Second, the price of reinsurance is skyrocketing. And finally, Florida’s litigation-friendly environment compounds the issue by making it easy for customers to sue their insurers.

Disasters, like sea levels, are on the rise

With its location on the beautiful-yet-hurricane-prone Gulf of Mexico, Florida has long been vulnerable to the elements. Natural disasters cost the state $5 billion to $10 billion every year, the federal government estimated in 2018, the last year for which data was available.

Yet that likely understates the case today, since disasters have only become bigger, more common and more expensive since then. For example, climate change has made oceans warmer, which research suggests fuels stronger, more intense hurricanes.

As a result, Florida has experienced billion-dollar disasters an average of four times annually over the past five years – up from about one each year in the 1980s.

This surge in disasters doesn’t just put lives at risk; it also wreaks havoc with the insurance market, as carriers are inundated with claims from one catastrophe after another. This makes it harder for them to turn a profit or obtain reinsurance to protect their stakeholders.

Why reinsurance matters

Insurance companies, in essence, make money two ways. First, they pool risk among policyholders. Risk-pooling is the practice of taking similarly situated individuals or properties, grouping them together, and charging similar prices for insurance since they face the same risk.

Second, they reduce risk by acquiring reinsurance. Reinsurance acts as a safeguard for insurance companies – it’s essentially insurance for the insurers. Reinsurers pledge to cover a specified portion or type of insurance claim – for instance, catastrophic hurricanes – which provides a layer of financial protection.

The new era of climate disasters has thrown a wrench into the process. Reinsurance companies, grappling with a surge in claims due to more frequent and severe disasters, have found themselves forced to raise their premiums for insurance carriers. Carriers, in turn, have passed the burden to policyholders.

To try to navigate these challenges, some companies have chosen to limit coverage for specific types of damage. For example, some insurance companies in Florida will no longer offer hurricane or flood coverage. And in extreme cases, insurance companies have withdrawn entirely from the state.

Understanding this complex relationship between insurers, reinsurers and policyholders is key to understanding the broader implications of the Florida insurance crisis. It underscores the urgent need for comprehensive solutions and collaborative efforts to address evolving challenges in the insurance ecosystem.

Learning from Florida … one way or another

Florida isn’t taking all this sitting down. In December 2022, state lawmakers responded to growing property market instability by passing Senate Bill 2A, a package of insurance reforms.

One major part was a rule change designed to discourage policyholders from suing their insurers. Previously, Florida law let insured individuals recover attorney fees if they secured any amount through litigation against their insurer.

The idea is that making this change will discourage needless lawsuits. However, my research as an environmental justice professor shows that attempts to exclude attorneys from the negotiation process often lead to more expensive litigation and less access to justice.

The bill also restricts assignment of benefits, a mechanism that permits third-party entities like roofing companies to negotiate with insurance companies on behalf of Florida residents. While assignment of benefits increased advocacy, it was also linked to skyrocketing claims costs.

The balancing act between providing ample opportunities and containing costs has sparked debate among justice advocates. Florida’s legislative response reflects an ongoing effort to strike an equilibrium, ensuring fairness and accessibility while addressing the challenges faced by both insurers and policyholders.

Florida’s actions to address the property insurance crisis raise a critical question: Will the state serve as a blueprint for disaster-prone regions, or act as a cautionary tale? After all, states such as California and Louisiana have also seen insurance companies withdrawing from their markets. Will their legislatures draw inspiration from Florida’s?

For now, it’s too early to tell: The policies have only been in place since the latest round of hurricanes. But in the meantime, the rest of the U.S. will be watching – especially policymakers who care about resilience, and those who want to make sure vulnerable populations don’t get the short end of the stick.The Conversation

About the Author:

Latisha Nixon-Jones, Associate Professor of Law, Jacksonville University

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

Economics & Fundamentals Opinions
12 Mar

Venezuelan migrants are boosting economic growth in South America, says research

By Jose Caballero, International Institute for Management Development (IMD) 

Venezuela is engulfed in a political and economic crisis, which has forced over 6 million people – some 20% of the population – to flee the country since 2015. The mass exodus began when Venezuela’s economy collapsed, giving rise to rampant inflation, political turmoil and pervasive violence.

Over 80% of those who have left Venezuela have set up a new life in 17 countries across Latin America and the Caribbean. According to a recent report, these displaced migrants are having a positive effect on the economies of their host countries.

Between 2017 and 2030, migrant workers will boost the economies of their host countries by 0.10%–0.25% on average each year. The report, which was published by several leading international financial institutions and the UN Agency for Refugees, focuses on Venezuelan migrants but also covers Cubans and Salvadorans, among others.

The economic impact of migrants in Latin America is significant. But their integration into local job markets and society is poor. The economic benefits derived from migrants across Latin America could be even greater if they are given better access to jobs.

Boosting economic growth

Migration has clear economic benefits for local economies. It leads to an expansion of the workforce, thereby alleviating labour shortages and enhancing economic output.

Migrants bring a diverse range of skills and specialised knowledge to their host countries, which can improve the overall skill level of the local workforce. Their productive capabilities bridge skill gaps in local labour markets and heighten overall productivity.

Most migrant workers will also pay income tax, which increases government revenues. In Colombia, for instance, the income tax contribution of Venezuelan migrants in 2019 was approximately US$38.7 million (£30.1 million), equivalent to 0.01% of Colombia’s GDP.

And when migrants gain employment, they will spend their wages in the host country and create new demand in various other sectors. Greater demand leads to higher growth, which in turn attracts more investment and increases employment opportunities both for local people and migrants.

Underemployed

However, xenophobia and discrimination prevent many migrants from finding jobs in Latin America and integrating into society. According to the report, roughly 30% of the migrants residing in Chile, Colombia and Peru experience discrimination because of their nationality.

Thus, many migrants are forced to take jobs within the informal sector. Over 50% of migrants in Latin America work informally compared to 44.5% of locals.

Migrant workers also often earn lower wages than their local counterparts. In Colombia, the average monthly salary of locals with post-secondary school education is US$1,140. Venezuelan migrants with the same level of education earn just US$644 per month.

Despite this, immigrants still outperform the native-born population in their labour force participation and employment rates. Yet many of the migrants who are in formal employment are overqualified for their roles. In Chile, for instance, 34% of highly educated locals are overqualified for their jobs, compared to over 60% of migrants.

Migrants are often mistakenly assumed to be exclusively low-skilled workers. But the Venezuelan migrant crisis has seen many highly skilled people flee the country too. For example, 65% of the Venezuelans living in Chile and 48% residing in Ecuador have post-secondary school education.

However, most Venezuelans have not officially validated their academic credentials in their host countries. In fact, only 10% of those residing in Chile have completed the certification process.

Many migrants are unaware of the process so lack sufficient documentation about their qualifications. And the complexity of the process also demands investment that many migrants may not have the resources to cover.

To further enhance productivity in Latin America, it is essential to integrate migrant workers into professions that allow them to use their skills.

Access to services

Several other factors hinder the integration of migrants into society across Latin America. The report indicates that migrant workers have significantly lower access to health insurance relative to the native-born population. In Colombia, for example, 96% of local workers have access to health insurance, compared to just 40% of migrants.

Similarly, there are often barriers limiting access to education for migrants. Foreign-born residents and their family members have the right to access public primary and secondary education in the majority of South American countries. But school attendance rates are lower among displaced children than among native children, while the propensity for dropping out of school early appears to be significantly higher among migrant children.

Some people argue that immigration comes with costs, such as the perceived notion that migrants deprive locals of jobs. Nevertheless, the contribution of migrants to Latin American economies underscores the potential benefits. Improving their access to labour markets is thus a crucial tool for fostering long-term growth in Latin American economies.The Conversation

About the Author:

Jose Caballero, Senior Economist, IMD World Competitiveness Center, International Institute for Management Development (IMD)

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

Economics & Fundamentals Opinions
12 Mar

Nigeria: botched economic reforms plunge the country into crisis

By Chisom Ubabukoh, O.P. Jindal Global University and Kunal Sen, United Nations University 

Nigeria, Africa’s largest economy, is facing an economic crisis. From a botched currency redesign to the removal of fuel subsidies and a currency float, the nation has been plunged into spiralling inflation and a currency crisis with far-reaching consequences. The question now is: how long before the inferno consumes everything?

On October 26, 2022, the Central Bank of Nigeria announced a bold move – that it had redesigned the country’s highest denomination notes (₦200, ₦500 and ₦1000) and would be removing all old notes from circulation. People were given a deadline of January 31, 2023 (a couple of weeks before a national election) to make this exchange, or all of the old notes would cease to be valid legal tender.

This initiative ostensibly aimed to curb counterfeiting, encourage cashless transactions, and limit the buying of votes during the elections. But, while the intention may have been sound, the execution proved disastrous.

Short deadlines, limited availability of new notes, and inadequate communication created widespread panic. It led to long queues at banks, frustration among citizens, and a thriving black market for the new notes.

The confusion surrounding the currency redesign had an unintended consequence: the beginnings of a loss of confidence in the naira. People began to look to other mediums as a store of value and as a medium of exchange. The obvious choices were foreign currency like the US dollar and the British pound, as well as more stable cryptocurrencies like Tether’s USDT.

The currency redesign was criticised at the time by the then-presidential candidate of the ruling party, Bola Ahmed Tinubu, who saw it as a move to derail his presidential campaign. However, Tinubu won the contested election and, once in power, set out to reshape the economy immediately.

In his inaugural address in May 2023, Tinubu announced that the “fuel subsidy is gone”, referring to the government’s longstanding subsidised petrol policy that ensured Nigerians enjoyed some of the lowest petrol prices in the world. Over the coming days, he would also announce the reversal of the currency redesign policy and the floating of the Nigerian naira on the foreign exchange market.

Fuelling the flames

Other underlying economic conditions around the time of Tinubu’s inauguration included a large amount of foreign debt, dwindling foreign reserves and global economic headwinds. When the removal of the fuel subsidy was announced, it was met with a mix of surprise and elation by many Nigerians, and in particular by international donor agencies like the International Monetary Fund and the World Bank, who had long been advocating for the removal.

But this was all before the effects began to bite. And bite hard they did. The price of Premium Motor Spirit (also known as gasoline or petrol), which used to retail for ₦189 (US$0.12) per litre, increased by 196% practically overnight and began to retail for ₦557 per litre.

One challenge with developing economies like Nigeria is that a rise in fuel price tends to cause the price of everything else to rise. Many industries, particularly those in manufacturing and agriculture, tend to rely heavily on fuel for powering machinery and equipment due to the poor supply of grid electricity nationwide.

Many Nigerian households were significantly affected by the increased prices. But they saw an opportunity in that the savings from the fuel subsidy regime would be redistributed to improve education, healthcare provision and the general welfare of the people, as was promised during the electioneering. The regime cost the country an estimated ₦400 billion a month at its height, after all.

Enter currency devaluation

Then, on June 14, 2023, the Tinubu government ended the policy of pegging the naira to the US dollar, allowing it to float and find its true market value based on supply and demand. The idea was to stop corruption and reduce arbitrage opportunities due to the difference between official and black-market foreign exchange prices.

Currency arbitrage happens when people buy a currency at the lower official exchange rate and immediately sell it at the higher black market rate for a profit. This practice often occurs where there are strict currency controls and black markets offer a truer reflection of a currency’s value based on supply and demand.

However, this was one policy change too many. The naira lost a staggering 25% of its value in one day, and the cascading effects now push the country to the brink.

Nigeria depends heavily on imported commodities, including essential goods like food, fuel and medicine. So the policy escalated the inflationary crisis, pushing inflation to almost 30% (the major driver being food inflation, which reached 35.4%).

Imports in general have become significantly more expensive, and Nigerians are finding their purchasing power being eroded. Wages in Nigeria are pretty fixed. The current minimum wage in the country is ₦30,000 per month and the average monthly income is ₦71,185.

Businesses are also feeling the pinch, facing difficulties accessing the foreign exchange critical for importing raw materials and equipment.

Pheonix or ash?

The Central Bank of Nigeria has implemented measures to counter the crisis. It recently raised interest rates from 18.75% to 22.75% and is selling US dollars through auctions.

Recovery is a possibility and there are already signs of appreciation in the currency. The naira appreciated by 6.89% a day after interest rates were raised. But it will be a long, hard road.

These strategies often come with trade-offs. Higher interest rates can stifle already struggling economic growth, while currency interventions might deplete already strained reserves of foreign currency.

The bottom line is that if the current cost of living crisis continues, civil unrest is likely. Should this happen, who knows what – if anything – will be left behind when the flames are done.The Conversation

About the Author:

Chisom Ubabukoh, Assistant Professor of Economics, O.P. Jindal Global University and Kunal Sen, Professor and Director, World Institute for Development Economics Research (UNU-WIDER), United Nations University

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

 

Economics & Fundamentals Opinions
12 Mar

Natural gas prices are falling again. Chinese indices are growing amid support from the Central Bank

By JustMarkets

The Dow Jones Index (US30) was up 0.12% at Monday’s stock market close. The S&P 500 Index (US500) was down 0.11%. The NASDAQ Technology Index (US100) closed negative 0.41%. Stocks traded slightly lower on Monday amid rising 10-year T-note yields and caution ahead of Tuesday’s US Consumer Price Index report. On an annualized basis, overall inflation is expected to fall to 3.1% from 3.2%. Core inflation (excluding food and energy prices) will fall from 3.9% to 3.8% y/y. In monthly terms, inflationary pressures are expected to rise by 0.3%. If the data comes out in line with consensus, it would indicate that underlying inflationary trends are not intensifying. However, a stronger-than-expected CPI report would dampen hopes of a near-term Fed rate cut, which could put additional pressure on the indices.

Shares of Nvidia (NVDA) are down 1.98% on Monday, adding to last Friday’s 5.47% selloff. Nvidia shares suffered profit-taking last Friday after initially hitting a record high and rising more than 17% over the previous six sessions. Boeing (BA) is down 3.0% after news that the US Department of Justice has opened a criminal investigation into the recent airborne door explosion on an Alaskan Airlines flight. Moderna (MRNA) was Monday’s best-performing stock of the NASDAQ benchmark (US100), adding 8.69%. The biotech company rose following news that it is partnering with Merck to begin a mid-stage study to test its experimental cancer vaccine on patients with skin cancer.

Bitcoin (BTCUSD) gained more than 4% on Monday and set a new record high, adding to last week’s 9.3% rally. Cryptocurrencies continue to rise because of the US Securities and Exchange Commission’s recent decision to allow spot bitcoin ETFs. However, shares of Coinbase (COIN) are down 0.93% on Monday, giving up an early rally of more than 4%.

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) fell by 0.38%, France’s CAC 40 (FR40) lost 0.11%, Spain’s IBEX 35 (ES35) rose by 0.19%, and the UK’s FTSE 100 (UK100) closed positive 0.12%.

Shares of Austria’s Raiffeisen Bank closed 7.4% lower amid concerns over possible US sanctions over its relationship with Russia.

WTI crude oil prices climbed above $78 a barrel on Tuesday, recovering some of the losses of recent sessions. This week, markets await monthly reports from OPEC, the IEA, and the US EIA to assess the outlook for global demand. Investors continue to weigh conflicting supply and demand factors, as OPEC+ production cuts and tensions in the Middle East are offset by rising non-OPEC supply and signs of weak demand from major oil importer China. Data released last week showed that China’s oil imports fell about 5.7% to 10.8 million bpd in the first two months of the year, down from 11.44 million bpd in December.

The US natural gas price fell below $1.77 per Mmbbl to a two-week low, driven by reduced gas supplies to LNG export facilities and expectations of weaker demand due to milder weather in the next two weeks. Freeport LNG saw a nearly 50 percent drop in raw gas receipts last week due to the shutdown of one of its three processing lines. On the other hand, energy companies such as EQT and Chesapeake Energy cut gas production last month due to lower gas prices in February. Meanwhile, according to the latest EIA data, gas inventories as of March 1 are about 30.9% above normal levels.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was down 2.19% on the day, China’s FTSE China A50 (CHA50) was up 1.78%, Hong Kong’s Hang Seng (HK50) added 1.43% on Monday, and Australia’s ASX 200 (AU200) was negative 1.82%.

Hong Kong stocks climbed 1.2% in Tuesday morning trading to a two-week peak 16.735, maintaining bullish momentum for the third consecutive session amid gains in most sectors, especially healthcare, real estate, and consumer discretionary. Investors were scrambling to look for more catalysts after the close of China’s annual plenary meeting on Monday. During the event, Beijing set its 2024 GDP growth target at around 5.0% and planned to issue special bonds for large projects. At the same time, China’s central bank pledged to keep prices stable and said it may cut the refinancing rate further this year.

Japan’s business activity index for large manufacturing companies fell sharply to 6.7% in the first quarter of 2024 from 5.7% in the previous quarter, posting its lowest reading in a year and defying expectations for an improvement to 6.2%. The survey came amid official data that Japan’s economy fell into a technical recession in the fourth quarter of last year but was later revised to show a return to growth.

NAB Australia’s business confidence index fell to 0 in February 2024 from 1 in January. The reading was below the long-term average, with the retail sector among the top risk factors amid high borrowing costs and rising inflation.

S&P 500 (US500) 5,117.94 −5.75 (−0.11%)

Dow Jones (US30) 38,769.66 +46.97 (+0.12%)

DAX (DE40) 17,746.27 −68.24 (−0.38%)

FTSE 100 (UK100) 7,669.23 +9.49 (+0.12%)

USD Index 102.85 +0.14 (+0.13%)

Important events today:
  • – Japan Producer Price Index (m/m) at 01:50 (GMT+2);
  • – UK Average Earnings Index (m/m) at 09:00 (GMT+2);
  • – UK Claimant Count Change (m/m) at 09:00 (GMT+2);
  • – UK Unemployment Rate (m/m) at 09:00 (GMT+2);
  • – German Consumer Price Index (m/m) at 09:00 (GMT+2);
  • – US Consumer Price Index (m/m) at 14:30 (GMT+2).

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.

Economics & Fundamentals Financial News
11 Mar

The US labor market is cooling. ECB officials talked about cutting rates in the spring

By JustMarkets

At Friday’s stock market close, the Dow Jones Index (US30) decreased by 0.18% (for the week -0.63%). The S&P 500 Index (US500) was down 0.65% (for the week -0.14%). The NASDAQ Technology Index (US100) closed negative 1.16% (for the week -1.10%).

Although the US economy added 275K jobs, unemployment jumped to 3.9%, and wage growth slowed. The data indicates that the labor market has begun to cool down. Investors’ first reaction to the report was a rise in risk assets and a fall in the dollar. Market expectations for the first rate cut in June were confirmed and strengthened. But since this is not a new scenario and such a consensus has been priced in over the past month, the positivity was not enough for long, and investors sold off all the growth by the end of Friday. Current market conditions suggest index weakness will continue this week as investors take profits after the recent market rally. That said, this week promises to be even more volatile with the release of inflation data on Tuesday, March 12, and the quarterly derivatives expiration on Friday. Usually, these periods are when new trends are born, or old trends are reversed.

Also on Friday, shares of Nvidia (NVDA) fell more than 5%, its worst single-day performance since late May. But the stock ended the week up more than 6% amid a rally that has boosted its market value by more than $1 trillion this year.

Bitcoin hit a new all-time high above $70,000, helped by investor demand for new US spot bitcoin ETFs launched this year and expectations of lower global interest rates. Billions of dollars have poured into ETFs over the past few weeks. Also, let’s not forget the bitcoin “halving” that will take place in April 2024. In addition, the market has received support ahead of an expected upgrade to the Ethereum blockchain platform. Bitcoin’s previous boom in 2021 was followed by a “crypto winter” when bankruptcies and collapses of major cryptocurrency companies left millions of investors destitute, prompting regulators to step up regulation.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) was down 0.16% (for the week +0.40%), France’s CAC 40 (FR40) added 0.15% (for the week +1.18%) on Friday, Spain’s IBEX 35 (ES35) was down 0.13% (for the week +2.34%), and the UK’s FTSE 100 (UK100) closed negative 0.43% (for the week -0.30%).

Nagel, representative of the ECB Governing Council and President of the Bundesbank, said on Friday that an interest rate cut before the summer is increasingly likely. His colleague, ECB Governing Council representative Villeroy de Gallo, added that the first rate cut is very likely to come in the spring.

Oil prices closed 1% lower on Friday as markets remain wary of weak demand from China, even as the OPEC+ producer group extended supply cuts. Both benchmarks fell for the week, with Brent down 1.8% and WTI crude prices decreased by 2.5%. Currently, traders in the energy market are focusing on the timing of possible rate cuts by the Fed and ECB. Lower interest rates may increase demand for oil by accelerating economic growth.

Asian markets traded yesterday without any unified dynamics. Japan’s Nikkei 225 (JP225) was down 1.28% for the week, China’s FTSE China A50 (CHA50) lost 0.28% for the 5 trading days, Hong Kong’s Hang Seng (HK50) was down 1.66% for the week, and Australia’s ASX 200 (AU200) was positive 1.31%.

Japan’s economy returned to growth in the fourth quarter of 2023, averting a technical recession. Revised data showed that the country’s GDP grew by 0.4% and 0.1% year-on-year and 0.1% quarter-on-quarter, respectively, reversing preliminary contraction figures of 0.4% and 0.1% for the period. The latest data reinforced speculation that the Bank of Japan may start raising interest rates in April.

Chinese consumer prices rose by 0.7% year over year in February 2024, above market forecasts of 0.3%, and a turnaround from the sharpest 0.8% drop in 14 years in January. The latest result was the first consumer inflation since August last year, reaching the highest level in 11 months. But despite the rise in consumer prices, producer prices remain in deflation.

S&P 500 (US500) 5,123.69  −33.67 (−0.65%)

Dow Jones (US30) 38,722.69 −68.66 −0.18%)

DAX (DE40) 17,814.51 −28.34 (−0.16%)

FTSE 100 (UK100) 7,659.74 −32.72 (−0.43%)

USD Index 102.74 −0.08 (−0.08%)

Important events today:
  • – Japan GDP (q/q) at 01:50 (GMT+2).

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.

Economics & Fundamentals Financial News
08 Mar

ECB kept interest rates unchanged and delayed the first cut until the summer. Increased tension in the Middle East supports oil growth

By JustMarkets

At Thursday’s stock market close, the Dow Jones Index (US30) was up 0.34%, the S&P 500 Index (US500) added 1.03%, and the NASDAQ Technology Index (US100) closed positive 1.51%. Meanwhile, the S&P 500 (US500) and NASDAQ (US100) indices rose to new record highs. Stocks rose Thursday on speculation that the Fed and ECB will begin cutting interest rates as early as June.

Speaking in front of the US Senate on Thursday, Fed Chairman Jerome Powell indicated the central bank could move closer to revising its restrictive policy if signs of moderate inflation prove sustainable. Recent data also showed that weekly US jobless claims were slightly higher than expected, and Q4 labor costs were revised downward. The US trade deficit for January widened to $67.4 billion, exceeding expectations of $63.3 billion and becoming the most significant deficit in 9 months, a negative for Q1 GDP. Investors are now awaiting Friday’s release of the much-anticipated February employment report for more information on the state of the US labor market.

The monthly Nonfarm payrolls labor market report will be released in the US today. The economy is expected to add 190,000 jobs in February after adding 353,000 in January. The unemployment rate will likely remain at 3.7%, and wage growth will slow from 4.5% to 4.3% year-over-year. If the data comes out in line with economists’ forecasts, it would indicate a slight cooling of the labor market, increasing the likelihood of an FOMC rate cut in April. The USD index will be under pressure in such a scenario, and risk assets (EUR, GBP, indices) will be supported. On the contrary, if the labor market data comes out better than expected, it will indicate the stability of the labor market and will postpone the first rate cut to a later date. In such a scenario, the dollar index could gain significant support, negatively impacting risk assets, indices, and gold.

Equity markets in Europe rallied yesterday. Germany’s DAX (DE40) rose 0.71%, France’s CAC 40 (FR40) gained 0.77%, Spain’s IBEX 35 (ES35) added 1.20% on Thursday, and the UK’s FTSE 100 (UK100) closed positive 0.17%.

The ECB, as expected, left the deposit rate unchanged at 4.5% and said that keeping borrowing costs at this level for “quite some time” would make a “significant contribution” to bringing consumer price growth back to the 2% target. The ECB lowered its 2024 eurozone GDP forecast to 0.6% from its December forecast of 0.8% and cut its 2024 eurozone inflation forecast to 2.3% from its December forecast of 2.7%. ECB President Lagarde said the eurozone economy remains weak, and wage growth is slowing. She added that consumer price growth is slowing, but she and her colleagues are not convinced that monetary easing can begin now. Swaps put the odds of a 25 bps ECB rate cut at 14% at the next meeting on April 11 and 93% at the meeting on June 6.

WTI crude prices rose above $79 a barrel on Friday, rebounding from the previous session’s losses, as heightened tensions in the Middle East continue to raise supply concerns and a Houthi attack on a commercial ship in the Red Sea this week left people dead.

Natural gas prices (XNG) fell sharply on Thursday amid ample US gas inventories. The EIA’s weekly natural gas inventory data showed a 40 billion cubic foot fall on Thursday, which was in line with expectations. However, it was far less than the five-year average for this time of year of 93 billion cubic feet. This kept US natural gas inventories at 30.9% above the five-year average.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was down 1.23%, China’s FTSE China A50 (CHA50) lost 0.23%, Hong Kong’s Hang Seng (HK50) decreased by 1.27% on the day, and Australia’s ASX 200 (AU200) was positive 0.39% on Thursday.

Australia’s economy grew less than expected in the fourth quarter, supporting bets that the Reserve Bank of Australia (RBA) may start cutting rates this year. After weak GDP data, the Commonwealth Bank of Australia reiterated its forecast for an overall rate cut of 75 basis points this year.

S&P 500 (US500) 5,157.36  +52.60 (+1.03%)

Dow Jones (US30) 38,791.35 +130.30 (+0.34%)

DAX (DE40)  17,842.85 +126.14 (+0.71%)

FTSE 100 (UK100) 7,692.46 +13.15 (+0.17%)

USD Index 102.81 −0.56 (−0.54%)

Important events today:
  • – German Industrial Production (m/m) at 09:00 (GMT+2);
  • – German Producer Price Index (m/m) at 09:00 (GMT+2);
  • – Eurozone GDP (q/q) at 12:00 (GMT+2);
  • – US FOMC Member Williams Speaks (m/m) at 14:00 (GMT+2);
  • – US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
  • – US Unemployment Rate (m/m) at 15:30 (GMT+2);
  • – Canada Unemployment Rate (m/m) at 15:30 (GMT+2).

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.

Economics & Fundamentals Financial News
07 Mar

The Bank of Canada kept rates unchanged and maintained its dovish bias. The ECB will also keep all policy settings unchanged today

By JustMarkets

As of Wednesday’s stock market close, the Dow Jones Index (US30) was up 0.20%, the S&P 500 Index (US500) added 0.51%, and the NASDAQ Technology Index (US100) closed positive 0.58%.

Fed Chairman Powell said in front of Congress that it would likely be appropriate to begin reducing borrowing costs at some point this year. Still, the committee does not expect it will be appropriate to reduce the target range for the federal funds rate until it has more confidence that inflation is moving steadily toward 2%.

The latest economic data showed that US job openings for January, according to JOLTS, fell by 26,000 to 8.863 million, indicating a slight cooling in the labor market. Investors now await the main Nonfarm Payrolls report tomorrow.

Palantir (PLTR) closed higher by more than 9% after receiving a $178.4 million contract from the US Army to develop and produce ten prototype ground stations that use artificial intelligence and machine learning to process target information from space, airborne and ground sensors. JD.com (JD) closed higher by more than 16% after reporting fourth-quarter sales of ¥306.1 billion ($42.6 billion), beating the consensus forecast of ¥300 billion, and initiating a $3 billion share repurchase program. Hewlett Packard Enterprise (HPE) closed higher by more than 3% amid strong demand for the company’s artificial intelligence-focused servers. Orders for these servers totaled $3 billion, up $500 million from the last quarter.

At its March meeting, the Bank of Canada (BoC) kept its overnight rate target at 5%. It pledged to continue normalizing the bank’s balance sheet as policymakers remain concerned about risks to the inflation outlook. The bank said it would maintain its quantitative tightening policy until a further weakening in core inflation. The latest data showed that CPI inflation eased to 2.9% in January, but on an annualized and three-month basis, core inflation was from 3% to 3.5%. Policymakers forecast inflation to remain near 3% in the first half of this year and then gradually decline. The bank also noted that GDP growth remains weak and below potential, and employment continues to grow more slowly amid signs that wage pressures may be easing. At the press conference, Bank Governor Macklem said it was too early to consider cutting rates as more time is needed to ensure inflation falls to the 2% target.

Equity markets in Europe rallied yesterday. Germany’s DAX (DE40) rose by 0.10%, France’s CAC 40 (FR40) gained 0.28%, Spain’s IBEX 35 (ES35) increased by 0.79% on Wednesday, and the UK’s FTSE 100 (UK100) closed positive 0.43%.

Eurozone retail sales for January rose by 0.1% m/m, weaker than expectations of 0.2% m/m. German trade data was better than expected: exports for January rose by 6.3% m/m, stronger than expectations of 1.5% m/m and the largest increase in 3-1.5 years. In addition, January imports rose by 3.6% m/m, stronger than expectations of 1.8% m/m and the largest increase in 11 months.

In his pre-election budget statement, Treasury Secretary Jeremy Hunt announced plans for permanent tax cuts in line with slowing inflation to stimulate economic growth and support public services. The Office for Budget Responsibility (OBR) predicts that inflation will fall below the Bank of England’s target in the coming months and will also revise growth forecasts upwards.

The ECB’s monetary policy meeting will take place today. The ECB is forecast to leave the interest rate at 4.5%. In recent weeks, almost all ECB officials have unanimously argued that a premature rate cut could set a dangerous precedent for anchoring inflation. As a result, money markets have pushed back the likelihood of a first-rate cut from April to June. ECB chief Lagarde will likely reiterate that data remains lacking and refrain from giving clearer guidance on policy easing. Such a stance would be a moderately negative scenario for the euro.

WTI crude futures fell slightly to $79.1 a barrel on Wednesday, retreating from a four-month high after EIA data showed a smaller-than-expected rise in weekly US crude inventories. The US crude inventories rose by 1.367 million barrels last week, less than market expectations for a 2.116 million increase. On Tuesday, the API reported a modest 423,000 barrel rise in nationwide inventories.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was down 0.02%, China’s FTSE China A50 (CHA50) lost 0.76%, Hong Kong’s Hang Seng (HK50) was up 1.70% on the day, and Australia’s ASX 200 (AU200) was positive 0.12% on Wednesday.

S&P 500 (US500) 5,104.76 +26.11 (+0.51%)

Dow Jones (US30) 38,661.05 +75.86 (+0.20%)

DAX (DE40)  17,716.71 +18.31 (+0.10%)

FTSE 100 (UK100) 7,679.31 +33.15 (+0.43%)

USD Index 103.37 −0.42 (−0.41%)

Important events today:
  • – Australia Trade Balance (m/m) at 02:30 (GMT+2);
  • – China Trade Balance (m/m) at 05:00 (GMT+2);
  • – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+2);
  • – Eurozone ECB Interest Rate Decision at 15:15 (GMT+2);
  • – Eurozone ECB Monetary Policy Statement at 15:15 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • – US Trade Balance (m/m) at 15:30 (GMT+2);
  • – Canada Trade Balance (m/m) at 15:30 (GMT+2);
  • – Eurozone ECB Press Conference at 15:45 (GMT+2);
  • – US Fed Chair Jerome Powell Testifies at 17:00 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 17:00 (GMT+2);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+2);
  • – US FOMC Member Mester Speaks (m/m) at 18:30 (GMT+2).

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.

Economics & Fundamentals Financial News
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